-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, BBQtkOfbtLl9ynOgfPuKBRjpF+bbvc4fwh+fY13wUspny6uG0fWUr3SwnB9kfEYP 4B6ZgW5X1KLrOlNZGjh/2w== 0000950130-96-003802.txt : 19961008 0000950130-96-003802.hdr.sgml : 19961008 ACCESSION NUMBER: 0000950130-96-003802 CONFORMED SUBMISSION TYPE: S-1 PUBLIC DOCUMENT COUNT: 28 FILED AS OF DATE: 19961004 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: DADE INTERNATIONAL INC CENTRAL INDEX KEY: 0000942307 STANDARD INDUSTRIAL CLASSIFICATION: IN VITRO & IN VIVO DIAGNOSTIC SUBSTANCES [2835] IRS NUMBER: 363949533 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-1 SEC ACT: 1933 Act SEC FILE NUMBER: 333-13523 FILM NUMBER: 96639702 BUSINESS ADDRESS: STREET 1: 1717 DEERFIELD RD CITY: DEERFIELD STATE: IL ZIP: 60115 BUSINESS PHONE: 7082675400 MAIL ADDRESS: STREET 1: 153 EAST 53RD ST CITY: NEWYORK STATE: NY ZIP: 600150778 S-1 1 FORM S-1 AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 4 , 1996 REGISTRATION NO. 333- - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ---------------- FORM S-1 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 ---------------- DADE INTERNATIONAL INC. (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) ---------------- DELAWARE 2835 36-3949533 (STATE OR OTHER (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER JURISDICTION CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER) OFINCORPORATION OR ORGANIZATION) 1717 DEERFIELD ROAD DEERFIELD, ILLINOIS 60015-0778 TELEPHONE: (847) 267-5300 (ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES) ---------------- MICHAEL P. BUCKLO 1717 DEERFIELD ROAD DEERFIELD, ILLINOIS 60015-0778 TELEPHONE: (847) 267-5300 (NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF AGENT FOR SERVICE) COPY TO: LANCE C. BALK KIRKLAND & ELLIS 153 EAST 53RD STREET NEW YORK, NEW YORK 10022-4675 TELEPHONE: (212) 446-4800 ---------------- APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as practicable after this Registration Statement becomes effective. If the securities being registered on this Form are being offered in connection with the formation of a holding company and there is compliance with General Instruction G, check the following box. [_] The registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the Registration Statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine. CALCULATION OF REGISTRATION FEE - ------------------------------------------------------------------------------- - -------------------------------------------------------------------------------
PROPOSED PROPOSED MAXIMUM TITLE OF EACH CLASS OF AMOUNT MAXIMUM AGGREGATE AMOUNT OF SECURITIES TO BE TO BE OFFERING PRICE OFFERING REGISTRATION REGISTERED REGISTERED PER UNIT(1) PRICE(1) FEE - ------------------------------------------------------------------------------- 11 1/8% Senior Subordi- nated Notes due 2006, Series B............. $350,000,000 100% $350,000,000 $120,689.66
- ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- (1) Estimated solely for the purpose of calculating the registration fee. THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a), MAY DETERMINE. - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- CROSS REFERENCE SHEET PURSUANT TO ITEM 501(B) OF REGULATION S-K SHOWING LOCATION IN PROSPECTUS OF INFORMATION REQUIRED BY ITEMS OF PART I OF FORM S-1
REGISTRATION STATEMENT ITEM NUMBER AND CAPTION CAPTION OR LOCATION IN PROSPECTUS ----------------------- --------------------------------- 1. Forepart of Registration Statement and Outside Front Cover Page of Outside Front Cover Page Prospectus........................... 2. Inside Front and Outside Back Cover Inside Front Cover Page; Outside Pages of Prospectus.................. Back Cover Page 3. Risk Factors, Ratio of Earnings to Fixed Charges and Other Information.. Prospectus Summary; The Company; Risk Factors; Unaudited Pro Forma Financial Data; Selected Historical Financial Data 4. Terms of the Transaction.............. Outside Front Cover Page; Prospectus Summary; The Exchange Offer; Description of Exchange Notes; Certain Federal Income Tax Consequences 5. Pro Forma Financial Information....... Unaudited Pro Forma Financial Data 6. Material Contracts with the Company Inapplicable Being Acquired....................... 7. Additional Information Required....... Inapplicable 8. Interests of Named Experts and Legal Matters; Experts Counsel.............................. 9. Disclosure of Commission Position on Indemnification for Securities Act Inapplicable Liabilities.......................... 10. Information with Respect to S-3 Inapplicable Registrants.......................... 11. Incorporation of Certain Information Inapplicable by Reference......................... 12. Information with Respect to S-3 or S-2 Inapplicable Registrants.......................... 13. Incorporation of Certain Information Inapplicable by Reference......................... 14. Information with Respect to Registrants other than S-3 Outside Front Cover Page; or S-2 Registrants................... Prospectus Summary; Risk Factors; Use of Proceeds; The Acquisition; Capitalization; Unaudited Pro Forma Financial Data; Selected Historical Financial Data; Management's Discussion and Analysis of Financial Condition and Results of Operations; Industry; Business; Management; Principal Stockholders; Certain Relationships and Related Transactions; Description of Bank Credit Agreement
REGISTRATION STATEMENT ITEM NUMBER AND CAPTION CAPTION OR LOCATION IN PROSPECTUS ----------------------- --------------------------------- 15. Information with Respect to S-3 Inapplicable Companies............................. 16. Information with Respect to S-3 or S-2 Inapplicable Companies............................. 17. Information with Respect to Companies Other Than S-3 Inapplicable or S-2 Companies...................... 18. Information if Proxies, Consents or Authorizations are to be Solicited.... Inapplicable 19. Information if Proxies, Consents or Authorizations are not to be Solicited Management; Principal or in an Exchange Offer............... Stockholders; Certain Relationships and Related Transactions
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++ +INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A + +REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE + +SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY + +OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT + +BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR + +THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE + +SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE + +UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF + +ANY SUCH STATE. + ++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++ SUBJECT TO COMPLETION, DATED OCTOBER 4, 1996 PROSPECTUS DADE INTERNATIONAL INC. OFFER TO EXCHANGE ITS SERIES B 11 1/8% SENIOR SUBORDINATED NOTES DUE 2006 FOR ANY AND ALL OF ITS OUTSTANDING 11 1/8% SENIOR SUBORDINATED NOTES DUE 2006 THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON , 1996, UNLESS EXTENDED. Dade International Inc., a Delaware corporation (the "Company"), hereby offers (the "Exchange Offer"), upon the terms and conditions set forth in this Prospectus (the "Prospectus") and the accompanying Letter of Transmittal (the "Letter of Transmittal"), to exchange $1,000 principal amount of its Series B 11 1/8% Senior Subordinated Notes due 2006 (the "Exchange Notes"), which will have been registered under the Securities Act of 1933, as amended (the "Securities Act") pursuant to a Registration Statement of which this prospectus is a part, for each $1,000 principal amount of its outstanding 11 1/8% Senior Subordinated Notes due 2006 (the "Notes"), of which $350,000,000 principal amount is outstanding. The form and terms of the Exchange Notes are the same as the form and terms of the Notes (which they replace) except that the Exchange Notes will bear a Series B designation and will have been registered under the Securities Act and, therefore, will not bear legends restricting their transfer and will not contain certain provisions relating to an increase in the interest rate which were included in the terms of the Notes in certain circumstances relating to the timing of the Exchange Offer. The Exchange Notes will evidence the same debt as the Notes (which they replace) and will be issued under and be entitled to the benefits of the Indenture dated May 7, 1996 between the Company and IBJ Schroder Bank & Trust Company (the "Indenture") governing the Notes. See "The Exchange Offer" and "Description of Exchange Notes." The Company has not issued, and does not have any current firm arrangements to issue, any significant indebtedness to which the Exchange Notes would rank senior or pari passu in right of payment. The Exchange Notes will be subordinated in right of payment to all Senior Debt of the Company (including debt under the Bank Credit Agreement (as defined herein)) and will be effectively subordinated in right of payment to all indebtedness of the Company's subsidiaries. The aggregate amount of such Senior Debt was $485.0 million at June 30, 1996. The aggregate amount of indebtedness of all of the Company's subsidiaries (excluding indebtedness owed by the Company's subsidiaries to the Company of approximately $518.6 million) was approximately $10.0 million at June 30, 1996. The Company will accept for exchange any and all Notes validly tendered and not withdrawn prior to 5:00 p.m., New York City time, on , 1996, unless extended by the Company in its sole discretion (the "Expiration Date"). Notwithstanding the foregoing, the Company will not extend the Expiration Date beyond January 31, 1997. Tenders of Notes may be withdrawn at any time prior to 5:00 p.m. on the Expiration Date. The Exchange Offer is subject to certain customary conditions. The Notes were sold by the Company on May 7, 1996 to the Initial Purchasers (as defined) in a transaction not registered under the Securities Act in reliance upon an exemption under the Securities Act. The Initial Purchasers subsequently placed the Notes with qualified institutional buyers in reliance upon Rule 144A under the Securities Act and with a limited number of institutional accredited investors that agreed to comply with certain transfer restrictions and other conditions. Accordingly, the Notes may not be reoffered, resold or otherwise transferred in the United States unless registered under the Securities Act or unless an applicable exemption from the registration requirements of the Securities Act is available. The Exchange Notes are being offered hereunder in order to satisfy the obligations of the Company under the Registration Rights Agreement (as defined) entered into by the Company in connection with the offering of the Notes. See "The Exchange Offer." Based on no-action letters issued by the staff of the Securities and Exchange Commission (the "Commission") to third parties, the Company believes the Exchange Notes issued pursuant to the Exchange Offer may be offered for resale, resold and otherwise transferred by any holder thereof (other than any such holder that is an "affiliate" of the Company within the meaning of Rule 405 under the Securities Act) without compliance with the registration and prospectus delivery provisions of the Securities Act, provided that such Exchange Notes are acquired in the ordinary course of such holder's business and such holder has no arrangement or understanding with any person to participate in the distribution of such Exchange Notes. See "The Exchange Offer--Purpose and Effect of the Exchange Offer" and "The Exchange Offer-- Resale of the Exchange Notes." Each broker-dealer (a "Participating Broker- Dealer") that receives Exchange Notes for its own account pursuant to the Exchange Offer must acknowledge that it will deliver a prospectus in connection with any resale of such Exchange Notes. The Letter of Transmittal states that by so acknowledging and by delivering a prospectus, a participating Broker- Dealer will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act. This Prospectus, as it may be amended or supplemented from time to time, may be used by a Participating Broker-Dealer in connection with resales of Exchange Notes received in exchange for Notes where such Notes were acquired by such Participating Broker-Dealer as a result of market-making activities or other trading activities. The Company has agreed that, for a period of 180 days after the Expiration Date, it will make this Prospectus available to any participating Broker-Dealer for use in connection with any such resale. See "Plan of Distribution." Holders of Notes not tendered and accepted in the Exchange Offer will continue to hold such Notes and will be entitled to all the rights and benefits and will be subject to the limitations applicable thereto under the Indenture and with respect to transfer under the Securities Act. The Company will pay all the expenses incurred by it incident to the Exchange Offer. See "The Exchange Offer." SEE "RISK FACTORS" ON PAGE 20 FOR A DESCRIPTION OF CERTAIN RISKS TO BE CONSIDERED BY HOLDERS WHO TENDER THEIR NOTES IN THE EXCHANGE OFFER. THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. The date of this Prospectus is , 1996 There has not previously been any public market for the Notes or the Exchange Notes. The Company does not intend to list the Exchange Notes on any securities exchange or to seek approval for quotation through any automated quotation system. There can be no assurance that an active market for the Exchange Notes will develop. See "Risk Factors--Absence of a Public Market Could Adversely Affect the Value of Exchange Notes." Moreover, to the extent that Notes are tendered and accepted in the Exchange Offer, the trading market for untendered and tendered but unaccepted Notes could be adversely affected. The Exchange Notes will be available initially only in book-entry form. The Company expects that the Exchange Notes issued pursuant to this Exchange Offer will be issued in the form of a Global Certificate (as defined), which will be deposited with, or on behalf of, The Depository Trust Company (the "Depositary") and registered in its name or in the name of Cede & Co., its nominee. Beneficial interests in the Global Certificate representing the Exchange Notes will be shown on, and transfers thereof to qualified institutional buyers will be effected through, records maintained by the Depositary and its participants. After the initial issuance of the Global Certificate, Exchange Notes in certified form will be issued in exchange for the Global Certificate only on the terms set forth in the Indenture. See "Description of Exchange Notes--Book-Entry; Delivery and Form." AVAILABLE INFORMATION The Company has filed with the Commission a Registration Statement on Form S-1 (the "Exchange Offer Registration Statement," which term shall encompass all amendments, exhibits, annexes and schedules thereto) pursuant to the Securities Act, and the rules and regulations promulgated thereunder, covering the Exchange Notes being offered hereby. This Prospectus does not contain all the information set forth in the Exchange Offer Registration Statement. For further information with respect to the Company and the Exchange Offer, reference is made to the Exchange Offer Registration Statement. Statements made in this Prospectus as to the contents of any contract, agreement or other document referred to are not necessarily complete. With respect to each such contract, agreement or other document filed as an exhibit to the Exchange Offer Registration Statement, reference is made to the exhibit for a more complete description of the document or matter involved, and each such statement shall be deemed qualified in its entirety by such reference. The Exchange Offer Registration Statement, including the exhibits thereto, can be inspected and copied at the public reference facilities maintained by the Commission at Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549, at the Regional Offices of the commission at 75 Park Place, New York, New York 10007 and at Northwestern Atrium Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of such materials can be obtained from the Public Reference Section of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates. As a result of the filing of the Exchange Offer Registration Statement with the Commission, the Company will become subject to the informational requirements of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance therewith will be required to file periodic reports and other information with the Commission. The obligation of the Company to file periodic reports and other information with the Commission will be suspended if the Exchange Notes are held of record by fewer than 300 holders as of the beginning of any fiscal year of the Company other than the fiscal year in which the Exchange Offer Registration Statement is declared effective. The Company will nevertheless be required to continue to file reports with the Commission if the Exchange Notes are listed on a national securities exchange. In the event the Company ceases to be subject to the informational requirements of the Exchange Act, the Company will be required under the Indenture to continue to file with the Commission the annual and quarterly reports, information, documents or other reports, including, without limitation, reports on Forms 10-K, 10-Q and 8-K, which would be required pursuant to the informational requirements of the Exchange Act. Under the Indenture, the Company shall file with the Trustee annual, quarterly and other reports within fifteen days after it files such reports with the Commission. Further, to the extent that annual, quarterly or other financial reports are furnished by the Company to stockholders generally it will mail such reports to holders of Exchange Notes. The Company will furnish annual and quarterly financial reports to stockholders of the Company and will mail such reports to holders of Exchange Notes pursuant to the Indenture, thus holders of Exchange Notes will receive financial reports every quarter. Annual reports delivered to the Trustee and the holders of Exchange Notes will contain financial information that has been examined and reported upon, with an opinion expressed by an independent public or certified public accountant. The Company will also furnish such other reports as may be required by law. 2 DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS THIS PROSPECTUS INCLUDES "FORWARD-LOOKING STATEMENTS" WITHIN THE MEANING OF SECTION 27A OF THE SECURITIES ACT AND SECTION 21E OF THE EXCHANGE ACT. ALL STATEMENTS OTHER THAN STATEMENTS OF HISTORICAL FACTS INCLUDED IN THIS PROSPECTUS, INCLUDING WITHOUT LIMITATION, CERTAIN STATEMENTS UNDER PROSPECTUS SUMMARY," "MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS" AND "BUSINESS" AND LOCATED ELSEWHERE HEREIN REGARDING THE COMPANY'S FINANCIAL POSITION, BUSINESS STRATEGY, COST CUTTING PLANS AND PLANS TO TAKE ADVANTAGE OF SYNERGIES, MAY CONSTITUTE FORWARD-LOOKING STATEMENTS. ALTHOUGH THE COMPANY BELIEVES THAT THE EXPECTATIONS REFLECTED IN SUCH FORWARD-LOOKING STATEMENTS ARE REASONABLE, IT CAN GIVE NO ASSURANCE THAT SUCH EXPECTATIONS WILL PROVE TO HAVE BEEN CORRECT. IMPORTANT FACTORS THAT COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM THE COMPANY'S EXPECTATIONS ("CAUTIONARY STATEMENTS") ARE DISCLOSED IN THIS PROSPECTUS, INCLUDING WITHOUT LIMITATION IN CONJUNCTION WITH THE FORWARD-LOOKING STATEMENTS INCLUDED IN THIS PROSPECTUS AND UNDER "RISK FACTORS." ALL SUBSEQUENT WRITTEN AND ORAL FORWARD-LOOKING STATEMENTS ATTRIBUTABLE TO THE COMPANY OR PERSONS ACTING ON ITS BEHALF ARE EXPRESSLY QUALIFIED IN THEIR ENTIRETY BY THE CAUTIONARY STATEMENTS. 3 PROSPECTUS SUMMARY The following summary is qualified in its entirety by, and should be read in conjunction with, the more detailed information and financial data, including the Financial Statements and notes thereto included elsewhere in this Prospectus. Market data used throughout this Prospectus were obtained from internal company surveys and industry publications dating primarily from 1994 to 1996, the most currently available information. Industry publications generally state that the information contained therein has been obtained from sources believed to be reliable, but that the accuracy and completeness of such information is not guaranteed. The Company has not independently verified this market data. Similarly, internal company surveys, while believed by the Company to be reliable, have not been verified by any independent sources. As used in this Prospectus, unless the context otherwise requires, "Dade" refers to Dade International Inc. prior to the consummation of the acquisition (the "Acquisition") of the in vitro diagnostics business ("Dade Chemistry") of E.I. du Pont de Nemours and Company and certain of its affiliates ("DuPont"), and the "Company" refers to Dade International Inc. after giving effect to the Acquisition. THE COMPANY The Company is the largest supplier of in vitro diagnostics ("IVD") products and services to clinical laboratories in the United States and the third largest IVD supplier to clinical laboratories in the world. Of the total estimated $13.8 billion global IVD market, the Company serves a $7.1 billion segment that consists of IVD instruments, reagents (compounds and liquids used to perform tests), consumables (sample containers, lids, etc.) and services targeted primarily at clinical laboratories ("Company Served Markets"). Within the Company Served Markets, the Company has market leadership positions in four of its five core product segments (clinical chemistry, microbiology, hemostasis and controls) and a strong niche position in the fifth (immunochemistry). On a pro forma basis, the Company would have generated revenue and EBITDA of $959.0 million and $179.5 million, respectively, for the year ended December 31, 1995. In vitro (literally, "in glass") diagnostic tests are conducted outside the body and are used to identify and measure substances in patients' tissue, blood or urine samples which enable physicians to diagnose, treat and monitor patients. The most common IVD tests, accounting for up to 40% of a clinical laboratory's test volume, are traditional clinical chemistry tests such as glucose, cholesterol or sodium measured as part of routine blood checks. Other IVD tests measure bodily functions such as blood clotting ability, fertility and cardiac function or measure the presence of infections or drugs. The wide range and important nature of these tests have established IVD testing as an integral part of the managed healthcare environment, providing for accurate and timely patient diagnosis and treatment. Increasingly, IVD testing is being recognized as making a significant contribution to improving patient care and lowering total patient costs. As a result, management believes that future growth in IVD testing will be driven by (i) greater automation in order to achieve more consistent test results at lower costs; (ii) applications of emerging test technologies (e.g., cardiac markers which test for the occurrence of heart attacks); and (iii) demographic shifts such as the aging of the population. IVD tests are conducted primarily in clinical laboratories which, in the United States, consist of approximately 6,000 hospital-based laboratories and 4,000 reference laboratories (independent of hospitals). The Company provides products and services to over 90% of domestic hospital clinical laboratories and to the majority of reference laboratories worldwide. Nearly all hospitals require laboratory testing capability due to the "STAT" or emergency nature of their diagnostic needs and, therefore, represent a stable, attractive customer segment for the Company. The Company manufactures and markets a broad offering of IVD products and services which includes: (i) instruments (approximately 10% of pro forma 1995 sales); (ii) reagents and consumables (approximately 80% of pro forma 1995 sales); and (iii) services (approximately 10% of pro forma 1995 sales). The Company's extensive 4 product line is capable of conducting over 500 different types of IVD tests and serves over half of the global IVD market. In total, the Company has a worldwide installed base of approximately 21,500 instruments. With a typical instrument life of five to ten years, the Company's installed base of instruments generates annual revenue of approximately $40,100 per instrument from ongoing sales of reagents, consumables and service. More importantly, all but one of the Company's instrument systems are "closed" systems, which require the exclusive use of Company reagents and consumables in order to run tests. As a result, through its large installed base of instruments, the Company generates an attractive, stable and recurring stream of revenue from reagents, consumables, and service contracts. The table below profiles the Company's position within each segment of the Company Served Markets:
COMPANY SERVED MARKETS ---------------------------------------------------------------------------------------------- MICROBIOLOGY CLINICAL CHEMISTRY (1) IMMUNOCHEMISTRY (2) (3) HEMOSTASIS CONTROLS ------------------------ ------------------ -------------- -------------- -------------- Primary Test Routine tests for Specialized Identifies Measures blood Assesses the Purpose: substances found in tests for disease- clotting accuracy and large concentrations in substances causing ability precision of blood or urine samples found in small bacteria and instruments concentrations assists in the and procedures in blood determination of various IVD samples of treatment manufacturers Example Tests: --Cholesterol level --Screen for --Strep or --Bleeding --Instrument --Glucose level heart attack staph risk before, check --Fertility infection during and test --Effective after surgery --Thyroid antibiotic --Other function treatment bleeding disorders Company's Worldwide Installed Base as of June 30, 1996: 9,300 4,200 3,700 4,300 N/A Company System Type: Closed Closed Closed Open N/A Number of Test Types Offered by the Company: 198 30 150 30 160 Percent of Company's Pro Forma 1995 Sales (4): 47% 11% 14% 15% 4% Average U.S. Price to Patient: $9/test $25/test $20/test $14/test N/A Company Product Lines: Paramax (Dade) Stratus (Dade) MicroScan Dade Total Quality Dimension (Dade (Dade) Hemostasis Controls Chemistry) (Dade) aca (Dade Chemistry) Analyst (Dade Chemistry)
- -------- (1) The clinical chemistry segment of the Company Served Markets consists of automated clinical chemistry. See "Industry." (2) The immunochemistry segment of the Company Served Markets consists of the thyroid, drugs of abuse, cancer, therapeutic drug monitoring, cardiac, anemia and fertility test segments. See "Industry." (3) The microbiology segment of the Company Served Markets consists of identification/minimum inhibitory concentration ("ID/MIC" ) microbiology. See "Industry." (4) Excludes the sales of third-party distributed products and services as well as immunohematology products. 5 COMPETITIVE STRENGTHS The Company attributes its leading positions in the IVD market to the following competitive strengths: . Leading manufacturer and supplier of IVD instruments and supplies. With 1995 pro forma sales of $959.0 million, the Company is the leading supplier of IVD products and services to clinical laboratories in the United States and is the third largest IVD supplier to clinical laboratories in the world. The Company is the domestic market leader in automated clinical chemistry and the only supplier with domestic leadership positions in four major IVD segments. . Broadest product and service offering. The Company is the only supplier of products and services across five major IVD segments. The Company believes that its broad product offering provides a competitive advantage in marketing its products to a wide range of customers (from single-site hospitals to Health Systems (see "Industry") to reference laboratories), each with varying testing and performance requirements. For example, the Company believes that its ability to offer "one-stop shopping" due to its broad product offering was instrumental in its April 1996 signing of a five year agreement for all of the Company's five core product lines with Columbia/HCA (the largest for-profit hospital chain in the United States). . Stable and recurring stream of reagent, consumable and service revenues. The Company generates a stable and profitable stream of revenues from its large installed base of instruments which require the ongoing consumption of various reagents, consumables, and services. More importantly, all but one of the Company's instrument systems, representing approximately 80% of all installed instruments, are "closed" systems, which require customers to use the Company's reagents and consumables exclusively. In 1995, sales from reagents, consumables, and services accounted for approximately 90% of the Company's pro forma sales. . Extensive sales and service organization. The Company's sales and service force of approximately 1,900 professionals worldwide is one of the largest in the industry. Management believes this large network of customer support functions (including sales, installation, training and service) provides the Company with a competitive advantage in both acquiring and retaining customers. . Management team with successful track record. The Company has an experienced management team that averages twenty years each in the health care industry. Over the last several years, management has demonstrated its ability to develop leading market share positions, rationalize infrastructure and reduce costs. BUSINESS STRATEGY The Acquisition expanded Dade's leadership positions by significantly improving its competitive position in the important clinical chemistry segment. The Acquisition was consistent with the Company's strategy to seek consolidation opportunities within the IVD industry that leverage its installed base, broad product offering, international presence and economies of scale to increase profitability and enhance its global leadership position. Dade believes that its combination with Dade Chemistry creates one of the best positioned suppliers of IVD products and services in the world. The Company is committed to improving its strong market position through the following strategies: . Cross-sell products to increase market penetration. The Acquisition provides the Company with a unique opportunity to cross-sell existing product lines between Dade's and Dade Chemistry's extensive customer bases. The Company intends to capitalize on cross-selling opportunities primarily by marketing Dade Chemistry's clinical chemistry products to existing Dade customers and marketing Dade's controls, microbiology, immunochemistry and hemostasis products together with the sale of clinical chemistry analyzers. 6 . Increase international presence. The Acquisition provides Dade with exposure to new international markets and increases Dade's total pro forma 1995 international sales by 48% to approximately $277 million. This increased international presence will allow the Company to leverage sales, marketing and administrative costs in countries currently served by both Dade and Dade Chemistry and increase market share by introducing existing products to countries currently served by only one of the two businesses. The Company believes international markets also present growth opportunities due to the immaturity of these markets. . Maintain a pipeline of new products. The Company's research and development resources focus on three types of initiatives: (i) expanding test menus, such as the recent introduction of thirteen new assays in the Dimension product line; (ii) upgrading instruments, such as MicroScan's WalkAway or Dade Chemistry's next generation Dimension; and (iii) developing niche instrument platforms, such as Dade Hemostasis' Platelet Function Analyzer ("PFA"), the world's first commercial in vitro system to provide automated analysis of blood platelet function. The Company believes that these initiatives will allow it to both expand its large installed base and increase reagent revenue per instrument. . Leverage current infrastructure to reduce costs. In connection with the Acquisition, the Company has identified significant cost reduction opportunities expected to result in approximately $27 million of annual savings by 1997. These reductions consist of approximately $26 million from the immediate elimination of DuPont worldwide corporate allocations and other redundant costs (offset by approximately $20 million of incremental infrastructure costs required to operate within the reconfigured overall organization) as well as approximately $21 million from additional savings opportunities. In addition, the Company believes there are additional long-term cost saving opportunities related to improving manufacturing processes and leveraging its cost structure to further enhance profitability. . Seek additional consolidation opportunities. The Company believes that large IVD industry participants with broad product offerings and large installed bases have a competitive advantage in the current health care environment. The Company believes the Acquisition positions it to be one of the few market participants able to benefit from customer migration towards IVD suppliers with broad product offerings. The Company intends to continue to seek opportunities to form alliances and joint ventures, or acquire businesses, product lines and technologies to further enhance its global position. The Company's principal executive offices are located at 1717 Deerfield Road, Deerfield, Illinois 60015-0778 and its telephone number at such offices is (847) 267-5300. 7 THE TRANSACTIONS General On May 7, 1996 the Company completed the Acquisition (the "Closing") of Dade Chemistry from DuPont for $512.0 million plus the assumption of certain liabilities and obligations of DuPont. The Company is a wholly owned subsidiary of Diagnostics Holding, Inc. ("Holdings"). Bain Capital, Inc. ("Bain Capital") and GS Capital Partners, L.P., an affiliate of the Goldman Sachs Group, L.P. ("GS Capital"), and their respective related investors own substantially all of the voting capital stock of Holdings, which owns all of the outstanding capital stock of the Company. The Company's management has purchased common stock of Holdings and will be eligible to receive additional equity in part based upon the operating performance of the Company. See "Management--Compensation of Executive Officers." Funding for the Acquisition, related acquisition costs and the refinancing of then existing indebtedness (collectively, the "Refinancing") consisted of: (i) gross proceeds from the offering of the Notes of $350.0 million; (ii) borrowings under a credit agreement with certain banks (the "Bank Credit Agreement") of $510.0 million; and (iii) then existing cash on hand. The Bank Credit Agreement provided for $460.0 million of term loans and a $125.0 million revolving credit facility, of which $50.0 million was drawn down at the Closing of the Acquisition. The Acquisition and the Refinancing are collectively referred to herein as the "Transactions." See "The Transactions." Transition Services Agreement. At the Closing, the Company and DuPont entered into a transition services agreement (the "Transition Services Agreement") pursuant to which DuPont provides primarily international support services to the Company, including, among other things, certain human resources, finance and accounting services, information management, warehousing and distribution services, sales and marketing services and regulatory support as well as the lease and management of certain facilities and the assistance of certain designated personnel. Domestic services provided under the Transition Services Agreement include certain information management and purchasing support services. In general, DuPont will make these services available for one year from the date of the Closing. The Company will have the right to request that a particular service no longer be provided, subject to notice requirements. Services under the Transition Services Agreement are provided by DuPont at their estimated historical cost. Manufacturing Agreement. At the Closing, the Company and DuPont entered into a Manufacturing Agreement (the "Manufacturing Agreement") pursuant to which DuPont, or a successor, will continue to manufacture certain clinical analyzer components and related service parts at DuPont's manufacturing facility in Newtown, Connecticut for up to three years from the date of the Closing. Services under the Manufacturing Agreement are to be provided at DuPont's estimated historical cost. Subsequent to the Closing, DuPont divested its Newtown facility in conjunction with the sale of certain of its businesses. DuPont transferred its obligations under the Manufacturing Agreement to the purchaser of the Newtown facility. Prior to the Acquisition, Dade Chemistry operated as subsidiaries and divisions of DuPont and none of DuPont's debt was specifically allocated to Dade Chemistry. See "Risk Factors" for a description of certain risks relating to such level of indebtedness and the Acquisition. 8 THE NOTES OFFERING Notes....................... The Notes were sold by the Company on May 7, 1996 to BT Securities Corporation, CS First Boston, and Morgan Stanley & Co., Inc. (the "Initial Purchasers") pursuant to a Purchase Agreement dated May 7, 1996 (the "Purchase Agreement"). The Initial Purchasers subsequently resold the Notes to qualified institutional buyers pursuant to Rule 144A under the Securities Act and to a limited number of institutional accredited investors that agreed to comply with certain transfer restrictions and other conditions. Registration Rights Pursuant to the Purchase Agreement, the Company Agreement................... and the Initial Purchasers entered into a Registration Rights Agreement dated May 7, 1996 (the "Registration Rights Agreement"), which grants the holder of the Notes certain exchange and registration rights. The Exchange Offer is intended to satisfy such exchange rights which terminate upon the consummation of the Exchange Offer. THE EXCHANGE OFFER Securities Offered.......... $350,000,000 aggregate principal amount of Series B 11 1/8% Senior Subordinated Notes due 2006 (the "Exchange Notes"). The Exchange Offer.......... $1,000 principal amount of the Exchange Notes in exchange for each $1,000 principal amount of Notes. As of the date hereof, $350,000,000 aggregate principal amount of Notes are outstanding. The Company will issue the Exchange Notes to holders on or promptly after the Expiration Date. Based on an interpretation by the staff of the Commission set forth in no-action letters issued to third parties, the Company believes that Exchange Notes issued pursuant to the Exchange Offer in exchange for Notes may be offered for resale, resold and otherwise transferred by any holder thereof (other than any such holder which is an "affiliate" of the Company within the meaning of Rule 405 under the Securities Act) without compliance with the registration and prospectus delivery provisions of the Securities Act, provided that such Exchange Notes are acquired in the ordinary course of such holder's business and that such holder does not intend to participate and has no arrangement or understanding with any person to participate in the distribution of such Exchange Notes. Each Participating Broker-Dealer that receives Exchange Notes for its own account pursuant to the Exchange Offer must acknowledge that it will deliver a prospectus in connection with any resale of such Exchange Notes. The Letter of Transmittal states that by so acknowledging and by delivering a prospectus, a Participating Broker-Dealer will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act. This Prospectus, as it may be amended or supplemented from time to 9 time, may be used by a Participating Broker- Dealer in connection with resales of Exchange Notes received in exchange for Notes where such Notes were acquired by such Participating Broker- Dealer as a result of market-making activities or other trading activities. The Company has agreed that, for a period of 180 days after the Expiration Date, it will make this Prospectus available to any Participating Broker-Dealer for use in connection with any such resale. See "Plan of Distribution." Any holder who tenders in the Exchange Offer with the intention to participate, or for the purpose of participating, in a distribution of the Exchange Notes could not rely on the position of the staff of the Commission enunciated in no- action letters and, in the absence of an exemption therefrom, must comply with the registration and prospectus delivery requirements of the Securities Act in connection with any resale transaction. Failure to comply with such requirements in such instance may result in such holder incurring liability under the Securities Act for which the holder is not indemnified by the Company. Expiration Date............. 5:00 p.m., New York City time, on , 1996 unless the Exchange Offer is extended, in which case the term "Expiration Date" means the latest date and time to which the Exchange Offer is extended. Accrued Interest on the Exchange Notes and the Notes...................... Each Exchange Note will bear interest from its issuance date. Holders of Notes that are accepted for exchange will receive, in cash, accrued interest thereon to, but not including, the issuance date of the Exchange Notes. Such interest will be paid with the first interest payment on the Exchange Notes. Interest on the Notes accepted for exchange will cease to accrue upon issuance of the Exchange Notes. Conditions to the Exchange The Exchange Offer is subject to certain Offer....................... customary conditions, which may be waived by the Company. See "The Exchange Offer--Conditions." Procedures for Tendering Each holder of Notes wishing to accept the Notes....................... Exchange Offer must complete, sign and date the accompanying Letter of Transmittal, or a facsimile thereof, in accordance with the instructions contained herein and therein, and mail or otherwise deliver such Letter of Transmittal, or such facsimile, together with the Notes and any other required documentation to the Exchange Agent (as defined) at the address set forth herein. By executing the Letter of Transmittal, each holder will represent to the Company that, among other things, the Exchange Notes acquired pursuant to the Exchange Offer are being obtained in the ordinary course of business of the person receiving such Exchange Notes, whether or not such person is the holder, that neither the holder nor any such other person has any arrangement or understanding with any person to participate in the distribution of such Exchange Notes and that neither the holder nor any such other 10 person is an "affiliate," as defined under Rule 405 of the Securities Act, of the Company. See "The Exchange Offer--Purpose and Effect of the Exchange Offer" and "--Procedures for Tendering." Untendered Notes............ Following the consummation of the Exchange Offer, holders of Notes eligible to participate but who do not tender their Notes will not have any further exchange rights and such Notes will continue to be subject to certain restrictions on transfer. Accordingly, the liquidity of the market for such Notes could be adversely affected. Consequences of Failure to The Notes that are not exchanged pursuant to the Exchange.................... Exchange Offer will remain restricted securities. Accordingly, such Notes may be resold only (i) to the Company, (ii) pursuant to Rule 144A or Rule 144 under the Securities Act or pursuant to some other exemption under the Securities Act, (iii) outside the United States to a foreign person pursuant to the requirements of Rule 904 under the Securities Act, or (iv) pursuant to an effective registration statement under the Securities Act. See "The Exchange Offer-- Consequences of Failure to Exchange." Shelf Registration If any holder of the Notes (other than any such Statement................... holder which is an "affiliate" of the Company within the meaning of Rule 405 under the Securities Act) is not eligible under applicable securities laws to participate in the Exchange Offer, and such holder has provided information regarding such holder and the distribution of such holder's Notes to the Company for use therein, the Company has agreed to register the Notes on a shelf registration statement (the "Shelf Registration Statement") and use its best efforts to cause it to be declared effective by the Commission as promptly as practical on or after the consummation of the Exchange Offer. The Company has agreed to maintain the effectiveness of the Shelf Registration Statement for, under certain circumstances, a maximum of three years, to cover resales of the Notes held by any such holders. Special Procedures for Beneficial Owners.......... Any beneficial owner whose Notes are registered in the name of a broker, dealer, commercial bank, trust company or other nominee and who wishes to tender should contact such registered holder promptly and instruct such registered holder to tender on such beneficial owner's behalf. If such beneficial owner wishes to tender on such owner's own behalf, such owner must, prior to completing and executing the Letter of Transmittal and delivering its Notes, either make appropriate arrangements to register ownership of the Notes in such owner's name or obtain a properly completed bond power from the registered holder. The transfer of registered ownership may take considerable time. The Company will keep the Exchange Offer open for not less than twenty days in order to provide for the transfer of registered ownership. Guaranteed Delivery Holders of Notes who wish to tender their Notes Procedures.................. and whose Notes are not immediately available or who cannot deliver their Notes, the 11 Letter of Transmittal or any other documents required by the Letter of Transmittal to the Exchange Agent (or comply with the procedures for book-entry transfer) prior to the Expiration Date must tender their Notes according to the guaranteed delivery procedures set forth in "The Exchange Offer--Guaranteed Delivery Procedures." Withdrawal Rights........... Tenders may be withdrawn at any time prior to 5:00 p.m., New York City time, on the Expiration Date. Acceptance of Notes and Delivery of Exchange Notes...................... The Company will accept for exchange any and all Notes which are properly tendered in the Exchange Offer prior to 5:00 p.m., New York City time, on the Expiration Date. The Exchange Notes issued pursuant to the Exchange Offer will be delivered promptly following the Expiration Date. See "The Exchange Offer--Terms of the Exchange Offer." Use of Proceeds............. There will be no cash proceeds to the Company from the exchange pursuant to the Exchange Offer. Exchange Agent.............. IBJ Schroder Bank & Trust Company THE EXCHANGE NOTES General..................... The form and terms of the Exchange Notes are the same as the form and terms of the Notes (which they replace) except that (i) the Exchange Notes bear a Series B designation, (ii) the Exchange Notes have been registered under the Securities Act and, therefore, will not bear legends restricting the transfer thereof, and (iii) the holders of Exchange Notes will not be entitled to certain rights under the Registration Rights Agreement, including the provisions providing for an increase in the interest rate on the Notes in certain circumstances relating to the timing of the Exchange Offer, which rights will terminate when the Exchange Offer is consummated. See "The Exchange Offer--Purpose and Effect of the Exchange Offer." The Exchange Notes will evidence the same debt as the Notes and will be entitled to the benefits of the Indenture. See "Description of Exchange Notes." The Notes and the Exchange Notes are referred to herein collectively as the "Senior Subordinated Notes." Securities Offered.......... $350,000,000 aggregate principal amount of Series B 11 1/8% Senior Subordinated Notes due 2006 of the Company. Maturity Date............... May 1, 2006. Interest Payment Dates...... May 1 and November 1, commencing November 1, 1996. Ranking..................... The Exchange Notes will be unsecured obligations of the Company, ranking subordinate in right of payment to all Senior Debt (as defined herein) of the Company. The aggregate amount of such Senior Debt was $485.0 million at June 30, 1996. 12 Optional Redemption......... The Exchange Notes are not redeemable at the Company's option prior to May 1, 2001. Thereafter, the Exchange Notes will be redeemable, in whole or in part, at the option of the Company, at the redemption prices set forth herein plus accrued interest to the date of redemption. In addition, at any time, or from time to time, on or prior to May 1, 1999, the Company may, at its option, use the net cash proceeds of one or more Equity Offerings (as defined below) to redeem up to 40% (provided that such percentage shall decrease to 35% if an Initial Public Offering has not been consummated on or prior to March 31, 1997 and any other Exchange Notes previously redeemed pursuant to this provision shall be included in determining such percentage) of the aggregate principal amount of Exchange Notes originally issued at a redemption price equal to 110% (111.125% in the case of any Equity Offering after March 31, 1997) of the principal amount thereof plus, in each case, accrued interest to the date of redemption; provided that at least $175.0 million aggregate principal amount of Exchange Notes remains outstanding immediately after any such redemption. In order to effect the foregoing redemption with the proceeds of any Equity Offering, the Company shall make such redemption not more than 120 days after the consummation of any such Equity Offering. As used in the preceding paragraph, "Equity Offering" means any offering of Qualified Capital Stock of Holdings or the Company; provided that, in the event of any Equity Offering by Holdings, Holdings contributes to the capital of the Company the portion of the net cash proceeds of such Equity Offering necessary to pay the aggregate redemption price (plus accrued interest to the redemption date) of the Exchange Notes to be redeemed pursuant to the preceding paragraph. If fewer than all of the Exchange Notes are to be redeemed the Exchange Notes to be redeemed shall be selected on a pro rata basis, by lot or in such other fair and reasonable manner chosen at the discretion of the Trustee (as defined herein). See "Description of Exchange Notes-- Redemption." Change of Control........... In the event of a Change of Control (as defined herein), the Company will be obligated to make an offer to purchase all of the outstanding Exchange Notes at a redemption price of 101% of the principal amount thereof plus accrued interest to the date of repurchase. However, the Company's obligation to repurchase Exchange Notes pursuant to a Change of Control is subject to compliance with the requirements of Rule 14e-1 under the Exchange Act and any other applicable securities laws and regulations and subject to either the repayment in full by the Company of indebtedness under the Bank Credit Agreement and all other Senior Debt or the Company obtaining the requisite consents under the Bank Credit Agreement and all other Senior Debt to permit the repurchase of the Exchange Notes. In addition, provisions in the Bank Credit Agreement (or other similar agreements subsequently entered into) could delay or prohibit the making of such an offer in 13 the event of a Change of Control. If indebtedness is outstanding under the Bank Credit Agreement then any offer by the Company to repurchase the Exchange Notes would require approval of the lenders under the Bank Credit Agreement. Accordingly, the right of the holders of the Exchange Notes to require the Company to repurchase the Exchange Notes may be of limited value if the Company cannot obtain approval under the Bank Credit Agreement. Additionally, there can be no assurance that the Company will have sufficient funds to pay the required purchase price for all Exchange Notes tendered by holders upon a Change of Control. However, if the Company cannot or does not repurchase the Exchange Notes upon a Change of Control, the Exchange Notes will remain outstanding and will continue to accrue interest. Further, subject to compliance with the requirements of Rule 14e-1 under the Exchange Act and any other applicable securities laws and regulations, if the Company does not repurchase the Exchange Notes upon a Change of Control then an Event of Default (as defined herein) will have occurred under the Indenture. See "Description of Exchange Notes--Events of Default." The definition of Change of Control covers any recapitalizations or transactions with the Company's management or its affiliates in which Bain Capital or GS Capital does not retain control of the Company. Neither the Board of Directors of the Company nor the Trustee may waive the covenant relating to a holder's right to redemption upon a Change of Control. See "Description of Exchange Notes--Change of Control." Modification of the The Company and the Trustee, without the consent Indenture................... of the holders of the Senior Subordinated Notes, may amend the Indenture, if in the opinion of the Trustee, such change does not adversely affect the rights of the holders in any material respect. Other modifications to the Indenture may be made with the consent of holders of a majority of the principal amount of the Senior Subordinated Notes then outstanding except that consent is required from all holders of Senior Subordinated Notes in instances such as reductions in the amount or timing of interest payments, reductions in the principal and changes in the maturity, redemption or repurchase dates of the Senior Subordinated Notes. See "Description of Exchange Notes-- Modification of the Indenture." Events of Default........... An Event of Default occurs under the Indenture when there is a payment default under the Bank Credit Agreement but not when there is a non- payment default. Thus, a change of control under the Bank Credit Agreement would only result in an Event of Default if it resulted in a payment default under the Bank Credit Agreement. See "Description of Exchange Notes--Events of Default" and "Risk Factors--A Change of Control Could Adversely Affect Noteholders." Certain Covenants........... The Indenture contains covenants relating to, among other things, the incurrence of additional indebtedness, the payment of dividends, 14 the repurchase of stock and the making of certain other Restricted Payments (as defined herein), the creation of certain liens, transactions with affiliates, mergers and certain consolidations, and the sale of assets. Many of these covenants contain significant exceptions. See "Description of Exchange Notes--Certain Covenants." For additional information regarding the Exchange Notes, see "Description of Exchange Notes." RISK FACTORS See "Risk Factors" for a discussion of certain factors that should be considered by holders who tender their Notes in the Exchange Offer, including risks relating to (i) the Company's high level of indebtedness, (ii) ability to successfully integrate Dade Chemistry, (iii) potential business disruption from restructuring activities, (iv) charges relating to the transactions, (v) the subordination of the Exchange Notes, (vi) competition, (vii) dependence on the clinical laboratory industry, (viii) reliance on services provided by Baxter and DuPont, and (ix) the effect of exchange rates on the Company's results of operations. 15 SUMMARY HISTORICAL FINANCIAL DATA PREDECESSOR/DADE/COMPANY The following summary historical financial data as of and for the six months ended June 30, 1995 and 1996 were derived from unaudited historical financial statements of Dade and the Company included elsewhere in this Prospectus. The following summary historical financial data for the period from December 17, 1994 through December 31, 1994 and for the year ended December 31, 1995 were derived from the audited financial statements of Dade included elsewhere in this Prospectus. The following summary historical financial data for the year ended December 31, 1993 and the period from January 1, 1994 through December 16, 1994 were derived from the audited financial statements of Baxter Diagnostics, Inc. and certain of its affiliates (the "Predecessor"), which were formerly owned by Baxter International Inc. ("Baxter"), included elsewhere in this Prospectus. The following summary historical financial data for the year ended December 31, 1992 were derived from audited financial statements of the Predecessor, which have not been included in this Prospectus. The following summary historical financial data for the year ended December 31, 1991 were derived from unaudited historical financial statements of the Predecessor (not included in this Prospectus) which, in the opinion of management, reflect all adjustments (consisting of normal recurring adjustments) necessary for a fair presentation of the results for the unaudited period. The information contained in this table should be read in conjunction with "Selected Historical Financial Data--Predecessor/Dade/Company," "Management's Discussion and Analysis of Financial Condition and Results of Operations" and the Financial Statements and accompanying notes thereto included elsewhere in this Prospectus.
THE PREDECESSOR DADE COMBINED DADE DADE COMPANY ----------------------------------- -------------- -------------- ------- ---------- ------------- PERIOD FROM PERIOD FROM PERIOD FROM SIX MONTHS SIX MONTHS 1/1/94 TO 12/17/94 TO 1/1/94 TO ENDED ENDED 1991 1992 1993 12/16/94(1) 12/31/94(1)(2) 12/31/94(1)(2) 1995(2) 6/30/95(2) 6/30/96(2)(3) ------ ------ ------ ----------- -------------- -------------- ------- ---------- ------------- (DOLLARS IN MILLIONS) INCOME STATEMENT DATA: Net sales(4).......... $619.0 $683.3 $690.2 $650.6 $19.0 $669.6 $614.3 $300.0 $353.8 Gross profit (5)...... 257.6 281.5 269.4 259.2 0.4 259.6 245.7 91.3 145.4 Marketing and administrative expenses............. 165.7 183.9 179.2 173.2 2.4 175.6 171.1 77.6 113.1 Research and develop- ment expenses (6).... 45.9 53.2 47.2 33.4 1.1 34.5 26.5 13.7 114.2 Restructuring and other related items.. -- -- 30.2(7) -- -- -- -- -- 11.4(8) Goodwill amortization expense (credit)..... 2.7 2.7 2.6 2.6 (0.1) 2.5 (0.4) (0.8) 0.8 Income (loss) from operations (5)(6).... 43.3 41.7 10.2 50.0 (3.0) 47.0 48.5 0.8 (94.1) Provision (benefit) for income taxes..... 14.4 13.9 12.3 14.2 (2.3) 11.9 7.2 (4.8) (42.8) Net income (loss) (5)(6)(9)..... 28.9 22.1 (1.9) 35.8 (1.9) 33.9 12.7 (8.1) (97.9) OTHER FINANCIAL DATA: EBITDA (10)........... $ 84.3 $ 96.2 $ 99.1 $ -- $ -- $112.1 $ 97.0 $ 46.0 $ 54.2 Depreciation and amortization expense (credit) (11)........ 41.0 54.5 58.7 59.6 (0.1) 59.5 4.9 1.6 13.3 Capital expenditures.. 79.2 71.2 56.7 29.9 1.0 30.9 35.3 13.8 25.0 Ratio of earnings to fixed charges (12)... -- -- -- -- N/M N/M 1.6x N/M N/M
JUNE 30, JUNE 30, 1995(2) 1996(2)(3) -------- ---------- BALANCE SHEET DATA: Working capital........................................... $267.8 $ 175.8 Total assets.............................................. 554.0 1,044.6 Long term debt (including current maturities)............. 302.7 810.0 Stockholder's equity (deficit)............................ 78.9 (19.2)
- -------- N/M=Not meaningful (1) The financial data of the Predecessor and Dade for the period from January 1, 1994 to December 16, 1994 and the period from December 17, 1994 to December 31, 1994, respectively, were prepared on different bases of accounting. 16 (2) Financial data for the period from December 17, 1994 to December 31, 1994, for the year ended December 31, 1995 and the six months ended June 30, 1995 and 1996 exclude the results of the Bartels and Burdick & Jackson product lines, which have been reflected as "Net assets held for sale." (3) The financial data of the Company for the period from January 1, 1996 to June 30, 1996 includes six months of Dade's results of operations and two months of Dade Chemistry's post-Acquisition results of operations. The balance sheet data as of June 30, 1996 reflects the Acquisition. (4) Net sales include the net sales of Bartels and Burdick & Jackson as follows: 1991--$32.1 million, 1992--$34.7 million, 1993--$36.7 million, and 1994 (combined)--$34.3 million. Beginning on December 17, 1994, net sales of Bartels and Burdick & Jackson were excluded from total net sales as these businesses were accounted for as assets held for sale--see Note (2) above. (5) Dade's gross profit and net loss for the period December 17, 1994 to December 31, 1994 include a non-recurring pre-tax charge of $5.6 million (after-tax impact of $3.4 million) to cost of goods sold related to the partial amortization of $46.0 million of allocated purchase price made to record acquired finished goods and work-in-process inventory at fair market value related to the Initial Acquisition. Dade's gross profit and net income for the year ended December 31, 1995 include the non-recurring pre-tax amortization of the remaining $40.4 million (after-tax impact of $24.2 million) of the inventory write-up discussed above. The Company's gross profit and net loss for the six months ended June 30, 1996 include a non- recurring pre-tax charge of $25.5 million (after-tax impact of $15.3 million) to cost of goods sold related to the amortization of allocated purchase price made to record acquired finished goods and work-in-process inventory at fair market value related to the Acquisition. (6) Includes a non-recurring pre-tax charge of $98.1 million ($58.9 million after-tax) during the six months ended June 30, 1996 related to the write-off of allocated purchase price made to record in-process research and development projects at fair market value related to the Acquisition. Such in-process research and development projects have no alternative future use. (7) Reflects the restructuring effort undertaken by Baxter for downsizing its sales, general and administrative, instrument manufacturing and non-strategic research and development staffs in an effort to reorganize the businesses into a single operating division. (8) Represents the non-recurring charge for restructuring and related costs incurred as a direct result of the Acquisition. The restructuring charge primarily relates to severance and relocation costs. (9) In 1992, Baxter recorded a $5.7 million after-tax charge related to the Predecessor for the cumulative effect of adopting SFAS No. 106 "Employers' Accounting for Postretirement Benefits Other Than Pensions" and, in 1993, Baxter recorded a $3.3 million after-tax charge related to the Predecessor for the cumulative effect of adopting SFAS No. 109 "Accounting for Income Taxes." In the six months ended June 30, 1996 the Company recorded extraordinary losses of $25.0 million (after-tax) related to the early extinguishment of debt. (10) "EBITDA" represents, for any period, the sum of income (loss) from operations; depreciation and amortization expense; for 1993, restructuring and downsizing costs of $30.2 million; for the period December 17, 1994 to December 31, 1994, non-recurring purchase accounting write-offs of $5.6 million; for 1995, and for the six months ended June 30, 1995, non-recurring purchase accounting write-offs of $40.4 million (see Note (5) above) and $3.2 million of non-recurring, non-cash charges (see Note 2 of "Notes to Combined/Consolidated Financial Statements" included elsewhere in this Prospectus) and; for the six months ended June 30, 1996, non-recurring purchase accounting charges of $98.1 million (see Note (6) above), $25.5 million (see Note (5) above) and the $11.4 million non-recurring restructuring charge (see Note (8) above). EBITDA is presented because it is a widely accepted financial indicator of a company's ability to service and/or incur indebtedness. However, EBITDA should not be considered as an alternative to net income as a measure of the Predecessor's, Dade's or the Company's operating results or to cash flows as a measure of liquidity. (11) Excludes non-recurring purchase accounting write-offs (see Notes (5) and (6) above). (12) No ratio of earnings to fixed charges is presented for the Predecessor because the Predecessor was not allocated interest expense by Baxter. In calculating the ratio of earnings to fixed charges for Dade, earnings include income (loss) before income taxes plus fixed charges. Fixed charges consist of interest expense and amortization of deferred financing fees, whether expensed or capitalized, plus one-third of rental expense under operating leases which has been deemed by management to be representative of an appropriate interest factor. As a result of the loss incurred during the period December 17, 1994 to December 31, 1994, earnings did not cover fixed charges by $4.3 million. Excluding the impact during this period of the non- recurring purchase accounting write-off of $5.6 million (see Note (5) above), the ratio of earnings to fixed charges would have been 2.0 to 1.0. As a result of the loss incurred during the six months ended June 30, 1995, earnings did not cover fixed charges by $12.9 million. Excluding the similar $40.4 million non-recurring write-off in 1995, the 1995 ratio of earnings to fixed charges for the full year would have been 2.7 to 1.0 and 2.6 to 1.0 for the six months ended June 30, 1995. As a result of the loss incurred during the six months ended June 30, 1996, earnings did not cover fixed charges by $115.7 million. Excluding the $25.5 million non-recurring write-off of inventory step-up, the $98.1 million non-recurring write-off of in-process research and development and the $11.4 million non-recurring restructuring charge, the ratio of earnings to fixed charges for the six months ended June 30, 1996 would have been 1.7 to 1.0. 17 SUMMARY UNAUDITED PRO FORMA FINANCIAL DATA The following summary unaudited pro forma financial data set forth below for the year ended December 31, 1995 and the six months ended June 30, 1996 give effect to the Transactions as if they had occurred as of January 1, 1995 and 1996, respectively. The summary unaudited pro forma income statement data and other data do not (i) purport to represent what the Company's results of operations actually would have been if the Transactions had actually occurred as of such dates or what such results will be for any future periods or (ii) give effect to certain non-recurring charges resulting from the Transactions. The information contained in this table should be read in conjunction with "Unaudited Pro Forma Financial Data," "Selected Historical Financial Data-- Predecessor/Dade/Company," "Management's Discussion and Analysis of Financial Condition and Results of Operations" and the Financial Statements and accompanying notes thereto included elsewhere in this Prospectus.
YEAR ENDED SIX MONTHS ENDED DECEMBER 31, 1995 JUNE 30, 1996 --------------------- ------------------------- SUMMARY SUMMARY COMBINED SUMMARY COMBINED SUMMARY HISTORICAL PRO FORMA HISTORICAL PRO FORMA ---------- --------- ---------- --------- (DOLLARS IN (DOLLARS IN MILLIONS) MILLIONS) (UNAUDITED) (UNAUDITED) INCOME STATEMENT DATA: Net sales................... $959.0 $959.0 $468.6 $468.6 Gross profit................ 408.9(1) 404.6(1) 204.8(2) 229.4 Marketing and administrative expenses................... 279.9 261.0 150.7 145.3 Research and development ex- penses..................... 60.2 55.0 126.0(3) 26.2 Restructuring and other re- lated items................ -- -- 11.4(4) -- Goodwill amortization ex- pense (credit)............. (0.4) 6.0 0.8 3.0 Income (loss) from opera- tions...................... 69.2(1) 82.6(1) (84.1)(2)(3) 54.9 Interest expense............ 38.4 84.1 26.8 42.8 Provision for (benefit from) income taxes............... 10.9 0.3 (39.8) 5.8 Net income (loss)........... 22.1(1) 0.4(1) (93.7)(5) 8.7 OTHER DATA: EBITDA (6).................. $152.3 $179.5 $ 70.4 $ 78.6 Depreciation and amortiza- tion expense............... 70.9 83.1 19.5 23.7 Capital expenditures........ 56.5 56.5 25.0 25.0 Ratio of earnings to fixed charges (7)................ 1.0x 1.3x Ratio of EBITDA to cash in- terest expense (8)......... 2.3x 2.0x Ratio of total debt to EBITDA (9)................. 4.8x 5.5x Ratio of "Adjusted total debt" to EBITDA (10)....... 4.5x 5.2x
- -------- (1) Includes non-recurring, non-cash purchase accounting charges related to the amortization to cost of goods sold of inventory step-up of $40.4 million. The after-tax impact is $24.2 million. In addition, includes $8.8 million of abnormal restructuring implementation costs of Dade Chemistry related to the relocation of its Manati, Puerto Rico operations to Glasgow, Delaware, $1.4 million of costs related to the relocation of Dade Chemistry's headquarters to existing space at the Glasgow, Delaware facility, and $0.4 million of severance costs related to European workforce reduction actions (aggregate after-tax impact of $6.4 million). (2) Includes non-recurring, non-cash purchase accounting charge related to the amortization to cost of goods sold of inventory step-up of $25.5 million ($15.3 million after tax) related to the Acquisition. (3) Includes non-recurring, pre-tax charge of $98.1 million ($58.9 million after-tax) during the six months ended June 30, 1996 related to the write- off of allocated purchase price made to record in-process research and development projects at fair market value related to the Acquisition. Such in-process research and development projects have no alternative future use. (4) Represents the non-recurring charge for restructuring and related costs incurred as a direct result of the Acquisition. The restructuring charge primarily relates to severance and relocation costs. (5) Includes the impact of items described in (2), (3), and (4) above, plus the net of tax $25.0 million of extraordinary charges related to the write-off of deferred financing fees and tender premium costs in connection with the refinancing of existing indebtedness. 18 (6) "EBITDA" represents the sum of income from operations; depreciation and amortization expense; for 1995, for Dade Chemistry, $8.8 million of abnormal costs associated with relocating the Manati operations, $1.4 million of relocation costs for moving Dade Chemistry's headquarters, $0.4 million of severance costs related to European workforce reduction actions (see Note (1) above) and a $1.6 million adjustment to exclude the favorable effect of Dade Chemistry's LIFO method of accounting (for the "Summary Combined Historical" data only); and, for Dade, for 1995, $3.2 million of non-recurring, non-cash charges (see Note 2 of "Notes to Combined/Consolidated Financial Statements" included elsewhere in this Prospectus); for the six months ended June 30, 1996, $11.4 non-recurring charge for restructuring and related costs for severance, relocation and facility closures, and non-recurring purchase accounting charges of $98.1 million (see Note (3) above) and $25.5 million (see Note (2) above). EBITDA is presented because it is a widely accepted financial indicator of a company's ability to service and/or incur indebtedness. However, EBITDA should not be considered as an alternative to net income as a measure of the Company's operating results or to cash flows as a measure of liquidity. (7) In calculating the ratio of earnings to fixed charges, earnings consists of income before income taxes plus fixed charges. Fixed charges consist of interest expense and amortization of deferred financing fees, whether expensed or capitalized, plus one-third of the rent expense under operating leases, which management believes is a reasonable approximation of an appropriate interest factor. For 1995, excluding the non-recurring impacts of $40.4 million for Dade and the $8.8 million and $1.4 million of relocation costs as well as the $0.4 million of European severance costs for Dade Chemistry (see Note (1) above), the pro forma ratio of earnings to fixed charges would have been 1.6 to 1.0. (8) In calculating the ratio of EBITDA to cash interest expense, interest expense excludes amortization of deferred financing fees of $5.7 million for the year ended December 31, 1995 and $2.8 million for the six months ended June 30, 1996. (9) For the six months ended June 30, 1996, calculated by annualizing EBITDA. (10) "Adjusted total debt" reflects the assumed $54.9 million repayment of debt related to the expected proceeds from the sale of Dade's "Net assets held for sale." 19 RISK FACTORS In addition to the other information set forth in this Prospectus, the following factors should be considered carefully in evaluating an investment in the Exchange Notes offered hereby. HIGH LEVEL OF INDEBTEDNESS AND POSSIBLE INABILITY TO SERVICE DEBT In connection with the Transactions, the Company incurred a significant amount of indebtedness. At June 30, 1996, the Company's indebtedness was $835.0 million, and its shareholder's deficit was $19.2 million. In addition, subject to the restrictions in the Bank Credit Agreement and the Indenture, the Company may incur additional indebtedness from time to time to finance acquisitions or capital expenditures or for other purposes. For the six months ended June 30, 1996, on a pro forma basis, after giving effect to the Acquisition as if it had occurred on January 1, 1996, the Company's ratio of earnings to fixed charges would have been 1.3 to 1.0. The level of the Company's indebtedness could have important consequences to holders of the Exchange Notes, including: (i) a substantial portion of the Company's cash flow from operations must be dedicated to debt service and will not be available for other purposes; (ii) the Company's ability to obtain additional debt financing in the future for working capital, capital expenditures or acquisitions may be limited; and (iii) the Company's level of indebtedness could limit its flexibility in reacting to changes in the industry and economic conditions generally. Certain of the Company's competitors currently operate on a less leveraged basis and have significantly greater operating and financing flexibility than the Company. The Company's ability to pay interest on the Exchange Notes and to satisfy its other debt obligations will depend upon its future operating performance, which will be affected by prevailing economic conditions and financial, business and other factors, certain of which are beyond its control. If the Company is unable to service its indebtedness, it will be forced to adopt an alternative strategy that may include actions such as reducing or delaying capital expenditures, selling assets, restructuring or refinancing its indebtedness, or seeking additional equity capital. There can be no assurance that any of these strategies could be effected on satisfactory terms, if at all. See "Management's Discussion and Analysis of Financial Condition and Results of Operations--Liquidity and Capital Resources." ABILITY TO SUCCESSFULLY COMPLETE THE INTEGRATION OF DADE CHEMISTRY The integration and consolidation of Dade Chemistry into the Company since the consummation of the Acquisition is proceeding according to management's plan. This process, however, will require substantial continuing management, financial and other resources and may pose risks with respect to production, customer service and market share. While the Company's management believes that it has sufficient financial and management resources to complete the integration of Dade Chemistry, there can be no assurance in this regard or that the Company will not experience difficulties with customers, personnel or others. In addition, although the Company's management believes that the Acquisition has enhanced the competitive position and business prospects of the Company, there can be no assurance that such benefits will be fully realized or that the integration of Dade Chemistry into the Company will ultimately be successful. As the Company adapts to the current health care environment and completes the integration of Dade Chemistry, it has made and will continue to make operational changes including consolidating certain operations and closing certain facilities, all of which are designed to improve the future profitability of the Company. However, there can be no assurance as to the cost required to effect these integration changes or the timing or amount of any cost savings that are actually realized as a result of such operational changes. A reserve of $15.0 million was established through the purchase price allocation primarily to provide for severance costs related to the reconfigured Dade Chemistry organization. Additionally, an $11.4 million restructuring reserve was established for direct costs to exit and consolidate certain facilities in accordance with the integration plan for Dade Chemistry. These actions may result in significant disruption to the Company's operations, which could have a material adverse effect on the Company's business. Management is continuing to assess the Company's overall organization and cost structures and may, as a result of this on-going process, develop future initiatives to increase operating and administrative efficiency and enhance profitability. See "Management's Discussion and Analysis of Financial Condition and Results of Operations." 20 CHARGES RELATING TO TRANSACTIONS WILL AFFECT FUTURE FINANCIAL STATEMENTS The pro forma statements of income include adjustments to historical data for items which will affect the business on an ongoing basis after the Transactions. These adjustments reflect the full impact of structural changes to business operations made in conjunction with the Transactions, including increased interest expense related to the Transactions, increased goodwill and intangibles amortization and increased depreciation expense, and an estimated $19.6 million of annual incremental stand-alone corporate expenses. The pro forma statements of income exclude the impact of non-recurring, non- cash charges which the Company will record within its first full year of operation. In the two months following the Transactions, the Company has charged to cost of goods sold $25.5 million related to the write-up to fair market value of finished goods and work-in-process inventory and charged to expense $98.1 million related to the write-off of value allocated to in- process research and development projects resulting from purchase price allocation. SUBORDINATION OF EXCHANGE NOTES The Exchange Notes are subordinated in right of payment to all Senior Debt of the Company. In the event of bankruptcy, liquidation or reorganization of the Company, the assets of the Company will be available to pay obligations on the Exchange Notes only after all Senior Debt has been paid in full, and there may not be sufficient assets remaining to pay amounts due on any or all of the Exchange Notes then outstanding. In addition, indebtedness outstanding under the Bank Credit Agreement is secured by substantially all of the assets of the Company and its subsidiaries. The Senior Debt of the Company at June 30, 1996 was approximately $485.0 million. Additional Senior Debt may be incurred by the Company from time to time subject to certain restrictions contained in the Bank Credit Agreement and the Indenture. See "Description of Bank Credit Agreement" and "Description of Exchange Notes." RESTRICTIONS IMPOSED BY TERMS OF THE COMPANY'S INDEBTEDNESS The Indenture restricts, among other things, the Company's ability to incur additional indebtedness, incur liens, pay dividends or make certain other restricted payments, consummate certain asset sales, enter into certain transactions with affiliates, incur indebtedness that is subordinate in right of payment to any Senior Debt and senior in right of payment to the Exchange Notes, impose restrictions on the ability of a subsidiary to pay dividends or make certain payments to the Company, merge or consolidate with any other person or sell, assign, transfer, lease, convey or otherwise dispose of all or substantially all of the assets of the Company. See "Description of Exchange Notes--Certain Covenants." In addition, the Bank Credit Agreement contains other and more restrictive covenants and prohibits the Company from prepaying its indebtedness (including the Exchange Notes). The Bank Credit Agreement also requires the Company to maintain specified financial ratios and satisfy certain financial condition tests. The Company's ability to meet those financial ratios and tests can be affected by events beyond its control, and there can be no assurance that the Company will meet those tests. A breach of any of these covenants could result in a default under the Bank Credit Agreement and/or the Indenture. In the event of an event of default under the Bank Credit Agreement, the lenders could elect to declare all amounts outstanding under the Bank Credit Agreement, together with accrued interest, to be immediately due and payable. If the Company were unable to repay those amounts, the lenders could proceed against the collateral granted to them to secure that indebtedness. If the Bank Credit Agreement indebtedness were to be accelerated, there can be no assurance that the assets of the Company would be sufficient to repay in full that indebtedness and the other indebtedness of the Company, including the Exchange Notes. Substantially all the assets of the Company and its subsidiaries are pledged as security under the Bank Credit Agreement. See "Description of Bank Credit Agreement." COMPETITION The IVD industry is highly competitive, and the Company encounters competition from several international manufacturers in both domestic and foreign markets. Certain competitors are significantly larger and have greater 21 resources, financial and other, than the Company. Moreover, the Company encounters different competitors in each of its key product lines and there can be no assurance that the Company will not encounter increased competition in the future which could have a material adverse effect on the Company's business. Competition in the healthcare environment, coupled with uncertainty created in the marketplace by the divestiture of the Predecessor, has created flat to negative sales growth across a significant portion of the Company's product lines. DEPENDENCE ON CLINICAL LABORATORY INDUSTRY Substantially all of the Company's sales are to the clinical laboratory industry. The clinical laboratory industry is heavily regulated and may be significantly affected by healthcare reform legislation. Adverse changes in the clinical laboratory industry could have a material adverse effect on the Company. RELIANCE ON BAXTER AND DUPONT; DISTRIBUTION AND TRANSITION SERVICES AGREEMENTS Prior to the consummation of the acquisition (the "Initial Acquisition") of the IVD products and services business of Baxter by Diagnostics Holding, Inc. ("Holdings"), the parent of Dade, the Company was a division of Baxter and did not have suitable infrastructure to operate as a stand-alone entity. In connection with the Initial Acquisition, Baxter agreed to provide domestic distribution services and certain transitional services to Dade. Domestic distribution services include certain warehousing and distribution, sales and marketing, order processing, credit/collection, information management and quality control services as well as the lease and management of certain facilities and the assistance of certain designated personnel. Transitional services, which primarily support international activities, include certain human resources, finance and accounting services, information management, warehousing and distribution services, sales and marketing services, and regulatory support as well as the lease and management of certain facilities and the assistance of certain designated personnel. Each of the distribution agreement and the transition services agreement is terminable in whole or in part by one or both parties at various times prior to their respective expiration dates. Dade will need to continue establishing certain stand-alone capabilities such as treasury, finance, human resources, cash management, information systems, etc., which the Company expects will be funded as part of its normal operations. The partial or complete termination of the distribution or transition services agreements (either by Baxter or the Company) before suitable alternative arrangements are secured, or the Company's inability to replicate these services in a cost-effective manner, could have a material adverse effect on the Company. However, the Company believes that the services provided under the transition services agreements could be replicated by the Company at a cost equal to or less than the fees currently paid to Baxter. Also, the Company believes that services provided under the distribution and transition services agreements could be provided by competitors of Baxter in a cost effective manner. Prior to the consummation of the Acquisition, Dade Chemistry was a division of DuPont. DuPont has agreed to provide certain transitional services (similar to those provided by Baxter) to the Company and has assigned the responsibility for the manufacture of certain clinical analyzer components and related service parts to the purchaser of DuPont's manufacturing facility in Newtown, Connecticut. The partial or complete termination of either of these agreements (either by DuPont or the Company) before suitable alternative arrangements are secured could have a material adverse effect on the Company. See "The Transactions." The Company has incurred and expects additional start- up and duplicative costs as the Company establishes certain stand-alone functions covered by transition services provided by Baxter and DuPont. EFFECT OF POTENTIAL HEALTHCARE REFORM ON PROFIT MARGINS AND BUSINESS APPROACH Healthcare reform and the growth of managed care organizations have been considerable forces in the IVD industry. These competitive forces continue to place constraints on the levels of overall pricing, and thus could have a material adverse effect on the profit margins of the Company's products. Such continuing changes in the United States healthcare market could also force the Company to alter its approach in selling, marketing, distributing, and servicing its customer base. 22 A CHANGE OF CONTROL COULD ADVERSELY AFFECT NOTEHOLDERS In the event of a Change of Control, the Company will be required (subject to compliance with the requirements of Rule 14e-1 under the Exchange Act and any other applicable securities laws and regulations and subject to either the repayment in full by the Company of indebtedness under the Bank Credit Agreement and all other Senior Debt or the Company obtaining the requisite consents under the Bank Credit Agreement and all other Senior Debt to permit the repurchase of the Exchange Notes) to offer to purchase all the outstanding Senior Subordinated Notes at a purchase price equal to 101% of the principal amount plus accrued interest to the date of repurchase. The Bank Credit Agreement would restrict such a purchase and the offer would require the approval of the lenders thereunder. Accordingly, the right of the holders of the Exchange Notes to require the Company to repurchase the Exchange Notes may be of limited value if the Company cannot obtain approval under the Bank Credit Agreement. Additionally, there can be no assurance that the Company will have the financial resources to fund its obligations in the event of a Change of Control. Further, if a change of control under the Bank Credit Agreement were not considered a Change of Control and did not result in a payment default under the Bank Credit Agreement, then the holders of the Exchange Notes could be materially adversely affected. See "Description of Exchange Notes--Change of Control" and "Description of the Bank Credit Agreement." EXCHANGE RATES CAN ADVERSELY AFFECT RESULTS OF OPERATIONS Approximately 28% of the Company's sales are international, and a significant portion of the Company's earnings are attributable to operations conducted abroad. The United States dollar value of sales and earnings of these operations varies with currency exchange rate fluctuations. Changes in certain exchange rates could have an adverse effect on the Company's ability to meet interest and principal obligations on its United States dollar- denominated debt. FLOATING RATES UNDER THE BANK CREDIT AGREEMENT MAY ADVERSELY AFFECT DEBT SERVICE Interest under the Bank Credit Agreement, which represents 57% of the Company's debt portfolio at June 30, 1996, accrues at a floating rate. As a result, increases in the LIBOR rate could materially adversely affect the Company's ability to service debt under the Bank Credit Agreement which could result in the Company's inability to make interest payments on the Exchange Notes. To reduce exposure to interest rate fluctuations, the Company has purchased $230.0 million of interest rate caps. See "Description of Bank Credit Agreement." LACK OF RESTRICTIONS ON INTEREST RATE SWAP OBLIGATIONS AND CURRENCY AGREEMENTS There are no restrictions on the amount of indebtedness that may be incurred by the Company pursuant to interest rate swap obligations and currency agreements. Although the Company only intends to engage in hedging actions directed at reducing the Company's exposure to interest rate and currency movements, any change in the Company's policy or imprudent use of such derivative products could have a material adverse effect on the Company. RELIANCE ON PATENTS AND OTHER INTELLECTUAL PROPERTY The Company owns numerous United States and foreign patents, and has patent applications pending in the United States and abroad. The Company owns numerous United States and foreign registered trademarks and service marks, and has applications for the registration of trademarks and service marks pending in the United States and abroad. The Company also owns several United States copyright registrations. In addition, the Company owns a wide array of unpatented proprietary technology and know-how. Further, the Company licenses certain intellectual property rights from third parties. See "Business-- Intellectual Property." The Company's ability to compete effectively with other companies depends, to a significant extent, on its ability to maintain the proprietary nature of its owned and licensed intellectual property. There can be no 23 assurance as to the degree of protection offered by the various patents, the likelihood that patents will be issued on pending patent applications, or, with regard to the licensed intellectual property, that the licenses will not be terminated. Furthermore, there can be no assurance that others will not develop around the patented aspects of any of the Company's current or proposed products, independently develop technology or know-how that is the same as or competitive with the Company's technology and know-how or otherwise obtain access to the Company's intellectual property. If the Company were unable to maintain the proprietary nature of its intellectual property and its significant current or proposed products, the Company's business would be materially adversely affected. REGULATORY COMPLIANCE The Company's products and operations are subject to regulation by the United States Food and Drug Administration (the "FDA") and various other federal and state agencies, as well as by a number of foreign governmental agencies. FDA regulations require that most of the Company's new products have pre-marketing approval by the FDA, or prove substantial equivalence through a 510(k) application, and also require that most of the Company's products be manufactured in accordance with Good Manufacturing Practices ("GMP"). Compliance with such regulations substantially increases the time, difficulty and costs incurred in obtaining and maintaining the approval to market newly developed and existing products. In addition, government regulatory actions can result in the seizure or recall of products, suspension or revocation of the authority necessary for their production and sale, and other civil or criminal sanctions. See "Business--Legal Proceedings." ENVIRONMENTAL LIABILITY The Company is subject to federal, state, local and foreign environmental, health and safety laws and regulations, and to liabilities and compliance costs associated with past and current handling, processing, storing and disposing of hazardous substances and wastes. From time to time, the operations of the Company have resulted and may in the future result in noncompliance with environmental or occupational health and safety laws, or liability pursuant to such laws. For a more detailed discussion of environmental compliance and liability issues affecting the Company, see "Business--Environmental, Health and Safety Matters." POSSIBLE INABILITY TO REPURCHASE EXCHANGE NOTES UPON CHANGE OF CONTROL In the event of a Change of Control, the Company will be required to make an offer to repurchase all outstanding Exchange Notes. In such event, there can be no assurance that the Company will have sufficient funds to pay the required purchase price. In addition, provisions contained in the Bank Credit Agreement could delay or prohibit the making of such an offer. CONTROLLING STOCKHOLDERS As of October 1, 1996, Bain Capital, Inc. ("Bain Capital"), GS Capital Partners, L.P. ("GS Capital"), and their respective related investors owned in excess of 95% of Holdings' voting stock, and Bain Capital and GS Capital are parties to a stockholders agreement regarding the ownership (including the voting) of such stock. By virtue of such stock ownership and agreement, Bain Capital and GS Capital have the power to control all matters submitted to stockholders of, and to elect all directors of, Holdings and, indirectly, to elect all directors of the Company. ABSENCE OF A PUBLIC MARKET COULD ADVERSELY AFFECT THE VALUE OF EXCHANGE NOTES Prior to the Exchange Offer, there has not been any public market for the Notes. The Notes have not been registered under the Securities Act and will be subject to restrictions on transferability to the extent that they are not exchanged for Exchange Notes by holders who are entitled to participate in this Exchange Offer. The holders of Notes (other than any such holder that is an "affiliate" of the company within the meaning of Rule 405 under the Securities Act) who are not eligible to participate in the Exchange Offer are entitled to certain registration 24 rights, and the Company is required to file a Shelf Registration Statement with respect to such Notes. The Exchange Notes will constitute a new issue of securities with no established trading market. The Company does not intend to list the Exchange Notes on any national securities exchange or to seek the admission thereof to trading in the National Association of Securities Dealers Automated Quotation System. The Initial Purchaser has advised the Company that it currently intends to make a market in the Exchange Notes, but it is not obligated to do so and may discontinue such market making at any time. In addition, such market making activity will be subject to the limits imposed by the Securities Act and the Exchange Act and may be limited during the Exchange Offer and the pendency of the Shelf Registration Statements. Accordingly, no assurance can be given that an active public or other market will develop for the Exchange Notes or as to the liquidity of the trading market for the Exchange Notes. If a trading market does not develop or is not maintained, holders of the Exchange Notes may experience difficulty in reselling the Exchange Notes or may be unable to sell them at all. If a market for the Exchange Notes develops, any such market may be discontinued at any time. If a public trading market develops for the Exchange Notes, future trading prices of the Notes will depend on many factors, including, among other things, prevailing interest rates, the Company's operating results and the market for similar securities. Depending on prevailing interest rates, the market for similar securities and other factors, including the financial condition of the Company, the Exchange Notes may trade at a discount from their principal amount. FAILURE TO FOLLOW EXCHANGE OFFER PROCEDURES COULD ADVERSELY AFFECT HOLDERS Issuance of the Exchange Notes in exchange for the Notes pursuant to the Exchange Offer will be made only after a timely receipt by the Company of such Notes, a properly completed and duly executed Letter of Transmittal and all other required documents. Therefore, holders of the Notes desiring to tender such Notes in exchange for Exchange Notes should allow sufficient time to ensure timely delivery. The Company is under no duty to give notification of defects or irregularities with respect to the tenders of Notes for exchange. Notes that are not tendered or are tendered but not accepted will, following the consummation of the Exchange Offer, continue to be subject to the existing restrictions upon transfer thereof and, upon consummation of the Exchange Offer, certain registration rights under the Registration Rights Agreement will terminate. In addition, any holder of Notes who tenders in the Exchange Offer for the purpose of participating in a distribution of the Exchange Notes may be deemed to have received restricted securities and, if so, will be required to comply with the registration and prospectus delivery requirements of the Securities Act in connection with any resale transactions. Each Participating Broker-Dealer that receives Exchange Notes for its own account in exchange for Notes, where such Notes were acquired by such Participating Broker-Dealer as a result of market-making activities or other trading activities, must acknowledge that it will deliver a prospectus in connection with any resale of such Exchange Notes. See "Plan of Distribution." To the extent that Notes are tendered and accepted in the Exchange Offer, the trading market for untendered and tendered but unaccepted Notes could be adversely affected. See "The Exchange Offer." 25 THE TRANSACTIONS OVERVIEW Dade Chemistry Systems Inc., an affiliate of Dade, and DuPont are parties to a Purchase Agreement dated as of December 11, 1995 as amended and restated on May 7, 1996 (the "Acquisition Agreement"), pursuant to which Dade acquired Dade Chemistry. Funding for the Acquisition and the Refinancing consisted of: (i) gross proceeds from the offering of Notes of $350.0 million; (ii) borrowings under the Bank Credit Agreement of $510.0 million; and (iii) existing cash on hand. The Bank Credit Agreement provided for $460.0 million of term loans and a $125.0 million revolving credit facility, of which $50.0 million was drawn down at the Closing. TERMS OF THE ACQUISITION AGREEMENT As consideration for the Acquisition, Dade paid $512.0 million in cash to DuPont at Closing, which amount is subject to adjustment as provided below, plus assumption of certain liabilities and obligations of DuPont. The purchase price will be (i) increased or decreased to the extent the accounts receivable, inventories and other miscellaneous assets of Dade Chemistry as of the date of the Closing exceeded or was less than, respectively, the accounts receivable, inventories and miscellaneous assets of Dade Chemistry as of December 31, 1994, and (ii) decreased to the extent the amount of capital expenditures made through the date of Closing was less than an agreed upon target. The purchase price adjustments are being determined through customary post-Closing adjustment mechanisms. The Acquisition Agreement contains other provisions customary for transactions of this size and type, including representations and warranties with respect to the condition and operations of the business, and covenants with respect to the conduct of the business prior to the Closing. Pursuant to the Acquisition Agreement, DuPont has agreed to retain, and/or indemnify Dade for, certain liabilities and obligations relating to Dade Chemistry, including liabilities and obligations relating to pre-Closing accounts payable and accrued expenses, taxes, employee compensation and other benefits (including post-retirement medical and life insurance benefits), environmental matters and other matters as specified in the Acquisition Agreement. Additionally, the Acquisition Agreement required Dade to assume certain liabilities of DuPont including product warranties, certain employee liabilities, deferred service obligations and other customer related contract obligations. TRANSITION SERVICES AGREEMENT At the Closing, the Company and DuPont entered into the Transition Services Agreement pursuant to which DuPont provides primarily international support services to the Company, including, among other things, certain human resources, finance and accounting services, information management, warehousing and distribution services, sales and marketing services and regulatory support as well as the lease and management of certain facilities and the assistance of certain designated personnel. Domestic services provided under the Transition Services Agreement include certain information management and purchasing support services. In general, DuPont will make these services available for one year from the date of the Closing. The Company has the right to request that a particular service no longer be provided, subject to notice requirements. Services under the Transition Services Agreement are provided by DuPont at their estimated historical cost. MANUFACTURING AGREEMENT At the Closing, the Company and DuPont entered into the Manufacturing Agreement pursuant to which DuPont, or a successor, will continue to manufacture certain clinical analyzer components and related service parts at DuPont's manufacturing facility in Newtown, Connecticut for up to three years from the date of the Closing. Services under the Manufacturing Agreement are to be provided at DuPont's estimated historical cost. Subsequent to the Closing DuPont divested its Newtown Facility in conjunction with the sale of certain of its businesses. DuPont transferred its obligations under the Manufacturing Agreement to the purchaser of the Newtown Facility. 26 USE OF PROCEEDS The Exchange Offer is intended to satisfy certain of the Company's obligations under the Registration Rights Agreement. The Company will not receive any cash proceeds from the issuance of the Exchange Notes in the Exchange Offer. The gross proceeds of $350.0 million from the issuance of the Notes, together with borrowings under the Bank Credit Agreement and cash on hand, were used to acquire the assets of Dade Chemistry and pay the related fees and expenses. See "The Acquisition." 27 CAPITALIZATION The following tables set forth the capitalization of the Company on an historical basis as of June 30, 1996. This table should be read in conjunction with the "Selected Historical Financial Data" included elsewhere in this Prospectus.
JUNE 30, 1996 --------------------- HISTORICAL (DOLLARS IN MILLIONS) (UNAUDITED) Long-term debt (including current maturities): Bank Credit Agreement Term loans......................................... $460.0 Senior Subordinated Notes............................ 350.0 ------ Total long-term debt............................. 810.0 ------ Stockholder's equity (deficit): Common stock/additional paid-in capital.............. 87.0 Notes receivable on capital contributions............ (0.2) Accumulated deficit (1).............................. (102.9) Unrealized loss on investment........................ (1.4) Cumulative translation adjustment.................... (1.7) ------ Total stockholder's equity (deficit)............. (19.2) ------ Total capitalization................................. $790.8 ======
- -------- (1) Includes aggregate after-tax charges of $133.6 million related to: (i) the immediate write-off of value allocated to in-process research and development projects in accordance with the purchase method of accounting for the Acquisition ($58.9 million); (ii) the write-off of deferred financing fees and the incurrence of the tender premium in connection with the refinancing of existing debt ($25.0 million); (iii) the provision for reorganization and integration costs related to Dade's existing facilities and personnel ($6.8 million); and (iv) the amortization of inventory step- ups related to the application of the purchase method of accounting of $27.6 million and $15.3 million for the Initial Acquisition and the Acquisition, respectively. 28 UNAUDITED PRO FORMA FINANCIAL DATA The following unaudited pro forma statements of income for the year ended December 31, 1995 and for the six month period ending June 30, 1996 give effect to the Transactions as if they had occurred on January 1, 1995 and 1996, respectively. The unaudited pro forma financial data are based on the historical consolidated financial statements of Dade and Dade Chemistry and the assumptions and adjustments described in the accompanying notes. The unaudited pro forma statements of income and of income before extraordinary items: (i) do not purport to represent what the Company's results of operations actually would have been if the Transactions had occurred as of the dates indicated or what such results will be for any future periods and (ii) exclude the impact of certain non-recurring charges directly related to the Transactions as disclosed in the accompanying notes. The unaudited pro forma financial data are based upon assumptions that the Company believes are reasonable, including those related to cost savings arising from the Company's integration plans, which the Company believes are both factually supportable and directly attributable to the Acquisition. Such unaudited pro forma financial data should be read in conjunction with the Financial Statements of Dade and Dade Chemistry and the accompanying notes thereto included elsewhere in this Prospectus. DADE INTERNATIONAL INC. UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF INCOME YEAR ENDED DECEMBER 31, 1995 (DOLLARS IN MILLIONS)
HISTORICAL -------------------------------- DADE COMPANY DADE CHEMISTRY COMBINED ADJUSTMENTS PRO FORMA ------ --------- -------- ----------- --------- Net sales............... $614.3 $344.7 $959.0 $959.0 Cost of sales........... 368.6 (1) 181.5(1) 550.1 $ 2.6 (2) 554.4 3.2 (3) 0.3 (4) (1.8)(5) ------ ------ ------ ------ ------ Gross profit............ 245.7 (1) 163.2(1) 408.9 (4.3) 404.6 Marketing and administrative expenses................ 171.1 108.8 279.9 (1.0)(5) 261.0 (6.6)(6) (12.3)(7) 1.0 (8) Research and development expenses................ 26.5 33.7 60.2 (4.7)(7) 55.0 (0.5)(5) Goodwill amortization expense (credit)........ (0.4) -- (0.4) 6.4 (9) 6.0 ------ ------ ------ ------ ------ Income from operations.. 48.5 20.7 69.2 13.4 82.6 Interest expense........ 30.8 7.6 38.4 45.7 (10) 84.1 Interest income......... (2.2) (2.2) -- (2.2) ------ ------ ------ ------ ------ Income before income taxes................... 19.9 (1) 13.1(1) 33.0 (32.3) 0.7 Provision for income taxes................... 7.2 3.7 10.9 (10.6)(11) 0.3 ------ ------ ------ ------ ------ Net income (loss)....... $ 12.7 (1) $ 9.4(1) $ 22.1 $(21.7) $ 0.4 ====== ====== ====== ====== ====== OTHER DATA: Ratio of earnings to fixed charges......... 1.0x(12) ====== Depreciation and amortization expense.. $ 45.3 (13) $ 25.6 $ 70.9 $ 12.2 $ 83.1 ====== ====== ====== ====== ====== EBITDA(14)............ $ 97.0 $ 55.3 $152.3 $ 27.2 $179.5 ====== ====== ====== ====== ====== Ratio of EBITDA to cash interest expense............... 2.3x(15) ======
See accompanying notes. 29 DADE INTERNATIONAL INC. NOTES TO UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF INCOME YEAR ENDED DECEMBER 31, 1995 (DOLLARS IN MILLIONS) The Unaudited Pro Forma Consolidated Statement of Income gives effect to the following unaudited pro forma adjustments: (1) Includes the non-recurring impact in 1995 for Dade of $40.4 of amortization of inventory step-up arising from application of purchase accounting to the Initial Acquisition as of December 16, 1994 ($24.2 after-tax), and for Dade Chemistry, $8.8 of abnormal restructuring implementation costs related to the relocation of its Manati, Puerto Rico operations to Glasgow, Delaware, $1.4 of costs related to Dade Chemistry's headquarters relocation to Glasgow, Delaware and $0.4 of severance costs associated with Dade Chemistry European workforce reduction actions (an aggregate $6.4 after-tax impact). (2) Represents additional depreciation expense resulting from the $46.1 write-up of property, plant and equipment to fair market value (primarily buildings and special-purpose manufacturing machinery and equipment), assumed to be allocated entirely to cost of sales. (3) Represents the additional amortization expense for the twelve months ended December 31, 1995 related to $32.1 of acquired patents and trademarks. (4) Reflects the estimated recurring cost savings of $1.3 relating to manufacturing operations and field service operations from management's reorganization plans relating to plant closings and certain production department and field service consolidations resulting in headcount reduction, offset by the removal of Dade Chemistry's $1.6 favorable LIFO impact (the Company is on the FIFO inventory cost method). (5) Represents the elimination of post-retirement medical and life insurance benefits expense (OPEB) related to Dade Chemistry ($3.3 in aggregate). Dade does not offer OPEB to its current employees and the Company will not offer it prospectively to employees of Dade Chemistry, except to the extent of OPEB liabilities retained by DuPont. (6) Reflects the elimination of 100% of DuPont's "indirect corporate cost allocations" and 100% of DuPont's "direct corporate cost allocations" made to Dade Chemistry (an aggregate of $26.2); and the replacement of such costs with the Company's estimate of incremental infrastructure costs required to operate within the reconfigured overall Company organization ($19.6). (7) Reflects the estimated recurring cost savings related to research and development as well as marketing and administrative activities from management's reorganization plans as described below: Consolidation of research and development organizations and headcount reduction along with elimination of Paramax-related research pro- jects............................................................... $ 4.7 Consolidation of domestic sales, marketing and service organizations ($9.5), along with international organizations in Europe and Japan ($2.1).............................................................. 11.6 Cost reductions arising from elimination of allocated DuPont corpo- rate-sponsored "variable compensation program" related to DuPont Medical Product Group management not remaining with Dade Chemistry.. 0.5 Elimination of $0.1 of rent expense at former Dade Chemistry head- quarters location (not included in assets to be sold), which has been relocated to space within an existing Glasgow, Delaware facil- ity in late 1995 at no incremental cost and contractual reduction in rent of $0.1 for the Dade Chemistry Delaware distribution facility from what DuPont historically charged the Dade Chemistry business... 0.2 ----- $17.0 =====
30 (8) Represents the additional annual management fee in excess of the historical fee paid by Dade ($2.0) to equal an agreed upon prospective annual fee of $3.0 to be charged by Bain Capital and Goldman Sachs & Co. for consulting and financial services to be provided to the Company. (9) Represents the adjustment to reflect ongoing goodwill amortization resulting from the purchase of Dade Chemistry. The Acquisition resulted in estimated goodwill of $159.7 based on a preliminary allocation of purchase price and is being amortized over a twenty-five year period (annual amortization of $6.4). (10) Addition to pro forma interest expense is summarized as follows:
YEAR ENDED DECEMBER 31, 1995 ------------ Elimination of Dade's and Dade Chemistry's historical interest expense...................................................... ($38.4) ------ Interest on the $350.0 Senior Subordinated Notes (11.125%).... 38.9 Interest on borrowing under Bank Credit Agreement at LIBOR (5.5374%) plus: Revolver-2.75% (8.2874% on $50.0)........................... 4.1 Term A-2.75% (8.2874% on $185.0)............................ 15.3 Term B-3.25% (8.7874% on $90.0)............................. 7.9 Term C-3.50% (9.0374% on $90.0)............................. 8.1 Term D-3.75% (9.2874% on $95.0)............................. 8.8 Commitment fee on unused revolving credit facility at 0.50%... 0.3 ------ Gross cash interest expense................................... 83.4 Less: Interest on $54.9 of debt to be repaid with proceeds from "Net assets held for sale" at an average rate of 8.7636% (a)............................................... (4.8) ------ Net cash interest............................................. 78.6 Amortization of Acquisition debt issuance costs of $45.7 (av- erage 8.29 years amortization)................................................ 5.5 ------ Interest from Acquisition debt requirements................... 84.1 ------ Net increase.................................................. $ 45.7 ======
- -------- (a) Generally accepted accounting principles permit nonrecognition of interest expense in post-acquisition periods on incremental debt to be paid down with the expected net proceeds from assets identified for sale at the date of an acquisition. (11) Reflects tax provision for pro forma adjustments required to yield an estimated effective income tax rate of 40% on pro forma income before income taxes. (12) For purposes of computing this ratio, earnings consist of income before income taxes plus fixed charges. Fixed charges consist of interest expense, amortization of deferred financing fees and one-third of the rent expense from operating leases, which management believes is a reasonable approximation of an interest factor. Excluding the non- recurring impacts of $40.4 for Dade and $8.8, $1.4 and $0.4, for Dade Chemistry (see Note 1), the pro forma ratio of earnings to fixed charges would have been 1.6 to 1.0. (13) Includes the non-recurring impact of $40.4 of amortization of inventory step-up arising from the application of purchase accounting to the Initial Acquisition. (14) EBITDA is defined as the sum of income from operations (excluding the $1.6 favorable impact of LIFO for Dade Chemistry (and the effect of its reversal in the "Adjustments" column in Note 4)); depreciation and amortization expense; $8.8 of abnormal restructuring implementation costs, $1.4 of relocation costs and $0.4 of European severance costs related to the activities of Dade Chemistry (see Note 1); and other non- cash charges of $3.2 for Dade (see Note 2 of "Notes to Combined/Consolidated Financial Statements" included elsewhere in this Prospectus). (15) In calculating the ratio of EBITDA to cash interest expense, interest expense excludes amortization of deferred financing fees of $5.5 for the year ended December 31, 1995. 31 DADE INTERNATIONAL INC. UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF INCOME SIX MONTHS ENDED JUNE 30, 1996 (DOLLARS IN MILLIONS)
HISTORICAL -------------------------- DADE COMPANY DADE CHEMISTRY COMBINED ADJUSTMENTS PRO FORMA ------ --------- -------- ----------- --------- Net sales................. $353.8 $114.8 $ 468.6 $468.6 Cost of sales............. 208.4 55.4 263.8 $(25.5)(1) 239.2 0.9 (2) 1.1 (3) (0.4)(4) (0.7)(5) ------ ------ ------- ------ ------ Gross profit.............. 145.4 59.4 204.8 24.6 229.4 Marketing and administrative expenses... 113.1 37.6 150.7 (0.4)(5) 145.3 (1.3)(6) (4.0)(7) 0.3 (8) Research and development expenses.................. 114.2 11.8 126.0 (98.1)(9) 26.2 (1.5)(7) (0.2)(5) Goodwill amortization expense................... 0.8 -- 0.8 2.2 (10) 3.0 Restructuring and other related items............. 11.4 -- 11.4 (11.4)(11) -- ------ ------ ------- ------ ------ Income (loss) from operations................ (94.1) 10.0 (84.1) 139.0 54.9 Interest expense.......... 23.9 2.9 26.8 16.0 (12) 42.8 Other income.............. (2.3) (0.1) (2.4) -- (2.4) ------ ------ ------- ------ ------ Income (loss) before income taxes.............. (115.7) 7.2 (108.5) 123.0 14.5 Provision for (benefit from) income taxes........ (42.8) 3.0 (39.8) 45.6 (13) 5.8 ------ ------ ------- ------ ------ Income (loss) before extraordinary items....... (72.9) 4.2 (68.7) 77.4 8.7 Extraordinary items, net of tax.................... 25.0 -- 25.0 (25.0)(14) -- ------ ------ ------- ------ ------ Net income (loss)......... $(97.9) $ 4.2 $ (93.7) $102.4 $ 8.7 ====== ====== ======= ====== ====== OTHER DATA: Ratio of earnings to fixed charges........... 1.3x(15) ====== Depreciation and amortization expense.... $ 13.3 $ 6.2 $ 19.5 $ 4.2 $ 23.7 ====== ====== ======= ====== ====== EBITDA(16).............. $(80.8) $ 16.2 $ (64.6) $143.2 $ 78.6 ====== ====== ======= ====== ====== Ratio of EBITDA to cash interest expense........ 2.0x(17) ======
See accompanying notes. 32 DADE INTERNATIONAL INC. NOTES TO UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF INCOME SIX MONTHS ENDED JUNE 30, 1996 (DOLLARS IN MILLIONS) The Unaudited Pro Forma Consolidated Statement of Income gives effect to the following unaudited pro forma adjustments: (1) Represents the non-recurring, non-cash impact in 1996 of $25.5 of amortization of inventory step-up arising from application of purchase accounting to the Acquisition as of May 1, 1996 ($15.3 after-tax). (2) Represents the additional depreciation expense for the four months ended April 30, 1996 resulting from the $46.1 write-up of property, plant and equipment to fair market value (primarily buildings and special-purpose manufacturing machinery and equipment), assumed to be allocated entirely to cost of sales. (3) Represents the additional amortization expense for the four months ended April 30, 1996 related to $32.1 of acquired patents. (4) Reflects the prorated estimated recurring cost savings of $0.7 relating to manufacturing operations and field service operations from management's reorganization plans relating to plant closings and certain production department and field service consolidations resulting in headcount reduction, offset by the removal of Dade Chemistry's $0.3 favorable LIFO impact for the four months ended April 30, 1996 (the Company is on the FIFO inventory cost method). (5) Represents the elimination of post-retirement medical and life insurance benefits expense (OPEB) related to Dade Chemistry ($1.3 in aggregate). Dade does not offer OPEB to its current employees and the Company will not offer it prospectively to employees of Dade Chemistry, except to the extent of OPEB liabilities retained by DuPont. (6) Reflects the elimination of 100% of DuPont's "indirect corporate cost allocations" and 100% of DuPont's "direct corporate cost allocations" made to Dade Chemistry for the four months ended April 30, 1996 (an aggregate of $7.8); and the replacement of such costs with the Company's estimate of prorated incremental infrastructure costs required to operate within the reconfigured overall Company organization ($6.5). (7) Reflects the estimated prorated recurring cost savings related to research and development as well as marketing and administrative activities from management's reorganization plans as described below: Consolidation of research and development organizations and headcount reduction along with elimination of Paramax-related research pro- jects................................................................. $1.5 Consolidation of domestic sales, marketing and service organizations ($3.1), along with international organizations in Europe and Japan ($0.6)................................................................ 3.7 Cost reductions arising from elimination of allocated DuPont corporate- sponsored "variable compensation program" related to DuPont Medical Product Group management not remaining with Dade Chemistry............ 0.3 ---- $5.5 ====
(8) Represents for the four months ended April 30, 1996 the prorated additional annual management fee in excess of the historical fee paid by Dade ($2.0) to equal an agreed upon prospective annual fee of $3.0 to be charged by Bain Capital and Goldman Sachs & Co. for consulting and financial services to be provided to the Company. (9) Represents the non-recurring charge resulting from the application of purchase accounting to acquired in-process research and development projects which have no future alternative use. 33 (10) Represents for the four months ended April 30, 1996 the prorated adjustment to reflect ongoing goodwill amortization resulting from the purchase of Dade Chemistry. The Acquisition resulted in estimated goodwill of $159.7 based on a preliminary allocation of purchase price to be amortized over a twenty-five year period (annual amortization of $6.4). (11) Represents the non-recurring charge for restructuring and related costs incurred as a direct result of the Acquisition. The restructuring charge relates primarily to severance and relocation costs. (12) Addition to pro forma interest expense is summarized as follows:
SIX MONTHS ENDED JUNE 30, 1996 ---------------- Elimination of Dade's and Dade Chemistry's historical inter- est expense................................................ $(26.8) ------ Interest on the $350.0 Senior Subordinated Notes (11.125%).. 19.5 Interest on borrowing under Bank Credit Agreement at LIBOR (5.5374%) plus: Revolver--2.75% (8.2874% on $50.0)........................ 2.1 Term A--2.75% (8.2874% on $185.0)......................... 7.7 Term B--3.25% (8.7874% on $90.0).......................... 4.0 Term C--3.50% (9.0374% on $90.0).......................... 4.1 Term D--3.75% (9.2874% on $95.0).......................... 4.4 Commitment fee on unused revolving credit facility at 0.50%...................................................... 0.2 ------ Gross cash interest expense................................. 42.0 Less: Interest on $45.0 of debt to be repaid with proceeds from "Net assets held for sale" at an average rate of 8.7385% (a)............................................. (2.0) ------ Net cash interest........................................... 40.0 Amortization of Acquisition debt issuance costs of $45.7 (average 8.29 years amortization).............................................. 2.8 ------ Interest from Acquisition debt requirements................. 42.8 ------ Net increase................................................ $ 16.0 ======
- -------- (a) Generally accepted accounting principles permit nonrecognition of interest expense in post-acquisition periods on incremental debt to be paid down with the expected net proceeds from assets identified for sale at the date of an acquisition. (13) Reflects tax provision for pro forma adjustments required to yield an estimated effective income tax rate of 40% on pro forma income (loss) before income taxes. (14) Reflects the elimination of extraordinary losses directly related to the Transactions. (15) For purposes of computing this ratio, earnings consist of income before income taxes plus fixed charges. Fixed charges consist of interest expense, amortization of deferred financing fees and one- third of the rent expense from operating leases, which management believes is a reasonable approximation of an appropriate interest factor. (16) EBITDA is defined as the sum of income from operations, depreciation and amortization expense.
(17) In calculating the ratio of EBITDA to cash interest expense, interest expense excludes amortization of deferred financing fees of $2.8 for the six months ended June 30, 1996.
34 SELECTED HISTORICAL FINANCIAL DATA PREDECESSOR/DADE/COMPANY Set forth below are selected historical and other financial data of the Predecessor, Dade and the Company as of the dates and for the periods shown. The selected historical and other financial data as of June 30, 1995 and 1996, and for the respective six months then ended, were derived from unaudited historical financial statements of Dade and the Company for such periods. The selected historical financial data as of December 31, 1994 and 1995, for the period from December 17, 1994 through December 31, 1994 and for the year ended December 31, 1995 have been derived from Dade's audited financial statements, which were audited by Price Waterhouse LLP, and are included elsewhere in this Prospectus. The selected historical financial data for the year ended December 31, 1993 and for the period from January 1, 1994 through December 16, 1994 were derived from the audited historical financial statements of the Predecessor for such periods, which were audited by Price Waterhouse LLP, and are included elsewhere in this Prospectus. The selected historical financial data as of December 31, 1993 and for the year ended December 31, 1992 were derived from the audited financial statements of the Predecessor, which do not appear in this Prospectus. The selected historical financial data as of December 31, 1992 and for the year ended December 31, 1991 was derived from unaudited historical financial statements of the Predecessor (not included in this Prospectus) which, in the opinion of management, reflect all adjustments (consisting of normal recurring adjustments) necessary for a fair presentation of the results for the unaudited periods. The selected historical financial data should be read in conjunction with "Management's Discussion and Analysis of Financial Condition and Results of Operations" and the Financial Statements and accompanying notes thereto included elsewhere in this Prospectus.
THE PREDECESSOR DADE COMBINED DADE DADE COMPANY ------------------------------------ -------------- -------------- ------- ---------- ------------- PERIOD FROM PERIOD FROM PERIOD FROM SIX MONTHS SIX MONTHS 1/1/94 TO 12/17/94 TO 1/1/94 TO ENDED ENDED 1991 1992 1993 12/16/94(1) 12/31/94(1)(2) 12/31/94(1)(2) 1995(2) 6/30/95(2) 6/30/96(2)(3) ------ ------ ------ ----------- -------------- -------------- ------- ---------- ------------- (DOLLARS IN MILLIONS) INCOME STATEMENT DATA: Net Sales (4)....... $619.0 $683.3 $690.2 $650.6 $19.0 $669.6 $614.3 $300.0 $353.8 Cost of Sales....... 361.4 401.8 420.8 391.4 18.6 410.0 368.6 208.7 208.4 ------ ------ ------ ------ ----- ------ ------ ------ ------ Gross profit (5).... 257.6 281.5 269.4 259.2 0.4 259.6 245.7 91.3 145.4 Marketing and administrative expenses........... 165.7 183.9 179.2 173.2 2.4 175.6 171.1 77.6 113.1 Research and development expenses........... 45.9 53.2 47.2 33.4 1.1 34.5 26.5 13.7 114.2(6) Goodwill amortization expense (credit)... 2.7 2.7 2.6 2.6 (0.1) 2.5 (0.4) (0.8) 0.8 Restructuring and other related items.............. -- -- 30.2(8) -- -- -- -- -- 11.4(7) ------ ------ ------ ------ ----- ------ ------ ------ ------ Income (loss) from operations......... 43.3 41.7 10.2 50.0 (3.0) 47.0 48.5 0.8 (94.1) Provision (benefit) for income taxes... 14.4 13.9 12.3 14.2 (2.3) 11.9 7.2 (4.8) (42.8) ------ ------ ------ ------ ----- ------ ------ ------ ------ Income (loss) before extraordinary items and cumulative effect of change in accounting principle.......... 28.9 27.8 1.4 35.8 (1.9) 33.9 12.7 (8.1) (72.9) Extraordinary items.............. -- -- -- -- -- -- -- -- (25.0) Cumulative effect of change in accounting principle (9)...... -- (5.7) (3.3) -- -- -- -- -- -- ------ ------ ------ ------ ----- ------ ------ ------ ------ Net income (loss) (5)................. $ 28.9 $ 22.1 $ (1.9) $ 35.8 $(1.9) $ 33.9 $ 12.7 $ (8.1) $(97.9) ====== ====== ====== ====== ===== ====== ====== ====== ====== OTHER FINANCIAL DATA: EBITDA (10)......... $ 84.3 $ 96.2 $ 99.1 $ -- $ -- $112.1 $ 97.0 $ 46.0 $ 54.2 Depreciation and amortization expense (credit)... 41.0 54.5 58.7 59.6 (0.1) 59.5 4.9(11) 1.6 13.3(11) Capital expenditures....... 79.2 71.2 56.7 29.9 1.0 30.9 35.3 13.8 25.0 Ratio of earnings to fixed charges (12)............... -- -- -- -- N/M N/M 1.6x N/M N/M
35
THE PREDECESSOR DADE COMPANY ------------------------- ------------------------- ------------------- DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, JUNE 30, JUNE 30, 1992 1993 1994 1995 1995(2) 1996(2)(3) ------------ ------------ ------------ ------------ -------- ---------- (DOLLARS IN MILLIONS) BALANCE SHEET DATA: Working capital.......... $250.8 $246.4 $259.1 $219.4 $267.8 $ 175.8 Total assets (13)........ 734.9 710.6 696.2 550.9 554.0 1,044.6 Long term debt (including current maturities)..... -- -- 270.0 283.5 302.7 810.0 Parent company investment/stockholder's equity (deficit) (5).... 589.6 577.1 83.1 81.2 78.7 (19.2)
- -------- N/M=Not meaningful. (1) The financial data of the Predecessor and Dade for the period from January 1, 1994 to December 16, 1994 and the period from December 17, 1994 to December 31, 1994, respectively, were prepared on different bases of accounting. (2) Financial data for the period from December 17, 1994 to December 31, 1994, for the year ended December 31, 1995 and the six months ended June 30, 1995 and 1996 exclude the results of the Bartels and Burdick & Jackson product lines, which have been reflected as "Net assets held for sale." (3) The financial data of the Company for the period from January 1, 1996 to June 30, 1996 includes six months of Dade's results of operations and two months of Dade Chemistry's post-Acquisition results of operations. The balance sheet at June 30, 1996 reflects the Acquisition. (4) Net sales include the net sales of Bartels and Burdick & Jackson as follows: 1991--$32.1 million, 1992--$34.7 million, 1993--$36.7 million, and 1994 through December 16--$34.3 million. Beginning on December 17, 1994, net sales of Bartels and Burdick & Jackson were excluded from total net sales as these businesses were accounted for as assets held for sale--see Note (2) above. (5) Dade's stockholder's equity as of December 31, 1994 and gross profit and net loss for the period December 17, 1994 through December 31, 1994 includes a non-recurring pre-tax charge relating to the application of purchase accounting for a partial write-off of $5.6 million (after-tax impact of $3.4 million) to cost of goods sold related to the amortization of the $46.0 million of allocated purchase price made to record acquired finished goods and work-in-process inventory at fair market value related to the Initial Acquisition. Dade's stockholder's equity, gross profit and net income for the year ended December 31, 1995 include the non-recurring pre-tax write-off of the remaining $40.4 million (after-tax impact of $24.2 million) of the inventory write-up discussed above. Dade's stockholder's deficit, gross profit and net loss for the six months ended June 30, 1996 includes non-recurring purchase accounting charges related to the amortization of $25.5 million of allocated purchase price made to record Dade Chemistry inventories at fair market value ($15.3 million after tax), the write-off of $98.1 million of acquired in-process research and development projects ($58.9 million after tax), restructuring charges of $11.4 million ($6.8 million after tax) and $39.7 million of deferred financing fees and note repurchase premiums ($25.0 million after tax) related to the Transactions. (6) Includes the non-recurring, pre-tax charge of $98.1 million ($58.9 million after-tax) related to the write-off of allocated purchase price made to record in-process research and development projects at fair market value related to the Acquisition. Such in-process research and development projects have no alternative future use. (7) Represents the non-recurring charge for restructuring and related costs incurred as a direct result of the Acquisition. The restructuring charge relates primarily to severance and relocation costs. (8) In 1993, Baxter undertook a restructuring effort, charging the Predecessor with $30.2 million for downsizing its sales, general and administrative, instrument manufacturing and non-strategic research and development staffs in an effort to reorganize the businesses into a single operating division. (9) In 1992, Baxter recorded a $5.7 million after-tax charge related to the Predecessor for the cumulative effect of adopting SFAS No. 106 "Employers' Accounting for Postretirement Benefits Other Than Pensions," and, in 1993, Baxter recorded a $3.3 million after-tax charge related to the Predecessor for the cumulative effect of adopting SFAS No. 109 "Accounting for Income Taxes." (10) "EBITDA" represents, for any period, the sum of income from operations; depreciation and amortization expense and; for 1993, restructuring and downsizing costs of $30.2 million; for the period December 17, 1994 to December 31, 1994, non-recurring purchase accounting write-offs of $5.6 million; for 1995 and the six months ended June 30, 1995, non-recurring purchase accounting write-offs of $40.4 million (see Note (5) above) and $3.2 million, respectively, of non-recurring, non-cash charges (see Note 2 of "Notes to Combined/Consolidated Financial Statements" included elsewhere in this Prospectus); and, for the six months ended June 30, 1996, non-recurring purchase accounting charges of $98.1 million and $25.5 million, and non-recurring restructuring charges of $11.4 million (see Note (5) above). EBITDA is presented because it is a widely accepted financial indicator of a company's ability to service and/or incur indebtedness. However, EBITDA should not be considered as an alternative to net income as a measure of the Predecessor's, Dade's or the Company's operating results or to cash flows as a measure of liquidity. (11) Excludes, for 1995 and for the six months ended June 30, 1996, $40.4 million, and $25.5 million, respectively, of non-recurring purchase accounting write-offs (see Note (5) above). (12) No ratio of earnings to fixed charges is presented for the Predecessor because the Predecessor was not allocated interest expense by Baxter. In calculating the ratio of earnings to fixed charges for Dade and the Company, earnings include income (loss) before income 36 taxes plus fixed charges. Fixed charges consist of interest expense and amortization of deferred financing fees, whether expensed or capitalized, plus one-third of rental expense under operating leases which has been deemed by management to be representative of an appropriate interest factor. As a result of the loss incurred during the period December 17, 1994 to December 31, 1994, earnings did not cover fixed charges by $4.3 million. Excluding the impact during this period of the non-recurring purchase accounting write-off of $5.6 million (see Note (5) above), the ratio of earnings to fixed charges would have been 2.0 to 1.0. As a result of the loss incurred during the six months ended June 30, 1995, earnings did not cover fixed charges by $12.9 million. Excluding the similar $40.4 million non-recurring write-off in 1995, the 1995 ratio of earnings to fixed charges for the full year would have been 2.7 to 1.0 and 2.6 to 1.0 for the six months ended June 30, 1995. As a result of the loss incurred during the six months ended June 30, 1996, earnings did not cover fixed charges by $115.7 million. Excluding the $25.5 million non-recurring, non-cash write-off of inventory step-up, the $98.1 million non-recurring write-off of in-process research and development and the $11.4 million non-recurring restructuring charge, the ratio of earnings to fixed charges for the six months ended June 30, 1996 would have been 1.7 to 1.0. (13) Dade's total assets at December 31, 1994 include $200.0 million of restricted cash, which was used on January 6, 1995 to settle the installment portion of the Initial Acquisition purchase price with Baxter. 37 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS SIX MONTHS ENDED JUNE 30, 1996 COMPARED TO SIX MONTHS ENDED JUNE 30, 1995 Overview and Comparability The following discussion and analysis describes material changes in the Company's financial condition from December 31, 1995. The analysis of results of operation compares the six-month period ended June 30, 1996 to the corresponding period of 1995. Certain significant items related to the Acquisition and the Initial Acquisition have been included in the Company's consolidated financial statements for these periods which affect the comparability of the financial statements and the Company's overall financial performance: . $25.5 million was amortized to cost of goods sold related to the write-up to the fair market value of work-in-process and finished goods inventory in connection with the Acquisition's purchase price allocation. This non- recurring, write-off of inventory was recorded as cost of goods sold during the second quarter of 1996. . An $11.4 million restructuring charge was recorded in the second quarter of 1996 to operating expense. Approximately $9.4 million of this charge relates to employee severance and relocation costs and $2.0 million relates to other related expenses. No significant expenditures related to this reserve were made as of June 30, 1996. . The Company recorded a $98.1 million pre-tax charge to research and development expenses upon consummation of the Acquisition pertaining to purchase price allocated to in-process research and development projects that have no future alternative use. . Two extraordinary after-tax charges totaling $25.0 million were made in the second quarter of 1996 to record the costs associated with the repurchase of the original 13% Senior Subordinated Notes due 2005 and the write-off of previously deferred financing costs. . 1995 cost of goods sold include the amortization of $40.4 million of the $46.0 million non-recurring, non-cash write-up of inventory related to the Initial Acquisition which was recorded on the opening balance sheet of the Company in December 1994. Net Sales. Net sales for the six months ended June 30, 1996 increased by 17.9% from the comparable prior year period. As adjusted to include Dade Chemistry's pro forma six month results and the impact of the differences in reporting periods for the Company's International Operations, pro forma net sales would have declined by 4.4% for the six months ended June 30, 1996. Factors which contributed to these adjusted results include (1) increases in sales volume in the MicroScan product line and the newly acquired Dade Chemistry business, (2) the non-recurrence of 1995 sales of instruments and consumables of the Company's former Hemostasis supplier and (3) a continuation of volume declines in the Company's mature Stratus non-cardiac and Paramax instruments lines. Gross Profit. For the six months ended June 30, 1996, gross profit of $145.4 million represented an increase of 59.3% as compared to the comparable prior period. As adjusted to include Dade Chemistry's pro forma six month results and excluding impacts of purchase accounting items previously discussed and the differences in reporting periods for the Company's International Operations, pro forma gross profit for the six months ended June 30, 1996 would have been essentially unchanged as compared to prior year. Factors which contributed to these adjusted results include (1) the favorable effects of product mix and lower manufacturing costs stemming from cost reduction initiatives undertaken in 1995, (2) sales declines in the Company's Stratus non-cardiac and Paramax product lines, and (3) increased depreciation expense. Research and Development Expenses. Research and development expenses for the six months ended June 30, 1996 increased by $100.5 million from the comparable prior year period. As adjusted to include Dade Chemistry's pro forma six month results and excluding the impact of purchase accounting items previously discussed, pro forma research and development expenses for the six months ended June 30, 1996 were $27.9 million, a decrease of 8.8% as compared to the comparable prior year period. This reduction is due to the non- 38 recurrence of 1995 expense related to molecular biology research and lower research and development expenses in the Company's Paramax product line. The reduction in molecular biology research is due to the elimination of that unit during early 1996. The balance of this decline is due to product line rationalization efforts which began in early 1996 in anticipation of the Acquisition. Marketing and Administrative Expense. Marketing and administrative expenses increased by $35.5 million or 45.7% for the six month period ended June 30, 1996 over the comparable prior period. As adjusted to include Dade Chemistry's pro forma six month results and excluding the impacts of Acquisition related costs and the differences in reporting periods for the Company's International Operations, pro forma marketing and administrative expenses would have increased by 6.6% for the six months ended June 30, 1996 as compared to the comparable prior year period. This increase is principally the result of incremental expenses in the areas of finance, information systems and human resources required for the Company to operate as a stand-alone entity, including certain expenses which duplicate those paid to Baxter for transition services as the Company prepares for the expiration of certain transition services by the end of 1996. Income Taxes. The Company has recognized tax benefits for the six months ended June 30, 1996 and 1995 at an effective rate of approximately 37%. At June 30, 1996, the Company has recorded a net deferred tax asset of $220.3 million as compared to $138.4 million at December 31, 1995. Management continues to believe that realization of the net tax asset is more likely to occur than not. The deferred tax asset's realization is not dependent on material improvement over Dade's forecast of current levels of consolidated pre-tax income, material changes in the present relationship between income reported for financial and tax purposes, material asset sales or other non- routine transactions. Net Income. For the six month period ended June 30, 1996, the Company reported a net loss of $97.9 million as compared to a net loss of $8.1 million for the same period in 1995. The losses as reported for the six months ended June 30, 1996 are primarily attributable to the Acquisition, related purchase accounting items and declines in sales volumes as previously discussed. YEAR ENDED DECEMBER 31, 1995 COMPARED TO YEAR ENDED DECEMBER 31, 1994 Overview and Comparability The financial statements of Dade and its Predecessor for these periods are not comparable in certain respects due to differences between the cost bases of certain assets and liabilities and differences in the operating structures of the new and old companies. On December 20, 1994, Dade consummated the Initial Acquisition. Since the Initial Acquisition was accounted for in accordance with the purchase method of accounting and because the estimated fair value of assets acquired significantly exceeded total acquisition costs, several purchase accounting adjustments were necessary to properly reflect the assets and liabilities of Dade. These adjustments included: . All non-current assets as of December 16, 1994 were reduced to zero and the preliminary residual of $24.2 million was recorded as negative goodwill. Since Dade's non-current assets were reduced to zero, 1995 results of operations were favorably impacted by significantly reduced depreciation expense and amortization credits arising from the negative goodwill. . Dade management identified two product lines (Bartels and Burdick & Jackson), along with certain excess land and warehouse facilities at another location, as operations and assets held for sale. Such businesses and property have been reflected as "Net assets held for sale" in Dade's financial statements, and accordingly their 1995 results have been excluded from Dade's consolidated 1995 results. . A $46.0 million write-up of finished goods and work-in-process inventory to fair value was recorded as of December 16, 1994, of which $40.4 million was charged to cost of goods sold during 1995. 39 Further complicating comparisons to the prior year are structural changes to the business, such as changes in the manner in which products are distributed in certain international markets, the establishment of a royalty-producing licensing agreement in place of certain products previously sold by Dade and incremental marketing and administrative costs necessary to operate on a stand-alone basis. Finally, it should be noted that international results for Dade were recorded on a one month delay (i.e., international November 1995 results were reported as December 1995). Because Dade closed its accounts as of December 16, 1994 for the Initial Acquisition, consolidated results for the period ended December 31, 1995 include international results only for the period December 17, 1994 through November 30, 1995 (i.e., eleven and one-half months). Net Sales. Net sales in 1995 decreased 8.3% from the prior year. After adjusting for the reclassification of sales for product lines included in "Net assets held for sale" and the shorter reporting period for international results, net sales in 1995 were $621.3 million, a decrease of 0.7% from a comparable base of $625.9 million in 1994. The decrease in sales, as adjusted, is due to price reductions which Dade implemented for Stratus non-cardiac products, the loss of a portion of Dade Controls' OEM business and the lack of a hemostasis instrument offering from January through July of 1995. Partially offsetting these declines were increased hemostasis sales for the last five months of 1995 due to the launch of the product line of TOA Medical Electronics Co. Ltd. ("TOA") and growth in Dade's MicroScan product line. MicroScan's growth was attributable to continued international penetration and increased instrument placements as well as associated reagent volume resulting from contracts signed with several significant integrated health system providers. Gross Profit. Gross profit in 1995 was significantly impacted by the application of purchase accounting. These adjustments included the elimination of depreciation expense as a result of the write-off of the Predecessor's fixed assets, the amortization of the one-time non-cash write-up of inventories and the reclassification of sales for product lines included in "Net assets held for sale." Additionally, gross profit was impacted by the shorter reporting period for international results. Excluding these effects, gross profit and gross margin in 1995 were approximately equal to those in 1994. In 1995, declines due to price reductions which the Company implemented on its Stratus non-cardiac products and the loss of a portion of Dade Controls' OEM business were offset by increased volume in the MicroScan product line and the launch of the TOA instrument line. Marketing and Administrative Expenses. Marketing and administrative expenses (including goodwill amortization) for 1995 decreased by $7.4 million from $178.1 million in 1994 to $170.7 million in 1995, a decrease of 4.2%. The reduction is largely the result of purchase accounting adjustments, the reclassification of "Net assets held for sale" and the difference relating to international reporting periods. Excluding the impact of purchase accounting, the reclassification of "Net assets held for sale" and the difference relating to international reporting, marketing and administrative expenses increased to $173.9 million in 1995 from $165.0 million in 1994, principally as a result of incremental expenses in the areas of finance, information systems and human resources required for the Company to operate as a stand-alone entity. Research and Development Expenses. Research and development expenses for 1995 declined by $8.0 million or 23.2% from 1994. After adjusting for the reclassification of sales for product lines included in "Net assets held for sale," the shorter reporting period for international results and the elimination of historical depreciation, research and development expenses for 1995 declined modestly as compared to 1994. The decrease reflects the planned spin-off of an advanced molecular biology research team, reduced research efforts associated with the Paramax and Stratus instrument lines and a delay in the staffing of open personnel positions in new projects. Dade's research and development programs will continue to be focused on the hemostasis, immunochemistry, microbiology and controls segments of the clinical laboratory. Provision for Restructuring. At December 31, 1994, Dade had an aggregate reserve of $21.0 million to cover severance actions ($10.8 million) and direct costs to exit certain facilities ($10.2 million) as part of a facilities and plant rationalization program instituted at the time of the Initial Acquisition. The cost of this program was reflected as part of Dade's allocation of purchase price in accordance with the purchase method of accounting. Dade estimates that the restructuring generated net cost savings of approximately $7.2 million in 1995 which will increase to a full year recurring impact of approximately $13.7 million in 1996. Approximately $13.9 million of the $21.0 million was spent on restructuring projects in 1995. The Company expects that the remainder of its restructuring program actions will be completed during 1996. 40 Income Taxes. Given Dade's new legal and stand-alone operating structure, its prospective effective tax rate is expected to be approximately 37.0%. Dade and its Predecessor's combined effective tax rate during 1994 was 26.0%. As a result of purchase accounting in 1994, Dade recorded a net deferred tax asset of $125.3 million as of December 31, 1994. This asset increased to $143.0 million as of December 31, 1995 primarily as a result of tax net operating losses created by depreciation on historical tax assets exceeding pre-tax income during the year. In assessing the value of the deferred tax asset at December 31, 1995 management has analyzed Dade's forecast for future taxable earnings (and losses) by jurisdiction and other relevant factors and concluded that recoverability of the net deferred tax asset is more likely to occur than not. The deferred tax asset's realization is not dependent on material improvement over Dade's forecast of current levels of consolidated pre-tax income, material changes in the present relationship between income reported for financial and tax purposes, material asset sales or other non-routine transactions. Net Income. Net income for 1995 declined 62.5% from $33.9 million in 1994 to $12.7 million in 1995. Net income was negatively impacted by the effects of purchase accounting, the reclassification of operating results for product lines included in "Net assets held for sale," the shorter reporting period for international results and by $30.8 million in interest expense attributable to the debt incurred in connection with the Initial Acquisition. YEAR ENDED DECEMBER 31, 1994 COMPARED TO YEAR ENDED DECEMBER 31, 1993 Net Sales. Net sales decreased 3.0% to $669.6 million in 1994 from $690.2 million in 1993. Approximately 90% of this decline occurred in domestic operations where reduced Dade Hemostasis instrument sales resulted from the termination of the Predecessor's instrument supplier relationship and, to a lesser extent, where a reduction of sales in other product lines resulted from health care reform initiatives existing at that time that curtailed hospital spending and intensified competition. The Predecessor also lost sales in 1994 versus 1993 in its Stratus product line, primarily in its non-cardiac reagents products. Additionally, sales were negatively affected by uncertainty surrounding Baxter's announced divestiture of the Predecessor. The remaining 10% of this decrease was attributable to foreign operations, which declined due to the negative impact of fluctuations in foreign currency rates and reduced sales in the Dade Immunohematology product line. International sales of MicroScan's product were ahead of 1993 sales. Gross Profit. Gross profit in 1994 was impacted by the write-up of inventories through purchase accounting and the partial ($5.6 million) flow through to cost of goods sold as a one-time non-cash charge. Excluding this impact, gross profit decreased by 1.6% to $265.2 million in 1994 compared to $269.4 million in 1993 as a result of the decrease in sales. Excluding the effects of purchase accounting, gross profit margins of 39.6% in 1994 were slightly better than margins of 39.0% in 1993 partially due to a decline in lower margin instrument sales. This increase was, in part, due to the 1993 Restructuring which reduced costs across the Predecessor's and Company's manufacturing operations, especially the Stratus product line. Marketing and Administrative Expenses. As a percentage of sales, marketing and administrative expenses (including goodwill amortization) in 1994 increased slightly to 26.6% from 26.3% in 1993 primarily as a result of the sales decline discussed above. However, on an absolute basis, approximately $6.0 million of the $24.0 million in annual cost savings which resulted from Baxter's 1993 restructuring of the Predecessor as described below (the "1993 Restructuring") were realized as reduced marketing and administrative expenses in 1994. Research and Development Expenses. Research and development expenses incurred in 1994 decreased by 26.9% from 1993 as the Predecessor restructured its organization in the second half of 1993 to focus its research efforts on its highest priority projects. Research and development efforts are now focused on the core hemostasis, controls, microbiology and cardiac product lines. Approximately $14.0 million of the $24.0 million in annual cost savings which resulted from the 1993 Restructuring were realized in reduced research and development expenses for 1994. Management expects to maintain research and development expenses at approximately $30.0 to $40.0 million annually as it focuses increased attention on the Dade Hemostasis and MicroScan product lines. 41 Provision for Restructuring. At December 31, 1994, Dade had an aggregate reserve of $21.0 million to cover severance actions ($10.8 million) and direct costs to exit certain facilities ($10.2 million) as part of a facilities and plant rationalization program instituted at the time of the Initial Acquisition. The cost of this program was reflected as part of Dade's allocation of purchase price in accordance with the purchase method of accounting. Income Taxes. Dade's and its Predecessor's combined effective tax rate in 1994 was 26.0% as compared to the Predecessor's 89.8% effective tax rate in 1993. Given Dade's new legal and stand-alone operating structure, its prospective effective tax rate is expected to be approximately 37.0%. As a result of purchase accounting in 1994, Dade had a net deferred tax asset of $125.3 million which is expected to reduce income taxes payable in future years. In assessing the value of the deferred tax assets at December 31, 1994, management has analyzed Dade's forecast for future taxable earnings (and losses) by jurisdiction and other relevant factors and concluded that recoverability of the net deferred tax asset of $125.3 million is more likely to occur than not. The realization of this deferred tax asset is not dependent on material improvements over Dade's forecast of current levels of consolidated pre-tax income, material changes in the present relationship between income reported for financial and tax purposes, material asset sales or other non-routine transactions. Net Income. Combined net income of $33.9 million in 1994 was higher than the net loss of $1.9 million in 1993 due to the Predecessor recording a $30.2 million restructuring charge during 1993, as described above. Net income in 1993 was further reduced by $3.3 million for a cumulative adjustment to adopt SFAS No. 109 "Accounting for Income Taxes." Net income for 1994 was also negatively impacted by the aforementioned non-recurring purchase accounting adjustment. LIQUIDITY AND CAPITAL RESOURCES The Acquisition required the complete refinancing of the Company's debt arrangements in order to provide adequate funding for both the Dade Chemistry purchase price and the retirement of the Company's existing obligations. The Company submitted a tender offer for its 13% Senior Subordinated Notes due 2005 which was accepted by all of the holders. The cost of the tender offer to the Company totaled $146.3 million representing all principal, interest and tender premiums paid to holders. In addition, the Company retired all of its existing bank debt. To fund these retirements, the Company entered into the following financing arrangements. The first, a new Bank Credit Agreement, provides for loans up to $585 million comprised of $460 million of amortizing Term Loans and up to $125 million in a Revolving Credit Facility. On the date the Acquisition was consummated, all of the Term Loans and $50 million under the Revolving Credit Facility were drawn down. Second, $350 million of 11 1/8% Senior Subordinated Notes due 2006 were issued under an indenture between the Company and IBJ Schroder Bank & Trust Company. The notes are unsecured obligations of the Company ranking subordinate in right of payment to all Senior Debt (as defined in such indenture) of the Company. Interest on the notes is payable semi- annually. The Company's principal liquidity requirements are for working capital, capital expenditures, restructuring activities and debt service. During the first half of 1996, working capital decreased from $219.4 million to $175.8 million primarily due to debt incurred and liabilities assumed in connection with the Acquisition. Net assets held for sale decreased from $54.9 million to $45.0 million due to the sale of certain excess real estate. Capital expenditures of the Company increased to $25.0 million from $13.8 million for the six months ended June 30, 1996 as compared to the comparable period in 1995. This increase is attributable to investments in the Company's stand-alone infrastructure and instruments placed in customer locations. 42 The interest expense incurred by the Company in the first half of 1996 was approximately $23.9 million exclusive of the write-off of the deferred financing fees incurred under the prior financing arrangements. During 1995, Dade's net working capital declined from $259.1 million at December 31, 1994 to $219.4 million at December 31, 1995. After adjusting for non-cash items recorded in connection with purchase accounting and the increase in cash and cash equivalents during the period, net working capital increased $7.2 million during 1995. Receivables increased $62.7 million in 1995, principally due to the initial rebuilding of balances to normal operating levels stemming from Baxter's retention of a significant portion of the receivables outstanding as of the Initial Acquisition closing date. Net assets held for sale decreased by $18.3 million principally as a result of the sale of Bartels. Total inventories decreased $49.2 million during the period to a balance of $122.0 million as of December 31, 1995. Excluding the effects of purchase accounting adjustments and certain reclassifications, particularly the roll-out of the $40.4 million inventory write-up, inventory reductions generated $0.8 million in cash in 1995. Increases in accounts payable and accrued liabilities, attributable principally to rebuilding to normal operating levels of balances retained by Baxter, resulted in cash generation of $37.2 million during 1995. Dade's annual capital expenditures include expenditures for property, plant and equipment and expenditures for instruments placed with customers. Dade and its Predecessor made capital expenditures in 1993, 1994 and 1995 of approximately $56.7 million, $30.9 million and $35.3 million, respectively. The decrease in 1994 spending resulted primarily from lower expenditures by Baxter prior to the Initial Acquisition. In 1995, Dade increased capital expenditures to finance various cost reduction initiatives and facilities and systems necessary to operate on a stand-alone basis ($5.0 million). The Company expects to expend $73.3 million of capital expenditures in the first full year following the Acquisition. Approximately $16.0 million of these expenditures are one-time outlays associated with developing a stand- alone infrastructure, primarily for information systems. The remaining $57.3 million of expenditures primarily reflect outlays to support the ongoing operations of the business. Following the Initial Acquisition, Dade initiated a series of restructuring activities as part of a facilities and plant rationalization program. In 1995, Dade utilized approximately $13.9 million of cash related to these restructuring activities which management estimates will result in approximately $13.7 million of annualized operating savings. Another $7.1 million of restructuring reserves established at the Initial Acquisition closing date will be expended during 1996 as the remaining restructuring actions are implemented. Following the Acquisition of Dade Chemistry, the Company recorded $26.4 million of restructuring reserves related primarily to severance, relocation, and retention bonuses for certain employees during the integration process and for direct costs to exit and consolidate certain facilities. Management believes that the restructuring reserves provided will be adequate based on the integration plan and expects that this restructuring will be substantially completed in 1997. Management is continuing to assess the Company's overall organization and cost structures and may, as a result of this on-going process, develop future initiatives to increase operating and administrative efficiency and enhance profitability. In addition to the restructuring activities implemented following the Initial Acquisition, Dade identified the Burdick & Jackson ("B&J") and Bartels product lines and certain unutilized land and warehouse facilities as operations and assets to be sold. In October 1995, Dade divested its Bartels product line and received $16.5 million in gross cash proceeds from this asset sale, which were used to repay existing indebtedness. At December 31, 1995, Dade recorded the remaining Net assets held for sale at $54.9 million, which represented the expected net sales proceeds of the asset sales. In January 1996, the land and warehouse facilities were sold and the proceeds were used to repay existing indebtedness. Upon completion of the sale of B&J, the Company will utilize a substantial portion of the proceeds from such sale to repay bank debt in accordance with the Company's Bank Credit Agreement. Management believes that cash from operating activities, together with available revolving credit borrowings under the Bank Credit Agreement will be sufficient to permit the Company to meet its financial obligations and fund its operations. 43 INFLATION Inflation affects the cost of goods and services used by the Company. Inflation has been modest in recent years. The competitive environment limits the ability of the Company to recover these higher costs through increased selling prices, although the Company selectively increases prices for certain differentiated high value added products. Overall product prices have been relatively stable during the past three years and the Company continues to mitigate the adverse effects of inflation primarily through new product offerings, improved productivity and cost containment and improvement programs. RECENTLY ISSUED ACCOUNTING STANDARDS Accounting for Income Taxes. In 1993, the Predecessor adopted the provisions of SFAS No. 109 "Accounting for Income Taxes." The adoption of SFAS No. 109 resulted in a cumulative charge of $3.3 million in 1993. Accounting for Stock-Based Compensation. The Company intends to adopt in 1996 the provisions of SFAS No. 123, "Accounting for Stock-Based Compensation." The Company does not expect that adoption of SFAS No. 123 will materially impact the financial statements, with the exception of additional required pro forma disclosures. 44 INDUSTRY IVD instruments and systems are utilized by clinical laboratories to identify and measure substances in patients' tissue, blood or urine samples. Due to its important role in the diagnosis and treatment of patients, IVD testing is an integral part of overall patient care. Additionally, IVD testing is increasingly valued as an effective method of reducing health care costs by providing accurate, early detection of health disorders and also avoiding the cost of lengthy in-patient stays. The worldwide market for sales of IVD products (including instruments, reagents, and consumables) and services approximates $13.8 billion, with approximately 40% of this total in the United States market. The Company primarily provides those products and services that are relevant to the hospital and reference laboratory segments, which tend to use more precise, higher volume and more automated IVD systems. The specific segments of the overall IVD market served by the Company approximates $7.1 billion. The definition and approximate worldwide segment size of the Company Served Markets are as follows: . Clinical Chemistry. Clinical chemistry instrument systems, the highest volume instruments in most clinical laboratories, are primarily used to test for glucose, cholesterol, sodium and other substances found in large concentrations in the body. These tests are typically run for both routine and emergency patients to help doctors understand the status of basic bodily functions prior to ordering more extensive testing. . Immunochemistry. Immunochemistry instrument systems use targeted antibodies to identify and test enzymes, drugs, hormones and other substances found in relatively small concentrations in the body. Typical immunochemistry tests indicate conditions such as cardiac arrest, anemia and pregnancy, or monitor the level of therapeutic drugs in a patient's bloodstream. . Hemostasis. Hemostasis instrument systems test blood coagulation (clotting) or platelet function. Hemostasis tests are typically run before and during most surgeries or are performed to monitor patients on anti-coagulant therapy. . Microbiology. Automated microbiology instrument systems identify disease- causing bacteria and determine their susceptibility to various antibiotics. Example microbiology tests would include those for strep and staph infections. . Controls. Controls are used to test instruments for accuracy and consistency. Because of the need for a high degree of accuracy in IVD testing, controls are run daily on most instruments in a clinical laboratory. IVD systems are composed of instruments, reagents, consumables, service and data management systems. Instruments typically have a five to ten year life and serve to automate repetitive manual tasks, improve test accuracy and speed results reporting. Reagents are liquid or powder chemical substances that react with the patient sample to produce measurable, objective results. The consumable accessories vary across application segments but are generally items such as sample containers and lids used during test procedures. Both reagents and consumables are typically exclusive to their related instruments (thus, a "closed" system) and, therefore, generate significant ongoing revenues for suppliers. Sample handling and preparation devices as well as data management systems are becoming increasingly important components of the IVD system. These system additions further reduce labor, improve safety and reduce cost through their automation benefits. According to customer surveys and industry research, the most important criteria customers use to evaluate IVD systems are reliability, reagent quality and service. Providing a total integrated system solution that is reliable and easy to use creates high switching costs and loyalty among customers who value consistency and accuracy in test results. The primary users of IVD products are hospital and reference laboratories, which constituted approximately 82% of the market. The remaining 18% of the market included physicians' offices, clinics, home testing and alternate sites. From 1983 to 1994, hospitals' share of test revenue has remained stable at approximately 50% due to the large portion of hospital testing required on a "STAT" (non-discretionary testing requiring a turnaround time of under two hours) basis. The revenue share of reference laboratories has increased significantly over the past several years, growing from approximately 10% of the market eleven years ago to approximately 45 32% of the market in 1994. Reference laboratories have largely grown at the expense of physicians' offices and alternate sites, which declined from 40% to 18% during the same period, a trend affected largely by the Clinical Laboratory Improvement Amendment of 1988 ("CLIA '88")--legislation which encouraged a higher level of standardization and quality assurance among testing laboratories. A number of factors are likely to generate continued growth in the IVD market. Instrument automation trends such as sample handling, sample preparation, and data management systems will improve the consistency and labor costs of IVD testing, thereby enhancing the value component of IVD use. The development of new tests such as alternative cardiac markers will also encourage increased IVD usage in new and/or more frequent applications. An aging population is expected to increase the demand for health care services in general and, despite health care reform initiatives targeted at reducing the length of inpatient stays, hospital inpatient admissions and outpatient visits (at which time the majority of IVD tests are performed) continue to grow. Moreover, according to an independent industry source, the number of laboratory tests per hospital patient grew at 4% per year, and STAT testing grew at 6% per year. This latter trend reflects the growing recognition of the contribution IVD products can provide to the overall quality of patient care, particularly where the timeliness and accuracy of diagnosis are critical. For example, IVD testing can be used to identify the incidence of a heart attack. In the United States, approximately five million people with chest pain are admitted each year to hospitals, but only 14% of this group actually experience a heart attack. The incorrect admission or, even worse, the incorrect discharge of a patient can cost the health care system billions of dollars annually. The value of these tests has established IVD as an integral part of patient care, and IVD has become increasingly important to the overall delivery of cost efficient, high quality health care. At the same time, the cost of IVD products to the laboratory remains a small portion of their overall capital and operating costs, and is therefore not likely to be an area targeted for significant cost improvements. In fact, gross profit margins of IVD suppliers generally have remained relatively constant during the period from 1990 to 1995. In the past several years, management has observed that an increasing number of domestic hospitals have formed into groups known as Health Systems. In general, Health Systems consist of 3-10+ local or regional hospitals which have merged or formed joint ventures in order to compete for patients, develop strategic alliances with suppliers, and leverage specialized departments. The formation of these Health Systems presents larger IVD suppliers, such as the Company, with the opportunity to drive standardization of their products across all hospitals in the group. Management believes that successful IVD companies will need to offer a broad product portfolio, anchored by a strong position in clinical chemistry. Additionally, as purchase decisions have become more centralized, the sales process has become more sophisticated and IVD companies will increasingly need to demonstrate that their product offering can lower system costs and improve patient outcomes. The Company's recently signed agreement with Columbia/HCA (the largest for-profit hospital chain in the United States) across its five core product lines exemplifies the benefits of standardization. With its leadership position in clinical chemistry, its broad portfolio of products and its track record with Health Systems, the Company is well suited to take advantage of these trends. Management believes that as the IVD market continues to mature, IVD suppliers will need to increase the scale of their operations and broaden the scope of their product lines in order to leverage worldwide sales, service and research and development infrastructures. These trends are driving industry consolidation which, in turn, provides excellent opportunities for leading IVD suppliers like the Company to increase market share and participate in strategic alliances, joint ventures and acquisitions. 46 BUSINESS HISTORY DADE The Predecessor was established in 1949 as part of the Dade County Blood Bank in Florida and is currently headquartered in Deerfield, Illinois. The Predecessor initially distributed its blood products through American Hospital Supply Corporation ("AHS") and was subsequently acquired by AHS in 1956. Building upon its initial blood testing base, AHS initiated extensive research and development efforts and acquisitions to expand into the emerging IVD testing industry. From 1983 to 1985, Stratus and Paramax development, which began in the late 1970s, culminated in product introductions into the immunochemistry and clinical chemistry markets, respectively. The MicroScan product line was developed through a series of acquisitions in the early 1980s. In 1985, Baxter acquired AHS and formed the Baxter Diagnostics Division, which consisted of Dade's current major product lines. Baxter Diagnostics, Inc. was incorporated in 1990 to hold Dade's current major product lines and certain other businesses of Baxter. In December of 1994, Bain Capital and GS Capital Partners acquired the Predecessor from Baxter. Since the Initial Acquisition, Dade has made significant progress in focusing and implementing its business strategy. Several new products--such as the cardiac marker Troponin-I--were launched with strong market acceptance. Dade also entered into a worldwide alliance with TOA Medical Electronics Co. Ltd. ("TOA") to jointly develop and distribute coagulation products. Cost reduction activities such as the consolidation of Dade's Miami facilities, the increased automation of MicroScan's panel manufacturing line, and the consolidation of Stratus' Puerto Rico reagent manufacturing lines to Miami were implemented as part of Dade's strategy to continuously improve its cost position. Additionally, two non-core businesses were announced for sale, one of which was divested. During 1995, management reorganized Dade's domestic sales and service force to improve its customer tracking and retention capability, leverage its broad product offering and to capitalize on its key Health Systems partnerships. This reorganization was instrumental in driving a record level of fourth quarter 1995 instrument placements for many of Dade's product lines. Additionally, Dade's product line managers were realigned to have global responsibility for their products. In the current IVD market, management continues to believe that initiatives such as state-of-the-art customer tracking and global product management will be critical to the Company's long- term growth and competitiveness. DADE CHEMISTRY DuPont entered the automated clinical chemistry market in 1968 with the introduction of the aca analyzer. The aca was the first random access automated chemistry analyzer in the world. Its ease of use, random access capability and broad test menu combined to make the aca one of the most widely accepted analyzers. In 1986, Dade Chemistry launched its line of Dimension analyzers to serve the needs of higher volume customers. Since that time, Dade Chemistry has successfully introduced four significant new models to the Dimension line, each designed for higher volume customers. The most recent model, the Dimension XL, was released in mid-1995. Due to the success of the aca and the Dimension product lines, Dade Chemistry's installed base of clinical chemistry instruments is one of the largest in the world. Dade Chemistry has been very successful at leveraging this group of customers with an aggressive test development program focused on creating new tests which work on all existing instrument models. Because the clinical chemistry analyzer represents such a significant portion of a typical clinical laboratory's test volume, Dade expects to continue to build upon Dade Chemistry's strong position through new instrument models and enhanced test menus. Dade, a corporation organized under the laws of Delaware, has its principal executive offices located at 1717 Deerfield Road, Deerfield, Illinois 60015- 0778; its telephone number is (847) 267-5300. 47 OVERVIEW The Company is the largest supplier of IVD products and services to clinical laboratories in the United States and the third largest IVD supplier to clinical laboratories in the world. Of the total estimated $13.8 billion global IVD market, the Company serves a $7.1 billion segment that consists of IVD instruments, reagents (compounds and liquids used to perform tests), consumables (sample containers, lids, etc.) and services targeted primarily at clinical laboratories. Within the Company Served Markets, the Company has market leadership positions in four of its five core product segments (clinical chemistry, microbiology, hemostasis and controls) and a strong niche position in the fifth (immunochemistry). On a pro forma basis, the Company would have generated revenue and EBITDA of $959.0 million and $179.5 million, respectively, for the year ended December 31, 1995. In vitro (literally, "in glass") diagnostic tests are conducted outside the body and are used to identify and measure substances in patients' tissue, blood or urine samples which enable physicians to diagnose, treat and monitor patients. The most common IVD tests, accounting for up to 40% of a clinical laboratory's test volume, are traditional clinical chemistry tests such as glucose, cholesterol or sodium measured as part of routine blood checks. Other IVD tests measure bodily functions such as blood clotting ability, fertility and cardiac function or measure the presence of infections or drugs. The wide range and important nature of these tests have established IVD testing as an integral part of the managed healthcare environment, providing for accurate and timely patient diagnosis and treatment. Increasingly, IVD testing is being recognized as making a significant contribution to improving patient care and lowering total patient costs. As a result, management believes that future growth in IVD testing will be driven by (i) greater automation in order to achieve more consistent test results at lower costs; (ii) applications of emerging test technologies (e.g., cardiac markers which test for the occurrence of heart attacks); and (iii) demographic shifts such as the aging of the population. IVD tests are conducted primarily in clinical laboratories which, in the United States, consist of approximately 6,000 hospital-based laboratories and 4,000 reference laboratories (independent of hospitals). The Company provides products and services to over 90% of domestic hospital clinical laboratories and to the majority of reference laboratories worldwide. Nearly all hospitals require laboratory testing capability due to the "STAT" or emergency nature of their diagnostic needs and, therefore, represent a stable, attractive customer segment for the Company. The Company manufactures and markets a broad offering of IVD products and services which includes: (i) instruments (approximately 10% of pro forma 1995 sales); (ii) reagents and consumables (approximately 80% of pro forma 1995 sales); and (iii) services (approximately 10% of pro forma 1995 sales). The Company's extensive product line is capable of conducting over 500 different types of IVD tests and serves over half of the global IVD market. In total, the Company has a worldwide installed base of approximately 21,500 instruments. With a typical instrument life of five to ten years, the Company's installed base of instruments generates annual revenue of approximately $40,100 per instrument from ongoing sales of reagents, consumables and service. More importantly, all but one of the Company's instrument systems are "closed" systems, which require the exclusive use of Company reagents and consumables in order to run tests. As a result, through its large installed base of instruments, the Company generates an attractive, stable and recurring stream of revenue from reagents, consumables, and service contracts. 48 COMPETITIVE STRENGTHS The Company attributes its leading positions in the IVD market to the following competitive strengths: . Leading manufacturer and supplier of IVD instruments and supplies. With 1995 pro forma sales of $959.0 million, the Company is the leading supplier of IVD products and services to clinical laboratories in the United States and is the third largest IVD supplier to clinical laboratories in the world. The Company is the domestic market leader in automated clinical chemistry and the only supplier with domestic leadership positions in four major IVD segments. . Broadest product and service offering. The Company is the only supplier of products and services across five major IVD segments. The Company believes that its broad product offering provides a competitive advantage in marketing its products to a wide range of customers (from single-site hospitals to Health Systems to reference laboratories), each with varying testing and performance requirements. For example, the Company believes that its ability to offer "one-stop shopping" due to its broad product offering was instrumental in its April 1996 signing of a five year agreement for all of the Company's five core product lines with Columbia/HCA (the largest for- profit hospital chain in the United States). . Stable and recurring stream of reagent, consumable and service revenues. The Company generates a stable and profitable stream of revenues from its large installed base of instruments which require the ongoing consumption of various reagents, consumables, and services. More importantly, all but one of the Company's instrument systems, representing approximately 80% of all installed instruments, are "closed" systems, which require customers to use the Company's reagents and consumables exclusively. In 1995, sales from reagents, consumables, and services accounted for approximately 90% of the Company's pro forma sales. . Extensive sales and service organization. The Company's sales and service force of approximately 1,900 professionals worldwide is one of the largest in the industry. Management believes this large network of customer support functions (including sales, installation, training and service) provides the Company with a competitive advantage in both acquiring and retaining customers. . Management team with successful track record. The Company has an experienced management team that averages twenty years each in the health care industry. Over the last several years, management has demonstrated its ability to develop leading market share positions, rationalize infrastructure and reduce costs. BUSINESS STRATEGY The Acquisition expanded Dade's leadership positions by significantly improving its competitive position in the important clinical chemistry segment. The Acquisition was consistent with the Company's strategy to seek consolidation opportunities within the IVD industry that leverage its installed base, broad product offering, international presence and economies of scale to increase profitability and enhance its global leadership position. Dade believes that its combination with Dade Chemistry creates one of the best positioned suppliers of IVD products and services in the world. The Company is committed to improving its strong market position through the following strategies: . Cross-sell products to increase market penetration. The Acquisition provides the Company with a unique opportunity to cross-sell existing product lines between Dade's and Dade Chemistry's extensive customer bases. The Company intends to capitalize on cross-selling opportunities primarily by marketing Dade Chemistry's clinical chemistry products to existing Dade customers and marketing Dade's controls, microbiology and hemostasis products together with the sale of routine clinical chemistry analyzers. . Increase international presence. The Acquisition provides Dade with exposure to new international markets and increases Dade's total international sales by 48% to approximately $277 million. This increased international presence will allow the Company to leverage sales, marketing and administrative costs in countries currently served by both Dade and Dade Chemistry, and increase market share by introducing existing products to countries currently served by only one of the two businesses. The Company believes international markets also present growth opportunities due to the current under- penetration of automated systems in these markets. 49 . Maintain a pipeline of new products. The Company's research and development resources focuses on three types of initiatives: (i) expanding test menus, such as the recent introduction of thirteen new assays in the Dimension product line; (ii) upgrading instruments, such as MicroScan's WalkAway or Dade Chemistry's next generation Dimension; and (iii) developing niche instrument platforms, such as Dade Hemostasis' Platelet Function Analyzer ("PFA"), the world's first commercial in vitro system to provide automated analysis of blood platelet function. The Company believes that these initiatives will allow it to both expand its large installed base and increase reagent revenue per instrument. . Leverage current infrastructure to reduce costs. In connection with the Acquisition, the Company has identified significant cost reduction opportunities expected to result in approximately $27 million of annual savings by 1997. These reductions consist of approximately $26 million from the immediate elimination of DuPont worldwide corporate allocations and other redundant costs (off-set by approximately $20 million of incremental infrastructure costs required to operate within the reconfigured overall organization) as well as approximately $21 million from additional savings opportunities. In addition, the Company believes there are additional long- term cost saving opportunities related to improving manufacturing processes and leveraging its cost structure to further enhance profitability. . Seek additional consolidation opportunities. The Company believes that large IVD industry participants with broad product offerings and large installed bases have a competitive advantage in the current health care environment. The Company believes the Acquisition positions it to be one of the few market participants able to benefit from customer migration towards IVD suppliers with broad product offerings. The Company intends to continue to seek opportunities to form alliances and joint ventures, or acquire businesses, product lines and technologies to further enhance its global position. INDUSTRY SEGMENTS The following details the industry segments in which the Company's key products compete and the Company's market positions and strategies: CLINICAL CHEMISTRY PRODUCTS The Company is the leading domestic supplier in the automated clinical chemistry segment of the IVD market and the second largest supplier worldwide. The Company's clinical chemistry product line consists of three primary instrument platforms marketed to clinical laboratories (Paramax (Dade), aca (Dade Chemistry) and Dimension (Dade Chemistry)) and a fourth instrument platform marketed primarily to physicians' offices (Analyst (Dade Chemistry)). Routine clinical chemistry tests measure substances found in large concentrations in patients' blood, urine or other bodily fluids. These substances include cholesterol, glucose, iron and sodium and provide information on a patient's basic bodily functions. As the sensitivity of clinical chemistry analyzers has improved, more tests traditionally run on immunochemistry instruments have been developed for traditional chemistry instruments, such as those for therapeutic drug monitoring and drugs of abuse screening. This progression of tests to lower cost clinical chemistry analyzers allows customers to consolidate the number of instruments in their laboratory and reduce the labor costs associated with operating multiple instruments. The migration of certain immunochemistry tests from competitors' systems represents an attractive growth prospect for the Company due to its large installed base of routine and specialty clinical chemistry analyzers. On average, hospitals operate two to three clinical chemistry analyzers which serve such roles as routine, STAT, and specialty testing. The routine clinical chemistry analyzer, such as the Paramax or Dimension, is considered the workhorse of the clinical laboratory, accounting for up to 40% of all IVD tests performed in such laboratories. These analyzers are characterized by their high throughput capabilities. Specialty analyzers, such as the aca, are often dedicated to lower volume tasks such as emergencies, off-hours testing or drug screening. Specialty analyzers are characterized by their ease of use and test menu breadth. The clinical chemistry market is relatively mature. In the future, domestic growth is expected to be driven primarily by the expansion of test menus. The market is highly competitive and manufacturers have focused on specific segments by offering analyzers with different throughput and menu capabilities. 50 The combination of Paramax and Dade Chemistry provides an excellent strategic fit for the following reasons: (i) common customer focus; (ii) similar technology; and (iii) cross-selling opportunities. Paramax has historically focused on products targeting the medium to high volume market while Dade Chemistry's Dimension line has focused on small to medium volume accounts. The aca, due to its legacy as the first automated analyzer and subsequent repositioning as a specialty and STAT analyzer, enjoys a strong representation across all hospital volume segments. The Company believes that the ability to provide a full clinical chemistry solution, regardless of hospital size, is critical in order to be a strong competitor in clinical chemistry. The broad product offering created by the combination of Dade and Dade Chemistry will allow the Company to offer the variety of testing profiles and instrument performance characteristics necessary for a full chemistry solution. The technological fit is strong as well. Both Paramax and Dimension reagents are based on a similar dry, tableted technology. This will allow for the rapid integration of both research and development and manufacturing operations. Additionally, features unique to both instruments, such as Paramax's Closed Container Sampling and Dimension's solid state Multiply technology, are expected to be quickly incorporated into the Company's next generation analyzer. Lastly, the Company expects to benefit from cross-selling opportunities such as the sale of Dade controls to current aca and Dimension customers and from the migration of certain immunochemistry tests to lower cost clinical chemistry platforms such as the Dimension. IMMUNOCHEMISTRY PRODUCTS Stratus is a strong niche competitor in the United States immunochemistry market, with the leading position in the cardiac testing segment. Immunochemistry testing relies upon the properties of antibodies and antigens in the immune system as its key detection mechanism. Similar to clinical chemistry testing, immunoassays (immunochemistry tests) measure substances found in blood. Immunoassays are distinct, however, in their ability to measure relatively low concentration substances that are difficult to detect with conventional routine clinical chemistry methods. The application of immunoassays to test extremely small concentrations has become invaluable to some significant areas of clinical diagnoses. The following are the immunochemistry segments in which the Company competes: --Thyroid: thyroid dysfunction detection --Drugs of abuse: detection of harmful drugs --Cancer: detection of tumors --Therapeutic drug monitoring: drug treatment efficacy --Cardiac: diagnosis of heart attack --Anemia: screening for anemia --Fertility: screening for pregnancy Dade introduced its first immunochemistry analyzer in 1983. The Stratus analyzer currently offers a test menu of over 30 reagents and utilizes a patented tab technology which facilitates one of the fastest test processing times compared to those of competitors' instruments. The current installed base of Stratus analyzers is approximately 4,200 instruments worldwide. Because immunochemistry systems are "closed," sales of reagents are influenced by instrument placements. The Company accelerated the placement of its instruments in the early 1990s by providing Stratus instruments to its customers at no charge in exchange for ongoing reagent revenues. This strategy was pursued by other competitors and is now considered standard industry practice. The immunochemistry market is highly competitive. Stratus, however, has been repositioned to compete in the cardiac testing niche of the immunochemistry market because its instrument system currently provides the fastest response time for cardiac testing. Cardiac tests facilitate a physician's diagnosis of heart attacks or other forms of heart muscle damage by measuring blood markers such as CK-MB, Troponin-I and myoglobin. The Company has outperformed its competitors in new cardiac test development. Demand for its new Troponin-I assay has grown rapidly since its introduction in August 1995. Clinical data and market research indicates that Troponin-I will ultimately replace CK-MB as the standard for the detection of heart muscle damage. 51 The Company believes there is significant value in properly screening people entering a hospital for chest pains. In the United States, approximately five million people each year are admitted to a hospital with chest pains, but only 14% of these people actually suffer a heart attack. The incorrect admission or, even worse, the incorrect discharge of a patient can cost the health care system billions of dollars annually. Through the use of the Company's battery of cardiac tests, heart attacks can be more accurately identified and, if necessary, treated. In the future, the Company plans to continue to emphasize specific niche segments, especially cardiac, where it has established a market presence and where it can market its instruments' throughput and turnaround capabilities. To this end, the Company is working on a new point-of-care cardiac specific platform. MICROBIOLOGY PRODUCTS Through its MicroScan product line, the Company has a worldwide leadership position in the identification/minimum inhibitory concentration ("ID/MIC") microbiology products market. Moreover, a highly focused initiative in Japan has established a strong leadership position in that country with a rapid sales growth trend (more than 50% annually from 1992 to 1995). MicroScan serves a segment of the microbiology market that consists of ID/MIC instruments, reagent panels, data management systems, disposable accessories and service. Microbiology systems are "closed," meaning that reagents and consumables can only be used on the instruments for which they were produced. Growth in the microbiology testing market has been driven primarily by advances in automation, the complexity of various microbes, and the increasing resistance of microbes to antibiotics. Over the past three years, MicroScan has been increasing international sales at a compound annual growth rate of over 20%. Worldwide, MicroScan has approximately 3,700 instrument installations. Microbiology laboratories use ID/MIC products to identify infection-causing bacteria (e.g., strep and staph) and to determine the minimum concentration of antibiotic (e.g., erythromycin and ampicillin) necessary to inhibit or kill the bacteria. This information is critical to the optimum management of patient therapy. MicroScan manufactures and markets both manual and automated ID/MIC products. MicroScan's premier instruments are the WalkAway-40 and the WalkAway-96, fully automated instruments that use patented dry reagent panels to conduct bacterial identification and susceptibility testing at the same time. During 1995, the Company continued to implement its strategy of seeking growth internationally by entering the German market, and by releasing new products in Italy and Japan. Germany represents an attractive opportunity for the Company due to the combination of an advanced health care sector, a sizable population and a low penetration of automated microbiology systems. In the United States, MicroScan continued to secure business through the promotion of its Rapid Panels, which produce results sooner than those of competitive systems, and through the placement of pharmLINK systems. The pharmLINK system was enhanced in 1995 by a strategic alliance with SIMKIN. SIMKIN is a pharmacokinetic software package which suggests dosage changes based on patient-specific information (e.g., gender, age, weight, etc.). Combined with pharmLINK's antibiotic monitoring capabilities, the two software packages provide pharmacists, microbiologists and physicians with better information for the management of antibiotic therapy. In addition to more focused disease treatment, the system allows for more accurate tracking of oral vs. IV and brand-name vs. generic antibiotics. Because antibiotics can represent a significant portion of a typical hospital's drug budget, the potential for cost savings will continue to drive the use of pharmLINK as an important data management tool. In the future, the Company expects to continue to aggressively develop international markets and solidify its base in the United States. In addition, the Company has begun work on the WalkAway with a focus on reducing costs, improving ease of use and developing significant enhancements to its existing data management software. As hospitals outside the United States continue to develop the necessary information systems infrastructure, the Company expects to enhance international growth by developing new versions of pharmLINK that are specific to a country's needs. 52 HEMOSTASIS PRODUCTS Dade is a well recognized and respected name in the hemostasis segment of the IVD industry. The introduction of some of Dade's products approximately 40 years ago helped to pioneer the IVD testing industry. The Dade Hemostasis product line is a leader in both the domestic and worldwide hemostasis markets. Hemostasis testing measures a patient's ability to form and dissolve blood clots, a critical factor in the stabilization of the cardiovascular system. These tests are typically performed before and during surgical procedures. Hemostasis testing is also essential in post-surgical treatments for patients with cardiovascular disorders (e.g., monitoring treatments to "thin" the blood) and for patients with coagulation disorders (e.g., hemophilia). Recent hemostasis market growth has been influenced primarily by the number of surgical procedures performed. Additional market growth is expected to come from new hemostasis tests which accurately measure blood clotting and provide for improved patient treatment. The hemostasis product line consists of reagents, instruments and associated consumables. The Company offers over 30 routine and specialty coagulation tests. Unlike most other product areas served by the Company, hemostasis instrument systems are "open" systems, meaning that customers can use reagents from a number of vendors with instruments manufactured by other vendors. Primarily for this reason, the Company has sold third-party instruments rather than incurring costs to develop instruments in-house. In July 1994, the Company's former hemostasis instrument supplier, Medical Laboratory Automation, Inc., terminated its relationship with Dade. In March 1995, Dade signed a new supply agreement with TOA, a major global manufacturer of hematology and hemostasis equipment and a recognized leader in product innovation. In fact, TOA has introduced a new instrument system almost every year for the past 10 years. The Company's relationship with TOA extends back to 1993, when TOA outsourced the repair and service of their domestic hematology instruments to Dade's Product Service Management group. TOA began shipping its hemostasis instruments to Dade in July 1995, and the instrument line has been well accepted by customers. Additionally, despite being without a hemostasis instrument supplier from July 1994 to July 1995, the Company had a net gain in domestic hemostasis customers in 1995. Management believes this strong customer loyalty reflects the perception of Dade Hemostasis reagents as premium quality products and the value of the broad portfolio of products offered by the Company. Dade Hemostasis is committed to innovation and product quality and offers a broad product line with high lot-to-lot consistency in its reagents. These factors have allowed Dade to increase sales despite operating in an "open" system environment. This position has also allowed the Company to commit significant resources to research and development into products such as the Platelet Function Analyzer, a new system which provides more precise and consistent measurement of patient blood clotting functions in a less invasive and less time consuming manner than conventional testing procedures. CONTROL PRODUCTS Dade is also a well recognized and respected name in the controls segment of the IVD industry. Dade developed the first commercially available control reagents in 1951 and has since maintained its reputation as a quality- assurance leader. The Company's Total Quality Control ("TQC") product line has a leadership position in the worldwide laboratory IVD controls market. Controls are used by laboratory technicians to assess the accuracy and precision of equipment. Tests are performed using controls (solutions formulated to specific, standardized values) to determine whether instruments are producing results valid within a statistically acceptable range. The worldwide controls market includes controls for hemostasis, immunochemistry and clinical chemistry. CLIA '88 subjects laboratories to impromptu inspection and subsequent fines/penalties for compliance violations. 53 The implementation of governmental regulation mandating higher standards of quality control will continue to drive laboratories' needs for controls. The Company's TQC product line includes controls for use in the hemostasis, clinical chemistry and immunochemistry segments, as well as controls-related quality assurance programs ("QAPs"). These programs are sophisticated statistical database systems that aid a laboratory in monitoring and maintaining the accuracy and precision of testing over time. Dade's state-of- the-art QAPs enable users to monitor and compare system test results with those obtained by thousands of other laboratories using similar systems around the world. With over 10,000 QAP participants, the Company possesses the world's largest inter-laboratory peer group database. The Company plans to complement this database with new real-time information and enhanced data management products. Dade has traditionally focused on developing controls primarily for its own installed base of instruments. In 1995 however, the Company began an aggressive campaign to seek new business by soliciting manufacturers for OEM opportunities and developing customer compliance programs for non-Dade instruments. In 1995, this resulted in an exclusive controls supplier relationship with Columbia/HCA and an OEM relationship with a European supplier of clinical chemistry analyzers. The Company plans to continue to strengthen its business through: (i) the migration of existing Dade Chemistry customers to Dade controls; (ii) the aggressive pursuit of new OEM business; (iii) the development of specialty controls for each of the main IVD segments; and (iv) the establishment of exclusive supplier arrangements with Health Systems. Many IVD instrument companies, like Dade Chemistry, view controls manufacturing as non-strategic and often have a low share of their own instrument base. Dade management, however, estimates that, due to its strong history of controls manufacturing, its controls are used by approximately 75% of its customers. Moreover, management estimates that Dade controls are currently used on less than one-third of Dade Chemistry's domestic installed base. With Dade's reorganized and refocused salesforce, the further migration of Dade Chemistry's existing customers to Dade controls represents a clear growth opportunity for the Company. OTHER PRODUCT LINES Immunohematology. Dade Immunohematology and related products are typically used by hospital laboratories and blood donor centers to classify blood products for use in transfusion procedures. The Dade Immunohematology line consists of immunohematology reagents and laboratory equipment such as cell washers and automated centrifuges. This product line has suffered from increased competition in recent years due to a new, simpler testing procedure. Product Service Management. The Company believes its Product Service Management ("PSM") organization is the largest service organization in the industry with over 1,000 product and service specialists worldwide. This organization provides in-warranty and out-of-warranty service on the Company's 21,500 instruments and provides service on a third-party basis for other medical instrument companies. All of the Company's field service personnel are trained in the technical aspects of one or more of the Company's major instrument systems. In the United States, this field service organization provides rapid (usually within six hours), on-site service to the Company's entire customer base. The Company also maintains a telephone-based, in-house technical support and customer service group of over 400 people worldwide to provide troubleshooting and other user help, which leverages the higher cost of on-site service. Third-Party Product Distribution and Royalties. The Company distributes various products for third-party manufacturers in select international markets where it can leverage its existing distribution network. The Company receives a recurring stream of royalty revenues from third-parties related primarily to certain intellectual property assets. 54 Planned Divestiture. Dade is marketing the Burdick & Jackson product line for divestiture. Thus, this product line is being treated as "Net assets held for sale" in Dade's Consolidated Financial Statements and the results of operations from these product lines are excluded from Dade's 1995, 1994 and 1993 Consolidated Statement of Operations (see Note 4 of Notes to Combined/Consolidated Financial Statements). RESEARCH AND DEVELOPMENT OVERVIEW The Company maintains an active research and development program focused on the development and commercialization of products which both complement and update its existing product offerings. Within the IVD industry, the Company has established a track record of innovation and timely product introduction. In each of its core product lines, research and development was instrumental in the development of key technologies which have helped to create strategic product advantages. As of June 30, 1996, there were approximately 450 employees worldwide involved in the Company's research and development efforts. While management may adjust research and development levels to reflect the changing dynamics of the IVD industry, new product development will remain an important focus for continued growth and enhanced profitability. In order to maximize growth and enhance profitability, research and development activities are grouped into three primary categories: test menu development, next generation platform development and niche platform development. TEST MENU DEVELOPMENT Once the Company places an instrument, the development of new reagents to conduct additional tests represents a highly leveraged growth opportunity. The Company's large installed base of approximately 21,500 instruments thus represents significant potential for the Company's new reagent development efforts. New reagents such as Troponin-I for Stratus, expanded Panels for the MicroScan WalkAway and improvements to existing reagents will continue to receive significant developmental focus. NEXT GENERATION PLATFORM DEVELOPMENT The Company is committed to enhancing its current instrument line. Management believes that clinical laboratories are increasingly looking to IVD suppliers to help them reduce labor costs, the largest cost component in the laboratory. Among the activities that drive labor costs are: sample preparation; instrument setup, throughput and maintenance; manual data entry and manipulation; and the verification and reporting of results. The Company is currently working on a next generation clinical chemistry instrument and productivity enhancements for microbiology instrumentation that will further automate the laboratory and reduce total system costs. As part of the next generation clinical chemistry instrument, for example, Dade Chemistry has invested in on-the-instrument automated centrifuge technology to reduce excess sample handling and transportation time, enhanced Data Fusion software to allow seamless communication of results between the instrument and the laboratory information system and simplified on-board specimen management to improve reliability. Additionally, the Company expects to gain improvements by merging features unique to current Dade or Dade Chemistry platforms (such as Paramax's Closed Container Sampling and Dimension's Multiply technology) into its next generation instrument offerings. NICHE PLATFORM DEVELOPMENT In addition to improvements in the existing portfolio of instruments, the Company continues to seek out new growth opportunities through the focused development of certain niche instruments. Such products include the recently introduced Platelet Function Analyzer ("PFA"). Though platelet function can be measured today, 55 current tests have a number of disadvantages; they are manual and invasive, involve significant sample preparation time, measure only partial platelet function and are difficult to reproduce and standardize. The PFA automates the testing of platelet function and provides a quantifiable measurement of platelet function. Like most IVD instrument systems, the PFA is a "closed" system that uses proprietary reagents and consumables designed exclusively for this instrument. Potential niche products currently under research include a cardiac-specific analyzer designed for the immediate identification of heart attacks in patients with chest pain and a point-of-care metabolite analyzer based on Dade Chemistry's Multiply technology. CUSTOMERS The Company has a broad customer base that includes primarily hospital and reference laboratories. Though the Company sells worldwide and maintains a substantial international presence, its sales are concentrated in the United States hospital market due to Baxter's traditional emphasis on United States hospital customers. No end-user customer represents more than 4% of the Company's sales, on a pro forma basis. SALES, DISTRIBUTION AND MARKETING The Company employs approximately 950 people in its worldwide sales group, comprised of approximately 750 field sales representatives and managers and approximately 200 clinical application specialists ("CASs"). Field sales representatives are the traditional salesforce and are organized by product line. The 200 CASs provide troubleshooting in the field, customer training, and conduct workshops and seminars. The CASs are also organized by major product lines. In the United States, the Company maintains sales offices in seventeen cities. The Company maintains 20 additional sales offices internationally and has main offices in the following cities: Barcelona, Brisbane (Australia), Brussels, Dubai, Duedingen (Switzerland), Milan, Munich, Paris, Tokyo and Toronto. Approximately 450 of the 750 person field salesforce is domestic. In the United States, this sales organization works closely with Baxter U.S. Distribution, the hospital distribution division of Baxter, and the Company's chief domestic distributor (after the Acquisition, sales through Baxter will represent approximately one third of the Company's sales). A distribution agreement has been established with Baxter which includes access to approximately 500 of their highly trained distribution professionals, capable of generating sales leads and maintaining interactions with hospital decision- makers. Together with the Company's domestic field salesforce, these individuals represent a sizable 950 person team that is capable of developing strong relationships with thousands of customers. In addition to sales prospecting, the distribution agreement also provides for routine distribution and delivery functions such as order entry, invoicing, customer service, database management and physical warehousing and delivery. This distribution agreement can be terminated by Baxter at any time after June 18, 1999, subject to notice requirements. Dade Chemistry products will continue to be distributed through Dade Chemistry's existing distribution system. In addition to its worldwide sales group, the Company employs approximately 300 marketing personnel worldwide with extensive knowledge and understanding of industry issues, market trends, customer needs and competitive dynamics. Both the sales and marketing organizations are among the largest in the industry and should prove to be a valuable asset to the Company as these capabilities are leveraged in a consolidating industry. INSTRUMENT PLACEMENTS The Company's instruments range in retail price from $20,000 to $110,000. Approximately one-third of the Company's instrument placements in 1995 were sold directly to customers, approximately one-third were sold to third-party lessors and the remainder were financed directly by the Company. The Company offers customers a variety of financing options designed to offset the large up-front capital outlay necessary to purchase an IVD instrument. The two most common financing methods are (i) third-party 56 capital leases, in which a third party (Baxter in the case of Dade instruments and GE Capital in the case of Dade Chemistry instruments) purchases the instrument from the Company and in turn leases such instrument to the customer via a capital lease agreement; and (ii) reagent rental agreements in which Dade retains title to the instrument and recoups the cost via premiums on its reagents. In addition to reagent rental expenditures, the Company will, in certain circumstances primarily involving the Stratus product line, provide customers with instruments at no charge in exchange for ongoing reagent revenues, a practice commonly referred to in the industry as "seeding." Management's decision to reposition the Stratus product line as a niche cardiac product line has resulted in a decreased level of seeding. The Company believes it has a competitive advantage in the cardiac test segment and therefore does not need to engage in extensive instrument seeding. Dade Chemistry has not historically made any material investments in seeded instruments. INTELLECTUAL PROPERTY The Company owns nearly one thousand United States and foreign patents and has hundreds of patent applications currently pending in the United States and abroad. These patents and patent applications cover a broad base of technology relating to the Company's Dade, MicroScan, Stratus, Paramax, Dimension and aca product lines as well as technology which has yet to be commercialized. The Company also licenses certain patents and other intellectual property rights from third parties. In addition to its extensive patent portfolio, the Company possesses a wide array of unpatented proprietary technology and know-how. The Company owns approximately five hundred United States and foreign registered trademarks and service marks, including the Company's well-known and respected Dade(R), MicroScan(R), Stratus(R), Paramax(R), aca(R), Dimension(R) and Analyst(R) brand names. In addition, the Company has numerous applications for registration of trademarks and service marks pending in the United States and abroad. The Company also owns several United States copyright registrations. In the aggregate, these patents, patent applications, trademarks, copyrights and licenses are of material importance to the Company's business. However, the Company believes that no single patent, trademark or copyright (or related group of patents, trademarks or copyrights) is material in relation to the Company's business as a whole. The loss of any single license would not have a material adverse effect on the Company's business, except for the non- exclusive license granted by Hybritech Inc. to the Predecessor (now assigned to the Company) for Hybritech's tandem patent, which license has been granted for the life of the patent. Hybritech's tandem patent expires in August 2000 in the United States and expires between August 2001 and August 2003 in various countries other than the United States. The Company has initiated discussions with Hybritech concerning the Company's dispute of payments owed under the Hybritech license. Although the Company can give no assurances as to how this matter will be resolved, the Company currently knows of no reason why the Hybritech license would be terminated and does not believe that termination of this license is likely. See "Risk Factors-- Reliance on Patents and Other Intellectual Property." 57 FACILITIES The Company provides its customers with high quality products by controlling each stage of production. Dade manufactures products in nine locations (six in the continental United States, one in Puerto Rico, and two in Switzerland), with total plant area exceeding 1.4 million square feet (including administrative areas housed at plant sites). Dade Hemostasis and Paramax reagents as well as Total Quality Controls ("TQC") are manufactured in Puerto Rico and Miami; MicroScan reagents and instruments are manufactured in Sacramento, California; Stratus reagents are manufactured in Miami. Dade Chemistry manufactures products in two locations, both in the continental United States. Below is an overview of the Company's manufacturing facilities (excluding those related solely to Burdick & Jackson): MANUFACTURING FACILITIES
FLOOR AREA OWNED/ NO. OF LOCATION NO. OF SITES (SQ. FT.) LEASED PERSONNEL(1) -------- ------------ ---------- -------- ------------ DADE: Aguada, Puerto Rico............ 1 115,300 Leased 341 (Dade Hemostasis, Paramax and TQC) Duedingen, Switzerland......... 2 184,700 1 Owned 95 (Dade Immunohematology) 1 Leased Miami, Florida................. 2 420,900 Owned 1,109 (Dade Hemostasis, Stratus, Paramax and TQC) Sacramento, California......... 2 236,900 1 Owned 599 (Microscan) 1 Leased DADE CHEMISTRY: Glasgow, Delaware.............. 1 447,000 Owned 1,023 Newtown, Connecticut........... 1 22,000 Leased 119 --- --------- ----- TOTAL........................ 9 1,426,800 3,286 === ========= =====
- -------- (1) Personnel numbers include approximately 450 temporary employees but do not include personnel associated with, but not housed at, the locations (e.g., sales representatives and technical support specialists). LEGAL PROCEEDINGS The Company is the licensee of a third-party patent application that is currently involved in an interference proceeding filed on December 15, 1993 in the United States Patent and Trademark Office (Nemerson v. Edgington, Interference No. 103,203). The interference proceeding relates to patent protection of human recombinant tissue factor (hrTF), which is used in Dade's Innovin(R) product to determine a patient's ability to clot blood. Although current sales of Innovin(R) are immaterial, the Company expects sales of Innovin(R) to increase in the future. A negative determination in the pending patent interference proceeding could adversely impact the Company's use of this licensed technology and its ability to market the Innovin product in the United States, potentially resulting in a material adverse effect on the Company's business prospects. In October 1994, management of the Predecessor became aware that the diagnostics division of Baxter's Italian subsidiary had come under scrutiny as a part of an industry-wide investigation into business practices by diagnostic equipment suppliers. Management of the Company's Italian subsidiary believe that the Company has taken no actions related to the investigation that would be subject to any reasonable criticism. Based on the Company's current understanding of the facts and circumstances surrounding the investigation by the Italian authorities, the Company does not believe that the outcome of this investigation will have a material adverse effect on the Company's business or operations. 58 The Company is also involved in a number of legal proceedings arising in the ordinary course of its business, none of which is expected to have a material adverse effect on the Company's business or financial condition. ENVIRONMENTAL, HEALTH AND SAFETY MATTERS The Company is subject to federal, state, local and foreign environmental laws and regulations and is subject to liabilities and compliance costs associated with the past and current handling, processing, storing and disposing of hazardous substances and wastes. The Company's operations are also subject to federal, state and local occupational health and safety laws and regulations. The Company devotes resources to maintaining environmental compliance and managing environmental risk and believes that it conducts its operations in substantial compliance with applicable environmental and occupational health and safety laws and regulations. Nonetheless, from time to time, the operations of the Company may result in noncompliance with environmental or occupational health and safety laws or liability pursuant to such laws. The Company does not expect to incur material capital expenditures for environmental controls in the current or succeeding fiscal year. In connection with the Initial Acquisition, Baxter agreed to retain responsibility for, and indemnify Dade from and against, certain environmental matters. In connection with the Acquisition, DuPont agreed to retain responsibility for, and indemnify the Company from and against, certain environmental matters. The more significant of these indemnified matters are described below. Notwithstanding these contractual agreements, the Company could be pursued in the first instance by governmental authorities or third parties with respect to certain indemnified matters, subject to the Company's right to seek indemnification from Baxter or DuPont. Management does not currently believe that any such matter will have a material adverse effect on the business or financial condition of the Company. The federal Comprehensive Environmental Response, Compensation and Liability Act ("CERCLA") and similar state laws, impose retroactive, strict, joint and several liability with respect to certain releases or threatened releases of hazardous substances. In particular, CERCLA can impose liability as a result of waste disposal at a location that later requires cleanup. The Company did not assume any liabilities for offsite waste disposal by Baxter prior to the Initial Acquisition or offsite waste disposal by DuPont prior to the Acquisition. Nonetheless, the Company could in the future be held liable for waste disposal by the Company. To date, the Company has not received notice of any such liability. Prior to the Initial Acquisition, Baxter conducted certain environmental investigatory and/or remedial work at the Dade East facility in Miami, Florida (a soil investigation in a parking lot area and organic chemical-related groundwater remediation elsewhere on site) and at the Burdick & Jackson facility in Muskegon, Michigan (removal of underground storage tanks and associated groundwater monitoring). The Muskegon, Michigan facility is an asset held for sale. With regard to the soil investigation at the Dade East facility, Baxter submitted its investigation results to the Dade County environmental agency and received a determination that no further action is required. As to the groundwater remediation at Dade East and the underground tank-related matter at Muskegon, Baxter has completed remediation and is continuing groundwater monitoring as directed by the respective agencies. In all three cases, Baxter, in connection with the Initial Acquisition, has agreed to complete and bear the cost of all required investigatory, remedial and monitoring work and to indemnify Dade from and against any associated liabilities. There are certain limitations to Baxter's obligation to indemnify Dade for, or bear the cost of, these three issues, as follows: (i) Baxter will not indemnify Dade for, or bear the cost of addressing, preexisting contamination exacerbated through the negligence or willful misconduct of Dade; and (ii) Baxter will not indemnify Dade for claims brought against Dade by third parties arising from these three matters after December 20, 1999. Prior to the Acquisition, DuPont discovered groundwater contamination at its Glasgow Business Community, a portion of which is owned by the Company, and at its Newtown, Connecticut facility, a portion of which is leased by the Company. To the Company's knowledge, none of the contamination at Glasgow is located within the parcel owned by the Company and none of the contamination at Newtown is located within 59 the portion leased by the Company. With respect to Glasgow, DuPont installed, and continues to operate, a groundwater treatment system. With respect to Newtown, at the direction of the state of Connecticut, DuPont conducts groundwater monitoring and has supplied nearby residences with the municipal water supply. The terms of the Acquisition Agreement provide that DuPont shall retain responsibility for, and indemnify the Company without limitation from and against, both of these groundwater contamination matters. Accordingly, the Company expects that no expenditures will be made by the Company with respect to these matters. EMPLOYEES As of June 30, 1996, Dade had approximately 4,070 full-time and part-time employees, 3,370 in the United States (including Puerto Rico), 480 in Europe, 80 in Japan and 140 in other locations around the world. As of June 30, 1996, Dade Chemistry had approximately 1,790 full-time and part-time employees, 1,620 in the United States, 135 in Europe, 25 in Japan and 10 in other locations around the world. The Company has no collective bargaining agreements with any unions and believes that its overall relations with employees are satisfactory. 60 MANAGEMENT EXECUTIVE OFFICERS AND DIRECTORS Executive officers and directors of the Company are as follows:
NAME AGE POSITION ---- --- -------- Scott T. Garrett........ 46 President, Chief Executive Officer and Director Robert W. Brightfelt.... 52 Executive Vice President and Director Lee D. Flowers.......... 50 Executive Vice President Robert W. Kleinert...... 44 Executive Vice President James W.P. Reid- Anderson................ 38 Executive Vice President and Chief Financial Officer John F. Doherty......... 53 Senior Vice President of Operations Susan A. Evans.......... 49 Senior Vice President of Research and Development Thomas E. Hill.......... 46 Senior Vice President of Human Resources James E. Mahoney........ 38 Senior Vice President of Business Development and Strategic Planning Robert A. Boghosian..... 50 Corporate Vice President of Regulatory Affairs and Quality Assurance Dennis A. Taylor........ 52 Corporate Vice President and Controller Mark E. Nunnelly........ 37 Director Stephen G. Pagliuca..... 41 Director Adam Kirsch............. 35 Director John P. Connaughton..... 31 Director Joseph H. Gleberman..... 38 Director
Scott T. Garrett joined Baxter in 1975 as a product development engineer and has served in a number of research, strategic planning and management positions since that time. Mr. Garrett was named Vice President and General Manager of the Predecessor's European operations in 1987 and was named President of the Paramax Systems Division in 1989. Mr. Garrett became Executive Vice President of the Predecessor in 1990, with responsibility for all divisions and operations associated with manufactured product lines. In 1992, Mr. Garrett was elected Group Vice President of Baxter with responsibility for the manufacturing and distribution divisions comprising the Baxter Diagnostics, Inc. subsidiary. He became President and Chief Executive Officer of Dade in 1994. Mr. Garrett is a member of the American Association for Clinical Chemistry and also currently serves on the Health Industry Manufacturers Association Board of Directors. He is also a director of Sunol Molecular Corporation. Robert W. Brightfelt joined DuPont in 1967 as a mechanical engineer and has served in a number of research, supervisory and management positions since that time. In 1984, Mr. Brightfelt was named Dade Chemistry's New Product Development Manager and headed an effort to develop and commercialize two new, fully automated diagnostic testing systems: Dimension and Vista. Following the successful completion of this effort, Mr. Brightfelt was promoted to worldwide Marketing Manager of Dade Chemistry in 1987 and to worldwide Business Director in 1988. Following the Acquisition, Mr. Brightfelt became an Executive Vice President, responsible for the Clinical Chemistry and Immunochemistry product lines, and a Director of the Company. Mr. Brightfelt is also a director of Molecular Biosystems, Inc. Lee D. Flowers joined the Predecessor as a sales representative in 1973 and has held a variety of positions in sales management, product management, marketing and general management. Mr. Flowers has also served as Vice President of Sales and Marketing at Paramax, Vice President of Marketing at the former Dade Division of the Predecessor Company, President of Stratus and Vice President of Venture Development for Baxter. Mr. Flowers became Executive Vice President in 1994 and was responsible for operations in Japan and the MicroScan and Paramax product lines. He is currently responsible for the MicroScan, Hemostasis, Controls and Immunohematology product lines as well as the Sacramento and Miami/Puerto Rico sites. 61 Robert W. Kleinert, Jr. joined the Predecessor as a sales representative in 1974 and held various positions with the Predecessor in marketing, product management and business planning, including President of Clintec Nutrition Company, a joint venture created by Baxter and Nestle S.A., President of Baxter Diagnostics Europe, and President of MicroScan prior to becoming Executive Vice President in 1993. In this role he was responsible for the Hemostasis, Controls, Immunohemotology, Baxter Equipment and Burdick & Jackson. Additional duties included the global regional sales organization of Europe, North America and the rest of the world. Currently, Mr. Kleinert is responsible for the management of worldwide field operations. This includes United States field operations (Field Sales, Customer Care, Product Service Management, Sales Administration and Network Sales), Europe, Japan/Pacific and Canada/Latin America. In addition, Mr. Kleinert will be responsible for the Atlanta World Parts Center and the Duedingen, Switzerland sites. James W. P. Reid-Anderson became Executive Vice President and Chief Financial Officer in August 1996. Prior to joining the Company, Mr. Reid- Anderson was Chief Administrative and Chief Financial Officer of Wilson Sporting Goods; in addition concurrently he was also Chief Operating Officer of Wilson and served as Vice President and General Manager of Wilson's International Markets. Mr. Reid-Anderson has also served in various financial positions of increasing responsibility for Pepsico Inc., Grand Metropolitan PLC and Mobil Oil Corporation. John F. Doherty joined Baxter as Manager of Distribution Planning and Development in 1977 and has held a variety of positions since that time, including General Manager of Lytening Systems, a division that develops, manufactures, and sells specialty clinical analyzers for measuring electrolytes. Currently, Mr. Doherty is Senior Vice President of Operations and is responsible for the functional management of manufacturing, distribution and information systems. This includes cost improvement projects and worldwide stand-alone projects. Prior to joining Baxter, Mr. Doherty was employed by Price Waterhouse LLP in management consulting and held a number of positions in computer systems development. Susan A. Evans has served as the Predecessor's Vice President of Research and Development since 1991, after serving as Vice President of Research and Development at the former Dade Division of Baxter. Dr. Evans joined Baxter as a senior research scientist in 1981 and has held a variety of other positions. In 1987, Dr. Evans was promoted to Vice President of Research and Development at Dade, where she was responsible for programs in immunochemistry, hemostasis, controls and immunohematology. Dr. Evans also is a member of the American Chemical Society and has held numerous positions with the American Association for Clinical Chemistry, where she is currently a member of the board of directors. Thomas E. Hill has served as the Predecessor's Vice President of Human Resources since 1991. Dr. Hill joined American Hospital Supply in 1980 and has held a number of positions within the human resource function including Personal Planning Consultant, Manager of Personnel Research, Director of Human Resource Information Systems, Director of Corporate Compensation, Director of Compensation and Benefits for the Global Businesses and Vice President of Corporate Human Resource Planning and Staffing for Baxter Healthcare Corporation. James E. Mahoney has served as the Predecessor's Vice President of Business Development and Strategic Planning since 1993, after serving as its Director of Business Development. Before joining Baxter in January 1991, Mr. Mahoney was employed by FMC Corporation, where he held several positions in the areas of business development, investment analysis and financial planning. Robert A. Boghosian became Corporate Vice President of Regulatory Affairs and Quality Assurance in August 1995. For the nine years prior to joining the Company, Dr. Boghosian held management positions of increasing responsibility in Clinical, Regulatory and Quality Affairs, Research and Development and General Management for Johnson & Johnson Corporate and Ortho Diagnostic Systems Inc. From 1969 to 1986, Dr. Boghosian held Operations and Research management positions for Warner-Lambert's IVD and pharmaceutical businesses. 62 Dennis A. Taylor served as the Vice President and Controller for Baxter's Surgical Group until joining the Company in January, 1995. Mr. Taylor began his career with American Hospital Supply Corporation in 1965 where he held a variety of positions in financial management including Vice President/Controller of its MicroScan Division. In 1988, Mr. Taylor was promoted to the position of Vice President/Controller for Baxter's Operating Room Division, which was later reorganized into the Surgical Group. Mark E. Nunnelly has been a managing director of Bain Capital since May, 1993, and a general partner of Bain Venture Capital since 1990. Prior to joining Bain Venture Capital, Mr. Nunnelly was a partner at Bain & Company where he managed several relationships in the manufacturing sector, and he also served with Procter and Gamble in product management. He serves on the board of several companies including Stream International, EduServ Technologies, SR Research and Strategic Mapping. Stephen G. Pagliuca has been a managing director of Bain Capital since May, 1993, and a general partner of Bain Venture Capital since 1989. Prior to joining Bain Venture Capital, Mr. Pagliuca was a partner at Bain & Company, where he worked extensively in the health care arena. He also worked as a senior accountant and international tax specialist for Peat Marwick Mitchell & Company in the Netherlands. He serves on the board of several companies including Gartner Group, Coram Healthcare, Physio Control, VIVRA, EduServ Technologies and the Wesley-Jessen Corporation. Adam Kirsch has been a managing director of Bain Capital since May, 1993 and a general partner of Bain Venture Capital since 1990. Mr. Kirsch joined Bain Venture Capital in 1985 as an associate, and prior to joining Bain Venture Capital, Mr. Kirsch was a consultant at Bain & Company, where he worked in mergers and acquisitions. He serves on the board of several companies including Duane Reade Holding Corp., Stage Stores Inc., Brookstone, Inc. and the Wesley-Jessen Corporation. John P. Connaughton has been a principal of Bain Capital since 1995 and prior to 1995 was an associate. Prior to joining Bain Capital in 1989, Mr. Connaughton was a consultant at Bain & Company. Following the Acquisition, Mr. Connaughton became a Director of the Company. Joseph H. Gleberman is a partner in the Principal Investment Area of Goldman, Sachs & Co. He joined Goldman Sachs in 1982 in the Mergers and Acquisitions Department and became a partner of the firm in 1990. In 1990, he became head of Mergers and Acquisitions for Asia and moved to Tokyo. Mr. Gleberman joined the Principal Investment Area in 1993 and returned to New York. He currently serves as a director of Applied Analytical Industries, Inc., BCP/Essex Holdings Inc., Biofield Corporation and several private companies. 63 COMPENSATION OF EXECUTIVE OFFICERS The following table sets forth information concerning the compensation for 1994 and 1995 for the chief executive officer and the four other most highly compensated officers of the Company (collectively, the "named executive officers"). SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION LONG-TERM COMPENSATION ----------------------- -------------------------------------- ALL OTHER NAME AND OPTIONS(1)/ LTIP COMPENSATION PRINCIPAL POSITION YEAR SALARY($) BONUS($) SAR(#) PAYOUTS($)(2) ($) ------------------ ---- --------- -------- ----------- --------- ------------ Scott T. Garrett....... 1995 297,480 285,000 129,000 -- 4,500(3) President, Chief 9,750(4) Executive Officer and Director 1994 234,450 175,000 -- -- 350,000(5) 4,500(7) 5,835(8) Robert W. Kleinert..... 1995 198,707 177,600 29,500 11,872 4,500(3) Executive Vice President 3,586(4) 1994 192,096 70,596 -- -- 185,000(5) 90,000(6) 4,500(7) 2,515(8) Lee D. Flowers......... 1995 177,846 163,170 29,500 11,875 4,500(3) Executive Vice President 2,782(4) 1994 149,138 64,120 -- -- 185,000(5) 70,000(6) 4,500(7) 1,091(8) John F. Doherty........ 1995 166,546 117,300 29,500 8,125 4,500(3) Senior Vice President of Operations 1994 149,686 56,246 -- -- 185,000(5) 70,000(6) 4,500(7) 780(8) Thomas E. Hill......... 1995 161,323 107,350 22,500 8,125 4,500(3) Senior Vice President of Human Resources 1,644(4) 1994 155,577 43,307 -- -- 185,000(5) 75,000(6) 4,500(7) 1,055(8)
- -------- (1) The options were granted under the Diagnostic Holding, Inc. Executive Management Equity Plan. (2) The Predecessor issued value rights under the Baxter Diagnostics Inc. Long Term Incentive Plan. No new value rights were issued in 1995 or 1994. Dade's board of directors approved a set price of $2.50 per value right to be paid to holders of existing value rights in two equal installments if Dade met EBITDA targets in 1995 and 1996. Dade met its 1995 EBITDA targets, and as a result, half of the value rights were paid out. The remaining aggregate number and value of each named executive officer's value rights at the end of 1995 is as follows: Mr. Garrett forfeited his 16,600 value rights; Mr. Kleinert--4,750 value rights ($11,875); Mr. Flowers--4,750 value rights ($11,875); Mr. Doherty--3,250 value rights ($8,125); and Dr. Hill--3,250 value rights ($8,125). (3) Reflects amounts contributed by the Company for the benefit of the named executive officers under the Dade Savings Investment Plan. (4) Reflects amounts contributed by Dade for the benefit of the named executive officer under the Dade Deferred Compensation Plan. (5) Reflects amounts paid to the named executive officer by Baxter under the Baxter Divestiture Management Bonus Arrangement. (6) Reflects amounts paid to the named executive officer by Baxter under the Baxter Retention Bonus Arrangement. (7) Reflects amounts contributed by the Company for the benefit of the named executive officer under the Baxter Incentive Investment Plan. (8) Reflects amounts contributed by the Company for the benefit of the named executive officer under the Baxter Incentive Investment Supplemental Plan. 64 The following table sets forth information concerning the option grants by Holdings in 1995 to each of the named executive officers: OPTION GRANTS IN 1995
POTENTIAL REALIZABLE VALUE AT ASSUMED ANNUAL RATES OF STOCK PRICE APPRECIATION FOR OPTION TERM INDIVIDUAL GRANTS (1) ---------------------------------------------------- --------------- NUMBER OF SECURITIES % OF TOTAL UNDERLYING OPTIONS OPTIONS GRANTED TO EXERCISE OR GRANTED (#) EMPLOYEES IN BASE PRICE EXPIRATION DATE NAME (2) FISCAL YEAR ($/SH) (3) 5% ($) 10% ($) - ---- ---------- ------------ ----------- --------------- ------- ------- Scott T. Garrett........ 66,000 10.3% $ 0.50 July 28, 2005 $20,750 $52,590 31,500 4.9% $ 7.00 July 28, 2005 -- -- 31,500 4.9% $16.00 July 28, 2005 -- -- Robert W. Kleinert...... 6,500 1.0% $ 0.50 July 28, 2005 $ 2,040 $ 5,180 11,500 1.8% $ 7.00 July 28, 2005 -- -- 11,500 1.8% $16.00 July 28, 2005 -- -- Lee D. Flowers.......... 6,500 1.0% $ 0.50 July 28, 2005 $ 2,040 $ 5,180 11,500 1.8% $ 7.00 July 28, 2005 -- -- 11,500 1.8% $16.00 July 28, 2005 -- -- John F. Doherty......... 6,500 1.0% $ 0.50 July 28, 2005 $ 2,040 $ 5,180 11,500 1.8% $ 7.00 July 28, 2005 -- -- 11,500 1.8% $16.00 July 28, 2005 -- -- Thomas E. Hill.......... 4,500 0.7% $ 0.50 July 28, 2005 $ 1,420 $ 3,590 9,000 1.4% $ 7.00 July 28, 2005 -- -- 9,000 1.4% $16.00 July 28, 2005 -- --
- -------- (1) These amounts represent certain assumed rates of appreciation in accordance with rules of the Commission. Holdings' Common Stock (as defined herein) is not publicly traded. The assumed fair values of Holdings Common Stock and Class L Common (as defined herein) as of December 31, 1995 are $0.50/share and $40.50/share, respectively, the values determined by Holdings' board of directors in a resolution dated July 31, 1995. (2) All options were granted for shares of Holdings' Common Stock pursuant to the Diagnostic Holding, Inc. Executive Management Equity Plan. (3) The stock options expire earlier upon the termination of the employee. 65 The following table summarizes exercises of stock options and stock appreciation rights ("SARs") granted by Baxter in prior years by the five highest paid executive officers in the past year, as well as the number and value of all unexercised options and SARs held by such executive officers at the end of 1995. AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR END OPTION/SAR VALUES
VALUE OF UNEXERCISED NUMBER OF IN-THE-MONEY UNEXERCISED OPTIONS/SARS OPTIONS/SARS AT AT FISCAL YEAR FISCAL YEAR END END (1) --------------- -------------- SHARES ACQUIRED VALUE EXERCISABLE/ EXERCISABLE/ NAME ON EXERCISE (2) REALIZED (3) UNEXERCISABLE UNEXERCISABLE - ---- --------------- ----------- --------------- -------------- Scott T. Garrett... 19,287 $212,570 13,200/115,800 / Robert W. Klein- ert............... 13,505 $105,780 1,300/28,200 / Lee D. Flowers..... 4,301 $ 29,740 1,300/28,200 / John F. Doherty.... 4,683 $ 44,070 1,300/28,200 / Thomas E. Hill..... 6,072 $ 58,960 900/21,600 /
- -------- (1) Holdings' common stock is not publicly traded. The assumed fair values of Holdings Common Stock and Class L Common as of December 31, 1995 are $.50/share and $40.50/share, respectively, the values determined by Holdings' board of directors in a resolution dated July 31, 1995. (2) Reflects the exercise of stock options for Baxter's common stock that were granted to the named executive officers prior to the Initial Acquisition. (3) The value realized is the difference between the market price of the shares on the exercise date and the exercise price for each of the exercised options. The following table sets forth anticipated annual pension plan benefits based on a participant's average final remuneration and the number of years of participation in the Company's pension plan. PENSION PLAN TABLE
YEARS OF PLAN PARTICIPATION --------------------------------------- REMUNERATION 15 20 25 30 35 ------------ ------- ------- ------- ------- ------- 125,000............................ 32,813 43,750 54,688 65,625 76,563 150,000............................ 39,375 52,500 65,625 78,750 91,875 175,000............................ 45,938 61,250 76,563 91,875 107,188 200,000............................ 52,500 70,000 87,500 105,000 122,500 225,000............................ 59,063 78,750 98,438 118,125 137,813 250,000............................ 65,625 87,500 109,375 131,250 153,125 300,000............................ 78,750 105,000 131,250 157,500 183,750 400,000............................ 105,000 140,000 175,000 210,000 245,000 450,000............................ 118,125 157,500 196,875 236,250 275,625 500,000............................ 131,250 175,000 218,750 262,500 306,250
- -------- The above estimated pension benefit amounts assume that benefit payments begin at age 65 under a single life annuity form. Such amounts do not reflect the social security offset incorporated by the pension benefit formula. The social security offset amount is determined by a participant's social security earnings history and normal retirement date of age 65. The estimated pension amounts include benefits payable from the qualified and non-qualified pension plans. The non-qualified pension plan provides benefits derived by the qualified plan's formula which exceed legal maximum benefit limitations. The pension benefit formula is: 1.75% of "Final Average Pay" multiplied by the number of years of plan participation minus 1.75% of "social security PIA" multiplied by the number of years of plan participation (social security offset not to exceed 60% of PIA) where "Final Average Pay" is defined as a participant's five highest consecutive calendar year earnings (base salary and bonus) out of the last ten calendar years before retirement. As of January 1, 1996, the named executive officers' years of plan participation and Final Average Pay for purposes of calculating pension benefits payable under the Pension Plan are as follows: Mr. Garrett, 19 years and $331,980; Mr. Kleinert, 21 years and $217,871; Mr. Flowers, 21 years and $182,112; Mr. Doherty, 17 years and $170,519; Dr. Hill, 14 years and $174,735. COMPENSATION OF DIRECTORS Directors are not entitled to receive any compensation for serving on the Company's Board of Directors. Directors are reimbursed for their out-of-pocket expenses incurred in connection with such services. 66 PRINCIPAL STOCKHOLDERS Dade is a wholly owned subsidiary of Holdings. The common stock of Holdings consists of Common Stock, par value $.01 per share (the "Common Stock"), and Class L Common Stock, par value $.01 per share (the "Class L Common"). The holders of Class L Common have no voting rights except as required by law. The holders of the Common Stock are entitled to one vote per share on all matters to be voted upon by the stockholders of Holdings, including the election of directors. Bain Capital and its related investors and GS Capital and its related investors own 59.2% and 29.6%, respectively, of the Common Stock and are parties to a stockholder agreement regarding the ownership (including the voting) of such stock. By virtue of such stock ownership and stockholder agreement, Bain Capital and GS Capital have the power to control all matters submitted to a vote of stockholders of, and to elect all directors of, Holdings and, indirectly, to elect all directors of the Company. In 1995, certain members of Dade's management acquired voting common stock of Holdings, and members of the Company's management are eligible to receive additional common stock of Holdings in part based upon the future value of the Company. The following tables set forth certain information as of October 1, 1996 regarding the beneficial ownership of (i) voting common stock by each person (other than directors and executive officers of the Company) known to the Company to own more than 5% of the outstanding voting common stock of Holdings and (ii) voting and non-voting common stock by each director of the Company, each named executive officer and all of the Company's directors and executive officers as a group. To the knowledge of the Company, each of such stockholders has sole voting and investment power as to the shares shown unless otherwise noted. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
COMMON STOCK (VOTING) ----------------------- NUMBER OF PERCENTAGE OF NAME AND ADDRESS OF BENEFICIAL OWNER SHARES CLASS (1) ------------------------------------ --------- ------------- Bain Capital Entities (2)........................ 5,960,000 58.2% c/o Bain Capital Two Copley Place Boston, Massachusetts 02116 The Goldman Sachs Group, L.P. and related invest- ors (3) ........................................ 2,980,000 29.1% 85 Broad Street New York, NY 10004
- -------- (1) The percentages assume that all options held by the Company's management have been exercised. Certain of the options held by the Company's management are exercisable in accordance with certain time and performance criteria. (2) Amounts shown represent the aggregate number of shares held by Bain Capital Fund IV, L.P., Bain Capital Fund IV-B, L.P., BCIP Associates and BCIP Trust Associates, L.P. (the "Bain Capital Entities"). (3) Includes shares beneficially owned by certain investment limited partnerships of which affiliates of The Goldman Sachs Group, L.P. ("GS Group") are the general partners or the managing general partners. GS Group disclaims beneficial ownership of shares held by such investment partnerships to the extent partnership interests in such partnerships are held by persons other than GS Group and its affiliates. 67 SECURITY OWNERSHIP OF MANAGEMENT AND DIRECTORS
CLASS L COMMON STOCK COMMON STOCK (VOTING) (NON-VOTING) -------------------- ------------------------ NUMBER PERCENTAGE PERCENTAGE NAME OF OF SHARES OF CLASS NUMBER OF CLASS BENEFICIAL OWNER (1) (1) OF SHARES (1) (1) ---------------- --------- ---------- ------------ ---------- Scott T. Garrett................. 209,100 2.0% 8,900 0.9% Lee D. Flowers................... 74,500 0.7% 5,000 0.5% Robert W. Kleinert............... 74,500 0.7% 5,000 0.5% John F. Doherty.................. 74,500 0.7% 5,000 0.5% Robert W. Brightfelt............. 67,200 0.6% 2,800 0.3% Thomas E. Hill................... 49,500 0.5% 3,000 0.3% Mark E. Nunnelly (2)............. 5,960,000 58.2% 662,222.22 63.4% Stephen G. Pagliuca (2).......... 5,960,000 58.2% 662,222.22 63.4% Adam Kirsch (2).................. 5,960,000 58.2% 662,222.22 63.4% John P. Connaughton (2).......... 5,960,000 58.2% 662,222.22 63.4% Joseph H. Gleberman (3).......... 2,980,000 29.1% 331,111.11 31.7% All executive officers and directors of the Company as a group (16 persons)......................... 9,688,750 94.6% 1,030,383.33 98.5%
- -------- (1) The number of shares held by management and the percentages assume that all options held by management have been exercised. Certain options held by management are exercisable in accordance with certain time and performance criteria. (2) All of the shares shown are held by the Bain Capital Entities. Messrs. Kirsch, Nunnelly, Pagliuca and Connaughton, who serve as directors of the Company, and are managing directors or principals of Bain Capital, which is the general partner of certain of the Bain Capital Entities, and are limited partners of Bain Capital Partners IV, L.P., the general partner of certain of the Bain Capital Entities. Accordingly, Messrs. Kirsch, Nunnelly, Pagliuca and Connaughton may be deemed to share voting and dispositive power as to the shares held by the Bain Capital Entities. Messrs. Kirsch, Nunnelly, Pagliuca and Connaughton disclaim beneficial ownership of such shares. (3) Mr. Gleberman is a general partner of Goldman, Sachs & Co. The shares reported herein include shares beneficially owned by certain investment limited partnerships of which affiliates of GS Group are the general partners or the managing general partners. Mr. Gleberman disclaims beneficial ownership of such shares. 68 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS MANAGEMENT SERVICES AGREEMENTS On December 20, 1994, Dade entered into 5-year Management Services Agreements with Bain Capital and Goldman, Sachs & Co., an affiliate of GS Capital, pursuant to which Dade pays Bain Capital and Goldman, Sachs & Co. an aggregate annual fee of up to $2.0 million, plus their respective out-of- pocket expenses. In connection with the Acquisition, the Company entered into new Management Services Agreements with Bain Capital and Goldman, Sachs & Co., pursuant to which the Company paid Bain Capital and Goldman, Sachs & Co. (i) at Closing, in the aggregate, a cash financial advisory fee of $15.0 million, plus their respective out-of-pocket expenses and (ii) and will pay an aggregate annual fee of $3.0 million plus their respective out-of-pocket expenses, subject to compliance with the terms of the Indenture. Pursuant to the Management Services Agreements, Bain Capital and Goldman, Sachs & Co. have provided, and continue to provide, management consulting in the areas of corporate finance, corporate strategy, investment analysis, market research and business development, advisory services and support, negotiation and analysis of financial alternatives, acquisitions and dispositions and other services. Dade believes that the fees received for the professional services rendered are at least as favorable as those which could be negotiated with an unaffiliated third party. STOCK PURCHASE AGREEMENT On December 20, 1994, Holdings, Bain Capital Fund IV, L.P., Bain Capital Fund IV-B, L.P., GS Capital Partners, L.P. and certain other parties signatory thereto entered into a Stock Purchase Agreement whereby Holdings paid, in the aggregate, a cash financial advisory fee and related out-of-pocket expenses of $5.1 million to Bain Capital and $1.5 million to Goldman, Sachs & Co. Pursuant to the Stock Purchase Agreement, Bain Capital and Goldman, Sachs & Co. devoted significant resources and incurred significant expenses to the analysis, negotiation and financing of the Initial Acquisition. Dade believes that the fees received for the professional services rendered were at least as favorable as those which could be negotiated with an unaffiliated third party. STOCKHOLDERS AGREEMENT On December 20, 1994, Holdings, Bain Capital Fund IV, L.P., Bain Capital Fund IV-B, L.P., GS Capital Partners, L.P. and certain other parties signatory thereto entered into a Stockholders Agreement whereby prior to the fifth anniversary of the date of the Stockholders Agreement, if Holdings requires certain services of an investment banking firm, Holdings agrees to retain Goldman, Sachs & Co. to provide such services unless Holdings' Board of Directors determines that the retention of another investment banking firm would provide a material additional benefit to Holdings. 69 BANK CREDIT AGREEMENT The Company has entered into the Bank Credit Agreement with Bankers Trust Company as agent (the "Agent"), and other institutions party thereto (the "Banks"), which will provide loans of up to $585.0 million. Loans under the Bank Credit Agreement consisted of $185.0 million in aggregate principal amount of A Term Loans, $90.0 million in aggregate principal amount of B Term Loans, $90.0 million in aggregate principal amount of C Term Loans and $95.0 million in aggregate principal amount of D Term Loans (the "A Term Loans," the "B Term Loans," the "C Term Loans" and the "D Term Loans" are referred to collectively as the "Term Loans") and a $125.0 million revolving credit facility (the "Revolving Credit Facility"), of which $50.0 million was drawn down at the Closing and which permits the Company to borrow up to $125.0 million to finance working capital, letters of credit and other general corporate needs. The Company used the Term Loans to provide a portion of the funds necessary to consummate the Acquisition. This information relating to the Bank Credit Agreement is qualified in its entirety by reference to the complete text of the documents entered into in connection therewith. The following is a description of the general terms of the Bank Credit Agreement. Indebtedness of the Company under the Bank Credit Agreement is guaranteed by Holdings and certain of the domestic subsidiaries of the Company and is secured by (i) a first priority security interest in all, subject to certain customary exceptions, of the receivables, contracts, contract rights, securities, equipment (other than certain equipment secured by purchase money security interests), intellectual property, inventory and real estate owned by the Company and its domestic subsidiaries, (ii) a first priority perfected pledge of all capital stock and certain intercompany notes of the Company and its domestic subsidiaries and (iii) a first priority perfected pledge of 65% of the capital stock of foreign subsidiaries owned directly by the Company or its domestic subsidiaries. Indebtedness under the Bank Credit Agreement bears interest at a floating rate. Indebtedness under the Revolving Credit Facility and the Term Loans bears interest at a rate based upon (i) the Base Rate (defined as the higher of (x) the applicable prime lending rate of Bankers Trust Company and (y) the Federal Reserve reported certificate of deposit rate (as adjusted pursuant to the Bank Credit Agreement) plus 1/2 of 1%), in each case plus 1.75% in respect of the A Term Loans and the loans under the Revolving Credit Facility (the "Revolving Loans"), 2.25% in respect of the B Term Loans, 2.50% in respect of the C Term Loans and 2.75% in respect of the D Term Loans, or after the earlier of (a) the primary syndication of the Term Loans and the Revolving Credit Facility or (b) the 90th day following the effectiveness of the Bank Credit Agreement, at the Company's option, (ii) the Eurodollar Rate (as defined in the Bank Credit Agreement) for one, two, three, six or twelve months, in each case plus 2.75% in respect of A Term Loans and Revolving Loans, 3.25% in respect of B Term Loans, 3.50% in respect of the C Term Loans and 3.75% in respect of the D Term Loans. The Company is required to maintain specified levels of interest rate protection. The A Term Loans will mature on December 31, 2001. The B Term Loans will mature on December 31, 2002. The C Term Loans will mature on December 31, 2003. The D Term Loans will mature on December 31, 2004. The A Term Loans, the B Term Loans, C Term Loans and D Term Loans are subject to quarterly amortization payments commencing on March 31, 1997 with the B Term Loans amortizing in nominal amounts until the maturity of the A Term Loans, the C Term Loans amortizing in nominal amounts until the maturity of the B Term Loans and the D Term Loans amortizing in nominal amounts until the maturity of the C Term Loans. The Revolving Credit Facility will mature on December 31, 2001. In addition, the Bank Credit Agreement provides for mandatory repayments, subject to certain exceptions, of the Term Loans based on certain net asset sales outside the ordinary course of business of Holdings and its subsidiaries, the net proceeds of certain debt and equity issuances, excess cash flow and insurance proceeds. The Revolving Loans may be repaid and reborrowed. The Company is required to pay to the Banks under the Bank Credit Agreement a commitment fee equal to 1/2 of 1% per annum, payable in arrears on a quarterly basis, on the average unused portion of the Revolving Credit Facility during such quarter. The Company is also required to pay to the Banks participating in the Revolving Credit Facility letter of credit fees equal to 2.75% per annum on the average daily stated amount of each letter of credit outstanding and to the Bank issuing a letter of credit a fronting fee of 1/4 of 1% on the average daily stated amount of each outstanding letter of credit issued 70 by such Bank, in each case payable in arrears on a quarterly basis. The Agent and the Banks received and will continue to receive such other fees as have been separately agreed upon with the Agent. The Bank Credit Agreement requires the Company to meet certain financial tests, including minimum levels of EBITDA (as defined therein), minimum interest coverage, maximum leverage ratio, maximum amounts of capital expenditures and minimum current ratio. The Bank Credit Agreement also contains covenants which, among other things, limit the incurrence of additional indebtedness, investments, dividends, transactions with affiliates, asset sales, acquisitions, mergers and consolidations, prepayments of other indebtedness (including the Senior Subordinated Notes), liens and encumbrances and other matters customarily restricted in such agreements. The Bank Credit Agreement contains customary events of default, including payment defaults, breach of representations and warranties, covenant defaults, cross-defaults to certain other indebtedness, certain events of bankruptcy and insolvency, failures under ERISA or foreign pension plans, judgment defaults, failure of any guaranty or security document supporting the Bank Credit Agreement to be in full force and effect and change of control of Holdings or the Company. 71 DESCRIPTION OF EXCHANGE NOTES The Series B 11 1/8% Senior Subordinated Notes due 2006 (the "Exchange Notes") will be issued under an indenture (the "Indenture"), to be dated as of May 7, 1996 by and between the Company and IBJ Schroder Bank & Trust Company, as Trustee (the "Trustee"). The following summary of certain provisions of the Indenture does not purport to be complete and is subject to, and is qualified in its entirety by reference to, the Trust Indenture Act of 1939, as amended (the "TIA"), and to all of the provisions of the Indenture, including the definitions of certain terms therein and those terms made a part of the Indenture by reference to the TIA as in effect on the date of the Indenture. A copy of the Indenture may be obtained from the Company or the Initial Purchasers. The definitions of certain capitalized terms used in the following summary are set forth below under "Certain Definitions." For purposes of this section, references to the "Company" include only the Company and not its subsidiaries and references to the "Senior Subordinated Notes" include the Notes and the Exchange Notes. The Exchange Notes will be issued in fully registered form only, without coupons, in denominations of $1,000 and integral multiples thereof. The Senior Subordinated Notes may be presented for registration or transfer and exchange at the offices of the Registrar, which initially will be the Trustee's corporate trust office. The Company may change any Paying Agent and Registrar without notice to holders of the Senior Subordinated Notes (the "Holders"). The Company will pay principal (and premium, if any) on the Senior Subordinated Notes at the Trustee's corporate office in New York, New York. At the Company's option, interest may be paid at the Trustee's corporate trust office or by check mailed to the registered address of Holders. The form and terms of the Exchange Notes are the same as the form and terms of the Notes (which they replace) except that (i) the Exchange notes bear a Series B designation, (ii) the Exchange Notes have been registered under the Securities Act and, therefore, will not bear legends restricting the transfer thereof, and (iii) the holders of Exchange Notes will not be entitled to certain rights under the Registration Rights Agreement, including the provisions providing for an increase in the interest rate on the Notes in certain circumstances relating to the timing of the Exchange Offer, which rights will terminate when the Exchange offer is consummated. The Notes are, and the Exchange Notes will be, unsecured obligations of the Company, ranking subordinate in right of payment to all Senior Debt of the Company. PRINCIPAL, MATURITY AND INTEREST The Senior Subordinated Notes are limited in aggregate principal amount to $350.0 million and will mature on May 1, 2006. Interest on the Senior Subordinated Notes will accrue at the rate of 111/8% per annum and will be payable semiannually in cash on each May 1 and November 1 having commenced on November 1, 1996, to the Persons who are registered Holders at the close of business on the April 15 and October 15 immediately preceding the applicable interest payment date. Interest on the Senior Subordinated Notes will accrue from the most recent date to which interest has been paid or, if no interest has been paid, from the date of issuance. The Notes are not, and the Exchange Notes will not be, entitled to the benefit of any mandatory sinking fund. REDEMPTION Optional Redemption. The Exchange Notes will be redeemable, at the Company's option, in whole at any time or in part from time to time, on and after May 1, 2001, upon not less than 30 nor more than 60 days' notice, at the following redemption prices (expressed as percentages of the principal amount thereof) if redeemed during the twelve-month period commencing on May 1 of the year set forth below, plus, in each case, accrued interest to the date of redemption:
YEAR PERCENTAGE ---- ---------- 2001........................................ 105.563% 2002........................................ 103.708 2003........................................ 101.854 2004 and thereafter......................... 100.000
72 Optional Redemption Upon Equity Offerings. At any time, or from time to time, on or prior to May 1, 1999, the Company may, at its option, use the net cash proceeds of one or more Equity Offerings (as defined below) to redeem up to 40% (provided that such percentage shall decrease to 35% if an Initial Public Offering has not been consummated on or prior to March 31, 1997 and any other Senior Subordinated Notes previously redeemed pursuant to this provision shall be included in determining such percentage) of the aggregate principal amount of Notes originally issued at a redemption price equal to 110% (111.125% in the case of any Equity Offering after March 31, 1997) of the principal amount thereof plus, in each case, accrued interest to the date of redemption; provided that at least $175.0 million aggregate principal amount of Senior Subordinated Notes remains outstanding immediately after any such redemption. In order to effect the foregoing redemption with the proceeds of any Equity Offering, the Company shall make such redemption not more than 120 days after the consummation of any such Equity Offering. As used in the preceding paragraph, "Equity Offering" means any offering of Qualified Capital Stock of Holdings or the Company; provided that, in the event of any Equity Offering by Holdings, Holdings contributes to the capital of the Company the portion of the net cash proceeds of such Equity Offering necessary to pay the aggregate redemption price (plus accrued interest to the redemption date) of the Senior Subordinated Notes to be redeemed pursuant to the preceding paragraph. SELECTION AND NOTICE In case of a partial redemption, selection of the Senior Subordinated Notes or portions thereof for redemption shall be made by the Trustee by lot, pro rata or in such manner as it shall deem appropriate and fair and in such manner as complies with any applicable legal requirements; provided, however, that if a partial redemption is made with the proceeds of an Equity Offering, selection of the Senior Subordinated Notes or portion thereof for redemption shall be made by the Trustee only on a pro rata basis, unless such method is otherwise prohibited. Senior Subordinated Notes may be redeemed in part in multiples of $1,000 principal amount only. Notice of redemption will be sent, by first class mail, postage prepaid, at least 30 days and not more than 60 days prior to the date fixed for redemption to each Holder whose Senior Subordinated Notes are to be redeemed at the last address for such Holder then shown on the registry books. If any Senior Subordinated Note is to be redeemed in part only, the notice of redemption that relates to such Senior Subordinated Note shall state the portion of the principal amount thereof to be redeemed. A new Senior Subordinated Note in principal amount equal to the unredeemed portion thereof will be issued in the name of the Holder thereof upon cancellation of the original Senior Subordinated Note. On and after any redemption date, interest will cease to accrue on the Senior Subordinated Notes or part thereof called for redemption as long as the Company has deposited with the Paying Agent funds in satisfaction of the redemption price pursuant to the Indenture. SUBORDINATION The payment of all Obligations on the Senior Subordinated Notes is subordinated in right of payment to the prior payment in full in cash or Cash Equivalents of all Obligations on the Senior Debt. Upon any payment or distribution of assets of the Company of any kind or character, whether in cash, property or securities, to creditors upon any total or partial liquidation, dissolution, winding up, reorganization, assignment for the benefit of creditors or marshaling of assets of the Company or in a bankruptcy, reorganization, insolvency, receivership or other similar proceeding relating to the Company or its property, whether voluntary or involuntary, all Obligations due or to become due upon all Senior Debt shall first be paid in full in cash or Cash Equivalents, or such payment duly provided for to the satisfaction of the holders of Senior Debt, before any payment or distribution of any kind or character is made on account of any Obligations on the Senior Subordinated Notes, or for the acquisition of any of the Senior Subordinated Notes for cash or property or otherwise. If any default occurs and is continuing in the payment when due, whether at maturity, upon any redemption, by declaration or otherwise, of any principal of, interest on, unpaid drawings for letters of credit issued in respect of, or regularly accruing fees with respect to, any Senior Debt, no payment of any kind or character shall be made by or on 73 behalf of the Company or any other Person on its or their behalf with respect to any Obligations on the Senior Subordinated Notes or to acquire any of the Senior Subordinated Notes for cash or property or otherwise. In addition, if any other event of default occurs and is continuing with respect to any Designated Senior Debt, as such event of default is defined in the instrument creating or evidencing such Designated Senior Debt permitting the holders of such Designated Senior Debt then outstanding to accelerate the maturity thereof and if the Representative for the respective issue of Designated Senior Debt gives written notice of the event of default to the Trustee (a "Default Notice"), then, unless and until all events of default have been cured or waived or have ceased to exist or the Trustee receives notice from the Representative for the respective issue of Designated Senior Debt terminating the Blockage Period (as defined below), during the 180 days after the delivery of such Default Notice (the "Blockage Period"), neither the Company nor any other Person on its behalf shall (x) make any payment of any kind or character with respect to any Obligations on the Senior Subordinated Notes or (y) acquire any of the Senior Subordinated Notes for cash or property or otherwise. Notwithstanding anything herein to the contrary, in no event will a Blockage Period extend beyond 180 days from the date the payment on the Senior Subordinated Notes was due and only one such Blockage Period may be commenced within any 360 consecutive days. No event of default which existed or was continuing on the date of the commencement of any Blockage Period with respect to the Designated Senior Debt shall be, or be made, the basis for commencement of a second Blockage Period by the Representative of such Designated Senior Debt whether or not within a period of 360 consecutive days, unless such event of default shall have been cured or waived for a period of not less than 90 consecutive days (it being acknowledged that any subsequent action, or any breach of any financial covenants for a period commencing after the date of commencement of such Blockage Period that, in either case, would give rise to an event of default pursuant to any provisions under which an event of default previously existed or was continuing shall constitute a new event of default for this purpose). By reason of such subordination, in the event of the insolvency of the Company, creditors of the Company who are not holders of Senior Debt, including the Holders, may recover less, ratably, than holders of Senior Debt. As of June 30, 1996 the Company had approximately $485.0 million of Senior Debt outstanding. CHANGE OF CONTROL The Indenture provides that upon the occurrence of a Change of Control, each Holder will have the right to require that the Company purchase all or a portion of such Holder's Senior Subordinated Notes pursuant to the offer described below (the "Change of Control Offer"), at a purchase price equal to 101% of the principal amount thereof plus accrued interest to the date of purchase. The Indenture provides that, prior to the mailing of the notice referred to below, but in any event within 30 days following any Change of Control, the Company covenants to (i) repay in full and terminate all commitments under Indebtedness under the Bank Credit Agreement and all other Senior Debt the terms of which require repayment upon a Change of Control or offer to repay in full and terminate all commitments under all Indebtedness under the Bank Credit Agreement and all other such Senior Debt and to repay the Indebtedness owed to each lender which has accepted such offer or (ii) obtain the requisite consents under the Bank Credit Agreement and all such other Senior Debt to permit the repurchase of the Senior Subordinated Notes as provided below. The Company shall first comply with the covenant in the immediately preceding sentence before it shall be required to repurchase Senior Subordinated Notes pursuant to the provisions described below. The Company's failure to comply with the immediately preceding sentence shall constitute an Event of Default described in clause (iii) and not in clause (ii) under "Events of Default" below. Within 30 days following the date upon which the Change of Control occurred, the Company must send, by first class mail, a notice to each Holder, with a copy to the Trustee, which notice shall govern the terms of the Change of Control Offer. Such notice shall state, among other things, the purchase date, which must be no earlier 74 than 30 days nor later than 45 days from the date such notice is mailed, other than as may be required by law (the "Change of Control Payment Date"). Holders electing to have a Senior Subordinated Note purchased pursuant to a Change of Control Offer will be required to surrender the Senior Subordinated Note, with the form entitled "Option of Holder to Elect Purchase" on the reverse of the Senior Subordinated Note completed, to the Paying Agent at the address specified in the notice prior to the close of business on the third business day prior to the Change of Control Payment Date. A Change of Control includes a sale of "all or substantially all" (as defined herein) of the assets of Holdings or the Company. The determination of whether an asset disposition would constitute all or substantially all of the assets of Holdings or the Company, and thereby trigger a Change of Control Offer requirement, is uncertain under New York law, which governs the interpretation of the Indenture, and has been the subject of limited judicial interpretation in few jurisdictions. Courts addressing the issue have held that such determination is dependent on the particular facts involved in the disposition. As a result, there may be a degree of uncertainty in ascertaining the proportion of assets that would be necessary to constitute such a disposition for purposes of the Indenture. If a Change of Control Offer is made, there can be no assurance that the Company will have available funds sufficient to pay the Change of Control purchase price for all the Senior Subordinated Notes that might be delivered by Holders seeking to accept the Change of Control Offer. In the event the Company is required to purchase outstanding Senior Subordinated Notes pursuant to a Change of Control Offer, the Company expects that it would seek third party financing to the extent it does not have available funds to meet its purchase obligations. However, there can be no assurance that the Company would be able to obtain such financing. Neither the Board of Directors of the Company nor the Trustee may waive the covenant relating to a Holder's right to redemption upon a Change of Control. Restrictions in the Indenture described herein on the ability of the Company and its Restricted Subsidiaries to incur additional Indebtedness, to grant liens on its property, to make Restricted Payments and to make Asset Sales may also make more difficult or discourage a takeover of the Company, whether favored or opposed by the management of the Company. Consummation of any such transaction in certain circumstances may require redemption or repurchase of the Senior Subordinated Notes, and there can be no assurance that the Company or the acquiring party will have sufficient financial resources to effect such redemption or repurchase. Such restrictions and the restrictions on transactions with Affiliates may, in certain circumstances, make more difficult or discourage any leveraged buyout of the Company or any of its Subsidiaries by the management of the Company. While such restrictions cover a wide variety of arrangements which have traditionally been used to effect highly leveraged transactions, the Indenture may not afford the Holders of Senior Subordinated Notes protection in all circumstances from the adverse aspects of a highly leveraged transaction, reorganization, restructuring, merger or similar transaction. The Company will comply with the requirements of Rule 14e-1 under the Exchange Act and any other securities laws and regulations thereunder to the extent such laws and regulations are applicable in connection with the repurchase of Senior Subordinated Notes pursuant to a Change of Control Offer. To the extent that the provisions of any securities laws or regulations conflict with the "Change of Control" provisions of the Indenture, the Company shall comply with the applicable securities laws and regulations and shall not be deemed to have breached its obligations under the "Change of Control" provisions of the Indenture by virtue thereof. CERTAIN COVENANTS The Indenture contains, among others, the following covenants: Limitation on Restricted Payments. The Company will not, and will not cause or permit any of its Restricted Subsidiaries to, directly or indirectly, (a) declare or pay any dividend or make any distribution (other than dividends or distributions payable in Qualified Capital Stock of the Company) on or in respect of shares of the Company's Capital Stock to holders of such Capital Stock, (b) purchase, redeem or otherwise acquire or retire for value any Capital Stock of the Company or any warrants, rights or options to purchase or acquire shares 75 of any class of such Capital Stock, or (c) make any Restricted Investment (each of the foregoing actions set forth in clauses (a), (b) and (c) being referred to as a "Restricted Payment"), if at the time of such Restricted Payment or immediately after giving effect thereto, (i) a Default or an Event of Default shall have occurred and be continuing, (ii) the Company is not able to incur at least $1.00 of additional Indebtedness (other than Permitted Indebtedness) in compliance with the "Limitation on Incurrence of Additional Indebtedness" covenant, or (iii) the aggregate amount of Restricted Payments made subsequent to the Issue Date shall exceed the sum of: (w) 50% of the cumulative Consolidated Net Income (or if cumulative Consolidated Net Income shall be a loss, minus 100% of such loss) of the Company earned subsequent to the Issue Date and on or prior to the date the Restricted Payment occurs (the "Reference Date") (treating such period as a single accounting period); plus (x) 100% of the aggregate net proceeds received by the Company (including the fair market value of property other than cash) from any Person (other than a Subsidiary of the Company) from the issuance and sale subsequent to the Issue Date and on or prior to the Reference Date of Qualified Capital Stock of the Company (including Capital Stock issued upon the conversion of convertible Indebtedness or in exchange for outstanding Indebtedness); plus (y) without duplication of any amounts included in clause (iii)(x) above, 100% of the aggregate net proceeds (including the fair market value of property other than cash) of any equity contribution received by the Company from a holder of the Company's Capital Stock (excluding any net proceeds from an Equity Offering to the extent used to redeem Senior Subordinated Notes in accordance with the optional redemption provisions of the Senior Subordinated Notes other than in connection with an Equity Offering pursuant to a registration statement filed with the Commission in accordance with the Securities Act); plus (z) 100% of the aggregate net proceeds (including the fair market value of property other than cash) of any (i) sale or other disposition of Restricted Investments made by the Company and its Restricted Subsidiaries or (ii) dividend from, or the sale of the stock of, an Unrestricted Subsidiary. Notwithstanding the foregoing, the provisions set forth in the immediately preceding paragraph do not prohibit: (1) the payment of any dividend or the consummation of any irrevocable redemption within 60 days after the date of declaration of such dividend or notice of such redemption if the dividend or payment of the redemption price, as the case may be, would have been permitted on the date of declaration or notice; (2) if no Event of Default shall have occurred and be continuing as a consequence thereof, the acquisition of any shares of Capital Stock of the Company (the "Retired Capital Stock"), either (i) solely in exchange for shares of Qualified Capital Stock of the Company (the "Refunding Capital Stock"), or (ii) through the application of net proceeds of a substantially concurrent sale for cash (other than to a Subsidiary of the Company) of shares of Qualified Capital Stock of the Company, and, in the case of subclause (i) of this clause (2), if immediately prior to the retirement of Retired Capital Stock the declaration and payment of dividends thereon was permitted under clause (3) of this paragraph, the declaration and payment of dividends on the Refunding Capital Stock in an aggregate amount per year no greater than the aggregate amount of dividends per annum that was declarable and payable on such Retired Capital Stock immediately prior to such retirement; provided that at the time of the declaration of any such dividends, no Default or Event of Default shall have occurred and be continuing or would occur as a consequence thereof; (3) if no Default or Event of Default shall have occurred and be continuing or would occur as a consequence thereof, the declaration and payment of dividends to holders of any class or series of Designated Preferred Stock (other than Disqualified Capital Stock) issued after the Issue Date (including, without limitation, the declaration and payment of dividends on Refunding Capital Stock in excess of the dividends declarable and payable thereon pursuant to clause (2)); provided that, at the time of such issuance, the Company, after giving effect to such issuance on a pro forma basis, would have had a Consolidated Fixed Charge Coverage Ratio of at least 2.0 to 1.0; (4) payments for the purpose of and in an amount equal to the amount required to permit Holdings to redeem or repurchase Holdings' common equity or options in respect thereof, in each case in connection with the repurchase provisions under employee stock option or stock purchase agreements or other agreements to compensate management employees; provided that such redemptions or repurchases pursuant to this clause (4) shall not exceed $7.5 million (which amount shall be increased (A) to $15.0 million upon consummation of an Initial Public Offering and (B) by the amount of any proceeds to the Company from (x) sales of Capital Stock of Holdings to management employees subsequent to the Issue Date and (y) any "key-man" life insurance policies which are used to make such redemptions or repurchases) in the aggregate; provided, further, that the cancellation of Indebtedness owing to the Company from members of 76 management of the Company or any of its Restricted Subsidiaries in connection with a repurchase of Capital Stock of Holdings will not be deemed to constitute a Restricted Payment under the Indenture; (5) the making of distributions, loans or advances in an amount not to exceed $1.5 million per annum sufficient to permit Holdings to pay the ordinary operating expenses of Holdings (including, without limitation, directors' fees, indemnification obligations, professional fees and expenses) related to Holdings' ownership of Capital Stock of the Company (other than to the Principals or their Related Parties); (6) the payment of any amounts pursuant to the Tax Allocation Agreement; (7) the making of distributions, loans or advances in an amount not to exceed $2.0 million per annum sufficient to permit Holdings to pay the salaries or other compensation of employees who perform services for both Holdings and the Company; (8) so long as no Default or Event of Default shall have occurred and be continuing, payments to Holdings not to exceed $100,000 in the aggregate, to enable Holdings to make payments to holders of its Capital Stock in lieu of issuance of fractional shares of its Capital Stock; (9) so long as no Default or Event of Default shall have occurred and be continuing, payments to, or on behalf of, Holdings not to exceed an aggregate amount of $10.0 million plus the amount of all capitalized or accrued interest on the 10% Exchangeable Preferred Stock of Holdings (the "Holdings Preferred Stock") solely to purchase, redeem or otherwise retire some or all the Holdings Preferred Stock which was issued to Baxter International, Inc. and/or its affiliates in connection with the acquisition of the Company from Baxter International, Inc. in 1994 or any notes (including interest thereon) of Holdings issued in exchange for the Holdings Preferred Stock in accordance with the terms of the Holdings Preferred Stock as in effect on the Issue Date; (10) if no Default or Event of Default shall have occurred and be continuing or would occur as a consequence thereof and the Company would be permitted to incur at least $1.00 of additional Indebtedness (other than Permitted Indebtedness) in compliance with the "Limitation on Incurrence of Additional Indebtedness" covenant, other Restricted Payments in an aggregate amount not to exceed $12.0 million; and (11) repurchases of Capital Stock deemed to occur upon the exercise of stock options if such Capital Stock represents a portion of the exercise price thereof. In determining the aggregate amount of Restricted Payments made subsequent to the Issue Date in accordance with clause (iii) of the immediately preceding paragraph, (a) amounts expended (to the extent such expenditure is in the form of cash) pursuant to clauses (1), (2), (4), (9) and (10) shall be included in such calculation; provided such expenditures pursuant to clause (4) shall not be included to the extent of cash proceeds received by the Company from any "key man" life insurance policies and (b) amounts expended pursuant to clauses (3), (5), (6), (7), (8) or (11) shall be excluded from such calculation. Limitation on Incurrence of Additional Indebtedness. The Company will not, and will not permit any of its Restricted Subsidiaries to, directly or indirectly, create, incur, assume, guarantee, acquire, become liable, contingently or otherwise, with respect to, or otherwise become responsible for payment of (collectively, "incur") any Indebtedness (other than Permitted Indebtedness); provided, however, that if no Default or Event of Default shall have occurred and be continuing at the time or as a consequence of the incurrence of any such Indebtedness, the Company may incur Indebtedness if on the date of the incurrence of such Indebtedness, after giving effect to the incurrence thereof, the Consolidated Fixed Charge Coverage Ratio of the Company is greater than 2.0 to 1.0. Limitations on Transactions with Affiliates. (a) The Company will not, and will not permit any of its Restricted Subsidiaries to, directly or indirectly, enter into or permit to exist any transaction or series of related transactions (including, without limitation, the purchase, sale, lease or exchange of any property or the rendering of any service) with, or for the benefit of, any of its Affiliates involving aggregate consideration in excess of $1.0 million (an "Affiliate Transaction"), other than (x) Affiliate Transactions permitted under paragraph (b) below and (y) Affiliate Transactions on terms that are not materially less favorable than those that might reasonably have been obtained in a comparable transaction at such time on an arm's-length basis from a Person that is not an Affiliate; provided, however, that for a transaction or series of related transactions with an aggregate value of $7.5 million or more, at the Company's option (i) such determination shall be made in good faith by a majority of the disinterested members of the Board of the Directors of the Company or (ii) the Board of Directors of the Company or any such Restricted Subsidiary party to such Affiliate Transaction shall have received an opinion from a nationally recognized investment 77 banking firm that such Affiliate Transaction is on terms not materially less favorable than those that might reasonably have been obtained in a comparable transaction at such time on an arm's-length basis from a Person that is not an Affiliate; and provided, further, that for a transaction or series of related transactions with an aggregate value of $10.0 million or more, the Board of Directors of the Company or any such Restricted Subsidiary party to such Affiliate Transaction shall have received an opinion from a nationally recognized investment banking firm that such Affiliate Transaction is on terms not materially less favorable than those that might reasonably have been obtained in a comparable transaction at such time on an arm's-length basis from a Person that is not an Affiliate. (b) The foregoing restrictions shall not apply to (i) reasonable fees and compensation paid to and indemnity provided on behalf of, officers, directors, employees or consultants of the Company or any Subsidiary as determined in good faith by the Company's Board of Directors or senior management; (ii) transactions exclusively between or among the Company and any of its Restricted Subsidiaries or exclusively between or among such Restricted Subsidiaries, provided such transactions are not otherwise prohibited by the Indenture; (iii) transactions effected as part of a Qualified Securitization Transaction; (iv) any agreement as in effect as of the Issue Date or any amendment thereto or any transaction contemplated thereby (including pursuant to any amendment thereto) in any replacement agreement thereto so long as any such amendment or replacement agreement is not more disadvantageous to the Holders in any material respect than the original agreement as in effect on the Issue Date; (v) Restricted Payments permitted by the Indenture; (vi) the payment of customary annual management, consulting and advisory fees and related expenses to the Principals and their Affiliates; (vii) payments by the Company or any of its Restricted Subsidiaries to the Principals and their Affiliates made pursuant to any financial advisory, financing, underwriting or placement agreement or in respect of other investment banking activities, including, without limitation, in connection with acquisitions or divestitures which are approved by the Board of Directors of the Company or such Restricted Subsidiary in good faith; (viii) payments or loans to employees or consultants which are approved by the Board of Directors of the Company in good faith; (ix) the existence of, or the performance by the Company or any of its Restricted Subsidiaries of its obligations under the terms of, any stockholders agreement (including any registration rights agreement or purchase agreement related thereto) to which it is a party as of the Issue Date and any similar agreements which it may enter into thereafter; provided, however, that the existence of, or the performance by the Company or any of its Restricted Subsidiaries of obligations under, any future amendment to any such existing agreement or under any similar agreement entered into after the Issue Date shall only be permitted by this clause (ix) to the extent that the terms of any such amendment or new agreement are not otherwise disadvantageous to the Holders of the Senior Subordinated Notes in any material respect; (x) transactions permitted by, and complying with, the provisions of the covenant described under "--Merger, Consolidation and Sale of Assets"; and (xi) transactions with customers, clients, suppliers, joint venture partners or purchasers or sellers of goods or services, in each case in the ordinary course of business (including, without limitation, pursuant to joint venture agreements) and otherwise in compliance with the terms of the Indenture which are fair to the Company or its Restricted Subsidiaries, in the reasonable determination of the Board of Directors of the Company or the senior management thereof, or are on terms at least as favorable as might reasonably have been obtained at such time from an unaffiliated party. Limitation on Liens. The Company will not, and will not permit any of its Restricted Subsidiaries to, create, incur, assume or suffer to exist any Liens of any kind against or upon any of its property or assets, or any proceeds therefrom, unless (i) in the case of Liens securing Indebtedness that is expressly subordinate or junior in right of payment to the Senior Subordinated Notes, the Senior Subordinated Notes are secured by a Lien on such property, assets or proceeds that is senior in priority to such Liens and (ii) in all other cases, the Senior Subordinated Notes are equally and ratably secured, except for (A) Liens existing as of the Issue Date and any extensions, renewals or replacements thereof, (B) Liens securing Senior Debt, (C) Liens securing the Senior Subordinated Notes, (D) Liens of the Company or a Wholly Owned Restricted Subsidiary of the Company on assets of any Subsidiary of the Company, (E) Liens securing Indebtedness which is incurred to refinance Indebtedness which has been secured by a Lien permitted under the Indenture and which has been incurred in accordance with the provisions of the Indenture; provided, however, that such Liens do not extend to or cover 78 any property or assets of the Company or any of its Restricted Subsidiaries not securing the Indebtedness so refinanced, and (F) Permitted Liens. Prohibition on Incurrence of Senior Subordinated Debt. The Company will not incur or suffer to exist Indebtedness that is senior in right of payment to the Senior Subordinated Notes and subordinate in right of payment to any other Indebtedness of the Company. Limitation on Dividend and Other Payment Restrictions Affecting Subsidiaries. The Company will not, and will not permit any of its Restricted Subsidiaries to, directly or indirectly, create or otherwise cause or permit to exist or become effective any consensual encumbrance or consensual restriction on the ability of any Restricted Subsidiary to (a) pay dividends or make any other distributions on or in respect of its Capital Stock, (b) make loans or advances or to pay any Indebtedness or other obligation owed to the Company or any other Restricted Subsidiary of the Company or (c) transfer any of its property or assets to the Company or any other Restricted Subsidiary of the Company, except for such encumbrances or restrictions existing under or by reason of: (1) applicable law; (2) the Indenture; (3) non-assignment provisions of any contract or any lease entered into in the ordinary course of business; (4) any instrument governing Acquired Indebtedness, which encumbrance or restriction is not applicable to any Person, or the properties or assets of any Person, other than the Person or the properties or assets of the Person so acquired; (5) agreements existing on the Issue Date (including, without limitation, the Bank Credit Agreement and the indenture governing the Existing Notes); (6) restrictions on the transfer of assets subject to any Lien permitted under the Indenture imposed by the holder of such Lien; (7) restrictions imposed by any agreement to sell assets or Capital Stock permitted under the Indenture to any Person pending the closing of such sale; (8) any agreement or instrument governing Capital Stock of any Person that is acquired; (9) Indebtedness or other contractual requirements of a Securitization Entity in connection with a Qualified Securitization Transaction; provided that such restrictions apply only to such Securitization Entity; (10) any agreement or instrument governing Indebtedness (whether or not outstanding) of foreign Restricted Subsidiaries of the Company incurred in reliance on clause (iii) of the definition of Permitted Indebtedness; (11) other Indebtedness permitted to be incurred subsequent to the Issue Date pursuant to the provisions of the covenant described under "-- Limitations on Incurrence of Additional Indebtedness"; provided that any such restrictions are ordinary and customary with respect to the type of Indebtedness being incurred (under the relevant circumstances); (12) restrictions on cash or other deposits or net worth imposed by customers under contracts entered into in the ordinary course of business; and (13) any encumbrances or restrictions imposed by any amendments, modifications, restatements, renewals, increases, supplements, refundings, replacements or refinancings of the contracts, instruments or obligations referred to in clauses (1) through (12) above; provided that such amendments, modifications, restatements, renewals, increases, supplements, refundings, replacements or refinancings are, in the good faith judgment of the Company's Board of Directors, no more restrictive with respect to such dividend and other payment restrictions than those contained in the dividend or other payment restrictions prior to such amendment, modification, restatement, renewal, increase, supplement, refunding, replacement or refinancing. Limitation on Preferred Stock of Subsidiaries. The Company will not permit any of its Restricted Subsidiaries to issue any Preferred Stock (other than to the Company or to a Wholly Owned Restricted Subsidiary of the Company) or permit any Person (other than the Company or a Wholly Owned Restricted Subsidiary of the Company) to own any Preferred Stock of any Restricted Subsidiary of the Company, other than Permitted Foreign Subsidiary Preferred Stock and Permitted Domestic Subsidiary Preferred Stock. Merger, Consolidation and Sale of Assets. The Company will not, in a single transaction or a series of related transactions, consolidate with or merge with or into, or sell, assign, transfer, lease, convey or otherwise dispose of all or substantially all of its assets to, another Person or Persons or adopt a plan of liquidation unless: (i) either (A) the Company shall be the survivor of such merger or consolidation or (B) the surviving Person is a corporation, partnership or trust organized and existing under the laws of the United States, any state thereof or 79 the District of Columbia and such surviving Person shall expressly assume all the obligations of the Company under the Senior Subordinated Notes and the Indenture; (ii) immediately after giving effect to such transaction (on a pro forma basis, including any Indebtedness incurred or anticipated to be incurred in connection with such transaction), the Company or the surviving Person is able to incur at least $1.00 of additional Indebtedness (other than Permitted Indebtedness) in compliance with the "Limitation on Incurrence of Additional Indebtedness" covenant; and (iii) immediately before and immediately after giving effect to such transaction (including any Indebtedness incurred or anticipated to be incurred in connection with the transaction), no Default or Event of Default shall have occurred and be continuing. For purposes of the foregoing, the transfer (by lease, assignment, sale or otherwise, in a single transaction or series of transactions) of all or substantially all of the properties and assets of one or more Subsidiaries of the Company, the Capital Stock of which constitutes all or substantially all of the properties and assets of the Company, shall be deemed to be the transfer of all or substantially all of the properties and assets of the Company. Notwithstanding the foregoing clauses (ii) and (iii), (a) any Restricted Subsidiary of the Company may consolidate with, merge into or transfer all or part of its properties and assets to the Company and (b) the Company may merge with an Affiliate incorporated solely for the purpose of reincorporating the Company in another jurisdiction. The Indenture provides that upon any consolidation, combination or merger or any transfer of all or substantially all of the assets of the Company in accordance with the foregoing, the surviving entity shall succeed to, and be substituted for, and may exercise every right and power of, the Company under the Indenture and the Senior Subordinated Notes with the same effect as if such surviving entity had been named as such. Limitation on Asset Sales. The Company will not, and will not permit any of its Restricted Subsidiaries to, consummate an Asset Sale unless (i) the Company or the applicable Restricted Subsidiary, as the case may be, receives consideration at the time of such Asset Sale at least equal to the fair market value of the assets sold or otherwise disposed of (as determined in good faith by the Company's Board of Directors), (ii) at least 75% of the consideration received by the Company or the Restricted Subsidiary, as the case may be, from such Asset Sale shall be cash or Cash Equivalents; provided that the amount of (a) any liabilities (as shown on the Company's or such Restricted Subsidiary's most recent balance sheet) of the Company or any such Restricted Subsidiary (other than liabilities that are by their terms subordinated to the Senior Subordinated Notes) that are assumed by the transferee of any such assets, (b) any notes or other obligations received by the Company or any such Restricted Subsidiary from such transferee that are immediately converted by the Company or such Restricted Subsidiary into cash (to the extent of the cash received) and (c) any Designated Noncash Consideration received by the Company or any of its Restricted Subsidiaries in such Asset Sale having an aggregate fair market value, taken together with all other Designated Noncash Consideration received pursuant to this clause (c) that is at that time outstanding (including any Designated Noncash Consideration applied pursuant to the third paragraph of this covenant), not to exceed 10% of Total Assets at the time of the receipt of such Designated Noncash Consideration (with the fair market value of each item of Designated Noncash Consideration being measured at the time received and without giving effect to subsequent changes in value), shall be deemed to be cash for the purposes of this provision or for purposes of the third paragraph of this covenant, and (iii) upon the consummation of an Asset Sale, the Company shall apply, or cause such Restricted Subsidiary to apply, the Net Cash Proceeds relating to such Asset Sale within 365 days of receipt thereof either (A) to prepay any Senior Debt and, in the case of any Senior Debt under any revolving credit facility, effect a permanent reduction in the availability under such revolving credit facility, (B) to repurchase Existing Notes required to be repurchased under the indenture governing the Existing Notes, (C) to reinvest in Productive Assets, or (D) a combination of prepayment, repurchase and investment permitted by the foregoing clauses (iii)(A), (iii)(B) and (iii)(C). Pending the final application of any such Net Cash Proceeds, the Company or such Restricted Subsidiary may temporarily reduce Indebtedness under a revolving credit facility, if any, or otherwise invest such Net Cash Proceeds in Cash Equivalents. On the 366th day after an Asset Sale or such earlier date, if any, as the Board of Directors of the Company or of such Restricted Subsidiary determines not to apply the Net Cash Proceeds relating to such Asset Sale as set forth in clauses (iii)(A), (iii)(B), (iii)(C) or (iii)(D) of the next preceding sentence (each, a "Net Proceeds Offer Trigger Date"), such aggregate amount of Net Cash Proceeds 80 which have not been applied on or before such Net Proceeds Offer Trigger Date as permitted in clauses (iii)(A), (iii)(B), (iii)(C) and (iii)(D) of the next preceding sentence (each a "Net Proceeds Offer Amount") shall be applied by the Company or such Restricted Subsidiary to make an offer to purchase (the "Net Proceeds Offer") on a date (the "Net Proceeds Offer Payment Date") not less than 30 nor more than 45 days following the applicable Net Proceeds Offer Trigger Date, from all Holders on a pro rata basis that amount of Senior Subordinated Notes equal to the Net Proceeds Offer Amount at a price equal to 100% of the principal amount of the Senior Subordinated Notes to be purchased, plus accrued and unpaid interest thereon, if any, to the date of purchase; provided, however, that if at any time any non-cash consideration (including any Designated Noncash Consideration) received by the Company or any Restricted Subsidiary of the Company, as the case may be, in connection with any Asset Sale is converted into or sold or otherwise disposed of for cash (other than interest received with respect to any such non-cash consideration), then such conversion or disposition shall be deemed to constitute an Asset Sale hereunder and the Net Cash Proceeds thereof shall be applied in accordance with this covenant. Notwithstanding the foregoing, if a Net Proceeds Offer Amount is less than $10.0 million, the application of the Net Cash Proceeds constituting such Net Proceeds Offer Amount to a Net Proceeds Offer may be deferred until such time as such Net Proceeds Offer Amount plus the aggregate amount of all Net Proceeds Offer Amounts arising subsequent to the Net Proceeds Offer Trigger Date relating to such initial Net Proceeds Offer Amount from all Asset Sales by the Company and its Restricted Subsidiaries aggregates at least $10.0 million, at which time the Company or such Restricted Subsidiary shall apply all Net Cash Proceeds constituting all Net Proceeds Offer Amounts that have been so deferred to make a Net Proceeds Offer (the first date the aggregate of all such deferred Net Proceeds Offer Amounts is equal to $10.0 million or more shall be deemed to be a "Net Proceeds Offer Trigger Date"). Notwithstanding the two immediately preceding paragraphs, the Company and its Restricted Subsidiaries will be permitted to consummate an Asset Sale without complying with such paragraphs to the extent (i) at least 75% of the consideration for such Asset Sale constitutes Productive Assets, cash, cash equivalents and/or marketable securities (i.e., such securities which could be sold for cash within 180 days of the acquisition thereof) and (ii) such Asset Sale is for fair market value (as determined in good faith by the Company's Board of Directors); provided that any consideration not constituting Productive Assets received by the Company or any of its Restricted Subsidiaries in connection with any Asset Sale permitted to be consummated under this paragraph shall be subject to the provisions of the two preceding paragraphs. Each Net Proceeds Offer will be mailed to the record Holders as shown on the register of Holders within 25 days following the Net Proceeds Offer Trigger Date, with a copy to the Trustee, and shall comply with the procedures set forth in the Indenture. Upon receiving notice of the Net Proceeds Offer, Holders may elect to tender their Senior Subordinated Notes in whole or in part in integral multiples of $1,000 in exchange for cash. To the extent Holders properly tender Senior Subordinated Notes in an amount exceeding the Net Proceeds Offer Amount, Senior Subordinated Notes of tendering Holders will be purchased on a pro rata basis (based on amounts tendered). A Net Proceeds Offer shall remain open for a period of 20 business days or such longer period as may be required by law. To the extent that the aggregate amount of Senior Subordinated Notes tendered pursuant to a Net Proceeds Offer is less than the Net Proceeds Offer Amount, the Company may use any remaining Net Proceeds Offer Amount for general corporate purposes. Upon completion of any such Net Proceeds Offer, the Net Proceeds Offer Amount shall be reset at zero. The Company will comply with the requirements of Rule 14e-1 under the Exchange Act and any other securities laws and regulations thereunder to the extent such laws and regulations are applicable in connection with the repurchase of Senior Subordinated Notes pursuant to a Net Proceeds Offer. To the extent that the provisions of any securities laws or regulations conflict with the "Asset Sale" provisions of the Indenture, the Company shall comply with the applicable securities laws and regulations and shall not be deemed to have breached its obligations under the "Asset Sale" provisions of the Indenture by virtue thereof. 81 Limitation of Guarantees by Subsidiaries. The Company will not permit any Restricted Subsidiary, directly or indirectly, by way of the pledge of any intercompany note or otherwise, to assume, guarantee or in any other manner become liable with respect to any Indebtedness of the Company or any other Subsidiary (other than (A) Indebtedness and other obligations under the Bank Credit Agreement, (B) Permitted Indebtedness of a Restricted Subsidiary, (C) Indebtedness under Currency Agreements in reliance on clause (vi) of the definition of Permitted Indebtedness or (D) Interest Swap Obligations incurred in reliance on clause (v) of the definition of Permitted Indebtedness), unless, in any such case (a) such Restricted Subsidiary executes and delivers a supplemental indenture to the Indenture, providing a guarantee of payment of the Senior Subordinated Notes by such Restricted Subsidiary (the "Guarantee") and (b) (x) if any such assumption, guarantee or other liability of such Restricted Subsidiary is provided in respect of Senior Debt, the guarantee or other instrument provided by such Restricted Subsidiary in respect of such Senior Debt may be superior to the Guarantee pursuant to subordination provisions no less favorable to the Holders of the Senior Subordinated Notes than those contained in the Indenture and (y) if such assumption, guarantee or other liability of such Restricted Subsidiary is provided in respect of Indebtedness that is expressly subordinated to the Senior Subordinated Notes, the guarantee or other instrument provided by such Restricted Subsidiary in respect of such subordinated Indebtedness shall be subordinated to the Guarantee pursuant to subordination provisions no less favorable to the Holders of the Senior Subordinated Notes than those contained in the Indenture. Notwithstanding the foregoing, any such Guarantee by a Restricted Subsidiary of the Senior Subordinated Notes shall provide by its terms that it shall be automatically and unconditionally released and discharged, without any further action required on the part of the Trustee or any Holder, upon: (i) the unconditional release of such Restricted Subsidiary from its liability in respect of the Indebtedness in connection with which such Guarantee was executed and delivered pursuant to the preceding paragraph; or (ii) any sale or other disposition (by merger or otherwise) to any Person which is not a Restricted Subsidiary of the Company, of all of the Company's Capital Stock in, or all or substantially all of the assets of, such Restricted Subsidiary; provided that (a) such sale or disposition of such Capital Stock or assets is otherwise in compliance with the terms of the Indenture and (b) such assumption, guarantee or other liability of such Restricted Subsidiary has been released by the holders of the other Indebtedness so guaranteed. Conduct of Business. The Company and its Restricted Subsidiaries will not engage in any businesses a majority of whose revenues are not derived from the same or reasonably similar, ancillary or related to, or a reasonable extension, development or expansion of, the businesses in which the Company and its Restricted Subsidiaries are engaged on the Issue Date. EVENTS OF DEFAULT The following events are defined in the Indenture as "Events of Default": (i) the failure to pay interest on any Senior Subordinated Note when the same becomes due and payable and the default continues for a period of 30 days (whether or not such payment shall be prohibited by the subordination provisions of the Indenture); (ii) the failure to pay the principal on any Senior Subordinated Note when such principal becomes due and payable, at maturity, upon redemption or otherwise (including the failure to make a payment to purchase Senior Subordinated Notes tendered pursuant to a Change of Control Offer or a Net Proceeds Offer) (whether or not such payment shall be prohibited by the subordination provisions of the Indenture); (iii) a default in the observance or performance of any other covenant or agreement contained in the Indenture which default continues for a period of 30 days after the Company receives written notice specifying the default (and demanding that such default be remedied) from the Trustee or the Holders of at least 25% of the outstanding principal amount of the Senior Subordinated Notes; (iv) the failure to pay at final stated maturity (giving effect to any extensions thereof) the principal amount of any Indebtedness of the Company or any Restricted Subsidiary (other than a Securitization Entity) of the Company and such failure continues for a period of 20 days or more, or the acceleration of the final stated maturity of any such Indebtedness (which acceleration is not rescinded, annulled or otherwise cured within 20 days of receipt by the Company or such Restricted Subsidiary of notice of 82 any such acceleration) if the aggregate principal amount of such Indebtedness, together with the principal amount of any other such Indebtedness in default for failure to pay principal at final maturity or which has been accelerated, in each case with respect to which the 20-day period described above has passed, aggregates $20.0 million or more at any time; (v) one or more judgments in an aggregate amount in excess of $20.0 million shall have been rendered against the Company or any of its Significant Subsidiaries and such judgments remain undischarged, unpaid or unstayed for a period of 60 days after such judgment or judgments become final and non-appealable; and (vi) certain events of bankruptcy affecting the Company or any of its Significant Subsidiaries. Upon the happening of any Event of Default specified in the Indenture, the Trustee or the Holders of at least 25% in principal amount of outstanding Senior Subordinated Notes may declare the principal of and accrued interest on all the Senior Subordinated Notes to be due and payable by notice in writing to the Company and the Trustee specifying the respective Event of Default and that it is a "notice of acceleration" (the "Acceleration Notice"), and the same (i) shall become immediately due and payable or (ii) if there are any amounts outstanding under the Bank Credit Agreement, shall become immediately due and payable upon the first to occur of an acceleration under the Bank Credit Agreement or 5 business days after receipt by the Company and the Representative under the Bank Credit Agreement of such Acceleration Notice but only if such Event of Default is then continuing. If an Event of Default with respect to bankruptcy proceedings of the Company occurs and is continuing, then such amount shall ipso facto become and be immediately due and payable without any declaration or other act on the part of the Trustee or any holder of Senior Subordinated Notes. The Indenture provides that, at any time after a declaration of acceleration with respect to the Senior Subordinated Notes as described in the preceding paragraph, the Holders of a majority in principal amount of the Senior Subordinated Notes may rescind and cancel such declaration and its consequences (i) if the rescission would not conflict with any judgment or decree, (ii) if all existing Events of Default have been cured or waived except nonpayment of principal or interest that has become due solely because of the acceleration, (iii) to the extent the payment of such interest is lawful, interest on overdue installments of interest and overdue principal, which has become due otherwise than by such declaration of acceleration, has been paid, (iv) if the Company has paid the Trustee its reasonable compensation and reimbursed the Trustee for its expenses, disbursements and advances and (v) in the event of the cure or waiver of an Event of Default of the type described in clause (vi) of the description above of Events of Default, the Trustee shall have received an officers' certificate and an opinion of counsel that such Event of Default has been cured or waived. The holders of a majority in principal amount of the Senior Subordinated Notes may waive any existing Default or Event of Default under the Indenture, and its consequences, except a default in the payment of the principal of or interest on any Senior Subordinated Notes. LEGAL DEFEASANCE AND COVENANT DEFEASANCE The Company may, at its option and at any time, elect to have its obligations discharged with respect to the outstanding Senior Subordinated Notes ("Legal Defeasance"). Such Legal Defeasance means that the Company shall be deemed to have paid and discharged the entire indebtedness represented by the outstanding Senior Subordinated Notes, except for (i) the rights of holders of the Senior Subordinated Notes to receive payments in respect of the principal of, premium, if any, and interest on the Senior Subordinated Notes when such payments are due, (ii) the Company's obligations with respect to the Senior Subordinated Notes concerning issuing temporary Senior Subordinated Notes, registration of Senior Subordinated Notes, mutilated, destroyed, lost or stolen Senior Subordinated Notes and the maintenance of an office or agency for payments, (iii) the rights, powers, trust, duties and immunities of the Trustee and the Company's obligations in connection therewith and (iv) the Legal Defeasance provisions of the Indenture. In addition, the Company may, at its option and at any time, elect to have the obligations of the Company released with respect to certain covenants that are described in the Indenture ("Covenant Defeasance") and thereafter any omission to comply with such obligations shall not constitute a Default or Event of Default with respect to the Senior Subordinated Notes. In the event Covenant Defeasance occurs, certain events (not including non-payment, bankruptcy, receivership, reorganization and 83 insolvency events) described under "Events of Default" will no longer constitute an Event of Default with respect to the Senior Subordinated Notes. In order to exercise either Legal Defeasance or Covenant Defeasance: (i) the Company must irrevocably deposit with the Trustee, in trust, for the benefit of the Holders cash in U.S. dollars, non-callable U.S. government obligations or a combination thereof, in such amounts as will be sufficient, in the opinion of a nationally recognized firm of independent public accountants, to pay the principal of, premium, if any, and interest on the Senior Subordinated Notes on the stated date for payment thereof or on the applicable redemption date, as the case may be; (ii) in the case of Legal Defeasance, the Company shall have delivered to the Trustee an opinion of counsel in the United States reasonably acceptable to the Trustee confirming that (A) the Company has received from, or there has been published by, the Internal Revenue Service a ruling or (B) since the date of the Indenture, there has been a change in the applicable federal income tax law, in either case to the effect that, and based thereon such opinion of counsel shall confirm that, the Holders will not recognize income, gain or loss for federal income tax purposes as a result of such Legal Defeasance and will be subject to federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such Legal Defeasance had not occurred; (iii) in the case of Covenant Defeasance, the Company shall have delivered to the Trustee an opinion of counsel in the United States reasonably acceptable to the Trustee confirming that the Holders will not recognize income, gain or loss for federal income tax purposes as a result of such Covenant Defeasance and will be subject to federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such Covenant Defeasance had not occurred; (iv) no Default or Event of Default shall have occurred and be continuing on the date of such deposit (other than a Default or Event of Default with respect to the Indenture resulting from the incurrence of Indebtedness, all or a portion of which will be used to defease the Senior Subordinated Notes concurrently with such incurrence); (v) such Legal Defeasance or Covenant Defeasance shall not result in a breach or violation of, or constitute a default under, the Indenture or any other material agreement or instrument to which the Company or any of its Subsidiaries is a party or by which the Company or any of its Subsidiaries is bound; (vi) the Company shall have delivered to the Trustee an officers' certificate stating that the deposit was not made by the Company with the intent of preferring the Holders over any other creditors of the Company or with the intent of defeating, hindering, delaying or defrauding any other creditors of the Company or others; (vii) the Company shall have delivered to the Trustee an officers' certificate and an opinion of counsel, each stating that all conditions precedent provided for or relating to the Legal Defeasance or the Covenant Defeasance have been complied with; (viii) the Company shall have delivered to the Trustee an opinion of counsel to the effect that (A) the trust funds will not be subject to any rights of holders of Indebtedness of the Company other than the Senior Subordinated Notes and (B) assuming no intervening bankruptcy of the Company between the date of deposit and the 91st day following the deposit and that no Holder is an insider of the Company, after the 91st day following the deposit, the trust funds will not be subject to the effect of any applicable bankruptcy, insolvency, reorganization or similar laws affecting creditors' rights generally; and (ix) certain other customary conditions precedent are satisfied. SATISFACTION AND DISCHARGE The Indenture will be discharged and will cease to be of further effect (except as to surviving rights or registration of transfer or exchange of the Senior Subordinated Notes, as expressly provided for in the Indenture) as to all outstanding Senior Subordinated Notes when (i) either (a) all the Senior Subordinated Notes theretofore authenticated and delivered (except lost, stolen or destroyed Senior Subordinated Notes which have been replaced or paid and Senior Subordinated Notes for whose payment money has theretofore been deposited in trust or segregated and held in trust by the Company and thereafter repaid to the Company or discharged from such trust) have been delivered to the Trustee for cancellation or (b) all Senior Subordinated Notes not theretofore delivered to the Trustee for cancellation have become due and payable and the Company has irrevocably deposited or caused to be deposited with the Trustee funds in an amount sufficient to pay and discharge the entire Indebtedness on the Senior Subordinated Notes not theretofore delivered to the Trustee for cancellation, for principal of, premium, if any, and interest on the Senior Subordinated Notes to the date of deposit together with irrevocable instructions from the Company directing the Trustee to apply such funds to the 84 payment thereof at maturity or redemption, as the case may be; (ii) the Company has paid all other sums payable under the Indenture by the Company; and (iii) the Company has delivered to the Trustee an officers' certificate and an opinion of counsel stating that all conditions precedent under the Indenture relating to the satisfaction and discharge of the Indenture have been complied with. MODIFICATION OF THE INDENTURE From time to time, the Company and the Trustee, without the consent of the Holders, may amend the Indenture for certain specified purposes, including curing ambiguities, defects or inconsistencies, so long as such change does not, in the opinion of the Trustee, adversely affect the rights of any of the Holders in any material respect. In formulating its opinion on such matters, the Trustee will be entitled to rely on such evidence as it deems appropriate, including, without limitation, solely on an opinion of counsel. Other modifications and amendments of the Indenture may be made with the consent of the Holders of a majority in principal amount of the then outstanding Senior Subordinated Notes issued under the Indenture, except that, without the consent of each Holder affected thereby, no amendment may: (i) reduce the amount of Senior Subordinated Notes whose Holders must consent to an amendment; (ii) reduce the rate of or change or have the effect of changing the time for payment of interest, including defaulted interest, on any Senior Subordinated Notes; (iii) reduce the principal of or change or have the effect of changing the fixed maturity of any Senior Subordinated Notes, or change the date on which any Senior Subordinated Notes may be subject to redemption or repurchase, or reduce the redemption or repurchase price therefor; (iv) make any Senior Subordinated Notes payable in money other than that stated in the Senior Subordinated Notes; (v) make any change in provisions of the Indenture protecting the right of each Holder to receive payment of principal of and interest on such Holder's Note on or after the due date thereof or to bring suit to enforce such payment, or permitting holders of a majority in principal amount of a class of Senior Subordinated Notes to waive Defaults or Events of Default (other than Defaults or Events of Default with respect to the payment of principal of or interest on the Senior Subordinated Notes); (vi) amend, change or modify in any material respect the obligation of the Company to make and consummate a Change of Control Offer in the event of a Change of Control or make and consummate a Net Proceeds Offer with respect to any Asset Sale that has been consummated or modify any of the provisions or definitions with respect thereto after a Change of Control has occurred or the subject Asset Sale has been consummated; or (vii) modify the subordination provisions of the Indenture to adversely affect the Holders in any material respect. ADDITIONAL INFORMATION The Indenture provides that the Company will deliver to the Trustee within 15 days after the filing of the same with the Commission, copies of the quarterly and annual reports and of the information, documents and other reports, if any, which the Company is required to file with the Commission pursuant to Section 13 or 15(d) of the Exchange Act. The Indenture further provides that after the Exchange Offer has been consummated, notwithstanding that the Company may not be subject to the reporting requirements of Section 13 or 15(d) of the Exchange Act, the Company will file with the Commission, to the extent permitted, and provide the Trustee and Holders with such annual reports and such information, documents and other reports specified in Sections 13 and 15(d) of the Exchange Act. The Company will also comply with the other provisions of TIA (S) 314(a). CERTAIN DEFINITIONS Set forth below is a summary of certain of the defined terms used in the Indenture. Reference is made to the Indenture for the full definition of all such terms, as well as any other terms used herein for which no definition is provided. "Acquired Indebtedness" means Indebtedness of a Person or any of its Subsidiaries existing at the time such Person becomes a Restricted Subsidiary of the Company or assumed in connection with the acquisition of assets from such Person and not incurred by such Person in connection with, or in anticipation or contemplation of, such Person becoming a Restricted Subsidiary of the Company or such acquisition. 85 "Affiliate" means a Person who directly or indirectly through one or more intermediaries controls, or is controlled by, or is under common control with, the Company. The term "control" means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting securities, by contract or otherwise. Notwithstanding the foregoing, (i) no Person (other than the Company or any Subsidiary of the Company) in whom a Securitization Entity makes an Investment in connection with a Qualified Securitization Transaction shall be deemed to be an Affiliate of the Company or any of its Subsidiaries solely by reason of such Investment and (ii) none of Baxter International Inc. or its Subsidiaries shall be deemed to be an Affiliate of the Company. "all or substantially all" shall have the meaning given such phrase in the Revised Model Business Corporation Act. "Asset Acquisition" means (a) an Investment by the Company or any Restricted Subsidiary of the Company in any other Person if, as a result of such Investment, such Person shall become a Restricted Subsidiary of the Company or any Restricted Subsidiary of the Company, or shall be merged with or into the Company or any Restricted Subsidiary of the Company, or (b) the acquisition by the Company or any Restricted Subsidiary of the Company of the assets of any Person which constitute all or substantially all of the assets of such Person, any division or line of business of such Person or any other properties or assets of such Person other than in the ordinary course of business. "Asset Sale" means any direct or indirect sale, issuance, conveyance, transfer, lease (other than operating leases entered into in the ordinary course of business), assignment or other transfer for value by the Company or any of its Restricted Subsidiaries (including any Sale and Leaseback Transaction) to any Person other than the Company or a Wholly Owned Restricted Subsidiary of the Company of (a) any Capital Stock of any Restricted Subsidiary of the Company or (b) any other property or assets of the Company or any Restricted Subsidiary of the Company other than in the ordinary course of business; provided, however, that Asset Sales shall not include (i) a transaction or series of related transactions for which the Company or its Restricted Subsidiaries receive aggregate consideration of less than $1.0 million, (ii) the sale, lease, conveyance, disposition or other transfer of all or substantially all of the assets of the Company as permitted under "Merger, Consolidation and Sale of Assets" or any disposition that constitutes a Change of Control, (iii) the sale or discount, in each case without recourse, of accounts receivable arising in the ordinary course of business, but only in connection with the compromise or collection thereof, (iv) the factoring of accounts receivable arising in the ordinary course of business pursuant to arrangements customary in the region, (v) the licensing of intellectual property, (vi) disposals or replacements of obsolete equipment in the ordinary course of business, (vii) the sale, lease, conveyance, disposition or other transfer by the Company or any Restricted Subsidiary of assets or property to one or more Wholly Owned Restricted Subsidiaries in connection with Investments permitted under the "Limitations on Restricted Payments" covenant, (viii) sales of accounts receivable, equipment and related assets (including contract rights) of the type specified in the definition of "Qualified Securitization Transaction" to a Securitization Entity for the fair market value thereof, including cash in an amount at least equal to 75% of the fair market value thereof as determined in accordance with GAAP, and (ix) transfers of accounts receivable, equipment and related assets (including contract rights) of the type specified in the definition of "Qualified Securitization Transaction" (or a fractional undivided interest therein) by a Securitization Entity in a Qualified Securitization Transaction. For the purposes of clause (viii), Purchase Money Notes shall be deemed to be cash. "Bain Related Party" means Bain Capital and any Affiliate of Bain Capital. "Bank Credit Agreement" means the Credit Agreement dated as of the Issue Date, among the Company, Holdings, the lenders party thereto in their capacities as lenders thereunder and Bankers Trust Company, as agent, together with the related documents thereto (including, without limitation, any guarantee agreements and security documents), in each case as such agreements may be amended (including any amendment and restatement thereof), supplemented or otherwise modified from time to time, including any agreement extending the maturity of, refinancing, replacing or otherwise restructuring (including, without limitation, increasing the amount of available borrowings thereunder or adding Subsidiaries of the Company as additional borrowers or 86 guarantors thereunder) all or any portion of the Indebtedness under such agreement or any successor or replacement agreement and whether by the same or any other agent, lender or group of lenders. "Board of Directors" means, as to any Person, the board of directors of such Person or any duly authorized committee thereof. "Capitalized Lease Obligation" means, as to any Person, the obligations of such Person under a lease that are required to be classified and accounted for as capital lease obligations under GAAP and, for purposes of this definition, the amount of such obligations at any date shall be the capitalized amount of such obligations at such date, determined in accordance with GAAP. "Capital Stock" means (i) with respect to any Person that is a corporation, any and all shares, interests, participations or other equivalents (however designated) of corporate stock, including each class of common stock and preferred stock of such Person and (ii) with respect to any Person that is not a corporation, any and all partnership or other equity interests of such Person. "Cash Equivalents" means: (i) marketable direct obligations issued by, or unconditionally guaranteed by, the United States Government or issued by any agency thereof and backed by the full faith and credit of the United States, in each case maturing within one year from the date of acquisition thereof; (ii) marketable direct obligations issued by any state of the United States of America or any political subdivision of any such state or any public instrumentality thereof maturing within one year from the date of acquisition thereof and, at the time of acquisition, having one of the two highest ratings obtainable from either S&P or Moody's; (iii) commercial paper maturing no more than one year from the date of creation thereof and, at the time of acquisition, having a rating of at least A-1 from S&P or at least P-1 from Moody's; (iv) certificates of deposit or bankers' acceptances (or, with respect to foreign banks, similar instruments) maturing within one year from the date of acquisition thereof issued by any bank organized under the laws of the United States of America or any state thereof or the District of Columbia, Japan or any member of the European Economic Community or any U.S. branch of a foreign bank having at the date of acquisition thereof combined capital and surplus of not less than $200.0 million; provided that instruments issued by banks not having one of the two highest ratings obtainable from either S&P or Moody's or by banks organized under the laws of Japan or any member of the European Economic Community shall not constitute "Cash Equivalents" for purposes of the subordination provisions of the Indenture; (v) repurchase obligations with a term of not more than seven days for underlying securities of the types described in clause (i) above entered into with any bank meeting the qualifications specified in clause (iv) above; and (vi) investments in money market funds which invest substantially all their assets in securities of the types described in clauses (i) through (v) above. "Change of Control" means the occurrence of one or more of the following events: (i) any sale, lease, exchange or other transfer (in one transaction or a series of related transactions) of all or substantially all of the assets of the Company or Holdings to any Person or group of related Persons for purposes of Section 13(d) of the Exchange Act (a "Group"), together with any Affiliates thereof (whether or not otherwise in compliance with the provisions of the Indenture); (ii) the approval by the holders of Capital Stock of the Company of any plan or proposal for the liquidation or dissolution of the Company (whether or not otherwise in compliance with the provisions of the Indenture); (iii) any Person or Group (other than one or both of the Principals or their respective Related Parties) shall become the owner, directly or indirectly, beneficially or of record, of shares representing more than 50% of the aggregate ordinary voting power represented by the issued and outstanding Capital Stock of the Company or Holdings; or (iv) the first day within any two-year period on which a majority of the members of the Board of Directors of the Company or Holdings are not Continuing Directors. "Consolidated EBITDA" means, with respect to any Person, for any period, the sum (without duplication) of (i) Consolidated Net Income and (ii) to the extent Consolidated Net Income has been reduced thereby, (A) all income taxes and foreign withholding taxes of such Person and its Restricted Subsidiaries paid or accrued in accordance with GAAP for such period, (B) Consolidated Interest Expense and (C) Consolidated Non-cash Charges. 87 "Consolidated Fixed Charge Coverage Ratio" means, with respect to any Person, the ratio of Consolidated EBITDA of such Person during the four full fiscal quarters (the "Four Quarter Period") ending on or prior to the date of the transaction giving rise to the need to calculate the Consolidated Fixed Charge Coverage Ratio (the "Transaction Date") to Consolidated Fixed Charges of such Person for the Four Quarter Period. In addition to and without limitation of the foregoing, for purposes of this definition, "Consolidated EBITDA" and "Consolidated Fixed Charges" shall be calculated after giving effect on a pro forma basis for the period of such calculation to (i) the incurrence of any Indebtedness or the issuance of any Designated Preferred Stock of such Person or any of its Restricted Subsidiaries (and the application of the proceeds thereof) giving rise to the need to make such calculation and any incurrence or repayment of other Indebtedness or the issuance or redemption of other Designated Preferred Stock (and the application of the proceeds thereof) occurring during the Four Quarter Period or at any time subsequent to the last day of the Four Quarter Period and on or prior to the Transaction Date, as if such incurrence, repayment, issuance or redemption, as the case may be (and the application of the proceeds thereof), occurred on the first day of the Four Quarter Period and (ii) any Asset Sales or Asset Acquisitions (including, without limitation, any Asset Acquisition giving rise to the need to make such calculation as a result of such Person or one of its Restricted Subsidiaries (including any Person who becomes a Restricted Subsidiary as a result of the Asset Acquisition) incurring, assuming or otherwise being liable for Acquired Indebtedness and also including any Consolidated EBITDA (including any pro forma expense and cost reductions calculated on a basis consistent with Regulation S-X under the Securities Act as in effect and applied as of December 31, 1995) attributable to the assets which are the subject of the Asset Acquisition or Asset Sale during the Four Quarter Period) occurring during the Four Quarter Period or at any time subsequent to the last day of the Four Quarter Period and on or prior to the Transaction Date, as if such Asset Sale or Asset Acquisition (including the incurrence, assumption or liability for any such Indebtedness or Acquired Indebtedness) occurred on the first day of the Four Quarter Period. If such Person or any of its Restricted Subsidiaries directly or indirectly guarantees Indebtedness of a third Person, the preceding sentence shall give effect to the incurrence of such guaranteed Indebtedness as if such Person or any Restricted Subsidiary of such Person had directly incurred or otherwise assumed such guaranteed Indebtedness. Furthermore, in calculating "Consolidated Fixed Charges" for purposes of determining the denominator (but not the numerator) of this "Consolidated Fixed Charge Coverage Ratio," (1) interest on outstanding Indebtedness determined on a fluctuating basis as of the Transaction Date and which will continue to be so determined thereafter shall be deemed to have accrued at a fixed rate per annum equal to the rate of interest on such Indebtedness in effect on the Transaction Date; (2) if interest on any Indebtedness actually incurred on the Transaction Date may optionally be determined at an interest rate based upon a factor of a prime or similar rate, a eurocurrency interbank offered rate, or other rates, then the interest rate in effect on the Transaction Date will be deemed to have been in effect during the Four Quarter Period; and (3) notwithstanding clause (1) above, interest on Indebtedness determined on a fluctuating basis, to the extent such interest is covered by agreements relating to Interest Swap Obligations, shall be deemed to accrue at the rate per annum resulting after giving effect to the operation of such agreements. "Consolidated Fixed Charges" means, with respect to any Person for any period, the sum, without duplication, of (i) Consolidated Interest Expense (before amortization or write-off of debt issuance costs) plus (ii) the amount of all cash dividend payments on any series of Preferred Stock of such Person plus (iii) the amount of all dividend payments on any series of Permitted Foreign Subsidiary Preferred Stock or Permitted Domestic Subsidiary Preferred Stock; provided that with respect to any series of Designated Preferred Stock that was not paid cash dividends during such period but that is eligible to be paid cash dividends during any period prior to the maturity date of the Senior Subordinated Notes, cash dividends shall be deemed to have been paid with respect to such series of Designated Preferred Stock during such period for purposes of clause (ii) of this definition. "Consolidated Interest Expense" means, with respect to any Person for any period, the sum of, without duplication, (i) the aggregate of all cash and non-cash interest expense with respect to all outstanding Indebtedness of such Person and its Restricted Subsidiaries, including the net costs associated with Interest Swap Obligations, for such period determined on a consolidated basis in conformity with GAAP, and (ii) the interest component of Capitalized Lease Obligations paid, accrued and/or scheduled to be paid or accrued by such Person 88 and its Restricted Subsidiaries during such period as determined on a consolidated basis in accordance with GAAP. "Consolidated Net Income" of the Company means, for any period, the aggregate net income (or loss) of the Company and its Restricted Subsidiaries for such period on a consolidated basis, determined in accordance with GAAP; provided that there shall be excluded therefrom (a) gains and losses from Asset Sales (without regard to the $1.0 million limitation set forth in the definition thereof) or abandonments or reserves relating thereto and the related tax effects according to GAAP, (b) gains and losses due solely to fluctuations in currency values and the related tax effects according to GAAP, (c) items classified as extraordinary, unusual or nonrecurring gains and losses (including, without limitation, restructuring costs), and the related tax effects according to GAAP, (d) the net income (or loss) of any Person acquired in a pooling of interests transaction accrued prior to the date it becomes a Restricted Subsidiary of the Company or is merged or consolidated with the Company or any Restricted Subsidiary of the Company, (e) the net income of any Restricted Subsidiary of the Company to the extent that the declaration of dividends or similar distributions by that Restricted Subsidiary of the Company of that income is restricted by contract, operation of law or otherwise, (f) the net loss of any Person, other than a Restricted Subsidiary of the Company, (g) the net income of any Person, other than a Restricted Subsidiary of the Company, except to the extent of cash dividends or distributions paid to the Company or a Restricted Subsidiary of the Company by such Person, (h) only for purposes of clause (iii)(w) of the first paragraph of the "Limitation on Restricted Payments" covenant, any amounts included pursuant to clause (iii)(z) of the first paragraph of such covenant, (i) one time non-cash compensation charges, including any arising from existing stock options resulting from any merger or recapitalization transaction and (j) start-up costs and duplicative costs incurred in connection with the transition service and distribution agreements in effect on the Issue Date (as the same may be amended from time to time). For purposes of clause (iii)(w) of the first paragraph of the "Limitation on Restricted Payments" covenant, Consolidated Net Income shall be reduced by any cash dividends paid with respect to any series of Designated Preferred Stock. "Consolidated Net Worth" means, with respect to any Person for any date of determination, the sum of (i) stated capital with respect to Capital Stock of such Person and additional paid-in capital, and (ii) retained earnings (or minus accumulated deficit) of such Person and its Subsidiaries (or, in the case of the Company, the Restricted Subsidiaries), less, to the extent included in the foregoing, amounts attributable to Disqualified Capital Stock, each item determined on a consolidated basis in accordance with GAAP. "Consolidated Non-cash Charges" means, with respect to any Person for any period, the aggregate depreciation, amortization and other non-cash expenses of such Person and its Restricted Subsidiaries reducing Consolidated Net Income of such Person and its Restricted Subsidiaries for such period, determined on a consolidated basis in accordance with GAAP (excluding any such non-cash charge constituting an extraordinary item or loss or any such non- cash charge which requires an accrual of or a reserve for cash charges for any future period, other than the net non-cash charges related to deferred revenue in connection with recourse provisions under instrument sales programs entered into in the ordinary course of business). "Continuing Directors" means, as of any date of determination, any member of the Board of Directors of the Company or Holdings, as the case may be, who (i) was a member of such Board of Directors on the Issue Date or (ii) was nominated for election or elected to such Board of Directors with, or whose election to such Board of Directors was approved by, the affirmative vote of a majority of the Continuing Directors who were members of such Board of Directors at the time of such nomination or election or (iii) is any designee of the Principals or their Affiliates or was nominated by the Principals or their Affiliates or any designees of the Principals or their Affiliates on the Board of Directors. "Currency Agreement" means any foreign exchange contract, currency swap agreement or other similar agreement or arrangement designed to protect the Company or any Restricted Subsidiary of the Company against fluctuations in currency values. "Default" means an event or condition the occurrence of which is, or with the lapse of time or the giving of notice or both would be, an Event of Default. 89 "Designated Noncash Consideration" means the fair market value of noncash consideration received by the Company or one of its Restricted Subsidiaries in connection with an Asset Sale that is so designated as Designated Noncash Consideration pursuant to an officers' certificate executed by the principal executive officer and the principal financial officer of the Company or such Restricted Subsidiary, less the amount of cash or Cash Equivalents received in connection with a sale of such Designated Noncash Consideration. Such officers' certificate shall state the basis of such valuation, which shall be a report of a nationally recognized investment banking firm with respect to the receipt in one or a series of related transactions of Designated Noncash Consideration with a fair market value in excess of $10.0 million. "Designated Preferred Stock" means Preferred Stock that is so designated as Designated Preferred Stock, pursuant to an officers' certificate executed by the principal executive officer and the principal financial officer of the Company, on the issuance date thereof, the cash proceeds of which are excluded from the calculation set forth in clause (iii) of the first paragraph of the "Limitation on Restricted Payments" covenant. "Designated Senior Debt" means (i) Indebtedness under or in respect of the Bank Credit Agreement and (ii) any other Indebtedness constituting Senior Debt which, at the time of determination, has an aggregate principal amount of at least $25.0 million and is specifically designated in the instrument evidencing such Senior Debt as "Designated Senior Debt" by the Company. "Disqualified Capital Stock" means that portion of any Capital Stock which, by its terms (or by the terms of any security into which it is convertible or for which it is exchangeable), or upon the happening of any event (other than an event which would constitute a Change of Control), matures (excluding any maturity as the result of an optional redemption by the issuer thereof) or is mandatorily redeemable, pursuant to a sinking fund obligation or otherwise, or is redeemable at the sole option of the holder thereof (except, in each case, upon the occurrence of a Change of Control) on or prior to the final maturity date of the Senior Subordinated Notes. "Existing Notes" means the Company's 11 1/8% Senior Subordinated Notes due 2006. "fair market value" means, unless otherwise specified, with respect to any asset or property, the price which could be negotiated in an arm's-length, free market transaction, for cash, between a willing seller and a willing and able buyer, neither of whom is under undue pressure or compulsion to complete the transaction. Fair market value shall be determined by the Board of Directors of the Company acting reasonably and in good faith and shall be evidenced by a resolution of the Board of Directors of the Company delivered to the Trustee. "GAAP" is defined to mean generally accepted accounting principles in the United States of America as in effect as of the date of the Indenture, including, without limitation, those set forth in the opinions and pronouncements of the Accounting Principles Board of the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board or in such other statements by such other entity as approved by a significant segment of the accounting profession. All ratios and computations based on GAAP contained in the Indenture shall be computed in conformity with GAAP applied on a consistent basis, except that calculations made for purposes of determining compliance with the terms of the covenants and with other provisions of the Indenture shall be made without giving effect to (i) the deduction or amortization of any premiums, fees, and expenses incurred in connection with the Acquisition and related financings or any other permitted incurrence of Indebtedness or Refinancing Indebtedness and (ii) except as otherwise provided, the amortization of any amounts required or permitted by Accounting Principles Board Opinion Nos. 16 (including non-cash write-ups and non-cash charges relating to inventory, fixed assets and in- process research and development, in each case arising in connection with the Acquisition and the acquisition of the Company in 1994) and 17 (including non- cash charges relating to intangibles and goodwill arising in connection with the Acquisition). "GS Capital Related Party" means (a) any stockholder or partner of GS Capital on the Issue Date or (b) any trust, corporation, partnership or other entity, the beneficiaries, stockholders, partners, owners or Persons beneficially holding an 80% or more controlling interest which consist of GS Capital and/or such other Persons referred to in the immediately preceding clause (a). 90 "Indebtedness" means with respect to any Person, without duplication, (i) all obligations of such Person for borrowed money, (ii) all obligations of such Person evidenced by bonds, debentures, notes or other similar instruments, (iii) all Capitalized Lease Obligations of such Person, (iv) all obligations of such Person issued or assumed as the deferred purchase price of property, all conditional sale obligations and all obligations under any title retention agreement (but excluding trade accounts payable and warranty and service obligations arising in the ordinary course of business), (v) all obligations for the reimbursement of any obligor on any letter of credit, banker's acceptance or similar credit transaction, (vi) guarantees and other contingent obligations in respect of Indebtedness referred to in clauses (i) through (v) above and clause (viii) below, (vii) all obligations of any other Person of the type referred to in clauses (i) through (vi) which are secured by any lien on any property or asset of such Person, the amount of such obligation being deemed to be the lesser of the fair market value of such property or asset or the amount of the obligation so secured, (viii) all obligations under currency swap agreements and interest swap agreements of such Person and (ix) all Disqualified Capital Stock issued by such Person with the amount of Indebtedness represented by such Disqualified Capital Stock being equal to the greater of its voluntary or involuntary liquidation preference and its maximum fixed repurchase price, but excluding accrued dividends, if any. For purposes hereof, (x) the "maximum fixed repurchase price" of any Disqualified Capital Stock which does not have a fixed repurchase price shall be calculated in accordance with the terms of such Disqualified Capital Stock as if such Disqualified Capital Stock were purchased on any date on which Indebtedness shall be required to be determined pursuant to the Indenture, and if such price is based upon, or measured by, the fair market value of such Disqualified Capital Stock, such fair market value shall be determined reasonably and in good faith by the Board of Directors of the issuer of such Disqualified Capital Stock and (y) any transfer of accounts receivable, equipment or other assets (including contract rights) which constitute a sale for purposes of GAAP and any related recourse provisions under instrument sales programs entered into in the ordinary course of business shall not constitute Indebtedness hereunder. "Initial Public Offering" means the first underwritten public offering of Qualified Capital Stock by either Holdings or by the Company pursuant to a registration statement filed with the Commission in accordance with the Securities Act for aggregate net cash proceeds of at least $50.0 million; provided that in the event the Initial Public Offering is consummated by Holdings, Holdings contributes to the capital of the Company at least $50.0 million of the net cash proceeds of the Initial Public Offering. "Interest Swap Obligations" means the obligations of any Person, pursuant to any arrangement with any other Person, whereby, directly or indirectly, such Person is entitled to receive from time to time periodic payments calculated by applying either a floating or a fixed rate of interest on a stated notional amount in exchange for periodic payments made by such other Person calculated by applying a fixed or a floating rate of interest on the same notional amount. "Investment" means, with respect to any Person, any direct or indirect loan or other extension of credit (including, without limitation, a guarantee) or capital contribution to (by means of any transfer of cash or other property to others or any payment for property or services for the account or use of others), or any purchase or acquisition by such Person of any Capital Stock, bonds, notes, debentures or other securities or evidences of Indebtedness issued by, any Person. "Investment" shall exclude extensions of trade credit by the Company and its Subsidiaries on commercially reasonable terms in accordance with normal trade practices of the Company or such Subsidiary, as the case may be. For the purposes of the "Limitation on Restricted Payments" covenant, (i) "Investment" shall include and be valued at the book value of the net assets of any Restricted Subsidiary at the time that such Restricted Subsidiary is designated an Unrestricted Subsidiary and shall exclude the book value of the net assets of any Unrestricted Subsidiary at the time that such Unrestricted Subsidiary is designated a Restricted Subsidiary and (ii) the amount of any Investment shall be the original cost of such Investment plus the cost of all additional Investments by the Company or any of its Restricted Subsidiaries, without any adjustments for increases or decreases in value, or write-ups, write-downs or write-offs with respect to such Investment. If the Company or any Restricted Subsidiary of the Company sells or otherwise disposes of any Common Stock of any direct or indirect Restricted Subsidiary of the Company such that, after giving effect to any such sale or disposition, the Company no longer owns, directly or indirectly, 100% of the outstanding 91 Common Stock of such Restricted Subsidiary, the Company shall be deemed to have made an Investment on the date of any such sale or disposition equal to the book value of the Common Stock of such Restricted Subsidiary not sold or disposed of. "Issue Date" means the date of original issuance of the Notes. "Lien" means any lien, mortgage, deed of trust, pledge, security interest, charge or encumbrance of any kind (including any conditional sale or other title retention agreement, any lease in the nature thereof and any agreement to give any security interest). "Moody's" means Moody's Investors Service, Inc. and its successors. "Net Cash Proceeds" means, with respect to any Asset Sale, the proceeds in the form of cash or Cash Equivalents received by the Company or any of its Subsidiaries from such Asset Sale net of (a) out-of-pocket expenses and fees relating to such Asset Sale (including, without limitation, legal, accounting and investment banking fees and sales commissions), (b) taxes paid or payable after taking into account any reduction in consolidated tax liability due to available tax credits or deductions and any tax sharing arrangements, (c) repayment of Indebtedness that is required to be repaid in connection with such Asset Sale, (d) any portion of cash proceeds which the Company determines in good faith should be reserved for post-closing adjustments, it being understood and agreed that on the day that all such post-closing adjustments have been determined, the amount (if any) by which the reserved amount in respect of such Asset Sale exceeds the actual post-closing adjustments payable by the Company or any of its Subsidiaries shall constitute Net Cash Proceeds on such date. "Obligations" means all obligations for principal, premium, interest, penalties, fees, indemnifications, reimbursements, damages and other liabilities payable under the documentation governing any Indebtedness, without duplication. "Permitted Domestic Subsidiary Preferred Stock" means any series of Preferred Stock of a domestic Restricted Subsidiary of the Company that constitutes Qualified Capital Stock and has a fixed dividend rate, the liquidation value of all series of which, when combined with the aggregate amount of Indebtedness of the Company and its Restricted Subsidiaries incurred pursuant to clause (xvi) of the definition of Permitted Indebtedness, does not exceed $37.5 million; provided that such amount shall increase to $75.0 million upon consummation of an Initial Public Offering. "Permitted Foreign Subsidiary Preferred Stock" means any series of Preferred Stock of a foreign Restricted Subsidiary of the Company that constitutes Qualified Capital Stock and has a fixed dividend rate, the liquidation value of all series of which, when combined with the aggregate amount of Indebtedness of foreign Restricted Subsidiaries of the Company incurred pursuant to clause (iii) of the definition of Permitted Indebtedness, does not exceed $35.0 million; provided that such amount shall increase to $50.0 million upon consummation of an Initial Public Offering. "Permitted Indebtedness" means, without duplication, (i) the Senior Subordinated Notes, (ii) Indebtedness incurred pursuant to the Bank Credit Agreement in an aggregate principal amount at any time outstanding not to exceed $585.0 million less the aggregate amount of Indebtedness of Securitization Entities in Qualified Securitization Transactions (other than Qualified Securitization Transactions involving equipment and related assets); provided that the amount of such reduction shall not exceed $50.0 million, (A) less the amount of all mandatory principal payments actually made by the Company in respect of term loans thereunder (excluding any such payments to the extent refinanced at the time of payment under a replaced Bank Credit Agreement) and (B) reduced by any required permanent repayments (which are accompanied by a corresponding permanent commitment reduction) thereunder; provided that the amount of Indebtedness permitted to be incurred pursuant to the Bank Credit Agreement in accordance with this clause (ii) shall be in addition to any Indebtedness permitted to be incurred pursuant to the Bank Credit Agreement in reliance on, and in accordance with, clauses (x) and (xvi) of this definition, (iii) Indebtedness of foreign Restricted Subsidiaries of the Company, which 92 together with the aggregate liquidation value of all outstanding series of Permitted Foreign Subsidiary Preferred Stock, does not exceed $35.0 million; provided that such amount shall increase to $50.0 million upon consummation of an Initial Public Offering, (iv) other Indebtedness of the Company and its Subsidiaries outstanding on the Issue Date reduced by the amount of any scheduled amortization payments or mandatory prepayments when actually paid or permanent reductions thereon, (v) Interest Swap Obligations of the Company or any of its Subsidiaries covering Indebtedness of the Company or any of its Subsidiaries; provided that any Indebtedness to which any such Interest Swap Obligations correspond is otherwise permitted to be incurred under the Indenture; provided, further, that such Interest Swap Obligations are entered into, in the judgment of the Company, to protect the Company from fluctuation in interest rates on their respective outstanding Indebtedness, (vi) Indebtedness under Currency Agreements, (vii) intercompany Indebtedness owed by the Company to any Wholly Owned Restricted Subsidiary of the Company or by any Restricted Subsidiary of the Company to the Company or any Wholly Owned Restricted Subsidiary of the Company, (viii) Acquired Indebtedness to the extent the Company could have incurred such Indebtedness in accordance with the "Limitation on Incurrence of Additional Indebtedness" covenant on the date such Indebtedness became Acquired Indebtedness, (ix) guarantees by the Company and its Wholly Owned Restricted Subsidiaries of each other's Indebtedness; provided that such Indebtedness is permitted to be incurred under the Indenture, including, with respect to guarantees by Wholly Owned Restricted Subsidiaries of the Company, the "Limitation on Guarantees by Subsidiaries" covenant, (x) Indebtedness (including Capitalized Lease Obligations) incurred by the Company or any of its Restricted Subsidiaries to finance the purchase, lease or improvement of property (real or personal) or equipment (whether through the direct purchase of assets or the Capital Stock of any Person owning such assets) in an aggregate principal amount outstanding not to exceed 5% of Total Assets at the time of any incurrence thereof (including any Refinancing Indebtedness with respect thereto) (which amount may, but need not, be incurred in whole or in part under the Bank Credit Agreement), (xi) Indebtedness incurred by the Company or any of its Restricted Subsidiaries constituting reimbursement obligations with respect to letters of credit issued in the ordinary course of business, including, without limitation, letters of credit in respect of workers' compensation claims or self- insurance, or other Indebtedness with respect to reimbursement type obligations regarding workers' compensation claims, (xii) Indebtedness arising from agreements of the Company or a Restricted Subsidiary of the Company providing for indemnification, adjustment of purchase price, earn out or other similar obligations, in each case, incurred or assumed in connection with the disposition of any business, assets or a Restricted Subsidiary of the Company, other than guarantees of Indebtedness incurred by any Person acquiring all or any portion of such business, assets or Restricted Subsidiary for the purpose of financing such acquisition; provided that the maximum assumable liability in respect of all such Indebtedness shall at no time exceed the gross proceeds actually received by the Company and its Restricted Subsidiaries in connection with such disposition, (xiii) obligations in respect of performance and surety bonds and completion guarantees provided by the Company or any Restricted Subsidiary of the Company in the ordinary course of business, (xiv) any refinancing, modification, replacement, renewal, restatement, refunding, deferral, extension, substitution, supplement, reissuance or resale of existing or future Indebtedness, including any additional Indebtedness incurred to pay interest or premiums required by the instruments governing such existing or future Indebtedness as in effect at the time of issuance thereof ("Required Premiums") and fees in connection therewith ("Refinancing Indebtedness"); provided that any such event shall not (1) result in an increase in the aggregate principal amount of Permitted Indebtedness (except to the extent such increase is a result of a simultaneous incurrence of additional Indebtedness (A) to pay Required Premiums and related fees or (B) otherwise permitted to be incurred under the Indenture) of the Company and its Subsidiaries and (2) create Indebtedness with a Weighted Average Life to Maturity at the time such Indebtedness is incurred that is less than the Weighted Average Life to Maturity at such time of the Indebtedness being refinanced, modified, replaced, renewed, restated, refunded, deferred, extended, substituted, supplemented, reissued or resold (except that this subclause (2) will not apply in the event the Indebtedness being refinanced, modified, replaced, renewed, restated, refunded, deferred, extended, substituted, supplemented, reissued or resold was originally incurred in reliance upon clauses (vii) or (xvi) of this definition), (xv) the incurrence by a Securitization Entity of Indebtedness in a Qualified Securitization Transaction that is not recourse to the Company or any Subsidiary of the Company (except for Standard Securitization Undertakings), and (xvi) additional Indebtedness of the Company and its Restricted Subsidiaries in an aggregate principal amount, which together with the aggregate liquidation value of all 93 outstanding series of Permitted Domestic Subsidiary Preferred Stock, does not exceed $37.5 million at any one time outstanding (which amount, in the case of Indebtedness, may, but need not, be incurred in whole or in part under the Bank Credit Agreement); provided that such amount shall increase to $75.0 million upon consummation of an Initial Public Offering. "Permitted Investments" means (i) Investments by the Company or any Restricted Subsidiary of the Company in any Wholly Owned Restricted Subsidiary of the Company (whether existing on the Issue Date or created thereafter) or in any other Person (including by means of any transfer of cash or other property) if as a result of such Investment such Person shall become a Wholly Owned Restricted Subsidiary of the Company and Investments in the Company by any Restricted Subsidiary of the Company, (ii) cash and Cash Equivalents, (iii) Investments existing on the Issue Date, (iv) loans and advances to employees and officers of the Company and its Restricted Subsidiaries in the ordinary course of business, (v) accounts receivable created or acquired in the ordinary course of business, (vi) Currency Agreements and Interest Swap Obligations entered into in the ordinary course of the Company's or its Restricted Subsidiaries' businesses and otherwise in compliance with the Indenture, (vii) Investments in Unrestricted Subsidiaries in an amount at any one time outstanding not to exceed $25.0 million; provided that such amount shall increase to $50.0 million upon consummation of an Initial Public Offering, (viii) Investments in securities of trade creditors or customers received pursuant to any plan of reorganization or similar arrangement upon the bankruptcy or insolvency of such trade creditors or customers, (ix) guarantees (A) by the Company of Indebtedness otherwise permitted to be incurred by Restricted Subsidiaries of the Company under the Indenture or (B) permitted by the "Limitation on Guarantees by Subsidiaries" covenant, (x) additional Investments having an aggregate fair market value, taken together with all other Investments made pursuant to this clause (x) that are at that time outstanding, not to exceed 5% of Total Assets at the time of such Investment (with the fair market value of each Investment being measured at the time made and without giving effect to subsequent changes in value), (xi) any Investment by the Company or a Wholly Owned Subsidiary of the Company in a Securitization Entity or any Investment by a Securitization Entity in any other Person in connection with a Qualified Securitization Transaction; provided that any Investment in a Securitization Entity is in the form of a Purchase Money Note or an equity interest, (xii) any transaction to the extent it constitutes an Investment that is permitted by, and made in accordance with, clause (b) of the "Limitations on Transactions with Affiliates" covenant (other than transactions described in clause (v) of such clause (b)), (xiii) Investments the payment for which consists exclusively of Qualified Capital Stock of the Company and (xiv) Investments received by the Company or its Restricted Subsidiaries as consideration for asset sales, including Asset Sales; provided in the case of an Asset Sale, such Asset Sale is effected in compliance with the "Limitation on Asset Sales" covenant. "Permitted Liens" means the following types of Liens: (i) Liens for taxes, assessments or governmental charges or claims either (a) not delinquent or (b) contested in good faith by appropriate proceedings and as to which the Company or its Restricted Subsidiaries shall have set aside on its books such reserves as may be required pursuant to GAAP; (ii) statutory Liens of landlords and Liens of carriers, warehousemen, mechanics, suppliers, materialmen, repairmen and other Liens imposed by law incurred in the ordinary course of business for sums not yet delinquent or being contested in good faith, if such reserve or other appropriate provision, if any, as shall be required by GAAP shall have been made in respect thereof; (iii) Liens incurred or deposits made in the ordinary course of business in connection with workers' compensation, unemployment insurance and other types of social security, including any Lien securing letters of credit issued in the ordinary course of business consistent with past practice in connection therewith, or to secure the performance of tenders, statutory obligations, surety and appeal bonds, bids, leases, government contracts, performance and return-of-money bonds and other similar obligations (exclusive of obligations for the payment of borrowed money); (iv) judgment Liens not giving rise to an Event of Default; 94 (v) easements, rights-of-way, zoning restrictions and other similar charges or encumbrances in respect of real property not interfering in any material respect with the ordinary conduct of the business of the Company or any of its Restricted Subsidiaries; (vi) any interest or title of a lessor under any Capitalized Lease Obligation; (vii) purchase money Liens to finance property or assets of the Company or any Restricted Subsidiary of the Company acquired in the ordinary course of business; provided, however, that (A) the related purchase money Indebtedness shall not exceed the cost of such property or assets and shall not be secured by any property or assets of the Company or any Restricted Subsidiary of the Company other than the property and assets so acquired and (B) the Lien securing such Indebtedness shall be created within 90 days of such acquisition; (viii) Liens upon specific items of inventory or other goods and proceeds of any Person securing such Person's obligations in respect of bankers' acceptances issued or created for the account of such Person to facilitate the purchase, shipment, or storage of such inventory or other goods; (ix) Liens securing reimbursement obligations with respect to commercial letters of credit which encumber documents and other property relating to such letters of credit and products and proceeds thereof; (x) Liens encumbering deposits made to secure obligations arising from statutory, regulatory, contractual, or warranty requirements of the Company or any of its Restricted Subsidiaries, including rights of offset and set- off; (xi) Liens securing Interest Swap Obligations which Interest Swap Obligations relate to Indebtedness that is otherwise permitted under the Indenture; (xii) Liens securing Indebtedness under Currency Agreements; (xiii) Liens securing Indebtedness of foreign Restricted Subsidiaries of the Company incurred in reliance on clause (iii) of the definition of Permitted Indebtedness; (xiv) Liens securing Acquired Indebtedness incurred in reliance on clause (viii) of the definition of Permitted Indebtedness; (xv) Liens incurred in the ordinary course of business of the Company or any Restricted Subsidiary with respect to obligations that do not in the aggregate exceed $10.0 million at any one time outstanding; (xvi) Liens on assets transferred to a Securitization Entity or on assets of a Securitization Entity, in either case incurred in connection with a Qualified Securitization Transaction; (xvii) leases or subleases granted to others that do not materially interfere with the ordinary course of business of the Company and its Restricted Subsidiaries; (xviii) Liens arising from filing Uniform Commercial Code financing statements regarding leases; (xix) Liens in favor of customs and revenue authorities arising as a matter of law to secure payment of custom duties in connection with the importation of goods; and (xx) Liens existing on the Issue Date, together with any Liens securing Indebtedness incurred in reliance on clause (xiv) of the definition of Permitted Indebtedness in order to refinance the Indebtedness secured by Liens existing on the Issue Date; provided that the Liens securing the refinancing Indebtedness shall not extend to property other than that pledged under the Liens securing the Indebtedness being refinanced. "Person" means an individual, partnership, corporation, unincorporated organization, trust or joint venture, or a governmental agency or political subdivision thereof. 95 "Preferred Stock" of any Person means any Capital Stock of such Person that has preferential rights to any other Capital Stock of such Person with respect to dividends or redemptions or upon liquidation. "Principals" means Bain Capital and GS Capital. "Productive Assets" means assets (including Capital Stock) of a kind used or usable in the businesses of the Company and its Restricted Subsidiaries permitted by the covenant entitled "Conduct of Business." "Purchase Money Note" means a promissory note of a Securitization Entity evidencing a line of credit, which may be irrevocable, from the Company or any Subsidiary of the Company in connection with a Qualified Securitization Transaction to a Securitization Entity, which note shall be repaid from cash available to the Securitization Entity, other than amounts required to be established as reserves pursuant to agreements, amounts paid to investors in respect of interest, principal and other amounts owing to such investors and amounts paid in connection with the purchase of newly generated receivables or newly acquired equipment. "Qualified Capital Stock" means any stock that is not Disqualified Capital Stock. "Qualified Securitization Transaction" means any transaction or series of transactions that may be entered into by the Company or any of its Subsidiaries pursuant to which the Company or any or its Subsidiaries may sell, convey or otherwise transfer to (a) a Securitization Entity (in the case of a transfer by the Company or any of its Subsidiaries) and (b) any other Person (in the case of a transfer by a Securitization Entity), or may grant a security interest in, any accounts receivable or equipment (whether now existing or arising or acquired in the future) of the Company or any of its Subsidiaries, and any assets related thereto including, without limitation, all collateral securing such accounts receivable and equipment, all contracts and contract rights and all guarantees or other obligations in respect of such accounts receivable and equipment, proceeds of such accounts receivable and equipment and other assets (including contract rights) which are customarily transferred or in respect of which security interests are customarily granted in connection with asset securitization transactions involving accounts receivable and equipment. "Related Party" means, with respect to Bain Capital, any Bain Related Party and with respect to GS Capital, any GS Capital Related Party. "Representative" means the indenture trustee or other trustee, agent or representative in respect of any Designated Senior Debt; provided that if, and for so long as, any Designated Senior Debt lacks such a representative, then the Representative for such Designated Senior Debt shall at all times constitute the holders of a majority in outstanding principal amount of such Designated Senior Debt in respect of any Designated Senior Debt. "Restricted Investment" means an Investment other than a Permitted Investment. "Restricted Subsidiary" of any Person means any Subsidiary of such Person which at the time of determination is not an Unrestricted Subsidiary. "S&P" means Standard & Poor's Corporation and its successors. "Sale and Leaseback Transaction" means any direct or indirect arrangement with any Person or to which any such Person is a party, providing for the leasing to the Company or a Restricted Subsidiary of any property, whether owned by the Company or any Restricted Subsidiary at the Issue Date or later acquired, which has been or is to be sold or transferred by the Company or such Restricted Subsidiary to such Person or to any other Person from whom funds have been or are to be advanced by such Person on the security of such Property. "Securitization Entity" means a Wholly Owned Subsidiary of the Company (or another Person in which the Company or any Subsidiary of the Company makes an Investment and to which the Company or any Subsidiary of the Company transfers accounts receivable or equipment and related assets) which engages in no 96 activities other than in connection with the financing of accounts receivable or equipment and which is designated by the Board of Directors of the Company (as provided below) as a Securitization Entity (a) no portion of the Indebtedness or any other Obligations (contingent or otherwise) of which (i) is guaranteed by the Company or any Subsidiary of the Company (excluding guarantees of Obligations (other than the principal of, and interest on, Indebtedness)) pursuant to Standard Securitization Undertakings, (ii) is recourse to or obligates the Company or any Subsidiary of the Company in any way other than pursuant to Standard Securitization Undertakings or (iii) subjects any property or asset of the Company or any Subsidiary of the Company, directly or indirectly, contingently or otherwise, to the satisfaction thereof, other than pursuant to Standard Securitization Undertakings, (b) with which neither the Company nor any Subsidiary of the Company has any material contract, agreement, arrangement or understanding other than on terms no less favorable to the Company or such Subsidiary than those that might be obtained at the time from Persons that are not Affiliates of the Company, other than fees payable in the ordinary course of business in connection with servicing receivables of such entity, and (c) to which neither the Company nor any Subsidiary of the Company has any obligation to maintain or preserve such entity's financial condition or cause such entity to achieve certain levels of operating results. Any such designation by the Board of Directors of the Company shall be evidenced to the Trustee by filing with the Trustee a certified copy of the resolution of the Board of Directors of the Company giving effect to such designation and an officers' certificate certifying that such designation complied with the foregoing conditions. "Senior Debt" means the principal of, premium, if any, and interest (including any interest accruing subsequent to the filing of a petition of bankruptcy at the rate provided for in the documentation with respect thereto, whether or not such interest is an allowed claim under applicable law) on any Indebtedness of the Company, whether outstanding on the Issue Date or thereafter created, incurred or assumed, unless, in the case of any particular Indebtedness, the instrument creating or evidencing the same or pursuant to which the same is outstanding expressly provides that such Indebtedness shall not be senior in right of payment to the Senior Subordinated Notes. Without limiting the generality of the foregoing, "Senior Debt" shall also include the principal of, premium, if any, interest (including any interest accruing subsequent to the filing of a petition of bankruptcy at the rate provided for in the documentation with respect thereto, whether or not such interest is an allowed claim under applicable law) on, and all other amounts owing in respect of, (x) all monetary obligations (including guarantees thereof) of every nature of the Company under the Bank Credit Agreement, including, without limitation, obligations to pay principal and interest, reimbursement obligations under letters of credit, fees, expenses and indemnities, (y) all Interest Swap Obligations (including guarantees thereof) and (z) all obligations (including guarantees thereof) under Currency Agreements, in each case whether outstanding on the Issue Date or thereafter incurred. Notwithstanding the foregoing, Senior Debt shall not include (i) any Indebtedness, if 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, (ii) any Indebtedness of the Company to a Subsidiary of the Company, (iii) Indebtedness to, or guaranteed on behalf of, any shareholder, director, officer or employee of the Company or any Subsidiary of the Company (including, without limitation, amounts owed for compensation), (iv) Indebtedness to trade creditors and other amounts incurred in connection with obtaining goods, materials or services, (v) Indebtedness represented by Disqualified Capital Stock, (vi) any liability for federal, state, local or other taxes owed or owing by the Company, (vii) that portion of any Indebtedness incurred in violation of the Indenture provisions set forth under "Limitation on Incurrence of Additional Indebtedness" (but, as to any such obligation, no such violation shall be deemed to exist for purposes of this clause (vii) if the holder(s) of such obligation or their representative and the Trustee shall have received an officers' certificate of the Company to the effect that the incurrence of such Indebtedness does not (or, in the case of revolving credit Indebtedness, that the incurrence of the entire committed amount thereof at the date on which the initial borrowing thereunder is made) would not violate such provisions of the Indenture) and (viii) any Indebtedness which is, by its express terms, subordinated in right of payment to any other Indebtedness of the Company, including, without limitation, the Existing Notes. "Significant Subsidiary" means, as of any date of determination, for any Person, each Subsidiary of such Person which (i) for the most recent fiscal year of such Person (on or prior to December 31, 1996, the fiscal period beginning on the Issue Date and ending on the most recently completed fiscal quarter of such Person) 97 accounted for more than 10% of consolidated revenues or consolidated net income of such Person or (ii) as at the end of such fiscal year (on or prior to December 31, 1996, the fiscal period beginning on the Issue Date and ending on the most recently completed fiscal quarter of such Person), was the owner of more than 10% of the consolidated assets of such Person. "Standard Securitization Undertakings" means representations, warranties, covenants and indemnities entered into by the Company or any Subsidiary of the Company which are reasonably customary in an accounts receivable or equipment transaction. "Subsidiary", with respect to any Person, means (i) any corporation of which the outstanding Capital Stock having at least a majority of the votes entitled to be cast in the election of directors under ordinary circumstances shall at the time be owned, directly or indirectly, by such Person or (ii) any other Person of which at least a majority of the voting interest under ordinary circumstances is at the time, directly or indirectly, owned by such Person. "Tax Allocation Agreement" means the tax allocation agreement between the Company and Holdings as in effect on the Issue Date. "Total Assets" means the total consolidated assets of the Company and its Restricted Subsidiaries, as set forth on the Company's most recent consolidated balance sheet. "Unrestricted Subsidiary" of any Person means (i) any Subsidiary of such Person that at the time of determination shall be or continue to be designated an Unrestricted Subsidiary by the Board of Directors of such Person in the manner provided below and (ii) any Subsidiary of an Unrestricted Subsidiary. The Board of Directors may designate any Subsidiary (including any newly acquired or newly formed Subsidiary) to be an Unrestricted Subsidiary unless such Subsidiary owns any Capital Stock of, or owns or holds any Lien on any property of, the Company or any other Subsidiary of the Company that is not a Subsidiary of the Subsidiary to be so designated; provided that (x) the Company certifies to the Trustee that such designation complies with the "Limitation on Restricted Payments" covenant and (y) each Subsidiary to be so designated and each of its Subsidiaries has not at the time of designation, and does not thereafter, create, incur, issue, assume, guarantee or otherwise become directly or indirectly liable with respect to any Indebtedness pursuant to which the lender has recourse to any of the assets of the Company or any of its Restricted Subsidiaries. The Board of Directors may designate any Unrestricted Subsidiary to be a Restricted Subsidiary only if (x) immediately after giving effect to such designation, the Company is able to incur at least $1.00 of additional Indebtedness (other than Permitted Indebtedness) in compliance with the "Limitation on Incurrence of Additional Indebtedness" covenant and (y) immediately before and immediately after giving effect to such designation, no Default or Event of Default shall have occurred and be continuing. Any such designation by the Board of Directors shall be evidenced to the Trustee by promptly filing with the Trustee a copy of the resolution giving effect to such designation and an officers' certificate certifying that such designation complied with the foregoing provisions. "Weighted Average Life to Maturity" means, when applied to any Indebtedness at any date, the number of years obtained by dividing (a) the then outstanding aggregate principal amount of such Indebtedness into (b) the sum of the total of the products obtained by multiplying (i) the amount of each then remaining installment, sinking fund, serial maturity or other required payment of principal, including payment at final maturity, in respect thereof, by (ii) the number of years (calculated to the nearest one-twelfth) which will elapse between such date and the making of such payment. "Wholly Owned Restricted Subsidiary" of any Person means any Restricted Subsidiary of such Person of which all the outstanding voting securities (other than directors' qualifying shares or an immaterial amount of shares required to be owned by other Persons pursuant to applicable law) are owned by such Person or any Wholly Owned Restricted Subsidiary of such Person. 98 BOOK-ENTRY; DELIVERY AND FORM The Certificates representing the Exchange Notes will be issued in fully registered form, without coupons and will be deposited with, or on behalf of, the Depositary, and registered in the name of Cede & Co., as the Depositary's nominee in the form of a global Exchange Note certificate (the "Global Certificate") or will remain in the custody of the Trustee. Except as set forth below, the Global Certificate may be transferred, in whole and not in part, only by the Depositary to its nominee or by its nominee to such Depositary or another nominee of the Depositary or by the Depositary or its nominee to a successor of the Depositary or a nominee of such successor. The Company understands that the Depositary is a limited-purpose trust company which was created to hold securities for its participating organizations (the "Participants") and to facilitate the clearance and settlement of transactions in such securities between Participants through electronic book-entry changes in accounts of its Participants. Participants include securities brokers and dealers (including the Initial Purchasers), banks, trust companies, clearing corporations and certain other organizations. Access to the Depositary's book-entry system is also available to others, such as banks, brokers, dealers and trust companies that clear through or maintain a custodial relationship with a Participant, either directly or indirectly ("indirect participants"). Persons who are not participants may beneficially own securities held by the Depositary through Participants or indirect participants ("Beneficial Owners"). Pursuant to procedures established by the Depositary (i) upon deposit of the Global Certificate, the Depositary will credit the accounts of Participants designated by the Initial Purchasers with portions of the principal amount of the Global Certificate and (ii) ownership of the Senior Subordinated Notes will be shown on, and the transfer of ownership thereof will be effected only through, records maintained by the Depositary (with respect to the interest on the Depositary's participants), the Depositary's Participants and the Depositary's indirect participants. The laws of some states require that certain persons take physical delivery in definitive form of securities that they own. Consequently, the ability to transfer interests in the Global Certificate will be limited to such extent. So long as the nominee of the Depositary is the registered owner of the Global Certificate, such nominee will be considered the sole owner or holder of the Senior Subordinated Notes for all purposes under the Indenture. Except as provided below, the owners of interests in the Global Certificate will not be entitled to have Senior Subordinated Notes registered in their names, will not receive or be entitled to receive physical delivery of Senior Subordinated Notes in definitive form and will not be considered the owners or holders thereof under the Indenture. Accordingly, each person owning a beneficial interest in the Global Certificate must rely on the procedures of the Depositary and, if such person is not a participant, on the procedures of the Participant through which such person owns its interest, to exercise any rights of a Holder under the Indenture. The Depositary has represented to the Company that, in the event that the Company requests any action of Holders or that an owner of a beneficial interest in such a Global Certificate desires to give or take any action which a Holder is entitled to give or take under the Indenture, the Depositary would authorize the Participants holding the relevant beneficial interests to give or take such action, and such Participants would authorize Beneficial Owners owning through such Participants to give or take such action or would otherwise act upon the instructions of Beneficial Owners. Conveyance of notices and other communications by the Depositary to participants, by Participants to indirect participants, and by Participants and indirect participants to Beneficial Owners will be governed by arrangements among them, subject to any statutory or regulatory requirements as may be in effect from time to time. Neither the Company, the Trustee nor any paying agent will have any responsibility or liability for any aspect of the records relating to or payments made on account of interests in the Global Certificate or for maintaining, supervising or reviewing any records relating to such interests. 99 Principal and interest payments on the Global Certificate registered in the name of the Depositary's nominee will be made by the Company or through a paying agent to the Depositary's nominee as the registered owner of the Global Certificate. Under the terms of the Indenture, the Company and the Trustee will treat the persons in whose names the Senior Subordinated Notes are registered as the owners of such Senior Subordinated Notes for the purpose of receiving payments of principal and interest on such Senior Subordinated Notes and for all other purposes whatsoever. Therefore, neither the Company, the Trustee nor any paying agent has any direct responsibility or liability for the payment of principal or interest on the Senior Subordinated Notes to owners of interests in the Global Certificate. The Depositary has advised the Company and the Trustee that its present practice is, upon receipt of any payment of principal or interest, to credit immediately the account of the Participants with payments in amounts proportionate to their respective holdings in principal amount of interests in the Global Certificate as shown on the records of the Depositary. Payments by Participants and indirect participants to owners of interests in the Global Certificate will be governed by standing instructions and customary practices, as is now the case with securities held for the accounts of customers in bearer form or registered in "street name," and will be the responsibility of such participants or indirect participants. If the Depositary is at any time unwilling or unable to continue as depositary and a successor depositary is not appointed by the Company within 90 calendar days, the Company will issue Senior Subordinated Notes in certificated form in exchange for the Global Certificate. In addition, the Company may at any time determine not to have the Senior Subordinated Notes represented by a Global Certificate, and, in such event, will issue Senior Subordinated Notes in certificated form in exchange for the Global Certificate. In either instance, an owner of an interest in the Global Certificate would be entitled to physical delivery of such Senior Subordinated Notes in certificated form. Senior Subordinated Notes so issued in certificated form will be issued in denominations of $1,000 and integral multiples thereof and will be issued in registered form only. Neither the Company nor the Trustee shall be liable for any delay by the Depositary or its nominee in identifying the beneficial owners or the related Senior Subordinated Notes, and each such person may conclusively rely on, and shall be protected in relying on, instructions from the Depositary or its nominee for all purposes (including with respect to the registration and delivery, and the respective principal amounts, of the Senior Subordinated Notes to be issued). 100 THE EXCHANGE OFFER PURPOSE AND EFFECT OF THE EXCHANGE OFFER The Notes were originally sold by the Company on May 7, 1996 to the Initial Purchaser pursuant to the Purchase Agreement. The Initial Purchaser subsequently resold the Notes to qualified institutional buyers in reliance on Rule 144A under the Securities Act and to a limited number of institutional accredited investors that agreed to comply with certain transfer restrictions and other conditions. As a condition to the Purchase Agreement, the Company entered into the Registration Rights Agreement with the Initial Purchaser (the "Registration Rights Agreement") pursuant to which the Company has agreed, for the benefit of the holders of the Notes, at the Company's cost, to use its best efforts to (i) file the Exchange Offer Registration Statement within 150 days after the date of the original issue of the Notes with the Commission with respect to the Exchange Offer for the Exchange Notes, and (ii) cause the Exchange Offer Registration Statement to be declared effective under the Securities Act within 225 days after the date of original issuance of the Notes. Upon the Exchange Offer Registration Statement being declared effective, the Company will offer the Exchange Notes in exchange for surrender of the Notes. The Company will keep the Exchange Offer open for not less than 20 calendar days (or longer if required by applicable law) after the date on which notice of the Exchange Offer is mailed to the holders of the Notes. For each Note surrendered to the Company pursuant to the Exchange Offer, the holder of such Note will receive an Exchange Note having a principal amount equal to that of the surrendered Note. Interest on each Exchange Note will accrue from the date of its original issue. Under existing interpretations of the staff of the Commission contained in several no-action letters to third parties, the Exchange Notes would in general be freely tradeable after the Exchange Offer without further registration under the Securities Act. However, any purchaser of Notes who is an "affiliate" of the Company or who intends to participate in the Exchange Offer for the purpose of distributing the Exchange Notes (i) will not be able to rely on the interpretation of the staff of the Commission, (ii) will not be able to tender its Notes in the Exchange Offer and (iii) must comply with the registration and prospectus delivery requirements of the Securities Act in connection with any sale or transfer of the Notes, unless such sale or transfer is made pursuant to an exemption from such requirements. Each holder of the Notes (other than certain specified holders) who wishes to exchange the Notes for Exchange Notes in the Exchange Offer will be required to represent in the Letter of Transmittal that (i) it is not an affiliate of the Company, (ii) the Exchange Notes to be received by it were acquired in the ordinary course of its business and (iii) at the time of commencement of the Exchange Offer, it has no arrangement with any person to participate in the distribution (within the meaning of the Securities Act) of the Exchange Notes. In addition, in connection with any resales of Exchange Notes, any Participating Broker-Dealer who acquired the Notes for its own account as a result of market-making or other trading activities must deliver a prospectus meeting the requirements of the Securities Act. The Commission has taken the position that Participating Broker-Dealers may fulfill their prospectus delivery requirements with respect to the Exchange Notes (other than a resale of an unsold allotment from the original sale of the Notes) with the prospectus contained in the Exchange Offer Registration Statement. Under the Registration Rights Agreement, the Company is required to allow Participating Broker-Dealers and other persons, if any, subject to similar prospectus delivery requirements to use the prospectus contained in the Exchange Offer Registration Statement in connection with the resale of such Exchange Notes. In the event that changes in the law or the applicable interpretations of the staff of the Commission do not permit the Company to effect such an Exchange Offer, or if for any other reason the Exchange Offer is not consummated within 190 days after the original issue date of the Notes, or if any holder of the Notes (other than an "affiliate" of the Company or the Initial Purchaser) is not eligible to participate in the Exchange Offer, or upon the request of the Initial Purchaser under certain circumstances, the Company will, at its cost, (a) as promptly as practicable, file the Shelf Registration Statement covering resales of the Notes, (b) use its best efforts to cause the Shelf Registration Statement to be declared effective under the Securities Act and (c) use its best efforts to keep effective the Shelf Registration Statement until the earlier of three years after its effective date and such time as all of the applicable Notes have been sold thereunder. The Company will, in the event of the 101 filing of the Shelf Registration Statement, provide to each applicable holder of the Notes copies of the prospectus which is a part of the Shelf Registration Statement, notify each such holder when the Shelf Registration Statement has become effective and take certain other actions as are required to permit unrestricted resales of the Notes. A holder of Notes that sells such Notes pursuant to the Shelf Registration Statement generally will be required to be named as a selling securityholder in the related prospectus and to deliver a prospectus to purchasers, will be subject to certain of the civil liability provisions under the Securities Act in connection with such sales and will be bound by the provisions of the Registration Rights Agreement which are applicable to such a holder (including certain indemnification obligations). In addition, each holder of the Notes will be required to deliver information to be used in connection with the Shelf Registration Statement and to provide comments on the Shelf Registration Statement within the time periods set forth in the Registration Rights Agreement in order to have their Notes included in the Shelf Registration Statement and to benefit from the provisions set forth in the following paragraph. If the Company fails to comply with the above provisions or if such registration statement fails to become effective, then, as liquidated damages, additional interest (the "Additional Interest") shall become payable with respect to the Notes as follows: (i) if the Exchange Offer Registration Statement or Shelf Registration Statement is not filed within 150 days following the Issue Date, Additional Interest shall be accrued on the Notes over and above the stated interest at a rate of 0.50% per annum for the first 90 days immediately following the 151st day after the Issue Date, such Additional Interest rate increasing by an additional 0.50% per annum at the beginning of each subsequent 90-day period; (ii) if an Exchange Offer Registration Statement or Shelf Registration Statement is not declared effective within 225 days following the date on which such registration statement is required to be filed, then, commencing on the 226th after the Issue Date, Additional Interest shall be accrued on the Notes over and above the stated interest at a rate of 0.50% per annum for the first 90 days immediately following the 90th day after the Issue Date, such Additional Interest rate increasing by an additional 0.50% per annum at the beginning of each subsequent 90-day period; or (iii) if (A) the Company has not exchanged all Notes validly tendered in accordance with the terms of the Exchange Offer on or prior to 270 days after the Issue Date or (B) the Exchange Offer Registration Statement ceases to be effective at any time prior to the time that the Exchange Offer is consummated or (C) if applicable, the Shelf Registration Statement has been declared effective and such Shelf Registration Statement ceases to be effective at any time prior to the third anniversary of its effective date(unless all the Notes have been sold thereunder), then Additional Interest shall be accrued on the Notes over and above the stated interest at a rate of 0.50% per annum for the first 90 days commencing on (x) the 271st day after the Issue Date with respect to the Notes validly tendered and not exchanged by the Company, in the case of (A) above, or (y) the day the Exchange Offer Registration Statement ceases to be effective or usable for its intended purpose in the case of (B) above, or (z) the day such Shelf Registration Statement ceases to be effective in the case of (C) above, such Additional Interest rate increasing by an additional 0.50% per annum at the beginning of each subsequent 90-day period; provided however that the Additional Interest rate on the Notes may not exceed in the aggregate 1.0% per annum; and provided further that (1) upon the filing of the Exchange Offer Registration Statement or a Shelf Registration Statement (in the case of clause (i) above), (2) upon the effectiveness of the Exchange Offer Registration Statement or a Shelf Registration Statement (in the case of clause (ii) above), or (3) upon the exchange of Exchange Notes for all Notes tendered (in the case of clause (iii)(A) above), or upon the effectiveness of the Exchange Offer Registration Statement which has ceased to remain effective (in the case of clause (iii)(B) above), or upon the effectiveness of the Shelf Registration Statement which had ceased to remain effective (in the case of clause (iii)(C) above), Additional Interest on the Notes as a result of such clause (or the relevant subclause thereof), as the case may be, shall cease to accrue. Any amounts of Additional Interest due pursuant to clauses (i), (ii) or (iii) above will be payable in cash, on the same original interest payment dates as the Notes. The amount of Additional Interest will be determined by 102 multiplying the applicable Additional Interest rate by the principal amount of the Notes, multiplied by a fraction, the numerator of which is the number of days such Additional Interest rate was applicable during such period (determined on the basis of a 360-day year comprised on twelve 30-day months), and the denominator of which is 360. The summary herein of certain provisions of the Registration Rights Agreement does not purport to be complete and is subject to, and is qualified in its entirety by, all the provisions of the Registration Rights Agreement, a copy of which is filed as an exhibit to the Exchange Offer Registration Statement of which this Prospectus is a part. Following the consummation of the Exchange Offer, holders of the Notes who were eligible to participate in the Exchange Offer but who did not tender their Notes will not have any further registration rights and such Notes will continue to be subject to certain restrictions on transfer. Accordingly, the liquidity of the market for such Notes could be adversely affected. TERMS OF THE EXCHANGE OFFER Upon the terms and subject to the conditions set forth in this Prospectus and in the Letter of Transmittal, the Company will accept any and all Notes validly tendered and not withdrawn prior to 5:00 p.m., New York City time, on the Expiration Date. The Company will issue $1,000 principal amount of Exchange Notes in exchange for each $1,000 principal amount of outstanding Notes accepted in the Exchange Offer. Holders may tender some or all of their Notes pursuant to the Exchange Offer. However, Notes may be tendered only in integral multiples of $1,000. The form and terms of the Exchange Notes are the same as the form and terms of the Notes except that (i) the Exchange Notes bear a Series B designation and a different CUSIP Number from the Notes, (ii) the Exchange Notes have been registered under the Securities Act and hence will not bear legends restricting the transfer thereof and (iii) the holders of the Exchange Notes will not be entitled to certain rights under the Registration Rights Agreement, including the provisions providing for an increase in the interest rate on the Notes in certain circumstances relating to the timing of the Exchange Offer, all of which rights will terminate when the Exchange Offer is terminated. The Exchange Notes will evidence the same debt as the Notes and will be entitled to the benefits of the Indenture. As of the date of this Prospectus, $350,000,000 aggregate principal amount of Notes were outstanding. The Company has fixed the close of business on , 1996 as the record date for the Exchange Offer for purposes of determining the persons to whom this Prospectus and the Letter of Transmittal will be mailed initially. Holders of Notes do not have any appraisal or dissenters' rights under the General Corporation Law of Delaware or the Indenture in connection with the Exchange Offer. The Company intends to conduct the Exchange Offer in accordance with the applicable requirements of the Exchange Act and the rules and regulations of the Commission thereunder. The Company shall be deemed to have accepted validly tendered Notes when, as and if the Company has given oral or written notice thereof to the Exchange Agent. The Exchange Agent will act as agent for the tendering holders for the purpose of receiving the Exchange Notes from the Company. If any tendered Notes are not accepted for exchange because of an invalid tender, the occurrence of certain other events set forth herein or otherwise, the certificates for any such unaccepted Notes will be returned, without expense, to the tendering holder thereof as promptly as practicable after the Expiration Date. Holders who tender Notes in the Exchange Offer will not be required to pay brokerage commissions or fees or, subject to the instructions in the Letter of Transmittal, transfer taxes with respect to the exchange of Notes pursuant to the Exchange Offer. The Company will pay all charges and expenses, other than transfer taxes in certain circumstances, in connection with the Exchange Offer. See "--Fees and Expenses." 103 EXPIRATION DATE; EXTENSIONS; AMENDMENTS The term "Expiration Date" shall mean 5:00 p.m., New York City time, on , 1996, unless the Company, in its sole discretion, extends the Exchange Offer, in which case the term "Expiration Date" shall mean the latest date and time to which the Exchange Offer is extended. Notwithstanding the foregoing, the Company will not extend the Expiration Date beyond , 1996. In order to extend the Exchange Offer, the Company will notify the Exchange Agent of any extension by oral or written notice and will mail to the registered holders an announcement thereof, each prior to 9:00 a.m., New York City time, on the next business day after the previously scheduled expiration date. The Company reserves the right, in its sole discretion, (i) to delay accepting any Notes, to extend the Exchange Offer or to terminate the Exchange Offer if any of the conditions set forth below under "--Conditions" shall not have been satisfied, by giving oral or written notice of such delay, extension or termination to the Exchange Agent or (ii) to amend the terms of the Exchange Offer in any manner. Any such delay in acceptance, extension, termination or amendment will be followed as promptly as practicable by oral or written notice thereof to the registered holders. INTEREST ON THE EXCHANGE NOTES The Exchange Notes will bear interest from their date of issuance. Holders of Notes that are accepted for exchange will receive, in cash, accrued interest thereon to, but not including, the date of issuance of the Exchange Notes. Such interest will be paid with the first interest payment on the Exchange Notes on May 1, 1997. Interest on the Notes accepted for exchange will cease to accrue upon issuance of the Exchange Notes. Interest on the Exchange Notes is payable semi-annually on each May 1, and November 1, commencing on May 1, 1997. PROCEDURES FOR TENDERING Only a holder of Notes may tender such Notes in the Exchange Offer. To tender in the Exchange Offer, a holder must complete, sign and date the Letter of Transmittal, or a facsimile thereof, have the signatures thereon guaranteed if required by the Letter of Transmittal, and mail or otherwise deliver such Letter of Transmittal or such facsimile, together with the Notes and any other required documents, to the Exchange Agent prior to 5:00 p.m., New York City time, on the Expiration Date. To be tendered effectively, the Notes, Letter of Transmittal and other required documents must be completed and received by the Exchange Agent at the address set forth below under "Exchange Agent" prior to 5:00 p.m., New York City time, on the Expiration Date. Delivery of the Notes may be made by book-entry transfer in accordance with the procedures described below. Confirmation of such book-entry transfer must be received by the Exchange Agent prior to the Expiration Date. By executing the Letter of Transmittal, each holder will make to the Company the representations set forth above in the third paragraph under the heading "--Purpose and Effect of the Exchange Offer." The tender by a holder and the acceptance thereof by the Company will constitute agreement between such holder and the Company in accordance with the terms and subject to the conditions set forth herein and in the Letter of Transmittal. THE METHOD OF DELIVERY OF NOTES AND THE LETTER OF TRANSMITTAL AND ALL OTHER REQUIRED DOCUMENTS TO THE EXCHANGE AGENT IS AT THE ELECTION AND SOLE RISK OF THE HOLDER. AS AN ALTERNATIVE TO DELIVERY BY MAIL, HOLDERS MAY WISH TO CONSIDER OVERNIGHT OR HAND DELIVERY SERVICE. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ASSURE DELIVERY TO THE EXCHANGE AGENT BEFORE THE EXPIRATION DATE. NO LETTER OF TRANSMITTAL OR NOTES SHOULD BE SENT TO THE COMPANY. HOLDERS MAY REQUEST THEIR RESPECTIVE BROKERS, DEALERS, COMMERCIAL BANKS, TRUST COMPANIES OR NOMINEES TO EFFECT THE ABOVE TRANSACTIONS FOR SUCH HOLDERS. 104 Any beneficial owner whose Notes are registered in the name of a broker, dealer, commercial bank, trust company or other nominee and who wishes to tender should contact the registered holder promptly and instruct such registered holder to tender on such beneficial owner's behalf. See "Instruction to Registered Holder and/or Book-Entry Transfer Facility Participant from Owner" included with the Letter of Transmittal. Signatures on a Letter of Transmittal or a notice of withdrawal, as the case may be, must be guaranteed by an Eligible Institution (as defined below) unless the Notes tendered pursuant thereto are tendered (i) by a registered holder who has not completed the box entitled "Special Registration Instructions" or "Special Delivery Instructions" on the Letter of Transmittal or (ii) for the account of an Eligible Institution. In the event that signatures on a Letter of Transmittal or a notice of withdrawal, as the case may be, are required to be guaranteed, such guarantee must be by a member firm of the Medallion System (an "Eligible Institution"). If the Letter of Transmittal is signed by a person other than the registered holder of any Notes listed therein, such Notes must be endorsed or accompanied by a properly completed bond power, signed by such registered holder as such registered holder's name appears on such Notes with the signature thereon guaranteed by an Eligible Institution. If the Letter of Transmittal or any Notes or bond powers are signed by trustees, executors, administrators, guardians, attorneys-in-fact, offices of corporations or others acting in a fiduciary or representative capacity, such persons should so indicate when signing, and evidence satisfactory to the Company of their authority to so act must be submitted with the Letter of Transmittal. The Company understands that the Exchange Agent will make a request promptly after the date of this Prospectus to establish accounts with respect to the Notes at the book-entry transfer facility, The Depository Trust Company (the "Book-Entry Transfer Facility"), for the purpose of facilitating the Exchange Offer, and subject to the establishment thereof, any financial institution that is a participant in the Book-Entry Transfer Facility's system may make book-entry delivery of Notes by causing such Book-Entry Transfer Facility to transfer such Notes into the Exchange Agent's account with respect to the Notes in accordance with the Book-Entry Transfer Facility's procedures for such transfer. Although delivery of the Notes may be effected through book- entry transfer into the Exchange Agent's account at the Book-Entry Transfer Facility, an appropriate Letter of Transmittal properly completed and duly executed with any required signature guarantee and all other required documents must in each case be transmitted to and received or confirmed by the Exchange Agent at its address set forth below on or prior to the Expiration Date, or, if the guaranteed delivery procedures described below are complied with, within the time period provided under such procedures. Delivery of documents to the Book-Entry Transfer Facility does not constitute delivery to the Exchange Agent. All questions as to the validity, form, eligibility (including time of receipt), acceptance of tendered Notes and withdrawal of tendered Notes will be determined by the Company in its sole discretion, which determination will be final and binding. The Company reserves the absolute right to reject any and all Notes not properly tendered or any Notes the Company's acceptance of which would, in the opinion of counsel for the Company, be unlawful. The Company also reserves the right in its sole discretion to waive any defects, irregularities or conditions of tender as to particular Notes. The Company's interpretation of the terms and conditions of the Exchange Offer (including the instructions in the Letter of Transmittal) will be final and binding on all parties. Unless waived, any defects or irregularities in connection with tenders of Notes must be cured within such time as the Company shall determine. Although the Company intends, to notify holders of defects or irregularities with respect to tenders of Notes, neither the Company, the Exchange Agent nor any other person shall incur any liability for failure to give such notification. Tenders of Notes will not be deemed to have been made until such defects or irregularities have been cured or waived. Any Notes received by the Exchange Agent that are not properly tendered and as to which the defects or irregularities have not been cured or waived will be returned by the Exchange Agent to the tendering holders, unless otherwise provided in the Letter of Transmittal, as soon as practicable following the Expiration Date. 105 GUARANTEED DELIVERY PROCEDURES Holders who wish to tender their Notes and (i) whose Notes are not immediately available, (ii) who cannot deliver their Notes, the Letter of Transmittal or any other required documents to the Exchange Agent or (iii) who cannot complete the procedures for book-entry transfer, prior to the Expiration Date, may effect a tender if: (a) the tender is made through an Eligible Institution; (b) prior to the Expiration Date, the Exchange Agent receives from such Eligible Institution a properly completed and duly executed Notice of Guaranteed Delivery (by facsimile transmission, mail or hand delivery) setting forth the name and address of the holder, the certificate number(s) of such Notes and the principal amount of Notes tendered, stating that the tender is being made thereby and guaranteeing that, within five New York Stock Exchange trading days after the Expiration Date, the Letter of Transmittal (or facsimile thereof) together with the certificate(s) representing the Notes (or a confirmation of book-entry transfer of such Notes into the Exchange Agent's account at the Book-Entry Transfer Facility), and any other documents required by the Letter of Transmittal will be deposited by the Eligible Institution with the Exchange Agent; and (c) such properly completed and executed Letter of Transmittal (of facsimile thereof), as well as the certificate(s) representing all tendered Notes in proper form for transfer (or a confirmation of book-entry transfer of such Notes into the Exchange Agent's account at the Book-Entry Transfer Facility), and all other documents required by the Letter of Transmittal are received by the Exchange Agent upon five New York Stock Exchange trading days after the Expiration Date. Upon request to the Exchange Agent, a Notice of Guaranteed Delivery will be sent to holders who wish to tender their Notes according to the guaranteed delivery procedures set forth above. WITHDRAWAL OF TENDERS Except as otherwise provided herein, tenders of Notes may be withdrawn at any time prior to 5:00 p.m., New York City time, on the Expiration Date. To withdraw a tender of Notes in the Exchange Offer, a telegram, telex, letter or facsimile transmission notice of withdrawal must be received by the Exchange Agent at its address set forth herein prior to 5:00 p.m., New York City time, on the Expiration Date. Any such notice of withdrawal must (i) specify the name of the person having deposited the Notes to be withdrawn (the "Depositor"), (ii) identify the Notes to be withdrawn (including the certificate number(s) and principal amount of such Notes, or, in the case of Notes transferred by book-entry transfer, the name and number of the account at the Book-Entry Transfer Facility to be credited), (iii) be signed by the holder in the same manner as the original signature on the Letter of Transmittal by which such Notes were tendered (including any required signature guarantees) or be accompanied by documents of transfer sufficient to have the Trustee with respect to the Notes register the transfer of such Notes into the name of the person withdrawing the tender and (iv) specify the name in which any such Notes are to be registered, if different from that of the Depositor. All questions as to the validity, form and eligibility (including time of receipt) of such notices will be determined by the Company, whose determination shall be final and binding on all parties. Any Notes so withdrawn will be deemed not to have been validly tendered for purposes of the Exchange Offer and no Exchange Notes will be issued with respect thereto unless the Notes so withdrawn are validly retendered. Any Notes which have been tendered but which are not accepted for exchange will be returned to the holder thereof without cost to such holder as soon as practicable after withdrawal, rejection of tender or termination of the Exchange Offer. Properly withdrawn Notes may be retendered by following one of the procedures described above under "--Procedures for Tendering" at any time prior to the Expiration Date. 106 CONDITIONS Notwithstanding any other term of the Exchange Offer, the Company shall not be required to accept for exchange, or exchange Exchange Notes for, any Notes, and may terminate or amend the Exchange Offer as provided herein before the acceptance of such Notes, if: (a) any action or proceeding is instituted or threatened in any court or by or before any governmental agency with respect to the Exchange Offer which, in the sole judgment of the Company, might materially impair the ability of the Company to proceed with the Exchange Offer or any material adverse development has occurred in any existing action or proceeding with respect to the Company or any of its subsidiaries; or (b) any law, statute, rule, regulation or interpretation by the staff of the Commission is proposed, adopted or enacted, which, in the sole judgment of the Company, might materially impair the ability of the Company to proceed with the Exchange Offer or materially impair the contemplated benefits of the Exchange Offer to the Company; or (c) any governmental approval has not been obtained, which approval the Company shall, in its sole discretion, deem necessary for the consummation of the Exchange Offer as contemplated hereby. If the Company determines in its sole discretion that any of the conditions are not satisfied, the Company may (i) refuse to accept any Notes and return all tendered Notes to the tendering holders, (ii) extend the Exchange Offer and retain all Notes tendered prior to the expiration of the Exchange Offer, subject, however, to the rights of holders to withdraw such Notes (see "-- Withdrawal of Tenders") or (iii) waive such unsatisfied conditions with respect to the Exchange Offer and accept all properly tendered Notes which have not been withdrawn. EXCHANGE AGENT IBJ Schroder Bank & Trust Company has been appointed as Exchange Agent for the Exchange Offer. Questions and requests for assistance, requests for additional copies of this Prospectus or of the Letter of Transmittal and requests for Notice of Guaranteed Delivery should be directed to the Exchange Agent addressed as follows: IBJ Schroder Bank & Trust Company One State Street Plaza New York, New York 10004 Delivery to an address other than as set forth above will not constitute a valid delivery. FEES AND EXPENSES The expenses of soliciting tenders will be borne by the Company. The principal solicitation is being made by mail; however, additional solicitation may be made by telegraph, telecopy, telephone or in person by officers and regular employees of the Company and its affiliates. The Company has not retained any dealer-manager in connection with the Exchange Offer and will not make any payments to brokers, dealers, or others soliciting acceptances of the Exchange Offer. The Company, however, will pay the Exchange Agent reasonable and customary fees for its services and will reimburse it for its reasonable out-of-pocket expenses in connection therewith. The cash expenses to be incurred in connection with the Exchange Offer will be paid by the Company. Such expenses include fees and expenses of the Exchange Agent and Trustee, accounting and legal fees and printing costs, among others. 107 ACCOUNTING TREATMENT The Exchange Notes will be recorded at the same carrying value as the Notes, which is face value, as reflected in the Company's accounting records on the date of exchange. Accordingly, no gain or loss for accounting purposes will be recognized by the Company. The expenses of the Exchange Offer will be expensed over the term of the Exchange Notes. CONSEQUENCES OF FAILURE TO EXCHANGE The Notes that are not exchanged for Exchange Notes pursuant to the Exchange Offer will remain restricted securities. Accordingly, such Notes may be resold only (i) to the Company (upon redemption thereof or otherwise), (ii) so long as the Notes are eligible for resale pursuant to Rule 144A, to a person inside the United States whom the seller reasonably believes is a qualified institutional buyer within the meaning of Rule 144A under the Securities Act in a transaction meeting the requirements of Rule 144A, in accordance with Rule 144 under the Securities Act, or pursuant to another exemption from the registration requirements of the Securities Act (and based upon an opinion of counsel reasonably acceptable to the Company), (iii) outside the United States to a foreign person in a transaction meeting the requirements of Rule 904 under the Securities Act, or (iv) pursuant to an effective registration statement under the Securities Act, in each case in accordance with any applicable securities laws of any state of the United States. RESALE OF THE EXCHANGE NOTES With respect to resales of Exchange Notes, based on interpretations by the staff of the Commission set forth in no-action letters issued to third parties, the Company believes that a holder or other person who receives Exchange Notes, whether or not such person is the holder (other than a person that is an "affiliate" of the Company within the meaning of Rule 405 under the Securities Act) who receives Exchange Notes in exchange for Notes in the ordinary course of business and who is not participating, does not intend to participate, and has no arrangement or understanding with person to participate, in the distribution of the Exchange Notes, will be allowed to resell the Exchange Notes to the public without further registration under the Securities Act and without delivering to the purchasers of the Exchange Notes a prospectus that satisfies the requirements of Section 10 of the Securities Act. However, if any holder acquires Exchange Notes in the Exchange Offer for the purpose of distributing or participating in a distribution of the Exchange Notes, such holder cannot rely on the position of the staff of the Commission enunciated in such no-action letters or any similar interpretive letters, and must comply with the registration and prospectus delivery requirements of the Securities Act in connection with any resale transaction, unless an exemption from registration is otherwise available. Further, each Participating Broker- Dealer that receives Exchange Notes for its own account in exchange for Notes, where such Notes were acquired by such Participating Broker-Dealer as a result of market-making activities or other trading activities, must acknowledge that it will deliver a prospectus in connection with any resale of such Exchange Notes. As contemplated by these no-action letters and the Registration Rights Agreement, each holder accepting the Exchange Offer is required to represent to the Company in the Letter of Transmittal that (i) the Exchange Notes are to be acquired by the holder or the person receiving such Exchange Notes, whether or not such person is the holder, in the ordinary course of business, (ii) the holder or any such other person (other than a broker-dealer referred to in the next sentence) is not engaging and does not intend to engage, in the distribution of the Exchange Notes, (iii) the holder or any such other person has no arrangement or understanding with any person to participate in the distribution of the Exchange Notes, (iv) neither the holder nor any such other person is an "affiliate" of the Company within the meaning of Rule 405 under the Securities Act, and (v) the holder or any such other person acknowledges that if such holder or other person participates in the Exchange Offer for the purpose of distributing the Exchange Notes it must comply with the registration and prospectus delivery requirements of the Securities Act in connection with any resale of the Exchange Notes and cannot rely on those no- action letters. As indicated above, each Participating Broker-Dealer that receives an Exchange Note for its own account in exchange for Notes must acknowledge that it will deliver a prospectus in connection with any 108 resale of such Exchange Notes. For a description of the procedures for such resales by Participating Broker-Dealers, see "Plan of Distribution." CERTAIN FEDERAL INCOME TAX CONSEQUENCES The following discussion is based upon current provisions of the Internal Revenue Code of 1986, as amended, applicable Treasury regulations, judicial authority and administrative rulings and practice. There can be no assurance that the Internal Revenue Service (the "Service") will not take a contrary view, and no ruling from the Service has been or will be sought. Legislative, judicial or administrative changes or interpretations may be forthcoming that could alter or modify the statements and conditions set forth herein. Any such changes or interpretations may or may not be retroactive and could affect the tax consequences to holders. Certain holders (including insurance companies, tax-exempt organizations, financial institutions, broker-dealers, foreign corporations and persons who are not citizens or residents of the United States) may be subject to special rules not discussed below. The Company recommends that each holder consult such holder's own tax advisor as to the particular tax consequences of exchanging such holder's Notes for Exchange Notes, including the applicability and effect of any state, local or foreign tax laws. The exchange of the Notes for the Exchange Notes pursuant to the Exchange Offer should not be a taxable event to the holder and thus the holder should not recognize any taxable gain or loss as a result of the exchange. A holder's adjusted tax basis in the Exchange Notes will be the same as his adjusted tax basis in the Notes exchanged therefor, and his holding period for the Notes will be included in his holding period for the Exchange Notes. Although the exchange of the Notes for the Exchange Notes will not create additional "market discount" or "amortizable bond premium," to the extent that a holder acquired the Notes at a market discount or with amortizable bond premium, such discount or premium would generally carry over to the Exchange Notes received in exchange for the Notes. Such holders should consult their tax advisors regarding the United States Federal income tax treatment of such market discount and amortizable bond premium. PLAN OF DISTRIBUTION Each Participating Broker-Dealer that receives Exchange Notes for its own account pursuant to the Exchange Offer must acknowledge that it will deliver a prospectus in connection with any resale of such Exchange Notes. This Prospectus, as it may be amended or supplemented from time to time, may be used by a Participating Broker-Dealer in connection with resales of Exchange Notes received in exchange for Notes where such Notes were acquired as a result of market-making activities or other trading activities. The Company has agreed that for a period of 180 days after the Expiration Date, it will make this Prospectus, as amended or supplemented, available to any Participating Broker-Dealer for use in connection with any such resale. In addition, until , 1997, all dealers effecting transactions in the Exchange Notes may be required to deliver a prospectus. The Company will not receive any proceeds from any sales of the Exchange Notes by Participating Broker-Dealers. Exchange Notes received by Participating Broker-Dealers for their own account pursuant to the Exchange Offer may be sold from time to time in one or more transactions in the over- the-counter market, in negotiated transactions, through the writing of options on the Exchange Notes or a combination of such methods of resale, at market prices prevailing at the time of resale, at prices related to such prevailing market prices or negotiated prices. Any such resale may be made directly to purchaser or to or through brokers or dealers who may receive compensation in the form of commissions or concessions from any such Participating Broker- Dealer and/or the purchasers of any such Exchange Notes. Any Participating Broker-Dealer that resells the Exchange Notes that were received by it for its own account pursuant to the Exchange Offer and any broker or dealer that participates in a distribution of such Exchange Notes may be deemed to be an "underwriter" within the meaning of the Securities Act and any profit on any such resale of Exchange Notes and any commissions or concessions received by any such persons may be deemed to be underwriting compensation under the Securities Act. The Letter of Transmittal states that by acknowledging that it will deliver and by delivering a prospectus, a Participating Broker-Dealer will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act. 109 For a period of 180 days after the Expiration Date the Company will promptly send additional copies of this Prospectus and any amendment or supplement to this Prospectus to any Participating Broker-Dealer that requests such documents in the Letter of Transmittal. LEGAL MATTERS Certain legal matters in connection with the issuance of Exchange Notes offered hereby will be passed upon for the Company by Kirkland & Ellis, New York, New York. Partners of Kirkland & Ellis own 60,000 shares of Holdings' Common Stock and 6,666.7 shares of Holdings' Class L Common Stock. EXPERTS Dade's consolidated balance sheets as of December 31, 1994 and 1995, and the consolidated statements of operations, of cash flows, and of changes in stockholder's equity for the period December 17, 1994 through December 31, 1994 and for the year ended December 31, 1995 included in this Prospectus have been so included in reliance on the report of Price Waterhouse LLP, independent accountants, given on the authority of said firm as experts in auditing and accounting. The Predecessor's consolidated statements of operations and of cash flows for the year ended December 31, 1993 and for the period January 1, 1994 through December 16, 1994 included in this Prospectus have been so included in reliance on the report of Price Waterhouse LLP, independent accountants, given on the authority of said firm as experts in auditing and accounting. Dade Chemistry's combined statement of net assets to be sold as of December 31, 1993, 1994 and 1995 and the combined statement of operations for each of the three years in the period ended December 31, 1995 included in this Prospectus have been so included in reliance on the report of Price Waterhouse LLP, independent accountants, given on the authority of said firm as experts in auditing and accounting. 110 DADE INTERNATIONAL INC. INDEX TO FINANCIAL STATEMENTS
PAGE ---- Report of Independent Accountants--Dade.................................. F-2 Report of Independent Accountants--Predecessor........................... F-3 Consolidated Balance Sheets as of December 31, 1994 and December 31, 1995 (Dade).................................................................. F-4 Combined Statements of Operations for the year ended December 31, 1993 and the period from January 1, 1994 through December 16, 1994 (Predeces- sor) and Consolidated Statements of Operations for the period from De- cember 17, 1994 through December 31, 1994 and the year ended December 31, 1995 (Dade)......................................................... F-5 Combined Statements of Cash Flows for the year ended December 31, 1993 and the period from January 1, 1994 through December 16, 1994 (Predeces- sor) and Consolidated Statements of Cash Flows for the period from De- cember 17, 1994 through December 31, 1994 and the year ended December 31, 1995 (Dade)......................................................... F-6 Consolidated Statements of Changes in Stockholder's Equity for the period from December 17, 1994 through December 31, 1994 and the year ended De- cember 31, 1995 (Dade).................................................. F-7 Notes to Combined/Consolidated Financial Statements...................... F-8 Unaudited Consolidated Balance Sheet as of June 30, 1996................. F-35 Unaudited Consolidated Statement of Operations for the six months ended June 30, 1995 and 1996.................................................. F-36 Unaudited Consolidated Statement of Cash Flows for the six months ended June 30, 1995 and 1996.................................................. F-37 Notes to Unaudited Consolidated Financial Statements..................... F-38 IN VITRO DIAGNOSTICS, A DIVISION OF E.I. DU PONT DE NEMOURS AND COMPANY ("DADE CHEMISTRY") Report of Independent Accountants........................................ F-42 Combined Statement of Operations for the years ended December 31, 1995, 1994 and 1993........................................................... F-43 Combined Statement of Net Assets to be Sold at December 31, 1995, 1994 and 1993................................................................ F-44 Notes to Combined Financial Statements................................... F-45 Unaudited Combined Statement of Operations for the four months ended April 30, 1996 and 1995................................................. F-55 Unaudited Combined Statement of Net Assets to be Sold at April 30, 1996.. F-56 Notes to Unaudited Combined Financial Statements......................... F-57
F-1 REPORT OF INDEPENDENT ACCOUNTANTS To the Board of Directors and Stockholder of Dade International Inc. In our opinion, the accompanying consolidated balance sheets and the related consolidated statements of operations, of cash flows and of changes in stockholder's equity present fairly, in all material respects, the financial position of Dade International Inc. (a wholly-owned subsidiary of Diagnostics Holding, Inc.) and its subsidiaries (the Company) at December 31, 1995 and 1994, and the results of their operations and their cash flows for the year ended December 31, 1995 and for the period from December 17, 1994 (inception) through December 31, 1994, in conformity with generally accepted accounting principles. These financial statements are the responsibility of the Company's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with generally accepted auditing standards which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for the opinion expressed above. PRICE WATERHOUSE LLP Chicago, Illinois March 15, 1996 F-2 REPORT OF INDEPENDENT ACCOUNTANTS To the Board of Directors of Baxter International Inc. In our opinion, the accompanying combined statements of operations and of cash flows present fairly, in all material respects, the results of operations and cash flows of the in vitro diagnostics products manufacturing and services businesses of Baxter Diagnostics, Inc. and certain of its affiliates ("BDI") (the predecessor entity of Dade International Inc.) for the period from January 1, 1994 through December 16, 1994 and for the year ended December 31, 1993, in conformity with generally accepted accounting principles. These financial statements are the responsibility of BDI's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with generally accepted auditing standards which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for the opinion expressed above. As discussed in Note 2 to the combined financial statements, effective January 1, 1993, BDI adopted Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes." PRICE WATERHOUSE LLP Chicago, Illinois March 20, 1995 F-3 DADE INTERNATIONAL INC. CONSOLIDATED BALANCE SHEETS (SUCCESSOR) (DOLLARS IN MILLIONS, EXCEPT SHARE-RELATED DATA)
DECEMBER 31, DECEMBER 31, 1994 1995 ------------ ------------ ASSETS Current assets: Cash and cash equivalents.......................... $ 22.4 $ 27.9 Restricted cash (Notes 2 and 3).................... 200.0 -- Accounts receivable--trade, net.................... 40.9 76.0 Accounts receivable--trade, Baxter, net............ 15.4 55.2 Other receivables--Baxter, net..................... 21.9 9.7 Inventories........................................ 171.2 122.0 Refundable income taxes............................ -- 4.5 Deferred income taxes.............................. 21.0 34.4 Prepaid expenses and other current assets.......... 5.9 6.6 Net assets held for sale........................... 73.2 54.9 ------ ------ Total current assets............................. 571.9 391.2 ------ ------ Property, plant and equipment, net................... 1.0 31.8 Other assets......................................... -- 3.3 Debt issuance costs.................................. 21.9 19.1 Deferred income taxes................................ 101.4 105.5 ------ ------ Total assets..................................... $696.2 $550.9 ====== ====== LIABILITIES AND STOCKHOLDER'S EQUITY Current liabilities: Current portion of bank credit agreement........... $ 6.6 $ 5.8 Non-domestic bank debt............................. -- 2.1 Book overdrafts.................................... 4.9 6.9 Accounts payable, principally trade................ 17.6 35.1 Accounts payable--trade, Baxter.................... -- 14.5 Accrued liabilities................................ 82.6 105.9 Deferred income taxes.............................. 1.1 1.5 Installment note payable to Baxter (Note 3)........ 200.0 -- ------ ------ Total current liabilities........................ 312.8 171.8 ------ ------ Bank credit agreement, less current portion.......... 143.4 157.7 Accrued pension cost................................. 9.3 12.9 Other liabilities.................................... 3.5 1.7 Senior subordinated notes............................ 120.0 120.0 Negative goodwill, net............................... 24.1 5.6 ------ ------ Total liabilities................................ 613.1 469.7 ------ ------ Commitments and contingencies (Note 15).............. -- -- Stockholder's equity: Common stock, $.01 par value, 1,000 shares authorized, issued and outstanding................ -- -- Additional paid in capital......................... 85.0 87.0 Notes receivable on capital contribution........... -- (0.2) Retained earnings (deficit)........................ (1.9) (5.0) Unrealized gain (loss) on marketable equity securities........................................ -- (1.1) Cumulative translation adjustment.................. -- 0.5 ------ ------ Total stockholder's equity....................... 83.1 81.2 ------ ------ Total liabilities and stockholder's equity....... $696.2 $550.9 ====== ======
See accompanying notes to combined/consolidated financial statements. F-4 DADE INTERNATIONAL INC. COMBINED/CONSOLIDATED STATEMENTS OF OPERATIONS (DOLLARS IN MILLIONS)
PREDECESSOR SUCCESSOR ------------------------- ------------------------- PERIOD FROM PERIOD FROM JANUARY 1, DECEMBER 17, YEAR ENDED 1994 THROUGH 1994 THROUGH YEAR ENDED DECEMBER 31, DECEMBER 16, DECEMBER 31, DECEMBER 31, 1993 1994 1994 1995 ------------ ------------ ------------ ------------ Net Sales--Third parties................................................. $690.2 $650.6 $ 3.6 $250.4 --Related party...................................................... -- -- 15.4 363.9 ------ ------ ----- ------ 690.2 650.6 19.0 614.3 ------ ------ ----- ------ Operating costs and expenses: Cost of goods sold..................................................... 420.8 391.4 18.6 368.6 Marketing and administrative expenses.................................. 179.2 173.2 2.4 171.1 Research and development expenses...................................... 47.2 33.4 1.1 26.5 Goodwill amortization expense (credit)................................. 2.6 2.6 (0.1) (0.4) Restructuring and downsizing costs..................................... 30.2 -- -- -- ------ ------ ----- ------ Income (loss) from operations............................................ 10.2 50.0 (3.0) 48.5 Other income (expense): Interest expense....................................................... -- -- (1.2) (30.8) Other income........................................................... 3.5 -- -- 2.2 ------ ------ ----- ------ Income (loss) before income taxes and cumulative effect of accounting change.................................................................. 13.7 50.0 (4.2) 19.9 Income tax expense (benefit)............................................. 12.3 14.2 (2.3) 7.2 ------ ------ ----- ------ Income (loss) before cumulative effect of accounting change.............. 1.4 35.8 (1.9) 12.7 Cumulative effect of change in accounting for income taxes............... (3.3) -- -- -- ------ ------ ----- ------ Net income (loss)........................................................ $ (1.9) $ 35.8 $(1.9) $ 12.7 - -------------------------------------------------- ====== ====== ===== ======
See accompanying notes to combined/consolidated financial statements. F-5 DADE INTERNATIONAL INC. COMBINED/CONSOLIDATED STATEMENTS OF CASH FLOWS (DOLLARS IN MILLIONS)
PREDECESSOR SUCCESSOR ------------------------- ------------------------- PERIOD FROM PERIOD FROM JANUARY 1, DECEMBER 17, YEAR ENDED 1994 THROUGH 1994 THROUGH YEAR ENDED DECEMBER 31, DECEMBER 16, DECEMBER 31, DECEMBER 31, 1993 1994 1994 1995 ------------ ------------ ------------ ------------ CASH FLOW PROVIDED BY OPERATING ACTIVITIES: Net income (loss)......... $ (1.9) $ 35.8 $ (1.9) $ 12.7 Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: Cumulative effect of accounting change........ 3.3 -- -- -- Depreciation expense...... 50.3 50.3 -- 4.4 Amortization expense (credit)................. 8.4 9.3 (0.1) 0.5 Amortization of debt issuance costs........... -- -- 0.1 2.8 Amortization of inventory step-up.................. -- -- 5.6 40.4 Provision for downsizing costs.................... 30.2 -- -- -- Deferred income taxes (benefit)................ -- -- (2.5) 1.6 Changes in balance sheet items: Accounts receivable, net.. 2.1 29.1 (11.6) (76.9) Inventories............... 4.2 4.0 1.7 0.8 Accounts payable.......... (1.9) (1.5) 5.6 32.2 Accrued liabilities....... 2.5 (7.2) 6.2 5.0 Other assets.............. (12.6) (2.3) -- (1.3) Restructuring and downsizing payments...... (5.8) (4.3) -- -- Other..................... 10.6 (8.7) (6.1) (2.1) ------ ------ ------- ------- Cash flow provided by (used in) operating activities............... 89.4 104.5 (3.0) 20.1 ------ ------ ------- ------- INVESTMENT ACTIVITIES: Purchase of Company, net of cash acquired......... -- -- (68.3) -- Proceeds from Baxter for purchase price adjustments, net......... -- -- -- 8.0 Cash "restricted" for installment purchase price.................... -- -- (200.0) -- Purchase of marketable equity securities........ -- -- -- (2.0) Capital expenditures...... (56.7) (29.9) (1.0) (35.3) ------ ------ ------- ------- Investment activities, net..................... (56.7) (29.9) (269.3) (29.3) ------ ------ ------- ------- FINANCING ACTIVITIES: Issuance of common stock.. -- -- 45.0 -- Capital contribution...... -- -- -- 1.8 Debt issuance costs....... -- -- (20.3) (1.7) Cash dividend to Holdings for purchase of Holdings Preferred Stock from Baxter................... -- -- -- (15.8) Proceeds from revolving credit agreement......... -- -- -- 23.0 Repayment of borrowings under revolving credit agreement................ -- -- -- (23.0) Proceeds from bank credit agreement................ -- -- 150.0 35.0 Repayment of borrowings under bank credit agreement................ -- -- -- (21.5) Proceeds from issuance of senior subordinated notes.................... -- -- 120.0 -- Proceeds from sale of net assets held for sale..... -- -- -- 16.5 Advances from (payments to) Baxter (cash)........ (32.7) (74.6) -- -- ------ ------ ------- ------- Financing activities, net..................... (32.7) (74.6) 294.7 14.3 ------ ------ ------- ------- Effect of exchange rate changes on cash.......... -- -- -- 0.4 ------ ------ ------- ------- Net increase in Cash and Cash Equivalents......... 0.0 0.0 22.4 5.5 CASH AND CASH EQUIVALENTS: Beginning of period....... -- -- -- 22.4 ------ ------ ------- ------- End of period............. $ -- $ -- $ 22.4 $ 27.9 ====== ====== ======= ======= SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Cash paid during the period for interest...... $ -- $ -- $ 0.5 $ 25.0 ====== ====== ======= ======= Cash paid during the period for income taxes.. $ -- $ -- $ -- $ 7.7 ====== ====== ======= ======= Acquisition consideration contributed by Holdings.. $ -- $ -- $ 40.0 $ -- ====== ====== ======= ======= Installment note payable to Baxter for partial acquisition consideration............ $ -- $ -- $ 200.0 $ -- ====== ====== ======= ======= Installment note paid from restricted cash.......... $ -- $ -- $ -- $(200.0) ====== ====== ======= =======
See accompanying notes to combined/consolidated financial statements. F-6 DADE INTERNATIONAL INC. CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDER'S EQUITY (SUCCESSOR) (DOLLARS IN MILLIONS)
UNREALIZED GAIN (LOSS) NOTES ON COMMON STOCK ADDITIONAL RECEIVABLE RETAINED MARKETABLE CUMULATIVE TOTAL ------------- PAID IN ON CAPITAL EARNINGS EQUITY TRANSLATION STOCKHOLDER'S SHARES AMOUNT CAPITAL CONTRIBUTION (DEFICIT) SECURITIES ADJUSTMENT EQUITY ------ ------ ---------- ------------ --------- ----------- ----------- ------------- Balance at December 16, 1994................... -- $-- $ -- $ -- $ -- $ -- $-- $ -- ----- ---- ----- ----- ------ ----- ---- ------ Issuance of common stock.................. 1,000 -- 45.0 -- -- -- -- 45.0 Capital contribution.... -- -- 40.0 -- -- -- -- 40.0 Net loss................ -- -- -- -- (1.9) -- -- (1.9) ----- ---- ----- ----- ------ ----- ---- ------ Balance at December 31, 1994................... 1,000 -- 85.0 -- (1.9) -- -- 83.1 ----- ---- ----- ----- ------ ----- ---- ------ Capital contribution.... -- -- 2.0 -- -- -- -- 2.0 Notes receivable on capital contribution... -- -- -- (0.2) -- -- -- (0.2) Net income.............. -- -- -- -- 12.7 -- -- 12.7 Cash dividend to Holdings on common stock.................. -- -- -- -- (15.8) -- -- (15.8) Unrealized gain (loss) on marketable equity securities............. -- -- -- -- -- (1.1) -- (1.1) Cumulative translation adjustment............. -- -- -- -- -- -- 0.5 0.5 ----- ---- ----- ----- ------ ----- ---- ------ Balance at December 31, 1995................... 1,000 $-- $87.0 $(0.2) $ (5.0) $(1.1) $0.5 $ 81.2 ===== ==== ===== ===== ====== ===== ==== ======
See accompanying notes to combined/consolidated financial statements. F-7 DADE INTERNATIONAL INC. NOTES TO COMBINED/CONSOLIDATED FINANCIAL STATEMENTS 1 ORGANIZATION AND BUSINESS Dade International Inc., as successor by merger to Dade Acquisition, Inc., (the "Company" or "Successor") was incorporated in Delaware in 1994 to effect the acquisition (the "Acquisition") of the in vitro diagnostics products manufacturing and services businesses and net assets of Baxter Diagnostics, Inc. and certain of its affiliates ("BDI" or "Predecessor"), from Baxter International Inc. and its affiliates ("Baxter"). The in vitro diagnostics products manufacturing and services businesses of BDI consisted primarily of assets and businesses acquired through Baxter's 1985 acquisition of American Hospital Supply Corporation. The Company develops, manufactures and markets diagnostic equipment, reagents, consumable supplies and services worldwide. The financial statements include the accounts of the following product lines: Dade, MicroScan, Stratus, Paramax, Burdick & Jackson, Bartels and Product Services. For 1993, operations outside the United States and Puerto Rico ("foreign operations") are included in the Predecessor's financial statements on the basis of fiscal years ending November 30. For 1994, as a result of the Acquisition's December 16, 1994 effective date, foreign operations' balance sheet amounts at December 16, 1994 are included in the Successor's Consolidated Balance Sheet at December 31, 1994, adjusted for purchase accounting resulting from the Acquisition. In addition, results of operations outside the United States and Puerto Rico for the period December 1, 1993 through December 16, 1994 are included in the Predecessor's 1994 Combined Statement of Operations while foreign operating results are excluded from the Successor's Consolidated Statement of Operations for the period from December 17, 1994 through December 31, 1994. For 1995, foreign operations' balance sheet amounts at November 30, 1995 are included in the Successor's Consolidated Balance Sheet at December 31, 1995. Further, to facilitate prompt year-end reporting of the consolidated financial statements, results of foreign operations for the period from December 17, 1994 through November 30, 1995 are included in the Successor's 1995 Consolidated Statement of Operations. Neither the inclusion of twelve and one-half months of foreign operations in the Predecessor's combined results of operations for 1994, nor the omission of one-half month of foreign operations from the Successor's 1994 and 1995 consolidated results of operations are material to the combined or consolidated financial statements. The Company is a wholly-owned subsidiary of Diagnostics Holding, Inc. ("Holdings"). Bain Capital, Inc. ("Bain Capital") and GS Capital Partners, L.P., an affiliate of the Goldman Sachs Group, L.P. ("GS Capital"), and their respective related investors owned, until August 2, 1995, all of the voting capital stock of Holdings, which owns all of the outstanding capital stock of the Company. On August 2, 1995, Holdings adopted stock purchase and option plans (Note 9) which provide for members of the Company's management to own capital stock of Holdings. At December 31, 1995 Bain Capital, GS Capital and their respective related investors owned virtually all of the capital stock of Holdings. The financial statements of Holdings are not required to be included herein by the rules and regulations of the Securities and Exchange Commission ("SEC") as Holdings has not issued a guarantee with respect to the repayment of the Company's 13% Senior Subordinated Notes ("Senior Subordinated Notes"). The Company is restricted by its existing Bank Credit Agreement and Senior Subordinated Notes indenture from loaning or dividending cash to Holdings, except under limited circumstances. The Acquisition was completed on December 20, 1994, effective as of December 16, 1994, under the terms of a purchase agreement between Baxter and Holdings ("Purchase and Sale Agreement"). The financial statements for the post- Acquisition period present the consolidated accounts of the Company. For the pre-Acquisition period, the combined financial statements present the operations of BDI purchased by the Company. The financial statements of the Company and BDI are not comparable in certain respects due to differences between the cost bases of certain assets and liabilities as well as Baxter having retained a significant portion of the Predecessor's trade accounts receivable at December 16, 1994 in accordance with the Purchase and Sale F-8 DADE INTERNATIONAL INC. NOTES TO COMBINED/CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) Agreement. The Predecessor financial statements represent the "carve-out" financial position, results of operations and cash flows for the periods presented. Certain corporate and group general and administrative expenses of Baxter have been allocated to BDI on various bases which, in the opinion of management, are reasonable (Note 11). However, such expenses are not necessarily indicative of the nature and level of expenses which might have been incurred had BDI been operating as a separate company. Additionally, the combined statements of operations of BDI include the results of operations of Burdick & Jackson and Bartels which have been identified by the Company as assets held for sale (Note 4). Consequently, the post-Acquisition results of operations for these two businesses have been excluded from the Company's 1994 and 1995 Consolidated Statements of Operations. The financial information included herein does not necessarily reflect what the financial position and results of operations of BDI would have been had it operated as a stand alone entity during the periods covered, and may not be indicative of future operations or financial position. Senior Subordinated Notes Exchange Offering The Company filed a registration statement on Form S-4 (the "Exchange Offer Registration Statement") in June 1995 under the Securities Act of 1933, as amended, involving the registration of $120 million of its Series B 13% Senior Subordinated Notes due 2005 which, in July 1995, were exchanged for its 13% Senior Subordinated Notes due 2005 that were issued in connection with the Acquisition of the Company (the "Exchange Offering"). 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES This summary of significant accounting policies is presented to assist the reader in understanding and evaluating the accompanying financial statements. These policies are in conformity with generally accepted accounting principles, and have been applied consistently unless otherwise noted and apply to both the Company and the Predecessor unless otherwise noted. Management Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Principles of Consolidation The combined/consolidated financial statements include all majority owned subsidiaries. All significant intercompany accounts and transactions have been eliminated. Certain amounts in the Predecessor's financial statements have been reclassified to conform to the Successor's presentation. Revenue Recognition Successor's revenues for products that are subject to a Distribution Agreement in the United States with Baxter (a related party as more fully described in Notes 9 and 11) are recognized upon shipment of products to Baxter or direct shipment of the products by the Company to third party customers. Such revenues are recorded on the basis of the sales price to customers (i.e., generally the end consumer) less a distribution discount negotiated with Baxter's U.S. Distribution Division. All other revenues, including sales to VWR (Note 11), for products sold (i.e., those not subject to the Baxter Distribution Agreement) are recognized upon shipment of products to customers and are recorded on the basis of the sales price to such customers (i.e., generally the end consumer) or the sales price to VWR, as applicable. F-9 DADE INTERNATIONAL INC. NOTES TO COMBINED/CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) At December 31, 1995 the Company has recorded an estimate of the distribution discount due to Baxter's U.S. Distribution Division based upon items sold to Baxter which Baxter has not yet sold to third party customers. As the ultimate distribution discount is based upon the actual selling price by Baxter to third party customers, the estimated distribution discount recorded by the Company may be revised in the future as actual selling price information becomes available. Predecessor's revenues for products sold through Baxter (the Predecessor's parent) in the United States were recognized upon shipment by Baxter to customers (i.e., generally the end consumer). Such revenues were recorded on the basis of the sales price to customers less an intercompany distribution service fee negotiated with Baxter's U.S. Distribution Division. Distribution service fees were $63.4 million for the period January 1, 1994 through December 16, 1994 and $69.9 million for the year ended December 31, 1993 (Note 11). All other revenues for products sold were recognized upon shipment of products to customers. Revenues under product service contracts, which are generally for one year, are deferred and recognized ratably over the term of the contract. Cash and Cash Equivalents For purposes of reporting cash flows, cash and cash equivalents include demand deposits and cash equivalents which are highly liquid instruments with maturities of three months or less at the time of purchase and are held to maturity. Cash equivalents include $3.3 million and $23.7 million invested in short-term money market investments at December 31, 1994 and 1995, respectively. In accordance with Statement of Financial Accounting Standards No. 95, "Statement of Cash Flows," cash flows from the Company's operations in foreign countries are calculated based on their reporting currencies. As a result, amounts related to assets and liabilities reported in the Combined/Consolidated Statements of Cash Flows will not necessarily agree to changes in the corresponding balances on the Combined/Consolidated Balance Sheets. The effect of exchange rate changes on cash balances held in foreign currencies is reported below cash flows from financing activities. Restricted Cash As of December 31, 1994, $200 million of cash was restricted to settle the $200 million installment note payable to Baxter in connection with the Acquisition (Note 3). The installment note was paid from the restricted cash during 1995. Accounts Receivable Accounts receivable-trade are net of bad debt reserves of $2.2 million and $6.8 million at December 31, 1994 and 1995, respectively. Accounts receivable- trade are unsecured. Research and Development Expenses Expenditures by the Company for research, development and engineering of products and manufacturing processes are expensed as incurred. In conjunction with the Acquisition (Note 3), which was recorded in accordance with the purchase method of accounting, $30.3 million of fair value was first allocated to currently in-process research and development projects which were deemed to be of value to Successor's continuing research efforts and then written down to zero at the date of the Acquisition. Inventories Inventories are stated at the lower of cost (first-in, first-out method) or market. Cost includes materials, labor and manufacturing overhead costs. Market for raw materials is based on replacement costs and for other F-10 DADE INTERNATIONAL INC. NOTES TO COMBINED/CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) inventory classifications on net realizable value. Appropriate consideration is given to deterioration, obsolescence and other factors in evaluating net realizable value. Inventories of the Company consist of the following (in millions):
DECEMBER 31, DECEMBER 31, 1994 1995 ------------ ------------ Raw materials...................................... $ 20.8 $ 21.9 Work-in-process.................................... 37.9 34.4 Finished products.................................. 112.5 65.7 ------ ------ Total inventories.................................. $171.2 $122.0 ====== ======
Certain reclassifications have been made to the 1994 inventories balances to conform to the presentation of the 1995 balances. In connection with the Acquisition (Note 3), which was recorded in accordance with the purchase method of accounting, Successor's total inventories were written up by $46.0 million at the date of acquisition, $5.6 million and $40.4 million of which was charged to cost of goods sold during the period December 17, 1994 through December 31, 1994 and the year ended December 31, 1995, respectively. In addition, cost of goods sold for the year ended December 31, 1995 includes approximately $3.2 million of one time noncash charges related to historical depreciation expense associated with historical property, plant and equipment written down to zero in connection with the Acquisition (Note 3). Such depreciation expense was capitalized in inventories at the Acquisition date. Property, Plant and Equipment Property, plant and equipment are stated at cost. Depreciation and amortization are provided for financial reporting purposes principally on the straight-line method over the estimated useful lives of the assets as follows:
PREDECESSOR YEARS SUCCESSOR YEARS ----------------- --------------- Buildings.................................. 40 40 Machinery and equipment.................... 3 to 11 3 to 10
Assets recorded under capital leases are amortized over the life of the lease. Instruments leased to or placed with customers are included in machinery and equipment and are depreciated on a straight-line basis for a period not exceeding five years. Leasehold improvements are capitalized and amortized over their estimated useful lives or over the terms of the related leases, if shorter. Property, plant and equipment of the Company consist of the following (in millions):
DECEMBER 31, DECEMBER 31, 1994 1995 ------------ ------------ Land.............................................. $ -- $ -- Buildings and leasehold improvements.............. -- 0.4 Machinery and equipment........................... 0.5 26.9 Construction in progress.......................... 0.5 8.9 ----- ----- Total property, plant and equipment, at cost...... 1.0 36.2 Accumulated depreciation and amortization......... -- (4.4) ----- ----- Net property, plant and equipment................. $ 1.0 $31.8 ===== =====
F-11 DADE INTERNATIONAL INC. NOTES TO COMBINED/CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) In connection with the Acquisition (Note 3), which was recorded in accordance with the purchase method of accounting, total historical cost of property, plant and equipment acquired was written down by $197.0 million to zero at the date of the Acquisition. Negative Goodwill/Goodwill Successor's "negative" goodwill arose since the preliminary fair value of net assets acquired significantly exceeded total acquisition cost, resulting in the writedown of the Company's non-current assets and the fair value allocated to currently in-process research and development projects to zero with the residual preliminary discount of $24.2 million being allocated to negative goodwill. Preliminary negative goodwill was $24.1 million at December 31, 1994, net of $0.1 million of accumulated amortization. Negative goodwill was adjusted downward during 1995 by $18.1 million, net of tax, related to the reallocation of final purchase price and the fair value of net assets acquired based upon: (i) the resolution of certain pre-Acquisition contingencies, including adjustments to certain legal accruals; (ii) the sale of Bartels and revision of estimated net realizable value of remaining net assets held for sale; (iii) a negotiated settlement amount of Other receivables--Baxter related to the assumption of certain contractual liabilities; (iv) a negotiated settlement with Baxter related to final purchase price adjustments; (v) final determination of tax bases carried over from the Predecessor as of the Acquisition date, and the related deferred tax effects; and (vi) other miscellaneous adjustments arising from the determination of final fair values of the net assets acquired. Negative goodwill was $5.6 million at December 31, 1995, net of $0.5 million of accumulated amortization. The $18.1 million noncash adjustment to negative goodwill and its resulting impact on various asset and liability accounts has not been reflected in the Company's Consolidated Statement of Cash Flows for the year ended December 31, 1995. Negative goodwill is being amortized on a straight-line basis as a credit to income over 15 years. Predecessor goodwill represents primarily the excess of cost over the fair value of net assets allocated to the Predecessor arising from Baxter's 1985 acquisition of American Hospital Supply Corporation, and was being amortized on a straight-line basis over 40 years. Intangible Assets Intangible assets of the Predecessor included purchased patents and other identified rights which were amortized on a straight-line basis over their legal or estimated useful lives, whichever was shorter (generally not exceeding 17 years). In connection with the Acquisition (Note 3), intangible assets acquired, including Predecessor's goodwill, were written down to zero at the date of the Acquisition. Debt Issuance Costs Successor's debt issuance costs, which are being amortized over the applicable terms of the Bank Credit Agreement and 13% Senior Subordinated Notes indenture (7 years (weighted average) and 10 years, respectively), were $21.9 million at December 31, 1994, net of accumulated amortization of $0.1 million, and $19.1 million at December 31, 1995, net of accumulated amortization of $2.9 million. Income Taxes The Company accounts for income taxes in accordance with Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes" (SFAS No. 109), which is an asset and liability method of accounting for income taxes. Under this method, deferred tax assets and liabilities are recognized for the expected future tax consequences, utilizing current tax rates, of temporary differences between the carrying amounts and the tax bases of assets and liabilities. Deferred tax assets are recognized, net of any valuation allowance, for the F-12 DADE INTERNATIONAL INC. NOTES TO COMBINED/CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) estimated future tax effects of deductible temporary differences and tax operating loss and credit carryforwards. Deferred tax expense or benefit represents the change in the deferred tax asset or liability balances. Additionally, the Company provides deferred tax liabilities for the eventual tax effect of repatriating all unremitted earnings of foreign subsidiaries. The Company's operations are included in Holdings' consolidated U.S. federal and state income tax returns. Baxter adopted SFAS No. 109 effective January 1, 1993. The effect on the combined financial statements of the Predecessor is reflected as the Cumulative Effect of Change in Accounting in the Combined Statements of Operations. Prior to January 1, 1993, the Predecessor accounted for income taxes pursuant to Accounting Principles Board Opinion No. 11, "Accounting for Income Taxes." BDI's operations were historically included in Baxter's consolidated U.S. federal and state income tax returns and in the tax returns of certain Baxter foreign subsidiaries. The provisions for income taxes shown in the Combined Statements of Operations have been determined as if BDI had filed separate tax returns under its then existing legal structure for the periods presented. All U.S. income taxes, including deferred taxes, were settled with Baxter on a current basis through the Baxter investment accounts. Environmental Expenditures Environmental expenditures by the Successor, which are not indemnified under the Purchase and Sale Agreement with Baxter (Note 15), are expensed or capitalized depending upon their future economic benefit. Expenditures which improve a property as compared with the condition of the property when originally constructed or acquired and which prevent future environmental contamination are capitalized. Expenditures which return a property to its condition at the time of acquisition are expensed, and the related liabilities recorded, when it is probable that obligations have been incurred and the amounts can be reasonably estimated. Foreign Currency Translation Assets and liabilities of the foreign subsidiaries are translated at the fiscal year-end exchange rate. Revenues and expenses are translated at an average rate of exchange in effect during the year. Due to the consolidation of foreign subsidiaries as of December 16, 1994 in the December 31, 1994 Consolidated Balance Sheet and the exclusion of their results from the Consolidated Statement of Operations for the period December 17, 1994 through December 31, 1994 (Note 1), no cumulative translation adjustments related to the Successor arose during that period. Long-Term Intercompany Notes Payable At December 31, 1994 and 1995, the Company had designated long-term interest bearing intercompany notes payable (denominated in various foreign currencies) from certain of its foreign subsidiaries as hedges of the Company's exposures to exchange rate fluctuations in specified countries. The aggregate loan values, translated to dollars, were $49.1 million both at inception and at December 31, 1994 and were $51.9 million at December 31, 1995. Net gains or losses on translation of these intercompany notes were recorded as a component of the Company's cumulative translation adjustment. Derivative Financial Instruments The Company utilizes derivative financial instruments for purposes other than trading, which include managing its exposure to foreign currency rate and interest rate fluctuations. F-13 DADE INTERNATIONAL INC. NOTES TO COMBINED/CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) The Company enters into forward currency exchange contracts with highly- rated counterparties, both forward contracts and option contracts, to manage its exposure to foreign currency fluctuations on assets and liabilities, including intercompany borrowing arrangements, denominated in foreign currencies. Premiums and discounts on these contracts are deferred in other assets and amortized to administrative expense over the life of the contract. Gains and losses on forward contracts resulting from revaluations are recorded to other assets during their life. Gains and losses on option contracts resulting from exercise are recorded to administrative expense. At the maturity of the forward contracts and the exercise of the option contracts, the currencies involved will be exchanged based on the contracted exchange rate. At December 31, 1995, deferred amounts relating to these contracts are not material to the consolidated financial statements, and the replacement value of "in-the-money" contracts was not significant. Total notional contract value of foreign currencies bought and sold forward at December 31, 1995 are as follows (in millions): Forward purchases..................................... $ 7.4 Forward sales......................................... $27.4
The Company also utilizes a purchased interest rate cap, for which the Company will receive cash payments from the counterparty if an indexed rate of interest is exceeded, to manage its exposure to interest rate increases on its outstanding debt. Premiums paid for the purchase of the cap are capitalized and amortized to interest expense over the life of the cap. Upon settlement of the cap, amounts received, if any, are deferred and amortized to interest expense over the related period. At December 31, 1995, capitalized amounts, including deferrals, relating to the cap are not material to the consolidated financial statements. Other Income For the year ended December 31, 1995, Other income in the Company's Consolidated Statement of Operations consists of interest income of $2.2 million. Earnings (Loss) Per Share Historical earnings (loss) per share are not presented in the Predecessor's Combined Statements of Operations because, as a division of Baxter, it had no separate capital structure. Earnings (loss) per share are not presented for the Successor as the Company's common stock is not publicly traded. Concentration of Credit Risk Financial instruments which potentially subject the Company to concentration of credit risk consist principally of trade accounts receivable. A large percentage of U.S. accounts receivable were generated by the Company's sales through Baxter's U.S. Distribution Division (Note 11). The credit risk is mitigated due to the large number of entities comprising Baxter's worldwide customer base and their dispersion across many different geographies. At December 31, 1994 and 1995, the Company was aware of several other potential concentrations of credit risk. A number of the Company's customers operate in the hospital and reference laboratory market, which may be impacted by any legislated healthcare reforms. Additionally, at December 31, 1994 and 1995, approximately $19.7 million or 61% and $20.0 million or 31%, respectively, of the Company's foreign accounts receivable were geographically concentrated in Italy. The Company does not expect these potential risk factors to have a material adverse impact on its results of operations or financial position. Furthermore, pursuant to the Purchase and Sale Agreement, certain of the Company's foreign accounts receivable at the date of Acquisition, including those in Italy, may be put back to Baxter if not fully collected within certain specified time periods after December 16, 1994. F-14 DADE INTERNATIONAL INC. NOTES TO COMBINED/CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) Fair Value of Financial Instruments The carrying values of cash equivalents and other current assets and liabilities (such as accounts receivable and payable) approximate fair value at December 31, 1994 and 1995 because of the short maturity of these instruments. The excess of the fair values of derivative financial instruments, as noted in "Derivative Financial Instruments" above, over carrying values aggregated $0.4 million at December 31, 1995. The carrying value of the Term Loans (Note 7) approximates fair value as the interest rate on each instrument adjusts based upon market interest rate changes. The fair value of the 13% Senior Subordinated Notes, as of December 31, 1995, is somewhat influenced by the general decline in longer term interest rates since the Notes were issued. However, it is not practicable to estimate current fair value of the Notes as there is no public listing for the Notes and there has been little to no trading activity in the issue. Fair value estimates are made at a specific point in time, based on relevant market information and information about the financial instrument. These estimates are subjective in nature and involve uncertainties and matters of significant judgment and, therefore, cannot be determined with precision. Changes in assumptions could significantly affect the estimates. 3 ACQUISITION Effective December 16, 1994, the Company, in separate transactions, acquired certain net assets and businesses of BDI, including the stock of various foreign subsidiaries, but excluding approximately $93.8 million of accounts receivable. One transaction was structured as an exchange pursuant to Section 351 of the United States Internal Revenue Code. The remaining transactions were structured as direct stock purchases or asset acquisitions. The Acquisition was recorded in accordance with the purchase method of accounting. Accordingly, the purchase price plus direct costs of the Acquisition were allocated to the assets acquired and liabilities assumed based upon their estimated fair values at the date of Acquisition. Since the estimated fair values of the net assets acquired significantly exceeded total acquisition cost, the Company's non-current assets and currently in-process research and development projects were reduced to zero and the residual was recorded as negative goodwill. The estimated fair values were based on independent appraisals, management estimates, and arms-length negotiations with Baxter, and were subject to adjustments during 1995, which aggregated $18.1 million, after tax, and reduced the preliminary amount of negative goodwill (see Note 2 for discussion of the nature of final adjustments). A summary of assets acquired, liabilities assumed and the purchase price paid is as follows (in millions): Consideration: Cash............................................................ $ 65.9 Installment note payable to Baxter.............................. 200.0 Preferred stock of Holdings issued to Baxter (Note 9)........... 40.0 Costs of Acquisition............................................ 8.3 Preliminary Purchase Price Adjustment due from Baxter........... (3.7) ------ 310.5 Liabilities assumed............................................. 133.4 ------ Cost of assets acquired......................................... $443.9 ======
F-15 DADE INTERNATIONAL INC. NOTES TO COMBINED/CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) The preliminary cost allocated to each of the Company's assets and liabilities at the date of the Acquisition, as determined in accordance with the purchase method of accounting, is presented in the table below (in millions). The preliminary fair values allocated to acquired in-process research and development; property, plant and equipment and identifiable intangibles and other assets (shown below at a final allocated cost of zero) were $30.3 million, $179.0 million and $53.3 million, respectively. Cash.............................................................. $ 1.3 Accounts receivable............................................... 44.7 Inventories....................................................... 178.5 Prepaids and other current assets................................. 5.8 Net assets held for sale.......................................... 73.6 Other receivables from Baxter..................................... 20.1 Current deferred income tax assets................................ 19.2 In-process research and development............................... -- Property, plant and equipment..................................... -- Intangibles and other assets...................................... -- Non-current deferred income tax assets............................ 100.7 Accounts payable and accrued liabilities.......................... (93.3) Pension and other non-current liabilities......................... (14.8) Current deferred income tax liabilities........................... (1.1) Negative goodwill................................................. (24.2) ------ Net assets acquired........................................... $310.5 ======
The Acquisition was financed by the issuance of $45 million of Holdings' common stock, $150 million of bank debt, $120 million of senior subordinated debt, and $40 million of Holdings' preferred stock. Of the $270 million of debt proceeds, $22 million was used for debt issuance costs and approximately $25 million was used for working capital purposes. The installment note payable to Baxter was paid in full plus accrued interest on January 6, 1995. In addition to the $3.7 million preliminary purchase price adjustment due from Baxter, and in accordance with provisions of the Purchase and Sale Agreement, the Company had submitted a reimbursement request to Baxter for approximately $16.4 million of "Excluded General Liabilities" related to recorded pre- Acquisition period "Taxes" and "Employee Benefits" obligations, as defined, which have been or will be paid on Baxter's behalf by the Company. The aggregate amount due from Baxter of $20.1 million, plus post-Acquisition net operating cash "true-up" amounts of $1.8 million due from Baxter, was included within "Other receivables--Baxter, net" in the accompanying Consolidated Balance Sheet at December 31, 1994. The gross Acquisition-related amounts due from Baxter were subject to customary review and post-closing adjustment procedures provided for within the Purchase and Sale Agreement. The Company received a substantial portion of the estimated amounts due from Baxter, including final receipt in January 1996 from Baxter of the $9.7 million shown in the December 31, 1995 Consolidated Balance Sheet. The negotiated amount of the final purchase price that was not received was charged to negative goodwill in the finalization of acquisition accounting. The following represents the unaudited pro forma results of operations of the Company and its subsidiaries as if the Acquisition had occurred on January 1, 1994 and January 1, 1993, respectively, after giving effect to certain adjustments, including the exclusion of Burdick & Jackson's and Bartels' results, exclusion of the Predecessor's 1993 restructuring and downsizing costs, reduced depreciation of property, plant and equipment, reduced amortization of intangibles, amortization of negative goodwill, cost savings from the Company's restructuring actions (Note 5), increased employee benefits offset by reduced postretirement expenses, increased stand alone costs, increased interest expense on acquisition debt, the exclusion of non-recurring inventory writeoffs, and the related income tax effects of these adjustments (in millions): F-16 DADE INTERNATIONAL INC. NOTES TO COMBINED/CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
PRO FORMA PRO FORMA YEAR ENDED YEAR ENDED DECEMBER 31, DECEMBER 31, 1993 1994 ------------ ------------ (UNAUDITED) (UNAUDITED) Net sales.......................................... $653.5 $625.9 ====== ====== Net income......................................... $ 39.1 $ 44.3 ====== ======
The unaudited pro forma results of operations presented above, which have been adjusted to reflect the final amount of negative goodwill, are not necessarily indicative of the results that actually would have been obtained if the Acquisition had occurred on January 1, 1993 and 1994 and are not intended to be a projection of future results or trends. 4 NET ASSETS HELD FOR SALE The Company operated two businesses (Burdick & Jackson and Bartels) which, along with certain excess land and warehouse facilities at another location, were identified at the date of Acquisition (Note 3) as operations and assets to be sold. Burdick & Jackson is an integrated manufacturer of high purity solvents used for chromatography and spectrophotometry in the analytical laboratory. Bartels manufactures viral testing and related reagents under the Bartels name. Accordingly, the Company recorded $73.2 million as "Net assets held for sale" at December 31, 1994, which represented the estimated proceeds to be received from the sale of these operations and the excess land and facilities plus expected operating cash flow during the holding period, offset by interest expense on bank debt to be repaid with the estimated sales proceeds. The results of operations of Burdick & Jackson and Bartels have not been reflected in the Company's Consolidated Statements of Operations; however, they have been reflected in the combined financial statements of the Predecessor. Operating results for Burdick & Jackson and Bartels included in the Predecessor's Combined Statements of Operations follow (in millions):
PERIOD FROM JANUARY 1, 1994 YEAR ENDED THROUGH DECEMBER 31, DECEMBER 16, 1993 1994 ------------ --------------- Net sales....................................... $36.7 $34.3 ===== ===== Net income...................................... $ 5.6 $ 5.8 ===== =====
Bartels was sold during 1995 for gross proceeds of $16.5 million. The excess of the actual net proceeds over the Bartels carrying value at the date of its sale resulted in an adjustment and reallocation of the acquisition cost of the Company. Burdick & Jackson and the excess land and facilities were not sold during 1995; however, the excess land and facilities were sold in February 1996 at approximately the expected net proceeds, and the Company is currently actively marketing Burdick & Jackson. As the Company intends to sell Burdick & Jackson during 1996, the estimated net proceeds from its pending sale and from the February 1996 sale of the excess land and facilities, aggregating $54.9 million, were recorded as Net assets held for sale at December 31, 1995. As the Burdick & Jackson operations were not sold within one year of the Acquisition, its operations, as well as the interest expense on bank debt to be repaid with the estimated sales proceeds, will be reflected net within a single line in the Company's Consolidated Statements of Operations starting January 1, 1996. Interest expense allocated to the Net assets held for sale aggregated $6.1 million for the year ended December 31, 1995. Net assets held for sale at December 31, 1995 reflect the actual amount received from the sale of excess land and facilities in February 1996 plus management's best estimate of the amount expected to be realized on F-17 DADE INTERNATIONAL INC. NOTES TO COMBINED/CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) the sale of Burdick & Jackson. The amount the Company will ultimately realize could differ materially from the amount assumed in arriving at the net proceeds on disposal of the operations. 5 RESTRUCTURING AND DOWNSIZING CHARGES At the time of the Acquisition, the Successor's new ownership had identified a series of strategic restructuring actions for which it accrued an aggregate reserve of $21.0 million to cover severance actions ($10.8 million) and direct costs to exit certain facilities ($10.2 million) as part of a facilities and plant rationalization program. This overall plan is designed to improve the Company's future profitability. Restructuring actions include moving certain reagent production from Puerto Rico to Miami; consolidation and relocation of Paramax's manufacturing operations from Irvine, California; exiting an existing leased facility in Miami and moving the operations to owned facilities in Miami; streamlining the European sales force and exiting the Company's in-house printing and labeling functions in favor of third-party outsourcing. A total gross headcount reduction of 482 was identified as a part of these actions, consisting primarily of manufacturing and manufacturing support personnel at the affected operations and sales force personnel in Europe. The majority of these actions have already been completed and the overall program is expected to be completed prior to December 1996. During 1995, the Company paid $4.9 million to cover severance actions, paid $9.0 million for direct costs to exit certain facilities and terminated 288 employees under its restructuring plan, leaving a remaining restructuring reserve balance at December 31, 1995 of $7.1 million. In 1993, BDI undertook a series of measures to downsize its sales, general and administrative and non-strategic research and development staffs as part of a reorganization of its business units into a single operating division. These actions resulted in a charge of approximately $13.9 million (primarily for severance benefits paid to approximately 450 employees), substantially all of which was paid prior to December 16, 1994. As part of these initiatives, BDI also recorded a $16.3 million noncash charge for inventory and fixed asset write-offs in 1993 due to a decision to discontinue further investment (research and development and capital) and to curtail future production of certain under-performing product lines. The 1993 Combined Statement of Cash Flows includes $2.3 million of cash expenditures related to a BDI 1990 restructuring program. 6 ACCRUED LIABILITIES Accrued liabilities of the Company consist of the following (in millions):
DECEMBER 31, DECEMBER 31, 1994 1995 ------------ ------------ Salaries, wages, commissions, withholdings and other payroll taxes............................ $19.2 $ 36.0 Property, sales and use and other taxes......... 1.3 8.4 Restructuring and downsizing costs.............. 21.9 7.1 Deferred service contract revenue/warranty...... 5.6 11.3 Accrued debt/Acquisition costs.................. 6.3 -- Interest payable................................ -- 8.8 Other........................................... 28.3 34.3 ----- ------ $82.6 $105.9 ===== ======
Approximately $16.4 million of the Successor's accrued liabilities at December 31, 1994 represent "Excluded General Liabilities" related to "Taxes" and "Employee Benefits" obligations, as defined pursuant to the Purchase and Sale Agreement, for which the Company submitted a request for reimbursement from Baxter F-18 DADE INTERNATIONAL INC. NOTES TO COMBINED/CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) as a result of the Company having to logistically settle these liabilities on Baxter's behalf (Note 3). A substantial portion of these liabilities were reimbursed to the Company by Baxter. The portion disputed by Baxter, and ultimately agreed by the Company, was treated as an adjustment and reallocation of the acquisition cost of the Company (Note 2). 7 LONG-TERM DEBT AND LEASE OBLIGATIONS Long-term debt of the Company, which is subject to mandatory repayments under certain conditions (as described below), consists of the following (in millions):
DECEMBER 31, DECEMBER 31, 1994 1995 ------------ ------------ Bank Credit Agreement: A Term Loan...................................... $ 15.0 $ 39.9 B Term Loan...................................... 40.0 36.6 C Term Loan...................................... 45.0 41.2 D Term Loan...................................... 50.0 45.8 13% Senior Subordinated Notes...................... 120.0 120.0 ------ ------ 270.0 283.5 Less current portion............................... (6.6) (5.8) ------ ------ $263.4 $277.7 ====== ======
Term Loans and Revolving Credit Facility The Company entered into a Bank Credit Agreement with Bankers Trust Company as agent which provided for loans of up to $275 million (subsequently amended to $250 million). Loans available under the Bank Credit Agreement originally consisted of $115 million in aggregate principal amount of A Term Loan (subsequently amended to $50 million), $40 million in aggregate principal amount of B Term Loan, $45 million in aggregate principal amount of C Term Loan and $50 million in aggregate principal amount of D Term Loan (collectively, the "Term Loans") and a $25 million (subsequently amended to $65 million) revolving credit facility (the "Revolving Credit Facility"), which permits the Company to borrow up to $25 million (subsequently amended to $65 million) to finance working capital, letters of credit and other general corporate needs. The Company used $150 million of the Term Loans (only $15 million of the A Term Loan commitment) to provide a portion of the funds necessary to consummate the Acquisition of the Company (Note 3). Indebtedness of the Company under the Bank Credit Agreement is guaranteed by Holdings and the domestic subsidiaries of the Company. The borrowings under the Bank Credit Agreement are secured by all of the stock of the Company and each of its direct and indirect subsidiaries as well as substantially all of the domestic assets and certain foreign assets of the Company. The agreement contains various restrictive covenants, including but not limited to minimum earnings and interest coverage requirements, as well as limitations on borrowings, dividends/advances to Holdings and capital expenditures. The Company was in compliance with all debt covenants during the period December 17, 1994 through December 31, 1994 and during the year ended December 31, 1995. Indebtedness under the Bank Credit Agreement bears interest at a floating rate. Indebtedness under the Revolving Credit Facility and the Term Loans bears interest at a rate based upon (i) the Base Rate (defined as the higher of (a) the applicable prime rate of Bankers Trust Company or (b) the Federal Reserve reported certificate of deposit rate as adjusted pursuant to the Bank Credit Agreement plus 1/2 of 1%) in either case plus 1.75% in respect of A Term Loan and the loan under the Revolving Credit Facility, 2.25% in respect of B Term F-19 DADE INTERNATIONAL INC. NOTES TO COMBINED/CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) Loan, 2.50% in respect of C Term Loan and 2.875% in respect of D Term Loan or, after March 19, 1995 at the Company's option, (ii) the Eurodollar Rate (as defined in the Bank Credit Agreement) for one, two, three or six months, in each case plus 2.75% in respect of A Term Loan and the Revolving Credit Facility, 3.25% in respect of B Term Loan, 3.50% in respect of C Term Loan and 3.875% in respect of D Term Loan. At December 31, 1994, for the period December 17, 1994 through December 31, 1994, and for the period January 1, 1995 through March 21, 1995 the Company had funded its borrowings using the Base Rate option. At December 31, 1995 and for the period March 22, 1995 through December 31, 1995, the Company had funded its borrowings using the Eurodollar Rate Option. The Base Rate in effect at December 31, 1994 was the prime rate of 8.5%. The Eurodollar Rate in effect at December 31, 1995 was 5.875% in respect of A Term Loan and B Term Loan, 5.6875% in respect of C Term Loan, and 5.625% in respect of D Term Loan. As a condition of its Bank Credit Agreement, the Company has entered into an interest rate protection agreement with one of its banks, whereby effective March 14, 1995, it purchased a three year interest rate cap on $80 million of its outstanding term debt with a strike price of a LIBOR rate of 9% per annum. At December 31, 1994 and 1995, no amounts were outstanding under the Revolving Credit Facility, which expires September 30, 2000. The A Term Loan will mature on September 30, 2000. The B Term Loan will mature on December 31, 2001. The C Term Loan will mature on December 31, 2002. The D Term Loan will mature on June 30, 2003. The A Term Loan is subject to quarterly amortization payments which commenced in June 1995. The B Term Loan, C Term Loan and D Term Loan are subject to quarterly amortization payments which commenced in March 1995. In addition, the Bank Credit Agreement provides for mandatory repayments, subject to certain exceptions, of noncurrent portions of the Term Loans (and after all Term Loans have been repaid, certain commitment reductions under the Revolving Credit Facility) based on certain net asset sales outside the ordinary course of business of Holdings and its subsidiaries (including the asset sales contemplated in Note 4), the net proceeds of certain debt and equity issuances and 75% of Excess Cash Flow (as defined therein) per annum. The Revolving Credit Facility may be repaid and reborrowed. The Company is required to pay to the lenders under the Bank Credit Agreement a commitment fee equal to 1/2 of 1% per annum, payable on a quarterly basis, on the average unused portions of the Revolving Credit Facility and Term Loans during such quarter. The Bank Credit Agreement requires the Company to meet certain financial tests, including minimum levels of EBITDA (as defined therein), minimum interest coverage, maximum leverage ratio, other covenants which, among other things, limit the incurrence of additional indebtedness, dividends, transactions with affiliates, asset sales, acquisitions, mergers and consolidations, prepayments of other indebtedness (including the 13% Senior Subordinated Notes), liens and encumbrances and other matters customarily restricted in such agreements. The Bank Credit Agreement contains customary events of default, including payment defaults, breach of representations and warranties, covenant defaults, cross-defaults to certain other indebtedness, certain events of bankruptcy and insolvency, ERISA, judgment defaults, failure of any guaranty or security agreement supporting the Bank Credit Agreement to be in full force and effect and change of control of Holdings or the Company. 13% Senior Subordinated Notes The 13% Senior Subordinated Notes are due February 1, 2005 with interest payable semiannually. The 13% Senior Subordinated Notes are unsecured and were exchanged for 13% senior subordinated notes which were registered under the Securities Act of 1933 during 1995. The 13% Senior Subordinated Notes contain certain restrictive covenants, such as restrictions on certain payments, incurrence of additional debt and mergers and other change of control provisions. F-20 DADE INTERNATIONAL INC. NOTES TO COMBINED/CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) The 13% Senior Subordinated Notes are redeemable, in whole or in part, at the Company's option commencing February 1, 2000, except that the Company may redeem the Senior Subordinated Notes prior to February 1, 1998, with certain limitations, with the net proceeds of one or more public equity offerings. Redemption prices are specified in the Indenture Agreement. Letters of Credit At December 31, 1994, the Company was contingently obligated to fund $200 million in letters of credit to support the Company's installment note payable to Baxter (Note 3). The note was paid in full, and the letters of credit canceled, on January 6, 1995. Aggregate Maturities of Long-Term Debt The aggregate maturities of long-term debt at December 31, 1995 are as follows (in millions): 1996................................................. $ 5.8 1997................................................. 9.1 1998................................................. 10.9 1999................................................. 10.9 2000................................................. 16.0 Thereafter........................................... 230.8 ------ $283.5 ======
Multi--Currency Credit Facility During 1995, the Company entered into a multi-currency credit facility providing for aggregate borrowings of up to $10 million. This facility is guaranteed by the Company and provides working capital funds to several foreign subsidiaries. At December 31, 1995, of the $2.1 million of non- domestic bank debt outstanding, borrowings aggregating $1.0 million were outstanding under the facility, at interest rates on the various components equal to the specific foreign currency LIBOR rate plus a margin of 2.75%. Operating Leases The Company leases certain facilities and equipment under operating leases expiring at various dates. Most of these operating leases contain renewal options. Future minimum lease payments (including interest) under noncancelable operating leases at December 31, 1995 are as follows (in millions): 1996.................................................. $ 9.4 1997.................................................. 5.1 1998.................................................. 2.0 1999.................................................. 1.1 2000.................................................. 1.0 Thereafter............................................ 1.6 ----- $20.2 =====
F-21 DADE INTERNATIONAL INC. NOTES TO COMBINED/CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) Total expense for all operating leases was a net $16.6 million for the year ended December 31, 1993, $14.8 million for the period January 1, 1994 through December 16, 1994, $0.5 million for the period December 17, 1994 through December 31, 1994 and $12.9 million for the year ended December 31, 1995. 8 INCOME TAXES Income (loss) before income tax expense is as follows (in millions):
PREDECESSOR SUCCESSOR ---------------------------- ------------------------------ PERIOD FROM PERIOD FROM JANUARY 1, 1994 DECEMBER 17, 1994 YEAR ENDED THROUGH THROUGH YEAR ENDED DECEMBER 31, DECEMBER 16, DECEMBER 31, DECEMBER 31, 1993 1994 1994 1995 ------------ --------------- ----------------- ------------ Domestic (including Puerto Rico)........... $39.3 $73.7 $(4.2) $20.5 Foreign................. (25.6) (23.7) -- (0.6) ----- ----- ----- ----- Income (loss) before in- come tax expense....... $13.7 $50.0 $(4.2) $19.9 ===== ===== ===== =====
Tax Expense (Benefit) Income tax expense (benefit) consists of the following (in millions):
PREDECESSOR SUCCESSOR ---------------------------- ------------------------------ PERIOD FROM PERIOD FROM JANUARY 1, 1994 DECEMBER 17, 1994 YEAR ENDED THROUGH THROUGH YEAR ENDED DECEMBER 31, DECEMBER 16, DECEMBER 31, DECEMBER 31, 1993 1994 1994 1995 ------------ --------------- ----------------- ------------ CURRENT Domestic: Federal............... $ -- $ -- $ -- $1.0 State and local (in- cluding Puerto Ri- co).................. 5.0 5.5 0.2 3.6 Foreign................. 0.6 1.9 -- 1.0 ----- ----- ----- ---- Current income tax ex- pense.................. 5.6 7.4 0.2 5.6 ----- ----- ----- ---- DEFERRED Domestic: Federal............... -- -- (2.5) (0.3) State and local (in- cluding Puerto Ri- co).................. 6.7 7.1 -- 0.2 Foreign................. -- (0.3) -- 1.7 ----- ----- ----- ---- Deferred income tax ex- pense (benefit)........ 6.7 6.8 (2.5) 1.6 ----- ----- ----- ---- Total income tax expense (benefit).............. $12.3 $14.2 $(2.3) $7.2 ===== ===== ===== ====
F-22 DADE INTERNATIONAL INC. NOTES TO COMBINED/CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) Tax Rates Differences between income taxes computed using the U.S. federal income tax statutory rate of 35% and income tax expense recorded by the Company are attributable to the following (in millions):
PREDECESSOR SUCCESSOR ---------------------------- ------------------------------ PERIOD FROM PERIOD FROM JANUARY 1, 1994 DECEMBER 17, 1994 YEAR ENDED THROUGH THROUGH YEAR ENDED DECEMBER 31, DECEMBER 16, DECEMBER 31, DECEMBER 31, 1993 1994 1994 1995 ------------ --------------- ----------------- ------------ Income tax expense (ben- efit) at statutory rate................... $ 4.8 $ 17.5 $(1.5) $ 7.0 Tax exempt operations... (24.7) (26.5) (0.8) (4.8) Nondeductible (nontax- able) goodwill......... 2.3 2.2 -- (0.2) State and local taxes (net of federal bene- fit)................... 0.4 0.5 -- 0.5 Unrecognized net operat- ing loss carryforwards.......... 19.9 8.9 -- 3.1 U.S. tax on unremitted foreign earnings....... -- -- -- 1.1 Foreign tax expense (benefit).............. 9.5 11.5 -- (0.3) Other factors........... 0.1 0.1 -- 0.8 ------ ------ ----- ----- Income tax expense (ben- efit).................. $ 12.3 $ 14.2 $(2.3) $ 7.2 ====== ====== ===== =====
Deferred Taxes Deferred tax assets (liabilities) of the Company are comprised of the following (in millions):
DECEMBER 31, DECEMBER 31, 1994 1995 ------------ ------------ Gross deferred tax (liabilities)................. $ (4.0) $ (4.6) ------ ------ Gross deferred tax assets: Property, plant and equipment basis differ- ences......................................... 55.3 40.7 Tax goodwill................................... 41.2 39.4 Inventories basis difference................... 5.5 7.7 Accrued liabilities not currently deductible... 8.1 8.9 Other intangible assets basis difference....... 10.1 18.8 Net operating loss carryforwards............... -- 22.3 Other.......................................... 12.0 18.8 ------ ------ Gross deferred tax assets........................ 132.2 156.6 Valuation allowance.............................. (6.9) (13.6) ------ ------ Net deferred tax assets.......................... 125.3 143.0 ------ ------ $121.3 $138.4 ====== ======
Gross deferred tax assets were adjusted upward during 1995 by $21.3 million related to the reallocation of final purchase price and the fair value of net assets acquired (Note 2). At December 31, 1994 the Company recorded a valuation allowance of $6.9 million related to management's evaluation of the future realization of the excess tax basis for operating assets of certain foreign subsidiaries. Management has determined that, based upon facts existing at December 31, 1994, an adjusted valuation allowance at December 31, 1994 of $10.2 million was required. The offset to the $3.3 million upward adjustment to the valuation allowance was recorded as a reallocation of final purchase price (Note 2). In assessing F-23 DADE INTERNATIONAL INC. NOTES TO COMBINED/CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) the value of the gross deferred tax assets at December 31, 1995, management has analyzed the Company's forecast for future taxable earnings (and losses) by jurisdiction and other relevant factors and concluded that recoverability of a net deferred tax asset of $143.0 million is more likely than not. Accordingly, a $13.6 million valuation allowance has been established at December 31, 1995. The Company has requested a tax exemption grant from Puerto Rico which will provide that its manufacturing operations be partially exempt from local taxes until the year 2014. Appropriate taxes have been provided for these operations assuming repatriation of all available earnings. Taxes have been provided on the basis that the Company will receive the tax exemption retroactive to the period ended December 31, 1994. If the Company does not receive the tax exemption grant, the Company would be subject to additional local income taxes of approximately $6.0 million, net of federal benefit, through December 31, 1995. At December 31, 1995, the Company had net operating loss carryforwards available in the United States for federal income tax return purposes of $43.6 million which expire in 2009 and 2010. U.S. tax rules impose limitations on the use of net operating losses and excess tax bases following certain changes in ownership. If such a change were to occur, the limitation could reduce the amount of these benefits that would be available to offset future taxable income, starting with the year of ownership change. Additionally, at December 31, 1995, the Company had net operating loss carryforwards available in countries outside of the United States of $12.5 million with various dates of expiration. Deferred U.S. federal income taxes and foreign withholding taxes have been provided on the undistributed earnings of foreign subsidiaries deemed available for repatriation. 9 STOCKHOLDER'S EQUITY Common Stock The Company's common stock consists of 1,000 authorized shares of $.01 par value stock with voting rights, of which 1,000 shares were issued and outstanding at December 31, 1994 and 1995. All outstanding shares at December 31, 1994 and 1995 are owned by Holdings. During 1995, Holdings sold additional common stock of Holdings to members of the Company's management for $1.8 million in cash and $0.2 million in notes receivable. Holdings contributed the aggregate $2.0 million, including the notes receivable, to the capital of the Company which has classified the contribution as "Additional paid in capital" at December 31, 1995. Preferred Stock of Holdings Preferred stock of Holdings, with a fair value of $40.0 million, was issued to Baxter on December 20, 1994 as part of the total consideration paid to Baxter for the Company. Such consideration was contributed by Holdings to the capital of the Company and is classified as "Additional paid in capital" at December 31, 1994. A portion of the preferred stock was repurchased by Holdings from Baxter in a negotiated transaction and canceled by Holdings in December 1995 for an aggregate purchase price less than its fair value at issuance. The Company distributed $15.8 million to Holdings in December 1995 for Holdings' use for such preferred stock repurchase. Stock Purchase and Option Plans of Holdings On August 2, 1995, Holdings adopted the 1995 Executive Stock Purchase and Option Plan (the "Executive Plan") and the 1995 Management Stock Option Plan (the "Plan"). The Executive Plan provides for the sale of F-24 DADE INTERNATIONAL INC. NOTES TO COMBINED/CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) Holdings' common stock and the issuance of nonqualified stock options to purchase Holdings' common stock to certain members of the Company's management. The Plan provides for the issuance of nonqualified stock options to purchase Holdings' common stock to certain other members of the Company's management. All common stock shares sold, and stock options granted, to management under the Executive Plan and the Plan have issuance and exercise prices equal to or greater than the fair market value of Holdings' common stock on the date of sale or grant. The stock options have various vesting terms based upon the Company's performance and the passage of time. All granted stock options vest within ten years of the date of grant. 10 BAXTER INVESTMENT--PREDECESSOR A summary of changes in Baxter's investment, excluding the "Cumulative translation adjustment," is as follows (in millions): Excess of assets over liabilities at December 31, 1992............ $596.6 Net loss 1993..................................................... (1.9) Net change in amounts due to/from Baxter (Note 11)................ (29.4) ------ Excess of assets over liabilities at December 31, 1993............ 565.3 Net income from January 1, 1994 through December 16, 1994......... 35.8 Net change in amounts due to/from Baxter (Note 11)................ (74.6) ------ Excess of assets over liabilities at December 16, 1994............ $526.5 ======
11 RELATED PARTY TRANSACTIONS Commencing in December 1994, the Company and Baxter entered into a distribution agreement within the United States and other ancillary agreements to provide transition services to the Company and product services to Baxter. The terms of such agreements are summarized in the following paragraphs. U.S. Distribution Agreement Baxter The U.S. Distribution Agreement, which became effective at closing, and as amended and restated as of September 15, 1995, gives Baxter's U.S. Distribution Division the right, generally on an exclusive basis, to sell the Company's products in the areas in which Baxter's U.S. Distribution Division previously sold BDI's products. The term of this agreement is five years and provides for an automatic two year renewal term, and thereafter successive one year renewal terms. Baxter may terminate the agreement at any time after the four year anniversary date by providing the Company with at least six months prior written notice. The Company may also terminate the agreement at any time after the eighteen month anniversary with at least six months prior written notice. As of December 31, 1994 and 1995, the Company had $15.4 million and $53.4 million, respectively, of accounts receivable resulting from sales to Baxter's U.S. Distribution Division. Net sales to Baxter's U.S. Distribution Division aggregated $15.4 million for the period from December 17, 1994 through December 31, 1994 and $348.6 million for the year ended December 31, 1995. Net sales to Baxter divisions other than U.S. Distribution (including those under product services agreements discussed below) aggregated $15.3 million for the year ended December 31, 1995. Accounts receivable related to such non-U.S. Distribution Division sales aggregated $1.8 million at December 31, 1995. F-25 DADE INTERNATIONAL INC. NOTES TO COMBINED/CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) The U.S. Distribution Agreement provides for distribution margins to be received by Baxter at specified percentages off end user selling prices for which Baxter will provide the following: customer service, distribution services, outbound transportation, accounts receivable credit and collection, post sales services, leasing services (including capital equipment coordinators), sales administration, and a quality assurance program. Baxter will also continue to include the Company's products in Baxter's Corporate Program which provides rebates to customers who meet large volume purchase requirements. The Company reimburses Baxter for office support, national rebates and administration fees to multi-hospital systems, marketing tracing fees and cash application services for Product Services at Baxter's cost, which aggregated $0.2 million for the period December 17, 1994 through December 31, 1994 and $4.1 million during the year ended December 31, 1995. VWR Scientific Products Corporation (VWR) Effective September 15, 1995, the Company entered into an Exclusive Distribution Agreement with VWR for distribution of certain of its products to Industrial Customers. Such products were previously covered by the U.S. Distribution Agreement with Baxter; however, VWR acquired distribution rights to such products in connection with VWR's acquisition of Baxter's industrial products distribution business in 1995. The initial term of this agreement ends on December 31, 2000 and provides for automatic one year renewal terms. VWR or the Company may terminate the agreement any time after December 31, 2000 by providing at least six months prior written notice. The Company may also terminate the agreement at any time after the date of the agreement with at least six months prior written notice. Transition Services Agreement Pursuant to the Transition Services Agreement, which has a two year term, Baxter will supply the Company with certain international support services including regulatory support, sales and marketing support, warehousing services, human resource support, information resources, office space and accounting support. Baxter will also provide for two years certain domestic support services including data processing, regulatory and administrative services. Annual price increases will be the lower of 3% or the increase in the United States Consumer Price Index (CPI). The Consolidated Statements of Operations include $0.2 million for these services for the period December 17, 1994 through December 31, 1994 and $12.1 million for these services for the year ended December 31, 1995. Product Services Agreements Baxter and the Company have entered into Product Services Agreements whereby the Product Services unit of the Company will provide services to Baxter divisions on terms similar to those used historically. The terms of these Agreements range from one to three years, with automatic renewals unless terminated by notice. Notice required for termination of these Agreements ranges from 90 days to twelve months. The Consolidated Statement of Operations includes $12.5 million of net sales for these services for the year ended December 31, 1995. Leases In connection with the Acquisition, the Company will continue to lease certain warehouse facilities from Baxter and, in turn, Baxter has entered into a three year lease for one of the Company's owned warehouses in Miami. Lease payments to Baxter aggregated $0.5 million during the year ended December 31, 1995. Lease payments received from Baxter aggregated $0.1 million during the year ended December 31, 1995. Management Services Agreements The Company and Holdings entered into five year Management Services Agreements with Bain Capital and Goldman, Sachs & Co. (an affiliate of GS Capital) pursuant to which they will pay Bain Capital and Goldman, F-26 DADE INTERNATIONAL INC. NOTES TO COMBINED/CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) Sachs & Co. an aggregate annual fee of up to $2.0 million, subject to compliance with the terms of the Indenture governing the 13% Senior Subordinated Notes, plus their respective out-of-pocket expenses. Pursuant to the Management Services Agreements, Bain Capital and Goldman, Sachs & Co. have provided, and will continue to provide, management consulting, advisory services and support, negotiation and analysis of financing alternatives, acquisitions and dispositions and other services agreed upon by the Company, Bain Capital and Goldman, Sachs & Co. In connection with the Acquisition (Note 3), advisory fees and out-of-pocket expense reimbursements of $5.1 million and $1.5 million were paid to Bain Capital and Goldman, Sachs & Co., respectively, by Dade Acquisition, Inc. (Note 1). Advisory fees and out-of-pocket expense reimbursements under the Management Services Agreements of $1.8 million and $0.3 million to Bain Capital and Goldman, Sachs & Co., respectively, are included in the Consolidated Statement of Operations for the year ended December 31, 1995. Baxter Cash Management System--Predecessor The Predecessor participated in Baxter's centralized cash management program with respect to intercompany sales and accounts receivable, accounts payable and payroll/employee benefits. As a result, the Predecessor did not report a cash balance. Historically, the intercompany receivables and payables were settled in the normal course of business, usually within 30 to 60 days, and were not interest-bearing. Allocation of Baxter Selling, General and Administrative Expenses-- Predecessor Baxter had provided to the Predecessor certain domestic legal, treasury, audit, data processing, insurance, facility, regulatory and administrative services. Baxter had also provided to the Predecessor certain international support services from shared facilities in several locations worldwide. These shared services include regulatory and quality assurance, sales and marketing, warehousing, human resources, legal, information resources, office space and accounting and tax services. Charges for these domestic and international services to the Predecessor were based on allocations of Baxter's actual direct and indirect costs using varying allocation bases as appropriate (sales, payroll, headcount, managed capital, etc.) designed to estimate the actual cost incurred by Baxter to render these services to the Predecessor. The allocation process was consistent with the methodology used by Baxter to allocate the cost of similar services provided to its other business units. The allocated costs of these services are reflected in the Combined Statements of Operations and are summarized in the table below. No provision was made for possible incremental expenses that would have been incurred had the Predecessor operated as an independent stand-alone entity. The Predecessor also leased certain facilities on a month-to-month basis from Baxter. The lease rates approximated Baxter's cost and are included in the table below in the caption "Certain domestic services provided by Baxter." Baxter's U.S. Distribution Division was the exclusive distributor for the Predecessor's products in the United States. The U.S. Distribution Division provided the following services to BDI: customer service, distribution services, outbound transportation, accounts receivable, credit and collection, post-sales services, leasing services (including capital equipment coordinators), sales administration, and a quality assurance program. The estimated cost of providing these services was allocated to the Predecessor based on an allocation of actual direct and indirect costs incurred by the U.S. Distribution Division to provide these services. The allocation methodology was based primarily on sales volume and was consistent with the manner in which such costs were allocated to other Baxter manufacturing divisions for which the U.S. Distribution Division is the exclusive U.S. distributor. Based on Baxter's exclusive distribution arrangements with independent third-party manufacturers, management believes these allocations approximated "arms-length" pricing for these services. F-27 DADE INTERNATIONAL INC. NOTES TO COMBINED/CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) The allocated costs of these services are included as direct reductions of "Net sales" in the Combined Statements of Operations. Sales of products and services through Baxter, net of allocated distribution costs, represented 61.5% and 68.0% of total company sales for the year ended December 31, 1993 and for the period January 1, 1994 through December 16, 1994, respectively. The Baxter Corporate Program provides hospitals and multi-hospital systems with a single point of contact to gain immediate and convenient access to all of Baxter's products, services and systems. Customers participating in the Corporate Program also receive corporate rebates in connection with large volume purchases. Volume rebates pertaining to the sale of the Predecessor's products under the Corporate Programs are included in the allocated distribution costs discussed above. The Product Services unit of the Predecessor provided maintenance and repair services for medical devices sold by the Predecessor and several other Baxter operating units. The allocated cost of these services was billed to Baxter on the basis of hourly billing rates for services rendered, and is included in "Net sales" in the Combined Statements of Operations as summarized in the table below. A summary of the Predecessor related party transactions described in the paragraphs above, all of which are with Baxter or Baxter affiliates, is shown in the table below (in millions):
PERIOD FROM JANUARY 1, 1994 YEAR ENDED THROUGH DECEMBER 31, DECEMBER 16, 1993 1994 ------------ --------------- Product services provided to Baxter........... $ 4.5 $ 5.8 ===== ===== Certain domestic services provided by Baxter.. $ 6.6 $ 6.5 Certain international services provided by Baxter....................................... 21.3 20.7 Other distribution services provided by Bax- ter.......................................... 1.8 1.2 ----- ----- Total services provided by Baxter............. $29.7 $28.4 ===== =====
12 MANAGEMENT INCENTIVE COMPENSATION PLAN AND DEFERRED COMPENSATION PLAN The Company established a Management Incentive Compensation Plan (the "MICP") in 1995 which provides for incentive awards to certain key executives of the Company. The MICP is administered by the Board of Directors. At the end of each year during the life of the MICP, the Board of Directors will make cash awards based upon the attainment of annual predefined operating performance objectives. Awards under the MICP are charged to operations in the year earned. The Company established a Deferred Compensation Plan in 1995 which permits eligible employees to defer a portion of their compensation. The deferred compensation, together with Company matching amounts and accumulated interest, is accrued but unfunded and is distributable in cash after retirement or termination of employment. Participation in the Deferred Compensation Plan is limited to a group of Eligible Employees as designated by the Board of Directors. 13 RETIREMENT PROGRAMS--SUCCESSOR The Successor maintains non-contributory defined benefit pension plans covering substantially all employees in the United States and Puerto Rico ("Domestic Plans") and a combination of contributory and non-contributory plans in certain foreign locations ("Foreign Plans"). The Domestic Plans' benefits are based on years of service and the employee's compensation during five of the last ten years of employment as defined by F-28 DADE INTERNATIONAL INC. NOTES TO COMBINED/CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) the plans. The Company's funding policy is to make contributions to the trusts of the plans which meet or exceed the minimum requirements of the Employee Retirement Income Security Act of 1974 ("ERISA"). Under the terms of the Acquisition, Baxter retained liability for future benefits payable to existing retirees and non-transferred employees of the Predecessor as of the Acquisition date, and the Company established new plans for retained active employees. At December 31, 1994, approximately $34.6 million of assets related to the new plans remained in Baxter's trust accounts pending a cash transfer by the trustees of this amount plus interest of 7.5% per annum through the actual date of transfer. During 1995, substantially all of the assets were transferred to the new plans. At December 31, 1995, plan assets primarily consist of stocks, bonds and contracts with insurance companies. Assets held by the trusts of the Company's plans, including assets remaining in Baxter's plans' trusts at December 31, 1994, consist of the following (in millions):
DECEMBER 31, DECEMBER 31, 1994 1995 ------------ ------------ Total assets--Domestic Plans....................... $25.0 $26.6 Total assets--Foreign Plans........................ 9.6 11.4 ----- ----- $34.6 $38.0 ===== =====
Pension Expense Pension expense applicable to the Company includes the following components (in millions):
PERIOD FROM DECEMBER 17, 1994 THROUGH YEAR ENDED DECEMBER 31, DECEMBER 31, 1994 1995 ----------------- ------------ Service cost-benefits earned during the pe- riod...................................... $ 0.1 $ 4.5 Interest cost on projected benefit obliga- tion...................................... 0.1 2.9 Actual return on assets.................... (0.1) (2.0) Net amortization and deferral.............. -- (0.3) ----- ----- Total pension expense...................... $ 0.1 $ 5.1 ===== =====
Assumptions used for the above pension expense calculations include:
DECEMBER 31, DECEMBER 31, 1994 1995 ------------ ------------ Discount rate applied to benefit obligation: Domestic plans................................... 8.75% 8.75% Foreign plans (average).......................... 4.30% Long-term return on assets: Domestic plans................................... 9.50% 9.50% Foreign plans (average).......................... 5.00%
As foreign operations' results are excluded from the Company's Consolidated Statement of Operations for the period from December 17, 1994 through December 31, 1994, no pension expense related to foreign operations was recorded in the Consolidated Statement of Operations during that period. F-29 DADE INTERNATIONAL INC. NOTES TO COMBINED/CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) Funded Status The following tables set forth the funded status of amounts applicable to the Company (in millions):
DECEMBER 31, DECEMBER 31, 1994 1995 ------------ ------------ Actuarial present value of benefit obligation: Vested benefits................................ $ 32.9 $ 46.5 ------ ------ Accumulated benefits........................... 33.5 46.8 ------ ------ Projected benefits............................. 43.9 56.0 Less allocated plan assets at fair value......... (34.6) (38.0) ------ ------ Projected benefit obligation in excess of plan assets.......................................... 9.3 18.0 Unrecognized net gains (losses) and unrecognized prior service cost.............................. -- (5.1) ------ ------ Net pension liability............................ $ 9.3 $ 12.9 ====== ======
Assumptions used for the above funded status calculations include:
DECEMBER 31, DECEMBER 31, 1994 1995 ------------ ------------ Annual rate of increase in compensation levels: United States plans............................ 4.50% 4.50% Puerto Rico plan............................... 4.00% 4.00% Foreign plans (average)........................ 4.60% 3.10% Discount rate applied to benefit obligation: United States plans............................ 8.75% 7.75% Puerto Rico plan............................... 8.75% 7.75% Foreign plans (average)........................ 6.00% 4.30%
Most of the United States employees are eligible to participate in the Dade International Savings Investment Plan (SIP), a Company-sponsored qualified 401(k) plan. Participants may contribute up to 12% of their annual compensation, up to certain limits, to the SIP and the Company matches the participants' contributions, up to 3% of compensation. Matching contributions made by the Company were $0.1 million for the period December 17, 1994 through December 31, 1994 and $2.6 million for the year ended December 31, 1995. In conjunction with the Acquisition, the Company did not assume any existing retiree postretirement benefit obligations. At December 31, 1995, the Company does not offer postretirement benefits to its employees. 14 RETIREMENT PROGRAMS--PREDECESSOR BDI participated in Baxter-sponsored non-contributory defined benefit pension plans covering substantially all employees in the United States and Puerto Rico. The benefits were based on years of service and the employee's compensation during five of the last ten years of employment as defined by the plans. Baxter's funding policy has been to make contributions to the trust of the Qualified Plans which meet or exceed the minimum requirements of ERISA. Assets held by the trusts of the plans consist primarily of equity and fixed income securities. BDI also participated in Baxter-sponsored retirement plans in certain locations outside the United States and Puerto Rico. F-30 DADE INTERNATIONAL INC. NOTES TO COMBINED/CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) Pension Expense Pension expense applicable to BDI includes the following components (in millions):
PERIOD FROM JANUARY 1, 1994 YEAR ENDED THROUGH DECEMBER 31, DECEMBER 16, 1993 1994 ------------ --------------- Service cost-benefits earned during the peri- od.......................................... $ 5.1 $ 4.1 Interest cost on projected benefit obliga- tion........................................ 4.0 3.1 Actual return on assets...................... (2.6) (2.5) Net amortization and deferral................ 0.8 0.7 ----- ----- Total pension expense........................ $ 7.3 $ 5.4 ===== =====
Assumptions used for the above pension expense calculations include:
1993 1994 ----- ----- Discount rate applied to benefit obligation: United States and Puerto Rico plans........................... 8.0% 7.5% Foreign plans (average)....................................... 7.0% 7.0% Long-term return on assets: United States and Puerto Rico plans........................... 10.5% 10.5% Foreign plans (average)....................................... 8.0% 8.0%
Postretirement Benefits In addition to pension benefits, BDI participated in certain Baxter- sponsored contributory healthcare and life insurance benefit plans for substantially all domestic retired employees. Under these plans, BDI accrued costs for postretirement benefits over the service years of the employees. The postretirement benefit plans are not funded. Net postretirement healthcare and life insurance expense ("postretirement benefits") applicable to BDI for active employees includes the following components (in millions):
PERIOD FROM JANUARY 1, 1994 YEAR ENDED THROUGH DECEMBER 31, DECEMBER 16, 1993 1994 ------------ ------------ Service cost-benefits earned during the period.... $0.7 $0.5 Interest cost on projected benefit obligations.... 0.7 0.4 ---- ---- Net postretirement benefits cost.................. $1.4 $0.9 ==== ==== Assumptions used in determining the net postretirement benefits cost were: 1993 1994 ------------ ------------ Discount rate..................................... 8.0% 7.5% Annual rate of increase in the per capita costs... 14.0% 13.0% Rate to decrease to............................... 6.0% 5.0% By the year ended................................. 2003 2004
F-31 DADE INTERNATIONAL INC. NOTES TO COMBINED/CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) Most of the United States employees were eligible to participate in a Baxter-sponsored qualified 401(k) plan. Participants could contribute up to 12% of their annual compensation (limited in 1994 to $9,240 per individual) to the plan and Baxter matched the participants' contributions, up to 3% of compensation. Matching contributions made by Baxter related to BDI's employees were $3.6 million in 1993 and $3.3 million for the period January 1, 1994 through December 16, 1994. 15 COMMITMENTS, CONTINGENCIES AND INDEMNIFICATIONS The Company is a party in a number of legal proceedings. Based on the advice of legal counsel, management believes that any potential liability relative to the various legal proceedings pending against the Company, including the item described below, will not have a material adverse effect on the Company's conduct of its business, its results of operations, or its financial position. The Company is involved in a patent interference action involving certain Innovin(TM) products. This technology is licensed from a third party. Sales and operating margins associated with these products have not had a material impact on the Predecessor's or the Company's combined/consolidated financial statements. While the ultimate outcome cannot be predicted at this time, a negative determination by the United States Patent and Trademark Office in this interference could have a potentially material adverse effect on the Company's future plans for this technology. Purchase and Sale Agreement Indemnifications Pursuant to the Purchase and Sale Agreement, as subsequently amended, Baxter, Holdings and the Company entered into a number of indemnification and cross-indemnification agreements. Such indemnifications by the Company, where provided, generally relate to the protection of Baxter from certain actions, or failure to take certain actions, with respect to obligations assumed by the Company. Management believes that these indemnification obligations will not have a material adverse effect on the Company's conduct of its business, its results of operations, or its financial position. Conversely, Baxter has indemnified the Company, generally for a period of two years after the effective date of the Acquisition and subject to a deductible of $250,000 for each claim and an aggregate deductible of $15 million, for any pre-Acquisition intellectual property infringement matters and any breaches of representations and warranties by Baxter. Additionally, Baxter has indemnified the Company for all known and unknown "Taxes," as defined, relating to all pre-Acquisition periods (except with respect to recorded "Taxes" related to five smaller foreign and domestic subsidiaries), and for certain pre-Acquisition environmental liabilities (see "Environmental Matters" below), all pre-Acquisition workers' compensation claims and occurrences, and certain pre-Acquisition product liabilities and warranty matters. Environmental Matters Reserves for off-site environmental liabilities totaling $5.0 million at December 31, 1993 were created and accrued as a result of the actions of the Predecessor and its predecessors. Management believes the reserves established by Predecessor were adequate to cover any future environmental liability. Baxter has retained these off-site environmental liabilities, as well as other known pre-Acquisition environmental liabilities as specified in the Purchase and Sale Agreement; subject, in some cases, to certain nominal baskets and an overall $170.0 million cap. Baxter will also indemnify the Company for 100% of unknown pre-Acquisition liabilities, whether related to on-site or off-site matters, subject to survival periods ranging from three years to an indefinite period subsequent to the Acquisition date. In addition, Baxter has indemnified the Company for 65% of certain costs incurred by the Company to correct violations of environmental regulations at Transferred Real Properties (as defined) which occurred prior to the Acquisition. No environmental liability is recorded on the Company's Consolidated Balance Sheet at December 31, 1994 or 1995. F-32 DADE INTERNATIONAL INC. NOTES TO COMBINED/CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) 16 BUSINESS SEGMENT AND GEOGRAPHIC INFORMATION The Company is a leading manufacturer of diagnostics test equipment and supplies and provides related services to the hospital and reference lab market which is considered to be a single business segment. Financial information by geographic area for the year ended December 31, 1995 (Successor), the period December 17, 1994 through December 31, 1994 (Successor), the period January 1, 1994 through December 16, 1994 (Predecessor) and the year ended December 31, 1993 (Predecessor) is summarized as follows (in millions):
OTHER GENERAL INTER-AREA UNITED STATES EUROPE INTERNATIONAL CORPORATE ELIMINATIONS TOTAL ------------- ------ ------------- --------- ------------ ------ DECEMBER 31, 1995 AND THE YEAR THEN ENDED--SUCCESSOR (1) Trade sales............. $428.2 110.9 75.2 $614.3 Inter-area sales........ 60.3 1.5 -- (61.8) -- ------ ----- ---- ----- ------ Total sales............. $488.5 112.4 75.2 (61.8) $614.3 ====== ===== ==== ===== ====== Pretax income (loss) (2).................... $ 55.8 14.3 5.9 (56.1) $ 19.9 ====== ===== ==== ===== ====== Identifiable assets (3).................... $232.4 91.0 40.1 187.4 $550.9 DECEMBER 31, 1994 AND THE PERIOD DECEMBER 17, 1994 THROUGH DECEMBER 31, 1994-- SUCCESSOR (1) Trade sales............. $ 19.0 -- -- $ 19.0 Inter-area sales........ 1.4 -- -- (1.4) -- ------ ----- ---- ----- ------ Total sales............. $ 20.4 -- -- (1.4) $ 19.0 ====== ===== ==== ===== ====== Pretax income (loss) (2).................... $ (1.6) -- -- (2.6) $ (4.2) ====== ===== ==== ===== ====== Identifiable assets (3).................... $206.3 75.9 18.4 395.6 $696.2 PERIOD JANUARY 1, 1994 THROUGH DECEMBER 16, 1994--PREDECESSOR Trade sales............. $449.4 115.5 85.7 $650.6 Inter-area sales........ 50.1 -- -- (50.1) -- ------ ----- ---- ----- ------ Total sales............. $499.5 115.5 85.7 (50.1) $650.6 ====== ===== ==== ===== ====== Pretax income (loss).... $ 42.0 15.4 5.6 (13.0) $ 50.0 ====== ===== ==== ===== ====== THE YEAR ENDED DECEMBER 31, 1993--PREDECESSOR Trade sales............. $496.5 116.6 77.1 $690.2 Inter-area sales........ 61.8 -- -- (61.8) -- ------ ----- ---- ----- ------ Total sales............. $558.3 116.6 77.1 (61.8) $690.2 ====== ===== ==== ===== ====== Pretax income (loss) (4).................... $ 4.3 19.1 3.6 (13.3) $ 13.7 ====== ===== ==== ===== ======
- -------- (1) As described in Note 1, foreign results of operations for the period December 17, 1994 through December 31, 1994 are not material and have been omitted from the 1994 consolidated financial statements but were included in the 1995 consolidated financial statements. (2) As described in Note 2, pretax income (loss) includes a non-recurring charge resulting from the application of purchase accounting for a write- off of $5.6 million and $40.4 million for the period December 17, 1994 through December 31, 1994 and the year ended December 31, 1995, respectively, to cost of goods sold related to the amortization of the $46.0 million of allocated purchase price made to record acquired finished goods and work-in-process inventory at fair market value. F-33 DADE INTERNATIONAL INC. NOTES TO COMBINED/CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) (3) As described in Notes 2, 3, 4 and 8, general corporate identifiable assets at December 31, 1994 include net assets held for sale of $73.2 million, restricted cash of $200.0 million to settle the installment purchase price with Baxter, and net deferred tax assets of $125.3 million. At December 31, 1995, general corporate identifiable assets include net assets held for sale of $54.9 million and net deferred tax assets of $143.0 million. (4) As described in Note 5, pretax income for the year ended December 31, 1993 includes $30.2 million of restructuring charges. Inter-area transactions are accounted for at cost. Identifiable assets are those assets associated with a specific geographic area. Foreign net sales (including U.S. export sales) of all combined foreign entities were $210.5 million for the year ended December 31, 1993, $216.5 million for the period January 1, 1994 through December 16, 1994 and $202.2 million for the year ended December 31, 1995. Foreign net assets were $18.5 million and $21.1 million as of December 31, 1994 and 1995, respectively. 17 SUBSEQUENT EVENT--SUCCESSOR On December 11, 1995, the Company entered into a purchase and sale agreement with E. I. du Pont de Nemours and Company ("DuPont") pursuant to which the Company will acquire the worldwide in vitro diagnostics products manufacturing and services business ("IVD" or "Acquired Business" of DuPont) (the "IVD Acquisition"). The IVD Acquisition, which is expected to be consummated on or about April 30, 1996, involves an all cash purchase price of $525 million, which will require the Company to incur a significant amount of incremental debt to finance. Depending upon how the IVD Acquisition is financed and integrated within the Company, a portion or all of the Company's existing deferred financing fees may be written off and other one time costs are likely to be recorded. F-34 DADE INTERNATIONAL INC. UNAUDITED CONSOLIDATED BALANCE SHEET (DOLLARS IN MILLIONS, EXCEPT SHARE-RELATED DATA)
JUNE 30, 1996 ----------- (UNAUDITED) ASSETS: Current Assets: Cash and cash equivalents....................................... $ 10.9 Accounts receivable--trade and related party, net............... 166.1 Inventories..................................................... 160.2 Prepaid expenses and other current assets....................... 14.5 Net assets held for sale........................................ 45.0 Deferred income taxes........................................... 34.5 -------- Total Current Assets.......................................... 431.2 Property, plant and equipment, net................................ 160.0 Debt issuance costs............................................... 44.7 Deferred income taxes............................................. 187.1 Goodwill, net..................................................... 153.3 Patents and trademarks............................................ 31.6 Other assets...................................................... 15.8 Prepaid pension asset............................................. 20.9 -------- Total Assets.................................................. $1,044.6 ======== LIABILITIES AND STOCKHOLDER'S EQUITY: Current Liabilities: Current portion of Bank Credit Agreement........................ $ 7.7 Non-domestic bank debt.......................................... 10.0 Revolving credit agreement...................................... 15.0 Accounts payable--trade and related party....................... 59.0 Accrued liabilities............................................. 162.4 Deferred income taxes........................................... 1.3 -------- Total Current Liabilities..................................... 255.4 Bank credit agreement, less current portion....................... 452.3 Senior Subordinated Notes......................................... 350.0 Other liabilities................................................. 6.1 -------- Total Liabilities............................................. 1,063.8 Commitments and contingencies..................................... -- STOCKHOLDER'S EQUITY: Common stock, $.01 per value, 1000 shares authorized, issued and outstanding...................................................... -- Additional paid-in-capital........................................ 87.0 Notes receivable on capital contribution.......................... (0.2) Retained earnings (deficit)....................................... (102.9) Unrealized gain (loss) on investments............................. (1.4) Cumulative translation adjustment................................. (1.7) -------- Total Stockholder's Equity.................................... (19.2) -------- Total Liabilities and Stockholder's Equity.................... $1,044.6 ========
See accompanying notes to unaudited consolidated financial statements F-35 DADE INTERNATIONAL INC. UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS (DOLLARS IN MILLIONS)
SIX MONTHS ENDED JUNE 30, ---------- 1995 1996 ------ ------ (UNAUDITED) Net Sales--Third party......................................... $112.7 $187.8 --Related party....................................... 187.3 166.0 ------ ------ 300.0 353.8 ------ ------ Operating Costs and Expenses: Cost of goods sold........................................... 208.7 208.4 Marketing and administrative expenses........................ 77.6 113.1 Research and development expenses............................ 13.7 114.2 Goodwill amortization expense (credit)....................... (0.8) 0.8 Restructuring and other related items........................ -- 11.4 ------ ------ Income (loss) from operations.................................. 0.8 (94.1) Other Income (Expense): Interest expense............................................. (15.0) (23.9) Other income................................................. 1.3 2.3 ------ ------ Income (loss) before income taxes.............................. (12.9) (115.7) Income tax expense (benefit)................................... (4.8) (42.8) ------ ------ Income (loss) before extraordinary items....................... $ (8.1) (72.9) Extraordinary items (net of tax benefit of $14.7): Write-off of deferred financing fees......................... -- (11.4) Premium on purchase of Senior Subordinated Notes............. -- (13.6) ------ ------ Net income (loss).............................................. $ (8.1) $(97.9) ====== ======
See accompanying notes to unaudited consolidated financial statements F-36 DADE INTERNATIONAL INC. UNAUDITED CONSOLIDATED STATEMENT OF CASH FLOWS (DOLLARS IN MILLIONS)
SIX MONTHS ENDED JUNE 30, ------------- 1995 1996 ----- ------ (UNAUDITED) CASH FLOW PROVIDED (USED) BY OPERATING ACTIVITIES: Net loss....................................................... $(8.1) $(97.9) Adjustments to reconcile net loss to net cash provided (used) by operating activities: Write-off of in process research and development............. -- 98.1 Depreciation and amortization expense........................ 2.4 12.5 Amortization of goodwill..................................... (0.8) 0.8 Deferred income taxes........................................ (4.8) (57.8) Restructuring and other related costs........................ -- 11.4 Write-off of deferred finance fees........................... -- 18.1 Amortization of inventory write-up........................... 40.4 25.5 Changes in balance sheet items: Accounts receivable........................................ (71.0) 13.6 Inventories, net of amortization for inventory write-up.... 17.1 (6.3) Prepaid expenses........................................... (3.3) (3.9) Accounts payable and bank overdrafts....................... 24.4 3.5 Accrued liabilities........................................ 4.5 (10.5) Other liabilities.......................................... (1.3) 5.2 Other...................................................... (5.3) 1.4 ----- ------ Cash flow (used) provided by operating activities.............. (5.8) 13.7 INVESTING ACTIVITIES: Purchase of IVD................................................ -- (529.1) Capital expenditures........................................... (13.8) (25.0) Proceeds from Baxter International Inc., for purchase price ad- justments..................................................... 15.9 9.7 ----- ------ Investing activities, net...................................... 2.1 (544.4) FINANCING ACTIVITIES: Proceeds from "net assets held for sale"....................... -- 9.9 Proceeds from revolving credit agreement, net of repayments.... -- 15.0 Proceeds from short term notes................................. 2.2 8.3 Proceeds from Senior Subordinated Notes, net of repayments..... -- 230.0 Proceeds of bank credit agreement, net of repayments........... 32.7 296.5 Deferred financing fees........................................ -- (45.7) ----- ------ Financing activities, net...................................... 34.9 514.0 ----- ------ Effect of exchange rate changes on cash........................ 0.8 (0.3) ----- ------ Net increase (decrease) in Cash and Cash Equivalents........... 32.0 (17.0) CASH AND CASH EQUIVALENTS: Beginning of Period............................................ $22.4 $ 27.9 ----- ------ End of Period.................................................. $54.4 $ 10.9 ===== ======
See accompanying notes to unaudited consolidated financial statements F-37 DADE INTERNATIONAL INC. NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (DOLLARS IN MILLIONS) NOTE 1. FINANCIAL INFORMATION, ORGANIZATION AND BUSINESS Dade International Inc. (the "Company") was incorporated in Delaware in 1994 to effect the acquisition (the "Dade Acquisition") of the in vitro diagnostics products manufacturing and services businesses of Baxter Diagnostics Inc., a wholly-owned subsidiary of Baxter International Inc. ("Baxter"). The Company develops, manufactures and markets diagnostic equipment, reagents, consumable supplies and services worldwide. The Company is a wholly-owned subsidiary of Diagnostics Holding, Inc. ("Holdings"). Bain Capital, Inc. ("Bain Capital") and GS Capital Partners, L.P., an affiliate of the Goldman Sachs Group, L.P. ("GS Capital"), and their respective related investors owned, until August 2, 1995, all of the voting capital stock of Holdings, which in turn owns all of the outstanding capital stock of the Company. On August 2, 1995, Holdings adopted stock purchase and option plans which provided for members of the Company's management to own capital stock of Holdings. At June 30, 1996, Bain Capital, GS Capital, their respective related investors and the management of the Company owned all of the capital stock of Holdings. On May 7, 1996, the Company acquired (the "Chemistry Acquisition") the world- wide in vitro diagnostics business ("Dade Chemistry") of E.I. du Pont de Nemours and Company ("DuPont") with effect as of May 1, 1996. As a result, the Consolidated Statements of Operations for the six months and quarter ended June 30, 1996 and the Consolidated Balance Sheet as of June 30, 1996 are not comparable to the consolidated Balance Sheet and the Consolidated Statements of Operations in 1995. The unaudited interim financial statements of the Company have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission. Accordingly, certain information and footnote disclosures have been condensed or omitted. These unaudited interim consolidated financial statements should be read in conjunction with the consolidated financial statements and the notes for the year ended December 31, 1995. In the opinion of management, the unaudited interim consolidated financial statements reflect all adjustments (which include only normal and recurring adjustments) necessary for a fair presentation of the interim periods. The results of operations for the interim periods are not necessarily indicative of the results of operations expected for the full year. The results reported for the six month period ended June 30, 1996 reflect management's preliminary allocation of the purchase price necessary to record the Chemistry Acquisition as well as the results of Dade Chemistry subsequent to May 1, 1996. This preliminary allocation will be refined during the remainder of 1996. Certain balances have been reclassified to conform with the current presentation. NOTE 2. CHANGE IN INTERNATIONAL REPORTING PERIOD Prior to 1996, the Company's operations outside the United States and Puerto Rico (collectively "International Operations") were consolidated on a one-month delay (i.e. international May 1995 results were reported as June 1995 results) in the consolidated financial statements of the Company. Effective with 1996 reporting, this one month lag for International Operations was eliminated. As a consequence, operating results for the six-month period ended June 30, 1996 include seven months of International Operations. The Company has designated the month of December 1995 as the "lag month" for purposes of comparability to future periods. International Operations during the lag month produced net sales of approximately $12.3 million, and a net income of approximately $1.3 million, thus increasing consolidated net sales and consolidated net income by these respective amounts for the six month period ended June 30, 1996. F-38 DADE INTERNATIONAL INC. NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) (DOLLARS IN MILLIONS) NOTE 3. INVENTORIES Inventories consisted of the following:
DECEMBER 31, JUNE 30, 1995 1996 ------------ ----------- (UNAUDITED) Raw Materials................................... $ 21.9 $ 32.8 Work in Process................................. 34.4 47.1 Finished Products............................... 65.7 80.3 ------ ------ Total Inventories............................. $122.0 $160.2 ====== ======
In connection with the Dade Acquisition and the Chemistry Acquisition, which were recorded in accordance with the purchase method of accounting, the Company's inventories were written-up by $46.0 million and $25.5 million at the respective acquisition dates. Of the $46.0 million write-up, $5.6 million was charged to cost of goods sold during the period December 17, 1994 through December 31, 1994. The remaining $40.4 million was charged to cost of goods sold during the period January 1, 1995 through March 31, 1995. The $25.5 million write-up was charged to cost of goods sold during the quarter ended June 30, 1996. NOTE 4. CHEMISTRY ACQUISITION The Chemistry Acquisition was recorded in accordance with the purchase accounting method. Accordingly, the sum of the purchase price and the direct costs of the Chemistry Acquisition, which aggregated $529.1 million, was allocated to the assets acquired and the liabilities assumed based upon their fair market values at the date of the Chemistry Acquisition. Since the purchase price exceeded the fair market value of the net assets acquired, the residual, initially aggregating $158.0 million, was recorded as goodwill and is being amortized using the straight-line method over twenty-five years. The results of operations of Dade Chemistry are included in the accompanying Unaudited Consolidated Statements of Operations since the date of consummation of the Chemistry Acquisition. The assets and liabilities of Dade Chemistry, as determined in accordance with the purchase method of accounting, are also consolidated in the accompanying Unaudited Consolidated Balance Sheet from the date of the Chemistry Acquisition resulting in increases in various balances as compared to December 31, 1995. A summary of assets acquired, liabilities assumed and the purchase price paid is as follows: Cash consideration.................... $512.0 Costs of acquisition.................. 17.1 ------ 529.1 Liabilities assumed................... 56.4 ------ Costs of assets acquired.............. $585.5 ======
The Company's preliminary allocation of the Dade Chemistry purchase price includes $98.1 million of costs attributed to in-process research and development projects which the Company believes have no future alternative use. Accordingly, such costs were expensed upon the consummation of the Chemistry Acquisition. The Chemistry Acquisition was financed principally by the issuance of $350 million of senior subordinated debt, $510 million of bank debt and approximately $14 million of Company cash. Of the $860 million of debt proceeds, approximately $146 million was utilized for repayment of previously issued senior subordinated notes and related costs and approximately $154 million was used for the repayment of senior bank debt and accrued interest. An additional $45 million was used for debt issuance costs. F-39 DADE INTERNATIONAL INC. NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) (DOLLARS IN MILLIONS) The following represents the unaudited pro forma results of operations of the Company and its subsidiaries as if the Chemistry Acquisition had occurred on January 1, 1995 and January 1, 1996 respectively, after giving effect to the following adjustments: increased depreciation of property, plant and equipment, increased amortization of intangibles, increased amortization of goodwill, increased interest expense on acquisition debt, refinancing charges, and related income tax effects of these adjustments:
PRO FORMA SIX PRO FORMA SIX MONTHS ENDED MONTHS ENDED JUNE 30, 1995 JUNE 30, 1996 ------------- ------------- Net sales.................................... $ 479.5 $ 468.6 ======= ======= Loss before extraordinary items.............. $ (81.7) $ (77.2) ======= ======= Net loss..................................... $(106.7) $(102.2) ======= =======
The unaudited pro forma results of operations presented above are not necessarily indicative of the results that would have been obtained if the Chemistry Acquisition had actually occurred on January 1, 1995 and January 1, 1996. Moreover, the synergistic savings that are expected to be realized as a result of the Chemistry Acquisition and the adjustment for the differences in reporting periods for the Company's International Operations are not reflected in the unaudited pro forma results presented above. NOTE 5. REFINANCING Bank Credit Agreement. To fund the Chemistry Acquisition, the Company refinanced its existing indebtedness by entering into a credit agreement ("Bank Credit Agreement") with Bankers Trust Company as agent and other institutions party thereto which provides for borrowing up to $585.0 million, of which $460 million is in term loans and $125 million in a revolving credit facility ("Revolving Credit Facility"). Initial borrowings under the Bank Credit Agreement consist of $185.0 million of A Term Loans, $90.0 million of B Term Loans, $90.0 million amount of C Term Loans, $95.0 million of D Term Loans and $50 million of the $125 million under the Revolving Credit Facility. The borrowings under the Bank Credit Agreement are guaranteed by Holdings and the Company's domestic subsidiaries, and are secured by substantially all the domestic assets and certain foreign assets of the Company. The Bank Credit Agreement bears interest at floating rates as provided therein. The A Term Loans will mature on December 31, 2001. The B Term Loans will mature on December 31, 2002. The C Term Loans will mature on December 31, 2003. The D Term Loans will mature on December 31, 2004. The Revolving Credit Facility will mature on December 31, 2001. The Revolving Credit Facility may be repaid and reborrowed. The Company will be required to pay to the banks a commitment fee on the average unused portion of the Revolving Credit Facility during each quarter. The Company also will be required to pay to the banks participating in the Revolving Credit Facility letter of credit fees for each letter of credit outstanding and a fronting fee for each outstanding letter of credit issued. Under the terms of the Bank Credit Agreement, the Company is required to maintain specified levels of interest rate protection. The Company has purchased a series of interest rate caps under which the Company will receive cash payments from the counterparties if certain indexed rates of interest are exceeded. Premiums paid for the purchase of the caps are capitalized and amortized to interest expense over the life of the caps. Senior Subordinated Notes. Concurrent with the refinancing of the Bank Credit Agreement, Dade repurchased $120 million, 13% Senior Subordinated Notes due 2005 and subsequently issued $350 million 11 1/8% Senior Subordinated Notes due 2006 (the "Senior Subordinated Notes"). Interest on the Senior Subordinated Notes accrues from the date of issuance and is payable semi- annually on May 1 and November 1, commencing November 1, 1996. The Senior Subordinated Notes are redeemable in whole or in part, at the Company's option commencing May 1, 2006. F-40 DADE INTERNATIONAL INC. NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) (DOLLARS IN MILLIONS) In connection with the debt refinancing and purchase of the 13% Senior Subordinated Notes due 2005, $18.1 million ($11.4 million net of tax) of deferred financing fees and $21.6 million ($13.6 million net of tax) of premiums were realized as extraordinary items. NOTE 6. RESTRUCTURING During the second quarter of 1996, the Company recorded an $11.4 million charge for restructuring and costs in connection with the Chemistry Acquisition. The restructuring plan is designed to decrease costs, increase efficiency and eliminate redundant operations and is expected to produce annual savings and result in the elimination of permanent and temporary positions. Management expects to complete this restructuring within one year. F-41 REPORT OF INDEPENDENT ACCOUNTANTS To the Board of Directors of E. I. du Pont de Nemours and Company We have audited the accompanying combined statement of net assets to be sold of In Vitro Diagnostics (the "Business"), a division of E. I. du Pont de Nemours and Company (the "Company"), at December 31, 1995, 1994 and 1993 and the related combined statement of operations of the Business for the years then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe our audits provide a reasonable basis for our opinion. The accompanying combined financial statements were prepared to comply with the rules and regulations of the Securities and Exchange Commission and on the basis of presentation as described in Note 1, to present the combined net assets of the Business to be sold to Dade International Inc. and the related combined results of operations of the Business and are not intended to be a complete presentation of the Business' financial position or cash flows. In our opinion, the combined financial statements present fairly, in all material respects, the combined net assets of the Business to be sold to Dade International Inc. at December 31, 1995, 1994 and 1993 and the combined results of operations of the Business for the years then ended, in conformity with generally accepted accounting principles. PRICE WATERHOUSE LLP Philadelphia, Pennsylvania August 2, 1996 F-42 IN VITRO DIAGNOSTICS (A DIVISION OF E. I. DU PONT DE NEMOURS AND COMPANY) COMBINED STATEMENT OF OPERATIONS [SEE NOTE 1] (DOLLARS IN MILLIONS)
YEAR ENDED DECEMBER 31, SEE --------------------- NOTE 1995 1994 1993 ---- ------ ------ ------ 4 Sales ......................................... $341.8 $325.9 $333.2 Other Income................................... 2.9 3.7 1.2 ------ ------ ------ Total Revenues................................. 344.7 329.6 334.4 Cost of Goods Sold and Other Operating 6 Expenses....................................... 181.5 172.9 172.4 3 Selling, General and Administrative Expenses... 108.8 102.6 104.9 Research and Development Expenses.............. 33.7 33.6 34.6 5 Restructuring Charges.......................... -- 13.3 9.9 ------ ------ ------ Income Before Interest Expense and Taxes....... 20.7 7.2 12.6 2 Interest Expense............................... 7.6 6.8 6.8 ------ ------ ------ Income Before Income Taxes..................... 13.1 0.4 5.8 2,7 Provision for (Benefit from) Income Taxes...... 3.7 (0.9) (3.4) ------ ------ ------ NET INCOME..................................... $ 9.4 $ 1.3 $ 9.2 ====== ====== ======
See pages F-45 to F-54 for Notes to Combined Financial Statements. F-43 IN VITRO DIAGNOSTICS (A DIVISION OF E. I. DU PONT DE NEMOURS AND COMPANY) COMBINED STATEMENT OF NET ASSETS TO BE SOLD [SEE NOTE 1] (DOLLARS IN MILLIONS)
DECEMBER 31, SEE --------------------- NOTE 1995 1994 1993 ---- ------ ------ ------- ASSETS 4 Accounts Receivable Trade--Net..................... $ 74.2 $ 65.0 $ 64.8 8 Inventories........................................ 33.1 31.1 40.9 9 Property, Plant and Equipment...................... 184.8 208.0 202.3 Less: Accumulated Depreciation..................... 112.3 128.0 105.0 ------ ------ ------- Net Property, Plant and Equipment.................. 72.5 80.0 97.3 ------ ------ ------- Other Assets....................................... 8.6 10.4 9.9 ------ ------ ------- TOTAL ASSETS TO BE SOLD............................ 188.4 186.5 212.9 ------ ------ ------- LIABILITIES Product Warranty................................... 3.1 2.0 2.3 Deferred Service Revenue........................... 11.8 16.2 18.5 ------ ------ ------- TOTAL LIABILITIES TO BE ASSUMED.................... 14.9 18.2 20.8 ------ ------ ------- NET ASSETS TO BE SOLD.............................. $173.5 $168.3 $ 192.1 ====== ====== =======
See pages F-45 to F-54 for Notes to Combined Financial Statements. F-44 IN VITRO DIAGNOSTICS (A DIVISION OF E. I. DU PONT DE NEMOURS AND COMPANY) NOTES TO COMBINED FINANCIAL STATEMENTS (DOLLARS IN MILLIONS) NOTE 1. BASIS OF PRESENTATION On December 11, 1995, E. I. du Pont de Nemours and Company ("DuPont") entered into an Asset Purchase and Sale Agreement (the "Agreement") with Dade International Inc. ("Dade") for the sale of DuPont's worldwide In Vitro Diagnostics operations (the "Business"). The Business designs, manufactures and markets clinical analyzers and reagents, and provides related equipment service and customer support for hospitals and alternative health care markets worldwide. Under the terms of the Agreement, on April 30, 1996 (the "Closing Date"), DuPont sold to Dade essentially all of the assets related to DuPont's operation of the Business in the following countries: NORTH AMERICA SOUTH AMERICA EUROPE ASIA PACIFIC United States Venezuela Belgium Australia Canada France Japan Puerto Rico Germany Italy Netherlands Spain Switzerland United Kingdom The major manufacturing operations of the Business are conducted at Glasgow, DE, and, through October 1995, at Manati, Puerto Rico. Operations in Puerto Rico were transferred to the U.S. during 1995 [See Note 6]. In addition, the Business has other manufacturing operations at Newtown, CT. Under the terms of the Agreement, Dade assumed the deferred service and product warranty liabilities of the Business. Other liabilities, which will be retained by DuPont, are generally not specifically identifiable with the Business. Under DuPont's centralized cash management system, cash requirements of the Business were generally provided directly to the Business by DuPont and cash generated by the Business was generally remitted directly to DuPont. Transaction systems (e.g., payroll, employee benefits, freight, and accounts payable) used to record and account for cash disbursements were provided by centralized DuPont organizations. Most of these corporate systems are not designed to track liabilities and payments on a business specific basis. Accordingly, it is not practical to determine liabilities associated with the Business for the above items; therefore, such liabilities cannot be included in the Combined Financial Statements. Given these constraints, a Combined Statement of Net Assets to be Sold is presented in lieu of a statement of financial position and certain supplemental cash flow information is presented in lieu of a statement of cash flows [See Note 12]. Throughout the period covered by the Combined Financial Statements, the Business' U.S. operations were conducted and accounted for as a division of DuPont's Medical Products Strategic Business Unit ("Medical SBU"). Non-U.S. operations of the Business were conducted in each country through DuPont subsidiaries that included other DuPont businesses. Historically, financial statements were not prepared for the Business. These Combined Financial Statements were prepared to comply with the rules and regulations of the Securities and Exchange Commission. These statements were derived from DuPont's historical accounting records, and are presented as if the operations of the Business in each country had been conducted exclusively within a wholly-owned subsidiary of the DuPont subsidiary in that country. F-45 IN VITRO DIAGNOSTICS (A DIVISION OF E. I. DU PONT DE NEMOURS AND COMPANY) NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED) The Combined Statement of Operations includes all revenues and costs attributable to the Business, including 1) costs for facilities, functions and services used by the Business at sites shared with other DuPont operations, 2) costs for certain functions and services performed by centralized DuPont organizations directly charged to the Business, 3) allocations of DuPont's Medical Products SBU management expense and 4) allocations of interest expense [See Notes 2 and 3]. All of the allocations and estimates in the Combined Financial Statements are based on assumptions that DuPont management believes are reasonable under the circumstances. However, these allocations and estimates are not necessarily indicative of the costs that would have resulted if the Business had been operated as a separate entity. Transactions between the Business and other DuPont operations have been identified in the Combined Financial Statements as transactions between related parties to the extent practicable [See Note 3]. NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of Combination The Combined Financial Statements include the accounts of the various units comprising the Business. All material transactions and accounts among the units have been eliminated in combination. Revenue Recognition Sales and related cost of goods sold are included in income when goods are shipped to the customer. Service revenues are recognized ratably over the life of the service agreement or as service is performed, if not under a service agreement. Revenue on equipment leased to customers is recognized over the term of the lease. Inventories U.S. inventories are valued at the lower of aggregate cost or market, with cost being determined by the last-in, first-out (LIFO) method. Non-U.S. inventories, as well as stores and supplies, are valued at the lower of aggregate cost or market, with cost being determined by the average cost method. Elements of cost in inventory include raw materials, direct labor and manufacturing overhead. Property, Plant and Equipment (PP&E) PP&E is carried at cost and, for PP&E acquired subsequent to 1994, is depreciated using the straight-line method. PP&E acquired prior to 1995 is generally classified in depreciable groups and depreciated under the sum-of- the-years' digits method. This change in depreciation method did not have a material effect on 1995 results and was made to conform with the common industry practice, which management considers to be preferable. Depreciation rates are based on estimated useful lives of 15 to 25 years for buildings, 4 to 8 years for equipment leased to customers and 5 to 25 years for all other equipment. Generally, for PP&E acquired prior to 1991, the gross carrying value of PP&E surrendered, retired, sold or otherwise disposed of is charged to accumulated depreciation and any salvage or other recovery therefrom is credited to accumulated depreciation. For disposals of PP&E acquired after 1990, the gross carrying value and related accumulated depreciation are removed from the accounts and included in determining gain or loss on such disposals. F-46 IN VITRO DIAGNOSTICS (A DIVISION OF E. I. DU PONT DE NEMOURS AND COMPANY) NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED) Maintenance and repairs are charged to operations; replacements and betterments are capitalized. Research and Development Expenses Research and development costs are charged to expense when incurred. Interest Expense Interest expense is determined by DuPont based on consolidated indebtedness and, in these Combined Financial Statements, has been allocated to the Business on the basis of the Business' proportionate share of the identifiable operating assets of DuPont. DuPont management believes this allocation is reasonable, but it is not necessarily indicative of the cost that would have been incurred if the Business had been operated as a separate entity. Income Taxes The taxable income/loss of the various units comprising the Business was included in the tax return of the DuPont entity of which it was a part. As such, separate income tax returns were not prepared or filed for the Business. Tax expense has been separately determined for the Business by applying the asset and liability approach to the various units of the Business as if it were a separate taxpaying entity. Under the basis of presentation for these Combined Financial Statements, no provision has been made for taxes on cash remittances from the various units of the Business to the DuPont entity of which they are a part. Generally, remittances from a wholly-owned subsidiary to its in-country parent are tax free. Foreign Currency Translation DuPont has determined that the U.S. dollar is the functional currency of its worldwide operations and that this functional currency determination is appropriate to the economic environment in which the Business operated during the periods covered by these Combined Financial Statements. Foreign currency asset and liability amounts are translated into U.S. dollars at end-of-period exchange rates except for inventories and property, plant and equipment, which are translated at historical rates. Income and expenses are translated at average exchange rates in effect during the year, except for expenses related to balance sheet amounts which are translated at historical exchange rates. Gains and losses from the translation of monetary assets and liabilities are included in income in the period they occur and are allocated to the Business based on its proportionate share of the beginning-of-period and end-of-period balances of each monetary asset and liability of the DuPont subsidiary of which it is a part. Pensions DuPont has noncontributory defined benefit plans covering substantially all U.S. employees, including the employees of the Business. The benefits for these plans are based primarily on employees' years of service and pay near retirement. The cost of these plans for active employees was assigned to the Business. Pension coverage for employees of DuPont's non-U.S. subsidiaries is provided, to the extent deemed appropriate, through similar separate plans. Obligations under such plans are systematically provided for by depositing funds with trustees, under insurance policies or by book reserves. The cost of these non-U.S. plans has been assigned to the Business using methods that DuPont believes are reasonable. Pension cost assigned to the Business is considered to be financed by DuPont in the period the pension cost was incurred. Pension assets and liabilities have been measured at December 31, 1995, 1994, 1993 and 1992. F-47 IN VITRO DIAGNOSTICS (A DIVISION OF E. I. DU PONT DE NEMOURS AND COMPANY) NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED) Accordingly, resulting gains or losses associated with actuarial changes and with actual investment returns have been excluded from the pension costs assigned to the Business. Such cost is not necessarily indicative of the pension cost that would have been incurred if the Business had been operated as a separate company. DuPont has assumed responsibility for pension payments to Business retirees and will transfer assets to Dade, from the DuPont pension fund, equal to the agreed-upon liabilities for transferred employees. Accordingly, pension related assets and liabilities are not included in the Combined Financial Statements [See Note 10]. Other Postretirement Benefits DuPont and certain of its subsidiaries provide medical, dental and life insurance benefits to pensioners and their survivors. These benefits are accounted for as they are earned by employees. Other postretirement liabilities have been measured at December 31, 1995, 1994, 1993 and 1992. Accordingly, resulting gains or losses associated with actuarial changes have been excluded from the postretirement costs assigned to the Business. These benefit costs are not necessarily indicative of the postretirement benefit costs that would have been incurred if the Business had operated as a separate entity. The cost of these benefits is considered to be financed by DuPont in the period incurred. Liabilities associated with other postretirement benefits will be retained by DuPont and are not included in the Combined Financial Statements [See Note 11]. Compensation Plan DuPont sponsors a Variable Compensation Plan under which awards may be granted in DuPont stock and/or cash to employees of the Business who have contributed most in a general way to the Business' success, consideration being given to ability to attain more important managerial responsibility. Insurance During the period covered by the Combined Financial Statements, DuPont did not insure for property damage losses. Liability insurance was purchased with large deductibles. Costs included in the Combined Statement of Operations resulting from non-insured losses were not material; such costs are included in income as incurred. Environmental Remediation Expenses for environmental matters are recorded as operating expenses when it is probable that a liability has been incurred and the amount of the liability can be reasonably estimated. Where feasible, these costs are assigned to the business unit responsible for the conditions being remediated. During 1995, 1994 and 1993, no material environmental remediation costs were assigned to the Business. Product Warranty The Business warrants its equipment products for a period of up to one year. Anticipated costs related to product warranty claims are charged to Cost of Goods Sold and Other Operating Expenses when the related sales occur. NOTE 3. RELATED PARTY TRANSACTIONS The Combined Financial Statements include significant transactions with other DuPont organizations involving functions and services (such as cash management, tax administration, legal and data processing) that were provided to the Business. The costs of these functions and services have been directly charged and/or F-48 IN VITRO DIAGNOSTICS (A DIVISION OF E. I. DU PONT DE NEMOURS AND COMPANY) NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED) allocated to the Business using methods that DuPont management believes are reasonable. Such charges and allocations are not necessarily indicative of the costs that would have been incurred if the Business had been a separate entity. It is not feasible to segregate all of these charges from costs incurred directly by the Business. However, Selling, General and Administrative Expenses include $26.2 in 1995, $26.1 in 1994 and $24.9 in 1993 representing allocations of general corporate expenses to the Business. NOTE 4. SALES AND ACCOUNTS RECEIVABLE TRADE Substantially all of the Business' sales are to hospitals and alternative health care markets. Accounts Receivable Trade is net of an allowance for doubtful accounts of $1.3, $1.5 and $1.4 at December 31, 1995, 1994 and 1993, respectively. NOTE 5. RESTRUCTURING CHARGES During 1993, the Business recorded $9.9 of restructuring charges directly related to management's decision to downsize its global work force and to consolidate its warehousing and distribution activities at Glasgow, DE. Employee separation costs of $7.3 were incurred for the voluntary termination of about 160 employees based upon a plan that identified the number of employees to be terminated and their functions. The remaining portion of the restructuring charge, $2.6, resulted primarily from the withdrawal from distribution facilities in Atlanta, GA. This restructuring was completed in 1994. During 1994, the Business recorded $13.3 of additional restructuring charges directly related to management's decision to further downsize its U.S. work force and to cease the manufacturing at a facility in Manati, Puerto Rico in order to improve productivity and competitiveness. Employee separation costs totaling $3.3 were incurred for the involuntary and voluntary termination of about 150 employees based upon a plan which identified the number of employees to be terminated and their functions. The remaining portion of the restructuring charge, $10.0, is primarily attributable to the loss on the sale of the Manati facility. The Business' restructuring program was completed in 1995. NOTE 6. COST OF GOODS SOLD AND OTHER OPERATING EXPENSES In connection with implementation of the Business' 1994 restructuring plan, additional abnormal costs of $8.8 and $3.3 in 1995 and 1994, respectively, were expensed as incurred. These costs were primarily due to product transfer activities and employee training and relocation. F-49 IN VITRO DIAGNOSTICS (A DIVISION OF E. I. DU PONT DE NEMOURS AND COMPANY) NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED) NOTE 7. PROVISION FOR INCOME TAXES Throughout the period covered by the Combined Financial Statements, DuPont utilized various tax planning strategies and elections to minimize its total income tax expense. It is not practicable to identify the effects of these strategies and elections on the results of operations of the Business. Management believes that the Business would have adopted other tax strategies and elections if it had operated as a separate entity. The Provision for (Benefit from) Income Taxes consists of:
YEAR ENDED DECEMBER 31, ------------------ 1995 1994 1993 ---- ----- ----- Current Tax Expense: U.S. Federal....................................... $2.0 $ 6.3 $ -- U.S. State and Local............................... 0.6 -- -- Non-U.S............................................ 0.5 2.1 1.8 ---- ----- ----- Total............................................ 3.1 8.4 1.8 ---- ----- ----- Deferred Tax Expense: U.S. Federal....................................... 0.8 (8.5) (4.4) U.S. State and Local............................... (0.4) (0.8) (1.0) Non-U.S............................................ 0.2 -- 0.2 ---- ----- ----- Total............................................ 0.6 (9.3) (5.2) ---- ----- ----- Provision for (Benefit from) Income Taxes........ $3.7 $(0.9) $(3.4) ==== ===== =====
Deferred income taxes result from temporary differences between the financial and tax basis of the Business' assets and liabilities. The tax effects of temporary differences and tax loss/tax credit carry forwards included in the deferred income tax provision are as follows:
YEAR ENDED DECEMBER 31, ------------------ 1995 1994 1993 ---- ----- ----- Depreciation......................................... $2.0 $(2.5) $(2.1) Inventory............................................ 0.5 0.4 0.5 Accrued Liabilities.................................. (1.8) 5.7 (3.3) Net Operating Loss Carry Forwards.................... (1.0) (14.0) (1.1) Change in Valuation Allowance........................ 0.7 1.1 1.1 Other................................................ 0.2 -- (0.3) ---- ----- ----- Total.............................................. $0.6 $(9.3) $(5.2) ==== ===== =====
An analysis of the income tax provision (benefit) follows:
YEAR ENDED DECEMBER 31, ------------------- 1995 1994 1993 ----- ----- ----- Income Before Income Taxes.......................... $13.1 $ 0.4 $ 5.8 ----- ----- ----- Tax at 35% statutory U.S. federal tax rate.......... 4.6 0.1 2.0 Lower effective tax rate on operations within U.S. possessions........................................ (1.0) (1.8) (5.7) Change in Valuation Allowance....................... 0.7 1.1 1.1 Other--Net.......................................... (0.6) (0.3) (0.8) ----- ----- ----- Provision for (Benefit from) Income Taxes......... $ 3.7 $(0.9) $(3.4) ===== ===== =====
F-50 IN VITRO DIAGNOSTICS (A DIVISION OF E. I. DU PONT DE NEMOURS AND COMPANY) NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED) NOTE 8. INVENTORIES
DECEMBER 31, ------------------- 1995 1994 1993 ----- ----- ----- Raw materials......................................... $ 9.7 $12.1 $13.5 Semi-finished product................................. 12.5 11.2 12.5 Finished product...................................... 22.6 22.1 29.6 Stores and supplies................................... 2.4 1.4 1.2 ----- ----- ----- Total before LIFO 47.2 46.8 56.8 LIFO Reserve.......................................... (14.1) (15.7) (15.9) ----- ----- ----- Inventories......................................... $33.1 $31.1 $40.9 ===== ===== =====
DuPont's application of LIFO is not focused on individual business units. Accordingly, the results of applying LIFO are allocated to the Business. Management believes such allocations are reasonable, but may not necessarily reflect the cost that would have been incurred if LIFO had been applied on a business specific basis. The impact of the LIFO method was to decrease Cost of Goods Sold and Other Operating Expenses by $1.6 during 1995, $0.2 during 1994 and $1.3 during 1993. Inventories valued at LIFO comprise approximately 80 percent of combined inventories before LIFO adjustment for all years. NOTE 9. PROPERTY, PLANT AND EQUIPMENT
DECEMBER 31, -------------------- 1995 1994 1993 ------ ------ ------ Land................................................. $ 0.8 $ 1.0 $ 1.0 Buildings and Equipment.............................. 129.7 158.7 146.0 Equipment Leased to Customers........................ 49.1 41.3 46.8 Construction......................................... 5.2 7.0 8.5 ------ ------ ------ Property, Plant and Equipment, at Cost............. $184.8 $208.0 $202.3 ====== ====== ====== YEAR ENDED DECEMBER 31, -------------------- 1995 1994 1993 ------ ------ ------ Capital Expenditures: U.S. Capitalized Instruments....................... $ 9.3 $ 8.0 $ 6.7 U.S. Capitalized Software.......................... 2.2 2.2 2.1 U.S. All Other..................................... 7.5 8.0 5.5 Non-U.S............................................ 4.4 3.7 7.0 ------ ------ ------ Total Capital Expenditures....................... $ 23.4 $ 21.9 $ 21.3 ====== ====== ======
Non-U.S. capital expenditures for all three years were principally capitalized instruments. NOTE 10. PENSION COST For U.S. plans, the pension cost was determined using a discount rate of 9.00 percent, 7.25 percent and 8.50 percent for 1995, 1994 and 1993, respectively. A long-term rate of compensation increase of 5 percent was used for all years. For non-U.S. plans, no one of which was material, similar economic assumptions were used. F-51 IN VITRO DIAGNOSTICS (A DIVISION OF E. I. DU PONT DE NEMOURS AND COMPANY) NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED) The projected benefit obligation (PBO) used in determining the pension cost was $61.9, $88.6 and $59.8 at January 1, 1995, 1994 and 1993, respectively. For the U.S. qualified plan, the PBO was assumed to be fully funded by pension plan assets allocated from the DuPont plan, with an assumed long-term rate of return of 9 percent for all years. The elements of pension cost assigned to the Business using the above methods were:
YEAR ENDED DECEMBER 31, ------------------- 1995 1994 1993 ----- ----- ----- Service cost.......................................... $ 4.8 $ 6.7 $ 4.7 Interest cost......................................... 5.7 6.3 5.1 Expected return on plan assets........................ (4.9) (7.1) (4.7) ----- ----- ----- Net Pension Cost.................................... $ 5.6 $ 5.9 $ 5.1 ===== ===== =====
The year-end PBO was $97.4 for 1995. For the U.S. plans, the PBO was determined using a discount rate of 7.25 percent and a long-term rate of compensation increase of 5 percent. For the non-U.S. plans, similar economic assumptions were used. NOTE 11. OTHER POSTRETIREMENT BENEFITS Costs associated with other postretirement benefits include the following components:
YEAR ENDED DECEMBER 31, -------------- 1995 1994 1993 ---- ---- ---- Service cost............................................... $1.4 $2.0 $1.6 Interest cost.............................................. 1.9 2.2 2.0 ---- ---- ---- Other Postretirement Benefits Cost....................... $3.3 $4.2 $3.6 ==== ==== ====
The above costs were based on an accumulated postretirement benefit obligation (APBO) of $20.6, $30.9 and $22.6 at January 1, 1995, 1994 and 1993, respectively. The health care cost trend used in determining the APBO was an escalation rate of 8 percent decreasing to 5 percent over 8 years, 10 percent decreasing to 5 percent over 10 years and 11 percent decreasing to 5 percent over 10 years, respectively, for January 1, 1995, 1994 and 1993. A 5 percent assumed long-term rate of compensation increase was used for life insurance for all years. The discount rate was 9.00 percent, 7.25 percent and 8.50 percent for January 1, 1995, 1994 and 1993, respectively. A one percentage- point increase in the health care cost escalation rate would have increased the costs associated with other postretirement benefits by $0.4 in 1995, $0.7 in 1994 and $0.6 in 1993. F-52 IN VITRO DIAGNOSTICS (A DIVISION OF E. I. DU PONT DE NEMOURS AND COMPANY) NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED) NOTE 12. SUPPLEMENTAL CASH FLOW INFORMATION As described in Note 1, DuPont's cash management system is not designed to trace centralized cash and related financing transactions to the specific cash requirements of the Business. In addition, DuPont's corporate transaction systems are not designed to track liabilities and payments on a business specific basis. Given these constraints, the following data are presented to facilitate analysis of key components of cash flow activity.
YEAR ENDED DECEMBER 31, ------------------- 1995 1994 1993 ----- ----- ----- Net Income.......................................... $ 9.4 $ 1.3 $ 9.2 Deferred Tax Expense................................ 0.6 (9.3) (5.2) Depreciation........................................ 24.0 24.5 24.6 Amortization of Capitalized Software................ 1.6 1.4 1.0 Provision for Manati Sale [See Note 5].............. -- 10.0 -- Change in Accounts Receivable....................... (9.2) (0.2) 12.9 Change in Inventory................................. (2.0) 9.8 2.4 Change in Other Assets.............................. 2.4 0.3 0.5 Change in Product Warranty.......................... 1.1 (0.3) 0.3 Change in Deferred Service Revenue.................. (4.4) (2.3) 2.2 ----- ----- ----- Cash Flow from Operating Activities, excluding DuPont Financing................................... 23.5 35.2 47.9 Investment Activities: Capital Expenditures................................ (23.4) (21.9) (21.3) Proceeds from Manati Sale........................... 8.0 -- -- ----- ----- ----- Net Financing Provided to DuPont*................... $ 8.1 $13.3 $26.6 ===== ===== =====
- -------- * The difference between Cash Flow from Operating Activities and Investment Activities does not necessarily represent the cash flows of the Business, or the timing of such cash flows, had it operated as a separate entity. F-53 IN VITRO DIAGNOSTICS (A DIVISION OF E. I. DU PONT DE NEMOURS AND COMPANY) NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED) NOTE 13. COMMITMENTS AND CONTINGENCIES The Business has various purchase commitments for materials, supplies and items of permanent investment incidental to the ordinary conduct of business. In the aggregate, such commitments are not at prices in excess of current market. The Business does not have any material lease commitments. The Business is subject to various lawsuits and claims with respect to such matters as product liabilities, governmental regulations and other actions arising out of the normal course of business. While the effect on future financial results is not subject to reasonable estimation because considerable uncertainty exists, in the opinion of DuPont's counsel, the ultimate liabilities resulting from such lawsuits and claims will not materially affect the consolidated financial position of the Business. NOTE 14. INDUSTRY SEGMENT AND GEOGRAPHIC INFORMATION The Business operates within a single industry segment.
UNITED STATES EUROPE OTHER COMBINED ------ ------ ----- -------- 1995 Sales to unaffiliated customers (1)............ $258.7 $59.4 $23.7 $341.8 Transfers between geographic areas............. 38.8 0.6 -- -- ------ ----- ----- ------ Total........................................ $297.5 $60.0 $23.7 $341.8 ====== ===== ===== ====== Income (Loss) before interest expense and tax- es............................................ $ 21.4 $ 2.1 $(2.8) $ 20.7 ====== ===== ===== ====== Total assets to be sold........................ $134.2 $40.8 $13.4 $188.4 ====== ===== ===== ====== 1994 Sales to unaffiliated customers (1)............ $257.5 $46.3 $22.1 $325.9 Transfers between geographic areas............. 35.3 0.2 0.4 -- ------ ----- ----- ------ Total........................................ $292.8 $46.5 $22.5 $325.9 ====== ===== ===== ====== Income (Loss) before interest expense and tax- es............................................ $ 8.6 $(0.3) $(1.1) $ 7.2 ====== ===== ===== ====== Total assets to be sold........................ $140.7 $32.5 $13.3 $186.5 ====== ===== ===== ====== 1993 Sales to unaffiliated customers (1)............ $265.4 $45.3 $22.5 $333.2 Transfers between geographic areas............. 27.6 0.3 2.2 -- ------ ----- ----- ------ Total........................................ $293.0 $45.6 $24.7 $333.2 ====== ===== ===== ====== Income (Loss) before interest expense and tax- es............................................ $ 15.9 $(3.5) $ 0.2 $ 12.6 ====== ===== ===== ====== Total assets to be sold........................ $167.3 $31.7 $13.9 $212.9 ====== ===== ===== ======
- -------- (1) Sales outside the United States of products manufactured in, and exported from, the United States totaled $6.9 in 1995, $13.6 in 1994 and $11.6 in 1993. F-54 IN VITRO DIAGNOSTICS (A DIVISION OF E.I. DU PONT DE NEMOURS AND COMPANY) UNAUDITED COMBINED STATEMENT OF OPERATIONS [SEE NOTE 1] (DOLLARS IN MILLIONS)
FOUR MONTHS ENDED APRIL 30, ------------- SEE (UNAUDITED) NOTE 1996 1995 ---- ------ ------ Sales................................................ $114.8 $109.4 3 Other Income......................................... 0.1 1.3 ------ ------ Total Revenues....................................... $114.9 $110.7 4 Cost of Goods Sold and Other Operating Expenses...... 55.4 53.6 2 Selling, General and Administrative Expenses......... 37.6 34.7 Research and Development Expense..................... 11.8 11.2 ------ ------ Income Before Interest Expense and Taxes............. $10.1 $11.2 Interest Expense..................................... 2.9 1.4 ------ ------ Income Before Income Taxes........................... $7.2 $9.8 Provision for Income Taxes........................... 3.0 2.8 ------ ------ Net Income........................................... $4.2 $7.0 ====== ======
See Pages F-57 to F-58 for Notes to Unaudited Combined Financial Statements. F-55 IN VITRO DIAGNOSTICS (A DIVISION OF E. I. DU PONT DE NEMOURS AND COMPANY) UNAUDITED COMBINED STATEMENT OF NET ASSETS TO BE SOLD [SEE NOTE 1] (DOLLARS IN MILLIONS)
APRIL 30, SEE 1996 NOTE ----------- ---- (UNAUDITED) ASSETS: Accounts Receivable Trade--Net......................... $ 68.9 6 Inventories............................................ 33.5 7 Property, Plant and Equipment.......................... 193.0 Less: Accumulated Depreciation......................... 113.6 ------ Net Property, Plant and Equipment...................... 79.4 Other Assets........................................... 9.6 ------ TOTAL ASSETS TO BE SOLD................................ $191.4 ------ LIABILITIES: Product Warranty....................................... $ 4.3 Deferred Service Revenue............................... 10.6 ------ TOTAL LIABILITIES TO BE ASSUMED........................ $ 14.9 ------ NET ASSETS TO BE SOLD.................................. $176.5 ======
See pages F-57 to F-58 for notes to Unaudited Combined Financial Statements F-56 IN VITRO DIAGNOSTICS (A DIVISION OF E. I. DU PONT DE NEMOURS AND COMPANY) NOTES TO UNAUDITED COMBINED FINANCIAL STATEMENTS (DOLLARS IN MILLIONS) NOTE 1. BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES The unaudited Combined Financial Statements for the four-month periods of April 30, 1996 and 1995, should be read in conjunction with both Note 1 (Basis of Presentation) and Note 2 (Summary of Significant Accounting Policies) included in the audited 1995 Combined Financial Statements of the Business ("Audited 1995 Financial Statements"). Other notes considered by DuPont management to be relevant to the accompanying unaudited Combined Financial Statements are included herein. The unaudited Combined Financial Statements for the Business are based principally on DuPont's internal results and, in the opinion of management, reflect, consistent with the Audited 1995 Financial Statements, appropriate adjustments to more closely present the results of operations in accordance with generally accepted accounting principles. NOTE 2. RELATED PARTY TRANSACTIONS Selling, General and Administrative Expenses include $7.8 and $8.7 for the four-month periods ended April 30, 1996 and 1995, representing allocations of general corporate expenses to the Businesses. NOTE 3. OTHER INCOME Other income includes exchange gains/(losses) of $(0.3) and $0.5 for the four-month periods ended April 30, 1996 and 1995, respectively. NOTE 4. COST OF GOODS SOLD AND OTHER OPERATING EXPENSES In connection with implementation of restructuring plans, additional abnormal expenses of $2.1 were included in the four-month period ending April 30, 1995, primarily due to product transfer activities and employee training and relocation. NOTE 5. PENSION COST AND OTHER POSTRETIREMENT BENEFITS Pension Costs assigned to the business were $1.9 and $1.9, and Other Postretirement Benefits costs assigned to the Business were $1.3 and $1.1 for the four-month periods ended April 30, 1996 and 1995, respectively. NOTE 6. INVENTORIES
APRIL 30, 1996 ----------- (UNAUDITED) Raw materials................................................. $11.4 Semi-finished product......................................... 11.9 Finished Products............................................. 22.2 Stores and supplies........................................... 1.8 ----- Total before LIFO............................................. $47.3 LIFO Reserve.................................................. (13.8) ----- Inventories................................................... $33.5 =====
F-57 IN VITRO DIAGNOSTICS (A DIVISION OF E. I. DU PONT DE NEMOURS AND COMPANY) NOTES TO UNAUDITED COMBINED FINANCIAL STATEMENTS (DOLLARS IN MILLIONS) DuPont's application of LIFO is not focused on individual business units. Accordingly, the results of applying LIFO are allocated to the Business. Management believes such allocations are reasonable, but may not necessarily reflect the cost that would have been incurred if LIFO had been applied on a business specific basis. The impact of the LIFO method was to decrease Cost of Goods Sold and Other Operating Expenses by $0.3 and $0.6, for the four-month periods ended April 30, 1996 and 1995, respectively. NOTE 7. PROPERTY, PLANT AND EQUIPMENT
APRIL 30, 1996 ----------- (UNAUDITED) Land........................................................... $ 0.8 Buildings and Equipment (Includes Equipment Leased to Customers)................................ 186.3 Construction................................................... 5.9 ------ Property, Plant and Equipment, at Cost......................... $193.0 ======
NOTE 8. SUPPLEMENTAL CASH FLOW INFORMATION DuPont's cash management system is not designed to trace centralized cash and related financing transactions to the specific cash requirements of the Business. In addition, DuPont's corporate transaction systems are not designed to track liabilities and payments on a business specific basis. Given these constraints, the following data are presented to facilitate analysis of key components of cash flow activity.
FOUR MONTHS ENDED FOUR MONTHS ENDED APRIL 30, 1995 APRIL 30, 1996 ----------------- ----------------- (UNAUDITED) (UNAUDITED) Net income............................ $7.0 $ 4.2 ==== ===== Depreciation and amortization......... $7.3 $ 6.2 ==== ===== Capital expenditures.................. $6.8 $10.0 ==== =====
F-58 - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRE- SENTATIONS IN CONNECTION WITH THE OFFER CONTAINED HEREIN OTHER THAN THOSE CON- TAINED IN THIS PROSPECTUS, AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRE- SENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY ANY SECURITIES OTHER THAN THE SECURITIES TO WHICH IT RELATES, NOR DOES IT CON- STITUTE AN OFFER TO SELL, OR THE SOLICITATION OF AN OFFER TO BUY, TO ANY PER- SON IN ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION IS NOT AUTHORIZED, OR IN WHICH THE PERSON MAKING SUCH OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO, OR TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITA- TION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR THAT THE INFOR- MATION CONTAINED HEREIN IS CORRECT AS OF ANY DATE SUBSEQUENT TO THE DATE HERE- OF. --------------- TABLE OF CONTENTS PAGE Available Information..................................................... 2 Prospectus Summary........................................................ 4 Risk Factors.............................................................. 20 The Transactions.......................................................... 26 Use of Proceeds........................................................... 27 Capitalization............................................................ 28 Unaudited Pro Forma Financial Data........................................ 29 Selected Historical Financial Data........................................ 35 Management's Discussion and Analysis of Financial Condition and Results of Operations............................................................... 38 Industry.................................................................. 45 Business.................................................................. 47 Management................................................................ 61 Principal Stockholders.................................................... 67 Certain Relationships and Related Transactions............................ 69 Bank Credit Agreement..................................................... 70 Description of Exchange Notes............................................. 72 The Exchange Offer........................................................ 101 Certain Federal Income Tax Consequences................................... 109 Plan of Distribution...................................................... 109 Legal Matters............................................................. 110 Experts................................................................... 110 Index to Financial Statements............................................. F-1
--------------- UNTIL , 1997 (90 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL DEALERS EFFECTING TRANSACTIONS IN THE EXCHANGE NOTES OFFERED HEREBY, WHETHER OR NOT PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PRO- SPECTUS. - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- ------------- PROSPECTUS ------------- DADE INTERNATIONAL INC. OFFER TO EXCHANGE ITS SERIES B 11 1/8% SENIOR SUBORDINATED NOTES DUE 2006 FOR ANY AND ALL OF ITS OUTSTANDING 11 1/8% SENIOR SUBORDINATED NOTES DUE 2006 , 1996 - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- PART II INFORMATION NOT REQUIRED IN PROSPECTUS ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS. The Company is incorporated under the laws of the State of Delaware. Section 145 of the General Corporation Law of the State of Delaware, inter alia, ("Section 145") provides that a Delaware corporation may indemnify any persons who were, are or are threatened to be made, parties to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by or in the right of such corporation), by reason of the fact that such person is or was an officer, director, employee or agent of such corporation, or is or was serving at the request of such corporation as a director, officer employee or agent of another corporation or enterprise. The indemnity may include expenses (including attorneys' fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by such person in connection with such action, suit or proceeding, provided such person acted in good faith and in a manner he reasonably believed to be in or not opposed to the corporation's best interests and, with respect to any criminal action or proceeding, had no reasonable cause to believe that his conduct was illegal. A Delaware corporation may indemnify any persons who are, were or are threatened to be made, a party to any threatened, pending or completed action or suit by or in the right of the corporation by reason of the fact that such person was a director, officer, employee or agent of such corporation, or is or was serving at the request of such corporation as a director, officer, employee or agent of another corporation or enterprise. The indemnity may include expenses (including attorneys' fees) actually and reasonably incurred by such person in connection with the defense or settlement of such action or suit, provided such person acted in good faith and in a manner he reasonably believed to be in or not opposed to the corporation's best interests, provided that no indemnification is permitted without judicial approval if the officer, director, employee or agent is adjudged to be liable to the corporation. Where an officer, director, employee or agent is successful on the merits or otherwise in the defense of any action referred to above, the corporation must indemnify him against the expenses which such officer or director has actually and reasonably incurred. The Company's Certificate of Incorporation provides for the indemnification of directors and officers of the Company to the fullest extent permitted by the General Corporation Law of the State of Delaware, as it currently exists or may hereafter be amended. Section 145 further authorizes a corporation to purchase and maintain insurance on behalf of any person who is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation or enterprise, against any liability asserted against him and incurred by him in any such capacity, arising out of his status as such, whether or not the corporation would otherwise have the power to indemnify him under Section 145. The Company maintains and has in effect insurance policies covering all of the Company's directors and officers against certain liabilities for actions taken in such capacities, including liabilities under the Securities Act of 1933. II-1 ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES. (A) EXHIBITS. 3.1 Certificate of Incorporation of Dade International Inc. 3.2 By-laws of Dade International Inc. 4.1 Indenture dated as of May 7, 1996 between Dade International Inc. and IBJ Schroder Bank & Trust Company. 4.2 Purchase Agreement dated as of April 30, 1996 between Dade International Inc., BT Securities Corporation, CS First Boston Corporation and Morgan Stanley & Co. Incorporated. 4.3 Registration Rights Agreement dated as of May 7, 1996 between Dade International Inc., BT Securities Corporation, CS First Boston Corporation and Morgan Stanley & Co. Incorporated. 5.1 Opinion and consent of Kirkland & Ellis. 10.1 Credit Agreement dated as of May 7, 1996 among Diagnostics Holding, Inc., Dade International Inc., various lending institutions and Bankers Trust Company as Agent. 10.2 Security Agreement dated as of May 7, 1996 among Diagnostics Holding, Inc., Dade International Inc., certain subsidiaries of Dade International Inc. and Bankers Trust Company as Collateral Agent. 10.3 Pledge Agreement dated as of May 7, 1996 among Diagnostics Holding, Inc., Dade International Inc., various subsidiaries of Dade International Inc. and Bankers Trust Company as Collateral Agent. 10.4 Asset Purchase and Sale Agreement dated December 11, 1995, as amended and restated on May 7, 1996, between E.I. du Pont de Nemours and Company and Dade Chemistry Systems Inc. incorporated by reference to Exhibit 2.1 to the Company's Form 8-K under the Securities Act of 1934, as filed on May 22, 1996 (No. 33-90462). 10.5 Transitional Services Agreement entered into as of May 7, 1996, effective as of April 30, 1996 by and between E.I. du Pont de Nemours and Company and Dade Chemistry Systems Inc. 10.6 Manufacturing Agreement entered into as of May 7, 1996, effective as of April 30, 1996 by and between E.I. du Pont de Nemours and Company and Dade Chemistry Systems Inc. 10.7 Stockholders Agreement made as of December 20, 1994 by and among Dade International Inc. and the other parties signatory thereto incorporated by reference to Exhibit 10.6 to the Company's Form S-4 Registration Statement under the Securities Act of 1933, as filed on March 20, 1995 (No. 33-90462). 10.8 Management Services Agreement dated as of December 20, 1994 by and between Dade International Inc. and Bain Capital, Inc. incorporated by reference to Exhibit 10.7 to the Company's Form S-4 Registration Statement under the Securities Act of 1933, as filed on March 20, 1995 (No. 33-90462) as amended by Amendment No. 1 to Management Services Agreement dated as of May 7, 1996. 10.9 Management Services Agreement dated as of December 20, 1994 by and between Dade International Inc. and Goldman, Sachs & Co. incorporated by reference to Exhibit 10.8 to the Company's Form S-4 Registration Statement under the Securities Act of 1933, as filed on March 20, 1995 (No. 33-90462). 10.10 Tax Law Change Indemnification dated as of December 16, 1994 between Baxter International Inc. and Diagnostics Holding, Inc. incorporated by reference to Exhibit 10.9 to the Company's Form S-4 Registration Statement under the Securities Act of 1933, as filed on March 20, 1995 (No. 33-90462). 10.11 Amended and Restated Exclusive Distribution Agreement dated as of September 15, 1995, by and between Dade International Inc. and Baxter Healthcare Corporation as amended on September 26, 1996.
II-2 10.12 1995 Executive Stock Purchase and Option Plan incorporated by reference to Exhibit 10.1 to the Company's Form 10-Q under the Securities Act of 1934, as filed on August 14, 1995 (No. 33-90462). 10.13 1995 Management Stock Option Plan incorporated by reference to Exhibit 10.2 to the Company's Form 10-Q under the Securities Act of 1934, as filed on August 14, 1995 (No. 33-90462). 10.14 Form of Agreement under 1995 Executive Stock Purchase and Option Plan incorporated by reference to Exhibit 10.3 to the Company's Form 10-Q under the Securities Act of 1934, as filed on August 14, 1995 (No. 33- 90462). 10.15 Form of Agreement under 1995 Management Stock Option Plan incorporated by reference to Exhibit 10.4 to the Company's Form 10-Q under the Securities Act of 1934, as filed on August 14, 1995 (No. 33-90462). 10.16 1996 Executive Stock Purchase and Option Plan. 10.17 Form of Agreement under 1996 Executive Stock Purchase and Option Plan. 12.1 Statement of Computation of Ratios. 21.1 Subsidiaries of Dade International Inc. 23.1 Consent of Price Waterhouse LLP (Chicago). 23.2 Consent of Price Waterhouse LLP (Chicago). 23.3 Consent of Price Waterhouse LLP (Philadelphia). 23.4 Consent of Kirkland & Ellis (included in Exhibit 5.1). 24.1 Powers of Attorney (included in signature page). 25.1 Statement of Eligibility of Trustee on Form T-1. 27.1 Financial Data Schedule. 99.1 Form of Letter of Transmittal. 99.2 Form of Notice of Guaranteed Delivery. 99.3 Form of Tender Instructions.
(B) FINANCIAL STATEMENT SCHEDULES. Not Applicable. II-3 ITEM 22. UNDERTAKINGS. A. The undersigned registrant hereby undertakes: (1) To file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement; (i) To include any prospectus required by Section 10(a)(3) of the Securities Act of 1933; (ii) To reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post- effective amendment thereof) which individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement; (iii) To include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement; (2) That, for the purpose of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at the time shall be deemed to be the initial bona fide offering thereof; (3) To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering; and (4) If the registrant is a foreign private issuer, to file a post- effective amendment to the registration statement to include any financial statements required by Rule 3-19 of the chapter at the start of any delayed offering or throughout a continuous offering. Financial statements and information otherwise required by Section 10(a)(3) of the Act need not be furnished, provided, that the registrant includes in the prospectus, by means of a post-effective amendment, financial statements required pursuant to this paragraph (a)(4) and other information necessary to ensure that all other information in the prospectus is at least as current as the date of those financial statements. Notwithstanding the foregoing, with respect to registration statements on Form F-3, a post-effective amendment need not be filed to include financial statements and information required by Section 10(a)(3) of the Act or Rule 3-19 of this chapter if such financial statements and information are contained in periodic reports filed with or furnished to the Commission by the registrant pursuant to section 13 or section 15(d) of the Securities Exchange Act of 1934 that are incorporated by reference in the Form F-3. B. The undersigned registrant hereby undertakes as follows: that prior to any public reoffering of the securities registered hereunder through use of a prospectus which is a part of this registration statement, by any person or party who is deemed to be an underwriter within the meaning of Rule 145(c), the issuer undertakes that such reoffering prospectus will contain the information called for by the applicable registration form with respect to reofferings by persons who may be deemed underwriters, in addition to the information called for by the other items of the applicable form. C. The registrant undertakes that every prospectus: (i) that is filed pursuant to paragraph B immediately preceding, or (ii) that purports to meet the requirements of Section 10(a)(3) of the Act and is used in connection with an offering of securities subject to Rule 415, will be filed as a part of an amendment to the registration statement and will not be used until such amendment is effective, and that, for purposes of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. D. Insofar as indemnification for liabilities arising under the Securities Act of 1933 (the "Securities Act") may be permitted to directors, officers and controlling persons of the registrant pursuant to the provisions II-4 described under Item 20 or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue. E. The undersigned registrant hereby undertakes that: (1) For purposes of determining any liability under the Securities Act of 1933, the information omitted from the form of prospectus filed as part of this registration statement in reliance upon Rule 430A and contained in a form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be part of this registration statement as of the time it was declared effective. (2) For the purpose of determining any liability under the Securities Act of 1933, each post-effective amendment that contains a form of prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. F. The undersigned registrant hereby undertakes to respond to requests for information that is incorporated by reference into the prospectus pursuant to Item 4, 10(b), 11, or 13 of this form, within one business day of receipt of such request, and to send the incorporated documents by first class mail or other equally prompt means. This includes information contained in documents filed subsequent to the effective date of the registration statement through the date of responding to the request. G. The undersigned registrant hereby undertakes to supply by means of a post-effective amendment all information concerning a transaction, and the company being acquired involved therein, that was not the subject of and included in the registration statement when it became effective. II-5 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the Registrant has duly caused this Registration Statement on Form S-1 to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Deerfield, State of Illinois, on October 4, 1996. DADE INTERNATIONAL INC. /s/ Scott T. Garrett By_________________________________ NAME: SCOTT T. GARRETT TITLE: CHIEF EXECUTIVE OFFICER AND PRESIDENT POWER OF ATTORNEY The undersigned hereby severally constitute and appoint John P. Connaughton attorney-in-fact for the undersigned in any and all capacities, with the power of substitution, to sign any amendment to this Registration Statement, and to file the same with exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, hereby ratifying and confirming all that said attorney-in-fact, or his substitute or substitutes, may do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Act of 1933, this Registration Statement on Form S-1 has been signed by the following persons in the capacities and on the dates indicated: SIGNATURES CAPACITY DATE /s/ Scott T. Garrett Chief Executive October 4, 1996 - ------------------------------------- Officer, President SCOTT T. GARRETT and Director (principal executive officer) /s/ James W.P. Reid-Anderson Executive Vice October 4, 1996 - ------------------------------------- President and Chief JAMES W.P. REID-ANDERSON Financial Officer (principal financial officer) /s/ Dennis Taylor Corporate Vice October 4, 1996 - ------------------------------------- President/Controller DENNIS TAYLOR (principal accounting officer) /s/ Robert W. Brightfelt Executive Vice October 4, 1996 - ------------------------------------- President and ROBERT W. BRIGHTFELT Director /s/ Adam Kirsch Director October 4, 1996 - ------------------------------------- ADAM KIRSCH /s/ Mark E. Nunnelly Director October 4, 1996 - ------------------------------------- MARK E. NUNNELLY /s/ Steve G. Pagliuca Director October 4, 1996 - ------------------------------------- STEVE G. PAGLIUCA /s/ John P. Connaughton Director October 4, 1996 - ------------------------------------- JOHN P. CONNAUGHTON /s/ Joseph H. Gleberman Director October 4, 1996 - ------------------------------------- JOSEPH H. GLEBERMAN II-6 EXHIBIT INDEX
EXHIBITS DESCRIPTIONS PAGE -------- ------------ ---- 3.1 Certificate of Incorporation of Dade International Inc. 3.2 By-laws of Dade International Inc. 4.1 Indenture dated as of May 7, 1996 between Dade International Inc. and IBJ Schroder Bank & Trust Company. 4.2 Purchase Agreement dated as of April 30, 1996 between Dade International Inc., BT Securities Corporation, CS First Boston Corporation and Morgan Stanley & Co. Incorporated. 4.3 Registration Rights Agreement dated as of May 7, 1996 between Dade International Inc., BT Securities Corporation, CS First Boston Corporation and Morgan Stanley & Co. Incorporated. 5.1 Opinion and consent of Kirkland & Ellis. 10.1 Credit Agreement dated as of May 7, 1996 among Diagnostics Holding, Inc., Dade International Inc., various lending institutions and Bankers Trust Company as Agent. 10.2 Security Agreement dated as of May 7, 1996 among Diagnostics Holding, Inc., Dade International Inc., certain subsidiaries of Dade International Inc. and Bankers Trust Company as Collateral Agent. 10.3 Pledge Agreement dated as of May 7, 1996 among Diagnostics Holding, Inc., Dade International Inc., various subsidiaries of Dade International Inc. and Bankers Trust Company as Collateral Agent. 10.4 Asset Purchase and Sale Agreement dated December 11, 1995, as amended and restated on May 7, 1996, between E.I. du Pont de Nemours and Company and Dade Chemistry Systems Inc. incorporated by reference to Exhibit 2.1 to the Company's Form 8-K under the Securities Act of 1934, as filed on May 22, 1996 (No. 33-90462). 10.5 Transitional Services Agreement entered into as of May 7, 1996, effective as of April 30, 1996 by and between E.I. du Pont de Nemours and Company and Dade Chemistry Systems Inc. 10.6 Manufacturing Agreement entered into as of May 7, 1996, effective as of April 30, 1996 by and between E.I. du Pont de Nemours and Company and Dade Chemistry Systems Inc. 10.7 Stockholders Agreement made as of December 20, 1994 by and among Dade International Inc. and the other parties signatory thereto incorporated by reference to Exhibit 10.6 to the Company's Form S-4 Registration Statement under the Securities Act of 1933, as filed on March 20, 1995 (No. 33-90462). 10.8 Management Services Agreement dated as of December 20, 1994 by and between Dade International Inc. and Bain Capital, Inc. incorporated by reference to Exhibit 10.7 to the Company's Form S-4 Registration Statement under the Securities Act of 1933, as filed on March 20, 1995 (No. 33-90462) as amended by Amendment No. 1 to Management Services Agreement dated as of May 7, 1996. 10.9 Management Services Agreement dated as of December 20, 1994 by and between Dade International Inc. and Goldman, Sachs & Co. incorporated by reference to Exhibit 10.8 to the Company's Form S-4 Registration Statement under the Securities Act of 1933, as filed on March 20, 1995 (No. 33-90462). 10.10 Tax Law Change Indemnification dated as of December 16, 1994 between Baxter International Inc. and Diagnostics Holding, Inc. incorporated by reference to Exhibit 10.9 to the Company's Form S-4 Registration Statement under the Securities Act of 1933, as filed on March 20, 1995 (No. 33-90462). 10.11 Amended and Restated Exclusive Distribution Agreement dated as of September 15, 1995, by and between Dade International Inc. and Baxter Healthcare Corporation as amended on September 26, 1996.
EXHIBITS DESCRIPTIONS PAGE -------- ------------ ---- 10.12 1995 Executive Stock Purchase and Option Plan incorporated by reference to Exhibit 10.1 to the Company's Form 10-Q under the Securities Act of 1934, as filed on August 14, 1995 (No. 33- 90462). 10.13 1995 Management Stock Option Plan incorporated by reference to Exhibit 10.2 to the Company's Form 10-Q under the Securities Act of 1934, as filed on August 14, 1995 (No. 33-90462). 10.14 Form of Agreement under 1995 Executive Stock Purchase and Option Plan incorporated by reference to Exhibit 10.3 to the Company's Form 10-Q under the Securities Act of 1934, as filed on August 14, 1995 (No. 33-90462). 10.15 Form of Agreement under 1995 Management Stock Option Plan incorporated by reference to Exhibit 10.4 to the Company's Form 10-Q under the Securities Act of 1934, as filed on August 14, 1995 (No. 33-90462). 10.16 1996 Executive Stock Purchase and Option Plan. 10.17 Form of Agreement under 1996 Executive Stock Purchase and Option Plan. 12.1 Statement of Computation of Ratios. 21.1 Subsidiaries of Dade International Inc. 23.1 Consent of Price Waterhouse LLP (Chicago). 23.2 Consent of Price Waterhouse LLP (Chicago). 23.3 Consent of Price Waterhouse LLP (Philadelphia). 23.4 Consent of Kirkland & Ellis (included in Exhibit 5.1). 24.1 Powers of Attorney (included in signature page). 25.1 Statement of Eligibility of Trustee on Form T-1. 27.1 Financial Data Schedule. 99.1 Form of Letter of Transmittal. 99.2 Form of Notice of Guaranteed Delivery. 99.3 Form of Tender Instructions.
(B) FINANCIAL STATEMENT SCHEDULES. Not Applicable. EX-3.1 2 CERT OF INCORPORATION OF DADE INTL INC EXHIBIT 3.1 CERTIFICATE OF INCORPORATION ---------------------------- ARTICLE ONE ----------- The name of the corporation is Dade International Inc. ARTICLE TWO ----------- The address of the corporation's registered office in the State of Delaware is Corporation Trust Center, 1209 Orange Street, in the City of Wilmington, County of New Castle. The name of its registered agent at such address is the Corporation Trust Company. ARTICLE THREE ------------- The nature of the business or purposes to be conducted or promoted is to engage in any lawful act or activity for which corporations may be organized under the General Corporation Law of the State of Delaware. ARTICLE FOUR ------------ The total number of shares of stock which the corporation has authority to issue is one thousand (1,000) shares of Common Stock, with a par value of one cent ($.01) per share. ARTICLE FIVE ------------ The corporation is to have perpetual existence. ARTICLE SIX ----------- In furtherance and not in limitation of the powers conferred by statute, the board of directors of the corporation is expressly authorized to make, alter or repeal the by-laws of the corporation. ARTICLE SEVEN ------------- Meetings of stockholders may be held within or without the State of Delaware, as the by-laws of the corporation may provide. The books of the corporation may be kept outside the State of Delaware at such place or places as may be designated from time to time by the board of directors or in the by-laws of the corporation. Election of directors need not be by written ballot unless the by-laws of the corporation so provide. ARTICLE EIGHT ------------- To the fullest extent permitted by the General Corporation Law of the State of Delaware as the same exists or may hereafter be amended, a director of this corporation shall not be liable to the corporation or its stockholders for monetary damages for a breach of fiduciary duty as a director. Any repeal or modification of this ARTICLE EIGHT shall not aversely affect any right or ------------- protection of a director of the corporation existing at the time of such repeal or modification. ARTICLE NINE ------------ The corporation expressly elects not to be governed by Section 203 of the General Corporation Law of the State of Delaware. ARTICLE TEN ----------- The corporation reserves the right to amend, alter, change or repeal any provision contained in this certificate of incorporation in the manner now or hereafter prescribed herein and by the laws of the State of Delaware, and all rights conferred upon stockholders herein are granted subject to this reservation. ARTICLE ELEVEN -------------- The name and address of the incorporator are: Name Address ---- ------- John F. Gaither, Jr. Baxter Healthcare Corporation One Baxter Parkway Deerfield, Illinois 60015 -2- EX-3.2 3 BY-LAWS OF DADE INT'L INC Exhibit 3.2 BY-LAWS ------- OF -- DADE INTERNATIONAL INC. ----------------------- A Delaware Corporation ARTICLE I --------- OFFICES ------- Section 1. Registered Office. The registered office of the corporation in --------- ----------------- the State of Delaware shall be located at Corporation Trust Center, 1209 Orange Street, in the City of Wilmington, County of New Castle. The name of the corporation's registered agent at such address shall be the Corporation Trust Company. The registered office and/or registered agent of the corporation may be changed from time to time by action of the board of directors. Section 2. Other Offices. The corporation may also have offices at such --------- ------------- other places, both within and without the State of Delaware, as the board of directors may from time to time determine or the business of the corporation may require. ARTICLE II ---------- MEETINGS OF STOCKHOLDERS ------------------------ Section 1. Place and Time of Meetings. An annual meeting of the --------- -------------------------- stockholders shall be held each year within one hundred twenty (120) days after the close of the immediately preceding fiscal year of the corporation for the purpose of electing directors and conducting such other proper business as may come before the meeting. The date, time and place of the annual meeting shall be determined by the president of the corporation; provided, that if the president does not act, the board of directors shall determine the date, time and place of such meeting. Section 2. Special Meetings. Special meetings of stockholders may be --------- ---------------- called for any purpose and may be held at such time and place, within or without the State of Delaware, as shall be stated in a notice of meeting or in a duly executed waiver of notice thereof. Section 3. Place of Meetings. The board of directors may designate any --------- ----------------- place, either within or without the State of Delaware, as the place of meeting for any annual meeting or for any special meeting called by the board of directors. If no designation is made, or if a special meeting be otherwise called, the place of meeting shall be the principal executive office of the corporation. Section 4. Notice. Whenever stockholders are required or permitted to --------- ------ take action at a meeting, written or printed notice stating the place, date, time, and, in the case of special meetings, the purpose or purposes, of such meeting, shall be given to each stockholder entitled to vote at such meeting. Section 5. Stockholders List. The officer having charge of the stock --------- ----------------- ledger of the corporation shall make, at least 10 days before every meeting of the stockholders, a complete list of the stockholders entitled to vote at such meeting arranged in alpha betical order, showing the address of each stockholder and the number of shares registered in the name of each stockholder. Such list shall be open to the examination of any stockholder, for any purpose germane to the meeting, during ordinary business hours, for a period of at least 10 days prior to the meeting, either at a place within the city where the meeting is to be held, which place shall be specified in the notice of the meeting or, if not so specified, at the place where the meeting is to be held. The list shall also be produced and kept at the time and place of the meeting during the whole time thereof, and may be inspected by any stockholder who is present. Section 6. Quorum. The holders of a majority of the outstanding shares --------- ------ of capital stock, present in person or repre sented by proxy, shall constitute a quorum at all meetings of the stockholders, except as otherwise provided by statute or by the certificate of incorporation. If a quorum is not present, the holders of a majority of the shares present in person or represented by proxy at the meeting, and entitled to vote at the meeting, may adjourn the meeting to another time and/or place. Section 7. Adjourned Meetings. When a meeting is adjourned to another --------- ------------------ time and place, notice need not be given of the adjourned meeting if the time and place thereof are announced at the meeting at which the adjournment is taken. At the adjourned meeting the corporation may transact any business which might have been transacted at the original meeting. If the adjournment is for more than thirty days, or if after the adjournment a new record date is fixed for the adjourned meeting, a notice of the adjourned meeting shall be given to each stockholder of record entitled to vote at the meeting. Section 8. Vote Required. When a quorum is present, the affirmative vote --------- ------------- of the majority of shares present in person or represented by proxy at the meeting and entitled to vote on the subject matter shall be the act of the stockholders, unless the question is one upon which by express provisions of an applicable law or of the certificate of incorporation a different vote is -2- required, in which case such express provision shall govern and control the decision of such question. Section 9. Voting Rights. Except as otherwise provided by the General --------- ------------- Corporation Law of the State of Delaware or by the certificate of incorporation of the corporation or any amendments thereto and subject to Section 3 of Article VI hereof, every stockholder shall at every meeting of the stockholders be entitled to one vote in person or by proxy for each share of common stock held by such stockholder. Section 10. Proxies. Each stockholder entitled to vote at a meeting of ---------- ------- stockholders or to express consent or dissent to corporate action in writing without a meeting may authorize another person or persons to act for him or her by proxy, but no such proxy shall be voted or acted upon after three years from its date, unless the proxy provides for a longer period. Section 11. Action by Written Consent. Unless otherwise provided in the ---------- ------------------------- certificate of incorporation, any action required to be taken at any annual or special meeting of stockholders of the corporation, or any action which may be taken at any annual or special meeting of such stockholders, may be taken without a meeting, without prior notice and without a vote, if a consent or consents in writing, setting forth the action so taken and bearing the dates of signature of the stockholders who signed the consent or consents, shall be signed by the holders of outstanding stock having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present and voted and shall be delivered to the corporation by delivery to its registered office in the state of Delaware, or the corporation's principal place of business, or an officer or agent of the corporation having custody of the book or books in which proceedings of meetings of the stockholders are recorded. Delivery made to the corporation's registered office shall be by hand or by certified or registered mail, return receipt requested. All consents properly delivered in accordance with this section shall be deemed to be recorded when so delivered. No written consent shall be effective to take the corporate action referred to therein unless, within sixty days of the earliest dated consent delivered to the corporation as required by this section, written consents signed by the holders of a sufficient number of shares to take such corporate action are so recorded. Prompt notice of the taking of the corporate action without a meeting by less than unanimous written consent shall be given to those stockholders who have not consented in writing. Any action taken pursuant to such written consent or consents of the stockholders shall have the same force and effect as if taken by the stockholders at a meeting thereof. -3- ARTICLE III ----------- DIRECTORS --------- Section 1. General Powers. The business and affairs of the --------- -------------- corporation shall be managed by or under the direction of the board of directors. Section 2. Number, Election and Term of Office. The number of --------- ----------------------------------- directors shall be established from time to time by resolution of the board. The directors shall be elected by a plurality of the votes of the shares present in person or represented by proxy at the meeting and entitled to vote in the election of directors. The directors shall be elected in this manner at the annual meeting of the stockholders, except as provided in Section 4 of this Article III. Each director elected shall hold office until a successor is duly elected and qualified or until his or her earlier death, resignation or removal as hereinafter provided. Section 3. Removal and Resignation. Any director or the entire board --------- ----------------------- of directors may be removed at any time, with or with out cause, by the holders of a majority of the shares then entitled to vote at an election of directors. Whenever the holders of any class or series are entitled to elect one or more directors by the provisions of the corporation's certificate of incorporation, the provisions of this section shall apply, in respect to the removal without cause of a director or directors so elected, to the vote of the holders of the outstanding shares of that class or series and not to the vote of the outstanding shares as a whole. Any director may resign at any time upon written notice to the corporation. Section 4. Vacancies. Vacancies and newly created directorships --------- --------- resulting from any increase in the authorized number of directors may be filled by a majority of the directors then in office, though less than a quorum, or by a sole remaining director. Each director so chosen shall hold office until a successor is duly elected and qualified or until his or her earlier death, resignation or removal as herein provided. Section 5. Annual Meetings. The annual meeting of each newly elected --------- --------------- board of directors shall be held without other notice than this by-law immediately after, and at the same place as, the annual meeting of stockholders. Section 6. Other Meetings and Notice. Regular meetings, other than --------- ------------------------- the annual meeting, of the board of directors may be held without notice at such time and at such place as shall from time to time be determined by resolution of the board. Special meetings of the board of directors may be called by or at the request of the president on at least 24 hours notice to each -4- director, either personally, by telephone, by mail, or by telegraph. Section 7. Quorum, Required Vote and Adjournment. A majority of the --------- ------------------------------------- total number of directors shall constitute a quorum for the transaction of business. The vote of a majority of directors present at a meeting at which a quorum is present shall be the act of the board of directors. If a quorum shall not be present at any meeting of the board of directors, the directors present thereat may adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum shall be present. Section 8. Committees. The board of directors may, by resolution --------- ---------- passed by a majority of the whole board, designate one or more committees, each committee to consist of one or more of the directors of the corporation, which to the extent provided in such resolution or these by-laws shall have and may exercise the powers of the board of directors in the management and affairs of the corporation except as otherwise limited by law. The board of directors may designate one or more directors as alternate members of any committee, who may replace any absent or disqualified member at any meeting of the committee. Such committee or committees shall have such name or names as may be determined from time to time by resolution adopted by the board of directors. Each committee shall keep regular minutes of its meetings and report the same to the board of directors when required. Section 9. Committee Rules. Each committee of the board of directors --------- --------------- may fix its own rules of procedure and shall hold its meetings as provided by such rules, except as may otherwise be provided by a resolution of the board of directors designating such committee. In the event that a member and that member's alternate, if alternates are designated by the board of directors as provided in Section 8 of this Article III, of such committee is or are absent or disqualified, the member or members thereof present at any meeting and not disqualified from voting, whether or not such member or members constitute a quorum, may unanimously appoint another member of the board of directors to act at the meeting in place of any such absent or disqualified member. Section 10. Communications Equipment. Members of the board of ---------- ------------------------ directors or any committee thereof may participate in and act at any meeting of such board or committee through the use of a conference telephone or other communications equipment by means of which all persons participating in the meeting can hear each other, and participation in the meeting pursuant to this section shall constitute presence in person at the meeting. Section 11. Waiver of Notice and Presumption of Assent. Any member of ---------- ------------------------------------------ the board of directors or any committee thereof who is present at a meeting shall be conclusively presumed to have -5- waived notice of such meeting except when such member attends for the express purpose of objecting at the beginning of the meeting to the transaction of any business because the meeting is not lawfully called or convened. Such member shall be conclusively presumed to have assented to any action taken unless his or her dissent shall be entered in the minutes of the meeting or unless his or her written dissent to such action shall be filed with the person acting as the secretary of the meeting before the adjournment thereof or shall be forwarded by registered mail to the secretary of the corporation immediately after the adjournment of the meeting. Such right to dissent shall not apply to any member who voted in favor of such action. Section 12. Action by Written Consent. Unless otherwise restricted ---------- ------------------------- by the certificate of incorporation, any action required or permitted to be taken at any meeting of the board of directors, or of any committee thereof, may be taken without a meeting if all members of the board or committee, as the case may be, consent thereto in writing, and the writing or writings are filed with the minutes of proceedings of the board or committee. ARTICLE IV ---------- OFFICERS -------- Section 1. Number. The officers of the corporation shall be elected --------- ------ by the board of directors and shall consist of a chief executive officer, president, any number of vice presidents, a secretary, any number of assistant secretaries and such other officers and assistant officers as may be deemed necessary or desirable by the board of directors. Any number of offices may be held by the same person. In its discretion, the board of directors may choose not to fill any office for any period as it may deem advisable, except that the offices of president and secretary shall be filled as expeditiously as possible. Section 2. Election and Term of Office. The officers of the --------- --------------------------- corporation shall be elected annually by the board of directors at its first meeting held after each annual meeting of stockholders or as soon thereafter as conveniently may be. Vacancies may be filled or new offices created and filled at any meeting of the board of directors. Each officer shall hold office until a successor is duly elected and qualified or until his or her earlier death, resignation or removal as hereinafter provided. Section 3. Removal. Any officer or agent elected by the board of --------- ------- directors may be removed by the board of directors whenever in its judgment the best interests of the corporation would be served thereby, but such removal shall be without prejudice to the contract rights, if any, of the person so removed. -6- Section 4. Vacancies. Any vacancy occurring in any office because of --------- --------- death, resignation, removal, disqualification or otherwise, may be filled by the board of directors for the unexpired portion of the term by the board of directors then in office. Section 5. Compensation. Compensation of all officers shall be fixed --------- ------------ by the board of directors, and no officer shall be prevented from receiving such compensation by virtue of his or her also being a director of the corporation. Section 6. Chief Executive Officer. The chief executive officer of --------- ----------------------- the corporation, subject to the powers of the board of directors, shall have general and active management of the business of the corporation; and shall see that all orders and resolutions of the board of directors are carried into effect. The chief executive officer shall have such other powers and perform such other duties as may be prescribed by the chairman of the board, the chief executive officer or the board of directors or as may be provided in these by- laws. Section 7. President. The president shall be the chief executive --------- --------- officer of the corporation; shall preside at all meetings of the stockholders and board of directors at which he or she is present; subject to the powers of the board of directors, shall have general charge of the business, affairs and property of the corporation, and control over its officers, agents and employees; and shall see that all orders and resolutions of the board of directors are carried into effect. The president shall execute bonds, mortgages and other contracts requiring a seal, under the seal of the corporation, except where required or permitted by law to be otherwise signed and executed and except where the signing and execution thereof shall be expressly delegated by the board of directors to some other officer or agent of the corporation. The president shall have such other powers and perform such other duties as may be prescribed by the board of directors, the chief executive officer or as may be provided in these by-laws. Section 8. Vice-presidents. The vice-president, or if there shall be --------- --------------- more than one, the vice-presidents in the order determined by the board of directors shall, in the absence or disability of the president, act with all of the powers and be subject to all the restrictions of the president. The vice- presidents shall also perform such other duties and have such other powers as the board of directors, the chief executive officer, the president or these by- laws may, from time to time, prescribe. Section 9. The Secretary and Assistant Secretaries. The secretary --------- --------------------------------------- shall attend all meetings of the board of directors, all meetings of the committees thereof and all meetings of the stockholders and record all the proceedings of the meetings in a book or books to be kept for that purpose. Under the president's -7- supervision, the secretary shall give, or cause to be given, all notices required to be given by these by-laws or by law; shall have such powers and perform such duties as the board of directors, the president or these by-laws may, from time to time, prescribe; and shall have custody of the corporate seal of the corporation. The secretary, or an assistant secretary, shall have authority to affix the corporate seal to any instrument requiring it and when so af fixed, it may be attested by his or her signature or by the signature of such assistant secretary. The board of directors may give general authority to any other officer to affix the seal of the corporation and to attest the affixing by his or her signature. The assistant secretary, or if there be more than one, the assistant secretaries in the order determined by the board of directors, shall, in the absence or disability of the secretary, perform the duties and exercise the powers of the secretary and shall perform such other duties and have such other powers as the board of directors, the chief executive officer or the president may, from time to time, prescribe. Section 10. The Treasurer and Assistant Treasurer. The treasurer ---------- ------------------------------------- shall have the custody of the corporate funds and securities; shall keep full and accurate accounts of receipts and disbursements in books belonging to the corporation; shall deposit all monies and other valuable effects in the name and to the credit of the corporation as may be ordered by the board of directors; shall cause the funds of the corporation to be disbursed when such disbursements have been duly authorized, taking proper vouchers for such disbursements; and shall render to the president and the board of directors, at its regular meeting or when the board of directors so requires, an account of the corporation; shall have such powers and perform such duties as the board of directors, the president or these by-laws may, from time to time, prescribe. If required by the board of directors, the treasurer shall give the corporation a bond (which shall be rendered every six years) in such sums and with such surety or sureties as shall be satisfactory to the board of directors for the faithful performance of the duties of the office of the treasurer and for the restoration to the corporation, in case of death, resignation, retirement, or removal from office, of all books, papers, vouchers, money, and other property of whatever kind in the possession or under the control of the treasurer belonging to the corporation. The assistant treasurer, or if there shall be more than one, the assistant treasurers in the order determined by the board of directors, shall in the absence or disability of the treasurer, perform the duties and exercise the powers of the treasurer. The assistant treasurers shall perform such other duties and have such other powers as the board of directors, the chief executive officer or the president may, from time to time, prescribe. Section 11. Other Officers, Assistant Officers and Agents. Officers, ---------- --------------------------------------------- assistant officers and agents, if any, other than those whose duties are provided for in these by-laws, shall -8- have such authority and perform such duties as may from time to time be prescribed by resolution of the board of directors. Section 12. Absence or Disability of Officers. In the case of the ---------- --------------------------------- absence or disability of any officer of the corporation and of any person hereby authorized to act in such officer's place during such officer's absence or disability, the board of directors may by resolution delegate the powers and duties of such officer to any other officer or to any director, or to any other person whom it may select. ARTICLE V --------- INDEMNIFICATION OF OFFICERS, DIRECTORS AND OTHERS ------------------------------------------------- Section 1. Nature of Indemnity. Each person who was or is made a --------- ------------------- party or is threatened to be made a party to or is in volved in any action, suit or proceeding, whether civil, criminal, administrative or investigative (hereinafter a "proceeding"), by reason of the fact that he or she, is or was a director or officer, of the corporation or is or was serving at the request of the corporation as a director, officer, employee, fiduciary, or agent of another corporation or of a partnership, joint venture, trust or other enterprise including service with respect to employee benefit plans, whether the basis of such proceeding is alleged action in an official capacity as a director, officer, employee, fiduciary or agent or in any other capacity while serving as a director, officer, employee, fiduciary or agent, shall be indemnified and held harmless by the corporation to the fullest extent which it is empowered to do so by the General Corporation Law of the State of Delaware, as the same exists or may hereafter be amended against all expense, liability and loss (including attorneys' fees actually and reasonably incurred by such person in connection with such proceeding) and such indemnification shall inure to the benefit of his or her heirs, executors and administrators; provided, however, that, except as provided in Section 2 hereof, the corporation shall indemnify any such person seeking indemnification in connection with a proceeding initiated by such person only if such proceeding was authorized by the board of directors of the corporation. The right to indemnification conferred in this Article V shall be a contract right and, subject to Sections 2 and 5 hereof, shall include the right to be paid by the corporation the expenses incurred in defending any such proceeding in advance of its final disposition. The corporation may, by action of its board of directors, provide indemnification to employees and agents of the corporation with the same scope and effect as the foregoing indemnification of directors and officers. Section 2. Procedure for Indemnification of Directors and Officers. --------- ------------------------------------------------------- Any indemnification of a director, officer, employee, fiduciary or agent of the corporation under Section 1 of -9- this Article V or advance of expenses under Section 5 of this Article V shall be made promptly, and in any event within 30 days, upon the written request of the director, officer, employee, fiduciary or agent. If a determination (as defined in the General Corporation Law of the State of Delaware) by the corporation that the director, officer, employee, fiduciary or agent is entitled to indemnification pursuant to this Article V is required, and the corporation fails to respond within sixty days to a written request for indemnity, the corporation shall be deemed to have approved the request. If the corporation denies a written request for indemnification or advancing of expenses, in whole or in part, or if payment in full pursuant to such request is not made within 30 days, the right to indemnification or advances as granted by this Article V shall be enforceable by the director, officer, employee, fiduciary or agent in any court of competent jurisdiction. Such person's costs and expenses incurred in connection with successfully establishing his or her right to indemnification, in whole or in part, in any such action shall also be indemnified by the corporation. It shall be a defense to any such action (other than an action brought to enforce a claim for expenses incurred in defending any proceeding in advance of its final disposition where the required undertaking, if any, has been tendered to the corporation) that the claimant has not met the standards of conduct which make it permissible under the General Corporation Law of the State of Delaware for the corporation to indemnify the claimant for the amount claimed, but the burden of such defense shall be on the corporation. Neither the failure of the corporation (including its board of directors, independent legal counsel, or its stockholders) to have made a determination prior to the commencement of such action that indemnification of the claimant is proper in the circumstances because he or she has met the applicable standard of conduct set forth in the General Corporation Law of the State of Delaware, nor an actual determination by the corporation (including its board of directors, independent legal counsel, or its stockholders) that the claimant has not met such applicable standard of conduct, shall be a defense to the action or create a presumption that the claimant has not met the applicable standard of conduct. Section 3. Article Not Exclusive. The rights to indemnification and --------- --------------------- the payment of expenses incurred in defending a proceeding in advance of its final disposition conferred in this Article V shall not be exclusive of any other right which any person may have or hereafter acquire under any statute, provision of the certificate of incorporation, by-law, agreement, vote of stockholders or disinterested directors or otherwise. Section 4. Insurance. The corporation may purchase and maintain --------- --------- insurance on its own behalf and on behalf of any person who is or was a director, officer, employee, fiduciary, or agent of the corporation or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, -10- partnership, joint venture, trust or other enterprise against any liability asserted against him or her and incurred by him or her in any such capacity, whether or not the corporation would have the power to indemnify such person against such liability under this Article V. Section 5. Expenses. Expenses incurred by any person described in --------- -------- Section 1 of this Article V in defending a proceeding shall be paid by the corporation in advance of such proceeding's final disposition upon receipt of an undertaking by or on behalf of the director or officer to repay such amount if it shall ultimately be determined that he or she is not entitled to be indemnified by the corporation. Such expenses incurred by other employees and agents may be so paid upon such terms and conditions, if any, as the board of directors deems appropriate. Section 6. Employees and Agents. Persons who are not covered by the --------- -------------------- foregoing provisions of this Article V and who are or were employees or agents of the corporation, or who are or were serving at the request of the corporation as employees or agents of another corporation, partnership, joint venture, trust or other enterprise, may be indemnified to the extent authorized at any time or from time to time by the board of directors. Section 7. Contract Rights. The provisions of this Article V shall --------- --------------- be deemed to be a contract right between the corporation and each director or officer who serves in any such capacity at any time while this Article V and the relevant provisions of the General Corporation Law of the State of Delaware or other applicable law are in effect, and any repeal or modification of this Article V or any such law shall not affect any rights or obligations then existing with respect to any state of facts or proceeding then existing. Section 8. Merger or Consolidation. For purposes of this Article V, --------- ----------------------- references to "the corporation" shall include, in addition to the resulting corporation, any constituent corporation (including any constituent of a constituent) absorbed in a consolidation or merger which, if its separate existence had continued, would have had power and authority to indemnify its directors, officers, and employees or agents, so that any person who is or was a director, officer, employee or agent of such constituent corporation, or is or was serving at the request of such constituent corporation as a director, officer, employee, fiduciary or agent of another corporation, partnership, joint venture, trust or other enterprise, shall stand in the same position under this Article V with respect to the resulting or surviving corporation as he or she would have with respect to such constituent corporation if its separate existence had continued. -11- ARTICLE VI ---------- CERTIFICATES OF STOCK --------------------- Section 1. Form. Every holder of stock in the corporation shall be --------- ---- entitled to have a certificate, signed by, or in the name of the corporation by the chief executive officer, the president, or a vice-president and the secretary or any assistant secretary of the corporation, certifying the number of shares owned by such holder in the corporation. If such a certificate is countersigned (1) by a transfer agent or an assistant transfer agent other than the corporation or its employee or (2) by a registrar, other than the corporation or its employee, the signature of the chief executive officer, the president, any vice-president, secretary, or any assistant secretary may be facsimiles. In case any officer or officers who have signed, or whose facsimile signature or signatures have been used on, any such certificate or certificates shall cease to be such officer or officers of the corporation whether because of death, resignation or otherwise before such certificate or certificates have been delivered by the corporation, such certificate or certificates may nevertheless be issued and delivered as though the person or persons who signed such certificate or certificates or whose facsimile signature or signatures have been used thereon had not ceased to be such officer or officers of the corporation. All certificates for shares shall be consecutively numbered or otherwise identified. The name of the person to whom the shares represented thereby are issued, with the number of shares and date of issue, shall be entered on the books of the corporation. Shares of stock of the corporation shall only be transferred on the books of the corporation by the holder of record thereof or by such holder's attorney duly authorized in writing, upon surrender to the corporation of the certificate or certificates for such shares endorsed by the appropriate person or persons, with such evidence of the authenticity of such endorsement, transfer, authorization, and other matters as the corporation may reasonably require, and accompanied by all necessary stock transfer stamps. In that event, it shall be the duty of the corporation to issue a new certificate to the person entitled thereto, cancel the old certificate or certificates, and record the transaction on its books. The board of directors may appoint a bank or trust company organized under the laws of the United States or any state thereof to act as its transfer agent or registrar, or both in connection with the transfer of any class or series of securities of the corporation. Section 2. Lost Certificates. The board of directors may direct a --------- ----------------- new certificate or certificates to be issued in place of any certificate or certificates previously issued by the corpo ration alleged to have been lost, stolen, or destroyed, upon the making of an affidavit of that fact by the person claiming the certificate of stock to be lost, stolen, or destroyed. When authorizing such issue of a new certificate or certificates, the -12- board of directors may, in its discretion and as a condition precedent to the issuance thereof, require the owner of such lost, stolen, or destroyed certificate or certificates, or his or her legal representative, to give the corporation a bond sufficient to indemnify the corporation against any claim that may be made against the corporation on account of the loss, theft or destruction of any such certificate or the issuance of such new certificate. Section 3. Fixing a Record Date for Stockholder Meetings. In order --------- --------------------------------------------- that the corporation may determine the stockholders entitled to notice of or to vote at any meeting of stockholders or any adjournment thereof, the board of directors may fix a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted by the board of directors, and which record date shall not be more than sixty nor less than ten days before the date of such meeting. If no record date is fixed by the board of directors, the record date for determining stockholders entitled to notice of or to vote at a meeting of stockholders shall be the close of business on the next day preceding the day on which notice is given, or if notice is waived, at the close of business on the day next preceding the day on which the meeting is held. A determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting; provided, however, that the board of directors may fix a new record date for the adjourned meeting. Section 4. Fixing a Record Date for Action by Written Consent. In --------- -------------------------------------------------- order that the corporation may determine the stockholders entitled to consent to corporate action in writing without a meeting, the board of directors may fix a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted by the board of directors, and which date shall not be more than ten days after the date upon which the resolution fixing the record date is adopted by the board of directors. If no record date has been fixed by the board of directors, the record date for determining stockholders entitled to consent to corporate action in writing without a meeting, when no prior action by the board of directors is required by statute, shall be the first date on which a signed written consent setting forth the action taken or proposed to be taken is delivered to the corporation by delivery to its registered office in the State of Delaware, its principal place of business, or an officer or agent of the corporation having custody of the book in which proceedings of meetings of stockholders are recorded. Delivery made to the corporation's registered office shall be by hand or by certified or registered mail, return receipt requested. If no record date has been fixed by the board of directors and prior action by the board of directors is required by statute, the record date for determining stockholders entitled to consent to corporate action in writing without a meeting shall be at the close of business on the -13- day on which the board of directors adopts the resolution taking such prior action. Section 5. Fixing a Record Date for Other Purposes. In order that --------- --------------------------------------- the corporation may determine the stockholders entitled to receive payment of any dividend or other distribution or allotment or any rights or the stockholders entitled to exercise any rights in respect of any change, conversion or exchange of stock, or for the purposes of any other lawful action, the board of directors may fix a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted, and which record date shall be not more than sixty days prior to such action. If no record date is fixed, the record date for determining stockholders for any such purpose shall be at the close of business on the day on which the board of directors adopts the resolution relating thereto. Section 6. Registered Stockholders. Prior to the surrender to the --------- ----------------------- corporation of the certificate or certificates for a share or shares of stock with a request to record the transfer of such share or shares, the corporation may treat the registered owner as the person entitled to receive dividends, to vote, to receive notifications, and otherwise to exercise all the rights and powers of an owner. Section 7. Subscriptions for Stock. Unless otherwise provided for in --------- ----------------------- the subscription agreement, subscriptions for shares shall be paid in full at such time, or in such installments and at such times, as shall be determined by the board of direc tors. Any call made by the board of directors for payment on subscriptions shall be uniform as to all shares of the same class or as to all shares of the same series. In case of default in the payment of any installment or call when such payment is due, the corporation may proceed to collect the amount due in the same manner as any debt due the corporation. ARTICLE VII ----------- GENERAL PROVISIONS ------------------ Section 1. Dividends. Dividends upon the capital stock of the --------- --------- corporation, subject to the provisions of the certificate of incorporation, if any, may be declared by the board of directors at any regular or special meeting, pursuant to law. Dividends may be paid in cash, in property, or in shares of the capital stock, subject to the provisions of the certificate of incorporation. Before payment of any dividend, there may be set aside out of any funds of the corporation available for dividends such sum or sums as the directors from time to time, in their absolute discretion, think proper as a reserve or reserves to meet contingencies, or for equalizing dividends, or for repairing or maintaining any property -14- of the corporation, or any other purpose and the directors may modify or abolish any such reserve in the manner in which it was created. Section 2. Checks, Drafts or Orders. All checks, drafts, or other --------- ------------------------ orders for the payment of money by or to the corporation and all notes and other evidences of indebtedness issued in the name of the corporation shall be signed by such officer or officers, agent or agents of the corporation, and in such manner, as shall be determined by resolution of the board of directors or a duly authorized committee thereof. Section 3. Contracts. The board of directors may authorize any --------- --------- officer or officers, or any agent or agents, of the corporation to enter into any contract or to execute and deliver any instrument in the name of and on behalf of the corporation, and such authority may be general or confined to specific instances. Section 4. Loans. The corporation may lend money to, or guarantee --------- ----- any obligation of, or otherwise assist any officer or other employee of the corporation or of its subsidiary, including any officer or employee who is a director of the corporation or its subsidiary, whenever, in the judgment of the directors, such loan, guaranty or assistance may reasonably be expected to benefit the corporation. The loan, guaranty or other assistance may be with or without interest, and may be unsecured, or secured in such manner as the board of directors shall approve, including, without limitation, a pledge of shares of stock of the corporation. Nothing in this section contained shall be deemed to deny, limit or restrict the powers of guaranty or warranty of the corporation at common law or under any statute. Section 5. Fiscal Year. The fiscal year of the corporation shall --------- ----------- be fixed by resolution of the board of directors. Section 6. Corporate Seal. The board of directors may provide a --------- -------------- corporate seal which shall be in the form of a circle and shall have inscribed thereon the name of the corporation and the words "Corporate Seal, Delaware". The seal may be used by causing it or a facsimile thereof to be impressed or affixed or reproduced or otherwise. Section 7. Voting Securities Owned By Corporation. Voting securities --------- -------------------------------------- in any other corporation held by the corporation shall be voted by the president, unless the board of directors specifically confers authority to vote with respect thereto, which authority may be general or confined to specific instances, upon some other person or officer. Any person authorized to vote securities shall have the power to appoint proxies, with general power of substitution. -15- Section 8. Inspection of Books and Records. Any stockholder of --------- ------------------------------- record, in person or by attorney or other agent, shall, upon written demand under oath stating the purpose thereof, have the right during the usual hours for business to inspect for any proper purpose the corporation's stock ledger, a list of its stockholders, and its other books and records, and to make copies or extracts therefrom. A proper purpose shall mean any purpose reasonably related to such person's interest as a stockholder. In every instance where an attorney or other agent shall be the person who seeks the right to inspection, the demand under oath shall be accompanied by a power of attorney or such other writing which authorizes the attorney or other agent to so act on behalf of the stockholder. The demand under oath shall be directed to the corporation at its registered office in the State of Delaware or at its principal place of business. Section 9. Section Headings. Section headings in these by-laws are --------- ---------------- for convenience of reference only and shall not be given any substantive effect in limiting or otherwise construing any provision herein. Section 10. Inconsistent Provisions. In the event that any provision ---------- ----------------------- of these by-laws is or becomes inconsistent with any provision of the certificate of incorporation, the General Corporation Law of the State of Delaware or any other applicable law, the provision of these by-laws shall not be given any effect to the extent of such inconsistency but shall otherwise be given full force and effect. ARTICLE VIII ------------ AMENDMENTS ---------- These by-laws may be amended, altered, or repealed and new by-laws adopted at any meeting of the board of directors by a majority vote. The fact that the power to adopt, amend, alter, or repeal the by-laws has been conferred upon the board of directors shall not divest the stockholders of the same powers. -16- EX-4.1 4 INDENTURE DATED 05/07/96 EXHIBIT 4.1 DADE INTERNATIONAL INC., as Issuer and IBJ SCHRODER BANK & TRUST COMPANY, as Trustee ____________________ INDENTURE Dated as of May 7, 1996 ____________________ $350,000,000 11 1/8 % Senior Subordinated Notes due 2006 and Series B 11 1/8 % Senior Subordinated Notes due 2006 CROSS-REFERENCE TABLE TIA Indenture Section Section - ------- --------- 310(a)(1)........................................... 7.10 (a)(2)........................................... 7.10 (a)(3)........................................... N.A. (a)(4)........................................... N.A. (a)(5)........................................... 7.08; 7.10 (b).............................................. 7.08; 7.10; 11.02 (c).............................................. N.A. 311(a).............................................. 7.11 (b).............................................. 7.11 (c).............................................. N.A. 312(a).............................................. 2.05 (b).............................................. 11.03 (c).............................................. 11.03 313(a).............................................. 7.06 (b)(1)........................................... N.A. (b)(2)........................................... 7.06 (c).............................................. 7.06; 11.02 (d).............................................. 7.06 314(a).............................................. 4.07; 4.08; 11.02 (b).............................................. N.A. (c)(1)........................................... 11.04 (c)(2)........................................... 11.04 (c)(3)........................................... N.A. (d).............................................. N.A. (e).............................................. 11.05 (f).............................................. N.A. 315(a).............................................. 7.01(b) (b).............................................. 7.05; 11.02 (c).............................................. 7.01(a) (d).............................................. 7.01(c) (e).............................................. 6.11 316(a)(last sentence)............................... 2.09 (a)(1)(A)........................................ 6.05 (a)(1)(B)........................................ 6.04 (a)(2)........................................... N.A. (b).............................................. 6.07 (c).............................................. 9.05 317(a)(1)........................................... 6.08 (a)(2)........................................... 6.09 (b).............................................. 2.04 318(a).............................................. 11.01 (c).............................................. 11.01 ______________________ N.A. means Not Applicable NOTE: This Cross-Reference Table shall not, for any purpose, be deemed to be a part of the Indenture. -i- TABLE OF CONTENTS ----------------- Page ---- ARTICLE ONE DEFINITIONS AND INCORPORATION BY REFERENCE Section 1.01 Definitions........................................ 1 Section 1.02 Incorporation by Reference of TIA.................. 32 Section 1.03 Rules of Construction.............................. 33 ARTICLE TWO THE NOTES Section 2.01 Form and Dating.................................... 33 Section 2.02 Execution and Authentication; Aggregate Principal Amount....................... 34 Section 2.03 Registrar and Paying Agent......................... 36 Section 2.04 Paying Agent To Hold Assets in Trust............................................ 36 Section 2.05 Noteholder Lists................................... 37 Section 2.06 Transfer and Exchange.............................. 37 Section 2.07 Replacement Notes.................................. 38 Section 2.08 Outstanding Notes.................................. 38 Section 2.09 Treasury Notes..................................... 39 Section 2.10 Temporary Notes.................................... 39 Section 2.11 Cancellation....................................... 39 Section 2.12 Defaulted Interest................................. 40 Section 2.13 CUSIP Number....................................... 40 Section 2.14 Deposit of Moneys.................................. 40 Section 2.15 Restrictive Legends................................ 41 Section 2.16 Book-Entry Provisions for Global Security......................................... 43 Section 2.17 Special Transfer Provisions........................ 44 ARTICLE THREE REDEMPTION Section 3.01 Notices to Trustee................................. 47 Section 3.02 Selection of Notes To Be Redeemed.................. 47 Section 3.03 Notice of Redemption............................... 47 Section 3.04 Effect of Notice of Redemption..................... 48 Section 3.05 Deposit of Redemption Price........................ 49 Section 3.06 Notes Redeemed in Part............................. 49 -ii- Page ---- ARTICLE FOUR COVENANTS Section 4.01 Payment of Notes................................... 49 Section 4.02 Maintenance of Office or Agency.................... 50 Section 4.03 Corporate Existence................................ 50 Section 4.04 Payment of Taxes and Other Claims.................. 51 Section 4.05 Maintenance of Properties and Insurance........................................ 51 Section 4.06 Compliance Certificate; Notice of Default.......................................... 52 Section 4.07 Compliance with Laws............................... 53 Section 4.08 SEC Reports........................................ 53 Section 4.09 Waiver of Stay, Extension or Usury Laws............................................. 54 Section 4.10 Limitation on Restricted Payments.................. 54 Section 4.11 Limitation on Transactions with Affiliates....................................... 57 Section 4.12 Limitation on Incurrence of Additional Indebtedness.......................... 59 Section 4.13 Limitation on Dividend and Other Payment Restrictions Affecting Subsidiaries..................................... 60 Section 4.14 Prohibition on Incurrence of Senior Subordinated Debt................................ 61 Section 4.15 Change of Control.................................. 61 Section 4.16 Limitation on Asset Sales.......................... 63 Section 4.17 Limitation on Preferred Stock of Subsidiaries..................................... 68 Section 4.18 Limitation on Liens................................ 69 Section 4.19 Limitation of Guarantees by Subsidiaries..................................... 69 Section 4.20 Conduct of Business................................ 70 ARTICLE FIVE SUCCESSOR CORPORATION Section 5.01 Merger, Consolidation and Sale of Assets........................................... 71 Section 5.02 Successor Corporation Substituted.................. 72 -iii- Page ---- ARTICLE SIX DEFAULT AND REMEDIES Section 6.01 Events of Default.................................. 72 Section 6.02 Acceleration....................................... 74 Section 6.03 Other Remedies..................................... 75 Section 6.04 Waiver of Past Defaults............................ 75 Section 6.05 Control by Majority................................ 76 Section 6.06 Limitation on Suits................................ 76 Section 6.07 Rights of Holders To Receive Payment.......................................... 77 Section 6.08 Collection Suit by Trustee......................... 77 Section 6.09 Trustee May File Proofs of Claim................... 77 Section 6.10 Priorities......................................... 78 Section 6.11 Undertaking for Costs.............................. 78 ARTICLE SEVEN TRUSTEE Section 7.01 Duties of Trustee.................................. 79 Section 7.02 Rights of Trustee.................................. 80 Section 7.03 Individual Rights of Trustee....................... 81 Section 7.04 Trustee's Disclaimer............................... 82 Section 7.05 Notice of Default.................................. 82 Section 7.06 Reports by Trustee to Holders...................... 82 Section 7.07 Compensation and Indemnity......................... 83 Section 7.08 Replacement of Trustee............................. 84 Section 7.09 Successor Trustee by Merger, Etc................... 85 Section 7.10 Eligibility; Disqualification...................... 85 Section 7.11 Preferential Collection of Claims Against Company.................................. 86 ARTICLE EIGHT DISCHARGE OF INDENTURE; DEFEASANCE Section 8.01 Termination of the Company's Obligations...................................... 86 Section 8.02 Legal Defeasance and Covenant Defeasance....................................... 88 Section 8.03 Conditions to Legal Defeasance or Covenant Defeasance.............................. 89 Section 8.04 Application of Trust Money......................... 91 Section 8.05 Repayment to the Company........................... 92 -iv- Page ---- Section 8.06 Reinstatement...................................... 92 ARTICLE NINE AMENDMENTS, SUPPLEMENTS AND WAIVERS Section 9.01 Without Consent of Holders......................... 93 Section 9.02 With Consent of Holders............................ 94 Section 9.03 Effect on Senior Debt.............................. 95 Section 9.04 Compliance with TIA................................ 95 Section 9.05 Revocation and Effect of Consents.................. 95 Section 9.06 Notation on or Exchange of Notes................... 96 Section 9.07 Trustee To Sign Amendments, Etc.................... 97 ARTICLE TEN SUBORDINATION Section 10.01 Notes Subordinated to Senior Debt.................. 97 Section 10.02 No Payment on Notes in Certain Circumstances.................................... 97 Section 10.03 Payment Over of Proceeds upon Dissolution, Etc................................. 99 Section 10.04 Payments May Be Paid Prior to Dissolution...................................... 101 Section 10.05 Subrogation........................................ 101 Section 10.06 Obligations of the Company Unconditional.................................... 102 Section 10.07 Notice to Trustee.................................. 102 Section 10.08 Reliance on Judicial Order or Certificate of Liquidating Agent................. 103 Section 10.09 Trustee's Relation to Senior Debt.................. 103 Section 10.10 Subordination Rights Not Impaired by Acts or Omissions of the Company or Holders of Senior Debt................ 104 Section 10.11 Noteholders Authorize Trustee To Effectuate Subordination of Notes................ 104 Section 10.12 This Article Ten Not To Prevent Events of Default................................ 105 Section 10.13 Trustee's Compensation Not Prejudiced....................................... 105 -v- Page ---- ARTICLE ELEVEN MISCELLANEOUS Section 11.01 TIA Controls....................................... 105 Section 11.02 Notices............................................ 106 Section 11.03 Communications by Holders with Other Holders.................................... 107 Section 11.04 Certificate and Opinion as to Conditions Precedent............................. 107 Section 11.05 Statements Required in Certificate or Opinion....................................... 107 Section 11.06 Rules by Trustee, Paying Agent, Registrar........................................ 108 Section 11.07 Legal Holidays..................................... 108 Section 11.08 Governing Law...................................... 108 Section 11.09 No Adverse Interpretation of Other Agreements....................................... 108 Section 11.10 No Recourse Against Others......................... 109 Section 11.11 Successors......................................... 109 Section 11.12 Duplicate Originals................................ 109 Section 11.13 Severability....................................... 109 Signatures........................................................... 110 Exhibit A - Form of Initial Note.................................... A-1 Exhibit B - Form of Exchange Note................................... B-1 Exhibit C - Form of Certificate To Be Delivered in Connection with Transfers to Non-QIB Accredited Investors............................... C-1 Exhibit D - Form of Certificate To Be Delivered in Connection with Transfers Pursuant to Regulation S....................................... D-1 Note: This Table of Contents shall not, for any purpose, be deemed to be part of the Indenture. -vi- INDENTURE, dated as of May 7, 1996, between Dade International Inc., a Delaware corporation (the "Company"), and IBJ Schroder Bank & Trust Company, a New York banking corporation, as Trustee (the "Trustee"). The Company has duly authorized the creation of an issue of 11 1/8 % Senior Subordinated Notes due 2006 (the "Initial Notes") and Series B 11 1/8 % Senior Subordinated Notes due 2006 (the "Exchange Notes," and together with the Initial Notes, the "Notes") and, to provide therefor, the Company has duly authorized the execution and delivery of this Indenture. All things necessary to make the Notes, when duly issued and executed by the Company, and authenticated and delivered hereunder, the valid obligations of the Company, and to make this Indenture a valid and binding agreement of the Company, have been done. Each party hereto agrees as follows for the benefit of the other party and for the equal and ratable benefit of the Holders of the Notes. ARTICLE ONE DEFINITIONS AND INCORPORATION BY REFERENCE SECTION 1.01. Definitions. ----------- "Acceleration Notice" has the meaning provided in ------------------- Section 6.02(a). "Acquired Indebtedness" means Indebtedness of a --------------------- Person or any of its Subsidiaries existing at the time such Person becomes a Restricted Subsidiary of the Company or assumed in connection with the acquisition of assets from such Person and not incurred by such Person in connection with, or in anticipation or contemplation of, such Person becoming a Restricted Subsidiary of the Company or such acquisition. "Acquisition" means the acquisition by the Company of ----------- the in vitro diagnostics business of DuPont and certain of its -- ----- Affiliates pursuant to an Asset Sale and Purchase Agreement between Dade Chemistry Systems Inc. and DuPont dated December 11, 1995 as amended and restated on May 7, 1996. -2- "Affiliate" means a Person who directly or indirectly --------- through one or more intermediaries controls, or is controlled by, or is under common control with, the Company. The term "control" means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting securities, by contract or otherwise. Notwithstanding the foregoing, (i) no Person (other than the Company or any Subsidiary of the Company) in whom a Securitization Entity makes an Investment in connection with a Qualified Securitization Transaction shall be deemed to be an Affiliate of the Company or any of its Subsidiaries solely by reason of such Investment and (ii) none of Baxter International Inc. or its Subsidiaries shall be deemed to be an Affiliate of the Company. "Affiliate Transaction" has the meaning provided in --------------------- Section 4.11. "Agent" means any Registrar, Paying Agent or co- ----- Registrar. "Agent Members" has the meaning provided in ------------- Section 2.16. "all or substantially all" shall have the meaning ------------------------ given such phrase in the Revised Model Business Corporation Act. "Asset Acquisition" means (a) an Investment by the ----------------- Company or any Restricted Subsidiary of the Company in any other Person if, as a result of such Investment, such Person shall become a Restricted Subsidiary of the Company or any Restricted Subsidiary of the Company, or shall be merged with or into the Company or any Restricted Subsidiary of the Company, or (b) the acquisition by the Company or any Restricted Subsidiary of the Company of the assets of any Person which constitute all or substantially all of the assets of such Person, any division or line of business of such Person or any other properties or assets of such Person other than in the ordinary course of business. "Asset Sale" means any direct or indirect sale, ---------- issuance, conveyance, transfer, lease (other than operating leases entered into in the ordinary course of business), assignment or other transfer for value by the Company or any of its Restricted Subsidiaries (including any Sale and Leaseback Transaction) to any Person other than the Company or a Wholly -3- Owned Restricted Subsidiary of the Company of (a) any Capital Stock of any Restricted Subsidiary of the Company or (b) any other property or assets of the Company or any Restricted Subsidiary of the Company other than in the ordinary course of business; provided, however, that Asset Sales shall not include (i) a transaction or series of related transactions for which the Company or its Restricted Subsidiaries receive aggregate consideration of less than $1.0 million, (ii) the sale, lease, conveyance, disposition or other transfer of all or substantially all of the assets of the Company as permitted under Section 5.01 or any disposition that constitutes a Change of Control, (iii) the sale or discount, in each case without recourse, of accounts receivable arising in the ordinary course of business, but only in connection with the compromise or collection thereof, (iv) the factoring of accounts receivable arising in the ordinary course of business pursuant to arrangements customary in the region, (v) the licensing of intellectual property, (vi) disposals or replacements of obsolete equipment in the ordinary course of business, (vii) the sale, lease, conveyance, disposition or other transfer by the Company or any Restricted Subsidiary of assets or property to one or more Wholly Owned Restricted Subsidiaries in connection with Investments permitted under Section 4.10, (viii) sales of accounts receivable, equipment and related assets (including contract rights) of the type specified in the definition of "Qualified Securitization Transaction" to a Securitization Entity for the fair market value thereof, including cash in an amount at least equal to 75% of the fair market value thereof as determined in accordance with GAAP, and (ix) transfers of accounts receivable, equipment and related assets (including contract rights) of the type specified in the definition of "Qualified Securitization Transaction" (or a fractional undivided interest therein) by a Securitization Entity in a Qualified Securitization Transaction. For the purposes of clause (viii), Purchase Money Notes shall be deemed to be cash. "Authenticating Agent" has the meaning provided in -------------------- Section 2.02. "Bain Capital" means Bain Capital, Inc. ------------ "Bain Related Party" means Bain Capital and any ------------------ Affiliate of Bain Capital. "Bank Credit Agreement" means the Credit Agreement --------------------- dated as of the Issue Date, among the Company, Holdings, the lenders party thereto in their capacities as lenders thereunder -4- and Bankers Trust Company, as agent, together with the related documents thereto (including, without limitation, any guarantee agreements and security documents), in each case as such agreements may be amended (including any amendment and restatement thereof), supplemented or otherwise modified from time to time, including any agreement extending the maturity of, refinancing, replacing or otherwise restructuring (including, without limitation, increasing the amount of available borrowings thereunder or adding Subsidiaries of the Company as additional borrowers or guarantors thereunder) all or any portion of the Indebtedness under such agreement or any successor or replacement agreement and whether by the same or any other agent, lender or group of lenders. "Bankruptcy Law" means Title 11, U.S. Code or any -------------- similar Federal, state or foreign law for the relief of debtors. "Blockage Period" has the meaning provided in --------------- Section 10.02. "Board of Directors" means, as to any Person, the ------------------ board of directors of such Person or any duly authorized committee thereof. "Board Resolution" means, with respect to any Person, ---------------- a duly adopted resolution of the Board of Directors or other equivalent governing body of such Person. "Business Day" means a day that is not a Legal ------------ Holiday. "Capitalized Lease Obligation" means, as to any ---------------------------- Person, the obligations of such Person under a lease that are required to be classified and accounted for as capital lease obligations under GAAP and, for purposes of this definition, the amount of such obligations at any date shall be the capitalized amount of such obligations at such date, determined in accordance with GAAP. "Capital Stock" means (i) with respect to any Person ------------- that is a corporation, any and all shares, interests, participations or other equivalents (however designated) of corporate stock, including each class of common stock and preferred stock of such Person and (ii) with respect to any Person that is not a corporation, any and all partnership or other equity interests of such Person. -5- "Cash Equivalents" means (i) marketable direct ---------------- obligations issued by, or unconditionally guaranteed by, the United States Government or issued by any agency thereof and backed by the full faith and credit of the United States, in each case maturing within one year from the date of acquisition thereof; (ii) marketable direct obligations issued by any state of the United States of America or any political subdivision of any such state or any public instrumentality thereof maturing within one year from the date of acquisition thereof and, at the time of acquisition, having one of the two highest ratings obtainable from either S&P or Moody's; (iii) commercial paper maturing no more than one year from the date of creation thereof and, at the time of acquisition, having a rating of at least A-1 from S&P or at least P-1 from Moody's; (iv) certificates of deposit or bankers' acceptances (or, with respect to foreign banks, similar instruments) maturing within one year from the date of acquisition thereof issued by any bank organized under the laws of the United States of America or any state thereof or the District of Columbia, Japan or any member of the European Economic Community or any U.S. branch of a foreign bank having at the date of acquisition thereof combined capital and surplus of not less than $200.0 million; provided that instruments issued by banks not having one of the two highest ratings obtainable from either S&P or Moody's or by banks organized under the laws of Japan or any member of the European Economic Community shall not constitute "Cash Equivalents" for purposes of the subordination provisions of this Indenture; (v) repurchase obligations with a term of not more than seven days for underlying securities of the types described in clause (i) above entered into with any bank meeting the qualifications specified in clause (iv) above; and (vi) investments in money market funds which invest substantially all their assets in securities of the types described in clauses (i) through (v) above. "Change of Control" means the occurrence of one or ----------------- more of the following events: (i) any sale, lease, exchange or other transfer (in one transaction or a series of related transactions) of all or substantially all of the assets of the Company or Holdings to any Person or group of related Persons for purposes of Section 13(d) of the Exchange Act (a "Group"), together with any Affiliates thereof (whether or not otherwise in compliance with the provisions of this Indenture); (ii) the approval by the holders of Capital Stock of the Company of any plan or proposal for the liquidation or dissolution of the Company (whether or not otherwise in compliance with the provisions of this Indenture); (iii) any Person or Group (other than -6- one or both of the Principals or their respective Related Parties) shall become the owner, directly or indirectly, beneficially or of record, of shares representing more than 50% of the aggregate ordinary voting power represented by the issued and outstanding Capital Stock of the Company or Holdings; or (iv) the first day within any two-year period on which a majority of the members of the Board of Directors of the Company or Holdings are not Continuing Directors. "Change of Control Date" has the meaning provided in ---------------------- Section 4.15. "Change of Control Offer" has the meaning provided in ----------------------- Section 4.15. "Change of Control Payment Date" has the meaning ------------------------------ provided in Section 4.15. "Company" means the party named as such in this ------- Indenture until a successor replaces it pursuant to this Indenture and thereafter means such successor. "Consolidated EBITDA" means, with respect to any ------------------- Person, for any period, the sum (without duplication) of (i) Consolidated Net Income and (ii) to the extent Consolidated Net Income has been reduced thereby, (A) all income taxes and foreign withholding taxes of such Person and its Restricted Subsidiaries paid or accrued in accordance with GAAP for such period, (B) Consolidated Interest Expense and (C) Consolidated Non-cash Charges. "Consolidated Fixed Charge Coverage Ratio" means, ---------------------------------------- with respect to any Person, the ratio of Consolidated EBITDA of such Person during the four full fiscal quarters (the "Four Quarter Period") ending on or prior to the date of the transaction giving rise to the need to calculate the Consolidated Fixed Charge Coverage Ratio (the "Transaction Date") to Consolidated Fixed Charges of such Person for the Four Quarter Period. In addition to and without limitation of the foregoing, for purposes of this definition, "Consolidated EBITDA" and "Consolidated Fixed Charges" shall be calculated after giving effect on a pro forma basis for the period of such --- ----- calculation to (i) the incurrence of any Indebtedness or the issuance of any Designated Preferred Stock of such Person or any of its Restricted Subsidiaries (and the application of the proceeds thereof) giving rise to the need to make such calculation and any incurrence or repayment of other Indebtedness or the -7- issuance or redemption of other Designated Preferred Stock (and the application of the proceeds thereof) occurring during the Four Quarter Period or at any time subsequent to the last day of the Four Quarter Period and on or prior to the Transaction Date, as if such incurrence, repayment, issuance or redemption, as the case may be (and the application of the proceeds thereof), occurred on the first day of the Four Quarter Period and (ii) any Asset Sales or Asset Acquisitions (including, without limitation, any Asset Acquisition giving rise to the need to make such calculation as a result of such Person or one of its Restricted Subsidiaries (including any Person who becomes a Restricted Subsidiary as a result of the Asset Acquisition) incurring, assuming or otherwise being liable for Acquired Indebtedness and also including any Consolidated EBITDA (including any pro forma --- ----- expense and cost reductions calculated on a basis consistent with Regulation S-X under the Securities Act as in effect and applied as of December 31, 1995) attributable to the assets which are the subject of the Asset Acquisition or Asset Sale during the Four Quarter Period) occurring during the Four Quarter Period or at any time subsequent to the last day of the Four Quarter Period and on or prior to the Transaction Date, as if such Asset Sale or Asset Acquisition (including the incurrence, assumption or liability for any such Indebtedness or Acquired Indebtedness) occurred on the first day of the Four Quarter Period. If such Person or any of its Restricted Subsidiaries directly or indirectly guarantees Indebtedness of a third Person, the preceding sentence shall give effect to the incurrence of such guaranteed Indebtedness as if such Person or any Restricted Subsidiary of such Person had directly incurred or otherwise assumed such guaranteed Indebtedness. Furthermore, in calculating "Consolidated Fixed Charges" for purposes of determining the denominator (but not the numerator) of this "Consolidated Fixed Charge Coverage Ratio," (1) interest on outstanding Indebtedness determined on a fluctuating basis as of the Transaction Date and which will continue to be so determined thereafter shall be deemed to have accrued at a fixed rate per annum equal to the rate of interest on such Indebtedness in effect on the Transaction Date; (2) if interest on any Indebtedness actually incurred on the Transaction Date may optionally be determined at an interest rate based upon a factor of a prime or similar rate, a eurocurrency interbank offered rate, or other rates, then the interest rate in effect on the Transaction Date will be deemed to have been in effect during the Four Quarter Period; and (3) notwithstanding clause (1) above, interest on Indebtedness determined on a fluctuating basis, to the extent such interest is covered by agreements relating to Interest Swap Obligations, shall be -8- deemed to accrue at the rate per annum resulting after giving effect to the operation of such agreements. "Consolidated Fixed Charges" means, with respect to -------------------------- any Person for any period, the sum, without duplication, of (i) Consolidated Interest Expense (before amortization or write-off of debt issuance costs) plus (ii) the amount of all cash dividend payments on any series of Preferred Stock of such Person plus (iii) the amount of all dividend payments on any series of Permitted Foreign Subsidiary Preferred Stock or Permitted Domestic Subsidiary Preferred Stock; provided that -------- with respect to any series of Designated Preferred Stock that was not paid cash dividends during such period but that is eligible to be paid cash dividends during any period prior to the maturity date of the Notes, cash dividends shall be deemed to have been paid with respect to such series of Designated Preferred Stock during such period for purposes of clause (ii) of this definition. "Consolidated Interest Expense" means, with respect ----------------------------- to any Person for any period, the sum of, without duplication, (i) the aggregate of all cash and non-cash interest expense with respect to all outstanding Indebtedness of such Person and its Restricted Subsidiaries, including the net costs associated with Interest Swap Obligations, for such period determined on a consolidated basis in conformity with GAAP, and (ii) the interest component of Capitalized Lease Obligations paid, accrued and/or scheduled to be paid or accrued by such Person and its Restricted Subsidiaries during such period as determined on a consolidated basis in accordance with GAAP. "Consolidated Net Income" of the Company means, for ----------------------- any period, the aggregate net income (or loss) of the Company and its Restricted Subsidiaries for such period on a consolidated basis, determined in accordance with GAAP; provided that there shall be excluded therefrom (a) gains and - -------- losses from Asset Sales (without regard to the $1.0 million limitation set forth in the definition thereof) or abandonments or reserves relating thereto and the related tax effects according to GAAP, (b) gains and losses due solely to fluctuations in currency values and the related tax effects according to GAAP, (c) items classified as extraordinary, unusual or nonrecurring gains and losses (including, without limitation, restructuring costs), and the related tax effects according to GAAP, (d) the net income (or loss) of any Person acquired in a pooling of interests transaction accrued prior to the date it becomes a Restricted Subsidiary of the Company or is merged or -9- consolidated with the Company or any Restricted Subsidiary of the Company, (e) the net income of any Restricted Subsidiary of the Company to the extent that the declaration of dividends or similar distributions by that Restricted Subsidiary of the Company of that income is restricted by contract, operation of law or otherwise, (f) the net loss of any Person, other than a Restricted Subsidiary of the Company, (g) the net income of any Person, other than a Restricted Subsidiary of the Company, except to the extent of cash dividends or distributions paid to the Company or a Restricted Subsidiary of the Company by such Person, (h) only for purposes of clause (iii)(w) of the first paragraph of Section 4.10, any amounts included pursuant to clause (iii)(z) of Section 4.10, (i) one time non-cash compensation charges, including any arising from existing stock options resulting from any merger or recapitalization transaction and (j) start-up costs and duplicative costs incurred in connection with the transition service and distribution agreements in effect on the Issue Date (as the same may be amended from time to time). For purposes of clause (iii)(w) of the first paragraph of Section 4.10, Consolidated Net Income shall be reduced by any cash dividends paid with respect to any series of Designated Preferred Stock. "Consolidated Net Worth" means, with respect to any ---------------------- Person for any date of determination, the sum of (i) stated capital with respect to Capital Stock of such Person and additional paid-in capital, and (ii) retained earnings (or minus accumulated deficit) of such Person and its Subsidiaries (or, in the case of the Company, the Restricted Subsidiaries), less, to the extent included in the foregoing, amounts attributable to Disqualified Capital Stock, each item determined on a consolidated basis in accordance with GAAP. "Consolidated Non-cash Charges" means, with respect ----------------------------- to any Person for any period, the aggregate depreciation, amortization and other non-cash expenses of such Person and its Restricted Subsidiaries reducing Consolidated Net Income of such Person and its Restricted Subsidiaries for such period, determined on a consolidated basis in accordance with GAAP (excluding any such non-cash charge constituting an extraordinary item or loss or any such charge which requires an accrual of or a reserve for cash charges for any future period, other than the net non-cash charges related to deferred revenue in connection with recourse provisions under instrument sales programs entered into in the ordinary course of business). -10- "Continuing Directors" means, as of any date of -------------------- determination, any member of the Board of Directors of the Company or Holdings, as the case may be, who (i) was a member of such Board of Directors on the Issue Date or (ii) was nominated for election or elected to such Board of Directors with, or whose election to such Board of Directors was approved by, the affirmative vote of a majority of the Continuing Directors who were members of such Board of Directors at the time of such nomination or election or (iii) is any designee of the Principals or their Affiliates or was nominated by the Principals or their Affiliates or any designees of the Principals or their Affiliates on the Board of Directors. "Covenant Defeasance" has the meaning provided in ------------------- Section 8.02. "Currency Agreement" means any foreign exchange ------------------ contract, currency swap agreement or other similar agreement or arrangement designed to protect the Company or any Restricted Subsidiary against fluctuations in currency values. "Custodian" means any receiver, trustee, assignee, --------- liquidator, sequestrator or similar official under any Bankruptcy Law. "Default" means an event or condition the occurrence ------- of which is, or with the lapse of time or the giving of notice or both would be, an Event of Default. "Default Notice" has the meaning provided in -------------- Section 10.02. "Depository" means The Depository Trust Company, its ---------- nominees and successors. "Designated Noncash Consideration" means the fair -------------------------------- market value of noncash consideration received by the Company or one or its Restricted Subsidiaries in connection with an Asset Sale that is so designated as Designated Noncash Consideration pursuant to an officers' certificate executed by the principal executive officer and the principal financial officer of the Company or such Restricted Subsidiary, less the amount of cash or Cash Equivalents received in connection with a sale of such Designated Noncash Consideration. Such officers' certificate shall state the basis of such valuation, which shall be a report of a nationally recognized investment banking firm with respect to the receipt in one or a series of related -11- transactions of Designated Noncash Consideration with a fair market value in excess of $10.0 million. "Designated Preferred Stock" means Preferred Stock -------------------------- that is so designated as Designated Preferred Stock, pursuant to an officers' certificate executed by the principal executive officer and the principal financial officer of the Company, on the issuance date thereof, the cash proceeds of which are excluded from the calculation set forth in clause (iii) of the first paragraph of Section 4.10. "Designated Senior Debt" means (i) Indebtedness under ---------------------- or in respect of the Bank Credit Agreement and (ii) any other Indebtedness constituting Senior Debt which, at the time of determination, has an aggregate principal amount of at least $25.0 million and is specifically designated in the instrument evidencing such Senior Debt as "Designated Senior Debt" by the Company. "Disqualified Capital Stock" means that portion of -------------------------- any Capital Stock which, by its terms (or by the terms of any security into which it is convertible or for which it is exchangeable), or upon the happening of any event (other than an event which would constitute a Change of Control), matures (excluding any maturity as the result of an optional redemption by the issuer thereof) or is mandatorily redeemable, pursuant to a sinking fund obligation or otherwise, or is redeemable at the sole option of the holder thereof (except, in each case, upon the occurrence of a Change of Control) on or prior to the final maturity date of the Notes. "DuPont" means E.I. du Pont de Nemours and Company. ------ "Equity Offering" means any offering of Qualified --------------- Capital Stock of Holdings or the Company; provided that, in the -------- event of any Equity Offering by Holdings, Holdings contributes to the capital of the Company the portion of the net cash proceeds of such Equity Offering necessary to pay the aggregate redemption price (plus accrued interest to the redemption date) of the Notes to be redeemed pursuant to Paragraph 6(b) of the Notes. "Event of Default" has the meaning provided in ---------------- Section 6.01. -12- "Exchange Act" means the Securities Exchange Act of ------------ 1934, as amended, and the rules and regulations promulgated by the SEC thereunder. "Exchange Notes" has the meaning provided in the -------------- preamble to this Indenture. "Exchange Offer" means the registration by the -------------- Company under the Securities Act pursuant to a registration statement of the offer by the Company to each Holder of the Initial Notes to exchange all the Initial Notes held by such Holder for the Exchange Notes in an aggregate principal amount equal to the aggregate principal amount of the Initial Notes held by such Holder, all in accordance with the terms and conditions of the Registration Rights Agreement. "Existing Notes" means the Company's 13% Senior -------------- Subordinated Notes due 2005. "fair market value" means, unless otherwise ----------------- specified, with respect to any asset or property, the price which could be negotiated in an arm's-length, free market transaction, for cash, between a willing seller and a willing and able buyer, neither of whom is under undue pressure or compulsion to complete the transaction. Fair market value shall be determined by the Board of Directors of the Company acting reasonably and in good faith and shall be evidenced by a resolution of the Board of Directors of the Company delivered to the Trustee. "GAAP" is defined to mean generally accepted ---- accounting principles in the United States of America as in effect as of the date of this Indenture, including, without limitation, those set forth in the opinions and pronouncements of the Accounting Principles Board of the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board or in such other statements by such other entity as approved by a significant segment of the accounting profession. All ratios and computations based on GAAP contained in this Indenture shall be computed in conformity with GAAP applied on a consistent basis, except that calculations made for purposes of determining compliance with the terms of the covenants and with other provisions of this Indenture shall be made without giving effect to (i) the deduction or amortization of any premiums, fees, and expenses incurred in connection with the Acquisition and related financings or any other permitted incurrence of -13- Indebtedness or Refinancing Indebtedness and (ii) except as otherwise provided, the amortization of any amounts required or permitted by Accounting Principles Board Opinion Nos. 16 (including non-cash write-ups and non-cash charges relating to inventory, fixed assets and in-process research and development, in each case arising in connection with the Acquisition and the acquisition of the Company in 1994) and 17 (including non-cash charges relating to intangibles and goodwill arising in connection with the Acquisition). "Global Note" has the meaning provided in ----------- Section 2.01. "GS Capital" means GS Capital Partners, L.P. ---------- "GS Capital Related Party" means (a) any stockholder ------------------------ or partner of GS Capital on the Issue Date or (b) any trust, corporation, partnership or other entity, the beneficiaries, stockholders, partners, owners or Persons beneficially holding an 80% or more controlling interest which consist of GS Capital and/or such other Persons referred to in the immediately preceding clause (a). "Holder" or "Noteholder" means the Person in whose ------ ---------- name a Note is registered on the Registrar's books. "Holdings" means Diagnostics Holding, Inc., a -------- Delaware corporation. "Holdings Preferred Stock" has the meaning provided ------------------------ in Section 4.10. "incur" has the meaning provided Section 4.12. ----- "Indebtedness" means with respect to any Person, ------------ without duplication, (i) all obligations of such Person for borrowed money, (ii) all obligations of such Person evidenced by bonds, debentures, notes or other similar instruments, (iii) all Capitalized Lease Obligations of such Person, (iv) all obligations of such Person issued or assumed as the deferred purchase price of property, all conditional sale obligations and all obligations under any title retention agreement (but excluding trade accounts payable and warranty and service obligations arising in the ordinary course of business), (v) all obligations for the reimbursement of any obligor on any letter of credit, banker's acceptance or similar credit transaction, (vi) guarantees and other contingent obligations in -14- respect of Indebtedness referred to in clauses (i) through (v) above and clause (viii) below, (vii) all obligations of any other Person of the type referred to in clauses (i) through (vi) which are secured by any lien on any property or asset of such Person, the amount of such obligation being deemed to be the lesser of the fair market value of such property or asset or the amount of the obligation so secured, (viii) all obligations under currency swap agreements and interest swap agreements of such Person and (ix) all Disqualified Capital Stock issued by such Person with the amount of Indebtedness represented by such Disqualified Capital Stock being equal to the greater of its voluntary or involuntary liquidation preference and its maximum fixed repurchase price, but excluding accrued dividends, if any. For purposes hereof, (x) the "maximum fixed repurchase price" of any Disqualified Capital Stock which does not have a fixed repurchase price shall be calculated in accordance with the terms of such Disqualified Capital Stock as if such Disqualified Capital Stock were purchased on any date on which Indebtedness shall be required to be determined pursuant to this Indenture, and if such price is based upon, or measured by, the fair market value of such Disqualified Capital Stock, such fair market value shall be determined reasonably and in good faith by the Board of Directors of the issuer of such Disqualified Capital Stock and (y) any transfer of accounts receivable, equipment or other assets (including contract rights) which constitute a sale for purposes of GAAP and any related recourse provisions under instrument sales programs entered into in the ordinary course of business shall not constitute Indebtedness hereunder. "Indenture" means this Indenture, as amended or --------- supplemented from time to time in accordance with the terms hereof. "Initial Notes" has the meaning provided in the ------------- preamble to this Indenture. "Initial Public Offering" means the first ----------------------- underwritten public offering of Qualified Capital Stock by either Holdings or the Company pursuant to a registration statement filed with the SEC in accordance with the Securities Act for aggregate net cash proceeds of at least $50.0 million; provided that in the event the Initial Public Offering is - -------- consummated by Holdings, Holdings contributes to the capital of the Company at least $50.0 million of the net cash proceeds of the Initial Public Offering. -15- "Initial Purchasers" means BT Securities Corporation, ------------------ CS First Boston Corporation and Morgan Stanley & Co. Incorporated. "Institutional Accredited Investor" means an --------------------------------- institution that is an "accredited investor" as that term is defined in Rule 501(a)(1), (2), (3) or (7) under the Securities Act. "Interest Payment Date" means the stated maturity of --------------------- an installment of interest on the Notes. "Interest Swap Obligations" means the obligations of ------------------------- any Person, pursuant to any arrangement with any other Person, whereby, directly or indirectly, such Person is entitled to receive from time to time periodic payments calculated by applying either a floating or a fixed rate of interest on a stated notional amount in exchange for periodic payments made by such other Person calculated by applying a fixed or a floating rate of interest on the same notional amount. "Internal Revenue Code" means the Internal Revenue --------------------- Code of 1986, as amended to the date hereof and from time to time hereafter. "Investment" means, with respect to any Person, any ---------- direct or indirect loan or other extension of credit (including, without limitation, a guarantee) or capital contribution to (by means of any transfer of cash or other property to others or any payment for property or services for the account or use of others), or any purchase or acquisition by such Person of any Capital Stock, bonds, notes, debentures or other securities or evidences of Indebtedness issued by, any Person. "Investment" shall exclude extensions of trade credit by the Company and its Subsidiaries on commercially reasonable terms in accordance with normal trade practices of the Company or such Subsidiary, as the case may be. For the purposes of Section 4.10, (i) "Investment" shall include and be valued at the book value of the net assets of any Restricted Subsidiary at the time that such Restricted Subsidiary is designated an Unrestricted Subsidiary and shall exclude the book value of the net assets of any Unrestricted Subsidiary at the time that such Unrestricted Subsidiary is designated a Restricted Subsidiary and (ii) the amount of any Investment shall be the original cost of such Investment plus the cost of all additional Investments by the Company or any of its Restricted Subsidiaries, without any adjustments for increases or decreases in value, or write-ups, write-downs or write-offs with respect to such -16- Investment. If the Company or any Restricted Subsidiary of the Company sells or otherwise disposes of any Common Stock of any direct or indirect Restricted Subsidiary of the Company such that, after giving effect to any such sale or disposition, the Company no longer owns, directly or indirectly, 100% of the outstanding Common Stock of such Restricted Subsidiary, the Company shall be deemed to have made an Investment on the date of any such sale or disposition equal to the book value of the Common Stock of such Restricted Subsidiary not sold or disposed of. "Issue Date" means the date of original issuance of ---------- the Notes. "Legal Defeasance" has the meaning provided in ---------------- Section 8.02. "Legal Holiday" has the meaning provided in ------------- Section 11.07. "Lien" means any lien, mortgage, deed of trust, ---- pledge, security interest, charge or encumbrance of any kind (including any conditional sale or other title retention agreement, any lease in the nature thereof and any agreement to give any security interest). "Maturity Date" means May 1, 2006. ------------- "Moody's" means Moody's Investors Service, Inc. and ------- its successors. "Net Cash Proceeds" means, with respect to any Asset ----------------- Sale, the proceeds in the form of cash or Cash Equivalents received by the Company or any of its Subsidiaries from such Asset Sale net of (a) out-of-pocket expenses and fees relating to such Asset Sale (including, without limitation, legal, accounting and investment banking fees and sales commissions), (b) taxes paid or payable after taking into account any reduction in consolidated tax liability due to available tax credits or deductions and any tax sharing arrangements, (c) re- payment of Indebtedness that is required to be repaid in connection with such Asset Sale, (d) any portion of cash proceeds which the Company determines in good faith should be reserved for post-closing adjustments, it being understood and agreed that on the day that all such post-closing adjustments have been determined, the amount (if any) by which the reserved amount in respect of such Asset Sale exceeds the actual post- closing -17- adjustments payable by the Company or any of its Subsidiaries shall constitute Net Cash Proceeds on such date. "Net Proceeds Offer" has the meaning provided in ------------------ Section 4.16. "Net Proceeds Offer Payment Date" has the meaning ------------------------------- provided in Section 4.16. "Net Proceeds Offer Trigger Date" has the meaning ------------------------------- provided in Section 4.16. "Non-U.S. Person" means a person who is not a U.S. --------------- person, as defined in Regulation S. "Notes" means the Initial Notes and the Exchange ----- Notes treated as a single class of securities, as amended or supplemented from time to time in accordance with the terms hereof, that are issued pursuant to this Indenture. "Obligations" means all obligations for principal, ----------- premium, interest, penalties, fees, indemnifications, reimbursements, damages and other liabilities payable under the documentation governing any Indebtedness, without duplication. "Offering Memorandum" means the Offering Memorandum ------------------- dated April 30, 1996, pursuant to which the Initial Notes were offered, and any supplement thereto. "Officer" means, with respect to any Person, the ------- Chairman of the Board, the Chief Executive Officer, the President, any Vice President, the Chief Financial Officer, the Treasurer, the Controller, or the Secretary of such Person, or any other officer designated by the Board of Directors serving in a similar capacity. "Officers' Certificate" means, with respect to any --------------------- Person, a certificate signed by two Officers or by an Officer and either an Assistant Treasurer or an Assistant Secretary of such Person and otherwise complying with the requirements of Sections 11.04 and 11.05, as they relate to the making of an Officers' Certificate. "Offshore Physical Notes" has the meaning provided in ----------------------- Section 2.01. -18- "Opinion of Counsel" means a written opinion from ------------------ legal counsel, who may be counsel for the Company, and who is reasonably acceptable to the Trustee complying with the requirements of Sections 11.04 and 11.05, as they relate to the giving of an Opinion of Counsel. "Paying Agent" has the meaning provided in ------------ Section 2.03. "Permitted Domestic Subsidiary Preferred Stock" means --------------------------------------------- any series of Preferred Stock of a domestic Restricted Subsidiary of the Company that constitutes Qualified Capital Stock and has a fixed dividend rate, the liquidation value of all series of which, when combined with the aggregate amount of Indebtedness of the Company and its Restricted Subsidiaries incurred pursuant to clause (xvi) of the definition of Permitted Indebtedness, does not exceed $37.5 million; provided -------- that such amount shall increase to $75.0 million upon consummation of an Initial Public Offering. "Permitted Foreign Subsidiary Preferred Stock" means -------------------------------------------- any series of Preferred Stock of a foreign Restricted Subsidiary of the Company that constitutes Qualified Capital Stock and has a fixed dividend rate, the liquidation value of all series of which, when combined with the aggregate amount of Indebtedness of foreign Restricted Subsidiaries of the Company incurred pursuant to clause (iii) of the definition of Permitted Indebtedness, does not exceed $35.0 million; provided -------- that such amount shall increase to $50.0 million upon consummation of an Initial Public Offering. "Permitted Indebtedness" means, without duplication, ---------------------- (i) the Notes, (ii) Indebtedness incurred pursuant to the Bank Credit Agreement in an aggregate principal amount at any time outstanding not to exceed $585.0 million less the aggregate amount of Indebtedness of Securitization Entities in Qualified Securitization Transactions (other than Qualified Securitization Transactions involving equipment and related assets); provided that the amount of such reduction shall not -------- exceed $50.0 million, (A) less the amount of all mandatory principal payments actually made by the Company in respect of term loans thereunder (excluding any such payments to the extent refinanced at the time of payment under a replaced Bank Credit Agreement) and (B) reduced by any required permanent repayments (which are accompanied by a corresponding permanent commitment reduction) thereunder; provided that the amount of -------- Indebtedness permitted to be incurred pursuant to the Bank -19- Credit Agreement in accordance with this clause (ii) shall be in addition to any Indebtedness permitted to be incurred pursuant to the Bank Credit Agreement in reliance on, and in accordance with, clauses (x) and (xvi) of this definition, (iii) Indebtedness of foreign Restricted Subsidiaries of the Company, which together with the aggregate liquidation value of all outstanding series of Permitted Foreign Subsidiary Preferred Stock, does not exceed $35.0 million; provided that -------- such amount shall increase to $50.0 million upon consummation of an Initial Public Offering, (iv) other Indebtedness of the Company and its Subsidiaries outstanding on the Issue Date reduced by the amount of any scheduled amortization payments or mandatory prepayments when actually paid or permanent reductions thereon, (v) Interest Swap Obligations of the Company or any of its Subsidiaries covering Indebtedness of the Company or any of its Subsidiaries; provided that any -------- Indebtedness to which any such Interest Swap Obligations correspond is otherwise permitted to be incurred under this Indenture; provided, further, that such Interest Swap -------- ------- Obligations are entered into, in the judgment of the Company, to protect the Company from fluctuation in interest rates on their respective outstanding Indebtedness, (vi) Indebtedness under Currency Agreements, (vii) intercompany Indebtedness owed by the Company to any Wholly Owned Restricted Subsidiary of the Company or by any Restricted Subsidiary of the Company to the Company or any Wholly Owned Restricted Subsidiary of the Company, (viii) Acquired Indebtedness to the extent the Company could have incurred such Indebtedness in accordance with Section 4.12 on the date such Indebtedness became Acquired Indebtedness, (ix) guarantees by the Company and its Wholly Owned Restricted Subsidiaries of each other's Indebtedness; provided that such Indebtedness is permitted to be incurred - -------- under this Indenture, including, with respect to guarantees by Wholly Owned Restricted Subsidiaries of the Company, Section 4.19, (x) Indebtedness (including Capitalized Lease Obligations) incurred by the Company or any of its Restricted Subsidiaries to finance the purchase, lease or improvement of property (real or personal) or equipment (whether through the direct purchase of assets or the Capital Stock of any Person owning such assets) in an aggregate principal amount outstanding not to exceed 5% of Total Assets at the time of any incurrence thereof (including any Refinancing Indebtedness with respect thereto) (which amount may, but need not, be incurred in whole or in part under the Bank Credit Agreement), (xi) Indebtedness incurred by the Company or any of its Restricted Subsidiaries constituting reimbursement obligations with respect to letters of credit issued in the ordinary course of business, including, without limitation, letters of -20- credit in respect of workers' compensation claims or self- insurance, or other Indebtedness with respect to reimbursement type obligations regarding workers' compensation claims, (xii) Indebtedness arising from agreements of the Company or a Restricted Subsidiary of the Company providing for indemnification, adjustment of purchase price, earn out or other similar obligations, in each case, incurred or assumed in connection with the disposition of any business, assets or a Restricted Subsidiary of the Company, other than guarantees of Indebtedness incurred by any Person acquiring all or any portion of such business, assets or Restricted Subsidiary for the purpose of financing such acquisition; provided that the -------- maximum assumable liability in respect of all such Indebtedness shall at no time exceed the gross proceeds actually received by the Company and its Restricted Subsidiaries in connection with such disposition, (xiii) obligations in respect of performance and surety bonds and completion guarantees provided by the Company or any Restricted Subsidiary of the Company in the ordinary course of business, (xiv) any refinancing, modification, replacement, renewal, restatement, refunding, deferral, extension, substitution, supplement, reissuance or resale of existing or future Indebtedness, including any additional Indebtedness incurred to pay interest or premiums required by the instruments governing such existing or future Indebtedness as in effect at the time of issuance thereof ("Required Premiums") and fees in connection therewith ("Refinancing Indebtedness"); provided that any such event -------- shall not (1) result in an increase in the aggregate principal amount of Permitted Indebtedness (except to the extent such increase is a result of a simultaneous incurrence of additional Indebtedness (A) to pay Required Premiums and related fees or (B) otherwise permitted to be incurred under this Indenture) of the Company and its Subsidiaries and (2) create Indebtedness with a Weighted Average Life to Maturity at the time such Indebtedness is incurred that is less than the Weighted Average Life to Maturity at such time of the Indebtedness being refinanced, modified, replaced, renewed, restated, refunded, deferred, extended, substituted, supplemented, reissued or resold (except that this subclause (2) will not apply in the event the Indebtedness being refinanced, modified, replaced, renewed, restated, refunded, deferred, extended, substituted, supplemented, reissued or resold was originally incurred in reliance upon clauses (vii) or (xvi) of this definition), (xv) the incurrence by a Securitization Entity of Indebtedness in a Qualified Securitization Transaction that is not recourse to the Company or any Subsidiary of the Company (except for Standard Securitization Undertakings), and (xvi) additional Indebtedness -21- of the Company and its Restricted Subsidiaries in an aggregate principal amount, which together with the aggregate liquidation value of all outstanding series of Permitted Domestic Subsidiary Preferred Stock, does not exceed $37.5 million at any one time outstanding (which amount, in the case of Indebtedness, may, but need not, be incurred in whole or in part under the Bank Credit Agreement); provided that such amount shall increase to $75.0 -------- million upon consummation of an Initial Public Offering. "Permitted Investments" means (i) Investments by the --------------------- Company or any Restricted Subsidiary of the Company in any Wholly Owned Restricted Subsidiary of the Company (whether existing on the Issue Date or created thereafter) or in any other Person (including by means of transfer of cash or other property) if as a result of such Investment such Person shall become a Wholly Owned Restricted Subsidiary of the Company and Investments in the Company by any Restricted Subsidiary of the Company; (ii) cash and Cash Equivalents; (iii) Investments existing on the Issue Date; (iv) loans and advances to employees and officers of the Company and its Restricted Subsidiaries in the ordinary course of business; (v) accounts receivable created or acquired in the ordinary course of business; (vi) Currency Agreements and Interest Swap Obligations entered into in the ordinary course of the Company's or its Restricted Subsidiaries' businesses and otherwise in compliance with this Indenture; (vii) Investments in Unrestricted Subsidiaries in an amount at any one time outstanding not to exceed $25.0 million; provided that such -------- amount shall increase to $50.0 million upon consummation of an Initial Public Offering; (viii) Investments in securities of trade creditors or customers received pursuant to any plan of reorganization or similar arrangement upon the bankruptcy or insolvency of such trade creditors or customers; (ix) guaran- tees (A) by the Company of Indebtedness otherwise permitted to be incurred by Restricted Subsidiaries of the Company under this Indenture or (B) permitted by Section 4.19; (x) additional Investments having an aggregate fair market value, taken together with all other Investments made pursuant to this clause (x) that are at that time outstanding, not to exceed 5% of Total Assets at the time of such Investment (with the fair market value of each Investment being measured at the time made and without giving effect to subsequent changes in value); (xi) any Investment by the Company or a Wholly Owned Subsidiary of the Company in a Securitization Entity or any Investment by a Securitization Entity in any other Person in connection with a Qualified Securitization Transaction; provided that any -------- Investment in a Securitization Entity is in the -22- form of a Purchase Money Note or an equity interest; (xii) any transaction to the extent it constitutes an Investment that is permitted by, and made in accordance with, clause (b) of Section 4.11 (other than transactions described in clause (v) of such clause (b)); (xiii) investments the payment for which consists exclusively of Qualified Capital Stock of the Company and (xiv) Investments received by the Company or its Restricted Subsidiaries as consideration for asset sales, including Asset Sales; provided in the case of an Asset Sale, such Asset Sale -------- is effected in compliance with Section 4.16. "Permitted Liens" means the following types of Liens: --------------- (i) Liens for taxes, assessments or governmental charges or claims either (a) not delinquent or (b) contested in good faith by appropriate proceedings and as to which the Company or its Restricted Subsidiaries shall have set aside on its books such reserves as may be required pursuant to GAAP; (ii) statutory Liens of landlords and Liens of carriers, warehousemen, mechanics, suppliers, materialmen, repairmen and other Liens imposed by law incurred in the ordinary course of business for sums not yet delinquent or being contested in good faith, if such reserve or other appropriate provision, if any, as shall be required by GAAP shall have been made in respect thereof; (iii) Liens incurred or deposits made in the ordinary course of business in connection with workers' compensation, unemployment insurance and other types of social security, including any Lien securing letters of credit issued in the ordinary course of business consistent with past practice in connection therewith, or to secure the performance of tenders, statutory obligations, surety and appeal bonds, bids, leases, government contracts, performance and return-of-money bonds and other similar obligations (exclusive of obligations for the payment of borrowed money); (iv) judgment Liens not giving rise to an Event of Default; (v) easements, rights-of-way, zoning restrictions and other similar charges or encumbrances in respect of real property not interfering in any material respect with -23- the ordinary conduct of the business of the Company or any of its Restricted Subsidiaries; (vi) any interest or title of a lessor under any Capitalized Lease Obligation; (vii) purchase money Liens to finance property or assets of the Company or any Restricted Subsidiary of the Company acquired in the ordinary course of business; provided, however, that (A) the related purchase money -------- ------- Indebtedness shall not exceed the cost of such property or assets and shall not be secured by any property or assets of the Company or any Restricted Subsidiary of the Company other than the property and assets so acquired and (B) the Lien securing such Indebtedness shall be created within 90 days of such acquisition; (viii) Liens upon specific items of inventory or other goods and proceeds of any Person securing such Person's obligations in respect of bankers' acceptances issued or created for the account of such Person to facilitate the purchase, shipment, or storage of such inventory or other goods; (ix) Liens securing reimbursement obligations with respect to commercial letters of credit which encumber documents and other property relating to such letters of credit and products and proceeds thereof; (x) Liens encumbering deposits made to secure obligations arising from statutory, regulatory, contractual, or warranty requirements of the Company or any of its Restricted Subsidiaries, including rights of offset and set-off; (xi) Liens securing Interest Swap Obligations which Interest Swap Obligations relate to Indebtedness that is otherwise permitted under this Indenture; (xii) Liens securing Indebtedness under Currency Agreements; (xiii) Liens securing Indebtedness of foreign Restricted Subsidiaries of the Company incurred in reliance on clause (iii) of the definition of Permitted Indebtedness; -24- (xiv) Liens securing Acquired Indebtedness incurred in reliance on clause (viii) of the definition of Permitted Indebtedness; (xv) Liens incurred in the ordinary course of business of the Company or any Restricted Subsidiary with respect to obligations that do not in the aggregate exceed $10.0 million at any one time outstanding; (xvi) Liens on assets transferred to a Securitization Entity or on assets of a Securitization Entity, in either case incurred in connection with a Qualified Securitization Transaction; (xvii) leases or subleases granted to others that do not materially interfere with the ordinary course of business of the Company and its Restricted Subsidiaries; (xviii) Liens arising from filing Uniform Commercial Code financing statements regarding leases; (xix) Liens in favor of customs and revenue authorities arising as a matter of law to secure payment of custom duties in connection with the importation of goods; and (xx) Liens existing on the Issue Date, together with any Liens securing Indebtedness incurred in reliance on clause (xiv) of the definition of Permitted Indebtedness in order to refinance the Indebtedness secured by Liens existing on the Issue Date; provided that the Liens -------- securing the refinancing Indebtedness shall not extend to property other than that pledged under the Liens securing the Indebtedness being refinanced. "Person" means an individual, partnership, ------ corporation, unincorporated organization, trust or joint venture, or a governmental agency or political subdivision thereof. "Physical Notes" has the meaning provided in -------------- Section 2.01. "Plan of Liquidation" means, with respect to any ------------------- Person, a plan that provides for, contemplates or the effectuation of which is preceded or accompanied by (whether or not substantially contemporaneously, in phases or otherwise) (i) the sale, lease, conveyance or other disposition of all or substantially -25- all of the assets of such Person otherwise than as an entirety or substantially as an entirety and (ii) the distribution of all or substantially all of the proceeds of such sale, lease, conveyance or other disposition and all or substantially all of the remaining assets of such Person to holders of Capital Stock of such Person. "Preferred Stock" of any Person means any Capital --------------- Stock of such Person that has preferential rights to any other Capital Stock of such Person with respect to dividends or redemptions or upon liquidation. "principal" of any Indebtedness (including the Notes) --------- means the principal amount of such Indebtedness plus the premium, if any, on such Indebtedness. "Principals" means Bain Capital and GS Capital. ---------- "Private Placement Legend" means the legend initially ------------------------ set forth on the Notes in the form set forth in Section 2.15. "Proceeds Purchase Date" has the meaning provided in ---------------------- Section 4.16. "Productive Assets" means assets (including Capital ----------------- Stock) of a kind used or usable in the businesses of the Company and its Restricted Subsidiaries permitted by Section 4.20. "pro forma" means, with respect to any calculation --------- made or required to be made pursuant to the terms of this Indenture, a calculation in accordance with Article 11 of Regulation S-X under the Securities Act, as determined by the Board of Directors of the Company in consultation with its independent public accountants. "Purchase Money Note" means a promissory note of a ------------------- Securitization Entity evidencing a line of credit, which may be irrevocable, from the Company or any Subsidiary of the Company in connection with a Qualified Securitization Transaction to a Securitization Entity, which note shall be repaid from cash available to the Securitization Entity, other than amounts required to be established as reserves pursuant to agreements, amounts paid to investors in respect of interest, principal and other amounts owing to such investors and amounts paid in connection with the purchase of newly generated receivables or newly acquired equipment. -26- "Qualified Capital Stock" means any stock that is not ----------------------- Disqualified Capital Stock. "Qualified Institutional Buyer" or "QIB" shall have ----------------------------- --- the meaning specified in Rule 144A under the Securities Act. "Qualified Securitization Transaction" means any ------------------------------------ transaction or series of transactions that may be entered into by the Company or any of its Subsidiaries pursuant to which the Company or any or its Subsidiaries may sell, convey or otherwise transfer to (a) a Securitization Entity (in the case of a transfer by the Company or any of its Subsidiaries) and (b) any other Person (in the case of a transfer by a Securitization Entity), or may grant a security interest in, any accounts receivable or equipment (whether now existing or arising or acquired in the future) of the Company or any of its Subsidiaries, and any assets related thereto including, without limitation, all collateral securing such accounts receivable and equipment, all contracts and contract rights and all guarantees or other obligations in respect of such accounts receivable and equipment, proceeds of such accounts receivable and equipment and other assets (including contract rights) which are customarily transferred or in respect of which security interests are customarily granted in connection with asset securitization transactions involving accounts receivable and equipment. "Record Date" means the Record Dates specified in the ----------- Notes, whether or not a Legal Holiday. "Redemption Date," when used with respect to any Note --------------- to be redeemed, means the date fixed for such redemption pursuant to this Indenture and the Notes. "Redemption Price," when used with respect to any ---------------- Note to be redeemed, means the price fixed for such redemption pursuant to this Indenture and the Notes. "Reference Date" has the meaning provided in -------------- Section 4.10. "Refinancing Indebtedness" has the meaning provided ------------------------ in clause (xiv) of the definition of Permitted Indebtedness. "Refunding Capital Stock" has the meaning provided in ----------------------- Section 4.10. "Registrar" has the meaning provided in Section 2.03. --------- -27- "Registration Rights Agreement" means the ----------------------------- Registration Rights Agreement dated May 7, 1996 among the Company and the Initial Purchasers for the benefit of themselves and the Holders, as the same may be amended or modified from time to time in accordance with the terms thereof. "Regulation S" means Regulation S under the ------------ Securities Act. "Related Party" means, with respect to Bain Capital, ------------- any Bain Related Party and with respect to GS Capital, any GS Capital Related Party. "Representative" means the indenture trustee or other -------------- trustee, agent or representative in respect of any Designated Senior Debt; provided that if, and for so long as, any -------- Designated Senior Debt lacks such a representative, then the Representative for such Designated Senior Debt shall at all times constitute the holders of a majority in outstanding principal amount of such Designated Senior Debt in respect of any Designated Senior Debt. "Required Premiums" has the meaning provided in ----------------- clause (xiv) of the definition of Permitted Indebtedness. "Restricted Investment" means an Investment other --------------------- than a Permitted Investment. "Restricted Payment" has the meaning provided in ------------------ Section 4.10. "Restricted Security" has the meaning assigned to ------------------- such term in Rule 144(a)(3) under the Securities Act; provided that the Trustee shall be entitled to request and conclusively rely on an Opinion of Counsel with respect to whether any Note constitutes a Restricted Security. "Restricted Subsidiary" of any Person means any --------------------- Subsidiary of such Person which at the time of determination is not an Unrestricted Subsidiary. "Retiring Capital Stock" has the meaning provided in ---------------------- Section 4.10. "Rule 144A" means Rule 144A under the Securities Act. --------- -28- "S&P" means Standard & Poor's Corporation and its --- successors. "Sale and Leaseback Transaction" means any direct or ------------------------------ indirect arrangement with any Person or to which any such Person is a party, providing for the leasing to the Company or a Restricted Subsidiary of any property, whether owned by the Company or any Restricted Subsidiary at the Issue Date or later acquired, which has been or is to be sold or transferred by the Company or such Restricted Subsidiary to such Person or to any other Person from whom funds have been or are to be advanced by such Person on the security of such Property. "SEC" means the Securities and Exchange Commission. --- "Securities Act" means, the Securities Act of 1933, -------------- as amended, and the rules and regulations of the SEC promulgated thereunder. "Securitization Entity" means a Wholly Owned --------------------- Subsidiary of the Company (or another Person in which the Company or any Subsidiary of the Company makes an Investment and to which the Company or any Subsidiary of the Company transfers accounts receivable or equipment and related assets) which engages in no activities other than in connection with the financing of accounts receivable or equipment and which is designated by the Board of Directors of the Company (as provided below) as a Securitization Entity (a) no portion of the Indebtedness or any other Obligations (contingent or otherwise) of which (i) is guaranteed by the Company or any Subsidiary of the Company (excluding guarantees of Obligations (other than the principal of, and interest on, Indebtedness)) pursuant to Standard Securitization Undertakings, (ii) is recourse to or obligates the Company or any Subsidiary of the Company in any way other than pursuant to Standard Securiti- zation Undertakings or (iii) subjects any property or asset of the Company or any Subsidiary of the Company, directly or indirectly, contingently or otherwise, to the satisfaction thereof, other than pursuant to Standard Securitization Undertakings, (b) with which neither the Company nor any Subsidiary of the Company has any material contract, agreement, arrangement or understanding other than on terms no less favorable to the Company or such Subsidiary than those that might be obtained at the time from Persons that are not Affiliates of the Company, other than fees payable in the ordinary course of business in connection with servicing receivables of such entity, and (c) to which neither the Company nor any Subsidiary of the Company has any obligation to -29- maintain or preserve such entity's financial condition or cause such entity to achieve certain levels of operating results. Any such designation by the Board of Directors of the Company shall be evidenced to the Trustee by filing with the Trustee a certified copy of the resolution of the Board of Directors of the Company giving effect to such designation and an Officers' Certificate certifying that such designation complied with the foregoing conditions. "Senior Debt" means the principal of, premium, if ----------- any, and interest (including any interest accruing subsequent to the filing of a petition of bankruptcy at the rate provided for in the documentation with respect thereto, whether or not such interest is an allowed claim under applicable law) on any Indebtedness of the Company, whether outstanding on the Issue Date or thereafter created, incurred or assumed, unless, in the case of any particular Indebtedness, the instrument creating or evidencing the same or pursuant to which the same is outstanding expressly provides that such Indebtedness shall not be senior in right of payment to the Notes. Without limiting the generality of the foregoing, "Senior Debt" shall also include the principal of, premium, if any, interest (including any interest accruing subsequent to the filing of a petition of bankruptcy at the rate provided for in the documentation with respect thereto, whether or not such interest is an allowed claim under applicable law) on, and all other amounts owing in respect of, (x) all monetary obligations (including guarantees thereof) of every nature of the Company under the Bank Credit Agreement, including, without limitation, obligations to pay principal and interest, reimbursement obligations under letters of credit, fees, expenses and indemnities, (y) all Interest Swap Obligations (including guarantees thereof) and (z) all obligations (including guarantees thereof) under Currency Agreements, in each case whether outstanding on the Issue Date or thereafter incurred. Notwithstanding the foregoing, Senior Debt shall not include (i) any Indebtedness, if 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, (ii) any Indebtedness of the Company to a Subsidiary of the Company, (iii) Indebted- ness to, or guaranteed on behalf of, any shareholder, director, officer or employee of the Company or any Subsidiary of the Company (including, without limitation, amounts owed for compensation), (iv) Indebtedness to trade creditors and other amounts incurred in connection with obtaining goods, materials or services, (v) Indebtedness represented by Disqualified Capital Stock, (vi) any liability for federal, state, local or -30- other taxes owed or owing by the Company, (vii) that portion of any Indebtedness incurred in violation of the provisions set forth under Section 4.12 (but, as to any such obligation, no such violation shall be deemed to exist for purposes of this clause (vii) if the holder(s) of such obligation or their representative and the Trustee shall have received an Officers' Certificate of the Company to the effect that the incurrence of such Indebtedness does not (or, in the case of revolving credit Indebtedness, that the incurrence of the entire committed amount thereof at the date on which the initial borrowing thereunder is made) would not violate such provisions of this Indenture) and (viii) any Indebtedness which is, by its express terms, subordinated in right of payment to any other Indebtedness of the Company, including, without limitation, the Existing Notes. "Significant Subsidiary" means, as of any date of ---------------------- determination, for any Person, each Subsidiary of such Person which (i) for the most recent fiscal year of such Person (on or prior to December 31, 1996, the fiscal period beginning on the Issue Date and ending on the most recently completed fiscal quarter of such Person) accounted for more than 10% of consolidated revenues or consolidated net income of such Person or (ii) as at the end of such fiscal year (on or prior to December 31, 1996, the fiscal period beginning on the Issue Date and ending on the most recently completed fiscal quarter of such Person), was the owner of more than 10% of the consolidated assets of such Person. "Standard Securitization Undertakings" means ------------------------------------ representations, warranties, covenants and indemnities entered into by the Company or any Subsidiary of the Company which are reasonably customary in an accounts receivable or equipment transaction. "Subsidiary", with respect to any Person, means ---------- (i) any corporation of which the outstanding Capital Stock having at least a majority of the votes entitled to be cast in the election of directors under ordinary circumstances shall at the time be owned, directly or indirectly, by such Person or (ii) any other Person of which at least a majority of the voting interest under ordinary circumstances is at the time, directly or indirectly, owned by such Person. "Tax Allocation Agreement" means the tax allocation ------------------------ agreement between the Company and Holdings as in effect on the Issue Date. -31- "TIA" means the Trust Indenture Act of 1939 (15 --- U.S.C. (S)(S) 77aaa-77bbbb), as amended, as in effect on the date of this Indenture, except as otherwise provided in Section 9.04. "Total Assets" means the total consolidated assets of ------------ the Company and its Restricted Subsidiaries, as set forth on the Company's most recent consolidated balance sheet. "Trust Officer" means any officer of the Trustee ------------- assigned by the Trustee to administer this Indenture, or in the case of a successor trustee, an officer assigned to the department, division or group performing the corporation trust work of such successor and assigned to administer this Indenture. "Trustee" means the party named as such in this ------- Indenture until a successor replaces it in accordance with the provisions of this Indenture and thereafter means such successor. "Unrestricted Subsidiary" of any Person means (i) any ----------------------- Subsidiary of such Person that at the time of determination shall be or continue to be designated an Unrestricted Subsidiary by the Board of Directors of such Person in the manner provided below and (ii) any Subsidiary of an Unrestricted Subsidiary. The Board of Directors may designate any Subsidiary (including any newly acquired or newly formed Subsidiary) to be an Unrestricted Subsidiary unless such Subsidiary owns any Capital Stock of, or owns or holds any Lien on any property of, the Company or any other Subsidiary of the Company that is not a Subsidiary of the Subsidiary to be so designated; provided that (x) the Company certifies to the -------- Trustee that such designation complies with Section 4.10 and (y) each Subsidiary to be so designated and each of its Subsidiaries has not at the time of designation, and does not thereafter, create, incur, issue, assume, guarantee or otherwise become directly or indirectly liable with respect to any Indebtedness pursuant to which the lender has recourse to any of the assets of the Company or any of its Restricted Subsidiaries. The Board of Directors may designate any Unrestricted Subsidiary to be a Restricted Subsidiary only if (x) immediately after giving effect to such designation, the Company is able to incur at least $1.00 of additional Indebtedness (other than Permitted Indebtedness) in compliance with Section 4.12 and (y) immediately before and immediately after giving effect to such designation, no Default or Event of Default shall have occurred and be continuing. Any such designation by the Board of Directors shall be evidenced -32- to the Trustee by promptly filing with the Trustee a copy of the resolution giving effect to such designation and an Officers' Certificate certifying that such designation complied with the foregoing provisions. "U.S. Government Obligations" means direct --------------------------- obligations of, and obligations guaranteed by, the United States of America for the payment of which the full faith and credit of the United States of America is pledged. "U.S. Legal Tender" means such coin or currency of ----------------- the United States of America as at the time of payment shall be legal tender for the payment of public and private debts. "U.S. Physical Notes" has the meaning provided in ------------------- Section 2.01. "Weighted Average Life to Maturity" means, when --------------------------------- applied to any Indebtedness at any date, the number of years obtained by dividing (a) the then outstanding aggregate principal amount of such Indebtedness into (b) the sum of the total of the products obtained by multiplying (i) the amount of each then remaining installment, sinking fund, serial maturity or other required payment of principal, including payment at final maturity, in respect thereof, by (ii) the number of years (calculated to the nearest one-twelfth) which will elapse between such date and the making of such payment. "Wholly Owned Restricted Subsidiary" of any Person ---------------------------------- means any Restricted Subsidiary of such Person of which all the outstanding voting securities (other than directors' qualifying shares or an immaterial amount of shares required to be owned by other Persons pursuant to applicable law) are owned by such Person or any Wholly Owned Restricted Subsidiary of such Person. SECTION 1.02. Incorporation by Reference of TIA. --------------------------------- Whenever this Indenture refers to a provision of the TIA, such provision is incorporated by reference in, and made a part of, this Indenture. The following TIA terms used in this Indenture have the following meanings: "indenture securities" means the Notes. "indenture security holder" means a Holder or a Noteholder. -33- "indenture to be qualified" means this Indenture. "indenture trustee" or "institutional trustee" means the Trustee. "obligor" on the indenture securities means the Company or any other obligor on the Notes. All other TIA terms used in this Indenture that are defined by the TIA, defined by TIA reference to another statute or defined by SEC rule and not otherwise defined herein have the meanings assigned to them therein. SECTION 1.03. Rules of Construction. --------------------- Unless the context otherwise requires: (1) a term has the meaning assigned to it; (2) an accounting term not otherwise defined has the meaning assigned to it in accordance with GAAP as in effect on the date hereof; (3) "or" is not exclusive; (4) words in the singular include the plural, and words in the plural include the singular; and (5) "herein," "hereof" and other words of similar import refer to this Indenture as a whole and not to any particular Article, Section or other subdivision. ARTICLE TWO THE NOTES SECTION 2.01. Form and Dating. --------------- The Initial Notes and the Trustee's certificate of authentication shall be substantially in the form of Exhibit A hereto. The Exchange Notes and the Trustee's certificate of authentication shall be substantially in the form of Exhibit B hereto. The Notes may have notations, legends or endorsements required by law, stock exchange rule or depository rule or usage. The Company and the Trustee shall approve the form of the Notes and any notation, legend or endorsement on them. -34- Each Note shall be dated the date of its issuance and shall show the date of its authentication. The terms and provisions contained in the Notes, annexed hereto as Exhibits A and B, shall constitute, and are hereby expressly made, a part of this Indenture and, to the extent 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. Notes offered and sold in reliance on Rule 144A shall be issued initially in the form of one or more permanent global Notes in registered form, substantially in the form set forth in Exhibit A (the "Global Note"), deposited with the Trustee, as custodian for the Depository, duly executed by the Company and authenticated by the Trustee as hereinafter provided. The aggregate principal amount of the Global Note may from time to time be increased or decreased by adjustments made on the records of the Trustee, as custodian for the Depository, as hereinafter provided. Notes offered and sold in offshore transactions in reliance on Regulation S shall be issued in the form of permanent certificated Notes in registered form in substantially the form set forth in Exhibit A (the "Offshore Physical Notes"). Notes offered and sold in reliance on any other exemption from registration under the Securities Act other than as described in the preceding paragraph shall be issued, and Notes offered and sold in reliance on Rule 144A may be issued, in the form of permanent certificated Notes in registered form, in substantially the form set forth in Exhibit A (the "U.S. Physical Notes"). The Offshore Physical Notes and the U.S. Physical Notes are sometimes collectively herein referred to as the "Physical Notes." Physical Notes shall initially be registered in the name of the Depository or the nominee of such Depository and be delivered to the Trustee as custodian for such Depository. Beneficial owners of Physical Notes, however, may request registration of such Physical Notes in their names or the names of their nominees. SECTION 2.02. Execution and Authentication; Aggregate Principal Amount. ----------------------------- Two Officers, or an Officer and an Assistant Secretary, shall sign, or one Officer shall sign and one Officer or an Assistant Secretary (each of whom shall, in each case, have been duly authorized by all requisite corporate actions) shall -35- attest to, the Notes for the Company by manual or facsimile signature. The Company's seal shall also be reproduced on the Notes. If an Officer or Assistant Secretary whose signature is on a Note was an Officer or Assistant Secretary at the time of such execution but no longer holds that office or position at the time the Trustee authenticates the Note, the Note shall nevertheless be valid. A Note shall not be valid until an authorized signatory of the Trustee manually signs the certificate of authentication on the Note. The signature shall be conclusive evidence that the Note has been authenticated under this Indenture. The Trustee shall authenticate (i) Initial Notes for original issue in the aggregate principal amount not to exceed $350,000,000, and (ii) Exchange Notes from time to time for issue only in exchange for a like principal amount of Initial Notes, in each case upon written orders of the Company in the form of an Officers' Certificate. The Officers' Certificate shall specify the amount of Notes to be authenticated, the date on which the Notes are to be authenticated and the aggregate principal amount of Notes outstanding on the date of authentication, whether the Notes are to be Initial Notes or Exchange Notes, and shall further specify the amount of such Notes to be issued as the Global Note, Offshore Physical Notes or U.S. Physical Notes. The aggregate principal amount of Notes outstanding at any time may not exceed $350,000,000, except as provided in Section 2.07. The Trustee shall not be required to authenticate Notes if the issuance of such Notes pursuant to this Indenture will affect the Trustee's own rights, duties or immunities under the Notes and this Indenture in a manner which is not reasonably acceptable to the Trustee. The Trustee may appoint an authenticating agent (the "Authenticating Agent") reasonably acceptable to the Company to authenticate Notes. Unless otherwise provided in the appointment, an Authenticating Agent may authenticate Notes whenever the Trustee may do so. Each reference in this Indenture to authentication by the Trustee includes authentication by such Authenticating Agent. An Authenticating Agent has the same rights as an Agent to deal with the Company and Affiliates of the Company. -36- The Notes shall be issuable in fully registered form only, without coupons, in denominations of $1,000 and any integral multiple thereof. SECTION 2.03. Registrar and Paying Agent. -------------------------- The Company shall maintain an office or agency (which shall be located in the Borough of Manhattan in the City of New York, State of New York) where (a) Notes may be presented or surrendered for registration of transfer or for exchange ("Registrar"), (b) Notes may be presented or surrendered for payment ("Paying Agent") and (c) notices and demands to or upon the Company in respect of the Notes and this Indenture may be served. The Registrar shall keep a register of the Notes and of their transfer and exchange. The Company, upon prior written notice to the Trustee, may have one or more co-Registrars and one or more additional paying agents reasonably acceptable to the Trustee. The term "Paying Agent" includes any additional Paying Agent. Neither the Company nor any Affiliate of the Company may act as Paying Agent. The Company shall enter into an appropriate agency agreement with any Agent not a party to this Indenture, which agreement shall incorporate the provisions of the TIA and implement the provisions of this Indenture that relate to such Agent. The Company shall notify the Trustee, in advance, of the name and address of any such Agent. If the Company fails to maintain a Registrar or Paying Agent, or fails to give the foregoing notice, the Trustee shall act as such. The Company initially appoints the Trustee as Registrar, Paying Agent and agent for service of demands and notices in connection with the Notes, until such time as the Trustee has resigned or a successor has been appointed. The Paying Agent or Registrar may resign upon 30 days notice to the Company. SECTION 2.04. Paying Agent To Hold Assets in Trust. ------------------------------------ The Company shall require each Paying Agent other than the Trustee to agree in writing that each Paying Agent shall hold in trust for the benefit of the Holders or the Trustee all assets held by the Paying Agent for the payment of principal of, or interest on, the Notes (whether such assets have been distributed to it by the Company or any other obligor on the Notes), and the Company and the Paying Agent shall notify the Trustee of any Default by the Company (or any other -37- obligor on the Notes) in making any such payment. The Company at any time may require a Paying Agent to distribute all assets held by it to the Trustee and account for any assets disbursed and the Trustee may at any time during the continuance of any payment Default, upon written request to a Paying Agent, require such Paying Agent to distribute all assets held by it to the Trustee and to account for any assets distributed. Upon distribution to the Trustee of all assets that shall have been delivered by the Company to the Paying Agent, the Paying Agent shall have no further liability for such assets. SECTION 2.05. Noteholder Lists. ---------------- The Trustee shall preserve in as current a form as is reasonably practicable the most recent list available to it of the names and addresses of the Holders. If the Trustee is not the Registrar, the Company shall furnish or cause the Registrar to furnish to the Trustee before each Record Date and at such other times as the Trustee may request in writing a list as of such date and in such form as the Trustee may reasonably require of the names and addresses of the Holders, which list may be conclusively relied upon by the Trustee. SECTION 2.06. Transfer and Exchange. --------------------- Subject to the provisions of Sections 2.16 and 2.17, when Notes are presented to the Registrar or a co-Registrar with a request to register the transfer of such Notes or to exchange such Notes for an equal principal amount of Notes of other authorized denominations, the Registrar or co-Registrar shall register the transfer or make the exchange as requested if its requirements for such transaction are met; provided, -------- however, that the Notes presented or surrendered for - ------- registration of transfer or exchange shall be duly endorsed or accompanied by a written instrument of transfer in form satisfactory to the Company and the Registrar or co-Registrar, duly executed by the Holder thereof or his attorney duly authorized in writing. To permit registrations of transfer and exchanges, the Company shall execute and the Trustee shall authenticate Notes at the Registrar's or co-Registrar's request. No service charge shall be made for any registration of transfer or exchange, but the Company may require payment of a sum sufficient to cover any transfer tax or similar governmental charge payable in connection therewith (other than any such transfer taxes or similar governmental charge payable upon exchanges or transfers pursuant to Sections 2.10, 3.06, 4.15, 4.16 or 9.06, -38- in which event the Company shall be responsible for the payment of such taxes). The Registrar or co-Registrar shall not be required to register the transfer of or exchange of any Note (i) during a period beginning at the opening of business 15 days before the mailing of a notice of redemption of Notes and ending at the close of business on the day of such mailing and (ii) selected for redemption in whole or in part pursuant to Article Three, except the unredeemed portion of any Note being redeemed in part. Any Holder of the Global Note shall, by acceptance of such Global Note, agree that transfers of beneficial interests in such Global Notes may be effected only through a book entry system maintained by the Holder of such Global Note (or its agent), and that ownership of a beneficial interest in the Note shall be required to be reflected in a book entry. SECTION 2.07. Replacement Notes. ----------------- If a mutilated Note is surrendered to the Trustee or if the Holder of a Note claims that the Note has been lost, destroyed or wrongfully taken, the Company shall issue and the Trustee shall authenticate a replacement Note if the Trustee's requirements are met. If required by the Trustee or the Company, such Holder must provide an affidavit of lost certificate and an indemnity bond or other indemnity, sufficient in the judgment of both the Company and the Trustee, to protect the Company, the Trustee or any Agent from any loss which any of them may suffer if a Note is replaced. The Company may charge such Holder for its reasonable, out-of- pocket expenses in replacing a Note, including reasonable fees and expenses of counsel. Every replacement Note shall constitute an additional obligation of the Company. SECTION 2.08. Outstanding Notes. ----------------- Notes outstanding at any time are all the Notes that have been authenticated by the Trustee except those cancelled by it, those delivered to it for cancellation and those described in this Section as not outstanding. Subject to the provisions of Section 2.09, a Note does not cease to be outstanding because the Company or any of its Affiliates holds the Note. -39- If a Note is replaced pursuant to Section 2.07 (other than a mutilated Note surrendered for replacement), it ceases to be outstanding unless the Trustee receives an Opinion of Counsel that the replaced Note is held by a bona fide ---- ---- purchaser. A mutilated Note ceases to be outstanding upon surrender of such Note and replacement thereof pursuant to Section 2.07. If on a Redemption Date or the Maturity Date the Paying Agent holds U.S. Legal Tender or U.S. Government Obligations sufficient to pay all of the principal and interest due on the Notes payable on that date and is not prohibited from paying such money to the Holders thereof pursuant to the terms of this Indenture, then on and after that date such Notes cease to be outstanding and interest on them ceases to accrue. SECTION 2.09. Treasury Notes. -------------- In determining whether the Holders of the required principal amount of Notes have concurred in any direction, waiver, consent or notice, Notes owned by the Company or any of its Affiliates shall be considered as though they are not outstanding, except that for the purposes of determining whether the Trustee shall be protected in relying on any such direction, waiver or consent, only Notes which a Trust Officer of the Trustee actually knows are so owned shall be so considered. The Company shall notify the Trustee, in writing, when it or any of its Affiliates repurchases or otherwise acquires Notes, of the aggregate principal amount of such Notes so repurchased or otherwise acquired. SECTION 2.10. Temporary Notes. --------------- Until definitive Notes are ready for delivery, the Company may prepare and the Trustee shall authenticate temporary Notes upon receipt of a written order of the Company in the form of an Officers' Certificate. The Officers' Certificate shall specify the amount of temporary Notes to be authenticated and the date on which the temporary Notes are to be authenticated. Temporary Notes shall be substantially in the form of definitive Notes but may have variations that the Company considers appropriate for temporary Notes. Without unreasonable delay, the Company shall prepare and the Trustee shall authenticate upon receipt of a written order of the Company pursuant to Section 2.02 definitive Notes in exchange for temporary Notes. -40- SECTION 2.11. Cancellation. ------------ The Company at any time may deliver Notes to the Trustee for cancellation. The Registrar and the Paying Agent shall forward to the Trustee any Notes surrendered to them for transfer, exchange or payment. The Trustee, or at the direction of the Trustee, the Registrar or the Paying Agent, and no one else, shall cancel and, at the written direction of the Company, shall dispose of all Notes surrendered for transfer, exchange, payment or cancellation. Subject to Section 2.07, the Company may not issue new Notes to replace Notes that it has paid or delivered to the Trustee for cancellation. If the Company shall acquire any of the Notes, such acquisition shall not operate as a redemption or satisfaction of the Indebtedness represented by such Notes unless and until the same are surrendered to the Trustee for cancellation pursuant to this Section 2.11. SECTION 2.12. Defaulted Interest. ------------------ If the Company defaults in a payment of interest on the Notes, it shall pay the defaulted interest, plus (to the extent lawful) any interest payable on the defaulted interest to the Persons who are Holders on a subsequent special record date, which date shall be the fifteenth day next preceding the date fixed by the Company for the payment of defaulted interest or the next succeeding Business Day if such date is not a Business Day. At least 15 days before the subsequent special record date, the Company shall mail to each Holder, as of a recent date selected by the Company, with a copy to the Trustee, a notice that states the subsequent special record date, the payment date and the amount of defaulted interest, and interest payable on such defaulted interest, if any, to be paid. SECTION 2.13. CUSIP Number. ------------ The Company in issuing the Notes may use a "CUSIP" number, and if so, the Trustee shall use the CUSIP number in notices of redemption or exchange as a convenience to Holders; provided that no representation is hereby deemed to be made by - -------- the Trustee as to the correctness or accuracy of the CUSIP number printed in the notice or on the Notes, and that reliance may be placed only on the other identification numbers printed on the Notes. The Company shall promptly notify the Trustee of any change in the CUSIP number. -41- SECTION 2.14. Deposit of Moneys. ----------------- Prior to 11:00 a.m. New York City time on each Interest Payment Date and on the Maturity Date, the Company shall have deposited with the Paying Agent in immediately available funds money sufficient to make cash payments, if any, due on such Interest Payment Date or Maturity Date, as the case may be, in a timely manner which permits the Paying Agent to remit payment to the Holders on such Interest Payment Date or Maturity Date, as the case may be. SECTION 2.15. Restrictive Legends. ------------------- Each Global Note and Physical Note that constitutes a Restricted Security shall bear the following legend (the "Private Placement Legend") on the face thereof until May 7, 1999, unless otherwise agreed by the Company and the Holder thereof: THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S. PERSONS EXCEPT AS SET FORTH BELOW. BY ITS ACQUISITION HEREOF, THE HOLDER (1) REPRESENTS THAT (A) IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) OR (B) IT IS AN INSTITUTIONAL "ACCREDITED INVESTOR" (AS DEFINED IN RULE 501(a)(1), (2), (3) OR (7) UNDER THE SECURITIES ACT) (AN "ACCREDITED INVESTOR") OR (C) IT IS NOT A U.S. PERSON AND IS ACQUIRING THIS SECURITY IN AN OFFSHORE TRANSACTION, (2) AGREES THAT IT WILL NOT WITHIN THREE YEARS AFTER THE ORIGINAL ISSUANCE OF THIS SECURITY RESELL OR OTHERWISE TRANSFER THIS SECURITY EXCEPT (A) TO THE ISSUER 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 THAT, PRIOR TO SUCH TRANSFER, FURNISHES (OR HAS FURNISHED ON ITS BEHALF BY A U.S. BROKER-DEALER) TO THE TRUSTEE A SIGNED LETTER CONTAINING CERTAIN REPRESENTATIONS AND AGREEMENTS RELATING TO THE RESTRICTIONS ON TRANSFER OF THIS SECURITY (THE FORM OF WHICH LETTER CAN BE OBTAINED FROM THE TRUSTEE OR REGISTRAR), (D) OUTSIDE THE UNITED STATES IN AN OFFSHORE TRANSACTION IN -42- COMPLIANCE WITH RULE 904 OF REGULATION S UNDER THE SECURITIES ACT, (E) PURSUANT TO THE EXEMPTION FROM REGISTRATION PROVIDED BY RULE 144 UNDER THE SECURITIES ACT (IF AVAILABLE) OR (F) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND (3) AGREES THAT IT WILL DELIVER TO EACH PERSON TO WHOM THIS SECURITY IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. IN CONNECTION WITH ANY TRANSFER OF THIS SECURITY WITHIN THREE YEARS AFTER THE ORIGINAL ISSUANCE OF THE SECURITY, IF THE PROPOSED TRANSFEREE IS AN INSTITUTIONAL ACCREDITED INVESTOR, THE HOLDER MUST, PRIOR TO SUCH TRANSFER, FURNISH TO THE TRUSTEE AND THE ISSUER SUCH CERTIFICATIONS, LEGAL OPINIONS OR OTHER INFORMATION AS EITHER OF THEM MAY REASONABLY REQUIRE TO CONFIRM THAT SUCH TRANSFER IS BEING MADE PURSUANT TO AN EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT. AS USED HEREIN, THE TERMS "OFFSHORE TRANSACTION," "UNITED STATES" AND "U.S. PERSON" HAVE THE MEANINGS GIVEN TO THEM BY REGULATION S UNDER THE SECURITIES ACT. Each Global Note shall also bear the following legend on the face thereof: UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN PART FOR SECURITIES IN DEFINITIVE FORM, THIS SECURITY MAY NOT BE TRANSFERRED EXCEPT AS A WHOLE BY THE DEPOSITARY TO A NOMINEE OF THE DEPOSITARY, OR BY ANY SUCH NOMINEE OF THE DEPOSITARY, OR BY THE DEPOSITARY OR NOMINEE OF SUCH SUCCESSOR DEPOSITARY OR ANY SUCH NOMINEE TO A SUCCESSOR DEPOSITARY OR A NOMINEE OF SUCH SUCCESSOR DEPOSITARY. UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE ISSUER OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT HEREON IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE -43- REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN. TRANSFERS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS IN WHOLE, BUT NOT IN PART, TO NOMINEES OF CEDE & CO. OR TO A SUCCESSOR THEREOF OR SUCH SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN SECTION 2.17 OF THE INDENTURE. SECTION 2.16. Book-Entry Provisions for Global Security. --------------------- (a) The Global Note initially shall (i) be registered in the name of the Depository or the nominee of such Depository, (ii) be delivered to the Trustee as custodian for such Depository and (iii) bear legends as set forth in Sec- tion 2.15. Members of, or participants in, the Depository ("Agent Members") shall have no rights under this Indenture with respect to any Global Note held on their behalf by the Depository, or the Trustee as its custodian, or under the Global Note, and the Depository may be treated by the Company, the Trustee and any agent of the Company or the Trustee as the absolute owner of the Global Note for all purposes whatsoever. Notwithstanding the foregoing, nothing herein shall prevent the Company, the Trustee or any agent of the Company or the Trustee from giving effect to any written certification, proxy or other authorization furnished by the Depository or impair, as between the Depository and its Agent Members, the operation of customary practices governing the exercise of the rights of a holder of any Note. (b) Transfers of the Global Note shall be limited to transfers in whole, but not in part, to the Depository, its successors or their respective nominees. Interests of beneficial owners in the Global Note may be transferred or exchanged for Physical Notes in accordance with the rules and procedures of the Depository and the provisions of Section 2.17. In addition, Physical Notes shall be transferred to all beneficial owners in exchange for their beneficial interests in the Global Note if (i) the Depository notifies the Company that it is unwilling or unable to continue as Depository for the Global Note and a successor depositary is not appointed by the Company within 90 days of such notice or (ii) an Event of Default has -44- occurred and is continuing and the Registrar has received a written request from the Depository to issue Physical Notes. (c) In connection with any transfer or exchange of a portion of the beneficial interest in the Global Note to beneficial owners pursuant to paragraph (b), the Registrar shall (if one or more Physical Notes are to be issued) reflect on its books and records the date and a decrease in the principal amount of the Global Note in an amount equal to the principal amount of the beneficial interest in the Global Note to be transferred, and the Company shall execute, and the Trustee shall authenticate and deliver, one or more Physical Notes of like tenor and amount. (d) In connection with the transfer of the entire Global Note to beneficial owners pursuant to paragraph (b), the Global Note shall be deemed to be surrendered to the Trustee for cancellation, and the Company shall execute, and the Trustee shall authenticate and deliver, to each beneficial owner identified by the Depository in exchange for its beneficial interest in the Global Note, an equal aggregate principal amount of Physical Notes of authorized denominations. (e) Any Physical Note constituting a Restricted Security delivered in exchange for an interest in the Global Note pursuant to paragraph (b) or (c) shall, except as otherwise provided by paragraphs (a)(i)(x) and (c) of Section 2.17, bear the legend regarding transfer restrictions applicable to the Physical Notes set forth in Section 2.15. (f) The Holder of the Global Note may grant proxies and otherwise authorize any person, including Agent Members and persons that may hold interests through Agent Members, to take any action which a Holder is entitled to take under this Indenture or the Notes. SECTION 2.17. Special Transfer Provisions. --------------------------- (a) Transfers to Non-QIB Institutional Accredited --------------------------------------------- Investors and Non-U.S. Persons. The following provisions shall - ------------------------------ apply with respect to the registration of any proposed transfer of a Note constituting a Restricted Security to any Institutional Accredited Investor which is not a QIB or to any Non-U.S. Person: (i) the Registrar shall register the transfer of any Note constituting a Restricted Security, whether or not -45- such Note bears the Private Placement Legend, if (x) the requested transfer is after May 7, 1999 or (y) (1) in the case of a transfer to an Institutional Accredited Investor which is not a QIB (excluding Non-U.S. Persons), the proposed transferee has delivered to the Registrar a certificate substantially in the form of Exhibit C hereto or (2) in the case of a transfer to a Non-U.S. Person, the proposed transferor has delivered to the Registrar a certificate substantially in the form of Exhibit D hereto; and (ii) if the proposed transferor is an Agent Member holding a beneficial interest in the Global Note, upon receipt by the Registrar of (x) the certificate, if any, required by paragraph (i) above and (y) instructions given in accordance with the Depository's and the Registrar's procedures, whereupon (a) the Registrar shall reflect on its books and records the date and (if the transfer does not involve a transfer of outstanding Physical Notes) a decrease in the principal amount of the Global Note in an amount equal to the principal amount of the beneficial interest in the Global Note to be transferred, and (b) the Company shall execute and the Trustee shall authenticate and deliver one or more Physical Notes of like tenor and amount. (b) Transfers to QIBs. The following provisions ----------------- shall apply with respect to the registration of any proposed transfer of a Note constituting a Restricted Security to a QIB (excluding transfers to Non-U.S. Persons): (i) the Registrar shall register the transfer if such transfer is being made by a proposed transferor who has checked the box provided for on the form of Note stating, or has otherwise advised the Company and the Registrar in writing, that the sale has been made in compliance with the provisions of Rule 144A to a transferee who has signed the certification provided for on the form of Note stating, or has otherwise advised the Company and the Registrar in writing, that it is purchasing the Note for its own account or an account with respect to which it exercises sole investment discretion and that it and any such account is a QIB within the meaning of Rule 144A, and is aware that the sale to it is being made in reliance on Rule 144A and acknowledges that it has received such information regarding the Company as it has requested -46- pursuant to Rule 144A or has determined not to request such information and that it is aware that the transferor is relying upon its foregoing representations in order to claim the exemption from registration provided by Rule 144A; and (ii) if the proposed transferee is an Agent Member, and the Notes to be transferred consist of Physical Notes which after transfer are to be evidenced by an interest in the Global Note, upon receipt by the Registrar of instructions given in accordance with the Depository's and the Registrar's procedures, the Registrar shall reflect on its books and records the date and an increase in the principal amount of the Global Note in an amount equal to the principal amount of the Physical Notes to be transferred, and the Trustee shall cancel the Physical Notes so transferred. (c) Private Placement Legend. Upon the transfer, ------------------------ exchange or replacement of Notes not bearing the Private Placement Legend, the Registrar shall deliver Notes that do not bear the Private Placement Legend. Upon the transfer, exchange or replacement of Notes bearing the Private Placement Legend, the Registrar shall deliver only Notes that bear the Private Placement Legend unless (i) the circumstance contemplated by paragraph (a)(i)(x) of this Section 2.17 exist or (ii) there is delivered to the Registrar an Opinion of Counsel reasonably satisfactory to the Company and the Trustee to the effect that neither such legend nor the related restrictions on transfer are required in order to maintain compliance with the provisions of the Securities Act. (d) General. By its acceptance of any Note bearing ------- the Private Placement Legend, each Holder of such a Note acknowledges the restrictions on transfer of such Note set forth in this Indenture and in the Private Placement Legend and agrees that it will transfer such Note only as provided in this Indenture. The Registrar shall retain copies of all letters, notices and other written communications received pursuant to Section 2.16 or this Section 2.17. The Company shall have the right to inspect and make copies of all such letters, notices or other written communications at any reasonable time upon the giving of reasonable written notice to the Registrar. -47- ARTICLE THREE REDEMPTION SECTION 3.01. Notices to Trustee. ------------------ If the Company elects to redeem Notes pursuant to Paragraph 6 of the Notes, it shall notify the Trustee and the Paying Agent in writing of the Redemption Date and the principal amount of the Notes to be redeemed. The Company shall give each notice provided for in this Section 3.01 at least 60 days before the Redemption Date (unless a shorter notice period shall be satisfactory to the Trustee, as evidenced in a writing signed on behalf of the Trustee), together with an Officers' Certificate stating that such redemption shall comply with the conditions contained herein and in the Notes. SECTION 3.02. Selection of Notes To Be Redeemed. --------------------------------- If fewer than all of the Notes are to be redeemed, the Trustee shall select the Notes to be redeemed on a pro rata --- ---- basis, by lot or in such other fair and reasonable manner chosen at the discretion of the Trustee; provided, however, -------- ------- that if a partial redemption is made with the proceeds of an Equity Offering, selection of the Notes or portion thereof for redemption shall be made by the Trustee only on a pro rata --- ---- basis, unless such method is otherwise prohibited. The Trustee shall make the selection from the Notes outstanding and not previously called for redemption and shall promptly notify the Company in writing of the Notes selected for redemption and, in the case of any Note selected for partial redemption, the principal amount thereof to be redeemed. Notes in denominations of $1,000 may be redeemed only in whole. The Trustee may select for redemption portions (equal to $1,000 or any integral multiple thereof) of the principal of Notes that have denominations larger than $1,000. Provisions of this Indenture that apply to Notes called for redemption also apply to portions of Notes called for redemption. SECTION 3.03. Notice of Redemption. -------------------- At least 30 days but not more than 60 days before a Redemption Date, the Company shall mail or cause to be mailed a notice of redemption by first class mail, postage prepaid, to each Holder whose Notes are to be redeemed, with a copy to the -48- Trustee and any Paying Agent. At the Company's written request, the Trustee shall give the notice of redemption in the Company's name and at the Company's expense. Each notice for redemption shall identify the Notes to be redeemed and shall state: (1) the Redemption Date; (2) the Redemption Price and the amount of accrued interest, if any, to be paid; (3) the name and address of the Paying Agent; (4) the subparagraph of the Notes pursuant to which such redemption is being made; (5) that Notes called for redemption must be surrendered to the Paying Agent to collect the Redemption Price plus accrued interest, if any; (6) that, unless the Company defaults in making the redemption payment, interest on Notes called for redemption ceases to accrue on and after the Redemption Date, and the only remaining right of the Holders of such Notes is to receive payment of the Redemption Price plus accrued interest, if any, upon surrender to the Paying Agent of the Notes redeemed; (7) if any Note is being redeemed in part, the portion of the principal amount of such Note to be redeemed and that, after the Redemption Date, and upon surrender of such Note, a new Note or Notes in the aggregate principal amount equal to the unredeemed portion thereof will be issued; and (8) if fewer than all the Notes are to be redeemed, the identification of the particular Notes (or portion thereof) to be redeemed, as well as the aggregate principal amount of Notes to be redeemed and the aggregate principal amount of Notes to be outstanding after such partial redemption. SECTION 3.04. Effect of Notice of Redemption. ------------------------------ Once notice of redemption is mailed in accordance with Section 3.03, Notes called for redemption become due and -49- payable on the Redemption Date and at the Redemption Price plus accrued interest, if any. Upon surrender to the Trustee or Paying Agent, such Notes called for redemption shall be paid at the Redemption Price (which shall include accrued interest thereon to the Redemption Date), but installments of interest, the maturity of which is on or prior to the Redemption Date, shall be payable to Holders of record at the close of business on the relevant record dates referred to in the Notes. SECTION 3.05. Deposit of Redemption Price. --------------------------- On or before the Redemption Date, the Company shall deposit with the Paying Agent U.S. Legal Tender sufficient to pay the Redemption Price plus accrued interest, if any, of all Notes to be redeemed on that date. The Paying Agent shall promptly return to the Company any U.S. Legal Tender so deposited which is not required for that purpose, except with respect to monies owed as obligations to the Trustee pursuant to Article Seven. If the Company complies with the preceding paragraph, then, unless the Company defaults in the payment of such Redemption Price plus accrued interest, if any, interest on the Notes to be redeemed will cease to accrue on and after the applicable Redemption Date, whether or not such Notes are presented for payment. SECTION 3.06. Notes Redeemed in Part. ---------------------- Upon surrender of a Note that is to be redeemed in part, the Company shall execute and the Trustee shall authenticate for the Holder a new Note or Notes equal in principal amount to the unredeemed portion of the Note surrendered. ARTICLE FOUR COVENANTS SECTION 4.01. Payment of Notes. ---------------- The Company shall pay the principal of and interest on the Notes on the dates and in the manner provided in the Notes and in this Indenture. An installment of principal of or interest on the Notes shall be considered paid on the date it is due if the Trustee or Paying Agent (other than the Company or an Affiliate of the Company) holds on that date U.S. Legal -50- Tender designated for and sufficient to pay the installment in full and is not prohibited from paying such money to the Holders pursuant to the terms of this Indenture. The Company shall pay, to the extent such payments are lawful, interest on overdue principal and on overdue installments of interest (without regard to any applicable grace periods) from time to time on demand at the rate borne by the Notes plus 2% per annum. Interest will be computed on the basis of a 360-day year comprised of twelve 30-day months. Notwithstanding anything to the contrary contained in this Indenture, the Company may, to the extent it is required to do so by law, deduct or withhold income or other similar taxes imposed by the United States of America from principal or interest payments hereunder. SECTION 4.02. Maintenance of Office or Agency. ------------------------------- The Company shall maintain the office or agency required under Section 2.03. The Company shall give prior written notice to the Trustee of the location, and any change in the location, of such office or agency. If at any time the Company shall fail to maintain any such required office or agency or shall fail to furnish the Trustee with the address thereof, such presentations, surrenders, notices and demands may be made or served at the address of the Trustee set forth in Section 11.02. SECTION 4.03. Corporate Existence. ------------------- Except as otherwise permitted by Article Five and Section 4.16, the Company shall do or cause to be done, at its own cost and expense, all things necessary to preserve and keep in full force and effect its corporate existence and the corporate existence of each of its Restricted Subsidiaries in accordance with the respective organizational documents of each such Restricted Subsidiary and the material rights (charter and statutory) and franchises of the Company and each such Restricted Subsidiary; provided, however, that the Company -------- ------- shall not be required to preserve, with respect to itself, any material right or franchise and, with respect to any of its Restricted Subsidiaries, any such existence, material right or franchise, if the Board of Directors of the Company shall determine in good faith that the preservation thereof is no longer desirable in the conduct of the business of the Company and the Restricted Subsidiaries, taken as a whole. -51- SECTION 4.04. Payment of Taxes and Other Claims. --------------------------------- The Company shall pay or discharge or cause to be paid or discharged, before the same shall become delinquent, (i) all material taxes, assessments and governmental charges (including withholding taxes and any penalties, interest and additions to taxes) levied or imposed upon it or any of its Subsidiaries or properties of it or any of its Subsidiaries and (ii) all lawful claims for labor, materials and supplies that, if unpaid, might by law become a Lien upon the property of it or any of its Subsidiaries; provided, however, that the Company -------- ------- shall not be required to pay or discharge or cause to be paid or discharged any such tax, assessment, charge or claim whose amount, applicability or validity is being contested in good faith by appropriate proceedings properly instituted and diligently conducted for which adequate reserves, to the extent required under GAAP, have been taken. SECTION 4.05. Maintenance of Properties and Insurance. ------------------------- (a) The Company shall, and shall cause each of its Restricted Subsidiaries to, maintain its material properties in good working order and condition (subject to ordinary wear and tear) and make all necessary repairs, renewals, replacements, additions, betterments and improvements thereto and actively conduct and carry on its business; provided, however, that --------- ------- nothing in this Section 4.05 shall prevent the Company or any of its Restricted Subsidiaries from discontinuing the operation and maintenance of any of its properties, if such discontinuance is, in the good faith judgment of the Board of Directors of the Company or the Restricted Subsidiary, as the case may be, desirable in the conduct of their respective businesses and is not disadvantageous in any material respect to the Holders. (b) The Company shall provide or cause to be provided, for itself and each of its Restricted Subsidiaries, insurance (including appropriate self-insurance) against loss or damage of the kinds that, in the good faith judgment of the Board of Directors of the Company, are adequate and appropriate for the conduct of the business of the Company and such Restricted Subsidiaries in a prudent manner, with reputable insurers or with the government of the United States of America or an agency or instrumentality thereof, in such amounts, with such deductibles, and by such methods as shall be customary, in the good faith judgment of the Board of Directors of the Company, for companies similarly situated in the industry. -52- SECTION 4.06. Compliance Certificate; Notice of Default. ----------------------- (a) The Company shall deliver to the Trustee, within 90 days after the end of the Company's fiscal year, an Officers' Certificate stating that a review of its activities and the activities of its Subsidiaries during the preceding fiscal year has been made under the supervision of the signing Officers with a view to determining whether the Company has kept, observed, performed and fulfilled its obligations under this Indenture and further stating, as to each such Officer signing such certificate, that to the best of such Officer's knowledge the Company during such preceding fiscal year has kept, observed, performed and fulfilled each and every such covenant and no Default or Event of Default occurred during such year and at the date of such certificate there is no Default or Event of Default that has occurred and is continuing or, if such signers do know of such Default or Event of Default, the certificate shall describe the Default or Event of Default and its status with particularity. The Officers' Certificate shall also notify the Trustee should the Company elect to change the manner in which it fixes its fiscal year end. (b) The annual financial statements delivered pursuant to Section 4.08 shall be accompanied by a written report of the Company's independent accountants (who shall be a firm of established national reputation) that in conducting their audit of such financial statements nothing has come to their attention that would lead them to believe that the Company has violated any provisions of Article Four, Five or Six of this Indenture insofar as they relate to accounting matters or, if any such violation has occurred, specifying the nature and period of existence thereof, it being understood that such accountants shall not be liable directly or indirectly to any Person for any failure to obtain knowledge of any such violation. (c) (i) If any Default or Event of Default has occurred and is continuing or (ii) if any Holder seeks to exercise any remedy hereunder with respect to a claimed Default under this Indenture or the Notes, the Company shall deliver to the Trustee, at its address set forth in Section 11.02 hereof, by registered or certified mail or by telegram, telex or facsimile transmission followed by hard copy by registered or certified mail an Officers' Certificate specifying such event, notice or other action within five Business Days of its becoming aware of such occurrence. -53- SECTION 4.07. Compliance with Laws. -------------------- The Company shall comply, and shall cause each of its Subsidiaries to comply, with all applicable statutes, rules, regulations, orders and restrictions of the United States of America, all states and municipalities thereof, and of any governmental department, commission, board, regulatory authority, bureau, agency and instrumentality of the foregoing, in respect of the conduct of their respective businesses and the ownership of their respective properties, except for such noncompliances as are not in the aggregate reasonably likely to have a material adverse effect on the financial condition or results of operations of the Company and its Restricted Subsidiaries, taken as a whole. SECTION 4.08. SEC Reports. ----------- (a) Upon consummation of the Exchange Offer and the issuance of the Exchange Notes, the Company (at its own expense) shall file with the SEC and shall file with the Trustee within 15 days after it files them with the SEC copies of the quarterly and annual reports and of the information, documents, and other reports (or copies of such portions of any of the foregoing as the SEC may by rules and regulations prescribe) to be filed pursuant to Section 13 or 15(d) of the Exchange Act (without regard to whether the Company is subject to the requirements of such Section 13 or 15(d) of the Exchange Act); provided that prior to the consummation of the Exchange -------- Offer and the issuance of the Exchange Notes, the Company (at its own expense) will mail to the Trustee and Holders in accordance with paragraph (b) of this Section 4.08 substantially the same information that would have been required by the foregoing documents within 15 days of when any such document would otherwise have been required to be filed with the SEC. Upon qualification of this Indenture under the TIA, the Company shall also comply with the provisions of TIA (S) 314(a). (b) At the Company's expense, the Company shall cause an annual report if furnished by it to stockholders generally and each quarterly or other financial report if furnished by it to stockholders generally to be filed with the Trustee and mailed to the Holders at their addresses appearing in the register of Notes maintained by the Registrar at the time of such mailing or furnishing to stockholders. (c) The Company shall provide to any Holder any information reasonably requested by such Holder concerning the -54- Company (including financial statements) necessary in order to permit such Holder to sell or transfer Notes in compliance with Rule 144A under the Securities Act. SECTION 4.09. Waiver of Stay, Extension or Usury Laws. ------------------------- The Company covenants (to the extent that it may lawfully do so) that it will not at any time insist upon, plead, or in any manner whatsoever claim or take the benefit or advantage of, any stay or extension law or any usury law or other law that would prohibit or forgive the Company from paying all or any portion of the principal of or interest on the Notes as contemplated herein, wherever enacted, now or at any time hereafter in force, or which may affect the covenants or the performance of this Indenture; and (to the extent that it may lawfully do so) the Company hereby expressly waives all benefit or advantage of any such law, and covenants that it will not hinder, delay or impede the execution of any power herein granted to the Trustee, but will suffer and permit the execution of every such power as though no such law had been enacted. SECTION 4.10. Limitation on Restricted Payments. --------------------------------- The Company shall not, and shall not cause or permit any of its Restricted Subsidiaries to, directly or indirectly, (a) declare or pay any dividend or make any distribution (other than dividends or distributions payable in Qualified Capital Stock of the Company) on or in respect of shares of the Company's Capital Stock to holders of such Capital Stock, (b) purchase, redeem or otherwise acquire or retire for value any Capital Stock of the Company or any warrants, rights or options to purchase or acquire shares of any class of such Capital Stock, or (c) make any Restricted Investment (each of the foregoing actions set forth in clauses (a), (b) and (c) being referred to as a "Restricted Payment"), if at the time of such Restricted Payment or immediately after giving effect thereto, (i) a Default or an Event of Default shall have occurred and be continuing, (ii) the Company is not able to incur at least $1.00 of additional Indebtedness (other than Permitted Indebtedness) in compliance with Section 4.12, or (iii) the aggregate amount of Restricted Payments made subsequent to the Issue Date shall exceed the sum of: (w) 50% of the cumulative Consolidated Net Income (or if cumulative Consolidated Net Income shall be a loss, minus 100% of such loss) of the Company earned subsequent to the Issue Date and on or prior to the date the Restricted Payment occurs (the "Reference Date") (treating such period as -55- a single accounting period); plus (x) 100% of the aggregate net proceeds received by the Company (including the fair market value of property other than cash) from any Person (other than a Subsidiary of the Company) from the issuance and sale subsequent to the Issue Date and on or prior to the Reference Date of Qualified Capital Stock of the Company (including Capital Stock issued upon the conversion of convertible Indebtedness or in exchange for outstanding Indebtedness); plus (y) without duplication of any amounts included in clause (iii)(x) above, 100% of the aggregate net proceeds (including the fair market value of property other than cash) of any equity contribution received by the Company from a holder of the Company's Capital Stock (excluding any net proceeds from an Equity Offering to the extent used to redeem Notes in accordance with the optional redemption provisions of the Notes other than in connection with an Equity Offering pursuant to a registration statement filed with the SEC in accordance with the Securities Act); plus (z) 100% of the aggregate net proceeds (including the fair market value of property other than cash) of any (i) sale or other disposition of Restricted Investments made by the Company and its Restricted Subsidiaries or (ii) dividend from, or the sale of the stock of, an Unrestricted Subsidiary. Notwithstanding the foregoing, the provisions set forth in the immediately preceding paragraph do not prohibit: (1) the payment of any dividend or the consummation of any irrevocable redemption within 60 days after the date of declaration of such dividend or notice of such redemption if the dividend or payment of the redemption price, as the case may be, would have been permitted on the date of declaration or notice; (2) if no Event of Default shall have occurred and be continuing as a consequence thereof, the acquisition of any shares of Capital Stock of the Company (the "Retired Capital Stock"), either (i) solely in exchange for shares of Qualified Capital Stock (the "Refunding Capital Stock"), or (ii) through the application of net proceeds of a substantially concurrent sale for cash (other than to a Subsidiary of the Company) of shares of Qualified Capital Stock of the Company, and, in the case of subclause (i) of this clause (2), if immediately prior to the retirement of Retired Capital Stock the declaration and payment of dividends thereon was permitted under clause (3) of this paragraph, the declaration and payment of dividends on the Refunding Capital Stock in an aggregate amount per year no greater than the aggregate amount of dividends per annum that was declarable and payable on such Retired Capital Stock immediately prior to such retirement; provided that at the time -------- of the declaration of any such dividends, no Default or Event of -56- Default shall have occurred and be continuing or would occur as a consequence thereof; (3) if no Default or Event of Default shall have occurred and be continuing or would occur as a consequence thereof, the declaration and payment of dividends to holders of any class or series of Designated Preferred Stock (other than Disqualified Capital Stock) issued after the Issue Date (including, without limitation, the declaration and payment of dividends on Refunding Capital Stock in excess of the dividends declarable and payable thereon pursuant to clause (2)); provided that, at the time of such issuance, the Company, -------- after giving effect to such issuance on a pro forma basis, would have had a Consolidated Fixed Charge Coverage Ratio of at least 2.0 to 1.0; (4) payments for the purpose of and in an amount equal to the amount required to permit Holdings to redeem or repurchase Holdings' common equity or options in respect thereof, in each case in connection with the repurchase provisions under employee stock option or stock purchase agreements or other agreements to compensate management employees; provided that such redemptions or repurchases -------- pursuant to this clause (4) shall not exceed $7.5 million (which amount shall be increased (A) to $15.0 million upon consummation of an Initial Public Offering and (B) by the amount of any proceeds to the Company from (x) sales of Capital Stock of Holdings to management employees subsequent to the Issue Date and (y) any "key-man" life insurance policies which are used to make such redemptions or repurchases) in the aggregate; provided, further, that the cancellation of -------- ------- Indebtedness owing to the Company from members of management of the Company or any of its Restricted Subsidiaries in connection with a repurchase of Capital Stock of Holdings will not be deemed to constitute a Restricted Payment under the Indenture; (5) the making of distributions, loans or advances in an amount not to exceed $1.5 million per annum sufficient to permit --- ----- Holdings to pay the ordinary operating expenses of Holdings (including, without limitation, directors' fees, indemnification obligations, professional fees and expenses) related to Holdings' ownership of Capital Stock of the Company (other than to the Principals or their Related Parties); (6) the payment of any amounts pursuant to the Tax Allocation Agreement; (7) the making of distributions, loans or advances in an amount not to exceed $2.0 million per annum sufficient to --- ----- permit Holdings to pay the salaries or other compensation of employees who perform services for both Holdings and the Company; (8) so long as no Default or Event of Default shall have occurred and be continuing, payments to Holdings not to exceed $100,000 in the aggregate, to enable Holdings to make payments to holders of its Capital Stock in lieu of issuance of fractional shares of its Capital -57- Stock; (9) so long as no Default or Event of Default shall have occurred and be continuing, payments to, or on behalf of, Holdings not to exceed an aggregate amount of $10.0 million plus the amount of all capitalized or accrued interest on the 10% Exchangeable Preferred Stock of Holdings (the "Holdings Preferred Stock") solely to purchase, redeem or otherwise retire some or all the Holdings Preferred Stock which was issued to Baxter International, Inc. and/or its affiliates in connection with the acquisition of the Company from Baxter International, Inc. in 1994 or any notes (including interest thereon) of Holdings issued in exchange for the Holdings Preferred Stock in accordance with the terms of the Holdings Preferred Stock as in effect on the Issue Date; (10) if no Default or Event of Default shall have occurred and be continuing or would occur as a consequence thereof and the Company would be permitted to incur at least $1.00 of additional Indebtedness (other than Permitted Indebtedness) in compliance with Section 4.12, other Restricted Payments in an aggregate amount not to exceed $12.0 million; and (11) repurchases of Capital Stock deemed to occur upon the exercise of stock options if such Capital Stock represents a portion of the exercise price thereof. In determining the aggregate amount of Restricted Payments made subsequent to the Issue Date in accordance with clause (iii) of the immediately preceding paragraph, (a) amounts expended (to the extent such expenditure is in the form of cash) pursuant to clauses (1), (2), (4), (9) and (10) shall be included in such calculation; provided such expenditures -------- pursuant to clause (4) shall not be included to the extent of cash proceeds received by the Company from any "key man" life insurance policies and (b) amounts expended pursuant to clauses (3), (5), (6), (7), (8) or (11) shall be excluded from the such calculation. SECTION 4.11. Limitation on Transactions with Affiliates. -------------------------- (a) The Company shall not, and shall not permit any of its Restricted Subsidiaries to, directly or indirectly, enter into or permit to exist any transaction or series of related transactions (including, without limitation, the purchase, sale, lease or exchange of any property or the rendering of any service) with, or for the benefit of, any of its Affiliates involving aggregate consideration in excess of $1.0 million (an "Affiliate Transaction"), other than (x) Affiliate Transactions permitted under paragraph (b) below and (y) Affiliate Transactions on terms that are not materially less favorable than those that might reasonably have been obtained in a comparable transaction at such time on an arm's- -58- length basis from a Person that is not an Affiliate; provided, -------- however, that for a transaction or series of related - ------- transactions with an aggregate value of $7.5 million or more, at the Company's option (i) such determination shall be made in good faith by a majority of the disinterested members of the Board of the Directors of the Company or (ii) the Board of Directors of the Company or any such Restricted Subsidiary party to such Affiliate Transaction shall have received an opinion from a nationally recognized investment banking firm that such Affiliate Transaction is on terms not materially less favorable than those that might reasonably have been obtained in a comparable transaction at such time on an arm's-length basis from a Person that is not an Affiliate; and provided, -------- further, that for a transaction or series of related - ------- transactions with an aggregate value of $10.0 million or more, the Board of Directors of the Company or any such Restricted Subsidiary party to such Affiliate Transaction shall have received an opinion from a nationally recognized investment banking firm that such Affiliate Transaction is on terms not materially less favorable than those that might reasonably have been obtained in a comparable transaction at such time on an arm's-length basis from a Person that is not an Affiliate. (b) The foregoing restrictions shall not apply to (i) reasonable fees and compensation paid to and indemnity provided on behalf of, officers, directors, employees or consultants of the Company or any Subsidiary as determined in good faith by the Company's Board of Directors or senior management; (ii) transactions exclusively between or among the Company and any of its Restricted Subsidiaries or exclusively between or among such Restricted Subsidiaries, provided such transactions are not otherwise prohibited by the Indenture; (iii) transactions effected as part of a Qualified Securitization Transaction; (iv) any agreement as in effect as of the Issue Date or any amendment thereto or any transaction contemplated thereby (including pursuant to any amendment thereto) in any replacement agreement thereto so long as any such amendment or replacement agreement is not more disadvantageous to the Holders in any material respect than the original agreement as in effect on the Issue Date; (v) Restricted Payments permitted by this Indenture; (vi) the payment of customary annual management, consulting and advisory fees and related expenses to the Principals and their Affiliates; (vii) payments by the Company or any of its Restricted Subsidiaries to the Principals and their Affiliates made pursuant to any financial advisory, financing, underwriting or placement agreement or in respect of other investment banking activities, including, without -59- limitation, in connection with acquisitions or divestitures which are approved by the Board of Directors of the Company or such Restricted Subsidiary in good faith; (viii) payments or loans to employees or consultants which are approved by the Board of Directors of the Company in good faith; (ix) the existence of, or the performance by the Company or any of its Restricted Subsidiaries of its obligations under the terms of, any stockholders agreement (including any registration rights agreement or purchase agreement related thereto) to which it is a party as of the Issue Date and any similar agreements which it may enter into thereafter; provided, however, that -------- ------- the existence of, or the performance by the Company or any of its Restricted Subsidiaries of obligations under, any future amendment to any such existing agreement or under any similar agreement entered into after the Issue Date shall only be permitted by this clause (ix) to the extent that the terms of any such amendment or new agreement are not otherwise disadvantageous to the Holders of the Notes in any material respect; (x) transactions permitted by, and complying with, the provisions of Section 5.01; and (xi) transactions with customers, clients, suppliers, joint venture partners or purchasers or sellers of goods or services, in each case in the ordinary course of business (including, without limitation, pursuant to joint venture agreements) and otherwise in compliance with the terms of the Indenture which are fair to the Company or its Restricted Subsidiaries, in the reasonable determination of the Board of Directors of the Company or the senior management thereof, or are on terms at least as favorable as might reasonably have been obtained at such time from an unaffiliated party. SECTION 4.12. Limitation on Incurrence of Additional Indebtedness. -------------------------- The Company shall not, and shall not permit any of its Restricted Subsidiaries to, directly or indirectly, create, incur, assume, guarantee, acquire, become liable, contingently or otherwise, with respect to, or otherwise become responsible for payment of (collectively, "incur") any Indebtedness (other than Permitted Indebtedness); provided, however, that if no -------- ------- Default or Event of Default shall have occurred and be continuing at the time or as a consequence of the incurrence of any such Indebtedness, the Company may incur Indebtedness if on the date of the incurrence of such Indebtedness, after giving effect to the incurrence thereof, the Consolidated Fixed Charge Coverage Ratio of the Company is greater than 2.0 to 1.0. -60- SECTION 4.13. Limitation on Dividend and Other Payment Restrictions Affecting Subsidiaries. -------------------------- The Company shall not, and shall not permit any of its Restricted Subsidiaries to, directly or indirectly, create or otherwise cause or permit to exist or become effective any consensual encumbrance or consensual restriction on the ability of any Restricted Subsidiary to (a) pay dividends or make any other distributions on or in respect of its Capital Stock; (b) make loans or advances or to pay any Indebtedness or other obligation owed to the Company or any other Restricted Subsidiary of the Company; or (c) transfer any of its property or assets to the Company or any other Restricted Subsidiary of the Company, except for such encumbrances or restrictions existing under or by reason of: (1) applicable law; (2) this Indenture; (3) non-assignment provisions of any contract or any lease entered into in the ordinary course of business; (4) any instrument governing Acquired Indebtedness, which encumbrance or restriction is not applicable to any Person, or the properties or assets of any Person, other than the Person or the properties or assets of the Person so acquired; (5) agreements existing on the Issue Date (including, without limitation, the Bank Credit Agreement and the indenture governing the Existing Notes); (6) restrictions on the transfer of assets subject to any Lien permitted under this Indenture imposed by the holder of such Lien; (7) restrictions imposed by any agreement to sell assets or Capital Stock permitted under this Indenture to any Person pending the closing of such sale; (8) any agreement or instrument governing Capital Stock of any Person that is acquired; (9) Indebtedness or other contractual requirements of a Securitization Entity in connection with a Qualified Securitization Transaction; provided that such -------- restrictions apply only to such Securitization Entity; (10) any agreement or instrument governing Indebtedness (whether or not outstanding) of foreign Restricted Subsidiaries of the Company incurred in reliance on clause (iii) of the definition of Permitted Indebtedness; (11) other Indebtedness permitted to be incurred subsequent to the Issue Date pursuant to Section 4.12; provided that any such restrictions are ordinary and customary - -------- with respect to the type of Indebtedness being incurred (under the relevant circumstances); (12) restrictions on cash or other deposits or net worth imposed by customers under contracts entered into in the ordinary course of business; and (13) any encumbrances or restrictions imposed by any amendments, modifications, restatements, renewals, increases, supplements, refundings, replacements or refinancings of the contracts, instruments or -61- obligations referred to in clauses (1) through (12) above; provided that such amendments, modifications, restatements, renewals increases, supplements, refundings, replacements or refinancings are, in the good faith judgment of the Company's Board of Directors, no more restrictive with respect to such dividend and other payment restrictions than those contained in the dividend or other payment restrictions prior to such amendment, modification, restatement, renewal, increase, supplement, refunding, replacement or refinancing. SECTION 4.14. Prohibition on Incurrence of Senior Subordinated Debt. ---------------------------- The Company shall not incur or suffer to exist Indebtedness that is senior in right of payment to the Notes and subordinate in right of payment to any other Indebtedness of the Company. SECTION 4.15. Change of Control. ----------------- (a) Upon the occurrence of a Change of Control, the Company shall make an offer to purchase all outstanding Notes pursuant to the offer described in paragraph (b) below (the "Change of Control Offer") at a purchase price equal to 101% of the principal amount thereof plus accrued interest, if any, to the date of purchase. Prior to the mailing of the notice referred to below, but in any event within 30 days following any Change of Control, the Company shall (i) repay in full and terminate all commitments under Indebtedness under the Bank Credit Agreement, and all other Senior Debt the terms of which require repayment upon a Change of Control, or offer to repay in full and terminate all commitments under all Indebtedness under the Bank Credit Agreement and all other such Senior Debt and to repay the Indebtedness owed to each lender which has accepted such offer, or (ii) obtain the requisite consents under the Bank Credit Agreement and all other Senior Debt to permit the repurchase of the Notes as provided below. The Company shall first comply with the covenant in the immediately preceding sentence before it shall be required to repurchase Notes pursuant to the provisions described in this Section 4.15. The Company's failure to comply with the immediately preceding sentence shall constitute an Event of Default under Section 6.01(3) and not under Section 6.01(2). (b) Within 30 days following the date upon which the Change of Control occurred (the "Change of Control Date"), the Company shall send, by first class mail, a notice to each -62- Holder, with a copy to the Trustee, which notice shall govern the terms of the Change of Control Offer. The notice to the Holders shall contain all instructions and materials necessary to enable such Holders to tender Notes pursuant to the Change of Control Offer. Such notice shall state: (1) that the Change of Control Offer is being made pursuant to this Section 4.15 and that all Notes tendered and not withdrawn will be accepted for payment; (2) the purchase price (including the amount of accrued interest) and the purchase date (which shall be no earlier than 30 days nor later than 45 days from the date such notice is mailed, other than as may be required by law) (the "Change of Control Payment Date"); provided that -------- the Change of Control Payment Date for the Notes shall be a date subsequent to any payment dates for the purchase or other repayment of Senior Debt having similar provisions; (3) that any Note not tendered will continue to accrue interest; (4) that, unless the Company defaults in making payment therefor, any Note accepted for payment pursuant to the Change of Control Offer shall cease to accrue interest after the Change of Control Payment Date; (5) that Holders electing to have a Note purchased pursuant to a Change of Control Offer will be required to surrender the Note, with the form entitled "Option of Holder to Elect Purchase" on the reverse of the Note completed, to the Paying Agent at the address specified in the notice prior to the close of business on the third Business Day prior to the Change of Control Payment Date; (6) that Holders will be entitled to withdraw their election if the Paying Agent receives, not later than five Business Days prior to the Change of Control Payment Date, a telegram, telex, facsimile transmission or letter setting forth the name of the Holder, the principal amount of the Notes the Holder delivered for purchase and a statement that such Holder is withdrawing his election to have such Notes purchased; (7) that Holders whose Notes are purchased only in part will be issued new Notes in a principal amount equal to the unpurchased portion of the Notes surrendered; -63- provided that each Note purchased and each new Note issued -------- shall be in an original principal amount of $1,000 or integral multiples thereof; and (8) the circumstances and relevant facts regarding such Change of Control. On or before the Change of Control Payment Date, the Company shall (i) accept for payment Notes or portions thereof tendered pursuant to the Change of Control Offer, (ii) deposit with the Paying Agent U.S. Legal Tender sufficient to pay the purchase price plus accrued interest, if any, of all Notes so tendered and (iii) deliver to the Trustee Notes so accepted together with an Officers' Certificate stating the Notes or portions thereof being purchased by the Company. The Paying Agent shall promptly mail to the Holders of Notes so accepted payment in an amount equal to the purchase price plus accrued interest, if any, and the Trustee shall promptly authenticate and mail to such Holders new Notes equal in principal amount to any unpurchased portion of the Notes surrendered. Any Notes not so accepted shall be promptly mailed by the Company to the Holder thereof. For purposes of this Section 4.15, the Trustee shall act as the Paying Agent. Any amounts remaining after the purchase of Notes pursuant to a Change of Control Offer shall be returned by the Trustee to the Company. The Company shall comply with the requirements of Rule 14e-1 under the Exchange Act and any other securities laws and regulations thereunder to the extent such laws and regulations are applicable in connection with the repurchase of Notes pursuant to a Change of Control Offer. To the extent the provisions of any securities laws or regulations conflict with the provisions under this Section 4.15, the Company shall comply with the applicable securities laws and regulations and shall not be deemed to have breached its obligations under this Section 4.15 by virtue thereof. SECTION 4.16. Limitation on Asset Sales. ------------------------- (a) The Company shall not, and shall not permit any of its Restricted Subsidiaries to, consummate an Asset Sale unless (i) the Company or the applicable Restricted Subsidiary, as the case may be, receives consideration at the time of such Asset Sale at least equal to the fair market value of the assets sold or otherwise disposed of (as determined in good -64- faith by the Company's Board of Directors), (ii) at least 75% of the consideration received by the Company or the Restricted Subsidiary, as the case may be, from such Asset Sale shall be cash or Cash Equivalents; provided that the amount of (a) any liabilities (as shown on the Company's or such Restricted Subsidiary's most recent balance sheet) of the Company or any such Restricted Subsidiary (other than liabilities that are by their terms subordinated to the Notes) that are assumed by the transferee of any such assets, (b) any notes or other obligations received by the Company or any such Restricted Subsidiary from such transferee that are immediately converted by the Company or such Restricted Subsidiary into cash (to the extent of the cash received) and (c) any Designated Noncash Consideration received by the Company or any of its Restricted Subsidiaries in such Asset Sale having an aggregate fair market value, taken together with all other Designated Noncash Consideration received pursuant to this clause (c) that is at that time outstanding (including any Designated Noncash Consideration applied pursuant to the third paragraph of this covenant), not to exceed 10% of Total Assets at the time of the receipt of such Designated Noncash Consideration (with the fair market value of each item of Designated Noncash Consideration being measured at the time received and without giving effect to subsequent changes in value), shall be deemed to be cash for the purposes of this provision or for purposes of the third paragraph of this covenant, and (iii) upon the consummation of an Asset Sale, the Company shall apply, or cause such Restricted Subsidiary to apply, the Net Cash Proceeds relating to such Asset Sale within 365 days of receipt thereof either (A) to prepay any Senior Debt and, in the case of any Senior Debt under any revolving credit facility, effect a permanent reduction in the availability under such revolving credit facility, (B) to repurchase Existing Notes required to be repurchased under the indenture governing the Existing Notes, (C) to reinvest in Productive Assets, or (D) a combination of prepayment, repurchase and investment permitted by the foregoing clauses (iii)(A), (iii)(B) and (iii)(C). Pending the final application of any such Net Cash Proceeds, the Company or such Restricted Subsidiary may temporarily reduce Indebtedness under a revolving credit facility, if any, or otherwise invest such Net Cash Proceeds in Cash Equivalents. On the 366th day after an Asset Sale or such earlier date, if any, as the Board of Directors of the Company or of such Restricted Subsidiary determines not to apply the Net Cash Proceeds relating to such Asset Sale as set forth in clauses (iii)(A), (iii)(B), (iii)(C) or (iii)(D) of the next preceding sentence (each, a "Net Proceeds Offer Trigger Date"), such aggregate amount of Net Cash Proceeds which -65- have not been applied on or before such Net Proceeds Offer Trigger Date as permitted in clauses (iii)(A), (iii)(B), (iii)(C) and (iii)(D) of the next preceding sentence (each a "Net Proceeds Offer Amount") shall be applied by the Company or such Restricted Subsidiary to make an offer to purchase (the "Net Proceeds Offer") on a date (the "Net Proceeds Offer Payment Date") not less than 30 nor more than 45 days following the applicable Net Proceeds Offer Trigger Date, from all Holders on a pro rata basis that amount of Notes equal to the Net Proceeds --- ---- Offer Amount at a price equal to 100% of the principal amount of the Notes to be purchased, plus accrued interest thereon, if any, to the date of purchase; provided, however, that if at any -------- ------- time any non-cash consideration (including any Designated Noncash Consideration) received by the Company or any Restricted Subsidiary of the Company, as the case may be, in connection with any Asset Sale is converted into or sold or otherwise disposed of for cash (other than interest received with respect to any such non-cash consideration), then such conversion or disposition shall be deemed to constitute an Asset Sale hereunder and the Net Cash Proceeds thereof shall be applied in accordance with this covenant. Notwithstanding the foregoing, if a Net Proceeds Offer Amount is less than $10.0 million, the application of the Net Cash Proceeds constituting such Net Proceeds Offer Amount to a Net Proceeds Offer may be deferred until such time as such Net Proceeds Offer Amount plus the aggregate amount of all Net Proceeds Offer Amounts arising subsequent to the Net Proceeds Offer Trigger Date relating to such initial Net Proceeds Offer Amount from all Asset Sales by the Company and its Restricted Subsidiaries aggregates at least $10.0 million, at which time the Company or such Restricted Subsidiary shall apply all Net Cash Proceeds constituting all Net Proceeds Offer Amounts that have been so deferred to make a Net Proceeds Offer (the first date the aggregate of all such deferred Net Proceeds Offer Amounts is equal to $10.0 million or more shall be deemed to be a "Net Proceeds Offer Trigger Date"). Notwithstanding the two immediately preceding paragraphs, the Company and its Restricted Subsidiaries will be permitted to consummate an Asset Sale without complying with such paragraphs to the extent (i) at least 75% of the consideration for such Asset Sale constitutes Productive Assets, cash, cash equivalents and/or marketable securities (i.e., such securities which could ---- be sold for cash within 180 days of the acquisition thereof) and (ii) such Asset Sale is for fair market value (as determined in good faith by the Company's Board -66- of Directors); provided that any consideration not constituting -------- Productive Assets received by the Company or any of its Restricted Subsidiaries in connection with any Asset Sale permitted to be consummated under this paragraph shall be subject to the provisions of the two preceding paragraphs. Each Net Proceeds Offer will be mailed to the record Holders as shown on the register of Holders within 25 days following the Net Proceeds Offer Trigger Date, with a copy to the Trustee, and shall comply with the procedures set forth in the Indenture. Upon receiving notice of the Net Proceeds Offer, Holders may elect to tender their Notes in whole or in part in integral multiples of $1,000 in exchange for cash. To the extent Holders properly tender Notes in an amount exceeding the Net Proceeds Offer Amount, Notes of tendering Holders will be purchased on a pro rata basis (based on amounts tendered). A --- ---- Net Proceeds Offer shall remain open for a period of 20 business days or such longer period as may be required by law. To the extent that the aggregate amount of Notes tendered pursuant to a Net Proceeds Offer is less than the Net Proceeds Offer Amount, the Company may use any remaining Net Proceeds Offer Amount for general corporate purposes. Upon completion of any such Net Proceeds Offer, the Net Proceeds Offer Amount shall be reset at zero. The Company will comply with the requirements of Rule 14e-1 under the Exchange Act and any other securities laws and regulations thereunder to the extent such laws and regulations are applicable in connection with the repurchase of Notes pursuant to a Net Proceeds Offer. To the extent that the provisions of any securities laws or regulations conflict with the "Asset Sale" provisions of this Indenture, the Company shall comply with the applicable securities laws and regulations and shall not be deemed to have breached its obligations under the "Asset Sale" provisions of this Indenture by virtue thereof. (b) Subject to the deferral of the Net Proceeds Offer Trigger Date contained in the second paragraph of subsection (a) above, each notice of a Net Proceeds Offer pursuant to this Section 4.16 shall be mailed or caused to be mailed, by first class mail, by the Company not more than 25 days after the Net Proceeds Offer Trigger Date to all Holders at their last registered addresses as of a date within 15 days of the mailing of such notice, with a copy to the Trustee. The notice shall contain all instructions and materials necessary to enable such Holders to tender Notes pursuant to the Net Proceeds Offer and shall state the following terms: -67- (1) that the Net Proceeds Offer is being made pursuant to Section 4.16 and that all Notes tendered will be accepted for payment; provided, however, that if the aggregate --------- ------- principal amount of Notes tendered in a Net Proceeds Offer plus accrued interest at the expiration of such offer exceeds the aggregate amount of the Net Proceeds Offer, the Company shall select the Notes to be purchased on a pro rata basis (with such --- ---- adjustments as may be deemed appropriate by the Company so that only Notes in denominations of $1,000 or multiples thereof shall be purchased); (2) the purchase price (including the amount of accrued interest) and the purchase date (which shall be 20 Business Days from the date of mailing of notice of such Net Proceeds Offer, or such longer period as required by law) (the "Proceeds Purchase Date"); provided that the Proceeds Purchase -------- Date for the Notes shall be a date subsequent to any payment dates for the purchase or other repayment of Senior Debt having similar provisions; (3) that any Note not tendered will continue to accrue interest; (4) that, unless the Company defaults in making payment therefor, any Note accepted for payment pursuant to the Net Proceeds Offer shall cease to accrue interest after the Proceeds Purchase Date; (5) that Holders electing to have a Note purchased pursuant to a Net Proceeds Offer will be required to surrender the Note, with the form entitled "Option of Holder to Elect Purchase" on the reverse of the Note completed, to the Paying Agent at the address specified in the notice prior to the close of business on the third Business Day prior to the Proceeds Purchase Date; (6) that Holders will be entitled to withdraw their election if the Paying Agent receives, not later than five Business Days prior to the Proceeds Purchase Date, a telegram, telex, facsimile transmission or letter setting forth the name of the Holder, the principal amount of the Notes the Holder delivered for purchase and a statement that such Holder is withdrawing his election to have such Note purchased; and -68- (7) that Holders whose Notes are purchased only in part will be issued new Notes in a principal amount equal to the unpurchased portion of the Notes surrendered; provided that -------- each Note purchased and each new Note issued shall be in an original principal amount of $1,000 or integral multiples thereof; On or before the Proceeds Purchase Date, the Company shall (i) accept for payment Notes or portions thereof tendered pursuant to the Net Proceeds Offer which are to be purchased in accordance with item (b)(1) above, (ii) deposit with the Paying Agent U.S. Legal Tender sufficient to pay the purchase price plus accrued interest, if any, of all Notes to be purchased and (iii) deliver to the Trustee Notes so accepted together with an Officers' Certificate stating the Notes or portions thereof being purchased by the Company. The Paying Agent shall promptly mail to the Holders of Notes so accepted payment in an amount equal to the purchase price plus accrued interest, if any. For purposes of this Section 4.16, the Trustee shall act as the Paying Agent. Any amounts remaining after the purchase of Notes pursuant to a Net Proceeds Offer shall be returned by the Trustee to the Company. The Company shall comply with the requirements of Rule 14e-1 under the Exchange Act and any other securities laws and regulations thereunder to the extent such laws and regulations are applicable in connection with the purchase of Notes pursuant to a Net Proceeds Offer. To the extent the provisions of any securities laws or regulations conflict with the provisions of this Indenture relating to a Net Proceeds Offer, the Company shall comply with the applicable securities laws and regulations and shall not be deemed to have breached its obligations relating to such Net Proceeds Offer by virtue thereof. SECTION 4.17. Limitation on Preferred Stock of Subsidiaries. ----------------------- The Company shall not permit any of its Restricted Subsidiaries to issue any Preferred Stock (other than to the Company or to a Wholly Owned Restricted Subsidiary of the Company) or permit any Person (other than the Company or a Wholly Owned Restricted Subsidiary of the Company) to own any Preferred Stock of any Restricted Subsidiary of the Company, other than Permitted Foreign Subsidiary Preferred Stock and Permitted Domestic Subsidiary Preferred Stock. -69- SECTION 4.18. Limitation on Liens. ------------------- The Company shall not, and shall not permit any of its Restricted Subsidiaries to, create, incur, assume or suffer to exist any Liens of any kind against or upon any of its property or assets, or any proceeds therefrom, unless (i) in the case of Liens securing Indebtedness that is expressly subordinate or junior in right of payment to the Notes, the Notes are secured by a Lien on such property, assets or proceeds that is senior in priority to such Liens and (ii) in all other cases, the Notes are equally and ratably secured, except for (A) Liens existing as of the Issue Date and any extensions, renewals or replacements thereof; (B) Liens securing Senior Debt; (C) Liens securing the Notes; (D) Liens of the Company or a Wholly Owned Restricted Subsidiary on assets of any Subsidiary of the Company; (E) Liens securing Indebtedness which is incurred to refinance Indebtedness which has been secured by a Lien permitted under this Indenture and which has been incurred in accordance with the provisions of this Indenture; provided, -------- however, that such Liens do not extend to or cover any property - ------- or assets of the Company or any of its Restricted Subsidiaries not securing the Indebtedness so refinanced; and (F) Permitted Liens. SECTION 4.19. Limitation of Guarantees by Subsidiaries. ------------------------ The Company shall not permit any Restricted Subsidiary, directly or indirectly, by way of the pledge of any intercompany note or otherwise, to assume, guarantee or in any other manner become liable with respect to any Indebtedness of the Company or any other Subsidiary (other than (A) Indebtedness and other obligations under the Bank Credit Agreement, (B) Permitted Indebtedness of a Restricted Subsidiary, (C) Indebtedness under Currency Agreements in reliance on clause (vi) of the definition of Permitted Indebtedness or (D) Interest Swap Obligations incurred in reliance on clause (v) of the definition of Permitted Indebtedness), unless, in any such case (a) such Restricted Subsidiary executes and delivers a supplemental indenture to the Indenture, providing a guarantee of payment of the Notes by such Restricted Subsidiary (the "Guarantee") and (b) (x) if any such assumption, guarantee or other liability of such Restricted Subsidiary is provided in respect of Senior Debt, the guarantee or other instrument provided by such Restricted Subsidiary in respect of such Senior Debt may be superior to the Guarantee pursuant to subordination provisions no less favorable to the -70- Holders of the Notes than those contained in the Indenture and (y) if such assumption, guarantee or other liability of such Restricted Subsidiary is provided in respect of Indebtedness that is expressly subordinated to the Notes, the guarantee or other instrument provided by such Restricted Subsidiary in respect of such subordinated Indebtedness shall be subordinated to the Guarantee pursuant to subordination provisions no less favorable to the Holders of the Notes than those contained in the Indenture. Notwithstanding the foregoing, any such Guarantee by a Restricted Subsidiary of the Notes shall provide by its terms that it shall be automatically and unconditionally released and discharged, without any further action required on the part of the Trustee or any Holder, upon: (i) the unconditional release of such Restricted Subsidiary from its liability in respect of the Indebtedness in connection with which such Guarantee was executed and delivered pursuant to the preceding paragraph; or (ii) any sale or other disposition (by merger or otherwise) to any Person which is not a Restricted Subsidiary of the Company, of all of the Company's Capital Stock in, or all or substantially all of the assets of, such Restricted Subsidiary; provided that (a) such sale or -------- disposition of such Capital Stock or assets is otherwise in compliance with the terms of the Indenture and (b) such assumption, guarantee or other liability of such Restricted Subsidiary has been released by the holders of the other Indebtedness so guaranteed. SECTION 4.20. Conduct of Business. ------------------- The Company and its Restricted Subsidiaries shall not engage in any businesses a majority of whose revenues are not derived from the same or reasonably similar, ancillary or related to, or a reasonable extension, development or expansion of, the businesses in which the Company and its Restricted Subsidiaries are engaged on the Issue Date. -71- ARTICLE FIVE SUCCESSOR CORPORATION SECTION 5.01. Merger, Consolidation and Sale of Assets. --------------------- (a) The Company shall not, in a single transaction or a series of related transactions, consolidate with or merge with or into, or sell, assign, transfer, lease, convey or otherwise dispose of all or substantially all of its assets to, another Person or Persons or adopt a Plan of Liquidation unless: (1) either (A) the Company shall be the survivor of such merger or consolidation or (B) the surviving Person is a corporation, partnership or trust organized and existing under the laws of the United States, any state thereof or the District of Columbia and such surviving Person shall expressly assume all the obligations of the Company under the Notes and this Indenture; (2) immediately after giving effect to such transaction (on a pro forma basis, including any Indebtedness incurred or anticipated to be incurred in connection with such transaction), the Company or the surviving Person is able to incur at least $1.00 of additional Indebtedness (other than Permitted Indebtedness) in compliance with Section 4.12; and (3) immediately before and immediately after giving effect to such transaction (including any Indebtedness incurred or anticipated to be incurred in connection with the transaction), no Default or Event of Default shall have occurred and be continuing. (b) For purposes of the foregoing, the transfer (by lease, assignment, sale or otherwise, in a single transaction or series of transactions) of all or substantially all of the properties and assets of one or more Subsidiaries of the Company, the Capital Stock of which constitutes all or substantially all of the properties and assets of the Company, shall be deemed to be the transfer of all or substantially all of the properties and assets of the Company. Notwithstanding the foregoing clauses (2) and (3), (a) any Restricted Subsidiary of the Company may consolidate with, merge into or transfer all or -72- part of its properties and assets to the Company and (b) the Company may merge with an Affiliate incorporated solely for the purpose of reincorporating the Company in another jurisdiction. SECTION 5.02. Successor Corporation Substituted. --------------------------------- Upon any consolidation, combination or merger or any transfer of all or substantially all of the assets of the Company in accordance with the foregoing, the surviving entity shall succeed to, and be substituted for, and may exercise every right and power of, the Company under this Indenture and the Notes with the same effect as if such surviving entity had been named as such; provided that solely for purposes of computing -------- amounts described in clause (iii) of the first paragraph of Section 4.10, any such surviving entity to the Company shall only be deemed to have succeeded to and be substituted for the Company with respect to periods subsequent to the effective time of such merger, consolidation, combination or transfer of assets. ARTICLE SIX DEFAULT AND REMEDIES SECTION 6.01. Events of Default. ----------------- An "Event of Default" occurs if: (1) the Company fails to pay interest on any Notes when the same becomes due and payable and the Default continues for a period of 30 days (whether or not such payment shall be prohibited by Article Ten of this Indenture); or (2) the Company fails to pay the principal on any Notes when such principal becomes due and payable, at maturity, upon redemption or otherwise (including the failure to make a payment to purchase Notes tendered pursuant to a Change of Control Offer or a Net Proceeds Offer) (whether or not such payment shall be prohibited by Article Ten); or (3) the Company defaults in the observance or performance of any other covenant or agreement contained in this Indenture and which default continues for a period of -73- 30 days after the Company receives written notice specifying the default (and demanding that such default be remedied) from the Trustee or the Holders of at least 25% of the outstanding principal amount of the Notes; or (4) the Company fails to pay at final stated maturity (giving effect to any extensions thereof) the principal amount of any Indebtedness of the Company or any Restricted Subsidiary (other than a Securitization Entity) of the Company, and such failure continues for a period of 20 days or more, or the acceleration of the final stated maturity of any such Indebtedness (which acceleration is not rescinded, annulled or otherwise cured within 20 days of receipt by the Company or such Restricted Subsidiary of notice of any such acceleration) if the aggregate principal amount of such Indebtedness, together with the principal amount of any other such Indebtedness in default for failure to pay principal at final stated maturity or which has been accelerated, in each case with respect to which the 20- day period described above has passed, aggregates $20.0 million or more at any time; or (5) one or more judgments in an aggregate amount in excess of $20.0 million shall have been rendered against the Company or any of its Significant Subsidiaries and such judgments remain undischarged, unpaid or unstayed for a period of 60 days after such judgment or judgments become final and non- appealable; or (6) the Company or any Significant Subsidiary (A) commences a voluntary case or proceeding under any Bankruptcy Law with respect to itself, (B) consents to the entry of a judgment, decree or order for relief against it in an involuntary case or proceeding under any Bankruptcy Law, (C) consents to the appointment of a Custodian of it or for substantially all of its property, (D) consents to or acquiesces in the institution of a bankruptcy or an insolvency proceeding against it, (E) makes a general assignment for the benefit of its creditors, or (F) takes any corporate action to authorize or effect any of the foregoing; or (7) a court of competent jurisdiction enters a judgment, decree or order for relief in respect of the Company or any Significant Subsidiary in an involuntary case or proceeding under any Bankruptcy Law, which shall (A) approve as properly filed a petition seeking -74- reorganization, arrangement, adjustment or composition in respect of the Company or any Significant Subsidiary, (B) appoint a Custodian of the Company or any Significant Subsidiary or for substantially all of its property or (C) order the winding-up or liquidation of its affairs; and such judgment, decree or order shall remain unstayed and in effect for a period of 60 consecutive days. Any Event of Default shall not be deemed to have occurred under clause (4) or (5) until the Trustee shall have received written notice from the Company or any of the Holders or unless a Trust Officer shall have actual knowledge of such Event of Default. SECTION 6.02. Acceleration. ------------ (a) If an Event of Default (other than an Event of Default specified in Section 6.01(6) or (7) with respect to the Company) occurs and is continuing and has not been waived pursuant to Section 6.04, then the Trustee or the Holders of at least 25% in principal amount of outstanding Notes may declare the principal of and accrued interest on all the Notes to be due and payable by notice in writing to the Company and the Trustee specifying the respective Event of Default and that it is a "notice of acceleration" (the "Acceleration Notice"), and the same (i) shall become immediately due and payable or (ii) if there are any amounts outstanding under the Bank Credit Agreement, shall become due and payable upon the first to occur of an acceleration under the Bank Credit Agreement or 5 business days after receipt by the Company and the Representative under the Bank Credit Agreement of such Acceleration Notice but only if such Event of Default is then continuing. Upon any such declaration, but subject to the immediately preceding sentence, such amount shall be immediately due and payable. (b) If an Event of Default specified in Section 6.01(6) or (7) occurs with respect to the Company, all unpaid principal and accrued interest on the Notes then outstanding shall ipso facto become and be immediately due and ---- ----- payable without any declaration or other act on the part of the Trustee or any Noteholder. (c) At any time after a declaration of acceleration with respect to the Notes in accordance with Section 6.02(a), the Holders of a majority in principal amount of the Notes may rescind and cancel such declaration and its consequences (i) if the rescission would not conflict with any judgment or decree, (ii) if all existing Events of Default have been cured or -75- waived except nonpayment of principal or interest that has become due solely because of the acceleration, (iii) to the extent the payment of such interest is lawful, interest on overdue installments of interest and overdue principal, which has become due otherwise than by such declaration of acceleration, has been paid, (iv) if the Company has paid the Trustee its reasonable compensation and reimbursed the Trustee for its expenses, disbursements and advances and (v) in the event of the cure or waiver of an Event of Default of the type described in Section 6.01(6) or (7), the Trustee shall have received an Officers' Certificate and an Opinion of Counsel that such Event of Default has been cured or waived. The holders of a majority in principal amount of the Notes may waive any existing Default or Event of Default under this Indenture, and its consequences, except a default in the payment of the principal of or interest on any Notes. SECTION 6.03. Other Remedies. -------------- If an Event of Default occurs and is continuing, the Trustee may pursue any available remedy by proceeding at law or in equity to collect the payment of principal of or interest on the Notes or to enforce the performance of any provision of the Notes or this Indenture. The Trustee may maintain a proceeding even if it does not possess any of the Notes or does not produce any of them in the proceeding. A delay or omission by the Trustee or any Noteholder in exercising any right or remedy accruing upon an Event of Default shall not impair the right or remedy or constitute a waiver of or acquiescence in the Event of Default. No remedy is exclusive of any other remedy. All available remedies are cumulative to the extent permitted by law. SECTION 6.04. Waiver of Past Defaults. ----------------------- Subject to Sections 2.09, 6.07 and 9.02, the Holders of a majority in principal amount of the outstanding Notes by notice to the Trustee may waive an existing Default or Event of Default and its consequences, except a Default in the payment of principal of or interest on any Note as specified in clauses (1) and (2) of Section 6.01. When a Default or Event of Default is waived, it is cured and ceases. -76- SECTION 6.05. Control by Majority. ------------------- Subject to Section 2.09, the Holders of a majority in principal amount of the outstanding Notes may 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 it, including, without limitation, any remedies provided for in Section 6.03. Subject to Section 7.01, however, the Trustee may refuse to follow any direction that the Trustee reasonably believes conflicts with any law or this Indenture, that the Trustee determines may be unduly prejudicial to the rights of another Noteholder, or that may involve the Trustee in personal liability; provided that the -------- Trustee may take any other action deemed proper by the Trustee which is not inconsistent with such direction; and provided -------- further that this provision shall not affect the rights of the - ------- Trustee set forth in Section 7.01(d). SECTION 6.06. Limitation on Suits. ------------------- A Noteholder may not pursue any remedy with respect to this Indenture or the Notes unless: (1) the Holder gives to the Trustee written notice of a continuing Event of Default; (2) Holders of at least 25% in principal amount of the outstanding Notes make a written request to the Trustee to pursue the remedy; (3) such Holders offer to the Trustee indemnity reasonably satisfactory to the Trustee against any loss, liability or expense to be incurred in compliance with such request; (4) the Trustee does not comply with the request within 45 days after receipt of the request and the offer of satisfactory indemnity; and (5) during such 45-day period the Holders of a majority in principal amount of the outstanding Notes do not give the Trustee a direction which, in the opinion of the Trustee, is inconsistent with the request. A Noteholder may not use this Indenture to prejudice the rights of another Noteholder or to obtain a preference or priority over such other Noteholder. -77- SECTION 6.07. Rights of Holders To Receive Payment. ------------------------------------ Notwithstanding any other provision of this Indenture, the right of any Holder to receive payment of principal of and interest on a Note, on or after the respective due dates expressed in such Note, or to bring suit for the enforcement of any such payment on or after such respective dates, shall not be impaired or affected without the consent of such Holder. SECTION 6.08. Collection Suit by Trustee. -------------------------- If an Event of Default in payment of principal or interest specified in clause (1) or (2) of Section 6.01 occurs and is continuing, the Trustee may recover judgment in its own name and as trustee of an express trust against the Company or any other obligor on the Notes for the whole amount of principal and accrued interest remaining unpaid, together with interest on overdue principal and, to the extent that payment of such interest is lawful, interest on overdue installments of interest at the rate set forth in Section 4.01 and such further amount as shall be sufficient to cover the costs and expenses of collection, including the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel. SECTION 6.09. Trustee May File Proofs of Claim. -------------------------------- The Trustee may file such proofs of claim and other papers or documents as may be necessary or advisable in order to have the claims of the Trustee (including any claim for the reasonable compensation, expenses, taxes, disbursements and advances of the Trustee, its agents and counsel) and the Noteholders allowed in any judicial proceedings relating to the Company or any other obligor upon the Notes, any of their respective creditors or any of their respective property and shall be entitled and empowered to collect and receive any monies or other property payable or deliverable on any such claims and to distribute the same, and any Custodian in any such judicial proceedings is hereby authorized by each Noteholder 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 to it for the reasonable compensation, expenses, taxes, disbursements and advances of the Trustee, its agent and counsel, and any other amounts due the Trustee under Section 7.07. The Company's payment obligations under this Section 6.09 shall be secured in accordance with the provisions of Section 7.07 -78- hereunder. Nothing herein contained shall be deemed to authorize the Trustee to authorize or consent to or accept or adopt on behalf of any Noteholder any plan of reorganization, arrangement, adjustment or composition affecting the Notes or the rights of any Holder thereof, or to authorize the Trustee to vote in respect of the claim of any Noteholder in any such proceeding. SECTION 6.10. Priorities. ---------- If the Trustee collects any money or property pursuant to this Article Six, it shall pay out the money in the following order: First: to the Trustee for amounts due under Section 7.07; Second: if the Holders are forced to proceed against the Company directly without the Trustee, to Holders for their collection costs; Third: to Holders for amounts due and unpaid on the Notes for principal and interest, ratably, without preference or priority of any kind, according to the amounts due and payable on the Notes for principal and interest, respectively; and Fourth: to the Company or any other obligor on the Notes, as their interests may appear, or as a court of competent jurisdiction may direct. The Trustee, upon prior notice to the Company, may fix a record date and payment date for any payment to Noteholders pursuant to this Section 6.10. SECTION 6.11. Undertaking for Costs. --------------------- In any suit for the enforcement of any right or remedy under this Indenture or in any suit against the Trustee for any action taken or omitted by it as Trustee, a court in its discretion may require the filing by any party litigant in the suit of an undertaking to pay the costs of the suit, and the court in its discretion may assess reasonable costs, including reasonable attorneys' fees, against any party litigant in the suit, having due regard to the merits and good faith of the claims or defenses made by the party litigant. This Section 6.11 does not apply to a suit by the Trustee, a suit by a Holder pursuant to Section 6.07, or a suit by a -79- Holder or Holders of more than 10% in principal amount of the outstanding Notes. ARTICLE SEVEN TRUSTEE SECTION 7.01. Duties of Trustee. ----------------- (a) If a Default or an Event of Default has occurred and is continuing, 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 its exercise thereof as a prudent person would exercise or use under the circumstances in the conduct of his own affairs. (b) Except during the continuance of a Default or an Event of Default: (1) The Trustee need perform only those duties as are specifically set forth in this Indenture and no covenants or obligations shall be implied in this Indenture against the Trustee. (2) In the absence of bad faith on its part, the Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon certificates or opinions furnished to the Trustee and conforming to the requirements of this Indenture. However, the Trustee shall examine the certificates and opinions to determine whether or not they conform to the requirements of this Indenture. (c) Notwithstanding anything to the contrary herein contained, the Trustee may not be relieved from liability for its own negligent action, its own negligent failure to act, or its own willful misconduct, except that: (1) This paragraph does not limit the effect of paragraph (b) of this Section 7.01. (2) The Trustee shall not be liable for any error of judgment made in good faith by a Trust Officer, unless it -80- is proved that the Trustee was negligent in ascertaining the pertinent facts. (3) The Trustee shall not be liable with respect to any action it takes or omits to take in good faith in accordance with a direction received by it pursuant to Section 6.02, 6.04 or 6.05. (d) No provision of this Indenture shall require the Trustee to expend or risk its own funds or otherwise incur any financial liability in the performance of any of its duties hereunder or in the exercise of any of its rights or powers if it shall have reasonable grounds for believing that repayment of such funds or adequate indemnity against such risk or liability is not reasonably assured to it. (e) Whether or not herein expressly provided, every provision of this Indenture that in any way relates to the Trustee is subject to paragraphs (a), (b), (c) and (d) of this Section 7.01. (f) The Trustee shall not be liable for interest on any money or assets received by it except as the Trustee may agree in writing with the Company. Assets held in trust by the Trustee need not be segregated from other assets except to the extent required by law. SECTION 7.02. Rights of Trustee. ----------------- Subject to Section 7.01: (a) The Trustee may rely and shall be fully protected in acting or refraining from acting upon any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, note or other paper or document believed by it to be genuine and to have been signed or presented by the proper Person. The Trustee need not investigate any fact or matter stated in the document. (b) Before the Trustee acts or refrains from acting, it may consult with counsel and may require an Officers' Certificate, an Opinion of Counsel or both, which shall conform to Sections 11.04 and 11.05. The Trustee shall not be liable for any action it takes or omits to take in good faith in reliance on such Officers' Certificate or Opinion of Counsel. -81- (c) The Trustee may execute any of the trusts or powers hereunder or perform any duties hereunder either directly or indirectly or by or through agents or attorneys and the Trustee shall not be responsible for the misconduct or negligence of any agent or attorney appointed with due care. (d) The Trustee shall not be liable for any action that it takes or omits to take in good faith which it reasonably believes to be authorized or within its rights or powers. (e) The Trustee shall not be bound to make any investigation into the facts or matters stated in any resolution, certificate, statement, instrument, opinion, notice, request, direction, consent, order, bond, debenture, or other paper or document, but the Trustee, in its discretion, may make such further inquiry or investigation into such facts or matters as it may see fit, and, if the Trustee shall determine to make such further inquiry or investigation, it shall be entitled, upon reasonable notice to the Company, to examine the books, records, and premises of the Company, personally or by agent or attorney and to consult with the officers and representatives of the Company, including the Company's accountants and attorneys. (f) The Trustee shall be under no obligation to exercise any of the rights or powers vested in it by this Indenture at the request, order or direction of any of the Holders pursuant to the provisions of this Indenture, unless such Holders shall have offered to the Trustee security or indemnity reasonably satisfactory to the Trustee against the costs, expenses and liabilities which may be incurred by it in compliance with such request, order or direction. (g) The Trustee shall not be required to give any bond or surety in respect of the performance of its powers and duties hereunder. SECTION 7.03. Individual Rights of Trustee. ---------------------------- The Trustee in its individual or any other capacity may become the owner or pledgee of Notes and may otherwise deal with the Company, any Subsidiary of the Company, or their respective Affiliates with the same rights it would have if it -82- were not Trustee. Any Agent may do the same with like rights. However, the Trustee must comply with Sections 7.10 and 7.11. SECTION 7.04. Trustee's Disclaimer. -------------------- The recitals contained herein and in the Notes shall be taken as statements of the Company and the Trustee assumes no responsibility for their correctness. The Trustee makes no representation as to the validity or adequacy of this Indenture or the Notes, and it shall not be accountable for the Company's use of the proceeds from the Notes, and it shall not be responsible for any statement of the Company in this Indenture or the Notes other than the Trustee's certificate of authentication. SECTION 7.05. Notice of Default. ----------------- If a Default or an Event of Default occurs and is continuing and if it is known to the Trustee, the Trustee shall mail to each Noteholder notice of the uncured Default or Event of Default within 90 days after such Default or Event of Default occurs. Except in the case of a Default or an Event of Default in payment of principal of, or interest on, any Note, including an accelerated payment and the failure to make payment on the Change of Control Payment Date pursuant to a Change of Control Offer or on the Proceeds Purchase Date pursuant to a Net Proceeds Offer and, except in the case of a failure to comply with Article V hereof, the Trustee may withhold the notice if and so long as its Board of Directors, the executive committee of its Board of Directors or a committee of its directors and/or Trust Officers in good faith determines that withholding the notice is in the interest of the Noteholders. SECTION 7.06. Reports by Trustee to Holders. ----------------------------- Within 60 days after each May 15, the Trustee shall, to the extent that any of the events described in TIA (S) 313(a) occurred within the previous twelve months, but not otherwise, mail to each Noteholder a brief report dated as of such date that complies with TIA (S) 313(a). The Trustee also shall comply with TIA (S)(S) 313(b), (c) and (d). A copy of each report at the time of its mailing to Noteholders shall be mailed to the Company and filed with the SEC and each stock exchange, if any, on which the Notes are listed. -83- The Company shall promptly notify the Trustee if the Notes become listed on any stock exchange and the Trustee shall comply with TIA (S) 313(d). SECTION 7.07. Compensation and Indemnity. -------------------------- The Company shall pay to the Trustee from time to time reasonable compensation for its services. The Trustee's compensation shall not be limited by any law on compensation of a trustee of an express trust. The Company shall reimburse the Trustee upon request for all reasonable fees and expenses, including out-of-pocket expenses incurred or made by it in connection with the performance of its duties under this Indenture. Such expenses shall include the reasonable fees and expenses of the Trustee's agents and counsel. The Company shall indemnify the Trustee and its agents, employees, stockholders and directors and officers for, and hold them harmless against, any loss, liability or expense incurred by them except for such actions to the extent caused by any negligence, bad faith or willful misconduct on their part, arising out of or in connection with the administration of this trust including the reasonable costs and expenses of defending themselves against any claim or liability in connection with the exercise or performance of any of their rights, powers or duties hereunder. The Trustee shall notify the Company promptly of any claim asserted against the Trustee for which it may seek indemnity. At the Trustee's sole discretion, the Company shall defend the claim and the Trustee shall cooperate and may participate in the defense; provided -------- that any settlement of a claim shall be approved in writing by the Trustee. Alternatively, the Trustee may at its option have separate counsel of its own choosing and the Company shall pay the reasonable fees and expenses of such counsel; provided that -------- the Company will not be required to pay such fees and expenses if it assumes the Trustee's defense and there is no conflict of interest between the Company and the Trustee in connection with such defense as reasonably determined by the Trustee. The Company need not pay for any settlement made without its written consent. The Company need not reimburse any expense or indemnify against any loss or liability to the extent incurred by the Trustee through its negligence, bad faith or willful misconduct. To secure the Company's payment obligations in this Section 7.07, the Trustee shall have a lien prior to the Notes on all assets or money held or collected by the Trustee, in its -84- capacity as Trustee, except assets or money held in trust to pay principal of or interest on particular Notes. The Trustee's right to receive payment of any amounts due under this Section 7.07 shall not be subordinate to any other liability or indebtedness of the Company (even though the Notes may be subordinate to such other liability or indebtedness). When the Trustee incurs expenses or renders services after an Event of Default specified in Section 6.01(6) or (7) occurs, such expenses and the compensation for such services are intended to constitute expenses of administration under any Bankruptcy Law; provided, however, that this shall not affect -------- ------- the Trustee's rights as set forth in the preceding paragraph or Section 6.10. SECTION 7.08. Replacement of Trustee. ---------------------- The Trustee may resign by so notifying the Company. The Holders of a majority in principal amount of the outstand- ing Notes may remove the Trustee by so notifying the Company and the Trustee and may appoint a successor Trustee. The Company may remove the Trustee if: (1) the Trustee fails to comply with Section 7.10; (2) the Trustee is adjudged bankrupt or insolvent; (3) a receiver or other public officer takes charge of the Trustee or its property; or (4) the Trustee becomes incapable of acting. If the Trustee resigns or is removed or if a vacancy exists in the office of Trustee for any reason, the Company shall notify each Holder of such event and shall promptly appoint a successor Trustee. Within one year after the successor Trustee takes office, the Holders of a majority in principal amount of the Notes may appoint a successor Trustee to replace the successor Trustee appointed by the Company. A successor Trustee shall deliver a written acceptance of its appointment to the retiring Trustee and to the Company. Immediately after that, the retiring Trustee shall transfer all property held by it as Trustee to the successor Trustee, subject to the lien provided in Section 7.07, the resignation or removal of the retiring Trustee shall become effective, and the successor Trustee shall have all the rights, -85- powers and duties of the Trustee under this Indenture. A successor Trustee shall mail notice of its succession to each Noteholder. If a successor Trustee does not take office within 60 days after the retiring Trustee resigns or is removed, the retiring Trustee, the Company or the Holders of at least 10% in principal amount of the outstanding Notes may petition any court of competent jurisdiction for the appointment of a successor Trustee. If the Trustee fails to comply with Section 7.10, any Noteholder may petition any court of competent jurisdiction for the removal of the Trustee and the appointment of a successor Trustee. Notwithstanding replacement of the Trustee pursuant to this Section 7.08, the Company's obligations under Section 7.07 shall continue for the benefit of the retiring Trustee. SECTION 7.09. Successor Trustee by Merger, Etc. -------------------------------- If the Trustee consolidates with, merges or converts into, or transfers all or substantially all of its corporate trust business to, another corporation, the resulting, surviving or transferee corporation without any further act shall, if such resulting, surviving or transferee corporation is otherwise eligible hereunder, be the successor Trustee; provided that such corporation shall be otherwise qualified and - -------- eligible under this Article Seven. SECTION 7.10. Eligibility; Disqualification. ----------------------------- This Indenture shall always have a Trustee who satisfies the requirement of TIA (S)(S) 310(a)(1), (2) and (5). The Trustee (or, in the case of a corporation included in a bank holding company system, the related bank holding company) shall have a combined capital and surplus of at least $50 million as set forth in its most recent published annual report of condition. In addition, if the Trustee is a corporation included in a bank holding company system, the Trustee, independently of such bank holding company, shall meet the capital requirements of TIA (S) 310(a)(2). The Trustee shall comply with TIA (S) 310(b); provided, however, that there shall -------- ------- be excluded from the operation of TIA (S) 310(b)(1) any indenture or indentures under which other securities, or certificates of interest or participation in other securities, of the Company are -86- outstanding, if the requirements for such exclusion set forth in TIA (S) 310(b)(1) are met. The provisions of TIA (S) 310 shall apply to the Company, as obligor of the Notes. SECTION 7.11. Preferential Collection of Claims Against Company. -------------------------- The Trustee shall comply with TIA (S) 311(a), excluding any creditor relationship listed in TIA (S) 311(b). A Trustee who has resigned or been removed shall be subject to TIA (S) 311(a) to the extent indicated therein. The provisions of TIA (S) 311 shall apply to the Company, as obligor on the Notes. ARTICLE EIGHT DISCHARGE OF INDENTURE; DEFEASANCE SECTION 8.01. Termination of the Company's Obligations. --------------------- The Company may terminate its obligations under the Notes and this Indenture, except those obligations referred to in the penultimate paragraph of this Section 8.01, if all Notes previously authenticated and delivered (other than destroyed, lost or stolen Notes which have been replaced or paid or Notes for whose payment U.S. Legal Tender has theretofore been deposited with the Trustee or the Paying Agent in trust or segregated and held in trust by the Company and thereafter repaid to the Company, as provided in Section 8.05) have been delivered to the Trustee for cancellation and the Company has paid all sums payable by it hereunder, or if: (a) either (i) pursuant to Article Three, the Company shall have given notice to the Trustee and mailed a notice of redemption to each Holder of the redemption of all of the Notes under arrangements satisfactory to the Trustee for the giving of such notice or (ii) all Notes have otherwise become due and payable hereunder; (b) the Company shall have irrevocably deposited or caused to be deposited with the Trustee or a trustee satisfactory to the Trustee, under the terms of an irrevocable trust agreement in form and substance satisfactory to the Trustee, as trust funds in trust solely for the benefit of the Holders for that purpose, U.S. Legal Tender -87- in such amount as is sufficient without consideration of reinvestment of such interest, to pay principal of, premium, if any, and interest on the outstanding Notes to maturity or redemption; provided that the Trustee shall have been irrevocably -------- instructed to apply such U.S. Legal Tender to the payment of said principal, premium, if any, and interest with respect to the Notes and, provided, further, that from and after the time of deposit, -------- ------- the money deposited shall not be subject to the rights of holders of Senior Debt pursuant to the provisions of Article Ten; (c) no Default or Event of Default with respect to this Indenture or the Notes shall have occurred and be continuing on the date of such deposit or shall occur as a result of such deposit and such deposit will not result in a breach or violation of, or constitute a default under, any other instrument to which the Company is a party or by which it is bound; (d) the Company shall have paid all other sums payable by it hereunder; and (e) the Company shall have delivered to the Trustee an Officers' Certificate and an Opinion of Counsel, each stating that all conditions precedent providing for the termination of the Company's obligations under the Notes and this Indenture have been complied with. Such Opinion of Counsel shall also state that such satisfaction and discharge does not result in a default under the Bank Credit Agreement (if then in effect) or any other agreement or instrument then known to such counsel that binds or affects the Company. Notwithstanding the foregoing paragraph, the Company's obligations in Sections 2.05, 2.06, 2.07, 2.08, 4.01, 4.02, 7.07, 8.05 and 8.06 shall survive until the Notes are no longer outstanding pursuant to the last paragraph of Section 2.08. After the Notes are no longer outstanding, the Company's obligations in Sections 7.07, 8.05 and 8.06 shall survive. After such delivery or irrevocable deposit, the Trustee upon request shall acknowledge in writing the discharge of the Company's obligations under the Notes and this Indenture except for those surviving obligations specified above. -88- SECTION 8.02. Legal Defeasance and Covenant Defeasance. ------------------- (a) The Company may, at its option by Board Resolution of the Board of Directors of the Company, at any time, elect to have either paragraph (b) or (c) below be applied to all outstanding Notes upon compliance with the conditions set forth in Section 8.03. (b) Upon the Company's exercise under paragraph (a) hereof of the option applicable to this paragraph (b), the Company shall, subject to the satisfaction of the conditions set forth in Section 8.03, be deemed to have been discharged from its obligations with respect to all outstanding Notes on the date the conditions set forth below are satisfied (hereinafter, "Legal Defeasance"). For this purpose, Legal Defeasance means that the Company shall be deemed to have paid and discharged the entire Indebtedness represented by the outstanding Notes, which shall thereafter be deemed to be "outstanding" only for the purposes of Section 8.04 hereof and the other Sections of this Indenture referred to in (i) and (ii) below, and to have satisfied all its other obligations under such Notes and this Indenture (and the Trustee, on demand of and at the expense of the Company, shall execute proper instruments acknowledging the same), and Holders of the Notes and any amounts deposited under Section 8.03 hereof shall cease to be subject to any obligations to, or the rights of, any holder of Senior Debt under Article Ten or otherwise, except for the following provisions, which shall survive until otherwise terminated or discharged hereunder: (i) the rights of Holders of outstanding Notes to receive solely from the trust fund described in Section 8.04 hereof, and as more fully set forth in such Section, payments in respect of the principal of and interest on such Notes when such payments are due, (ii) the Company's obligations with respect to such Notes under Article Two and Section 4.02 hereof, (iii) the rights, powers, trusts, duties and immunities of the Trustee hereunder and the Company's obligations in connection therewith and (iv) this Article Eight. Subject to compliance with this Article Eight, the Company may exercise its option under this paragraph (b) notwithstanding the prior exercise of its option under paragraph (c) hereof. (c) Upon the Company's exercise under paragraph (a) hereof of the option applicable to this paragraph (c), the Company shall, subject to the satisfaction of the conditions set forth in Section 8.03 hereof, be released from its obligations under the covenants contained in Sections 4.10 through 4.20 and -89- Article Five hereof with respect to the outstanding Notes on and after the date the conditions set forth below are satisfied (hereinafter, "Covenant Defeasance"), and the Notes shall thereafter be deemed not "outstanding" for the purposes of any direction, waiver, consent or declaration or act of Holders (and the consequences of any thereof) in connection with such covenants, but shall continue to be deemed "outstanding" for all other purposes hereunder (it being understood that such Notes shall not be deemed outstanding for accounting purposes) and Holders of the Notes and any amounts deposited under Section 8.03 hereof shall cease to be subject to any obligations to, or the rights of, any holder of Senior Debt under Article Ten or otherwise. For this purpose, such Covenant Defeasance means that, with respect to the outstanding Notes, the Company may omit to comply with and shall have no liability in respect of any term, condition or limitation set forth in any such covenant, whether directly or indirectly, by reason of any reference elsewhere herein to any such covenant or by reason of any reference in any such covenant to any other provision herein or in any other document and such omission to comply shall not constitute a Default or an Event or Default under Section 6.01(3) hereof, but, except as specified above, the remainder of this Indenture and such Notes shall be unaffected thereby. In addition, upon the Company's exercise under paragraph (a) hereof of the option applicable to this paragraph (c), subject to the satisfaction of the conditions set forth in Section 8.03 hereof, Sections 6.01(3), 6.01(4) and 6.01(5) shall not constitute Events of Default. SECTION 8.03. Conditions to Legal Defeasance or Covenant Defeasance. ------------------------------ The following shall be the conditions to the application of either Section 8.02(b) or 8.02(c) hereof to the outstanding Notes: In order to exercise either Legal Defeasance or Covenant Defeasance: (a) the Company must irrevocably deposit with the Trustee, in trust, for the benefit of the Holders, U.S. Legal Tender or U.S. Government Obligations, or a combination thereof, in such amounts as will be sufficient, in the opinion of a nationally recognized firm of independent public accountants, to pay the principal of and interest on the Notes on the stated date for payment thereof or on the applicable redemption date, as the case may be, of -90- such principal or installment of principal of or interest on the Notes; provided that the Trustee shall -------- have received an irrevocable written order from the Company instructing the Trustee to apply such U.S. Legal Tender or the proceeds of such U.S. Government Obligations to said payments with respect to the Notes; (b) in the case of an election under Section 8.02(b) hereof, the Company shall have delivered to the Trustee an Opinion of Counsel in the United States reasonably acceptable to the Trustee confirming that (A) the Company has received from, or there has been published by, the Internal Revenue Service a ruling or (B) since the date of this Indenture, there has been a change in the applicable federal income tax law, in either case to the effect that, and based thereon such Opinion of Counsel shall confirm that, the Holders of the Notes will not recognize income, gain or loss for federal income tax purposes as a result of such Legal Defeasance and will be subject to federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such Legal Defeasance had not occurred; (c) in the case of an election under Section 8.02(c) hereof, the Company shall have delivered to the Trustee an Opinion of Counsel in the United States reasonably acceptable to the Trustee confirming that the Holders of the Notes will not recognize income, gain or loss for federal income tax purposes as a result of such Covenant Defeasance and will be subject to federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such Covenant Defeasance had not occurred; (d) no Default or Event of Default or event which with notice or lapse of time or both would become a Default or an Event of Default with respect to the Notes shall have occurred and be continuing on the date of such deposit (other than a Default or Event of Default resulting from the incurrence of Indebtedness all or a portion of the proceeds of which will be used to defease the Notes pursuant to this Article Eight concurrently with such incurrence) or insofar as Sections 6.01(6) and 6.01(7) hereof are concerned, at any time in the period ending on the 91st day after the date of such deposit; -91- (e) such Legal Defeasance or Covenant Defeasance shall not result in a breach or violation of or constitute a default under this Indenture or any other material agreement or instrument to which the Company or any of its Subsidiaries is a party or by which the Company or any of its Subsidiaries is bound; (f) the Company shall have delivered to the Trustee an Officers' Certificate stating that the deposit was not made by the Company with the intent of preferring the Holders over any other creditors of the Company or with the intent of defeating, hindering, delaying or defrauding any other creditors of the Company; (g) the Company shall have delivered to the Trustee an Officers' Certificate and an Opinion of Counsel, each stating that all conditions precedent provided for or relating to the Legal Defeasance or the Covenant Defeasance have been complied with; and (h) the Company shall have delivered to the Trustee an Opinion of Counsel to the effect that (i) the trust funds will not be subject to any rights of any holders of Indebtedness of the Company other than the Notes, and (ii) assuming no intervening bankruptcy or insolvency of the Company between the date of deposit and the 91st day following the deposit and that no Holder is an insider of the Company, after the 91st day following the deposit, the trust funds will not be subject to the effect of any applicable Bankruptcy Law. SECTION 8.04. Application of Trust Money. -------------------------- The Trustee or Paying Agent shall hold in trust U.S. Legal Tender or U.S. Government Obligations deposited with it pursuant to Article Eight, and shall apply the deposited U.S. Legal Tender and the money from U.S. Government Obligations in accordance with this Indenture to the payment of principal of and interest on the Notes. The Trustee shall be under no obligation to invest said U.S. Legal Tender or U.S. Government Obligations except as it may agree with the Company. The Company shall pay and indemnify the Trustee against any tax, fee or other charge imposed on or assessed against the U.S. Legal Tender or U.S. Government Obligations deposited pursuant to Section 8.03 hereof or the principal and interest received in respect thereof other than any such tax, -92- fee or other charge which by law is for the account of the Holders of the outstanding Notes. Anything in this Article Eight to the contrary notwithstanding, the Trustee shall deliver or pay to the Company from time to time upon the Company's request any U.S. Legal Tender or U. S. Government Obligations held by it as provided in Section 8.03 hereof which, in the opinion of a nationally recognized firm of independent public accountants expressed in a written certification thereof delivered to the Trustee, are in excess of the amount thereof that would then be required to be deposited to effect an equivalent Legal Defeasance or Covenant Defeasance. SECTION 8.05. Repayment to the Company. ------------------------ Subject to Article Eight, the Trustee and the Paying Agent shall promptly pay to the Company upon request any excess U.S. Legal Tender or U.S. Government Obligations held by them at any time and thereupon shall be relieved from all liability with respect to such money. The Trustee and the Paying Agent shall pay to the Company upon request any money held by them for the payment of principal or interest that remains unclaimed for two years; provided that the Trustee or such Paying Agent, -------- before being required to make any payment, may at the expense of the Company cause to be published once in a newspaper of general circulation in the City of New York or mail to each Holder entitled to such money notice that such money remains unclaimed and that after a date specified therein which shall be at least 30 days from the date of such publication or mailing any unclaimed balance of such money then remaining will be repaid to the Company. After payment to the Company, Noteholders entitled to such money must look to the Company for payment as general creditors unless an applicable law designates another Person. SECTION 8.06. Reinstatement. ------------- If the Trustee or Paying Agent is unable to apply any U.S. Legal Tender or U.S. Government Obligations in accordance with Article Eight by reason of any legal proceeding or by reason of any order or judgment of any court or governmental authority enjoining, restraining or otherwise prohibiting such application, the Company's obligations under this Indenture and the Notes shall be revived and reinstated as though no deposit had occurred pursuant to Article Eight until such time as the Trustee or Paying Agent is permitted to apply all such U.S. -93- Legal Tender or U.S. Government Obligations in accordance with Article Eight; provided that if the Company has made any -------- payment of interest on or principal of any Notes because of the reinstatement of its obligations, the Company shall be subrogated to the rights of the Holders of such Notes to receive such payment from the U.S. Legal Tender or U.S. Government Obligations held by the Trustee or Paying Agent. ARTICLE NINE AMENDMENTS, SUPPLEMENTS AND WAIVERS SECTION 9.01. Without Consent of Holders. -------------------------- The Company, when authorized by a Board Resolution, and the Trustee, together, may amend or supplement this Indenture or the Notes without notice to or consent of any Noteholder: (1) to cure any ambiguity, defect or inconsistency; provided that such amendment or supplement does not, in -------- the opinion of the Trustee, adversely affect the rights of any Holder in any material respect; (2) to comply with Article Five; (3) to provide for uncertificated Notes in addition to or in place of certificated Notes; (4) to comply with any requirements of the SEC in order to effect or maintain the qualification of this Indenture under the TIA; (5) to make any change that would provide any additional benefit or rights to the Noteholders or that does not adversely affect the rights of any Noteholder; (6) to provide for issuance of the Exchange Notes, which will have terms substantially identical in all material respects to the Initial Notes (except that the transfer restrictions contained in the Initial Notes will be modified or eliminated, as appropriate), and which will be treated together with any outstanding Initial Notes, as a single issue of securities; or -94- (7) to make any other change that does not, in the opinion of the Trustee, adversely affect in any material respect the rights of any Noteholders hereunder; provided that the Company has delivered to the Trustee an - -------- Opinion of Counsel stating that such amendment or supplement complies with the provisions of this Section 9.01. SECTION 9.02. With Consent of Holders. ----------------------- Subject to Section 6.07, the Company, when authorized by a Board Resolution, and the Trustee, together, with the written consent of the Holder or Holders of at least a majority in aggregate principal amount of the outstanding Notes, may amend or supplement this Indenture or the Notes, without notice to any other Noteholders. Subject to Section 6.07, the Holder or Holders of a majority in aggregate principal amount of the outstanding Notes may waive compliance by the Company with any provision of this Indenture or the Notes without notice to any other Noteholder. No amendment, supplement or waiver, including a waiver pursuant to Section 6.04, shall, without the consent of each Holder of each Note affected thereby: (1) reduce the amount of Notes whose Holders must consent to an amendment; (2) reduce the rate of or change or have the effect of changing the time for payment of interest, including defaulted interest, on any Notes; (3) reduce the principal of or change or have the effect of changing the fixed maturity of any Notes, or change the date on which any Notes may be subject to redemption or repurchase, or reduce the redemption or repurchase price therefor; (4) make any Notes payable in money other than that stated in the Notes; (5) make any change in provisions of this Indenture protecting the right of each Holder to receive payment of principal of and interest on such Note on or after the due date thereof or to bring suit to enforce such payment, permitting holders of a majority in principal amount of Notes to waive Defaults or Events of Default, other than ones with respect to the payment of principal of or -95- interest on the Notes, or relating to certain amendments of this Indenture; (6) amend, modify or change in any material respect the obligation of the Company to make or consummate a Change of Control Offer in the event of a Change of Control or make and consummate a Net Proceeds Offer in respect of any Asset Sale that has been consummated or modify any of the provisions or definitions with respect thereto after a Change of Control has occurred or the subject Asset Sale has been consummated; or (7) modify Article Ten or the definitions used in Article Ten to adversely affect the Holders of the Notes in any material respect. It shall not be necessary for the consent of the Holders under this Section to approve the particular form of any proposed amendment, supplement or waiver, but it shall be sufficient if such consent approves the substance thereof. After an amendment, supplement or waiver under this Section 9.02 becomes effective, the Company shall mail to the Holders affected thereby a notice briefly describing the amendment, supplement or waiver. Any failure of the Company to mail such notice, or any defect therein, shall not, however, in any way impair or affect the validity of any such supplemental indenture. SECTION 9.03. Effect on Senior Debt. --------------------- No amendment of this Indenture shall adversely affect the rights of any holder of Senior Debt under Article Ten of this Indenture, without the consent of such holder. SECTION 9.04. Compliance with TIA. ------------------- Every amendment, waiver or supplement of this Indenture or the Notes shall comply with the TIA as then in effect. SECTION 9.05. Revocation and Effect of Consents. --------------------------------- Until an amendment, waiver or supplement becomes effective, a consent to it by a Holder is a continuing consent by the Holder and every subsequent Holder of a Note or portion of a Note that evidences the same debt as the consenting Holder's Note, even if notation of the consent is not made on any -96- Note. Subject to the following paragraph, any such Holder or subsequent Holder may revoke the consent as to such Holder's Note or portion of such Note by notice to the Trustee or the Company received before the date on which the Trustee receives an Officers' Certificate certifying that the Holders of the requisite principal amount of Notes have consented (and not theretofore revoked such consent) to the amendment, supplement or waiver. The Company may, but shall not be obligated to, fix a record date for the purpose of determining the Holders entitled to consent to any amendment, supplement or waiver, which record date shall be at least 30 days prior to the first solicitation of such consent. If a record date is fixed, then notwithstanding the last sentence of the immediately preceding paragraph, those Persons who were Holders at such record date (or their duly designated proxies), and only those Persons, shall be entitled to revoke any consent previously given, whether or not such Persons continue to be Holders after such record date. No such consent shall be valid or effective for more than 90 days after such record date. After an amendment, supplement or waiver becomes effective, it shall bind every Noteholder, unless it makes a change described in any of clauses (1) through (7) of Section 9.02, in which case, the amendment, supplement or waiver shall bind only each Holder of a Note who has consented to it and every subsequent Holder of a Note or portion of a Note that evidences the same debt as the consenting Holder's Note; provided that any such waiver shall not impair or affect the - -------- right of any Holder to receive payment of principal of and interest on a Note, on or after the respective due dates expressed in such Note, or to bring suit for the enforcement of any such payment on or after such respective dates without the consent of such Holder. SECTION 9.06. Notation on or Exchange of Notes. -------------------------------- If an amendment, supplement or waiver changes the terms of a Note, the Trustee may require the Holder of the Note to deliver it to the Trustee. The Trustee may place an appropriate notation on the Note about the changed terms and return it to the Holder. Alternatively, if the Company or the Trustee so determines, the Company in exchange for the Note shall issue and the Trustee shall authenticate a new Note that reflects the changed terms. Any such notation or exchange shall be made at the sole cost and expense of the Company. -97- SECTION 9.07. Trustee To Sign Amendments, Etc. ------------------------------- The Trustee shall execute any amendment, supplement or waiver authorized pursuant to this Article Nine; provided -------- that the Trustee may, but shall not be obligated to, execute any such amendment, supplement or waiver which affects the Trustee's own rights, duties or immunities under this Indenture. The Trustee shall be entitled to receive, and shall be fully protected in relying upon, an Opinion of Counsel and an Officers' Certificate each stating that the execution of any amendment, supplement or waiver authorized pursuant to this Article Nine is authorized or permitted by this Indenture. Such Opinion of Counsel shall not be an expense of the Trustee. ARTICLE TEN SUBORDINATION SECTION 10.01. Notes Subordinated to Senior Debt. --------------------------------- The Company covenants and agrees, and the Trustee and each Holder of the Notes, by its acceptance thereof, likewise covenants and agrees, that all Notes shall be issued subject to the provisions of this Article Ten; and the Trustee and each Person holding any Note, whether upon original issue or upon transfer, assignment or exchange thereof, accepts and agrees that the payment of all Obligations on the Notes by the Company shall, to the extent and in the manner herein set forth, be subordinated and junior in right of payment to the prior payment in full in cash or Cash Equivalents of all Obligations on the Senior Debt; that the subordination is for the benefit of, and shall be enforceable directly by, the holders of Senior Debt, and that each holder of Senior Debt whether now outstanding or hereafter created, incurred, assumed or guaranteed shall be deemed to have acquired Senior Debt in reliance upon the covenants and provisions contained in this Indenture and the Notes. SECTION 10.02. No Payment on Notes in Certain Circumstances. ---------------------- (a) If any default occurs and is continuing in the payment when due, whether at maturity, upon redemption, by declaration or otherwise, of any principal of, interest on, unpaid drawings for letters of credit issued in respect of, or -98- regularly accruing fees with respect to, any Senior Debt, no payment of any kind or character shall be made by, or on behalf of, the Company or any other Person on its or their behalf with respect to any Obligations on the Notes, or to acquire any of the Notes for cash or property or otherwise. In addition, if any other event of default occurs and is continuing with respect to any Designated Senior Debt, as such event of default is defined in the instrument creating or evidencing such Designated Senior Debt, permitting the holders of such Designated Senior Debt then outstanding to accelerate the maturity thereof and if the Representative for the respective issue of Designated Senior Debt gives notice of the event of default to the Trustee (a "Default Notice"), then, unless and until all events of default have been cured or waived or have ceased to exist or the Trustee receives notice thereof from the Representative for the respective issue of Designated Senior Debt terminating the Blockage Period (as defined below), during the 180 days after the delivery of such Default Notice (the "Blockage Period"), neither the Company nor any other Person on its behalf shall (x) make any payment of any kind or character with respect to any Obligations on the Notes or (y) acquire any of the Notes for cash or property or otherwise. Notwithstanding anything herein to the contrary, in no event will a Blockage Period extend beyond 180 days from the date the payment on the Notes was due and only one such Blockage Period may be commenced within any 360 consecutive days. No event of default which existed or was continuing on the date of the commencement of any Blockage Period with respect to the Designated Senior Debt shall be, or be made, the basis for the commencement of a second Blockage Period by the Representative of such Designated Senior Debt whether or not within a period of 360 consecutive days, unless such event of default shall have been cured or waived for a period of not less than 90 consecutive days (it being acknowledged that any subsequent action, or any breach of any financial covenants for a period commencing after the date of commencement of such Blockage Period that, in either case, would give rise to an event of default pursuant to any provisions under which an event of default previously existed or was continuing shall constitute a new event of default for this purpose). (b) In the event that, notwithstanding the foregoing, any payment shall be received by the Trustee or any Holder when such payment is prohibited by Section 10.02(a), such payment shall be held in trust for the benefit of, and shall be paid over or delivered to, the holders of Senior Debt (pro rata to such holders on the basis of the respective amount -99- of Senior Debt held by such holders) or their respective Representatives, as their respective interests may appear. The Trustee shall be entitled to rely on information regarding amounts then due and owing on the Senior Debt, if any, received from the holders of Senior Debt (or their Representatives) or, if such information is not received from such holders or their Representatives, from the Company and only amounts included in the information provided to the Trustee shall be paid to the holders of Senior Debt. Nothing contained in this Article Ten shall limit the right of the Trustee or the Holders of Notes to take any action to accelerate the maturity of the Notes pursuant to Section 6.02 or to pursue any rights or remedies hereunder; provided that all Senior Debt thereafter due or declared to be - -------- due shall first be paid in full in cash or Cash Equivalents before the Holders are entitled to receive any payment of any kind or character with respect to Obligations on the Notes. SECTION 10.03. Payment Over of Proceeds upon Dissolution, Etc. ------------------------ (a) Upon any payment or distribution of assets of the Company of any kind or character, whether in cash, property or securities, to creditors upon any total or partial liquidation, dissolution, winding-up, reorganization, assignment for the benefit of creditors or marshaling of assets of the Company or in a bankruptcy, reorganization, insolvency, receivership or other similar proceeding relating to the Company or its property, whether voluntary or involuntary, all Obligations due or to become due upon all Senior Debt shall first be paid in full in cash or Cash Equivalents, or such payment duly provided for to the satisfaction of the holders of Senior Debt, before any payment or distribution of any kind or character is made on account of any Obligations on the Notes, or for the acquisition of any of the Notes for cash or property or otherwise. Upon any such dissolution, winding-up, liquidation, reorganization, receivership or similar proceeding, any payment or distribution of assets of the Company of any kind or character, whether in cash, property or securities, to which the Holders of the Notes or the Trustee under this Indenture would be entitled, except for the provisions hereof, shall be paid by the Company or by any receiver, trustee in bankruptcy, liquidating trustee, agent or other Person making such payment or distribution, or by the Holders or by the Trustee under this Indenture if received by them, directly to the holders of Senior Debt (pro rata to such holders on the basis of the respective amounts of Senior Debt -100- held by such holders) or their respective Representatives, or to the trustee or trustees under any indenture pursuant to which any of such Senior Debt may have been issued, as their respective interests may appear, for application to the payment of Senior Debt remaining unpaid until all such Senior Debt has been paid in full in cash or Cash Equivalents after giving effect to any concurrent payment, distribution or provision therefor to or for the holders of Senior Debt. (b) To the extent any payment of Senior Debt (whether by or on behalf of the Company, as proceeds of security or enforcement of any right of setoff or otherwise) is declared to be fraudulent or preferential, set aside or required to be paid to any receiver, trustee in bankruptcy, liquidating trustee, agent or other similar Person under any bankruptcy, insolvency, receivership, fraudulent conveyance or similar law, then, if such payment is recovered by, or paid over to, such receiver, trustee in bankruptcy, liquidating trustee, agent or other similar Person, the Senior Debt or part thereof originally intended to be satisfied shall be deemed to be reinstated and outstanding as if such payment had not occurred. (c) In the event that, notwithstanding the foregoing, any payment or distribution of assets of the Company of any kind or character, whether in cash, property or securities, shall be received by any Holder when such payment or distribution is prohibited by Section 10.03(a), such payment or distribution shall be held in trust for the benefit of, and shall be paid over or delivered to, the holders of Senior Debt (pro rata to such holders on the basis of the respective amount of Senior Debt held by such holders) or their respective Representatives, or to the trustee or trustees under any indenture pursuant to which any of such Senior Debt may have been issued, as their respective interests may appear, for application to the payment of Senior Debt remaining unpaid until all such Senior Debt has been paid in full in cash or Cash Equivalents, after giving effect to any concurrent payment, distribution or provision therefor to or for the holders of such Senior Debt. (d) The consolidation of the Company with, or the merger of the Company with or into, another corporation or the liquidation or dissolution of the Company following the conveyance or transfer of all or substantially all of its assets, to another corporation upon the terms and conditions provided in Article Five hereof and as long as permitted under the terms of the Senior Debt shall not be deemed a dissolution, winding-up, -101- liquidation or reorganization for the purposes of this Section if such other corporation shall, as a part of such consolidation, merger, conveyance or transfer, assume the Company's obligations hereunder in accordance with Article Five hereof. SECTION 10.04. Payments May Be Paid Prior to Dissolution. -------------------------- Nothing contained in this Article Ten or elsewhere in this Indenture shall prevent (i) the Company, except under the conditions described in Sections 10.02 and 10.03, from making payments at any time for the purpose of making payments of principal of and interest on the Notes, or from depositing with the Trustee any moneys for such payments, or (ii) in the absence of actual knowledge by the Trustee that a given payment would be prohibited by Section 10.02 or 10.03, the application by the Trustee of any moneys deposited with it for the purpose of making such payments of principal of, and interest on, the Notes to the Holders entitled thereto unless at least two Business Days prior to the date upon which such payment would otherwise become due and payable a Trust Officer shall have actually received the written notice provided for in the second sentence of Section 10.02(a) or in Section 10.07 (provided -------- that, notwithstanding the foregoing, such application shall otherwise be subject to the provisions of the first sentence of Section 10.02(a) and Section 10.03). The Company shall give prompt written notice to the Trustee of any dissolution, winding-up, liquidation or reorganization of the Company. SECTION 10.05. Subrogation. ----------- Subject to the payment in full in cash or Cash Equivalents of all Senior Debt, the Holders of the Notes shall be subrogated to the rights of the holders of Senior Debt to receive payments or distributions of cash, property or securities of the Company applicable to the Senior Debt until the Notes shall be paid in full; and, for the purposes of such subrogation, no such payments or distributions to the holders of the Senior Debt by or on behalf of the Company or by or on behalf of the Holders by virtue of this Article Ten which otherwise would have been made to the Holders shall, as between the Company and the Holders of the Notes, be deemed to be a payment by the Company to or on account of the Senior Debt, it being understood that the provisions of this Article Ten are and are intended solely for the purpose of defining the relative rights of the Holders of the Notes, on the one hand, and the holders of the Senior Debt, on the other hand. -102- SECTION 10.06. Obligations of the Company Unconditional. -------------------------- Nothing contained in this Article Ten or elsewhere in this Indenture or in the Notes is intended to or shall impair, as among the Company, its creditors other than the holders of Senior Debt, and the Holders, the obligation of the Company, which is absolute and unconditional, to pay to the Holders the principal of and any interest on the Notes as and when the same shall become due and payable in accordance with their terms, or is intended to or shall affect the relative rights of the Holders and creditors of the Company other than the holders of the Senior Debt, nor shall anything herein or therein prevent the Holder of any Note or the Trustee on its behalf from exercising all remedies otherwise permitted by applicable law upon default under this Indenture, subject to the rights, if any, in respect of cash, property or securities of the Company received upon the exercise of any such remedy. SECTION 10.07. Notice to Trustee. ----------------- The Company shall give prompt written notice to the Trustee of any fact known to the Company which would prohibit the making of any payment to or by the Trustee in respect of the Notes pursuant to the provisions of this Article Ten. Regardless of anything to the contrary contained in this Article Ten or elsewhere in this Indenture, the Trustee shall not be charged with knowledge of the existence of any default or event of default with respect to any Senior Debt or of any other facts which would prohibit the making of any payment to or by the Trustee unless and until the Trustee shall have received notice in writing from the Company, or from a holder of Senior Debt or a Representative therefor, together with proof satisfactory to the Trustee of such holding of Senior Debt or of the authority of such Representative, and, prior to the receipt of any such written notice, the Trustee shall be entitled to assume (in the absence of actual knowledge to the contrary) that no such facts exist. In the event that the Trustee determines in good faith that any evidence is required with respect to the right of any Person as a holder of Senior Debt to participate in any payment or distribution pursuant to this Article Ten, the Trustee may request such Person to furnish evidence to the reasonable satisfaction of the Trustee as to the amounts of Senior Debt held by such Person, the extent to which such Person is entitled to participate in such payment or distribu- tion and any -103- other facts pertinent to the rights of such Person under this Article Ten, and if such evidence is not furnished the Trustee may defer any payment to such Person pending judicial determination as to the right of such Person to receive such payment. SECTION 10.08. Reliance on Judicial Order or Certificate of Liquidating Agent. -------------------------------- Upon any payment or distribution of assets of the Company referred to in this Article Ten, the Trustee, subject to the provisions of Article Seven hereof, 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 any insolvency, bankruptcy, receivership, dissolution, winding-up, liquidation, reorganization or similar case or proceeding is pending, or upon a certificate of the receiver, trustee in bankruptcy, liquidating trustee, receiver, assignee for the benefit of creditors, agent or other person making such payment or distribution, delivered to the Trustee or the Holders of the Notes, for the purpose of ascertaining the persons entitled to participate in such payment or distribution, the holders of the Senior Debt and other Indebtedness of the Company, the amount thereof or payable thereon, the amount or amounts paid or distributed thereon and all other facts pertinent thereto or to this Article Ten. SECTION 10.09. Trustee's Relation to Senior Debt. --------------------------------- The Trustee and any agent of the Company or the Trustee shall be entitled to all the rights set forth in this Article Ten with respect to any Senior Debt which may at any time be held by it in its individual or any other capacity to the same extent as any other holder of Senior Debt and nothing in this Indenture shall deprive the Trustee or any such agent of any of its rights as such holder. With respect to the holders of Senior Debt, the Trustee undertakes to perform or to observe only such of its covenants and obligations as are specifically set forth in this Article Ten, and no implied covenants or obligations with respect to the holders of Senior Debt 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 Debt. Whenever a distribution is to be made or a notice given to holders or owners of Senior Debt, the distribution may -104- be made and the notice may be given to their Representative, if any. SECTION 10.10. Subordination Rights Not Impaired by Acts or Omissions of the Company or Holders of Senior Debt. ----------------------------------- No right of any present or future holders of any Senior Debt to enforce subordination as provided herein 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 of this Indenture, regardless of any knowledge thereof which any such holder may have or otherwise be charged with. Without in any way limiting the generality of the foregoing paragraph, the holders of Senior Debt may, at any time and from time to time, without the consent of or notice to the Trustee, without incurring responsibility to the Trustee or the Holders of the Notes and without impairing or releasing the subordination provided in this Article Ten or the obligations hereunder of the Holders of the Notes to the holders of the Senior Debt, do any one or more of the following: (i) change the manner, place or terms of payment or extend the time of payment of, or renew or alter, Senior Debt, or otherwise amend or supplement in any manner Senior Debt, or any instrument evidencing the same or any agreement under which Senior Debt is outstanding; (ii) sell, exchange, release or otherwise deal with any property pledged, mortgaged or otherwise securing Senior Debt; (iii) release any Person liable in any manner for the payment or collection of Senior Debt; and (iv) exercise or refrain from exercising any rights against the Company and any other Person. SECTION 10.11. Noteholders Authorize Trustee To Effectuate Subordination of Notes. --------------------------------- Each Holder of Notes by its acceptance of them authorizes and expressly directs the Trustee on its behalf to take such action as may be necessary or appropriate to effectuate, as between the holders of Senior Debt and the Holders of Notes, the subordination provided in this Article Ten, and appoints the Trustee its attorney-in-fact for such purposes, including, in the event of any dissolution, winding-up, liquidation or reorganization of the Company (whether in bankruptcy, insolvency, receivership, reorganization or similar proceedings or -105- upon an assignment for the benefit of creditors or otherwise) tending towards liquidation of the business and assets of the Company, the filing of a claim for the unpaid balance of its Notes and accrued interest in the form required in those proceedings. If the Trustee does not file a proper claim or proof of debt in the form required in such proceeding prior to 30 days before the expiration of the time to file such claim or claims, then the holders of the Senior Debt or their Representative are or is hereby authorized to have the right to file and are or is hereby authorized to file an appropriate claim for and on behalf of the Holders of said Notes. Nothing herein contained shall be deemed to authorize the Trustee or the holders of Senior Debt or their Representative to authorize or consent to or accept or adopt on behalf of any Holder any plan of reorganization, arrangement, adjustment or composition affecting the Notes or the rights of any Holder thereof, or to authorize the Trustee or the holders of Senior Debt or their Representative to vote in respect of the claim of any Holder in any such proceeding. SECTION 10.12. This Article Ten Not To Prevent Events of Default. ------------------------- The failure to make a payment on account of principal of or interest on the Notes by reason of any provision of this Article Ten will not be construed as preventing the occurrence of an Event of Default. SECTION 10.13. Trustee's Compensation Not Prejudiced. ---------------------- Nothing in this Article Ten will apply to amounts due to the Trustee pursuant to other sections in this Indenture. ARTICLE ELEVEN MISCELLANEOUS SECTION 11.01. TIA Controls. ------------ If any provision of this Indenture limits, qualifies, or conflicts with another provision which is required to be -106- included in this Indenture by the TIA, the required provision shall control. SECTION 11.02. Notices. ------- Any notices or other communications required or permitted hereunder shall be in writing, and shall be sufficiently given if made by hand delivery, by telex, by telecopier or registered or certified mail, postage prepaid, return receipt requested, addressed as follows: if to the Company: Dade International Inc. 1717 Deerfield Road Deerfield, IL 60015-0778 Facsimile No.: (847) 267-5396 Attn: Chief Financial Officer if to the Trustee: IBJ Schroder Bank & Trust Company One State Street New York, NY 10004 Facsimile No.: (212) 858-2952 Attention: Corporate Trust Department Each of the Company and the Trustee by written notice to each other such Person may designate additional or different addresses for notices to such Person. Any notice or communication to the Company or the Trustee shall be deemed to have been given or made as of the date so delivered if personally delivered; when answered back, if telexed; when receipt is acknowledged, if faxed; and five (5) calendar days after mailing if sent by registered or certified mail, postage prepaid (except that a notice of change of address shall not be deemed to have been given until actually received by the addressee). Any notice or communication mailed to a Noteholder shall be mailed to him by first class mail or other equivalent means at his address as it appears on the registration books of the Registrar 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 -107- communication is mailed in the manner provided above, it is duly given, whether or not the addressee receives it. SECTION 11.03. Communications by Holders with Other Holders. ------------------------- Noteholders may communicate pursuant to TIA { 312(b) with other Noteholders with respect to their rights under this Indenture or the Notes. The Company, the Trustee, the Registrar and any other Person shall have the protection of TIA { 312(c). SECTION 11.04. Certificate and Opinion as to Conditions Precedent. -------------------------- Upon any request or application by the Company to the Trustee to take any action under this Indenture, the Company shall furnish to the Trustee: (1) an Officers' Certificate, in form and substance satisfactory to the Trustee, stating that, in the opinion of the signers, all conditions precedent to be performed by the Company, if any, provided for in this Indenture relating to the proposed action have been complied with; and (2) an Opinion of Counsel stating that, in the opinion of such counsel, all such conditions precedent to be performed by the Company, if any, provided for in this Indenture relating to the proposed action have been complied with. SECTION 11.05. Statements Required in Certificate or Opinion. ---------------------- Each certificate or opinion with respect to compliance with a condition or covenant provided for in this Indenture, other than the Officers' Certificate required by Section 4.06, shall include: (1) a statement that the Person making such certificate or opinion has read such covenant or condition and the definitions relating thereto; (2) a brief statement as to the nature and scope of the examination or investigation upon which the statements -108- or opinions contained in such certificate or opinion are based; (3) a statement that, in the opinion of such Person, he has made such examination or investigation as is reasonably necessary to enable him to express an informed opinion as to whether or not such covenant or condition has been complied with; and (4) a statement as to whether or not, in the opinion of each such Person, such condition or covenant has been complied with. SECTION 11.06. Rules by Trustee, Paying Agent, Registrar. ------------------------ The Trustee may make reasonable rules in accordance with the Trustee's customary practices for action by or at a meeting of Noteholders. The Paying Agent or Registrar may make reasonable rules for its functions. SECTION 11.07. Legal Holidays. -------------- A "Legal Holiday" used with respect to a particular place of payment is a Saturday, a Sunday or a day on which banking institutions in New York, New York or at such place of payment are not required to be open. If a payment date is a Legal Holiday at such place, payment may be made at such place on the next succeeding day that is not a Legal Holiday, and no interest shall accrue for the intervening period. SECTION 11.08. Governing Law. ------------- THIS INDENTURE AND THE NOTES SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, AS APPLIED TO CONTRACTS MADE AND PERFORMED WITHIN THE STATE OF NEW YORK, WITHOUT REGARD TO PRINCIPLES OF CONFLICT OF LAWS. EACH OF THE PARTIES HERETO AGREES TO SUBMIT TO THE JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS INDENTURE. SECTION 11.09. No Adverse Interpretation of Other Agreements. ------------------------- This Indenture may not be used to interpret another indenture, loan or debt agreement of the Company or any of its -109- Subsidiaries. Any such indenture, loan or debt agreement may not be used to interpret this Indenture. SECTION 11.10. No Recourse Against Others. -------------------------- A director, officer, employee, stockholder or incorporator, as such, of the Company or of the Trustee shall not have any liability for any obligations of the Company under the Notes or this Indenture or for any claim based on, in respect of or by reason of such obligations or their creations. Each Noteholder by accepting a Note waives and releases all such liability. Such waiver and release are part of the consideration for the issuance of the Notes. SECTION 11.11. Successors. ---------- All agreements of the Company in this Indenture and the Notes shall bind its successors. All agreements of the Trustee in this Indenture shall bind its successors. SECTION 11.12. Duplicate Originals. ------------------- All parties may sign any number of copies of this Indenture. Each signed copy shall be an original, but all of them together shall represent the same agreement. SECTION 11.13. Severability. ------------ In case any one or more of the provisions in this Indenture or in the Notes shall be held invalid, illegal or unenforceable, in any respect for any reason, the validity, legality and enforceability of any such provision in every other respect and of the remaining provisions shall not in any way be affected or impaired thereby, it being intended that all of the provisions hereof shall be enforceable to the full extent permitted by law. -110- SIGNATURES IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be duly executed, all as of the date first written above. Issuer: DADE INTERNATIONAL INC. By: /s/ John Connaughton ------------------------------------ Name: John Connaughton Title: Vice President and Assistant Secretary Trustee: IBJ SCHRODER BANK & TRUST COMPANY, as Trustee By: /s/ Nancy Besse ------------------------------------ Name: Nancy Besse Title: EXHIBIT A --------- CUSIP No.: DADE INTERNATIONAL INC. 11 1/8% SENIOR SUBORDINATED NOTE DUE 2006 No. $ DADE INTERNATIONAL INC., a Delaware corporation (the "Company," which term includes any successor entity), for value received promises to pay to or registered assigns, the principal sum of Dollars, on May 1, 2006. Interest Payment Dates: May 1 and November 1. Record Dates: April 15 and October 15. Reference is made to the further provisions of this Note contained herein, which will for all purposes have the same effect as if set forth at this place. IN WITNESS WHEREOF, the Company has caused this Note to be signed manually or by facsimile by its duly authorized officers and a facsimile of its corporate seal to be affixed hereto or imprinted hereon. DADE INTERNATIONAL INC. By: ----------------------------------- Name: Title: By: ----------------------------------- Name: Dated: May 7, 1996 Title: Certificate of Authentication This is one of the 11 1/8% Senior Subordinated Notes due 2006 referred to in the within-mentioned Indenture. IBJ SCHRODER BANK & TRUST COMPANY, as Trustee Dated: May 7, 1996 By: ----------------------------------- Authorized Signatory A-1 (REVERSE OF SECURITY) 11 1/8% SENIOR SUBORDINATED NOTE DUE 2006 1. Interest. DADE INTERNATIONAL INC., a Delaware -------- corporation (the "Company"), promises to pay interest on the principal amount of this Note at the rate per annum shown above. Interest on the Notes will accrue from the most recent date on which interest has been paid or, if no interest has been paid, from May 7, 1996. The Company will pay interest semi-annually in arrears on each Interest Payment Date, commencing November 1, 1996. Interest will be computed on the basis of a 360-day year of twelve 30-day months. The Company shall pay interest on overdue principal and on overdue installments of interest from time to time on demand at the rate borne by the Notes plus 2% per annum and on overdue installments of interest (without regard to any applicable grace periods) to the extent lawful. 2. Method of Payment. The Company shall pay ----------------- interest on the Notes (except defaulted interest) to the Persons who are the registered Holders at the close of business on the Record Date immediately preceding the Interest Payment Date even if the Notes are cancelled on registration of transfer or registration of exchange after such Record Date. Holders must surrender Notes to a Paying Agent to collect principal payments. The Company shall pay principal and interest in money of the United States that at the time of payment is legal tender for payment of public and private debts ("U.S. Legal Tender"). However, the Company may pay principal and interest by its check payable in such U.S. Legal Tender. The Company may deliver any such interest payment to the Paying Agent or to a Holder at the Holder's registered address. 3. Paying Agent and Registrar. Initially, IBJ -------------------------- Schroder Bank & Trust Company, a New York banking corporation (the "Trustee"), will act as Paying Agent and Registrar. The Company may change any Paying Agent, Registrar or co-Registrar without notice to the Holders. 4. Indenture. The Company issued the Notes under --------- an Indenture, dated as of May 7, 1996 (the "Indenture"), between the Company and the Trustee. This Note is one of a duly authorized issue of Initial Notes of the Company designated as its 11 1/8% Senior Subordinated Notes due 2006 (the "Initial Notes"). The Notes are limited in aggregate principal amount to $350,000,000. The Notes include the Initial Notes and the Exchange Notes, as defined below, issued in exchange A-2 for the Initial Notes pursuant to the Indenture. The Initial Notes and the Exchange Notes are treated as a single class of securities under the Indenture. Capitalized terms herein are used as defined in the Indenture unless otherwise defined herein. The terms of the Notes include those stated in the Indenture and those made part of the Indenture by reference to the Trust Indenture Act of 1939 (15 U.S. Code {{ 77aaa-77bbbb) (the "TIA"), as in effect on the date of the Indenture. Notwithstanding anything to the contrary herein, the Notes are subject to all such terms, and Holders of Notes are referred to the Indenture and said Act for a statement of them. The Notes are general unsecured obligations of the Company. 5. Subordination. The Notes are subordinated in ------------- right of payment, in the manner and to the extent set forth in the Indenture, to the prior payment in full in cash or Cash Equivalents of all Senior Debt of the Company, whether outstanding on the date of the Indenture or thereafter created, incurred, assumed or guaranteed. Each Holder by his acceptance hereof agrees to be bound by such provisions and authorizes and expressly directs the Trustee, on his behalf, to take such action as may be necessary or appropriate to effectuate the subordination provided for in the Indenture and appoints the Trustee his attorney-in-fact for such purposes. 6. Redemption. ---------- (a) Optional Redemption. The Notes will be ------------------- redeemable, at the Company's option, in whole at any time or in part from time to time, on and after May 1, 2001, upon not less than 30 nor more than 60 days' notice, at the following redemption prices (expressed as percentages of the principal amount thereof) if redeemed during the twelve-month period commencing on May 1 of the year set forth below, plus, in each case, accrued interest to the date of redemption: Year Percentage - ---- ---------- 2001..................................................... 105.563% 2002..................................................... 103.708 2003..................................................... 101.854 2004 and thereafter...................................... 100.000 (b) Optional Redemption Upon Equity Offerings. At ----------------------------------------- any time, or from time to time, on or prior to May 1, 1999, the Company may, at its option, use the net cash proceeds of one or more Equity Offerings (as defined in the Indenture) to redeem up to 40% (provided that such percentage shall decrease to 35% if an Initial Public Offering (as defined in the Indenture) has not been consummated on or prior to March 31, 1997 and any A-3 other Notes previously redeemed pursuant to this provision shall be included in determining such percentage) of the aggregate principal amount of Notes originally issued at a redemption price equal to 110% (111.125% in the case of any Equity Offering after March 31, 1997) of the principal amount thereof plus, in each case, accrued interest to the date of redemption; provided that at least $175.0 million aggregate -------- principal amount of Notes remains outstanding immediately after any such redemption. In order to effect the foregoing redemption with the proceeds of any Equity Offering, the Company shall make such redemption not more than 120 days after the consummation of any such Equity Offering. 7. Notice of Redemption. Notice of redemption will -------------------- be mailed at least 30 days but not more than 60 days before the Redemption Date to each Holder of Notes to be redeemed at such Holder's registered address. Notes in denominations larger than $1,000 may be redeemed in part. Except as set forth in the Indenture, if monies for the redemption of the Notes called for redemption shall have been deposited with the Paying Agent for redemption on such Redemption Date, then, unless the Company defaults in the payment of such Redemption Price plus accrued interest, if any, the Notes called for redemption will cease to bear interest from and after such Redemption Date and the only right of the Holders of such Notes will be to receive payment of the Redemption Price plus accrued interest, if any. 8. Offers to Purchase. Sections 4.15 and 4.16 of ------------------ the Indenture provide that, after certain Asset Sales (as defined in the Indenture) and upon the occurrence of a Change of Control (as defined in the Indenture), and subject to further limitations contained therein, the Company will make an offer to purchase certain amounts of the Notes in accordance with the procedures set forth in the Indenture. 9. Registration Rights. Pursuant to the ------------------- Registration Rights Agreement among the Company and the Holders of the Initial Notes, the Company will be obligated to consummate an exchange offer pursuant to which the Holder of this Note shall have the right to exchange this Note for the Company's Series B 11 1/8% Senior Subordinated Notes due 2006 (the "Exchange Notes"), which have been registered under the Securities Act, in like principal amount and having terms identical in all material respects to the Initial Notes. The Holders of the Initial Notes shall be entitled to receive certain additional interest payments in the event such exchange offer is not A-4 consummated and upon certain other conditions, all pursuant to and in accordance with the terms of the Registration Rights Agreement. 10. Denominations; Transfer; Exchange. The Notes --------------------------------- are in registered form, without coupons, in denominations of $1,000 and integral multiples of $1,000. A Holder shall register the transfer of or exchange Notes in accordance with the Indenture. The Registrar may require a Holder, among other things, to furnish appropriate endorsements and transfer documents and to pay certain transfer taxes or similar governmental charges payable in connection therewith as permitted by the Indenture. The Registrar need not register the transfer of or exchange of any Notes or portions thereof selected for redemption. 11. Persons Deemed Owners. The registered Holder of --------------------- a Note shall be treated as the owner of it for all purposes. 12. Unclaimed Money. If money for the payment of --------------- principal or interest remains unclaimed for two years, the Trustee and the Paying Agent will pay the money back to the Company. After that, all liability of the Trustee and such Paying Agent with respect to such money shall cease. 13. Discharge Prior to Redemption or Maturity. If ----------------------------------------- the Company at any time deposits with the Trustee U.S. Legal Tender or U.S. Government Obligations sufficient to pay the principal of and interest on the Notes to redemption or maturity and complies with the other provisions of the Indenture relating thereto, the Company will be discharged from certain provisions of the Indenture and the Notes (including certain covenants, but excluding its obligation to pay the principal of and interest on the Notes). 14. Amendment; Supplement; Waiver. Subject to ----------------------------- certain exceptions, the Indenture or the Notes may be amended or supplemented with the written consent of the Holders of at least a majority in aggregate principal amount of the Notes then outstanding, and any existing Default or Event of Default or noncompliance with any provision may be waived with the written consent of the Holders of a majority in aggregate principal amount of the Notes then outstanding. Without notice to or consent of any Holder, the parties thereto may amend or supplement the Indenture or the Notes to, among other things, cure any ambiguity, defect or inconsistency, provide for uncertificated Notes in addition to or in place of certificated Notes, or comply with Article Five of the Indenture or make any other change that does not adversely affect in any material respect the rights of any Holder of a Note. A-5 15. Restrictive Covenants. The Indenture imposes --------------------- certain limitations on the ability of the Company and its Restricted Subsidiaries to, among other things, incur additional Indebtedness, make payments in respect of its Capital Stock or certain Indebtedness, enter into transactions with Affiliates, create dividend or other payment restrictions affecting Subsidiaries, merge or consolidate with any other Person, sell, assign, transfer, lease, convey or otherwise dispose of all or substantially all of its assets or adopt a plan of liquidation. Such limitations are subject to a number of important qualifications and exceptions. The Company must annually report to the Trustee on compliance with such limitations. 16. Successors. When a successor assumes, in ---------- accordance with the Indenture, all the obligations of its predecessor under the Notes and the Indenture, the predecessor will be released from those obligations. 17. Defaults and Remedies. If an Event of Default --------------------- occurs and is continuing, the Trustee or the Holders of at least 25% in aggregate principal amount of Notes then outstanding may declare all the Notes to be due and payable in the manner, at the time and with the effect provided in the Indenture. Holders of Notes may not enforce the Indenture or the Notes except as provided in the Indenture. The Trustee is not obligated to enforce the Indenture or the Notes unless it has received indemnity reasonably satisfactory to it. The Indenture permits, subject to certain limitations therein provided, Holders of a majority in aggregate principal amount of the Notes then outstanding to direct the Trustee in its exercise of any trust or power. The Trustee may withhold from Holders of Notes notice of any continuing Default or Event of Default (except a Default in payment of principal or interest) if it determines that withholding notice is in their interest. 18. Trustee Dealings with Company. The Trustee ----------------------------- under the Indenture, in its individual or any other capacity, may become the owner or pledgee of Notes and may otherwise deal with the Company, its Subsidiaries or their respective Affiliates as if it were not the Trustee. 19. No Recourse Against Others. No stockholder, -------------------------- director, officer, employee or incorporator, as such, of the Company shall have any liability for any obligation of the Company under the Notes or the Indenture or for any claim based on, in respect of or by reason of, such obligations or their creation. Each Holder of a Note by accepting a Note waives and releases all such liability. The waiver and release are part of the consideration for the issuance of the Notes. A-6 20. Authentication. This Note shall not be valid -------------- until the Trustee or Authenticating Agent manually signs the certificate of authentication on this Note. 21. Governing Law. The Laws of the State of New ------------- York shall govern this Note and the Indenture, without regard to principles of conflict of laws. 22. Abbreviations and Defined Terms. Customary ------------------------------- abbreviations may be used in the name of a Holder of a Note or an assignee, such as: TEN COM (= tenants in common), TEN ENT (= tenants by the entireties), JT TEN (= joint tenants with right of survivorship and not as tenants in common), CUST (= Custodian), and U/G/M/A (= Uniform Gifts to Minors Act). 23. CUSIP Numbers. Pursuant to a recommendation ------------- promulgated by the Committee on Uniform Security Identification Procedures, the Company has caused CUSIP numbers to be printed on the Notes as a convenience to the Holders of the Notes. No representation is made as to the accuracy of such numbers as printed on the Notes and reliance may be placed only on the other identification numbers printed hereon. 24. Indenture. Each Holder, by accepting a Note, --------- agrees to be bound by all of the terms and provisions of the Indenture, as the same may be amended from time to time. The Company will furnish to any Holder of a Note upon written request and without charge a copy of the Indenture, which has the text of this Note in larger type. Requests may be made to: Dade International Inc., 1717 Deerfield Road, Deerfield, IL 60015-0778, Attn: Chief Financial Officer. A-7 ASSIGNMENT FORM If you the Holder want to assign this Note, fill in the form below and have your signature guaranteed: I or we assign and transfer this Note to: _______________________________________________________________ _______________________________________________________________ _______________________________________________________________ (Print or type name, address and zip code and social security or tax ID number of assignee) and irrevocably appoint ______________________________________, agent to transfer this Note on the books of the Company. The agent may substitute another to act for him. Date: ___________________ Signed: ____________________________ (Sign exactly as your name appears on the other side of this Note) Signature Guarantee: ____________________________ In connection with any transfer of this Note occurring prior to the date which is the earlier of (i) the date of the declaration by the SEC of the effectiveness of a registration statement under the Securities Act of 1933, as amended (the "Securities Act") covering resales of this Note (which effectiveness shall not have been suspended or terminated at the date of the transfer) and (ii) May 7, 1999, the undersigned confirms that it has not utilized any general solicitation or general advertising in connection with the transfer and that this Note is being transferred: A-8 [Check One] --------- (1) __ to the Company or a subsidiary thereof; or (2) __ pursuant to and in compliance with Rule 144A under the Securities Act; or (3) __ to an institutional "accredited investor" (as defined in Rule 501(a)(1), (2), (3) or (7) under the Securities Act) that has furnished to the Trustee a signed letter containing certain representations and agreements (the form of which letter can be obtained from the Trustee); or (4) __ outside the United states to a "foreign person" in compliance with Rule 904 of Regulation S under the Securities Act; or (5) __ pursuant to the exemption from registration provided by Rule 144 under the Securities Act; or (6) __ pursuant to an effective registration statement under the Securities Act; or (7) __ pursuant to another available exemption from the registration requirements of the Securities Act. Unless one of the boxes is checked, the Trustee will refuse to register any of the Notes evidenced by this certificate in the name of any person other than the registered Holder thereof; provided that if box (3), (4), (5) or (7) is checked, the - -------- Company or the Trustee may require, prior to registering any such transfer of the Notes, in its sole discretion, such legal opinions, certifications (including an investment letter in the case of box (3) or (4)) and other information as the Trustee or the Company has reasonably requested to confirm that such transfer is being made pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act. A-9 If none of the foregoing boxes is checked, the Trustee or Registrar shall not be obligated to register this Note in the name of any person other than the Holder hereof unless and until the conditions to any such transfer of registration set forth herein and in Section 2.17 of the Indenture shall have been satisfied. Dated: __________________ Signed: ____________________________ (Sign exactly as name appears on the other side of this Security) Signature Guarantee: ___________________________________________________ TO BE COMPLETED BY PURCHASER IF (2) ABOVE IS CHECKED The undersigned represents and warrants that it is purchasing this Note for its own account or an account with respect to which it exercises sole investment discretion and that it and any such account is a "qualified institutional buyer" within the meaning of Rule 144A under the Securities Act and is aware that the sale to it is being made in reliance on Rule 144A and acknowledges that it has received such information regarding the Company as the undersigned has requested pursuant to Rule 144A or has determined not to request such information and that it is aware that the transferor is relying upon the undersigned's foregoing representations in order to claim the exemption from registration provided by Rule 144A. Dated: __________________ ____________________________ NOTICE: To be executed by an executive officer A-10 [OPTION OF HOLDER TO ELECT PURCHASE] If you want to elect to have this Note purchased by the Company pursuant to Section 4.15 or Section 4.16 of the Indenture, check the appropriate box: Section 4.15 [ ] Section 4.16 [ ] If you want to elect to have only part of this Note purchased by the Company pursuant to Section 4.15 or Section 4.16 of the Indenture, state the amount you elect to have purchased: $___________________ Dated: __________________ ____________________________________ NOTICE: The signature on this assignment must correspond with the name as it appears upon the face of the within Note in every particular without alteration or enlargement or any change whatsoever and be guaranteed by the endorser's bank or broker. Signature Guarantee: ____________________________________ A-11 EXHIBIT B --------- CUSIP No.: DADE INTERNATIONAL INC. SERIES B 11 1/8% SENIOR SUBORDINATED NOTE DUE 2006 No. $ DADE INTERNATIONAL INC., a Delaware corporation (the "Company," which term includes any successor entity), for value received promises to pay to or registered assigns, the principal sum of Dollars, on May 1, 2006. Interest Payment Dates: May 1 and November 1. Record Dates: April 15 and October 15. Reference is made to the further provisions of this Note contained herein, which will for all purposes have the same effect as if set forth at this place. IN WITNESS WHEREOF, the Company has caused this Note to be signed manually or by facsimile by its duly authorized officers and a facsimile of its corporate seal to be affixed hereto or imprinted hereon. DADE INTERNATIONAL INC. By: ----------------------------------- Name: Title: By: ----------------------------------- Name: Dated: Title: Certificate of Authentication This is one of the Series B 11 1/8% Senior Subordinated Notes due 2006 referred to in the within-mentioned Indenture. IBJ SCHRODER BANK & TRUST COMPANY, as Trustee Dated: By: ----------------------------------- Authorized Signatory B-1 (REVERSE OF SECURITY) SERIES B 11 1/8% SENIOR SUBORDINATED NOTE DUE 2006 1. Interest. DADE INTERNATIONAL INC., a Delaware -------- corporation (the "Company"), promises to pay interest on the principal amount of this Note at the rate per annum shown above. Interest on the Notes will accrue from the most recent date on which interest has been paid or, if no interest has been paid, from May 7, 1996. The Company will pay interest semi-annually in arrears on each Interest Payment Date, commencing November 1, 1996. Interest will be computed on the basis of a 360-day year of twelve 30-day months. The Company shall pay interest on overdue principal and on overdue installments of interest from time to time on demand at the rate borne by the Notes plus 2% per annum and on overdue installments of interest (without regard to any applicable grace periods) to the extent lawful. 2. Method of Payment. The Company shall pay ----------------- interest on the Notes (except defaulted interest) to the Persons who are the registered Holders at the close of business on the Record Date immediately preceding the Interest Payment Date even if the Notes are cancelled on registration of transfer or registration of exchange after such Record Date. Holders must surrender Notes to a Paying Agent to collect principal payments. The Company shall pay principal and interest in money of the United States that at the time of payment is legal tender for payment of public and private debts ("U.S. Legal Tender"). However, the Company may pay principal and interest by its check payable in such U.S. Legal Tender. The Company may deliver any such interest payment to the Paying Agent or to a Holder at the Holder's registered address. 3. Paying Agent and Registrar. Initially, IBJ -------------------------- Schroder Bank & Trust Company, a New York banking corporation (the "Trustee"), will act as Paying Agent and Registrar. The Company may change any Paying Agent, Registrar or co-Registrar without notice to the Holders. 4. Indenture. The Company issued the Notes under --------- an Indenture, dated as of May 7, 1996 (the "Indenture"), between the Company and the Trustee. This Note is one of a duly authorized issue of Exchange Notes of the Company designated as its Series B 11 1/8% Senior Subordinated Notes due 2006 (the "Exchange Notes"). The Notes are limited in aggregate principal amount to $350,000,000. The Notes include the Initial Notes (the 11 1/8% Senior Subordinated Notes due 2006) B-2 and the Exchange Notes, issued in exchange for the Initial Notes pursuant to the Indenture. The Initial Notes and the Exchange Notes are treated as a single class of securities under the Indenture. Capitalized terms herein are used as defined in the Indenture unless otherwise defined herein. The terms of the Notes include those stated in the Indenture and those made part of the Indenture by reference to the Trust Indenture Act of 1939 (15 U.S. Code {{ 77aaa-77bbbb) (the "TIA"), as in effect on the date of the Indenture. Notwithstanding anything to the contrary herein, the Notes are subject to all such terms, and Holders of Notes are referred to the Indenture and said Act for a statement of them. The Notes are general unsecured obligations of the Company. 5. Subordination. The Notes are subordinated in ------------- right of payment, in the manner and to the extent set forth in the Indenture, to the prior payment in full in cash or Cash Equivalents of all Senior Debt of the Company, whether outstanding on the date of the Indenture or thereafter created, incurred, assumed or guaranteed. Each Holder by his acceptance hereof agrees to be bound by such provisions and authorizes and expressly directs the Trustee, on his behalf, to take such action as may be necessary or appropriate to effectuate the subordination provided for in the Indenture and appoints the Trustee his attorney-in-fact for such purposes. 6. Redemption. ---------- (a) Optional Redemption. The Notes will be ------------------- redeemable, at the Company's option, in whole at any time or in part from time to time, on and after May 1, 2001, upon not less than 30 nor more than 60 days' notice, at the following redemption prices (expressed as percentages of the principal amount thereof) if redeemed during the twelve-month period commencing on May 1 of the year set forth below, plus, in each case, accrued interest to the date of redemption: Year Percentage - ---- ---------- 2001..................................................... 105.563% 2002..................................................... 103.708 2003..................................................... 101.854 2004 and thereafter...................................... 100.000 (b) Optional Redemption Upon Equity Offerings. At ----------------------------------------- any time, or from time to time, on or prior to May 1, 1999, the Company may, at its option, use the net cash proceeds of one or more Equity Offerings (as defined in the Indenture) to redeem up to 40% (provided that such percentage shall decrease to 35% if an Initial Public Offering (as defined in the Indenture) has B-3 not been consummated on or prior to March 31, 1997 and any other Notes previously redeemed pursuant to this provision shall be included in determining such percentage) of the aggregate principal amount of Notes originally issued at a redemption price equal to 110% (111.125% in the case of any Equity Offering after March 31, 1997) of the principal amount thereof plus, in each case, accrued interest to the date of redemption; provided that at least $175.0 million aggregate -------- principal amount of Notes remains outstanding immediately after any such redemption. In order to effect the foregoing redemption with the proceeds of any Equity Offering, the Company shall make such redemption not more than 120 days after the consummation of any such Equity Offering. 7. Notice of Redemption. Notice of redemption will -------------------- be mailed at least 30 days but not more than 60 days before the Redemption Date to each Holder of Notes to be redeemed at such Holder's registered address. Notes in denominations larger than $1,000 may be redeemed in part. Except as set forth in the Indenture, if monies for the redemption of the Notes called for redemption shall have been deposited with the Paying Agent for redemption on such Redemption Date, then, unless the Company defaults in the payment of such Redemption Price plus accrued interest, if any, the Notes called for redemption will cease to bear interest from and after such Redemption Date and the only right of the Holders of such Notes will be to receive payment of the Redemption Price plus accrued interest, if any. 8. Offers to Purchase. Sections 4.15 and 4.16 of ------------------ the Indenture provide that, after certain Asset Sales (as defined in the Indenture) and upon the occurrence of a Change of Control (as defined in the Indenture), and subject to further limitations contained therein, the Company will make an offer to purchase certain amounts of the Notes in accordance with the procedures set forth in the Indenture. 9. Denominations; Transfer; Exchange. The Notes --------------------------------- are in registered form, without coupons, in denominations of $1,000 and integral multiples of $1,000. A Holder shall register the transfer of or exchange Notes in accordance with the Indenture. The Registrar may require a Holder, among other things, to furnish appropriate endorsements and transfer documents and to pay certain transfer taxes or similar governmental charges payable in connection therewith as permitted by the Indenture. The Registrar need not register the transfer of or B-4 exchange of any Notes or portions thereof selected for redemption. 10. Persons Deemed Owners. The registered Holder of --------------------- a Note shall be treated as the owner of it for all purposes. 11. Unclaimed Money. If money for the payment of --------------- principal or interest remains unclaimed for two years, the Trustee and the Paying Agent will pay the money back to the Company. After that, all liability of the Trustee and such Paying Agent with respect to such money shall cease. 12. Discharge Prior to Redemption or Maturity. If ----------------------------------------- the Company at any time deposits with the Trustee U.S. Legal Tender or U.S. Government Obligations sufficient to pay the principal of and interest on the Notes to redemption or maturity and complies with the other provisions of the Indenture relating thereto, the Company will be discharged from certain provisions of the Indenture and the Notes (including certain covenants, but excluding its obligation to pay the principal of and interest on the Notes). 13. Amendment; Supplement; Waiver. Subject to ----------------------------- certain exceptions, the Indenture or the Notes may be amended or supplemented with the written consent of the Holders of at least a majority in aggregate principal amount of the Notes then outstanding, and any existing Default or Event of Default or noncompliance with any provision may be waived with the written consent of the Holders of a majority in aggregate principal amount of the Notes then outstanding. Without notice to or consent of any Holder, the parties thereto may amend or supplement the Indenture or the Notes to, among other things, cure any ambiguity, defect or inconsistency, provide for uncertificated Notes in addition to or in place of certificated Notes, or comply with Article Five of the Indenture or make any other change that does not adversely affect in any material respect the rights of any Holder of a Note. 14. Restrictive Covenants. The Indenture imposes --------------------- certain limitations on the ability of the Company and its Restricted Subsidiaries to, among other things, incur additional Indebtedness, make payments in respect of its Capital Stock or certain Indebtedness, enter into transactions with Affiliates, create dividend or other payment restrictions affecting Subsidiaries, merge or consolidate with any other Person, sell, assign, transfer, lease, convey or otherwise dispose of all or substantially all of its assets or adopt a plan of liquidation. Such limitations are subject to a number of important qualifications and exceptions. The Company must B-5 annually report to the Trustee on compliance with such limitations. 15. Successors. When a successor assumes, in ---------- accordance with the Indenture, all the obligations of its predecessor under the Notes and the Indenture, the predecessor will be released from those obligations. 16. Defaults and Remedies. If an Event of Default --------------------- occurs and is continuing, the Trustee or the Holders of at least 25% in aggregate principal amount of Notes then outstanding may declare all the Notes to be due and payable in the manner, at the time and with the effect provided in the Indenture. Holders of Notes may not enforce the Indenture or the Notes except as provided in the Indenture. The Trustee is not obligated to enforce the Indenture or the Notes unless it has received indemnity reasonably satisfactory to it. The Indenture permits, subject to certain limitations therein provided, Holders of a majority in aggregate principal amount of the Notes then outstanding to direct the Trustee in its exercise of any trust or power. The Trustee may withhold from Holders of Notes notice of any continuing Default or Event of Default (except a Default in payment of principal or interest) if it determines that withholding notice is in their interest. 17. Trustee Dealings with Company. The Trustee ----------------------------- under the Indenture, in its individual or any other capacity, may become the owner or pledgee of Notes and may otherwise deal with the Company, its Subsidiaries or their respective Affiliates as if it were not the Trustee. 18. No Recourse Against Others. No stockholder, -------------------------- director, officer, employee or incorporator, as such, of the Company shall have any liability for any obligation of the Company under the Notes or the Indenture or for any claim based on, in respect of or by reason of, such obligations or their creation. Each Holder of a Note by accepting a Note waives and releases all such liability. The waiver and release are part of the consideration for the issuance of the Notes. 19. Authentication. This Note shall not be valid -------------- until the Trustee or Authenticating Agent manually signs the certificate of authentication on this Note. 20. Governing Law. The Laws of the State of New ------------- York shall govern this Note and the Indenture, without regard to principles of conflict of laws. 21. Abbreviations and Defined Terms. Customary ------------------------------- abbreviations may be used in the name of a Holder of a Note or B-6 an assignee, such as: TEN COM (= tenants in common), TEN ENT (= tenants by the entireties), JT TEN (= joint tenants with right of survivorship and not as tenants in common), CUST (= Custodian), and U/G/M/A (= Uniform Gifts to Minors Act). 22. CUSIP Numbers. Pursuant to a recommendation ------------- promulgated by the Committee on Uniform Security Identification Procedures, the Company has caused CUSIP numbers to be printed on the Notes as a convenience to the Holders of the Notes. No representation is made as to the accuracy of such numbers as printed on the Notes and reliance may be placed only on the other identification numbers printed hereon. 23. Indenture. Each Holder, by accepting a Note, --------- agrees to be bound by all of the terms and provisions of the Indenture, as the same may be amended from time to time. The Company will furnish to any Holder of a Note upon written request and without charge a copy of the Indenture, which has the text of this Note in larger type. Requests may be made to: Dade International Inc., 1717 Deerfield Road, Deerfield, IL 60015-0778, Attn: Chief Financial Officer. B-7 ASSIGNMENT FORM If you the Holder want to assign this Note, fill in the form below and have your signature guaranteed: I or we assign and transfer this Note to: _______________________________________________________________ _______________________________________________________________ _______________________________________________________________ (Print or type name, address and zip code and social security or tax ID number of assignee) and irrevocably appoint ______________________________________, agent to transfer this Note on the books of the Company. The agent may substitute another to act for him. Dated: __________________ Signed: _________________________ (Sign exactly as name appears on the other side of this Note) Signature Guarantee: _________________________________ B-8 [OPTION OF HOLDER TO ELECT PURCHASE] If you want to elect to have this Note purchased by the Company pursuant to Section 4.15 or Section 4.16 of the Indenture, check the appropriate box: Section 4.15 [ ] Section 4.16 [ ] If you want to elect to have only part of this Note purchased by the Company pursuant to Section 4.15 or Section 4.16 of the Indenture, state the amount you elect to have purchased: $___________________ Dated: _________________ _____________________________________ NOTICE: The signature on this assignment must correspond with the name as it appears upon the face of the within Note in every particular without alteration or enlargement or any change whatsoever and be guaranteed by the endorser's bank or broker. Signature Guarantee: ____________________________ B-9 Exhibit C --------- Form of Certificate To Be Delivered in Connection with Transfers to Non-QIB Accredited Investors ----------------------------------------- ___________, ____ IBJ Schroder Bank & Trust Company One State Street New York, New York 10004 Attention: Securities Processing Window Level SC1 Re: Dade International Inc. 11 1/8% Senior Subordinated Notes due 2006 --------------------------------- Ladies and Gentlemen: In connection with our proposed purchase of 11 1/8% Senior Subordinated Notes due 2006 (the "Notes") of Dade International Inc. (the "Company"), we confirm that: 1. We have received a copy of the Offering Memorandum (the "Offering Memorandum"), dated April 30, 1996 relating to the Notes and such other information as we deem necessary in order to make our investment decision. We acknowledge that we have read and agreed to the matters stated on pages (i)-(ii) of the Offering Memorandum and in the section entitled "Transfer Restrictions" of the Offering Memorandum, including the restrictions on duplication and circulation of the Offering Memorandum. 2. We understand that any subsequent transfer of the Notes is subject to certain restrictions and conditions set forth in the Indenture relating to the Notes (as described in the Offering Memorandum) and the undersigned agrees to be bound by, and not to resell, pledge or otherwise transfer the Notes except in compliance with, such restrictions and conditions and the Securities Act of 1933, as amended (the "Securities Act"). 3. We understand that the offer and sale of the Notes have not been registered under the Securities Act, and that the Notes may not be offered or sold except as permitted in the following sentence. We agree, on our own behalf and on behalf of any accounts for which we are acting as hereinafter stated, that if we should sell or otherwise transfer any Notes prior to the date which is three years after the original issuance of the Notes, we will do so only (i) to the Company or any of its subsidiaries, (ii) inside the United States in C-1 accordance with Rule 144A under the Securities Act to a "qualified institutional buyer" (as defined in Rule 144A under the Securities Act), (iii) inside the United States to an institutional "accredited investor" (as defined below) that, prior to such transfer, furnishes (or has furnished on its behalf by a U.S. broker-dealer) to the Trustee (as defined in the Indenture relating to the Notes), a signed letter containing certain representations and agreements relating to the restrictions on transfer of the Notes, (iv) outside the United States in accordance with Rule 904 of Regulation S under the Securities Act, (v) pursuant to the exemption from registration provided by Rule 144 under the Securities Act (if available), or (vi) pursuant to an effective registration statement under the Securities Act, and we further agree to provide to any person purchasing any of the Notes from us a notice advising such purchaser that resales of the Notes are restricted as stated herein. 4. We are not acquiring the Notes for or on behalf of, and will not transfer the Notes to, any pension or welfare plan (as defined in Section 3 of the Employee Retirement Income Security Act of 1974), except as permitted in the section entitled "Transfer Restrictions" of the Offering Memorandum. 5. We understand that, on any proposed resale of any Notes, we will be required to furnish to the Trustee and the Company such certification, legal opinions and other information as the Trustee and the Company may reasonably require to confirm that the proposed sale complies with the foregoing restrictions. We further understand that the Notes purchased by us will bear a legend to the foregoing effect. 6. We are an institutional "accredited investor" (as defined in Rule 501(a)(1), (2), (3) or (7) of Regulation D under the Securities Act) and have such knowledge and experience in financial and business matters as to be capable of evaluating the merits and risks of our investment in the Notes, and we and any accounts for which we are acting are each able to bear the economic risk of our or their investment, as the case may be. 7. We are acquiring the Notes purchased by us for our account or for one or more accounts (each of which is an institutional "accredited investor") as to each of which we exercise sole investment discretion. C-2 You and the Company are entitled to rely upon this letter and are irrevocably authorized to produce this letter or a copy hereof to any interested party in any administrative or legal proceeding or official inquiry with respect to the matters covered hereby. Very truly yours, By: --------------------------------------- Name: Title: C-3 Exhibit D --------- Form of Certificate To Be Delivered in Connection with Transfers Pursuant to Regulation S ----------------------------------- ______________, ____ IBJ Schroder Bank & Trust Company One State Street New York, NY 10004 Attention: Securities Processing Window Level SC1 Re: Dade International Inc. (the "Company") 11 1/8% Senior Subordinated Notes due 2006 (the "Notes") --------------------------------------- Ladies and Gentlemen: In connection with our proposed sale of $___________ aggregate principal amount of the Notes, we confirm that such sale has been effected pursuant to and in accordance with Regulation S under the U.S. Securities Act of 1933, as amended (the "Securities Act"), and, accordingly, we represent that: (1) the offer of the Notes was not made to a person in the United States; (2) either (a) at the time the buy offer was originated, the transferee was outside the United States or we and any person acting on our behalf reasonably believed that the transferee was outside the United States, or (b) the transaction was executed in, on or through the facilities of a designated off-shore securities market and neither we nor any person acting on our behalf knows that the transaction has been pre- arranged with a buyer in the United States; (3) no directed selling efforts have been made in the United States in contravention of the requirements of Rule 903(b) or Rule 904(b) of Regulation S, as applicable; D-1 (4) the transaction is not part of a plan or scheme to evade the registration requirements of the Securities Act; and (5) we have advised the transferee of the transfer restrictions applicable to the Notes. You and the Company are entitled to rely upon this letter and are irrevocably authorized to produce this letter or a copy hereof to any interested party in any administrative or legal proceedings or official inquiry with respect to the matters covered hereby. Terms used in this certificate have the meanings set forth in Regulation S. Very truly yours, [Name of Transferor] By: -------------------------------- Authorized Signature D-2 EX-4.2 5 PURCHASE AGREEMENT DATED 05/07/96 EXHIBIT 4.2 Dade International Inc. $350,000,000 11 1/8% Senior Subordinated Notes due 2006 PURCHASE AGREEMENT ------------------ April 30, 1996 BT SECURITIES CORPORATION CS FIRST BOSTON CORPORATION MORGAN STANLEY & CO. INCORPORATED c/o BT Securities Corporation One Bankers Trust Plaza 130 Liberty Street New York, New York 10006 Ladies and Gentlemen: Dade International Inc., a Delaware corporation (the "Company"), hereby confirms its agreement with you (the ------- "Initial Purchasers"), as set forth below. ------------------ 1. The Securities. Subject to the terms and -------------- conditions herein contained, the Company proposes to issue and sell to the Initial Purchasers $350,000,000 aggregate principal amount of its 11 1/8% Senior Subordinated Notes due 2006 (the "Notes"). The Notes are to be issued under an indenture (the ----- "Indenture") to be dated as of May 7, 1996 between the Company --------- and IBJ Schroder Bank & Trust Company, as trustee (the "Trustee"). ------- On April 9, 1996, an offer, as supplemented on April 26, 1996 (the "Tender Offer"), was commenced to purchase ------------ for cash up to all (but not less than a majority in principal amount outstanding) of the Company's 13% Senior Subordinated Notes due 2005 (the "Old Notes") and a related solicitation --------- (the "Consent Solicitation") of consents to modify certain -------------------- terms of the indenture under which the Old Notes were issued (the "Old Notes Indenture"). In connection therewith, the ------------------- Company and IBJ Schroder Bank & Trust Company, as trustee (the "Old Notes Trustee"), will execute a supplemental indenture ----------------- -2- (the "Supplemental Indenture") giving effect to the proposed ---------------------- amendments to the Old Notes Indenture. The Notes are being issued and sold in connection with the acquisition by the Company (the "Acquisition") of the ----------- in vitro diagnostics business of E.I. du Pont de Nemours and Company and its affiliates ("DuPont"), pursuant to an Asset ------ Purchase and Sale Agreement (the "Asset Purchase Agreement") ------------------------ dated December 11, 1995 between the Company and DuPont. All references herein to the "IVD Business" refer to the Business ------------ Assets (as defined in the Asset Purchase Agreement) to be purchased from DuPont pursuant to the Asset Purchase Agreement. The Acquisition and the ongoing working capital needs of the Company will be financed by: (i) the issuance of the Notes and (ii) the incurrence by the Company and its subsidiaries of senior secured bank financing pursuant to a credit agreement (together with all documents executed in connection therewith, the "Credit Agreement") among the ---------------- Company, Diagnostics Holding, Inc. ("Holdings"), Bankers Trust -------- Company, as agent, and certain financial institutions party thereto in the form of (A) a multiple tranche term loan facility in the amount of $460 million and (B) a revolving credit facility for working capital purposes in the amount of $50 million. The Notes will be offered and sold to the Initial Purchasers without being registered under the Securities Act of 1933, as amended (the "Act"), in reliance on one or more --- exemptions therefrom. In connection with the sale of the Notes, the Company has prepared a preliminary offering memorandum dated April 11, 1996 (the "Preliminary Memorandum") and a final offering ---------------------- memorandum dated April 30, 1996 (the "Final Memorandum"; the ---------------- Preliminary Memorandum and the Final Memorandum each herein being referred to as a "Memorandum"), each setting forth or ---------- including a description of the terms of the Notes and the offering, a description of the Acquisition of the transactions contemplated thereby and hereby, a description of the Company and the IVD Business and any material developments relating to the Company and the IVD Business occurring after the date of the most recent historical financial statements included therein. The Initial Purchasers and their direct and indirect transferees of the Notes will be entitled to the benefits of the Registration Rights Agreement, substantially in the form attached hereto as Exhibit A (the "Registration Rights --------- ------------------- -3- Agreement"), pursuant to which the Company has agreed, among - --------- other things, to file a registration statement (the "Registration Statement") with the Securities and Exchange ---------------------- Commission (the "Commission") registering the Exchange Notes ---------- (as defined therein) or, in certain cases, the Notes under the Act. 2. Representations and Warranties. The Company ------------------------------ represents and warrants to and agrees with each of the Initial Purchasers that: (a) Neither the Preliminary Memorandum as of the date thereof nor the Final Memorandum nor any amendment or supplement thereto as of the date thereof and at all times subsequent thereto up to the Closing Date (as defined in Section 3 below) contained or contains any untrue statement of a material fact or omitted or omits to state a material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading, except that the representations and warranties set forth in this Section 2(a) do not apply to statements or omissions made in reliance upon and in conformity with information relating to any of the Initial Purchasers furnished to the Company in writing by BT Securities Corporation, on behalf of any of the Initial Purchasers, expressly for use in the Preliminary Memorandum, the Final Memorandum or any amendment or supplement thereto. (b) As of the Closing Date, the Company will have the capitalization set forth in the Final Memorandum; all of the subsidiaries of the Company (which includes any subsidiaries of the Company that have been formed to consummate the Acquisition) are listed on Schedule 2 attached hereto ---------- (each, a "Subsidiary" and collectively, the "Subsidiaries"); ---------- ------------ all of the outstanding shares of capital stock of the Company and the Subsidiaries have been, and as of the Closing Date will be, duly authorized and validly issued, are fully paid and nonassessable and were not issued in violation of any preemptive or similar rights; except as set forth in the Final Memorandum, all of the outstanding shares of capital stock of the Company and of each of the Subsidiaries will be free and clear of all liens, encumbrances, equities and claims or restrictions on transferability (other than those imposed by the Act and the securities or "Blue Sky" laws of certain jurisdictions) or voting; except as set forth in the Final Memorandum, there are no (i) options, warrants or other rights to purchase, (ii) agreements or other obligations to issue or (iii) other rights to convert any obligation into, or exchange any securities for, shares of capital stock of or ownership interests in the Company or any of the -4- Subsidiaries outstanding. Except for the Subsidiaries or as disclosed in the Final Memorandum, the Company does not own, directly or indirectly, any material amount of capital stock or any other equity or long-term debt securities or have any equity interest in any firm, partnership, joint venture or other entity other than Sunol Molecular Corporation and Spectral Diagnostics Inc. (c) Each of the Company and the Subsidiaries has been duly incorporated, is validly existing and is in good standing as a corporation under the laws of its jurisdiction of incorporation, with all requisite corporate power and authority to own its properties and conduct its business as now conducted, and as described in the Final Memorandum; each of the Company and the Subsidiaries is, and upon consummation of the Acquisition will be, duly qualified to do business as a foreign corporation in good standing in all other jurisdictions where the ownership or leasing of its properties or the conduct of its business requires such qualification, except where the failure to be so qualified would not, individually or in the aggregate, have a material adverse effect on the general affairs, management, business, condition (financial or otherwise), prospects or results of operations of the Company and the Subsidiaries, taken as a whole, or the IVD Business (any such event, a "Material Adverse Effect"). ----------------------- (d) The Company has all requisite corporate power and authority to execute, deliver and perform each of its obligations under the Notes, the Exchange Notes and the Private Exchange Notes (as defined in the Registration Rights Agreement). The Notes, the Exchange Notes and the Private Exchange Notes have each been duly and validly authorized by the Company and, when executed by the Company and authenticated by the Trustee in accordance with the provisions of the Indenture and, in the case of the Notes, when delivered to and paid for by the Initial Purchasers in accordance with the terms of this Agreement, will have been duly executed, issued and delivered and will constitute valid and legally binding obligations of the Company, entitled to the benefits of the Indenture and enforceable against the Company in accordance with their terms, except that the enforcement thereof may be subject to (i) bankruptcy, insolvency, reorganization, moratorium or other similar laws now or hereafter in effect relating to creditors' rights generally, and (ii) general principles of equity and the discretion of the court before which any proceeding therefor may be brought. -5- (e) The Company has all requisite corporate power and authority to execute, deliver and perform its obligations under the Indenture. The Indenture meets the requirements for qualification under the Trust Indenture Act of 1939, as amended (the "TIA"). The Indenture has been duly and validly --- authorized by the Company and, when executed and delivered by the Company (assuming the due authorization, execution and delivery by the Trustee), will constitute a valid and legally binding agreement of the Company, enforceable against the Company in accordance with its terms, except that the enforcement thereof may be subject to (i) bankruptcy, insolvency, reorganization, moratorium or other similar laws now or hereafter in effect relating to creditors' rights generally and (ii) general principles of equity and the discretion of the court before which any proceeding therefor may be brought. (f) The Company has all requisite corporate power and authority to execute, deliver and perform its obligations under the Registration Rights Agreement. The Registration Rights Agreement has been duly and validly authorized by the Company and, when executed and delivered by the Company, will constitute a valid and legally binding agreement of the Company, enforceable against the Company in accordance with its terms, except that (A) the enforcement thereof may be subject to (i) bankruptcy, insolvency, reorganization, moratorium or other similar laws now or hereafter in effect relating to creditors' rights generally and (ii) general principles of equity and the discretion of the court before which any proceeding therefor may be brought and (B) any rights to indemnity or contribution thereunder may be limited by federal and state securities laws and public policy considerations. (g) The Company has all requisite corporate power and authority to execute, deliver and perform its obligations under this Agreement and to consummate the transactions contemplated hereby. This Agreement has been duly and validly authorized, executed and delivered by the Company. (h) The Company has delivered to the Initial Purchasers a true, correct and complete executed copy of the Asset Purchase Agreement, together with any amendments thereto. The Company has all requisite corporate power and authority to enter into the Asset Purchase Agreement and the Company has all requisite corporate power and authority to consummate the transactions contemplated thereby. The Asset Purchase Agreement has been duly authorized, executed and delivered by the Company. Each of the representations and warranties of the -6- Company set forth in the Asset Purchase Agreement is true in all material respects as of the date hereof. (i) No consent, approval, authorization or order of any court or governmental agency or body or third party is required for the performance of this Agreement or the Asset Purchase Agreement by the Company or the consummation by the Company of the transactions contemplated hereby or thereby, except such as have been obtained and such as may be required under state securities or "Blue Sky" laws in connection with the purchase and resale of the Notes by the Initial Purchasers. None of the Company or the Subsidiaries is, or upon consummation of the Acquisition will be, (i) in violation of its certificate of incorporation or bylaws (or similar organizational document), (ii) in breach or violation of any statute, judgment, decree, order, rule or regulation applicable to any of them or any of their respective properties or assets, except for any such breach or violation which would not, individually or in the aggregate, have a Material Adverse Effect, or (iii) in breach of or default under (nor has any event occurred which, with notice or passage of time or both, would constitute a default under) or in violation of any of the terms or provisions of any indenture, mortgage, deed of trust, loan agreement, note, lease, license, franchise agreement, permit, certificate, contract or other agreement or instrument to which any of them is a party or to which any of them or their respective properties or assets is subject (collectively, "Contracts"), except for any such breach, default, violation or --------- event which would not, individually or in the aggregate, have a Material Adverse Effect. (j) The execution, delivery and performance by the Company of this Agreement, the Indenture, the Registration Rights Agreement and the Asset Purchase Agreement and the consummation by the Company of the transactions contemplated hereby and thereby, and the fulfillment of the terms hereof and thereof, will not conflict with or constitute or result in a breach of or a default under (or an event which with notice or passage of time or both would constitute a default under) or violation of any of (i) the terms or provisions of any Contract, except for any such conflict, breach, violation, default or event which would not, individually or in the aggregate, have a Material Adverse Effect, (ii) the certificate of incorporation or bylaws (or similar organizational document) of the Company or any of the Subsidiaries, or (iii) (assuming compliance with all applicable state securities or "Blue Sky" laws and assuming the accuracy of the representations and warranties -7- of the Initial Purchasers in Section 8 hereof) any statute, judgment, decree, order, rule or regulation applicable to the Company or any of the Subsidiaries or any of their respective properties or assets, except for any such conflict, breach or violation which would not, individually or in the aggregate, have a Material Adverse Effect. (k) The audited consolidated financial statements of the Company and, to the knowledge of the Company after due inquiry, the IVD Business included in the Final Memorandum present fairly in all material respects the financial position, results of operations and cash flows of the Company and the IVD Business, respectively, at the dates and for the periods to which they relate and have been prepared in accordance with generally accepted accounting principles applied on a consistent basis, except as otherwise stated therein. The summary and selected financial and statistical data in the Final Memorandum present fairly in all material respects the information shown therein and the summary and selected financial data have been prepared and compiled on a basis consistent with the audited financial statements included therein, except as otherwise stated therein. Price Waterhouse LLP (the "Independent Accountants") is an independent public ----------------------- accounting firm within the meaning of the Act and the rules and regulations promulgated thereunder. (l) The pro forma financial statements (including the notes thereto) and the other pro forma financial information included in the Final Memorandum (i) comply as to form in all material respects with the applicable requirements of Regulation S-X promulgated under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), (ii) have been ------------ prepared in accordance with the Commission's rules and guidelines with respect to pro forma financial statements, and (iii) have been properly computed on the bases described therein; the assumptions used in the preparation of the pro forma financial data and other pro forma financial information included in the Final Memorandum are reasonable and the adjustments used therein are appropriate to give effect to the transactions or circumstances referred to therein. (m) Other than as described in the Memorandum under the captions "Legal Proceedings," "Environmental, Health and Safety Matters" and "Intellectual Property," there is not pending or, to the knowledge of the Company, threatened any action, suit, proceeding, inquiry or investigation to which the Company, any of the Subsidiaries or the IVD Business is a party, -8- or to which the property or assets of the Company, any of the Subsidiaries or the IVD Business are subject, before or brought by any court, arbitrator or governmental agency or body which, if determined adversely to the Company, any of the Subsidiaries or the IVD Business, would, individually or in the aggregate, have a Material Adverse Effect or which seeks to restrain, enjoin, prevent the consummation of or otherwise challenge the issuance or sale of the Notes to be sold hereunder or the consummation of the other transactions described in the Final Memorandum. (n) Each of the Company, the Subsidiaries and, to the knowledge of the Company after due inquiry, DuPont with respect to the IVD Business owns or possesses, and upon consummation of the Acquisition the Company and the Subsidiaries will own or possess, adequate licenses or other rights to use all patents, trademarks, service marks, trade names, copyrights and know-how necessary to conduct the businesses now or proposed to be operated by it as described in the Final Memorandum, and none of the Company, the Subsidiaries or, to the knowledge of the Company after due inquiry, DuPont with respect to the IVD Business has received any notice of infringement of or conflict with (or knows of any such infringement of or conflict with) asserted rights of others with respect to any patents, trademarks, service marks, trade names, copyrights or know-how which, if such assertion of infringement or conflict were sustained, would, individually or in the aggregate, have a Material Adverse Effect. (o) Each of the Company, the Subsidiaries and, to the knowledge of the Company after due inquiry, DuPont with respect to the IVD Business possesses, and upon consummation of the Acquisition the Company and the Subsidiaries will possess, all licenses, permits, certificates, consents, orders, approvals and other authorizations from, and has made or will have made all declarations and filings with, all federal, state, local and other governmental authorities, all self- regulatory organizations and all courts and other tribunals, presently required or necessary to own or lease, as the case may be, and to operate its respective properties and to carry on its respective businesses as now or proposed to be conducted as set forth in the Final Memorandum ("Permits"), except where ------- the failure to obtain such Permits would not, individually or in the aggregate, have a Material Adverse Effect; each of the Company, the Subsidiaries and, to the knowledge of the Company after due inquiry, DuPont with respect to the IVD Business has fulfilled and performed all of its obligations with respect to -9- such Permits and no event has occurred which allows, or after notice or lapse of time would allow, revocation or termination thereof or results in any other material impairment of the rights of the holder of any such Permit; and none of the Company, the Subsidiaries or, to the knowledge of the Company after due inquiry, DuPont with respect to the IVD Business has received any notice of any proceeding relating to revocation or modification of any such Permit, except as described in the Final Memorandum and except where such revocation or modification would not, individually or in the aggregate, have a Material Adverse Effect. (p) Since the date of the most recent financial statements appearing in the Final Memorandum, except as described therein, (i) none of the Company, the Subsidiaries or to the knowledge of the Company, the IVD Business has incurred any liabilities or obligations, direct or contingent, or entered into or agreed to enter into any transactions or contracts (written or oral) not in the ordinary course of business which liabilities, obligations, transactions or contracts would, individually or in the aggregate, be material to the general affairs, management, business, condition (financial or otherwise), prospects or results of operations of the Company and the Subsidiaries, taken as a whole, or the IVD Business (a "Material Change"), (ii) none of the Company or the --------------- Subsidiaries has purchased any of its outstanding capital stock, nor declared, paid or otherwise made any dividend or distribution of any kind on its capital stock, and (iii) there shall not have been any change in the capital stock or long- term indebtedness of the Company, the Subsidiaries or the IVD Business which would, individually or in the aggregate, be a Material Change. (q) Each of the Company and the Subsidiaries has filed all necessary federal, state and foreign income and franchise tax returns, except where the failure to so file such returns would not, individually or in the aggregate, have a Material Adverse Effect, and has paid all taxes shown as due thereon; and other than tax deficiencies which the Company or any Subsidiary is contesting in good faith and for which the Company or such Subsidiary has provided adequate reserves, there is no tax deficiency that has been asserted against the Company or any of the Subsidiaries that would have, individually or in the aggregate, a Material Adverse Effect. (r) The statistical and market-related data included in the Final Memorandum are based on or derived from sources -10- which the Company and the Subsidiaries believe to be reliable and accurate. (s) None of the Company, the Subsidiaries or any agent acting on their behalf has taken or will take any action that might cause this Agreement or the sale of the Notes to violate Regulation G, T, U or X of the Board of Governors of the Federal Reserve System, in each case as in effect, or as the same may hereafter be in effect, on the Closing Date. (t) Each of the Company, the Subsidiaries and, to the knowledge of the Company, after due inquiry, the IVD Business has, and upon consummation of the Acquisition the Company and the Subsidiaries will have, good and marketable title to all real property and good title to all personal property described in the Final Memorandum as being owned by it and good and marketable title to a leasehold estate in the real and personal property described in the Final Memorandum as being leased by it free and clear of all liens, charges, encumbrances or restrictions, except as described in the Final Memorandum or to the extent the failure to have such title or the existence of such liens, charges, encumbrances or restrictions would not, individually or in the aggregate, have a Material Adverse Effect. All leases, contracts and agreements to which the Company, any of the Subsidiaries or DuPont with respect to the IVD Business is a party or by which any of them is bound are valid and enforceable against the Company, such Subsidiaries or the IVD Business, to the knowledge of the Company are valid and enforceable against the other party or parties thereto and are in full force and effect with only such exceptions as would not, individually or in the aggregate, have a Material Adverse Effect. (u) There are no legal or governmental proceedings involving or affecting the Company, any Subsidiary or to the knowledge of the Company after due inquiry, DuPont with respect to the IVD Business or any of their respective properties or assets which would be required to be described in a prospectus pursuant to the Act that are not described in the Final Memorandum, nor are there any material contracts or other documents which would be required to be described in a prospectus pursuant to the Act that are not described in the Final Memorandum. (v) Except as would not, individually or in the aggregate, have a Material Adverse Effect, (A) each of the Company, the Subsidiaries and to the knowledge of the Company after due inquiry, DuPont with respect to the IVD Business is -11- in compliance with and not subject to liability under applicable Environmental Laws, (B) each of the Company, the Subsidiaries and to the knowledge of the Company after due inquiry, DuPont with respect to the IVD Business has made all filings and provided all notices required under any applicable Environmental Law, and has and is in compliance with all Permits required under any applicable Environmental Laws and each of them is in full force and effect, (C) there is no civil, criminal or administrative action, suit, demand, claim, hearing, notice of violation, investigation, proceeding, notice or demand letter or request for information pending or, to the knowledge of the Company or any of the Subsidiaries, threatened against the Company, any of the Subsidiaries or to the knowledge of the Company after due inquiry, DuPont with respect to the IVD Business under any Environmental Law, (D) no lien, charge, encumbrance or restriction has been recorded under any Environmental Law with respect to any assets, facility or property owned, operated, leased or controlled by the Company, any of the Subsidiaries or to the knowledge of the Company after due inquiry, DuPont with respect to the IVD Business, (E) none of the Company, the Subsidiaries or to the knowledge of the Company after due inquiry, DuPont with respect to the IVD Business has received notice that it has been identified as a potentially responsible party under the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended ("CERCLA"), or any comparable state law, (F) no ------ property or facility of the Company, any of the Subsidiaries or to the knowledge of the Company after due inquiry the IVD Business is (i) listed or proposed for listing on the National Priorities List under CERCLA or is (ii) listed in the Comprehensive Environmental Response, Compensation, Liability Information System List promulgated pursuant to CERCLA, or on any comparable list maintained by any state or local governmental authority. For purposes of this Agreement, "Environmental Laws" means the common law and all applicable federal, state and local laws or regulations, codes, orders, decrees, judgments or injunctions issued, promulgated, approved or entered thereunder, relating to pollution or protection of public or employee health and safety or the environment, including, without limitation, laws relating to (i) emissions, discharges, releases or threatened releases of hazardous materials, into the environment (including, without limitation, ambient air, surface water, ground water, land surface or subsurface strata), (ii) the manufacture, processing, distribution, use, generation, treatment, storage, disposal, transport or handling of -12- hazardous materials, and (iii) underground and above ground storage tanks, and related piping, and emissions, discharges, releases or threatened releases therefrom. (w) There is no strike, labor dispute, slowdown or work stoppage with the employees of the Company, any of the Subsidiaries or the IVD Business which is pending or, to the knowledge of the Company or any of the Subsidiaries, threatened. (x) Each of the Company, the Subsidiaries and the IVD Business carries insurance in such amounts and covering such risks as is adequate for the conduct of its business and the value of its properties. (y) None of the Company, the Subsidiaries or, to the knowledge of the Company, the IVD Business has any liability for any prohibited transaction or funding deficiency or any complete or partial withdrawal liability with respect to any pension, profit sharing or other plan which is subject to the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), to which the Company, any of the Subsidiaries or, to ----- the knowledge of the Company, the IVD Business makes or ever has made a contribution and in which any employee of the Company, of any Subsidiary or of the IVD Business is or has ever been a participant. With respect to such plans, the Company, each Subsidiary and, to the knowledge of the Company, the IVD Business are in compliance in all material respects with all applicable provisions of ERISA. (z) Each of the Company and the Subsidiaries (i) makes and keeps accurate books and records and (ii) maintains internal accounting controls which provide reasonable assurance that (A) transactions are executed in accordance with management's authorization, (B) transactions are recorded as necessary to permit preparation of its financial statements and to maintain accountability for its assets, (C) access to its assets is permitted only in accordance with management's authorization and (D) the reported accountability for its assets is compared with existing assets at reasonable intervals. (aa) None of the Company or the Subsidiaries will be an "investment company" or "promoter" or "principal under writer" for an "investment company," as such terms are defined in the Investment Company Act of 1940, as amended, and the rules and regulations thereunder. -13- (bb) The Notes, the Exchange Notes, the Indenture and the Registration Rights Agreement will conform in all material respects to the descriptions thereof in the Final Memorandum. (cc) No holder of securities of the Company or any Subsidiary will be entitled to have such securities registered under the registration statements required to be filed by the Company pursuant to the Registration Rights Agreement other than as expressly permitted thereby. (dd) Immediately after the consummation of the transactions contemplated by this Agreement and the Asset Purchase Agreement, the fair value and present fair saleable value of the assets of the Company will exceed the sum of its stated liabilities and identified contingent liabilities; the Company is not, nor will the Company be, after giving effect to the execution, delivery and performance of this Agreement and the Asset Purchase Agreement, and the consummation of the transactions contemplated hereby and thereby, (a) left with unreasonably small capital with which to carry on its business as it is proposed to be conducted, (b) unable to pay its debts (contingent or otherwise) as they mature or (c) otherwise insolvent. (ee) Neither the Company nor its respective Affiliates (as defined in Rule 501(b) of Regulation D under the Act) has directly, or through any agent, (i) sold, offered for sale, solicited offers to buy or otherwise negotiated in respect of, any "security" (as defined in the Act) which is or could be integrated with the sale of the Notes in a manner that would require the registration under the Act of the Notes or (ii) engaged in any form of general solicitation or general advertising (as those terms are used in Regulation D under the Act) in connection with the offering of the Notes or in any manner involving a public offering within the meaning of Section 4(2) of the Act. (ff) Assuming the accuracy of the representations and warranties of the Initial Purchasers in Section 8 hereof, it is not necessary in connection with the offer, sale and delivery of the Notes to the Initial Purchasers in the manner contemplated by this Agreement to register any of the Notes under the Act or to qualify the Indenture under the TIA. (gg) No securities of the Company are of the same class (within the meaning of Rule 144A under the Act) as the Notes and listed on a national securities exchange registered -14- under Section 6 of the Exchange Act, or quoted in a U.S. automated inter-dealer quotation system. (hh) None of the Company or the Subsidiaries has taken, nor will any of them take, directly or indirectly, any action designed to, or that might be reasonably expected to, cause or result in stabilization or manipulation of the price of the Notes. Any certificate signed by any officer of the Company or any Subsidiary and delivered to any Initial Purchaser or to counsel for the Initial Purchasers shall be deemed a joint and several representation and warranty by the Company and each of the Subsidiaries to each Initial Purchaser as to the matters covered thereby. 3. Purchase, Sale and Delivery of the Notes. On ---------------------------------------- the basis of the representations, warranties, agreements and covenants herein contained and subject to the terms and conditions herein set forth, the Company agrees to issue and sell to the Initial Purchasers, and the Initial Purchasers, acting severally and not jointly, agree to purchase the Notes in the respective amounts set forth on Schedule 1 hereto from ---------- the Company, at 97% of their principal amount. One or more certificates in definitive form for the Notes that the Initial Purchasers have agreed to purchase hereunder, and in such denomination or denominations and registered in such name or names as the Initial Purchasers request upon notice to the Company at least 36 hours prior to the Closing Date, shall be delivered by or on behalf of the Company to the Initial Purchasers, against payment by or on behalf of the Initial Purchasers of the purchase price therefor by wire transfer (same day funds), net of the overnight cost of such funds, to such account or accounts as the Company shall specify prior to the Closing Date, or by such means as the parties hereto shall agree prior to the Closing Date. Such delivery of and payment for the Notes shall be made at the offices of Cahill Gordon & Reindel, 80 Pine Street, New York, New York at 10:00 A.M., New York time, on May 7, 1996, or at such other place, time or date as the Initial Purchasers, on the one hand, and the Company, on the other hand, may agree upon, such time and date of delivery against payment being herein referred to as the "Closing Date." ------------ The Company will make such certificate or certificates for the Notes available for checking and packaging by the Initial Purchasers at the offices of BT Securities Corporation in New York, New York, or at such other place as BT Securities Corporation may designate, at least 24 hours prior to the Closing Date. -15- 4. Offering by the Initial Purchasers. The Initial ---------------------------------- Purchasers propose to make an offering of the Notes at the price and upon the terms set forth in the Final Memorandum, as soon as practicable after this Agreement is entered into and as in the judgment of the Initial Purchasers is advisable. 5. Covenants of the Company. The Company covenants ------------------------ and agrees with each of the Initial Purchasers that: (a) The Company will not amend or supplement the Final Memorandum or any amendment or supplement thereto of which the Initial Purchasers shall not previously have been advised and furnished a copy for a reasonable period of time prior to the proposed amendment or supplement and as to which the Initial Purchasers shall not have given their consent. The Company will promptly, upon the reasonable request of the Initial Purchasers or counsel for the Initial Purchasers, make any amendments or supplements to the Preliminary Memorandum or the Final Memorandum that may be necessary or advisable in connection with the resale of the Notes by the Initial Purchasers. (b) The Company will cooperate with the Initial Purchasers in arranging for the qualification of the Notes for offering and sale under the securities or "Blue Sky" laws of which jurisdictions as the Initial Purchasers may designate and will continue such qualifications in effect for as long as may be necessary to complete the resale of the Notes; provided, -------- however, that in connection therewith, the Company shall not be - ------- required to qualify as a foreign corporation or to execute a general consent to service of process in any jurisdiction or subject itself to taxation in excess of a nominal dollar amount in any such jurisdiction where it is not then so subject. (c) If, at any time prior to the completion of the distribution by the Initial Purchasers of the Notes or the Private Exchange Notes, any event occurs or information becomes known as a result of which the Final Memorandum as then amended or supplemented would include any untrue statement of a material fact, or omit to state a material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading, or if for any other reason it is necessary at any time to amend or supplement the Final Memorandum to comply with applicable law, the Company will promptly notify the Initial Purchasers thereof and will prepare, at the expense of the Company, an amendment or supplement to the Final Memorandum that corrects such statement or omission or effects such compliance. -16- (d) The Company will, without charge, provide to the Initial Purchasers and to counsel for the Initial Purchasers as many copies of the Preliminary Memorandum and the Final Memorandum or any amendment or supplement thereto as the Initial Purchasers may reasonably request. (e) The Company will apply the net proceeds from the sale of the Notes as set forth under "Use of Proceeds" in the Final Memorandum. (f) For so long as any of the Notes remain outstanding, the Company will furnish to the Initial Purchasers copies of all reports and other communications (financial or otherwise) furnished by the Company to the Trustee, or the holders of the Notes and, as soon as available, copies of any reports or financial statements furnished to or filed by the Company with the Commission or any national securities exchange on which any class of securities of the Company may be listed. (g) Prior to the Closing Date, the Company will furnish to the Initial Purchasers, as soon as they have been prepared, a copy of any unaudited interim financial statements of the Company and the IVD Business for any period subsequent to the period covered by the most recent financial statements appearing in the Final Memorandum. (h) None of the Company or any of its Affiliates will sell, offer for sale or solicit offers to buy or otherwise negotiate in respect of any "security" (as defined in the Act) which could be integrated with the sale of the Notes in a manner which would require the registration under the Act of the Notes. (i) The Company will not, and will not permit any of the Subsidiaries to, engage in any form of general solicitation or general advertising (as those terms are used in Regulation D under the Act) in connection with the offering of the Notes or in any manner involving a public offering within the meaning of Section 4(2) of the Act. (j) For so long as any of the Notes remain outstanding, the Company will make available, upon request, to any seller of such Notes the information specified in Rule 144A(d)(4) under the Act, unless the Company is then subject to Section 13 or 15(d) of the Exchange Act. -17- (k) The Company will use its best efforts to (i) permit the Notes to be designated PORTAL securities in accordance with the rules and regulations adopted by the NASD relating to trading in the Private Offerings, Resales and Trading through Automated Linkages market (the "Portal Market") ------------- and (ii) permit the Notes to be eligible for clearance and settlement through The Depository Trust Company. 6. Expenses. The Company agrees to pay all costs -------- and expenses incident to the performance of its obligations under this Agreement, whether or not the transactions contemplated herein are consummated or this Agreement is terminated pursuant to Section 11 hereof, including all costs and expenses incident to (i) the printing, word processing or other production of documents with respect to the transactions contemplated hereby, including any costs of printing the Preliminary Memorandum and the Final Memorandum and any amendment or supplement thereto, and any "Blue Sky" memoranda, (ii) all arrangements relating to the delivery to the Initial Purchasers of copies of the foregoing documents, (iii) the fees and disbursements of the counsel, the accountants and any other experts or advisors retained by the Company, (iv) preparation (including printing), issuance and delivery to the Initial Purchasers of the Notes, (v) the qualification of the Notes under state securities and "Blue Sky" laws, including filing fees and fees and disbursements of counsel for the Initial Purchasers relating thereto, (vi) expenses of the Company in connection with any meetings with prospective investors in the Notes, (vii) fees and expenses of the Trustee including fees and expenses of counsel, (viii) all expenses and listing fees incurred in connection with the application for quotation of the Notes on the PORTAL Market and (ix) any fees charged by investment rating agencies for the rating of the Notes. If the sale of the Notes provided for herein is not consummated because any condition to the obligations of the Initial Purchasers set forth in Section 7 hereof is not satisfied, because this Agreement is terminated pursuant to Section 11 hereof or because of any failure, refusal or inability on the part of the Company to perform all obligations and satisfy all conditions on its part to be performed or satisfied hereunder (other than solely by reason of a default by the Initial Purchasers of their obligations hereunder after all conditions hereunder have been satisfied in accordance herewith), the Company agrees to promptly reimburse the Initial Purchasers upon demand for all out-of-pocket expenses (including fees, disbursements and charges of Cahill Gordon & Reindel, counsel for the Initial Purchasers) that -18- shall have been incurred by the Initial Purchasers in connection with the proposed purchase and sale of the Notes. 7. Conditions of the Initial Purchasers' ------------------------------------ Obligations. The obligation of the Initial Purchasers to - ----------- purchase and pay for the Notes shall, in their sole discretion, be subject to the satisfaction or waiver of the following conditions on or prior to the Closing Date: (a) All of the conditions contained in the Credit Agreement to be fulfilled or complied with prior to any borrowing under such agreement shall have been complied with; and the financing for the Acquisition (other than the offering and sale of the Notes as set forth herein and the application of the proceeds therefrom) shall have been consummated or shall be consummated simultaneously herewith. (b) On the Closing Date, the Initial Purchasers shall have received the opinion, dated as of the Closing Date and addressed to the Initial Purchasers, of Kirkland & Ellis, counsel for the Company, in form and substance satisfactory to counsel for the Initial Purchasers, to the effect that: (i) Each of the Company and the Subsidiaries on Schedule A attached to such opinion is duly incorporated, validly existing and in good standing under the laws of its respective jurisdiction of incorporation and has all requisite corporate power and authority to own, lease and operate its properties and to conduct its business as described in the Final Memorandum. The Company is duly qualified as a foreign corporation and in good standing in the jurisdictions set forth on Schedule B attached to such opinion. (ii) The Company has the capitalization set forth in the Final Memorandum; all of the outstanding shares of capital stock of the Company have been duly authorized and validly issued, are fully paid and nonassessable and were not issued in violation of any preemptive or similar rights. (iii) Except as set forth in or contemplated by the Final Memorandum, (A) no options, warrants or other rights to purchase from the Company shares of capital stock or ownership interests in the Company are outstanding, (B) no agreements or other obligations of the Company to issue, or other rights to cause the Company to convert, any -19- obligation into, or exchange any securities for, shares of capital stock or ownership interests in the Company are outstanding and (C) no holder of securities of the Company is entitled to have such securities registered under a registration statement filed by the Company pursuant to the Registration Rights Agreement. (iv) The Company has all requisite corporate power and authority to execute, deliver and perform its obligations under the Indenture, the Notes, the Exchange Notes and the Private Exchange Notes; the Indenture is in sufficient form for qualification under the TIA; the Indenture has been duly and validly authorized by the Company and, when duly executed and delivered by the Company (assuming the due authorization, execution and delivery thereof by the Trustee), will constitute the valid and legally binding agreement of the Company, enforceable against the Company in accordance with its terms, except that the enforcement thereof may be subject to (i) bankruptcy, insolvency, reorganization, moratorium or other similar laws now or hereafter in effect relating to creditors' rights generally and (ii) general principles of equity and the discretion of the court before which any proceeding therefor may be brought. (v) The Notes are in the form contemplated by the Indenture. The Notes have each been duly and validly authorized by the Company and when duly executed and delivered by the Company and paid for by the Initial Purchasers in accordance with the terms of this Agreement (assuming the due authorization, execution and delivery of the Indenture by the Trustee and due authentication and delivery of the Notes by the Trustee in accordance with the Indenture), will constitute the valid and legally binding obligations of the Company, entitled to the benefits of the Indenture, and enforceable against the Company in accordance with their terms, except that the enforcement thereof may be subject to (i) bankruptcy, insolvency, reorganization, moratorium or other similar laws now or hereafter in effect relating to creditors' rights generally and (ii) general principles of equity and the discretion of the court before which any proceeding therefor may be brought. (vi) The Exchange Notes and the Private Exchange Notes have been duly and validly authorized by the Company and, when the Exchange Notes and the Private Exchange -20- Notes have been duly executed and delivered by the Company in accordance with the terms of the Registration Rights Agreement and the Indenture (assuming the due authorization, execution and delivery of the Indenture by the Trustee and due authentication and delivery of the Exchange Notes and the Private Exchange Notes by the Trustee in accordance with the Indenture), will constitute the valid and legally binding obligations of the Company, entitled to the benefits of the Indenture, and enforceable against the Company in accordance with their terms, except that the enforcement thereof may be subject to (i) bankruptcy, insolvency, reorganization, moratorium or other similar laws now or hereafter in effect relating to creditors' rights generally and (ii) general principles of equity and the discretion of the court before which any proceeding therefor may be brought. (vii) The Company has all requisite corporate power and authority to execute, deliver and perform its obligations under the Registration Rights Agreement; the Registration Rights Agreement has been duly and validly authorized by the Company and, when duly executed and delivered by the Company (assuming due authorization, execution and delivery thereof by the Initial Purchasers), will constitute the valid and legally binding agreement of the Company enforceable against the Company in accordance with its terms, except that (A) the enforcement thereof may be subject to (i) bankruptcy, insolvency, reorganization, moratorium or other similar laws now or hereafter in effect relating to creditors' rights generally and (ii) general principles of equity and the discretion of the court before which any proceeding therefor may be brought and (B) any rights to indemnity or contribution thereunder may be limited by federal and state securities laws and public policy considerations. (viii) The Company has all requisite corporate power and authority to execute, deliver and perform its obligations under this Agreement and to consummate the transactions contemplated hereby; this Agreement and the consummation by the Company of the transactions contemplated hereby have been duly and validly authorized by the Company. This Agreement has been duly executed and delivered by the Company. (ix) The Indenture, the Notes, the Exchange Notes and the Registration Rights Agreement conform as to legal -21- matters in all material respects to the descriptions thereof contained in the Final Memorandum. (x) To the knowledge of such counsel, no legal or governmental proceedings are pending to which the Company is, or upon consummation of the Acquisition will be, a party or to which the property or assets of the Company is subject which would be required under the Act to be described in a registration statement or in a prospectus and are not described in the Final Memorandum, or which seek to restrain, enjoin, prevent the consummation of or otherwise challenge the issuance or sale of the Notes to be sold hereunder or the consummation of the other transactions described in the Final Memorandum under the caption "Use of Proceeds" or the "Transactions." (xi) To the knowledge of such counsel, no contract, agreement or other document to which the Company or any of the Subsidiaries is, or upon consummation of the Acquisition will be, a party would be required under the Act to be described in a registration statement or prospectus that is not described in the Final Memorandum; provided, however, that no opinion is expressed with respect to the matters summarized, or required to be summarized, under "Private Placement" in the Final Memorandum. (xii) The Company is not, and upon consummation of the Acquisition will not be, (i) in violation of its certificate of incorporation or bylaws (or similar organizational document), (ii) to the knowledge such counsel, in breach or violation of any statute, judgment, decree, order, rule or regulation applicable to any of them or any of their respective properties or assets, except for any such breach or violation which would not, individually or in the aggregate, have a Material Adverse Effect, or (iii) to the knowledge of such counsel, in breach or default under (nor has any event occurred which, with notice or passage of time or both, would constitute a default under) or in violation of any of the terms or provisions of any contract set forth on Schedule 3 to this Agreement, except for any such breach, default, violation or event which would not, individually or in the aggregate, have a Material Adverse Effect. (xiii) The execution and delivery of this Agreement, the Indenture, the Registration Rights Agreement, the Asset Purchase Agreement and the related documents and the -22- consummation of the transactions contemplated hereby and thereby (including, without limitation, the issuance and sale of the Notes to the Initial Purchasers) will not conflict with or constitute or result in a breach or a default under (or an event which with notice or passage of time or both would constitute a default under) or violation of any of (i) the terms or provisions of any contract set forth on Schedule 3 to this Agreement, except for any such conflict, breach, violation, default or event which would not, individually or in the aggregate, have a Material Adverse Effect, (ii) the certificate of incorporation or bylaws (or similar organizational document) of the Company, or (iii) (assuming compliance with all applicable state securities or "Blue Sky" laws and assuming the accuracy of the representations and warranties of the Initial Purchasers in Section 8 hereof) any statute, judgment, decree, order, rule or regulation which, in our experience, is normally applicable both to general business corporations which are not engaged in regulated business activities and to transactions of the type contemplated by the Final Memorandum (but without our having made any special investigation as to other laws and provided that such opinion need not cover any laws or regulations to which the Company or its affiliates may be subject as a result of any of the Initial Purchasers' legal or regulatory status or the involvement of any of the Initial Purchasers in such transaction), except for any such conflict, breach or violation which would not, individually or in the aggregate, have a Material Adverse Effect. (xiv) To the knowledge of such counsel, no consent, approval, authorization or order of any governmental authority is required for the performance of the Asset Purchase Agreement and the related documents or the issuance and sale by the Company of the Notes to the Initial Purchasers or the other transactions contemplated hereby, except such as may be required under Blue Sky laws, as to which such counsel need express no opinion, and those which have previously been obtained. (xv) None of the Company or the Subsidiaries is, or immediately after the sale of the Notes to be sold hereunder and the application of the proceeds from such sale (as described in the Final Memorandum under the caption "Use of Proceeds") will be, an "investment company" as such term is defined in the Investment Company Act of 1940, as amended. -23- (xvi) No registration under the Act of the Notes is required in connection with the sale of the Notes to the Initial Purchasers as contemplated by this Agreement and the Final Memorandum or in connection with the initial resale of the Notes by the Initial Purchasers in accordance with Section 8 of this Agreement, and prior to the commencement of the Exchange Offer (as defined in the Registration Rights Agreement) or the effectiveness of the Shelf Registration Statement (as defined in the Registration Rights Agreement), the Indenture is not required to be qualified under the TIA, in each case assuming (i) that the purchasers who buy such Notes in the initial resale thereof are qualified institutional buyers as defined in Rule 144A promulgated under the Act ("QIBs") or accredited investors as defined in Rule 501(a) (1), (2), (3) or (7) promulgated under the Act ("Accredited Investors"), (ii) the accuracy of the Initial Purchasers' representations in Section 8 and those of the Company contained in this Agreement regarding the absence of a general solicitation in connection with the sale of such Notes to the Initial Purchasers and the initial resale thereof, (iii) the due performance by the Initial Purchasers of the agreements set forth in Section 8 hereof and (iv) the accuracy of the representations made by each Accredited Investor who purchases Notes in the initial resale as set forth in the Final Memorandum. (xvii) Neither the consummation of the transactions contemplated by this Agreement nor the sale, issuance, execution or delivery of the Notes will violate Regulation G, T, U or X of the Board of Governors of the Federal Reserve System. (xviii) The Company has all requisite corporate power and corporate authority to execute, deliver and perform its obligations under the Asset Purchase Agreement; the Asset Purchase Agreement has been duly authorized by requisite corporate action on the part of the Company and constitutes the legal, valid and binding agreement of the Company, enforceable against the Company in accordance with its terms, except that the enforcement thereof may be subject to (i) bankruptcy, insolvency, reorganization, moratorium or other similar laws now or hereafter in effect relating to creditors' rights generally and (ii) general principles of equity and the discretion of the court before which any proceeding therefor may be brought. -24- (xix) The Credit Agreement has been duly authorized, executed and delivered by the Company and Holdings. At the time the foregoing opinion is delivered, Kirkland & Ellis shall additionally state that it has participated in conferences with officers and other representatives of the Company, representatives of the independent public accountants for the Company, representatives of the Initial Purchasers and counsel for the Initial Purchasers, at which conferences the contents of the Final Memorandum and related matters were discussed, and, although it has not independently verified and is not passing upon and assumes no responsibility for the accuracy, completeness or fairness of the statements contained in the Final Memorandum (except to the extent specified in subsection 7(b)(ix)), no facts have come to its attention which lead it to believe that the Final Memorandum, on the date thereof or at the Closing Date, contained an untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary to make the statements contained therein, in the light of the circumstances under which they were made, not misleading (it being understood that such firm need express no opinion with respect to the financial statements and related notes thereto and the other financial, statistical and accounting data included in the Final Memorandum). The opinion of Kirkland & Ellis described in this Section shall be rendered to the Initial Purchasers at the request of the Company and shall so state therein. References to the Final Memorandum in this subsection (b) shall include any amendment or supplement thereto prepared in accordance with the provisions of this Agreement at the Closing Date. In rendering such opinion, such counsel may state that they express no opinion as to the laws of any jurisdiction other than the federal laws of the United States, the laws of the State of New York and the Delaware General Corporation Law. Such counsel may also state that, insofar as such opinion involves factual matters, such counsel have relied, to the extent they deem proper, upon certificates of officers of the Company and certificates of public officials; provided that -------- such certificates have been provided to the Initial Purchasers; provided, further, that for the purposes of such opinion - -------- ------- "Material Adverse Effect" need not be defined to include the prospects of the Company and its Subsidiaries. -25- (c) On the Closing Date, the Initial Purchasers shall have received the opinion, in form and substance satisfactory to counsel for the Initial Purchasers, dated as of the Closing Date and addressed to the Initial Purchasers, of counsel for DuPont. (d) On the Closing Date, the Initial Purchaser shall have received the opinion, in form and substance satisfactory to the Initial Purchasers, dated as of the Closing Date and addressed to the Initial Purchasers, of Cahill Gordon & Reindel, counsel for the Initial Purchasers, with respect to certain legal matters relating to this Agreement and such other related matters as the Initial Purchasers may reasonably require. In rendering such opinion, Cahill Gordon & Reindel shall have received and may rely upon such certificates and other documents and information as it may reasonably request to pass upon such matters. (e) The Initial Purchasers shall have received from the Independent Accountants comfort letters dated the date hereof and the Closing Date, in form and substance satisfactory to counsel for the Initial Purchasers. (f) The representations and warranties of the Company contained in this Agreement shall be true and correct on and as of the date hereof and on and as of the Closing Date as if made on and as of the Closing Date; the statements of the Company's officers made pursuant to any certificate delivered in accordance with the provisions hereof shall be true and correct on and as of the date made and on and as of the Closing Date; the Company shall have performed all covenants and agreements and satisfied all conditions on its part to be performed or satisfied hereunder at or prior to the Closing Date; and, except as described in the Final Memorandum (exclusive of any amendment or supplement thereto after the date hereof), subsequent to the date of the most recent financial statements in such Final Memorandum, there shall have been no event or development that, individually or in the aggregate, has or would be reasonably likely to have a Material Adverse Effect. (g) The Acquisition and the sale of the Notes hereunder shall not be enjoined (temporarily or permanently) on the Closing Date. (h) Subsequent to the date of the most recent financial statements in the Final Memorandum (exclusive of any amendment or supplement thereto after the date hereof), the -26- conduct of the business and operations of the Company, any of the Subsidiaries or the IVD Business shall not have been interfered with by strike, fire, flood, hurricane, accident or other calamity (whether or not insured) or by any court or governmental action, order or decree, and, except as otherwise stated therein, the properties of the Company, any of the Subsidiaries or the IVD Business shall not have sustained any loss or damage (whether or not insured) as a result of any such occurrence, except any such interference, loss or damage which would not, individually or in the aggregate, have a Material Adverse Effect. (i) The Initial Purchasers shall have received a certificate of the Company, dated the Closing Date, signed by its Chairman of the Board, President or any Senior Vice President and the Chief Financial Officer, to the effect that: (i) The representations and warranties of the Company contained in this Agreement are true and correct as of the date hereof and as of the Closing Date, and the Company has performed all covenants and agreements and satisfied all conditions on its part to be performed or satisfied hereunder at or prior to the Closing Date; (ii) At the Closing Date, since the date hereof or since the date of the most recent financial statements in the Final Memorandum (exclusive of any amendment or supplement thereto after the date hereof), no event or events have occurred, no information has become known nor does any condition exist that, individually or in the aggregate, would have a Material Adverse Effect; (iii) The Acquisition and the sale of the Notes hereunder have not been enjoined (temporarily or permanently); and (iv) There have been no material amendments, alterations, modifications or waivers of any provisions of the Asset Purchase Agreement and related documents since the date of the execution and delivery thereof by the parties thereto; the Company, to the best knowledge of such officer after due inquiry, DuPont and its affiliates, to the extent each is a party thereto, have complied in all material respects with all agreements and covenants in the Asset Purchase Agreement and related documents and performed all conditions specified therein required to be -27- complied with or performed by them at or prior to the Closing Date. (j) On the Closing Date, the Initial Purchasers shall have received the Registration Rights Agreement executed by the Company and such agreement shall be in full force and effect at all times from and after the Closing Date. (k) The Tender Offer and the Consent Solicitation shall have been completed and the Company shall have received tenders and consents representing at least a majority in aggregate principal amount of the Old Notes outstanding to the amendments to the Old Notes Indenture set forth in the Offer to Purchase and Consent Solicitation Statement dated April 7, 1996 as supplemented by the First Supplement thereto dated April 26, 1996. (l) The Supplemental Indenture shall have been duly executed by the Company and the Old Notes Trustee. (m) The Initial Purchasers shall have received from the Company a true and correct executed copy of the Credit Agreement, dated on or about the Closing Date, and there shall have been no material amendments, alterations, modifications or waivers of any provisions of the Credit Agreement, and there exists as of the date hereof and on and as of the Closing Date (after giving effect to the transactions contemplated by this Agreement and the application of the proceeds received by the Company from the sale of the Notes) no condition that would constitute a Default or an Event of Default (each as defined in the Credit Agreement) under the Credit Agreement. (n) The Initial Purchasers shall have received from the Company a true and correct executed copy of the Asset Purchase Agreement, and there shall have been no material amendments, alterations, modifications or waivers of any provisions of the Asset Purchase Agreement since the date of this Agreement; all conditions to effect the Acquisition set forth in the Asset Purchase Agreement shall have been satisfied without waiver. (o) On the Closing Date, the Initial Purchasers shall have received an opinion from Murray Devine & Co., in a form reasonably satisfactory to the Initial Purchasers, regarding the solvency of the Company immediately after the consummation of the Acquisition and the transactions contemplated thereby. -28- On or before the Closing Date, the Initial Purchasers and counsel for the Initial Purchasers shall have received such further documents, opinions, certificates, letters and schedules or instruments relating to the business, corporate, legal and financial affairs of the Company and the Subsidiaries as they shall have heretofore reasonably requested from the Company. All such documents, opinions, certificates, letters, schedules or instruments delivered pursuant to this Agreement will comply with the provisions hereof only if they are reasonably satisfactory in all material respects to the Initial Purchasers and counsel for the Initial Purchasers. The Company shall furnish to the Initial Purchasers such conformed copies of such documents, opinions, certificates, letters, schedules and instruments in such quantities as the Initial Purchasers shall reasonably request. 8. Offering of Notes; Restrictions on Transfer. ------------------------------------------- Each of the Initial Purchasers represents and warrants (as to itself only) that it is a QIB. Each of the Initial Purchasers agrees with the Company (as to itself only) that (i) it has not and will not solicit offers for, or offer or sell, the Notes by any form of general solicitation or general advertising (as those terms are used in Regulation D under the Act) or in any manner involving a public offering within the meaning of Section 4(2) of the Act; and (ii) it has and will solicit offers for the Notes only from, and will offer the Notes only to (A) in the case of offers inside the United States, (x) persons whom the Initial Purchasers reasonably believe to be QIBs or, if any such person is buying for one or more institutional accounts for which such person is acting as fiduciary or agent, only when such person has represented to the Initial Purchasers that each such account is a QIB, to whom notice has been given that such sale or delivery is being made in reliance on Rule 144A, and, in each case, in transactions under Rule 144A or (y) a limited number of other institutional investors reasonably believed by the Initial Purchasers to be Accredited Investors that, prior to their purchase of the Notes, deliver to the Initial Purchasers a letter containing the representations and agreements set forth in Annex A to the Final Memorandum and (B) in the case of offers outside the United States, to persons other than U.S. persons ("foreign purchasers," which term shall include dealers or other professional fiduciaries in the United States acting on a discretionary basis for foreign beneficial owners (other than an estate or trust)); provided, however, that in the case of -------- ------- this clause (B), in purchasing -29- such Notes such persons are deemed to have represented and agreed as provided under the caption "Transfer Restrictions" contained in the Final Memorandum. 9. Indemnification and Contribution. (a) The -------------------------------- Company agrees to indemnify and hold harmless the Initial Purchasers and the affiliates, directors, officers, agents, representatives and employees of the Initial Purchasers or their affiliates, and each other person, if any, who controls any Initial Purchaser or its affiliates within the meaning of Section 15 of the Act or Section 20 of the Exchange Act, against any losses, claims, damages or liabilities to which any Initial Purchaser or such other person may become subject under the Act, the Exchange Act or otherwise, insofar as any such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon: (i) any untrue statement or alleged untrue statement of any material fact contained in any Memorandum or any amendment or supplement thereto or any application or other document, or any amendment or supplement thereto, executed by the Company or based upon written information furnished by or on behalf of the Company filed in any jurisdiction in order to qualify the Notes under the securities or "Blue Sky" laws thereof or filed with any securities association or securities exchange (each an "Application"); or (ii) the omission or alleged omission to state, in any Memorandum or any amendment or supplement thereto or any Application, a material fact required to be stated therein or necessary to make the statements therein not misleading, and will reimburse, as incurred, the Initial Purchasers and each such other person for any legal or other expenses incurred by the Initial Purchasers or such other person in connection with investigating, defending against or appearing as a third-party witness in connection with any such loss, claim, damage, liability or action; provided, however, the Company -------- ------- will not be liable in any such case to the extent that any such loss, claim, damage, or liability arises out of or is based upon any untrue statement or alleged untrue statement or omission or alleged omission made in any Memorandum or any amendment or supplement thereto or any Application in reliance upon and in conformity with written information concerning the Initial Purchasers furnished to the Company by BT Securities -30- Corporation, on behalf of the Initial Purchasers, specifically for use therein. This indemnity agreement will be in addition to any liability that the Company may otherwise have to the indemnified parties; and provided, further, that the Company -------- ------- will not be liable to any of the Initial Purchasers or any other person controlling any of the Initial Purchasers or any of their respective affiliates, directors, officers, agents, representatives or employees with respect to any such untrue statement or omission made in the Preliminary Memorandum that is corrected in the Final Memorandum (or any amendment or supplement thereto) if the person asserting any such loss, claim, damage or liability purchased Notes from any of the Initial Purchasers in reliance upon the Preliminary Memorandum but was not sent or given a copy of the Final Memorandum (as amended or supplemented) at or prior to the written confirmation of the sale of such Notes to such person, unless such failure to deliver the Final Memorandum (as amended or supplemented) was a result of noncompliance by the Company with Section 5(d) of this Agreement. The Company shall not be liable under this Section 9 for any settlement of any claim or action effected without its prior written consent, which shall not be unreasonably withheld. (b) Each of the Initial Purchasers severally agrees to indemnify and hold harmless the Company, its directors, its officers and each person, if any, who controls the Company within the meaning of Section 15 of the Act or Section 20 of the Exchange Act against any losses, claims, damages or liabilities to which the Company or any such director, officer or controlling person may become subject under the Act, the Exchange Act or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon (i) any untrue statement or alleged untrue statement of any material fact contained in any Memorandum or any amendment or supplement thereto or any Application or (ii) the omission or the alleged omission to state therein a material fact required to be stated in any Memorandum or any amendment or supplement thereto or any Application, or necessary to make the statements therein not misleading, in each case to the extent, but only to the extent, that such untrue statement or alleged untrue statement or omission or alleged omission was made in reliance upon and in conformity with written information concerning such Initial Purchaser, furnished to the Company by the Initial Purchasers specifically for use therein; and subject to the limitation set forth immediately preceding this clause, will reimburse, as incurred, any legal or other expenses incurred by the Company or any such director, -31- officer or controlling person in connection with investigating or defending against or appearing as a third party witness in connection with any such loss, claim, damage, liability or action in respect thereof. This indemnity agreement will be in addition to any liability that the Initial Purchasers may otherwise have to the indemnified parties. The Initial Purchasers shall not be liable under this Section 9 for any settlement of any claim or action effected without their consent, which shall not be unreasonably withheld. The Company shall not, without the prior written consent of the Initial Purchasers, effect any settlement or compromise of any pending or threatened proceeding in respect of which any Initial Purchaser is or could have been a party, or indemnity could have been sought hereunder by any Initial Purchaser, unless such settlement (A) includes an unconditional written release of the Initial Purchasers, in form and substance reasonably satisfactory to the Initial Purchasers, from all liability on claims that are the subject matter of such proceeding and (B) does not include any statement as to an admission of fault, culpability or failure to act by or on behalf of any Initial Purchaser. (c) Promptly after receipt by an indemnified party under this Section 9 of notice of the commencement of any action for which such indemnified party is entitled to indemnification under this Section 9, such indemnified party will, if a claim in respect thereof is to be made against the indemnifying party under this Section 9, notify the indemnifying party of the commencement thereof in writing; but the omission to so notify the indemnifying party (i) will not relieve it from any liability under paragraph (a) or (b) above unless and to the extent such failure results in the forfeiture by the indemnifying party of substantial rights and defenses and (ii) will not, in any event, relieve the indemnifying party from any obligations to any indemnified party other than the indemnification obligation provided in paragraphs (a) and (b) above. In case any such action is brought against any indemnified party, and it notifies the indemnifying party of the commencement thereof, the indemnifying party will be entitled to participate therein and, to the extent that it may wish, jointly with any other indemnifying party similarly notified, to assume the defense thereof, with counsel reasonably satisfactory to such indemnified party; provided, -------- however, that if (i) the use of counsel chosen by the - ------- indemnifying party to represent the indemnified party would present such counsel with a conflict of interest, (ii) the defendants in any such action include both the indemnified party and the indemnifying party and the indemnified party shall have been advised by counsel that there may be one -32- or more legal defenses available to it and/or other indemnified parties that are different from or additional to those available to the indemnifying party, or (iii) the indemnifying party shall not have employed counsel reasonably satisfactory to the indemnified party to represent the indemnified party within a reasonable time after receipt by the indemnifying party of notice of the institution of such action, then, in each such case, the indemnifying party shall not have the right to direct the defense of such action on behalf of such indemnified party or parties and such indemnified party or parties shall have the right to select separate counsel to defend such action on behalf of such indemnified party or parties. After notice from the indemnifying party to such indemnified party of its election so to assume the defense thereof and approval by such indemnified party of counsel appointed to defend such action, the indemnifying party will not be liable to such indemnified party under this Section 9 for any legal or other expenses, other than reasonable costs of investigation, subsequently incurred by such indemnified party in connection with the defense thereof, unless (i) the indemnified party shall have employed separate counsel in accordance with the proviso to the immediately preceding sentence (it being understood, however, that in connection with such action the indemnifying party shall not be liable for the expenses of more than one separate counsel (in addition to local counsel) in any one action or separate but substantially similar actions in the same jurisdiction arising out of the same general allegations or circumstances, designated by the Initial Purchasers in the case of paragraph (a) of this Section 9 or the Company in the case of paragraph (b) of this Section 9, representing the indemnified parties under such paragraph (a) or paragraph (b), as the case may be, who are parties to such action or actions) or (ii) the indemnifying party has authorized in writing the employment of counsel for the indemnified party at the expense of the indemnifying party. After such notice from the indemnifying party to such indemnified party, the indemnifying party will not be liable for the costs and expenses of any settlement of such action effected by such indemnified party without the prior written consent of the indemnifying party (which consent shall not be unreasonably withheld), unless such indemnified party waived in writing its rights under this Section 9, in which case the indemnified party may effect such a settlement without such consent. (d) In circumstances in which the indemnity agreement provided for in the preceding paragraphs of this Section 9 is unavailable to, or insufficient to hold harmless, an -33- indemnified party in respect of any losses, claims, damages or liabilities (or actions in respect thereof), each indemnifying party, in order to provide for just and equitable contribution, shall contribute to the amount paid or payable by such indemnified party as a result of such losses, claims, damages or liabilities (or actions in respect thereof) in such proportion as is appropriate to reflect (i) the relative benefits received by the indemnifying party or parties on the one hand and the indemnified party on the other from the offering of the Notes or (ii) if the allocation provided by the foregoing clause (i) is not permitted by applicable law, not only such relative benefits but also the relative fault of the indemnifying party or parties on the one hand and the indemnified party on the other in connection with the statements or omissions or alleged statements or omissions that resulted in such losses, claims, damages or liabilities (or actions in respect thereof). The relative benefits received by the Company on the one hand and any Initial Purchaser on the other shall be deemed to be in the same proportion as the total proceeds from the offering (before deducting expenses) received by the Company bear to the total discounts and commissions received by such Initial Purchaser. The relative fault of the parties shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the Company on the one hand, or such Initial Purchaser on the other, the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission or alleged statement or omission, and any other equitable considerations appropriate in the circumstances. The Company and the Initial Purchasers agree that it would not be equitable if the amount of such contribution were determined by pro rata or per capita allocation or by any other method of allocation that does not take into account the equitable considerations referred to in the first sentence of this paragraph (d). Notwithstanding any other provision of this paragraph (d), no Initial Purchaser shall be obligated to make contributions hereunder that in the aggregate exceed the total discounts, commissions and other compensation received by such Initial Purchaser under this Agreement, less the aggregate amount of any damages that such Initial Purchaser has otherwise been required to pay by reason of the untrue or alleged untrue statements or the omissions or alleged omissions to state a material fact, and no person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. For purposes of this -34- paragraph (d), each person, if any, who controls an Initial Purchaser within the meaning of Section 15 of the Act or Section 20 of the Exchange Act shall have the same rights to contribution as the Initial Purchasers, and each director of the Company, each officer of the Company and each person, if any, who controls the Company within the meaning of Section 15 of the Act or Section 20 of the Exchange Act, shall have the same rights to contribution as the Company. 10. Survival Clause. The respective --------------- representations, warranties, agreements, covenants, indemnities and other statements of the Company, its officers and the Initial Purchasers set forth in this Agreement or made by or on behalf of them pursuant to this Agreement shall remain in full force and effect, regardless of (i) any investigation made by or on behalf of the Company, any of its officers or directors, the Initial Purchasers or any other person referred to in Section 9 hereof and (ii) delivery of and payment for the Notes. The respective agreements, covenants, indemnities and other statements set forth in Sections 6, 9 and 15 hereof shall remain in full force and effect, regardless of any termination or cancellation of this Agreement. 11. Termination. (a) This Agreement may be ----------- terminated in the sole discretion of the Initial Purchasers by notice to the Company given prior to the Closing Date in the event that the Company shall have failed, refused or been unable to perform all obligations and satisfy all conditions on its part to be performed or satisfied hereunder at or prior thereto or, if at or prior to the Closing Date: (i) any of the Company, the Subsidiaries or the IVD Business shall have sustained any loss or interference with respect to its businesses or properties from fire, flood, hurricane, accident or other calamity, whether or not covered by insurance, or from any strike, labor dispute, slow down or work stoppage or any legal or governmental proceeding, which loss or interference, in the sole judgment of the Initial Purchasers, has had or has a Material Adverse Effect, or there shall have been, in the sole judgment of the Initial Purchasers, any event or development that, individually or in the aggregate, has or could be reasonably likely to have a Material Adverse Effect (including without limitation a change in control of the Company), except in each case as described in the Final Memorandum (exclusive of any amendment or supplement thereto); -35- (ii) trading in securities of the Company or in securities generally on the New York Stock Exchange, American Stock Exchange or the Nasdaq National Market shall have been suspended or minimum or maximum prices shall have been established on any such exchange or market; (iii) a banking moratorium shall have been declared by New York or United States authorities; (iv) there shall have been (A) an outbreak or escalation of hostilities between the United States and any foreign power, or (B) an outbreak or escalation of any other insurrection or armed conflict involving the United States or any other national or international calamity or emergency, or (C) any material change in the financial markets of the United States which, in the case of (A), (B) or (C) above and in the sole judgment of the Initial Purchasers, makes it impracticable or inadvisable to proceed with the public offering or the delivery of the Notes as contemplated by the Final Memorandum; or (v) any securities of the Company (other than the Old Notes) shall have been downgraded or placed on any "watch list" for possible downgrading by any nationally recognized statistical rating organization. (b) Termination of this Agreement pursuant to this Section 11 shall be without liability of any party to any other party except as provided in Section 10 hereof. 12. Information Supplied by the Initial Purchasers. ---------------------------------------------- The statements set forth in the last paragraph on the front cover page and in the last two paragraphs and the last two sentences of the third paragraph under the heading "Private Placement" in the Final Memorandum (to the extent such statements relate to the Initial Purchasers) constitute the only information furnished by the Initial Purchasers to the Company for the purposes of Sections 2(a) and 9 hereof. 13. Notices. All communications hereunder shall be ------- in writing and, if sent to the Initial Purchasers, shall be mailed or delivered to BT Securities Corporation, 130 Liberty Street, New York, New York 10006, Attention: Corporate Finance Department; if sent to the Company, shall be mailed or delivered to the Company at 1717 Deerfield Road, Deerfield, IL 60015-0778, Attention: Chief Financial Officer; with a copy to -36- Kirkland & Ellis, 153 East 53rd Street, New York, NY 10022-4675, Attention: Lance Balk, Esq. All such notices and communications shall be deemed to have been duly given: when delivered by hand, if personally delivered; five business days after being deposited in the mail, postage prepaid, if mailed; and one business day after being timely delivered to a next-day air courier. 14. Successors. This Agreement shall inure to the ---------- benefit of and be binding upon the Initial Purchasers, the Company and their respective successors and legal representatives, and nothing expressed or mentioned in this Agreement is intended or shall be construed to give any other person any legal or equitable right, remedy or claim under or in respect of this Agreement, or any provisions herein contained; this Agreement and all conditions and provisions hereof being intended to be and being for the sole and exclusive benefit of such persons and for the benefit of no other person except that (i) the indemnities of the Company contained in Section 9 of this Agreement shall also be for the benefit of any person or persons who control the Initial Purchasers within the meaning of Section 15 of the Act or Section 20 of the Exchange Act and (ii) the indemnities of the Initial Purchasers contained in Section 9 of this Agreement shall also be for the benefit of the directors and officers of the Company and any person or persons who control the Company within the meaning of Section 15 of the Act or Section 20 of the Exchange Act. No purchaser of Notes from the Initial Purchasers will be deemed a successor because of such purchase. 15. APPLICABLE LAW. THE VALIDITY AND INTERPRETATION -------------- OF THIS AGREEMENT, AND THE TERMS AND CONDITIONS SET FORTH HEREIN SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS MADE AND TO BE PERFORMED WHOLLY THEREIN, WITHOUT GIVING EFFECT TO ANY PROVISIONS THEREOF RELATING TO CONFLICTS OF LAW. 16. Counterparts. This Agreement may be executed in ------------ two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. If the foregoing correctly sets forth our understanding, please indicate your acceptance thereof in the space provided below for that purpose, whereupon this letter shall constitute a binding agreement between the Company and the Initial Purchasers. Very truly yours, DADE INTERNATIONAL INC. By: /s/ Kinzie L. Weimer -------------------------- Name: KINZIE L. WEIMER Title: SENIOR VICE PRESIDENT ANDD CHIEF FINANCIAL OFFICER The foregoing Agreement is hereby confirmed and accepted as of the date first above written. BT SECURITIES CORPORATION By: /s/ David F. Jacobs __________________________ Name: Title: CS FIRST BOSTON CORPORATION By: /s/ Mark R. Patterson __________________________ Name: Mark R. Patterson Title: Managing Director MORGAN STANLEY & CO. INCORPORATED By: /s/ Nicholas Osborne __________________________ Name: Nicholas Osborne Title: Vice President EX-4.3 6 REG. RIGHTS AGREEMENT DATED 05/07/96 EXHIBIT 4.3 - -------------------------------------------------------------------------------- REGISTRATION RIGHTS AGREEMENT Dated as of May 7, 1996 By and Among DADE INTERNATIONAL INC. and BT SECURITIES CORPORATION CS FIRST BOSTON CORPORATION and MORGAN STANLEY & CO. INCORPORATED as Initial Purchasers - -------------------------------------------------------------------------------- $350,000,000 11 1/8% SENIOR SUBORDINATED NOTES DUE 2006 TABLE OF CONTENTS Page 1. Definitions................................................. 1 2. Exchange Offer.............................................. 5 3. Shelf Registration.......................................... 8 4. Additional Interest......................................... 9 5. Registration Procedures..................................... 12 6. Registration Expenses....................................... 22 7. Indemnification............................................. 23 8. Rule 144 and 144A........................................... 27 9. Underwritten Registrations.................................. 28 10. Miscellaneous............................................... 28 (a) No Inconsistent Agreements............................ 28 (b) Adjustments Affecting Registrable Notes............................................... 29 (c) Amendments and Waivers................................ 29 (d) Notices............................................... 29 (e) Successors and Assigns................................ 30 (f) Counterparts.......................................... 31 (g) Headings.............................................. 31 (h) Governing Law......................................... 31 (i) Severability.......................................... 31 (j) Notes Held by the Company or its Affiliates.......................................... 31 (k) Third Party Beneficiaries............................. 31 -i- REGISTRATION RIGHTS AGREEMENT This Registration Rights Agreement (this "Agreement"), dated as of May 7, 1996, is being entered into by --------- and among Dade International Inc., a Delaware corporation (the "Company"), and BT Securities Corporation, CS First Boston ------- Corporation and Morgan Stanley & Co. Incorporated (the "Initial ------- Purchasers"). - ---------- This Agreement is being entered into in connection with the Purchase Agreement, dated April 30, 1996, between the Company and the Initial Purchasers (the "Purchase Agreement"), ------------------ which provides for the sale by the Company to the Initial Purchasers of $350,000,000 aggregate principal amount of the Company's 11 1/8% Senior Subordinated Notes due 2006 (the "Notes"). 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 for the benefit of the Initial Purchasers and their direct and indirect transferees. The execution and delivery of this Agreement is a condition to the obligation of the Initial Purchasers to purchase the Notes under the Purchase Agreement. The parties hereby agree as follows: 1. Definitions As used in this Agreement, the following terms shall have the following meanings: Additional Interest: See Section 4(a) hereof. ------------------- Advice: See the last paragraph of Section 5 hereof. ------ Agreement: See the first introductory paragraph --------- hereto. Applicable Period: See Section 2(b) hereof. ----------------- Closing Date: The Closing Date as defined in the ------------ Purchase Agreement. Company: See the first introductory paragraph ------- hereto. Effectiveness Date: The 225th day after the Issue ------------------ Date. Effectiveness Period: See Section 3(a) hereof. -------------------- -2- Event Date: See Section 4(b) hereof. ---------- Exchange Act: The Securities Exchange Act of 1934, ------------ as amended, and the rules and regulations of the SEC promulgated thereunder. Exchange Notes: See Section 2(a) hereof. -------------- Exchange Offer: See Section 2(a) hereof. -------------- Exchange Registration Statement: See Section 2(a) ------------------------------- hereof. Filing Date: The 150th day after the Issue Date. ----------- Holder: Any holder of a Registrable Note or ------ Registrable Notes. Indemnified Person: See Section 7(c) hereof. ------------------ Indemnifying Person: See Section 7(c) hereof. ------------------- Indenture: The Indenture, dated as of May 7, 1996 --------- between the Company and IBJ Schroder Bank & Trust Company, 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 introductory ------------------ paragraph hereto. Inspectors: See Section 5(o) hereof. ---------- Issue Date: The date on which the original Notes were sold to the Initial Purchasers pursuant to the Purchase Agreement. NASD: See Section 5(s) hereof. ---- Notes: See the second introductory paragraph hereto. ----- Participant: See Section 7(a) hereof. ----------- Participating Broker-Dealer: See Section 2(b) --------------------------- hereof. -3- Person: An individual, trustee, corporation, ------ partnership, limited liability company, joint stock company, trust, unincorporated association, union, business association, firm or other legal entity. Private Exchange: See Section 2(b) hereof. ---------------- Private Exchange Notes: See Section 2(b) hereof. ---------------------- Prospectus: The prospectus included in any ---------- Registration Statement (including, without limitation, any prospectus subject to completion and a prospectus that includes any information previously omitted from a prospectus filed as part of an effective registration statement in reliance upon Rule 430A promulgated under the Securities Act), as amended or supplemented by any prospectus supplement, and all other amendments and supplements to the Prospectus, with respect to the terms of the offering of any portion of the Registrable Notes covered by such Registration Statement including post- effective amendments, and all material incorporated by reference or deemed to be incorporated by reference in such Prospectus. Purchase Agreement: See the second introductory ------------------ paragraph hereto. Records: See Section 5(o) hereof. ------- Registrable Notes: Each Note upon original issuance ----------------- of the Notes and at all times subsequent thereto, each Exchange Note as to which Section 2(c)(v) hereof is applicable upon original issuance and at all times subsequent thereto and each Private Exchange Note upon original issuance thereof and at all times subsequent thereto, until in the case of any such Note, Exchange Note or Private Exchange Note, as the case may be, the earliest to occur of (i) a Registration Statement (other than, with respect to any Exchange Note as to which Section 2(c)(v) hereof is applicable, the Exchange Registration Statement) covering such Note, Exchange Note or Private Exchange Note, as the case may be, has been declared effective by the SEC and such Note (unless such Note was not tendered for exchange by the Holder thereof), Exchange Note or Private Exchange Note, as the case may be, has been disposed of in accordance with such effective Registration Statement, (ii) such Note, Exchange Note or Private Exchange Note, as the case may be, is sold in compliance with Rule 144, or (iii) such Note, Exchange Note or Private Exchange Note, as the case may be, ceases to be outstanding for purposes of the Indenture. -4- Registration Statement: Any registration statement ---------------------- of the Company, including, but not limited to, the Exchange Registration Statement, that covers any of the Registrable Notes 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 promulgated under the Securities -------- Act, as such Rule may be amended from time to time, or any similar rule (other than Rule 144A) or regulation hereafter adopted by the SEC providing for offers and sales of securities made in compliance therewith resulting in offers and sales by subsequent holders that are not affiliates of an issuer of such securities being free of the registration and prospectus delivery requirements of the Securities Act. Rule 144A: Rule 144A promulgated under the --------- Securities Act, as such Rule may be amended from time to time, or any similar rule (other than Rule 144) or regulation hereafter adopted by the SEC. Rule 415: Rule 415 promulgated under the Securities -------- Act, as such Rule may be amended from time to time, or any similar rule or regulation hereafter adopted by the SEC. SEC: The Securities and Exchange Commission. --- Securities Act: The Securities Act of 1933, as -------------- amended, and the rules and regulations of the SEC promulgated thereunder. Shelf Notice: See Section 2(c) hereof. ------------ Shelf Registration: See Section 3(a) hereof. ------------------ TIA: The Trust Indenture Act of 1939, as amended. --- Trustee: The trustee under the Indenture and, if ------- existent, the trustee under any indenture governing the Exchange Notes and Private Exchange Notes (if any). Underwritten registration or underwritten offering: -------------------------------------------------- A registration in which securities of the Company are sold to an underwriter for reoffering to the public. -5- 2. Exchange Offer -------------- (a) The Company agrees to file with the SEC no later than the Filing Date an offer to exchange (the "Exchange -------- Offer") any and all of the Registrable Notes (other than the - ----- Private Exchange Notes, if any) for a like aggregate principal amount of debt securities of the Company, which are identical in all material respects to the Notes (the "Exchange Notes") -------------- (and which are entitled to the benefits of the Indenture or a trust indenture which is identical in all material respects to the Indenture (other than such changes to the Indenture or any such identical trust indenture as are necessary to comply with any requirements of the SEC to effect or maintain the qualification thereof under the TIA) and which, in either case, has been qualified under the TIA), except that the Exchange Notes (other than Private Exchange Notes, if any) shall have been registered pursuant to an effective Registration Statement under the Securities Act and shall contain no restrictive legend thereon. The Exchange Offer shall be registered under the Securities Act on the appropriate form (the "Exchange -------- Registration Statement") and shall comply with all applicable - ---------------------- tender offer rules and regulations under the Exchange Act. The Company agrees to use its best efforts to (x) cause the Exchange Registration Statement to be declared effective under the Securities Act on or before the Effectiveness Date; (y) keep the Exchange Offer open for at least 20 business days (or longer if required by applicable law) after the date that notice of the Exchange Offer is mailed to Holders; and (z) con- summate the Exchange Offer on or prior to the 270th day following the Issue Date. If after such Exchange Registration Statement is declared effective by the SEC, the Exchange Offer or the issuance of the Exchange Notes thereunder is interfered with by any stop order, injunction or other order or requirement of the SEC or any other governmental agency or court, such Exchange Registration Statement shall be deemed not to have become effective for purposes of this Agreement. Each Holder who participates in the Exchange Offer will be required to represent that any Exchange Notes received by it will be acquired in the ordinary course of its business, that at the time of the consummation of the Exchange Offer such Holder will have no arrangement or understanding with any Person to participate in the distribution of the Exchange Notes in violation of the provisions of the Securities Act, and that such Holder is not an affiliate of the Company within the meaning of the Securities Act. Upon consummation of the Exchange Offer in accordance with this Section 2, the Company shall have no further obligation to register Registrable Notes (other than Private Exchange Notes and -6- other than in respect of any Exchange Notes as to which clause 2(c)(v) hereof applies) pursuant to Section 3 hereof. No securities other than the Exchange Notes shall be included in the Exchange Registration Statement. (b) The Company shall include within the Prospectus contained in the Exchange Registration Statement a section entitled "Plan of Distribution," reasonably acceptable to the Initial Purchasers, which shall contain a summary statement of the positions taken or policies made by the Staff of the SEC with respect to the potential "underwriter" status of any broker-dealer that is the beneficial owner (as defined in Rule 13d-3 under the Exchange Act) of Exchange Notes received by such broker-dealer in the Exchange Offer (a "Participating ------------- Broker-Dealer"), whether such positions or policies have been - ------------- publicly disseminated by the Staff of the SEC or such positions or policies, in the judgment of the Initial Purchasers, represent the prevailing views of the Staff of the SEC. Such "Plan of Distribution" section shall also expressly permit the use of the Prospectus by all Persons subject to the prospectus delivery requirements of the Securities Act, including all Participating Broker-Dealers, and include a statement describing the means by which Participating Broker-Dealers may resell the Exchange Notes. The Company shall use its best efforts to keep the Exchange Registration Statement effective and to amend and supplement the Prospectus contained therein, in order to permit such Prospectus to be lawfully delivered by any Participating Broker-Dealer subject to the prospectus delivery requirements of the Securities Act for such period of time as is necessary to comply with applicable law in connection with any resale of the Exchange Notes; provided, however, that such period shall -------- ------- not exceed 180 days after the consummation of the Exchange Offer (or such longer period if extended pursuant to the last paragraph of Section 5 hereof) (the "Applicable Period"). ----------------- If, prior to consummation of the Exchange Offer, the Initial Purchasers hold any Notes acquired by them and having the status of an unsold allotment in the initial distribution, the Company shall, upon the request of any of the Initial Purchasers, simultaneously with the delivery of the Exchange Notes in the Exchange Offer issue and deliver to the Initial Purchasers in exchange (the "Private Exchange") for such Notes ---------------- held by the Initial Purchasers a like principal amount of debt securities of the Company that are identical in all material respects to the Exchange Notes (the "Private Exchange Notes") ---------------------- (and which -7- are issued pursuant to the same indenture as the Exchange Notes) except for the placement of a restrictive legend on such Private Exchange Notes. The Private Exchange Notes shall bear the same CUSIP number as the Exchange Notes. Interest on the Exchange Notes and the Private Exchange Notes will accrue from the last interest payment date on which interest was paid on the Notes surrendered in exchange therefor or, if no interest has been paid on the Notes, from the Issue Date. In connection with the Exchange Offer, the Company shall: (1) mail to each Holder a copy of the Prospectus forming part of the Exchange Registration Statement, together with an appropriate letter of transmittal and related documents; (2) utilize the services of a depositary for the Exchange Offer with an address in the Borough of Manhattan, The City of New York; (3) permit Holders to withdraw tendered Notes at any time prior to the close of business, New York time, on the last business day on which the Exchange Offer shall remain open; and (4) otherwise comply in all material respects with all applicable laws, rules and regulations. As soon as practicable after the close of the Exchange Offer or the Private Exchange, as the case may be, the Company shall: (1) accept for exchange all Notes tendered and not validly withdrawn pursuant to the Exchange Offer or the Private Exchange; (2) deliver to the Trustee for cancellation all Notes so accepted for exchange; and (3) cause the Trustee to authenticate and deliver promptly to each Holder of Notes, Exchange Notes or Private Exchange Notes, as the case may be, equal in principal amount to the Notes of such Holder so accepted for exchange. -8- The Exchange Notes and the Private Exchange Notes may be issued under (i) the Indenture or (ii) an indenture identical in all material respects to the Indenture, which in either event shall provide that (1) the Exchange Notes shall not be subject to the transfer restrictions set forth in the Indenture and (2) the Private Exchange Notes shall be subject to the transfer restrictions set forth in the Indenture. The Indenture or such indenture shall provide that the Exchange Notes, the Private Exchange Notes and the Notes shall vote and consent together on all matters as one class and that none of the Exchange Notes, the Private Exchange Notes or the Notes will have the right to vote or consent as a separate class on any matter. (c) If, (i) because of any change in law or in currently prevailing interpretations of the Staff of the SEC, the Company is not permitted to effect an Exchange Offer, (ii) the Exchange Offer is not consummated within 270 days of the Issue Date, (iii) any holder of Private Exchange Notes so requests at any time after the consummation of the Private Exchange, (iv) the Holders of not less than a majority in aggregate principal amount of the Registrable Notes reasonably determine that the interests of the Holders would be materially adversely affected by consummation of the Exchange Offer or (v) in the case of any Holder that participates in the Exchange Offer, such Holder does not receive Exchange Notes on the date of the exchange that may be sold without restriction under federal securities laws (other than due solely to the status of such Holder as an affiliate of the Company within the meaning of the Securities Act), then the Company shall promptly deliver to the Holders and the Trustee written notice thereof (the "Shelf Notice") to the Trustee and in the case of clauses (i), ------------ (ii) and (iv), all Holders, in the case of clause (iii), the Holders of the Private Exchange Notes and in the case of clause (v), the affected Holder, and shall file a Shelf Registration pursuant to Section 3 hereof. 3. Shelf Registration ------------------ If a Shelf Notice is delivered as contemplated by Section 2(c) hereof, then: (a) Shelf Registration. The Company shall as ------------------ promptly as reasonably practicable file with the SEC a Registration Statement for an offering to be made on a continuous basis pursuant to Rule 415 covering all of the Registrable Notes (the "Shelf Registration"). If the Company ------------------ shall not -9- have yet filed an Exchange Registration Statement, the Company shall use its best efforts to file with the SEC the Shelf Registration on or prior to the Filing Date. The Shelf Registration shall be on Form S-1 or another appropriate form permitting registration of such Registrable Notes for resale by Holders in the manner or manners designated by them (including, without limitation, one or more underwritten offerings). The Company shall not permit any securities other than the Registrable Notes to be included in the Shelf Registration. The Company shall use its best efforts to cause the Shelf Registration to be declared effective under the Securities Act on or prior to the Effectiveness Date and to keep the Shelf Registration continuously effective under the Securities Act until the date which is three years from the Issue Date, subject to extension pursuant to the last paragraph of Section 5 hereof (the "Effectiveness Period"), or such -------------------- shorter period ending when all Registrable Notes covered by the Shelf Registration have been sold in the manner set forth and as contemplated in the Shelf Registration. (b) Withdrawal of Stop Orders. If the Shelf ------------------------- Registration ceases to be effective for any reason at any time during the Effectiveness Period (other than because of the sale of all of the securities registered thereunder), the Company shall use its best efforts to obtain the prompt withdrawal of any order suspending the effectiveness thereof. (c) Supplements and Amendments. The Company shall -------------------------- promptly supplement and amend the Shelf Registration if required by the rules, regulations or instructions applicable to the registration form used for such Shelf Registration, if required by the Securities Act, or if reasonably requested by the Holders of a majority in aggregate principal amount of the Registrable Notes covered by such Registration Statement or by any underwriter of such Registrable Notes. 4. Additional Interest ------------------- (a) The Company and the Initial Purchasers agree that the Holders of Registrable Notes will suffer damages if the Company fails to fulfill its obligations under Section 2 or Section 3 hereof and that it would not be feasible to ascertain the extent of such damages with precision. Accordingly, the Company agrees to pay, as liquidated damages, additional interest on the Notes ("Additional Interest") under the ------------------- circumstances and to the extent set forth below: -10- (i) if neither the Exchange Registration Statement nor the Shelf Registration has been filed on or prior to the Filing Date, then, commencing on the 151st day after the Issue Date, Additional Interest shall accrue on the Notes over and above the stated interest at a rate of 0.50% per annum for the first 90 days immediately following the Filing Date, such Additional Interest rate increasing by an additional 0.50% per annum at the beginning of each subsequent 90- day period; (ii) if neither the Exchange Registration Statement nor the Shelf Registration is declared effective by the SEC on or prior to the Effectiveness Date, then, commencing on the 226th day after the Issue Date, Additional Interest shall accrue on the Notes included or which should have been included in such Registration Statement over and above the stated interest at a rate of 0.50% per annum for the first 90 days immediately following the Effectiveness Date, such Additional Interest rate increasing by an additional 0.50% per annum at the beginning of each subsequent 90- day period; and (iii) if (A) the Company has not exchanged Exchange Notes for all Notes validly tendered in accordance with the terms of the Exchange Offer on or prior to the 270th day after the Issue Date or (B) the Exchange Registration Statement ceases to be effective at any time prior to the time that the Exchange Offer is consummated or (C) if applicable, the Shelf Registration has been declared effective and such Shelf Registration ceases to be effective at any time during the Effectiveness Period, then Additional Interest shall accrue (over and above any interest otherwise payable on such Notes) at a rate of 0.50% per annum on (x) the 271st day after the Issue Date with respect to the Notes validly tendered and not exchanged by the Company, in the case of (A) above, or (y) the day the Exchange Registration Statement ceases to be effective in the case of (B) above, or (z) the day such Shelf Registration ceases to be effective in the case of (C) above, such Additional Interest rate increasing by an additional 0.50% per annum at the beginning of -11- each such subsequent 90-day period (it being understood and agreed that, notwithstanding any provision to the contrary, so long as any Note which is the subject of a Shelf Notice is then covered by an effective Shelf Registration Statement, no Additional Interest shall accrue on such Note); provided, however, that the Additional Interest rate on any - -------- ------- affected Note may not exceed at any one time in the aggregate 1.0% per annum; and provided, further, that (1) upon the filing -------- ------- of the Exchange Registration Statement or a Shelf Registration (in the case of clause (i) of this Section 4(a)), (2) upon the effectiveness of the Exchange Registration Statement or the Shelf Registration (in the case of clause (ii) of this Section 4(a)), or (3) upon the exchange of Exchange Notes for all Notes tendered and not validly withdrawn (in the case of clause (iii)(A) of this Section 4(a)), or upon the effectiveness of the Exchange Registration Statement which had ceased to remain effective (in the case of (iii)(B) of this Section 4(a)), or upon the effectiveness of the Shelf Registration which had ceased to remain effective (in the case of (iii)(C) of this Section 4(a)), Additional Interest on the affected Notes as a result of such clause (or the relevant subclause thereof), as the case may be, shall cease to accrue. (b) The Company shall notify the Trustee within one business day after each and every date on which an event occurs in respect of which Additional Interest is required to be paid (an "Event Date"). Any amounts of Additional Interest due ---------- pursuant to clauses (a)(i), (a)(ii) or (a)(iii) of this Section 4 will be payable to the Holders of affected Notes in cash semi-annually on each May 1 and November 1 (to the holders of record on the April 15 and October 15 immediately preceding such dates), commencing with the first such date occurring after any such Additional Interest commences to accrue. The amount of Additional Interest will be determined by multiplying the applicable Additional Interest rate by the principal amount of the affected Registrable Notes of such Holders, multiplied by a fraction, the numerator of which is the number of days such Additional Interest rate was applicable during such period (determined on the basis of a 360-day year comprised of twelve 30-day months and, in the case of a partial month, the actual number of days elapsed), and the denominator of which is 360. -12- 5. Registration Procedures ----------------------- In connection with the filing of any Registration Statement pursuant to Sections 2 or 3 hereof, the Company shall effect such registration(s) to permit the sale of the securities covered thereby in accordance with the intended method or methods of disposition thereof, and pursuant thereto and in connection with any Registration Statement filed by the Company hereunder, the Company shall: (a) Prepare and file with the SEC prior to the Filing Date a Registration Statement or Registration Statements as prescribed by Sections 2 or 3 hereof, and use its best efforts to cause each such Registration Statement to become effective and remain effective as provided herein; provided, -------- however, that, if (1) such filing is pursuant to Section 3 - ------- hereof, or (2) a Prospectus contained in an Exchange Registration Statement filed pursuant to Section 2 hereof is required to be delivered under the Securities Act by any Participating Broker-Dealer who seeks to sell Exchange Notes during the Applicable Period, before filing any Registration Statement or Prospectus or any amendments or supplements thereto, the Company shall, if requested, furnish to and afford the Holders of the Registrable Notes covered by such Registration Statement or each such Participating Broker- Dealer, as the case may be, their counsel and the managing underwriters, if any, a reasonable opportunity to review copies of all such documents (including copies of any documents to be incorporated by reference therein and all exhibits thereto) proposed to be filed (in each case at least five business days prior to such filing). The Company shall not file any Registration Statement or Prospectus or any amendments or supplements thereto in respect of which the Holders must be afforded an opportunity to review prior to the filing of such document, if the Holders of a majority in aggregate principal amount of the Registrable Notes covered by such Registration Statement, or any such Participating Broker-Dealer, as the case may be, their counsel, or the managing underwriters, if any, shall reasonably object. (b) Prepare and file with the SEC such amendments and post-effective amendments to each Shelf Registration or Exchange Registration Statement, as the case may be, as may be necessary to keep such Registration Statement continuously effective for the Effectiveness Period or the Applicable Period or until consummation of the Exchange Offer, as the case may be; cause the related Prospectus to be supplemented by any Prospectus supplement required by applicable law, and as so -13- 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 and the Exchange Act applicable to it with respect to the disposition of all securities covered by such Registration Statement as so amended or in such Prospectus as so supplemented and with respect to the subsequent resale of any securities being sold by a Participating Broker-Dealer covered by any such Prospectus; the Company shall be deemed not to have used its best efforts to keep a Registration Statement effective during the Applicable Period if it voluntarily takes any action that would result in selling Holders of the Registrable Notes covered thereby or Participating Broker-Dealers seeking to sell Exchange Notes not being able to sell such Registrable Notes or such Exchange Notes during that period unless such action is required by applicable law or unless the Company complies with this Agreement, including without limitation, the provisions of paragraph 5(k) hereof and the last paragraph of this Section 5. (c) If (1) a Shelf Registration is filed pursuant to Section 3 hereof, or (2) a Prospectus contained in an Exchange Registration Statement filed pursuant to Section 2 hereof is required to be delivered under the Securities Act by any Participating Broker-Dealer who seeks to sell Exchange Notes during the Applicable Period, notify the selling Holders of Registrable Notes, or each such Participating Broker-Dealer, as the case may be, their counsel and the managing underwriters, if any, promptly (but in any event within two business days), and confirm such notice in writing, (i) when a Prospectus or any Prospectus supplement or post-effective amendment has been filed, and, with respect to a Registration Statement or any post-effective amendment, when the same has become effective under the Securities Act (including in such notice a written statement that any Holder may, upon request, obtain, at the sole expense of the Company, one conformed copy of such Registration Statement or post-effective amendment including financial statements and schedules, documents incorporated or deemed to be incorporated by reference and exhibits), (ii) of the issuance by the SEC of any stop order suspending the effectiveness of a Registration Statement or of any order preventing or suspending the use of any preliminary prospectus or the initiation of any proceedings for that purpose, (iii) if at any time when a prospectus is required by the Securities Act to be delivered in connection with sales of the Registrable Notes or resales of Exchange Notes by Participating Broker- Dealers upon written notice by any such Participting Broker-Dealer of a resale the representations and warranties of the Company -14- contained in any agreement (including any underwriting agreement), contemplated by Section 5(n) hereof cease to be true and correct, (iv) of the receipt by the Company of any notification with respect to the suspension of the qualification or exemption from qualification of a Registration Statement or any of the Registrable Notes or the Exchange Notes to be sold by any Participating Broker- Dealer for offer or sale in any jurisdiction, or the initiation or threatening of any proceeding for such purpose, (v) of the happening of any event, the existence of any condition or any information becoming known that makes any statement made in such Registration Statement or related Prospectus or any document incorporated or deemed to be incorporated therein by reference untrue in any material respect or that requires the making of any changes in or amendments or supplements to such Registration Statement, Prospectus or documents so that, in the case of the Registration Statement, it will not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein not misleading, and that in the case of the Prospectus, it will not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading, and (vi) of the determination by the Company that a post-effective amendment to a Registration Statement would be appropriate. (d) Use its best efforts to prevent the issuance of any order suspending the effectiveness of a Registration Statement or of any order preventing or suspending the use of a Prospectus or suspending the qualification (or exemption from qualification) of any of the Registrable Notes or the Exchange Notes for sale in any jurisdiction, and, if any such order is issued, to use its best efforts to obtain the withdrawal of any such order at the earliest possible moment. (e) If a Shelf Registration is filed pursuant to Section 3 and if requested by the managing underwriter or underwriters (if any), or the Holders of a majority in aggregate principal amount of the Registrable Notes being sold in connection with an underwritten offering, (i) promptly incorporate in a prospectus supplement or post-effective amendment such information as the managing underwriter or underwriters (if any), such Holders, or counsel for any of them reasonably request to be included therein, (ii) make all required filings of such prospectus supplement or such post- effective amendment as soon as practicable after the Company has received -15- notification of the matters to be incorporated in such prospectus supplement or post-effective amendment, and (iii) supplement or make amendments to such Registration Statement. (f) If (1) a Shelf Registration is filed pursuant to Section 3 hereof, or (2) a Prospectus contained in an Exchange Registration Statement filed pursuant to Section 2 hereof is required to be delivered under the Securities Act by any Participating Broker-Dealer who seeks to sell Exchange Notes during the Applicable Period, furnish to each selling Holder of Registrable Notes and to each such Participating Broker-Dealer who so requests and to counsel and each managing underwriter, if any, at the sole expense of the Company, one conformed copy of the Registration Statement or Registration Statements and each post-effective amendment thereto, including financial statements and schedules, and, if requested, all documents incorporated or deemed to be incorporated therein by reference and all exhibits. (g) If (1) a Shelf Registration is filed pursuant to Section 3 hereof, or (2) a Prospectus contained in an Exchange Registration Statement filed pursuant to Section 2 hereof is required to be delivered under the Securities Act by any Participating Broker-Dealer who seeks to sell Exchange Notes during the Applicable Period, deliver to each selling Holder of Registrable Notes, or each such Participating Broker-Dealer, as the case may be, their respective counsel, and the underwriters, if any, at the sole expense of the Company, as many copies of the Prospectus or Prospectuses (including each form of preliminary prospectus) and each amendment or supplement thereto and any documents incorporated by reference therein as such Persons may reasonably request; and, subject to the last paragraph of this Section 5, the Company hereby consents to the use of such Prospectus and each amendment or supplement thereto by each of the selling Holders of Registrable Notes or each such Participating Broker-Dealer, as the case may be, and the underwriters or agents, if any, and dealers (if any), in connection with the offering and sale of the Registrable Notes covered by, or the sale by Participating Broker-Dealers of the Exchange Notes pursuant to, such Prospectus and any amendment or supplement thereto. (h) Prior to any public offering of Registrable Notes or any delivery of a Prospectus contained in the Exchange Registration Statement by any Participating Broker-Dealer who seeks to sell Exchange Notes during the Applicable Period, use its best efforts to register or qualify such Registrable Notes -16- (and to cooperate with selling Holders of Registrable Notes or each such Participating Broker-Dealer, as the case may be, the managing underwriter or underwriters, if any, and their respective counsel in connection with the registration or qualification (or exemption from such registration or qualification) of such Registrable Notes) for offer and sale under the securities or Blue Sky laws of such jurisdictions within the United States as any selling Holder, Participating Broker-Dealer, or the managing underwriter or underwriters reasonably request in writing; provided, however, that where ----------------- Exchange Notes held by Participating Broker-Dealers or Registrable Notes are offered other than through an underwritten offering, the Company agrees to cause its counsel to perform Blue Sky investigations and file registrations and qualifications required to be filed pursuant to this Section 5(h); keep each such registration or qualification (or exemption therefrom) effective during the period such Registration Statement is required to be kept effective and do any and all other acts or things reasonably necessary or advisable to enable the disposition in such jurisdictions of the Exchange Notes held by Participating Broker-Dealers or the Registrable Notes covered by the applicable Registration Statement; provided, however, that the Company shall not be ----------------- required to (A) qualify generally to do business in any jurisdiction where it is not then so qualified, (B) take any action that would subject it to general service of process in any such jurisdiction where it is not then so subject or (C) subject itself to taxation in excess of a nominal dollar amount in any such jurisdiction where it is not then so subject. (i) If a Shelf Registration is filed pursuant to Section 3 hereof, cooperate with the selling Holders of Registrable Notes and the managing underwriter or underwriters, if any, to facilitate the timely preparation and delivery of certificates representing Registrable Notes to be sold, which certificates shall not bear any restrictive legends and shall be in a form eligible for deposit with The Depository Trust Company; and enable such Registrable Notes to be in such denominations and registered in such names as the managing underwriter or underwriters, if any, or Holders may reasonably request. (j) Use its best efforts to cause the Registrable Notes covered by the Registration Statement to be registered with or approved by such other governmental agencies or authorities as may be necessary to enable the Holders thereof or the underwriter or underwriters, if any, to dispose of such Registrable Notes, except as may be required solely as a consequence of the nature of a selling Holder's business, in which case the -17- Company will cooperate in all reasonable respects with the filing of such Registration Statement and the granting of such approvals. (k) If (1) a Shelf Registration is filed pursuant to Section 3 hereof, or (2) a Prospectus contained in an Exchange Registration Statement filed pursuant to Section 2 hereof is required to be delivered under the Securities Act by any Participating Broker-Dealer who seeks to sell Exchange Notes during the Applicable Period, upon the occurrence of any event contemplated by paragraph 5(c)(v) or 5(c)(vi) hereof, as promptly as practicable prepare and (subject to Section 5(a) hereof) file with the SEC, at the sole expense of the Company, a supplement or post-effective amendment to the Registration Statement or a supplement to the related Prospectus or any document incorporated or deemed to be incorporated therein by reference, or file any other required document so that, as thereafter delivered to the purchasers of the Registrable Notes being sold thereunder or to the purchasers of the Exchange Notes to whom such Prospectus will be delivered by a Participating Broker-Dealer, any such Prospectus will not contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading. (l) Use its best efforts to cause the Registrable Notes covered by a Registration Statement or the Exchange Notes, as the case may be, to be rated with the appropriate rating agencies, if so requested by the Holders of a majority in aggregate principal amount of Registrable Notes covered by such Registration Statement or the Exchange Notes, as the case may be, or the managing underwriter or underwriters, if any. (m) Prior to the effective date of the first Registration Statement relating to the Registrable Notes, (i) provide the Trustee with certificates for the Registrable Notes or Exchange Notes, as the case may be, in a form eligible for deposit with The Depository Trust Company and (ii) provide a CUSIP number for the Registrable Notes or Exchange Notes, as the case may be. (n) In connection with any underwritten offering of Registrable Notes pursuant to a Shelf Registration, enter into an underwriting agreement as is customary in underwritten offerings of debt securities similar to the Notes and take all such other actions as are reasonably requested by the managing -18- underwriter or underwriters in order to facilitate the registration or the disposition of such Registrable Notes and, in such connection, (i) make such representations and warranties to, and covenants with, the underwriters with respect to the business of the Company and its subsidiaries and the Registration Statement, Prospectus and documents, if any, incorporated or deemed to be incorporated by reference therein, in each case, as are customarily made by issuers to underwriters in underwritten offerings of debt securities similar to the Notes, and confirm the same in writing if and when requested; (ii) obtain the written opinion of counsel to the Company and written updates thereof in form, scope and substance reasonably satisfactory to the managing underwriter or underwriters, addressed to the underwriters covering the matters customarily covered in opinions requested in underwritten offerings of debt similar to the Notes and such other matters as may be reasonably requested by the managing underwriter or underwriters; (iii) obtain "cold comfort" letters and updates thereof in form, scope and substance reasonably satisfactory to the managing underwriter or underwriters from the independent certified public accountants of the Company (and, if necessary, any other independent certified public accountants of any subsidiary of the Company or of any business acquired by the Company for which financial statements and financial data are, or are required to be, included or incorporated by reference in the Registration Statement), addressed to each of the underwriters, such letters to be in customary form and covering matters of the type customarily covered in "cold comfort" letters in connection with underwritten offerings of debt similar to the Notes and such other matters as reasonably requested by the managing underwriter or underwriters; and (iv) if an underwriting agreement is entered into, the same shall contain indemnification provisions and procedures no less favorable than those set forth in Section 7 hereof (or such other provisions and procedures acceptable to Holders of a majority in aggregate principal amount of Registrable Notes covered by such Registration Statement and the managing underwriter or underwriters or agents) with respect to all parties to be indemnified pursuant to said Section. The above shall be done at each closing under such underwriting agreement, or as and to the extent required thereunder. (o) If (1) a Shelf Registration is filed pursuant to Section 3 hereof, or (2) a Prospectus contained in an Exchange Registration Statement filed pursuant to Section 2 hereof is required to be delivered under the Securities Act by any Participating Broker-Dealer who seeks to sell Exchange Notes -19- during the Applicable Period, make available for inspection by any selling Holder of such Registrable Notes being sold, or each such Participating Broker-Dealer, as the case may be, any underwriter participating in any such disposition of Registrable Notes, if any, and any attorney, accountant or other agent retained by any such selling Holder or each such Participating Broker-Dealer, as the case may be, or underwriter (collectively, the "Inspectors"), at the offices where normally ---------- kept, during reasonable business hours, all financial and other records, pertinent corporate documents and instruments of the Company and its subsidiaries (collectively, the "Records") as shall be reasonably necessary to enable them to exercise any applicable due diligence responsibilities, and cause the officers, directors and employees of the Company and its subsidiaries to supply all information reasonably requested by any such Inspector in connection with such Registration Statement. Records which the Company determines, in good faith, to be confidential and any Records which it notifies the Inspectors are confidential shall not be disclosed by the Inspectors unless (i) the disclosure of such Records is necessary to avoid or correct a misstatement or omission in such Registration Statement, (ii) the release of such Records is ordered pursuant to a subpoena or other order from a court of competent jurisdiction, (iii) disclosure of such information is, in the opinion of counsel for any Inspector, necessary or advisable in connection with any action, claim, suit or proceeding, directly or indirectly, involving or potentially involving such Inspector and arising out of, based upon, relating to, or involving this Agreement, or any transactions contemplated hereby or arising hereunder, or (iv) the information in such Records has been made generally available to the public. Each selling Holder of such Registrable Securities and each such Participating Broker-Dealer will be required to agree that information obtained by it as a result of such inspections shall be deemed confidential and shall not be used by it as the basis for any market transactions in the securities of the Company unless and until such information is generally available to the public. Each selling Holder of such Registrable Notes and each such Participating Broker-Dealer will be required to further agree that it will, upon learning that disclosure of such Records is sought in a court of competent jurisdiction, give notice to the Company and allow the Company to undertake appropriate action to prevent disclosure of the Records deemed confidential at the Company's sole expense. (p) Provide an indenture trustee for the Registrable Notes or the Exchange Notes, as the case may be, and cause the -20- Indenture or the trust indenture provided for in Section 2(a) hereof, as the case may be, to be qualified under the TIA not later than the effective date of the Exchange Offer or the first Registration Statement relating to the Registrable Notes; and in connection therewith, cooperate with the trustee under any such indenture and the Holders of the Registrable Notes, to effect such changes to such indenture as may be required for such indenture to be so qualified in accordance with the terms of the TIA; and execute, and use its best efforts to cause such trustee to execute, all documents as may be required to effect such changes, and all other forms and documents required to be filed with the SEC to enable such indenture to be so qualified in a timely manner. (q) Comply with all applicable rules and regulations of the SEC and make generally available to its securityholders earnings statements 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 Notes are sold to underwriters in a firm commitment or best efforts underwritten offering and (ii) if not sold to underwriters in such an offering, commencing on the first day of the first fiscal quarter of the Company after the effective date of a Registration Statement, which statements shall cover said 12-month periods. (r) If an Exchange Offer or a Private Exchange is to be consummated, upon delivery of the Registrable Notes by Holders to the Company (or to such other Person as directed by the Company) in exchange for the Exchange Notes or the Private Exchange Notes, as the case may be, the Company shall mark, or cause to be marked, on such Registrable Notes that such Registrable Notes are being cancelled in exchange for the Exchange Notes or the Private Exchange Notes, as the case may be; in no event shall such Registrable Notes be marked as paid or otherwise satisfied. (s) Cooperate with each seller of Registrable Notes covered by any Registration Statement and each underwriter, if any, participating in the disposition of such Registrable Notes and their respective counsel in connection with any filings required to be made with the National Association of Securities Dealers, Inc. (the "NASD"). ---- -21- (t) Use its best efforts to take all other steps necessary or advisable to effect the registration of the Registrable Notes covered by a Registration Statement contemplated hereby. The Company may require each seller of Registrable Notes as to which any Registration is being effected to furnish to the Company such information regarding such seller and the distribution of such Registrable Notes as the Company may, from time to time, reasonably request. The Company may exclude from such registration the Registrable Notes of any seller who unreasonably fails to furnish such information within a reasonable time after receiving such request. Each seller as to which any Shelf Registration is being effected agrees to furnish promptly to the Company all information required to be disclosed in order to make the information previously furnished to the Company by such seller not materially misleading. Each Holder of Registrable Notes and each Participating Broker-Dealer agrees by acquisition of such Registrable Notes or Exchange Notes to be sold by such Participating Broker-Dealer, as the case may be, that, upon actual receipt of any notice from the Company of the happening of any event of the kind described in Section 5(c)(ii), 5(c)(iv), 5(c)(v), or 5(c)(vi) hereof, such Holder will forthwith discontinue disposition of such Registrable Notes covered by such Registration Statement or Prospectus or Exchange Notes to be sold by such Holder or Participating Broker-Dealer, as the case may be, until such Holder's or Participating Broker-Dealer's receipt of the copies of the supplemented or amended Prospectus contemplated by Section 5(k) hereof, or until it is advised in writing (the "Advice") by the Company that the use of the applicable Prospectus may be resumed, and has received copies of any amendments or supplements thereto. In the event the Company shall give any such notice, each of the Effectiveness Period and the Applicable Period shall be extended by the number of days during such periods from and including the date of the giving of such notice to and including the date when each seller of Registrable Notes covered by such Registration Statement or Exchange Notes to be sold by such Participating Broker-Dealer, as the case may be, shall have received (x) the copies of the supplemented or amended Prospectus contemplated by Section 5(k) hereof or (y) the Advice. -22- 6. Registration Expenses (a) All fees and expenses incident to the performance of or compliance with this Agreement by the Company shall be borne by the Company whether or not the Exchange Offer or a Shelf Registration is filed or becomes effective, including, without limitation, (i) all registration and filing fees (including, without limitation, (A) fees with respect to filings required to be made with the NASD in connection with an underwritten offering and (B) fees and expenses of compliance with state securities or Blue Sky laws (including, without limitation, reasonable fees and disbursements of counsel in connection with Blue Sky qualifications of the Registrable Notes or Exchange Notes and determination of the eligibility of the Registrable Notes or Exchange Notes for investment under the laws of such jurisdictions (x) where the holders of Registrable Notes are located, in the case of the Exchange Notes, or (y) as provided in Section 5(h) hereof, in the case of Registrable Notes or Exchange Notes to be sold by a Participating Broker-Dealer during the Applicable Period)), (ii) printing expenses, including, without limitation, expenses of printing certificates for Registrable Notes or Exchange Notes in a form eligible for deposit with The Depository Trust Company and of printing prospectuses if the printing of prospectuses is requested by the managing underwriter or underwriters, if any, by the Holders of a majority in aggregate principal amount of the Registrable Notes included in any Registration Statement or sold by any Participating Broker- Dealer, as the case may be, (iii) messenger, telephone and delivery expenses, (iv) fees and disbursements of counsel for the Company and fees and disbursements of special counsel for the sellers of Registrable Notes (subject to the provisions of Section 6(b) hereof), (v) fees and disbursements of all independent certified public accountants referred to in Section 5(n)(iii) hereof (including, without limitation, the expenses of any special audit and "cold comfort" letters required by or incident to such performance), (vi) rating agency fees, if any, and any fees associated with making the Registrable Notes or Exchange Notes eligible for trading through The Depository Trust Company, (vii) Securities Act liability insurance, if the Company desires such insurance, (viii) fees and expenses of all other Persons retained by the Company, (ix) internal expenses of the Company (including, without limitation, all salaries and expenses of officers and employees of the Company performing legal or accounting duties), (x) the expense of any annual audit, (xi) the fees and expenses incurred in connection with the listing of the securities to be registered on any securities exchange, if -23- applicable, and (xii) the expenses relating to printing, word processing and distributing all Registration Statements, underwriting agreements, securities sales agreements, indentures and any other documents necessary in order to comply with this Agreement. (b) The Company shall (i) reimburse the Holders of the Registrable Notes being registered in a Shelf Registration for the reasonable fees and disbursements, not to exceed $25,000, of not more than one counsel (in addition to appropriate local counsel) chosen by the Holders of a majority in aggregate principal amount of the Registrable Notes to be included in such Registration Statement and (ii) reimburse out- of-pocket expenses (other than legal expenses) of Holders of Registrable Notes incurred in connection with the registration and sale of the Registrable Notes pursuant to a Shelf Registration or in connection with the exchange of Registrable Notes pursuant to the Exchange Offer. 7. Indemnification --------------- (a) The Company agrees to indemnify and hold harmless each Holder of Registrable Notes offered pursuant to a Shelf Registration Statement and each Participating Broker- Dealer selling Exchange Notes during the Applicable Period, the affiliates, directors, officers, agents, representatives and employees of each such Person or its affiliates, and each other Person, if any, who controls any such Person or its affiliates within the meaning of either Section 15 of the Securities Act or Section 20 of the Exchange Act (each, a "Participant"), from ----------- and against any and all losses, claims, damages and liabilities (including, without limitation, the reasonable legal fees and other expenses actually incurred in connection with any suit, action or proceeding or any claim asserted) caused by, arising out of or based upon any untrue statement or alleged untrue statement of a material fact contained in any Registration Statement pursuant to which the offering of such Registrable Notes or Exchange Notes, as the case may be, is registered (or any amendment thereto) or related Prospectus (or any amendments or supplements thereto) or any related preliminary prospectus, or caused by, arising out of or based upon any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading; provided, however, that the Company will not be -------- ------- required to indemnify a Participant if (i) such losses, claims, damages or liabilities are caused by any untrue statement or -24- omission or alleged untrue statement or omission made in reliance upon and in conformity with information relating to any Participant furnished to the Company in writing by or on behalf of such Participant expressly for use therein or (ii) if such Participant sold to the person asserting the claim the Registrable Notes or Exchange Notes which are the subject of such claim and such untrue statement or omission or alleged untrue statement or omission was contained or made in any preliminary prospectus and corrected in the Prospectus or any amendment or supplement thereto and the Prospectus does not contain any other untrue statement or omission or alleged untrue statement or omission of a material fact that was the subject matter of the related proceeding and it is established by the Company in the related proceeding that such Participant failed to deliver or provide a copy of the Prospectus (as amended or supplemented) to such Person with or prior to the confirmation of the sale of such Registrable Notes or Exchange Notes sold to such Person if required by applicable law, unless such failure to deliver or provide a copy of the Prospectus (as amended or supplemented) was a result of noncompliance by the Company with Section 5 of this Agreement. (b) Each Participant agrees, severally and not jointly, to indemnify and hold harmless the Company, its directors and officers and each Person who controls the Company within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act to the same extent as the foregoing indemnity from the Company to each Participant, but only (i) with reference to information relating to such Participant furnished to the Company in writing by or on behalf of such Participant expressly for use in any Registration Statement or Prospectus, any amendment or supplement thereto, or any preliminary prospectus or (ii) with respect to any untrue statement or representation made by such Participant in writing to the Company. The liability of any Participant under this paragraph shall in no event exceed the proceeds received by such Participant from sales of Registrable Notes or Exchange Notes giving rise to such obligations. (c) If any suit, action, proceeding (including any governmental or regulatory investigation), claim or demand shall be brought or asserted against any Person in respect of which indemnity may be sought pursuant to either of the two preceding paragraphs, such Person (the "Indemnified Person") ------------------ shall promptly notify the Person against whom such indemnity may be sought (the "Indemnifying Person") in writing, and the ------------------- Indemnifying Person, upon request of the Indemnified Person, -25- shall retain counsel reasonably satisfactory to the Indemnified Person to represent the Indemnified Person and any others the Indemnifying Person may reasonably designate in such proceeding and shall pay the reasonable fees and expenses actually incurred by such counsel related to such proceeding; provided, -------- however, that the failure to so notify the Indemnifying Person - ------- shall not relieve it of any obligation or liability which it may have hereunder or otherwise (unless and only to the extent that such failure directly results in the loss or compromise of any material rights or defenses by the Indemnifying Person and the Indemnifying Person was not otherwise aware of such action or claim). In any such proceeding, any Indemnified Person shall have the right to retain its own counsel, but the fees and expenses of such counsel shall be at the expense of such Indemnified Person unless (i) the Indemnifying Person and the Indemnified Person shall have mutually agreed in writing to the contrary, (ii) the Indemnifying Person shall have failed within a reasonable period of time to retain counsel reasonably satisfactory to the Indemnified Person or (iii) the named parties in any such proceeding (including any impleaded parties) include both the Indemnifying Person and the Indemnified Person and representation of both parties by the same counsel would be inappropriate due to actual or potential differing interests between them. It is understood that, unless there exists a conflict among Indemnified Persons, the Indemnifying Person shall not, in connection with any one such proceeding or separate but substantially similar related proceeding in the same jurisdiction arising out of the same general allegations, be liable for the fees and expenses of more than one separate firm (in addition to any local counsel) for all Indemnified Persons, and that all such fees and expenses shall be reimbursed promptly as they are incurred. Any such separate firm for the Participants and such control Persons of Participants shall be designated in writing by Participants who sold a majority in interest of Registrable Notes and Exchange Notes sold by all such Participants and any such separate firm for the Company, its directors, its officers and such control Persons of the Company shall be designated in writing by the Company. The Indemnifying Person shall not be liable for any settlement of any proceeding effected without its prior written consent, but if settled with such consent or if there be a final non-appealable judgment for the plaintiff for which the Indemnified Person is entitled to indemnification pursuant to this Agreement, the Indemnifying Person agrees to indemnify and hold harmless each Indemnified Person from and against any loss or liability by reason of such settlement or judgment. Notwithstanding the foregoing sentence, if at any time an Indemnified Person shall -26- have requested an Indemnifying Person to reimburse the Indemnified Person for reasonable fees and expenses actually incurred by counsel as contemplated by the third sentence of this paragraph, the Indemnifying Person 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 30 days after receipt by such Indemnifying Person of the aforesaid request and (ii) such Indemnifying Person shall not have reimbursed the Indemnified Person in accordance with such request prior to the date of such settlement; provided, however, that the Indemnifying Person shall not be liable - -------- ------- for any settlement effected without its consent pursuant to this sentence if the Indemnifying Person is contesting, in good faith, the request for reimbursement. No Indemnifying Person shall, without the prior written consent of the Indemnified Person, effect any settlement or compromise of any pending or threatened proceeding in respect of which any Indemnified Person is or could have been a party, and indemnity could have been sought hereunder by such Indemnified Person, unless such settlement (A) includes an unconditional written release of such Indemnified Person, in form and substance reasonably satisfactory to such Indemnified Person, from all liability on claims that are the subject matter of such proceeding and (B) does not include any statement as to an admission of fault, culpability or failure to act by or on behalf of any Indemnified Person. (d) If the indemnification provided for in the first and second paragraphs of this Section 7 is for any reason unavailable to, or insufficient to hold harmless, an Indemnified Person in respect of any losses, claims, damages or liabilities referred to therein, then each Indemnifying Person under such paragraphs, in lieu of indemnifying such Indemnified Person thereunder and in order to provide for just and equitable contribution, shall contribute to the amount paid or payable by such Indemnified Person as a result of such losses, claims, damages or liabilities in such proportion as is appropriate to reflect (i) the relative benefits received by the Indemnifying Person or Persons on the one hand and the Indemnified Person or Persons on the other from the offering of the Notes or (ii) if the allocation provided by the foregoing clause (i) is not permitted by applicable law, not only such relative benefits but also the relative fault of the Indemnifying Person or Persons on the one hand and the Indemnified Person or Persons on the other in connection with the statements or omissions or alleged statements or omissions that resulted in such losses, claims, damages or liabilities (or actions in -27- respect thereof). The relative fault of the parties shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the Company on the one hand or such Participant or such other Indemnified Person, as the case may be, on the other, the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission, and any other equitable considerations appropriate in the circumstances. (e) The parties agree that it would not be just and equitable if contribution pursuant to this Section 7 were determined by pro rata allocation (even if the Participants --- ---- were treated as one entity for such purpose) or by any other method of allocation that does not take account of the equitable considerations referred to in the immediately preceding paragraph. The amount paid or payable by an Indemnified Person as a result of the losses, claims, damages and liabilities referred to in the immediately preceding paragraph shall be deemed to include, subject to the limitations set forth above, any reasonable legal or other expenses actually incurred by such Indemnified Person in connection with investigating or defending any such action or claim. Notwithstanding the provisions of this Section 7, in no event shall a Participant be required to contribute any amount in excess of the amount by which proceeds received by such Participant from sales of Registrable Notes or Exchange Notes, as the case may be, exceeds the amount of any damages that such Participant has otherwise been required to pay or has paid by reason of such untrue or alleged untrue statement or omission or alleged omission. No Person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any Person who was not guilty of such fraudulent misrepresentation. (f) The indemnity and contribution agreements contained in this Section 7 will be in addition to any liability which the Indemnifying Persons may otherwise have to the Indemnified Persons referred to above. 8. Rule 144 and 144A ----------------- The Company covenants that it will file the reports required to be filed by it under the Securities Act and the Exchange Act and the rules and regulations adopted by the SEC thereunder in a timely manner in accordance with the -28- requirements of 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 Notes, make publicly available annual reports and such information, documents and other reports of the type specified in Sections 13 and 15(d) of the Exchange Act. The Company further covenants for so long as any Registrable Notes remain outstanding, to make available to any Holder or beneficial owner of Registrable Notes in connection with any sale thereof and any prospective purchaser of such Registrable Notes from such Holder or beneficial owner the information required by Rule 144A(d)(4) under the Securities Act in order to permit resales of such Registrable Notes pursuant to Rule 144A. 9. Underwritten Registrations -------------------------- If any of the Registrable Notes covered by any Shelf Registration are to be sold in an underwritten offering, the investment banker or investment bankers and manager or managers that will manage the offering will be selected by the Holders of a majority in aggregate principal amount of such Registrable Notes included in such offering and reasonably acceptable to the Company. No Holder of Registrable Notes may participate in any underwritten registation hereunder unless such Holder (a) agrees to sell such Holder's Registrable Notes on the basis provided in any underwriting arrangements approved by the Persons entitled hereunder to approve such arrangements and (b) completes and executes all questionnaires, powers of attorney, indemnities, underwriting agreements and other documents required under the terms of such underwriting arrangements. 10. Miscellaneous ------------- (a) No Inconsistent Agreements. The Company has not -------------------------- entered, as of the date hereof, and the Company will not, after the date of this Agreement, enter into any agreement with respect to any of its securities that is inconsistent with the rights granted to the Holders of Registrable Notes in this Agreement or otherwise conflicts with the provisions hereof. The Company has not entered and the Company will not enter into any agreement with respect to any of its securities which will grant to any Person piggy-back registration rights with respect to a Registration Statement. -29- (b) Adjustments Affecting Registrable Notes. The --------------------------------------- Company will not, directly or indirectly, take any action with respect to the Registrable Notes as a class that would adversely affect the ability of the Holders of Registrable Notes to include such Registrable Notes in a registration undertaken pursuant to this Agreement. (c) Amendments and Waivers. The provisions of this ---------------------- Agreement may not be amended, modified or supplemented, and waivers or consents to departures from the provisions hereof may not be given, otherwise than with the prior written consent of the Holders of not less than a majority in aggregate principal amount of the then outstanding Registrable Notes. Notwithstanding the foregoing, a waiver or consent to depart from the provisions hereof with respect to a matter that relates exclusively to the rights of Holders of Registrable Notes whose securities are being sold pursuant to a Registration Statement and that does not directly or indirectly affect, impair, limit or compromise the rights of other Holders of Registrable Notes may be given by Holders of at least a majority in aggregate principal amount of the Registrable Notes being sold by such Holders pursuant to such Registration Statement; provided, however, 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 ------- (including without limitation any notices or other communications to the Trustee) provided for or permitted hereunder shall be made in writing by hand- delivery, registered first-class mail, next-day air courier or facsimile: 1. if to a Holder of the Registrable Notes or any Participating Broker-Dealer, at the most current address of such Holder or Participating Broker-Dealer, as the case may be, set forth on the records of the registrar under the Indenture, with a copy in like manner to the Initial Purchasers as follows: BT Securities Corporation One Bankers Trust Plaza 130 Liberty Street New York, New York 10006 Facsimile No: (212) 250-7200 Attention: Corporate Finance Department -30- with a copy to: Cahill Gordon & Reindel 80 Pine Street New York, New York 10005 Facsimile No: (212) 269-5420 Attention: William M. Hartnett, Esq. 2. if to the Initial Purchasers, at the address specified in Section 10(d)(1); 3. if to the Company, as follows: Dade International Inc. 1717 Deerfield Road Deerfield, IL 60015-0778 Facsimile No: (847) 267-5396 Attention: Chief Financial Officer with copies to: Kirkland & Ellis 153 E. 53rd Street New York, New York 10022 Facsimile No: (212) 446-4900 Attention: Lance Balk, Esq. All such notices and communications shall be deemed to have been duly given: when delivered by hand, if personally delivered; five business days after being deposited in the mail, postage prepaid, if mailed; one business day after being timely delivered to a next-day air courier; and when receipt is acknowledged by the addressee, if sent by facsimile. Copies of all such notices, demands or other communications shall be concurrently delivered by the Person giving the same to the Trustee at the address and in the manner specified in such Indenture. (e) Successors and Assigns. This Agreement shall ---------------------- inure to the benefit of and be binding upon the successors and assigns of each of the parties hereto; provided, however, that -------- ------- this Agreement shall not inure to the benefit of or be binding upon a successor or assign of a Holder unless and to the extent such successor or assign holds Registrable Notes. -31- (f) Counterparts. This Agreement may be executed in ------------ any number of counterparts and by the parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement. (g) Headings. The headings in this Agreement are -------- for convenience of reference only and shall not limit or otherwise affect the meaning hereof. (h) 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 WHOLLY WITHIN THE STATE OF NEW YORK, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW. EACH OF THE PARTIES HERETO AGREES TO SUBMIT TO THE JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT. (i) Severability. If any term, provision, covenant ------------ or restriction of this Agreement is held by a court of competent jurisdiction to be invalid, illegal, void or unenforceable, the remainder of the terms, provisions, covenants and restrictions set forth herein shall remain in full force and effect and shall in no way be affected, impaired or invalidated, and the parties hereto shall use their best efforts to find and employ an alternative means to achieve the same or substantially the same result as that contemplated by such term, provision, covenant or restriction. It is hereby stipulated and declared to be the intention of the parties that they would have executed the remaining terms, provisions, covenants and restrictions without including any of such that may be hereafter declared invalid, illegal, void or unenforceable. (j) Notes Held by the Company or its Affiliates. ------------------------------------------- Whenever the consent or approval of Holders of a specified percentage of Registrable Notes is required hereunder, Registrable Notes held by the Company or its affiliates (as such term is defined in Rule 405 under the Securities Act) shall not be counted in determining whether such consent or approval was given by the Holders of such required percentage. (k) Third Party Beneficiaries. Holders of ------------------------- Registrable Notes and Participating Broker-Dealers are intended third party beneficiaries of this Agreement and this Agreement may be enforced by such Persons. IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above. DADE INTERNATIONAL INC. /s/ John Connaughton By:________________________________ Name: John Connaughton Title: Vice President BT SECURITIES CORPORATION CS FIRST BOSTON CORPORATION MORGAN STANLEY & CO. INCORPORATED By: BT Securities Corporation /s/ Julie Persily By:________________________________ Name: Julie Persily Title: Vice President EX-5.1 7 OPINION & CONSENT OF KIRKLAND & ELLIS EXHIBIT 5.1 Kirkland & Ellis To Call Writer Direct: 212 446-4800 October 4, 1996 Dade International Inc. 1717 Deerfield Road Deerfield, Illinois 60015-0778 Re: Series B 11 1/8% Senior Subordinated Notes due 2006 ------------------------------------------------ Gentlemen: We have acted as special counsel to Dade International Inc., a Delaware Corporation (the "Company"), in connection with the proposed registration under the Securities Act of 1933, as amended (the "Securities Act"), of $350,000,000 principal amount of Series B 11 1/8% Senior Subordinated Notes due 2006 (the "Exchange Notes") for the purpose of effecting an exchange offer (the "Exchange Offer") for the Company's 11 1/8% Senior Subordinated Notes due 2006 (the "Notes"). In connection therewith, we have examined and relied upon the original, or copies certified or otherwise identified to our satisfaction, of: (i) the Restated Certificate of Incorporation and By-Laws of the Company; (ii) minutes and records of the corporate proceedings of the Company with respect to the issuance and sale of the Exchange Notes; (iii) the registration statement regarding the registration of the Exchange Notes (the "Registration Statement") and exhibits thereto; (iv) the form of indenture entered into between the Company and IBJ Schroder Bank & Trust Company (the "Trustee") relating to the Notes (the "Indenture"); and (v) such other documents, corporate records and other instruments as we have deemed necessary for the expression of the opinions contained herein. For purposes of this opinion, we have assumed the authenticity of all documents submitted to us as originals, the conformity to the originals of all documents submitted to us as copies, and the authenticity of the originals of all documents submitted to us as copies. We have also assumed the genuineness of the signatures of persons signing all documents in connection with which this opinion is rendered, the authority of such persons signing on behalf of the Dade International Inc. October 4, 1996 Page 2 parties thereto other than the Company, and the due authorization, execution and delivery of all documents by the parties thereto other than the Company. It is our opinion that when, as and if (i) the Registration Statement shall have become effective pursuant to the provisions of the Securities Act, (ii) the Indenture shall have been qualified pursuant to the provisions of the Trust Indenture Act of 1939, as amended, (iii) the Notes shall have been validly tendered to the Company and (iv) the Exchange Notes shall have been issued in the form and containing the terms described in the Registration Statement, the Indenture, the resolutions of the Company's Board of Directors (and any authorized committee thereof) authorizing the foregoing and any legally required consents, approvals, authorizations and other order of the Commission and any other regulatory authorities to be obtained, the Exchange Notes when issued pursuant to the Exchange Offer will be legally issued, fully paid and nonassessable and will constitute binding obligations of the Company. Our opinions as herein expressed are subject to the following qualifications: (a) our opinions are subject to the effect of applicable bankruptcy, reorganization, insolvency, moratorium, fraudulent conveyance or transfer or other laws of general applicability relating to or affecting the enforcement of creditors' rights from time to time in effect and to general principles of equity; (b) provisions in the Indenture and the Exchange Notes deemed to impose the payment of interest on interest may be unenforceable, void or voidable under applicable law; (c) requirements in the Indenture and the Exchange Notes specifying that the provisions thereof may only be waived in writing may not be valid, binding or enforceable to the extent that an oral or implied agreement by trade practice or course of conduct has been created modifying any provision of such documents; Dade International Inc. October 4, 1996 Page 3 (d) we express no opinion as to the enforceability of the indemnification provisions of the Indenture and the Notes insofar as said provisions might require indemnification with respect to any litigation against the Company determined adversely to the Trustee, or any loss, cost or expense arising out of the Trustee's gross negligence or willful misconduct or any violation by such trustee of statutory duties, general principles or equity or public policy; and (e) we express no opinion with respect to indemnification or contribution obligations which contravene public policy including, without limitation, indemnification or contribution obligations which arise out of failure to comply with applicable state or federal securities law. We hereby consent to the filing of this opinion as an exhibit to the Registration Statement and to the reference to this firm under the section titled "Legal Matters" in the Registration Statement. We do not find it necessary for the purposes of this opinion, and accordingly we do not purport to cover herein, the application of the securities or "Blue Sky" laws of the various states to the issuance of the Notes. We are admitted to practice law in the State of New York, and we express no opinions as to matters under or involving any laws other than the laws of the State of New York, the federal laws of the United States of America and the General Corporation Law of the State of Delaware. This opinion is furnished to you in connection with the filing of the Registration Statement, and is not to be used, circulated, quoted or otherwise relied upon for any other purposes. Yours very truly, /s/ Kirkland & Ellis KIRKLAND & ELLIS EX-10.1 8 CREDIT AGREEMENT DATED 05/07/96 EXHIBIT 10.1 - -------------------------------------------------------------------------------- CREDIT AGREEMENT among DIAGNOSTICS HOLDING, INC., DADE INTERNATIONAL INC., VARIOUS LENDING INSTITUTIONS, THE BANK OF NOVA SCOTIA, THE BANK OF TOKYO-MITSUBISHI TRUST COMPANY, THE FIRST NATIONAL BANK OF BOSTON, GE CAPITAL COMMERCIAL FINANCE AND SANWA BUSINESS CREDIT CORPORATION, AS CO-AGENTS, and BANKERS TRUST COMPANY, AS AGENT ________________________________ Dated as of May 7, 1996 ________________________________ $585,000,000 - -------------------------------------------------------------------------------- TABLE OF CONTENTS
Page ---- SECTION 1. Amount and Terms of Credit............................................ 1 1.01 Commitments............................................................ 1 1.02 Minimum Borrowing Amounts, etc......................................... 4 1.03 Notice of Borrowing.................................................... 4 1.04 Disbursement of Funds.................................................. 5 1.05 Notes.................................................................. 6 1.06 Conversions............................................................ 7 1.07 Pro Rata Borrowings.................................................... 8 1.08 Interest............................................................... 8 1.09 Interest Periods....................................................... 9 1.10 Increased Costs, Illegality, etc....................................... 10 1.11 Compensation........................................................... 12 1.12 Change of Lending Office............................................... 12 1.13 Replacement of Banks................................................... 13 SECTION 2. Letters of Credit..................................................... 14 2.01 Letters of Credit...................................................... 14 2.02 Letter of Credit Requests; Notices of Issuance......................... 15 2.03 Agreement to Repay Letter of Credit Drawings........................... 15 2.04 Letter of Credit Participations........................................ 16 2.05 Increased Costs........................................................ 18 SECTION 3. Fees; Commitments..................................................... 19 3.01 Fees................................................................... 19 3.02 Voluntary Termination or Reduction of Total Unutilized Revolving Loan Commitment........................................................... 20 3.03 Mandatory Adjustments of Commitments, etc.............................. 20 SECTION 4. Payments.............................................................. 21 4.01 Voluntary Prepayments.................................................. 21 4.02 Mandatory Prepayments.................................................. 23 4.03 Method and Place of Payment............................................ 31 4.04 Net Payments........................................................... 31 SECTION 5. Conditions Precedent.................................................. 33 5.01 Execution of Agreement; Notes.......................................... 33 5.02 No Default; Representations and Warranties............................. 33 5.03 Officer's Certificate.................................................. 34 5.04 Opinions of Counsel.................................................... 34
- (i) -
Page ---- 5.05 Corporate Proceedings.................................................. 34 5.06 Adverse Change, etc.................................................... 35 5.07 Litigation............................................................. 35 5.08 Approvals.............................................................. 35 5.09 Consummation of the Transaction........................................ 35 5.10 Security Documents..................................................... 37 5.11 Subsidiary Guaranty.................................................... 38 5.12 Mortgages; Title Insurance; Surveys, etc............................... 38 5.13 Plans; Collective Bargaining Agreements; Existing Indebtedness Agreements; Shareholders' Agreements; Management Agreements; Employment Agreements; Non-Compete Agreements; Tax Allocation Agreements; Material Contracts....................................... 39 5.14 Solvency Opinions; Environmental Analyses; Insurance Analyses; Financial Statements................................................. 40 5.15 Pro Forma Balance Sheets............................................... 41 5.16 Projections............................................................ 41 5.17 Existing Indebtedness.................................................. 41 5.18 Payment of Fees........................................................ 42 5.19 Notice of Borrowing; Letter of Credit Request.......................... 42 SECTION 6. Representations, Warranties and Agreements............................ 42 6.01 Corporate Status....................................................... 42 6.02 Corporate Power and Authority.......................................... 42 6.03 No Violation........................................................... 43 6.04 Litigation............................................................. 43 6.05 Use of Proceeds; Margin Regulations.................................... 43 6.06 Governmental Approvals................................................. 43 6.07 Investment Company Act................................................. 44 6.08 Public Utility Holding Company Act..................................... 44 6.09 True and Complete Disclosure........................................... 44 6.10 Financial Condition; Financial Statements.............................. 44 6.11 Security Interests..................................................... 45 6.12 Representations and Warranties in Other Documents...................... 46 6.13 Transaction............................................................ 46 6.14 Special Purpose Corporation............................................ 46 6.15 Compliance with ERISA.................................................. 46 6.16 Capitalization......................................................... 47 6.17 Subsidiaries........................................................... 48 6.18 Intellectual Property.................................................. 48 6.19 Compliance with Statutes, etc.......................................... 48 6.20 Environmental Matters.................................................. 49 6.21 Properties............................................................. 49 6.22 Labor Relations........................................................ 49
- (ii) -
Page ---- 6.23 Tax Returns and Payments............................................. 50 6.24 Existing Indebtedness................................................ 50 6.25 Subordination........................................................ 51 SECTION 7. Affirmative Covenants............................................... 51 7.01 Information Covenants................................................ 51 7.02 Books, Records and Inspections....................................... 54 7.03 Insurance............................................................ 54 7.04 Payment of Taxes..................................................... 55 7.05 Corporate Franchises................................................. 55 7.06 Compliance with Statutes, etc........................................ 55 7.07 Compliance with Environmental Laws................................... 55 7.08 ERISA................................................................ 56 7.09 Good Repair.......................................................... 56 7.10 End of Fiscal Years; Fiscal Quarters................................. 57 7.11 Additional Security; Further Assurances.............................. 57 7.12 Interest Rate Protection............................................. 58 7.13 Register 64 7.14 Maintenance of Corporate Separateness................................ 58 7.15 Baxter PIK Notes; Baxter Preferred Stock; Permitted Holdings PIK Securities......................................................... 59 7.16 Foreign Subsidiaries Security........................................ 59 7.17 Contributions; Payments.............................................. 60 7.18 Accounts Receivable Facility Transaction............................. 60 SECTION 8. Negative Covenants.................................................. 61 8.01 Changes in Business.................................................. 61 8.02 Consolidation, Merger, Sale or Purchase of Assets, etc............... 62 8.03 Liens................................................................ 67 8.04 Indebtedness......................................................... 69 8.05 Designated Senior Debt............................................... 72 8.06 Advances, Investments and Loans...................................... 73 8.07 Dividends, etc....................................................... 76 8.08 Transactions with Affiliates......................................... 79 8.09 Capital Expenditures................................................. 80 8.10 Minimum Consolidated EBITDA.......................................... 82 8.11 Interest Coverage Ratio.............................................. 83 8.12 Current Ratio........................................................ 84 8.13 Leverage Ratio....................................................... 84 8.14 Limitation on Voluntary Payments and Modifications of Indebtedness; Modifications of Certificate of Incorporation, By-Laws and Certain Other Agreements; Issuance of Capital Stock; etc................... 85 8.15 Limitation on Certain Restrictions on Subsidiaries................... 86
- (iii) -
Page ---- 8.16 Limitation on the Creation of Subsidiaries........................... 87 SECTION 9. Events of Default................................................... 87 9.01 Payments............................................................. 87 9.02 Representations, etc................................................. 87 9.03 Covenants............................................................ 88 9.04 Default Under Other Agreements....................................... 88 9.05 Bankruptcy, etc...................................................... 88 9.06 ERISA................................................................ 88 9.07 Security Documents................................................... 89 9.08 Guaranties........................................................... 89 9.09 Judgments............................................................ 89 9.10 Ownership............................................................ 89 9.11 Distribution Agreement............................................... 89 9.12 Accounts Receivable Facility......................................... 90 SECTION 10. Definitions........................................................ 90 SECTION 11. The Agent.......................................................... 123 11.01 Appointment......................................................... 123 11.02 Delegation of Duties................................................ 123 11.03 Exculpatory Provisions.............................................. 124 11.04 Reliance by Agent................................................... 124 11.05 Notice of Default................................................... 125 11.06 Non-Reliance on Agent and Other Banks............................... 125 11.07 Indemnification..................................................... 125 11.08 Agent in its Individual Capacity.................................... 126 11.09 Holders 126 11.10 Resignation of the Agent; Successor Agent........................... 126 SECTION 12. Miscellaneous...................................................... 127 12.01 Payment of Expenses, etc............................................ 127 12.02 Right of Setoff; Collateral Matters................................. 127 12.03 Notices............................................................. 128 12.04 Benefit of Agreement................................................ 128 12.05 No Waiver; Remedies Cumulative...................................... 130 12.06 Payments Pro Rata................................................... 130 12.07 Calculations; Computations.......................................... 130 12.08 Governing Law; Submission to Jurisdiction; Venue.................... 131 12.09 Counterparts........................................................ 131 12.10 Effectiveness....................................................... 132 12.11 Headings Descriptive................................................ 132 12.12 Amendment or Waiver; etc............................................ 132
- (iv) -
Page ---- 12.13 Survival............................................................ 133 12.14 Domicile of Loans................................................... 133 12.15 Confidentiality..................................................... 133 12.16 Waiver of Jury Trial................................................ 134 SECTION 13. Holdings Guaranty................................................. 134 13.01 The Guaranty........................................................ 134 13.02 Bankruptcy.......................................................... 135 13.03 Nature of Liability................................................. 135 13.04 Independent Obligation.............................................. 135 13.05 Authorization....................................................... 135 13.06 Reliance............................................................ 136 13.07 Subordination....................................................... 136 13.08 Waiver.............................................................. 137 13.09 Nature of Liability................................................. 138
- (v) - CREDIT AGREEMENT, dated as of May 7, 1996, among DIAGNOSTICS HOLDING, INC., a Delaware corporation ("Holdings"), DADE INTERNATIONAL INC., a Delaware corporation (the "Borrower"), the lenders from time to time party hereto (each, a "Bank" and, collectively, the "Banks"), and BANKERS TRUST COMPANY, as Agent (in such capacity, the "Agent"). Unless otherwise defined herein, all capitalized terms used herein and defined in Section 10 are used herein as so defined. W I T N E S S E T H : - - - - - - - - - - WHEREAS, subject to and upon the terms and conditions herein set forth, the Banks are willing to make available the credit facilities provided for herein; NOW, THEREFORE, IT IS AGREED: SECTION 1. Amount and Terms of Credit. -------------------------- 1.01 Commitments. (A) Subject to and upon the terms and conditions ----------- herein set forth, each Bank severally agrees to make a loan or loans to the Borrower, which loans shall be drawn, to the extent such Bank has a commitment under such Facility, under the A Term Loan Facility, the B Term Loan Facility, the C Term Loan Facility, the D Term Loan Facility and the Revolving Loan Facility, as set forth below: (a) Loans under the A Term Loan Facility (each, an "A Term Loan" and, collectively, the "A Term Loans") (i) shall be incurred by the Borrower pursuant to a single drawing, which shall be on the Initial Borrowing Date, (ii) shall be denominated in U.S. Dollars, (iii) shall be made as Base Rate Loans and, except as hereinafter provided, may, at the option of the Borrower, be maintained as and/or converted into Base Rate Loans or Eurodollar Loans, provided, that (x) all A Term Loans made by all Banks -------- pursuant to the same Borrowing shall, unless otherwise specifically provided herein, consist entire ly of A Term Loans of the same Type and (y) no A Term Loans maintained as Eurodollar Loans may be incurred prior to the earlier of (1) the 90th day after the Initial Borrowing Date and (2) that date (the "Syndication Date") upon which the Agent determines in its sole discretion (and notifies the Borrower) that the primary syndication (and resultant additions of institutions as Banks pursuant to Section 12.04) has been completed and (iv) shall not exceed for any Bank at the time of incurrence thereof on the Initial Borrowing Date that aggregate principal amount which equals the A Term Loan Commitment, if any, of such Bank at such time. Once repaid, A Term Loans may not be reborrowed. - 1 - (b) Each loan under the B Term Loan Facility (each, a "B Term Loan" and, collectively, the "B Term Loans") (i) shall be incurred by the Borrower pursuant to a single drawing, which shall be on the Initial Borrowing Date, (ii) shall be denominated in U.S. Dollars, (iii) shall be made as Base Rate Loans and, except as hereinafter provided, may, at the option of the Borrower, be maintained as and/or converted into Base Rate Loans or Eurodollar Loans, provided, that (x) all B Term Loans made by all -------- Banks pursuant to the same Borrowing shall, unless otherwise specifically provided herein, consist entirely of B Term Loans of the same Type and (y) no B Term Loans maintained as Eurodollar Loans may be incurred prior to the earlier of (1) the 90th day after the Initial Borrowing Date and (2) the Syndication Date and (iv) shall not exceed for any Bank at the time of incurrence thereof on the Initial Borrowing Date that aggregate principal amount which equals the B Term Loan Commitment, if any, of such Bank at such time. Once repaid, B Term Loans may not be reborrowed. (c) Each loan under the C Term Loan Facility (each, a "C Term Loan" and, collectively, the "C Term Loans") (i) shall be incurred by the Borrower pursuant to a single drawing, which shall be on the Initial Borrowing Date, (ii) shall be denominated in U.S. Dollars, (iii) shall be made as Base Rate Loans and, except as hereinafter provided, may, at the option of the Borrower, be maintained as and/or converted into Base Rate Loans or Eurodollar Loans, provided, that (x) all C Term Loans made by all -------- Banks pursuant to the same Borrowing shall, unless otherwise specifically provided herein, consist entirely of C Term Loans of the same Type and (y) no C Term Loans maintained as Eurodollar Loans may be incurred prior to the earlier of (1) the 90th day after the Initial Borrowing Date and (2) the Syndication Date and (iv) shall not exceed for any Bank at the time of incurrence thereof on the Initial Borrowing Date that aggregate principal amount which equals the C Term Loan Commitment, if any, of such Bank at such time. Once repaid, C Term Loans may not be reborrowed. (d) Each loan under the D Term Loan Facility (each, a "D Term Loan" and, collectively, the "D Term Loans") (i) shall be incurred by the Borrower pursuant to a single drawing, which shall be on the Initial Borrowing Date, (ii) shall be denominated in U.S. Dollars, (iii) shall be made as Base Rate Loans and, except as hereinafter provided, may, at the option of the Borrower, be maintained as and/or converted into Base Rate Loans or Eurodollar Loans, provided, that (x) all D Term Loans made by all -------- Banks pursuant to the same Borrowing shall, unless otherwise specifically provided herein, consist entirely of D Term Loans of the same Type and (y) no D Term Loans maintained as Eurodollar Loans may be incurred prior to the earlier of (1) the 90th day after the Initial Borrowing Date and (2) the Syndication Date and (iv) shall not exceed for any Bank at the time of incurrence thereof on the Initial Borrowing Date that aggregate principal amount which equals the D Term Loan Commitment, if any, of such Bank at such time. Once repaid, D Term Loans may not be reborrowed. (e) Each loan under the Revolving Loan Facility (each, a "Revolving Loan" and, collectively, the "Revolving Loans") (i) may be incurred by the Borrower at any time and from --2-- time to time on and after the first Business Day immediately succeeding the Initial Borrowing Date and prior to the Revolving Loan Maturity Date, (ii) shall be denominated in U.S. Dollars, (iii) except as hereinafter provided, may, at the option of the Borrower, be incurred and maintained as and/or converted into Base Rate Loans or Eurodollar Loans, provided, that (x) all -------- Revolving Loans made as part of the same Borrowing shall, unless otherwise specifically provided herein, consist of Revolving Loans of the same Type and (y) no incurrences of, or conversions into, Revolving Loans maintained as Eurodollar Loans may be effected prior to the earlier of (1) the 90th day after the Initial Borrowing Date and (2) the Syndication Date, (iv) may be repaid and reborrowed in accordance with the provisions hereof and (v) shall not exceed for any Bank at any time outstanding that aggregate principal amount which, when combined with (I) the aggregate principal amount of all other then outstanding Revolving Loans made by such Bank and (II) such Bank's RL Percentage, if any, of the Swingline Loans then outstanding and the Letter of Credit Outstandings (exclusive of Unpaid Drawings which are repaid with the proceeds of, and simultaneously with the incurrence of, Revolving Loans or Swingline Loans) at such time, equals the Revolving Loan Commitment, if any, of such Bank at such time. (B) Subject to and upon the terms and conditions herein set forth, BTCo in its individual capacity agrees to make at any time and from time to time after the Initial Borrowing Date and prior to the Swingline Expiry Date, a loan or loans to the Borrower (each, a "Swingline Loan" and, collectively, the "Swingline Loans"), which Swingline Loans (i) shall be made and maintained as Base Rate Loans, (ii) shall be denominated in U.S. Dollars, (iii) may be repaid and reborrowed in accordance with the provisions hereof, (iv) shall not exceed in aggregate principal amount at any time outstanding, when combined with the aggregate principal amount of all Revolving Loans then outstanding and the Letter of Credit Outstandings (exclusive of Unpaid Drawings which are repaid with the proceeds of, and simultaneously with the incurrence of, Revolving Loans or Swingline Loans) at such time, an amount equal to the Total Revolving Loan Commitment then in effect and (v) shall not exceed in aggregate principal amount at any time outstanding the Maximum Swingline Amount. BTCo shall not be obligated to make any Swingline Loans at a time when a Bank Default exists unless BTCo has entered into arrangements satisfactory to it and the Borrower to eliminate BTCo's risk with respect to the Defaulting Bank's or Banks' participation in such Swingline Loans, including by cash collateralizing such Defaulting Bank's or Banks' RL Percentage of the outstanding Swingline Loans. BTCo will not make a Swingline Loan after it has received written notice from the Borrower or the Required Banks stating that a Default or an Event of Default exists until such time as BTCo shall have received a written notice of (i) rescission of such notice from the party or parties originally delivering the same or (ii) a waiver of such Default or Event of Default from the Required Banks. (C) On any Business Day, BTCo may, in its sole discretion, give notice to the RL Banks that its outstanding Swingline Loans shall be funded with a Borrowing of Revolving Loans (provided that each such notice shall be deemed -------- to have been automatically given upon the occurrence of a Default or an Event of Default under Section 9.05 or upon the exercise of any of the remedies provided in the last paragraph of Section 9), in which case a Borrowing of Revolving Loans constituting Base Rate Loans (each such Borrowing, a "Mandatory Borrowing") shall be made --3-- on the immediately succeeding Business Day by all RL Banks pro rata based on --- ---- each RL Bank's RL Percentage, and the proceeds thereof shall be applied directly to repay BTCo for such outstanding Swingline Loans. Each RL Bank hereby irrevocably agrees to make Base Rate Loans upon one Business Day's notice pursuant to each Mandatory Borrowing in the amount and in the manner specified in the preceding sentence and on the date specified in writing by BTCo, notwithstanding (i) that the amount of the Mandatory Borrowing may not comply with the Minimum Borrowing Amount otherwise required hereunder, (ii) whether any conditions specified in Section 5 are then satisfied, (iii) whether a Default or an Event of Default has occurred and is continuing, (iv) the date of such Mandatory Borrowing and (v) any reduction in the Total Revolving Loan Commitment after any such Swingline Loans were made. In the event that any Mandatory Borrowing cannot for any reason be made on the date otherwise required above (including, without limitation, as a result of the commencement of a proceeding under the Bankruptcy Code in respect of the Borrower), each RL Bank (other than BTCo) hereby agrees that it shall forthwith purchase from BTCo (without recourse or warranty) such assignment of the outstanding Swingline Loans as shall be necessary to cause the RL Banks to share in such Swingline Loans ratably based upon their respective RL Percentages, provided that all interest payable on the -------- Swingline Loans shall be for the account of BTCo until the date the respective assignment is purchased and, to the extent attributable to the purchased assignment, shall be payable to the RL Bank purchasing same from and after such date of purchase. 1.02 Minimum Borrowing Amounts, etc. The aggregate principal amount ------------------------------- of each Borrowing under a Facility shall not be less than the Minimum Borrowing Amount for such Facility. More than one Borrowing may be incurred on any day; provided, that at no time shall there be outstanding more than fifteen - -------- Borrowings of Eurodollar Loans. 1.03 Notice of Borrowing. (a) Whenever the Borrower desires to ------------------- incur Loans under any Facility (excluding Borrowings of Swingline Loans and Mandatory Borrowings), it shall give the Agent at its Notice Office, prior to 11:00 A.M. (New York time), at least three Business Days' prior written notice (or telephonic notice promptly confirmed in writing) of each Borrowing of Eurodollar Loans and at least one Business Day's prior written notice (or telephonic notice promptly confirmed in writing) of each Borrowing of Base Rate Loans to be made here under. Each such notice (each, a "Notice of Borrowing") shall, except as provided in Section 1.10, be irrevocable, and, in the case of each written notice and each confirmation of telephonic notice, shall be in the form of Exhibit A-1, appropriately completed to specify (i) the Facility pursuant to which such Borrowing is to be made, (ii) the aggregate principal amount of the Loans to be made pursuant to such Borrowing, (iii) the date of such Borrowing (which shall be a Business Day) and (iv) whether the respective Borrowing shall consist of Base Rate Loans or, to the extent permitted hereunder, Eurodollar Loans and, if Eurodollar Loans, the Interest Period to be initially applicable thereto. The Agent shall promptly give each Bank written notice (or telephonic notice promptly confirmed in writing) of each proposed Borrowing, of such Bank's proportionate share thereof, if any, and of the other matters covered by the Notice of Borrowing. (b) (i) Whenever the Borrower desires to make a Borrowing of Swingline Loans hereunder, it shall give BTCo not later than 12:00 Noon (New York time) on the day such Swingline Loan is to be made, written notice (or telephonic notice promptly confirmed in writing) of each --4-- Swingline Loan to be made hereunder. Each such notice shall be irrevocable and shall specify in each case (x) the date of such Borrowing (which shall be a Business Day) and (y) the aggregate principal amount of the Swingline Loan to be made pursuant to such Borrowing. (ii) Mandatory Borrowings shall be made upon the notice specified in Section 1.01(C), with the Borrower irrevocably agreeing, by its incurrence of any Swingline Loan, to the making of Mandatory Borrowings as set forth in such Section. (c) Without in any way limiting the obligation of the Borrower to confirm in writing any telephonic notice permitted to be given hereunder, the Agent or BTCo (in the case of a Borrowing of Swingline Loans) or the respective Letter of Credit Issuer (in the case of Letters of Credit), as the case may be, may prior to receipt of written confirmation act without liability upon the basis of such telephonic notice, believed by the Agent, BTCo or such Letter of Credit Issuer, as the case may be, in good faith to be from an Authorized Officer of the Borrower. In each such case, the Borrower hereby waives the right to dispute the Agent's, BTCo's or such Letter of Credit Issuer's record of the terms of such telephonic notice. 1.04 Disbursement of Funds. (a) No later than 1:00 P.M. (New York --------------------- time) on the date specified in each Notice of Borrowing (or (x) in the case of Swingline Loans, not later than 2:00 P.M. (New York time) on the date specified in Section 1.03(b)(i) or (y) in the case of Mandatory Borrowings, not later than 12:00 Noon (New York time) on the date specified in Section 1.01(C)), each Bank with a Commitment under the respective Facility will make available its pro rata --- ---- share, if any, of each Borrowing requested to be made on such date (or in the case of Swingline Loans, BTCo shall make available the full amount thereof) in the manner provided below. All amounts shall be made available to the Agent in U.S. Dollars and immediately available funds at the Payment Office and the Agent promptly will make available to the Borrower by depositing to its account at the Payment Office the aggregate of the amounts so made available in the type of funds received. Unless the Agent shall have been notified by any Bank prior to the date of Borrowing that such Bank does not intend to make available to the Agent its portion of the Borrowing or Borrowings to be made on such date, the Agent may assume that such Bank has made such amount available to the Agent on such date of Borrowing, and the Agent, in reliance upon such assumption, may (in its sole discretion and without any obligation to do so) make available to the Borrower a corresponding amount. If such corresponding amount is not in fact made available to the Agent by such Bank and the Agent has made available same to the Borrower, the Agent shall be entitled to recover such corresponding amount from such Bank. If such Bank does not pay such corresponding amount forthwith upon the Agent's demand therefor, the Agent shall promptly notify the Borrower, and the Borrower shall immediately pay such corresponding amount to the Agent. The Agent shall also be entitled to recover from the Bank or the Borrower, as the case may be, interest on such corresponding amount in respect of each day from the date such corresponding amount was made available by the Agent to the Borrower to the date such corresponding amount is recovered by the Agent, at a rate per annum equal to (x) if paid by such Bank, the overnight Federal Funds rate or (y) if paid by the Borrower, the then applicable rate of interest, calculated in accordance with Section 1.08, for the respective Loans. --5-- (b) Nothing herein shall be deemed to relieve any Bank from its obligation to fulfill its commitments hereunder or to prejudice any rights which the Borrower may have against any Bank as a result of any default by such Bank hereunder. 1.05 Notes. (a) The Borrower's obligation to pay the principal of, ----- and interest on, all the Loans made to it by each Bank shall be evidenced (i) if A Term Loans, by a promissory note substantially in the form of Exhibit B-1 with blanks appropriately completed in conformity herewith (each, an "A Term Note" and, collectively, the "A Term Notes"), (ii) if B Term Loans, by a promissory note substantially in the form of Exhibit B-2 with blanks appropriately completed in conformity herewith (each, a "B Term Note" and, collectively, the "B Term Notes"), (iii) if C Term Loans, by a promissory note substantially in the form of Exhibit B-3 with blanks appropriately completed in conformity herewith (each, a "C Term Note" and, collectively, the "C Term Notes"), (iv) if D Term Loans, by a promissory note substantially in the form of Exhibit B-4 with blanks appropriately completed in conformity herewith (each, a "D Term Note" and, collectively, the "D Term Notes"), (v) if Revolving Loans, by a promissory note substantially in the form of Exhibit B-5 with blanks appropriately completed in conformity herewith (each, a "Revolving Note" and, collectively, the "Revolving Notes") and (vi) if Swingline Loans, by a promissory note substantially in the form of Exhibit B-6 with blanks appropriately completed in conformity herewith (the "Swingline Note"). (b) The A Term Note issued to each Bank shall (i) be executed by the Borrower, (ii) be payable to the order of such Bank or its registered assigns and be dated the Initial Borrowing Date, (iii) be in a stated principal amount equal to the A Term Loans made by such Bank, (iv) mature on the A Term Loan Maturity Date, (v) bear interest as provided in the appropriate clause of Section 1.08 in respect of the Base Rate Loans and Eurodollar Loans, as the case may be, evidenced thereby, (vi) be subject to voluntary prepayment as provided in Section 4.01, and mandatory repayment as provided in Section 4.02, and (vii) be entitled to the benefits of this Agreement and the other Credit Documents. (c) The B Term Note issued to each Bank shall (i) be executed by the Borrower, (ii) be payable to the order of such Bank or its registered assigns and be dated the Initial Borrowing Date, (iii) be in a stated principal amount equal to the B Term Loans made by such Bank, (iv) mature on the B Term Loan Maturity Date, (v) bear interest as provided in the appropriate clause of Section 1.08 in respect of the Base Rate Loans and Eurodollar Loans, as the case may be, evidenced thereby, (vi) be subject to voluntary prepayment as provided in Section 4.01, and mandatory repayment as provided in Section 4.02, and (vii) be entitled to the benefits of this Agreement and the other Credit Documents. (d) The C Term Note issued to each Bank shall (i) be executed by the Borrower, (ii) be payable to the order of such Bank or its registered assigns and be dated the Initial Borrowing Date, (iii) be in a stated principal amount equal to the C Term Loans made by such Bank, (iv) mature on the C Term Loan Maturity Date, (v) bear interest as provided in the appropriate clause of Section 1.08 in respect of the Base Rate Loans and Eurodollar Loans, as the case may be, evi denced thereby, (vi) be subject to voluntary prepayment as provided in Section 4.01, and mandatory --6-- repayment as provided in Section 4.02, and (vii) be entitled to the benefits of this Agreement and the other Credit Documents. (e) The D Term Note issued to each Bank shall (i) be executed by the Borrower, (ii) be payable to the order of such Bank or its registered assigns and be dated the Initial Borrow ing Date, (iii) be in a stated principal amount equal to the D Term Loans made by such Bank, (iv) mature on the D Term Loan Maturity Date, (v) bear interest as provided in the appropriate clause of Section 1.08 in respect of the Base Rate Loans and Eurodollar Loans, as the case may be, evi denced thereby, (vi) be subject to voluntary prepayment as provided in Section 4.01, and mandatory repayment as provided in Section 4.02, and (vii) be entitled to the benefits of this Agreement and the other Credit Documents. (f) The Revolving Note issued to each Bank shall (i) be executed by the Borrower, (ii) be payable to the order of such Bank or its registered assigns and be dated the Initial Borrowing Date, (iii) be in a stated principal amount equal to the Revolving Loan Commitment of such Bank and be payable in the principal amount of the Revolving Loans evi denced thereby, (iv) mature on the Revolving Loan Maturity Date, (v) bear interest as provided in the appropriate clause of Section 1.08 in respect of the Base Rate Loans and Eurodollar Loans, as the case may be, evidenced thereby, (vi) be subject to voluntary prepayment as provided in Section 4.01, and mandatory repayment as provided in Section 4.02, and (vii) be entitled to the benefits of this Agreement and the other Credit Documents. (g) The Swingline Note issued to BTCo shall (i) be executed by the Borrower, (ii) be payable to the order of BTCo or its registered assigns and be dated the Initial Borrowing Date, (iii) be in a stated principal amount equal to the Maximum Swingline Amount and be payable in the principal amount of the Swingline Loans evidenced thereby, (iv) mature on the Swingline Expiry Date, (v) bear interest as provided in Section 1.08 in respect of the Base Rate Loans evidenced thereby, (vi) be subject to voluntary prepayment as provided in Section 4.01, and mandatory repayment as provided in Section 4.02, and (vii) be entitled to the benefits of this Agreement and the other Credit Documents. (h) Each Bank will note on its internal records the amount of each Loan made by it and each payment in respect thereof and will prior to any transfer of any of its Notes endorse on the reverse side thereof the outstanding principal amount of Loans evidenced thereby. Failure to make any such notation shall not affect the Borrower's obligations in respect of such Loans. 1.06 Conversions. The Borrower shall have the option to convert on ----------- any Business Day occurring on or after the earlier of (x) the 90th day after the Initial Borrowing Date and (y) the Syndication Date, all or a portion at least equal to the applicable Minimum Borrowing Amount of the outstanding principal amount of the Loans (other than Swingline Loans which at all times shall be maintained as Base Rate Loans) owing by the Borrower pursuant to a single Facility into a Borrowing or Borrowings of another Type of Loan under such Facility; provided, that (i) except as otherwise provided in Section 1.10(b), no -------- partial conversion of a Borrowing of Eurodollar Loans shall reduce the outstanding principal amount of the Eurodollar Loans made pursuant to such Bor- --7-- rowing to less than the Minimum Borrowing Amount applicable thereto, (ii) Base Rate Loans may only be converted into Eurodollar Loans if no payment Default, or Event of Default, is in existence on the date of the conversion and (iii) Borrowings of Eurodollar Loans resulting from this Section 1.06 shall be limited in number as provided in Section 1.02. Each such conversion shall be effected by the Borrower by giving the Agent at its Notice Office, prior to 11:00 A.M. (New York time), at least three Business Days' (or one Business Day's in the case of a conversion into Base Rate Loans) prior written notice (or telephonic notice promptly con firmed in writing) (each, a "Notice of Conversion") specifying the Loans to be so converted, the Type of Loans to be converted into and, if to be converted into a Borrowing of Eurodollar Loans, the Interest Period to be initially applicable thereto. The Agent shall give each Bank prompt notice of any such proposed conversion affecting any of its Loans. 1.07 Pro Rata Borrowings. All Borrowings of Loans (other than Swingline Loans) under this Agreement shall be made by the Banks pro rata on the --- ---- basis of their A Term Loan Commitments, B Term Loan Commitments, C Term Loan Commitments, D Term Loan Commitments or Revolving Loan Commitments, as the case may be. It is understood that no Bank shall be responsible for any default by any other Bank of its obligation to make Loans here under and that each Bank shall be obligated to make the Loans to be made by it hereunder, regardless of the failure of any other Bank to fulfill its commitments hereunder. 1.08 Interest. (a) The unpaid principal amount of each Base Rate -------- Loan shall bear interest from the date of the Borrowing thereof until the earlier of (i) the maturity (whether by acceleration or otherwise) of such Base Rate Loan and (ii) the conversion of such Base Rate Loan to a Eurodollar Loan pursuant to Section 1.06, at a rate per annum which shall at all times be the Applicable Base Rate Margin plus the Base Rate in effect from time to time. (b) The unpaid principal amount of each Eurodollar Loan shall bear interest from the date of the Borrowing thereof until the earlier of (i) the maturity (whether by acceler ation or otherwise) of such Eurodollar Loan and (ii) the conversion of such Eurodollar Loan to a Base Rate Loan pursuant to Section 1.06, 1.09 or 1.10(b), as applicable, at a rate per annum which shall at all times be the Applicable Eurodollar Margin plus the relevant Eurodollar Rate. (c) Overdue principal and, to the extent permitted by law, overdue interest in respect of each Loan shall bear interest at a rate per annum equal to the greater of (x) the rate which is 2% in excess of the rate then borne by such Loans and (y) the rate which is 2% in excess of the rate otherwise applicable to Base Rate Loans of such Facility from time to time. Interest which accrues under this Section 1.08(c) shall be payable on demand. (d) Interest shall accrue from and including the date of any Borrowing to but excluding the date of any repayment thereof and shall be payable (i) in respect of each Base Rate Loan, quarterly in arrears on each Quarterly Payment Date, (ii) in respect of each Eurodollar Loan, on (x) the date of any prepayment or repayment thereof (on the amount prepaid or repaid), (y) the date of any conversion into a Base Rate Loan pursuant to Section 1.06, 1.09 or 1.10(b), as applicable (on the amount converted) and (z) the last day of each Interest Period applicable thereto and, in the --8-- case of an Interest Period in excess of three months, on each date occurring at three month intervals after the first day of such Interest Period and (iii) in respect of each Loan, at maturity (whether by acceleration or otherwise) and, after such maturity, on demand. (e) All computations of interest hereunder shall be made in accordance with Section 12.07(b). (f) The Agent, upon determining the interest rate for any Borrowing of Eurodollar Loans for any Interest Period, shall promptly notify the Borrower and the Banks thereof. 1.09 Interest Periods. At the time the Borrower gives a Notice of ---------------- Borrowing or Notice of Conversion in respect of the making of, or conversion into, a Borrowing of Eurodollar Loans (in the case of the initial Interest Period applicable thereto) or prior to 12:00 Noon (New York time) on the third Business Day prior to the expiration of an Interest Period applicable to a Borrowing of Eurodollar Loans, it shall have the right to elect by giving the Agent written notice (or telephonic notice promptly confirmed in writing) of the Interest Period applicable to such Borrowing, which Interest Period shall, at the option of the Borrower, be a one, two, three or six-month period or, to the extent approved by all Banks with a Commitment and/or outstanding Loans, as the case may be, of the respective Facility, a twelve-month period. Notwithstanding anything to the contrary contained above: (i) all Eurodollar Loans comprising a Borrowing shall have the same Interest Period; (ii) the initial Interest Period for any Borrowing of Eurodollar Loans shall commence on the date of such Borrowing (including the date of any conversion from a Borrowing of Base Rate Loans) and each Interest Period occurring thereafter in respect of such Borrowing shall commence on the day on which the next preceding Interest Period expires; (iii) if any Interest Period begins on a day for which there is no numerically corresponding day in the calendar month at the end of such Interest Period, such Interest Period shall end on the last Business Day of such calendar month; (iv) if any Interest Period would otherwise expire on a day which is not a Business Day, such Interest Period shall expire on the next succeeding Business Day, provided, that if any Interest Period would -------- otherwise expire on a day which is not a Business Day but is a day of the month after which no further Business Day occurs in such month, such Interest Period shall expire on the next preceding Business Day; (v) no Interest Period for a Borrowing under a Facility may be elected if it would extend beyond the respective Maturity Date for such Facility; --9-- (vi) no Interest Period may be elected at any time when a payment Default, or an Event of Default, is then in existence; and (vii) no Interest Period with respect to any Borrowing of Term Loans shall extend beyond any date upon which a mandatory prepayment of such Term Loans is required to be made under Section 4.02(A)(b) (i), (ii), (iii) or (iv), as the case may be, if, after giving effect to the selection of such Interest Period, the aggregate principal amount of such Term Loans maintained as Eurodollar Loans with Interest Periods ending after such date of mandatory repayment would exceed the aggregate principal amount of such Term Loans permitted to be outstanding after such mandatory prepayment. If upon the expiration of any Interest Period, the Borrower has failed to elect, or is not permitted to elect by virtue of the application of clause (vi) above, a new Interest Period to be applicable to the respective Borrowing of Eurodollar Loans as provided above, the Borrower shall be deemed to have elected to convert such Borrowing into a Borrowing of Base Rate Loans effective as of the expiration date of such current Interest Period. 1.10 Increased Costs, Illegality, etc. (a) In the event that (x) in -------------------------------- the case of clause (i) below, the Agent or (y) in the case of clauses (ii) and (iii) below, any Bank, shall have determined (which determination shall, absent manifest error, be final and conclusive and binding upon all parties hereto): (i) on any date for determining the Eurodollar Rate for any Interest Period, that, by reason of any changes arising after the date of this Agreement affecting the interbank Eurodollar market, adequate and fair means do not exist for ascertaining the applicable interest rate on the basis provided for in the definition of Eurodollar Rate; or (ii) at any time, that such Bank shall incur increased costs or reductions in the amounts received or receivable hereunder with respect to any Eurodollar Loans (other than any increased cost or reduction in the amount received or receivable resulting from the imposition of or a change in the rate of net income taxes or similar charges) because of (x) any change since the date of this Agreement in any applicable law, govern mental rule, regulation, guideline, order or request (whether or not having the force of law), or in the interpretation or administration thereof and including the introduction of any new law or governmental rule, regulation, guideline, order or request (such as, for example, but not limited to a change in official reserve requirements, but, in all events, excluding reserves required under Regulation D to the extent included in the computation of the Eurodollar Rate) and/or (y) other circumstances affecting such Bank, the interbank Eurodollar market or the position of such Bank in such market; or (iii) at any time since the date of this Agreement, that the making or contin uance of any Eurodollar Loan has become unlawful by compliance by such Bank in good faith with any law, governmental rule, regulation, guideline or order (or would conflict with any such governmental rule, regulation, guideline or order not having the force of law but with which --10-- such Bank customarily complies even though the failure to comply therewith would not be unlawful), or has become impracticable as a result of a contingency occurring after the date of this Agreement which materially and adversely affects the interbank Eurodollar market; then, and in any such event, such Bank (or the Agent in the case of clause (i) above) shall (x) on such date and (y) as promptly as practicable (and in any event within 10 Business Days) after the date on which such event no longer exists give notice (by telephone confirmed in writing) to the Borrower and (except in the case of clause (i)) to the Agent of such determination (which notice the Agent shall promptly transmit to each of the other Banks). Thereafter, (x) in the case of clause (i) above, Eurodollar Loans shall no longer be available until such time as the Agent notifies the Borrower and the Banks that the circumstances giving rise to such notice by the Agent no longer exist, and any Notice of Borrowing or Notice of Conversion given by the Borrower with respect to Eurodollar Loans which have not yet been incurred shall be deemed rescinded by the Borrower, (y) in the case of clause (ii) above, the Borrower agrees to pay to such Bank, upon written demand therefor (accompanied by the written notice referred to below), such additional amounts (in the form of an increased rate of, or a different method of calculating, interest or otherwise as such Bank in its sole discretion shall determine) as shall be required to compensate such Bank for such increased costs or reductions in amounts received or receivable hereunder (a written notice as to the additional amounts owed to such Bank, showing the basis for the calcu lation thereof, submitted to the Borrower by such Bank shall, absent manifest error, be final and conclusive and binding upon all parties hereto) and (z) in the case of clause (iii) above, the Borrower shall take one of the actions specified in Section 1.10(b) as promptly as possible and, in any event, within the time period required by law. (b) At any time that any Eurodollar Loan is affected by the circumstances described in Section 1.10(a)(ii) or (iii), the Borrower may (and in the case of a Eurodollar Loan affected pursuant to Section 1.10(a)(iii) the Borrower shall) either (i) if the affected Eurodollar Loan is then being made pursuant to a Borrowing, cancel said Borrowing by giving the Agent telephonic notice (confirmed promptly in writing) thereof on the same date that the Borrower was notified by a Bank pursuant to Section 1.10(a)(ii) or (iii)), or (ii) if the affected Eurodollar Loan is then outstanding, upon at least three Business Days' notice to the Agent, require the affected Bank to convert each such Eurodollar Loan into a Base Rate Loan (which conversion, in the case of the circumstances described in Section 1.10(a)(iii), shall occur no later than the last day of the Interest Period then applicable to such Eurodollar Loan (or such earlier date as shall be required by applicable law)); provided, that if more -------- than one Bank is affected at any time, then all affected Banks must be treated the same pursuant to this Section 1.10(b). (c) If any Bank shall have determined that after the date hereof, the adoption or effectiveness of any applicable law, rule or regulation regarding capital adequacy, or any change therein, or any change in the interpretation or administration thereof by the National Association of Insurance Commissioners ("NAIC") or any governmental authority, central bank or comparable agency charged with the interpretation or administration thereof, or compliance by such Bank or any corporation controlling such Bank with any request or directive regarding capital adequacy (whether or not having the force of law) of the NAIC or any such authority, central bank or comparable agency, has or would have the effect of reducing the rate of return on such Bank's or such other --11-- corporation's capital or assets as a consequence of such Bank's Commitments or obligations hereunder to a level below that which such Bank or such other corporation could have achieved but for such adoption, effectiveness, change or compliance (taking into consideration such Bank's or such other corporation's policies with respect to capital adequacy), then from time to time, upon written demand by such Bank (with a copy to the Agent), accompanied by the notice referred to in the last sentence of this clause (c), the Borrower agrees to pay to such Bank such additional amount or amounts as will compensate such Bank or such other corporation for such reduction. Each Bank, upon determining in good faith that any additional amounts will be payable pursuant to this Section 1.10(c), will give prompt written notice thereof to the Borrower, which notice shall set forth the basis of the calculation of such additional amounts, although the failure to give any such notice shall not release or diminish the Borrower's obligations to pay additional amounts pursuant to this Section 1.10(c) upon the subsequent receipt of such notice. 1.11 Compensation. The Borrower agrees to compensate each Bank, ------------ promptly upon its written request (which request shall set forth the basis for requesting such compensation and shall be made through the Agent), for all reasonable losses, expenses and liabilities (including, without limitation, any loss, expense or liability incurred by reason of the liquidation or reemployment of deposits or other funds required by such Bank to fund its Eurodollar Loans but excluding loss of anticipated profit with respect to any Loans) which such Bank may sustain: (i) if for any reason (other than a default by such Bank or the Agent) a Borrowing of Eurodollar Loans does not occur on a date specified therefor in a Notice of Borrowing or Notice of Conversion (whether or not withdrawn by the Borrower or deemed withdrawn pursuant to Section 1.10(a)); (ii) if any repayment (including any repayment made pursuant to Section 4.02 or as a result of an acceleration of the Loans pursuant to Section 9) or conversion of any Eurodollar Loans occurs on a date which is not the last day of an Interest Period applicable thereto; (iii) if any prepayment of any Eurodollar Loans is not made on any date specified in a notice of prepayment given by the Borrower; or (iv) as a consequence of (x) any other default by the Borrower to repay its Eurodollar Loans when required by the terms of this Agreement or (y) an election made pursuant to Section 1.10(b). Calculation of all amounts payable to a Bank under this Section 1.11 shall be made as though that Bank had actually funded its relevant Eurodollar Loan through the purchase of a Eurodollar deposit bearing interest at the Eurodollar Rate in an amount equal to the amount of that Loan, having a maturity comparable to the relevant Interest Period and through the transfer of such Eurodollar deposit from an offshore office of that Bank to a domestic office of that Bank in the United States of America; provided, -------- however, that each Bank may fund each of its Eurodollar Loans in any manner it - ------- sees fit and the foregoing assumption shall be utilized only for the calculation of amounts payable under this Section 1.11. 1.12 Change of Lending Office. Each Bank agrees that, upon the ------------------------ occurrence of any event giving rise to the operation of Section 1.10(a)(ii) or (iii), 1.10(c), 2.05 or 4.04 with respect to such Bank, it will, if requested by the Borrower, use reasonable efforts (subject to overall policy considerations of such Bank) to designate another lending office for any Loans or Letters of Credit affected by such event; provided, that such designation is made on such -------- terms that, in the sole judgment of such Bank, such Bank and its lending office suffer no economic, legal or regulatory disadvantage, with the object of avoiding the consequences of the event giving rise to the operation --12-- of any such Section. Nothing in this Section 1.12 shall affect or postpone any of the obligations of the Borrower or the right of any Bank provided in Section 1.10, 2.05 or 4.04. 1.13 Replacement of Banks. (x) If any Bank becomes a Defaulting -------------------- Bank, (y) upon the occurrence of any event giving rise to the operation of Section 1.10(a)(ii) or (iii), Section 1.10(c), Section 2.05 or Section 4.04 with respect to any Bank which results in such Bank charging to the Borrower increased costs in excess of those being generally charged by the other Banks or (z) in the case of a refusal by a Bank to consent to a proposed change, waiver, discharge or termination with respect to this Agreement which has been approved by the Required Banks as provided in Section 12.12(b), the Borrower shall have the right, if no payment Default, or Event of Default, then exists, to replace such Bank (the "Replaced Bank") with one or more other Eligible Transferee or Transferees, none of whom shall constitute a Defaulting Bank at the time of such replacement (collectively, the "Replacement Bank") reasonably acceptable to the Agent, provided that (i) at the time of any replacement pursuant to this Section -------- 1.13, the Replacement Bank shall enter into one or more Assignment and Assumption Agreements pursuant to Section 12.04(b) (and with all fees payable pursuant to said Section 12.04(b) to be paid by the Replacement Bank) pursuant to which the Replacement Bank shall acquire all of the Commitments and outstanding Loans of, and in each case participations in Letters of Credit by, the Replaced Bank and, in connection therewith, shall pay to (x) the Replaced Bank in respect thereof an amount equal to the sum of (A) an amount equal to the principal of, and all accrued interest on, all outstanding Loans of the Replaced Bank, (B) an amount equal to all Unpaid Drawings that have been funded by (and not reimbursed to) such Replaced Bank, together with all then unpaid interest with respect thereto at such time and (C) an amount equal to all accrued, but theretofore unpaid, Fees owing to the Replaced Bank pursuant to Section 3.01, (y) the respective Letter of Credit Issuer an amount equal to such Replaced Bank's RL Percentage of any Unpaid Drawing (which at such time remains an Unpaid Drawing) with respect to a Letter of Credit issued by it to the extent such amount was not theretofore funded by such Replaced Bank and (z) BTCo an amount equal to such Replaced Bank's RL Percentage of any Mandatory Borrowing to the extent such amount was not theretofore funded by such Replaced Bank, and (ii) all obligations (including, without limitation, all such amounts, if any, owing under Section 1.11) of the Borrower owing to the Replaced Bank (other than those specifically described in clause (i) above in respect of which the assignment purchase price has been, or is concurrently being, paid) shall be paid in full to such Replaced Bank concurrently with such replacement. Upon the execution of the respective Assignment and Assumption Agreements, the payment of amounts referred to in clauses (i) and (ii) above, recordation of the assignment on the Register by the Agent pursuant to Section 7.13 and, if so requested by the Replacement Bank, delivery to the Replacement Bank of the appropriate Note or Notes executed by the Borrower, (x) the Replacement Bank shall become a Bank hereunder and the Replaced Bank shall cease to constitute a Bank hereunder, except with respect to indemnification provisions under this Agreement, which shall survive as to such Replaced Bank and (y) Annex I hereto shall be deemed modified to reflect the changed Commitments (and/or outstanding Term Loans, as the case may be) resulting from the assignment from the Replaced Bank to the Replacement Bank. --13-- SECTION 2. Letters of Credit. ----------------- 2.01 Letters of Credit. (a) Subject to and upon the terms and ----------------- conditions herein set forth, the Borrower may request a Letter of Credit Issuer at any time and from time to time on or after the Initial Borrowing Date and prior to the Revolving Loan Maturity Date to issue, for the account of the Borrower and in support of, (x) trade obligations of the Borrower or any of its Subsidiaries that arise in the ordinary course of business and are in respect of general corporate purposes of the Borrower or its Subsidiaries, as the case may be, and/or (y) on a standby basis, L/C Supportable Indebtedness, and subject to and upon the terms and conditions herein set forth each Letter of Credit Issuer agrees to issue from time to time, irrevocable letters of credit in such form as may be approved by such Letter of Credit Issuer (each such letter of credit, a "Letter of Credit" and, collectively, the "Letters of Credit"). Notwithstanding the foregoing, no Letter of Credit Issuer shall be under any obligation to issue any Letter of Credit if at the time of such issuance: (i) any order, judgment or decree of any governmental authority or arbitrator shall purport by its terms to enjoin or restrain such Letter of Credit Issuer from issuing such Letter of Credit or any requirement of law applicable to such Letter of Credit Issuer or any request or directive (whether or not having the force of law) from any governmental authority with jurisdiction over such Letter of Credit Issuer shall prohibit, or request that such Letter of Credit Issuer refrain from, the issuance of letters of credit generally or such Letter of Credit in particular or shall impose upon such Letter of Credit Issuer with respect to such Letter of Credit any restriction or reserve or capital requirement (for which such Letter of Credit Issuer is not otherwise compensated) not in effect on the date hereof, or any unreimbursed loss, cost or expense which was not applicable, in effect or known to such Letter of Credit Issuer as of the date hereof and which such Letter of Credit Issuer in good faith deems material to it; or (ii) such Letter of Credit Issuer shall have received notice from the Required Banks prior to the issuance of such Letter of Credit of the type described in clause (vi) of Section 2.01(b). (b) Notwithstanding the foregoing, (i) no Letter of Credit shall be issued the Stated Amount of which, when added to the Letter of Credit Outstandings (exclusive of Unpaid Drawings which are repaid on the date of, and prior to the issuance of, the respective Letter of Credit) at such time, would exceed either (x) $35,000,000 or (y) when added to the aggregate principal amount of all Revolving Loans and Swingline Loans then outstanding, the Total Revolving Loan Commitment at such time; (ii) (x) each standby Letter of Credit shall have an expiry date occurring not later than one year after such standby Letter of Credit's date of issuance, provided, that any standby Letter of Credit may be automatically renewable for periods of up to one year so long as such standby Letter of Credit provides that the respective Letter of Credit Issuer retains an option, satisfactory to such Letter of Credit Issuer, to terminate such standby Letter of Credit within a specified period of time prior to each scheduled renewal date and (y) each trade Letter of Credit shall have an expiry date occurring not later than 180 days after such trade Letter of Credit's date of issuance; (iii) (x) no standby Letter of Credit shall have an expiry date occurring later than the Business Day next --14-- preceding the Revolving Loan Maturity Date and (y) no trade Letter of Credit shall have an expiry date occurring later than 30 days prior to the Revolving Loan Maturity Date; (iv) each Letter of Credit shall be denominated in U.S. Dollars; (v) the Stated Amount of each Letter of Credit shall not be less than $100,000 or such lesser amount as is acceptable to the Letter of Credit Issuer; and (vi) no Letter of Credit Issuer will issue any Letter of Credit after it has received written notice from the Borrower or the Required Banks stating that a Default or an Event of Default exists until such time as such Letter of Credit Issuer shall have received a written notice of (i) rescission of such notice from the party or parties originally delivering the same or (ii) a waiver of such Default or Event of Default by the Required Banks. (c) Notwithstanding the foregoing, in the event a Bank Default exists, no Letter of Credit Issuer shall be required to issue any Letter of Credit unless the respective Letter of Credit Issuer has entered into arrangements satisfactory to it and the Borrower to eliminate such Letter of Credit Issuer's risk with respect to the participation in Letters of Credit of the Defaulting Bank or Banks, including by cash collateralizing such Defaulting Bank's or Banks' RL Percentage of the Letter of Credit Outstandings. (d) Annex XII hereto contains a description of all letters of credit issued pursuant to the Existing Credit Agreement and outstanding on the Effective Date. Each such letter of credit, including any extension or renewal thereof (each, as amended from time to time in accordance with the terms thereof and hereof, an "Existing Letter of Credit") shall constitute a "Letter of Credit" for all purposes of this Agreement, issued, for purposes of Section 2.04(a), on the Initial Borrowing Date. Any Bank hereunder to the extent it has issued an Existing Letter of Credit that is to remain outstanding on the Effective Date shall constitute a "Letter of Credit Issuer" for all purposes of this Agreement. 2.02 Letter of Credit Requests; Notices of Issuance. (a) Whenever ---------------------------------------------- it desires that a Letter of Credit be issued, the Borrower shall give the Agent and the respective Letter of Credit Issuer written notice (or telephonic notice confirmed in writing) thereof prior to 12:00 Noon (New York time) at least five Business Days (or such shorter period as may be acceptable to such Letter of Credit Issuer) prior to the proposed date of issuance (which shall be a Business Day) which written notice shall be in the form of Exhibit A-2 (each such notice, a "Letter of Credit Request"). Each Letter of Credit Request shall include any other documents as the respective Letter of Credit Issuer customarily requires in connection therewith. The Agent shall promptly transmit copies of each Letter of Credit Request to each RL Bank. (b) Each Letter of Credit Issuer shall, on the date of each issuance of or amend ment or modification to a Letter of Credit by it, give the Agent, each RL Bank and the Borrower written notice of the issuance of or amendment or modification to such Letter of Credit, accompanied by a copy to the Agent of the Letter of Credit or Letters of Credit issued by it and each such amendment or modification thereto. 2.03 Agreement to Repay Letter of Credit Drawings. (a) The Borrower -------------------------------------------- hereby agrees to reimburse the respective Letter of Credit Issuer, by making payment to the Agent in --15-- immediately available funds at the Payment Office, for any payment or disbursement made by such Letter of Credit Issuer under any Letter of Credit issued by it (each such amount so paid or disbursed until reimbursed, an "Unpaid Drawing") no later than one Business Day following the date of such payment or disbursement, with interest on the amount so paid or disbursed by such Letter of Credit Issuer, to the extent not reimbursed prior to 1:00 P.M. (New York time) on the date of such payment or disbursement, from and including the date paid or disbursed to but not including the date such Letter of Credit Issuer is reimbursed therefor at a rate per annum which shall be the Applicable Base Rate Margin plus the Base Rate as in effect from time to time for Revolving Loans (plus an additional 2% per annum if not reimbursed by the third Business Day after the date of such payment or disbursement), such interest also to be payable on demand. Each Letter of Credit Issuer shall provide the Borrower prompt notice of any payment or dis bursement made by it under any Letter of Credit issued by it, although the failure of, or delay in, giving any such notice shall not release or diminish the obligations of the Borrower under this Section 2.03(a) or under any other Section of this Agreement. (b) The Borrower's obligation under this Section 2.03 to reimburse the respective Letter of Credit Issuer with respect to Unpaid Drawings (including, in each case, interest thereon) shall be absolute and unconditional under any and all circumstances and irrespective of any setoff, counterclaim or defense to payment which the Borrower may have or have had against such Letter of Credit Issuer, the Agent or any Bank, including, without limitation, any defense based upon the failure of any drawing under a Letter of Credit issued by it to conform to the terms of the Letter of Credit or any non-application or misapplication by the beneficiary of the proceeds of such drawing; provided, however, that the -------- ------- Borrower shall not be obligated to reim burse such Letter of Credit Issuer for any wrongful payment made by such Letter of Credit Issuer under a Letter of Credit issued by it as a result of acts or omissions constituting willful misconduct or gross negligence on the part of such Letter of Credit Issuer. 2.04 Letter of Credit Participations. (a) Immediately upon the ------------------------------- issuance by a Letter of Credit Issuer of any Letter of Credit, such Letter of Credit Issuer shall be deemed to have sold and transferred to each other RL Bank, and each such RL Bank (each, a "Participant") shall be deemed irrevocably and unconditionally to have purchased and received from such Letter of Credit Issuer, without recourse or warranty, an undivided interest and participation, to the extent of such Participant's RL Percentage, in such Letter of Credit, each substitute letter of credit, each drawing made thereunder and the obligations of the Borrower under this Agreement with respect thereto (although Letter of Credit Fees shall be payable directly to the Agent for the account of the RL Banks as provided in Section 3.01(b) and the Participants shall have no right to receive any portion of any Facing Fees) and any security therefor or guaranty pertaining thereto. Upon any change in the Revolving Loan Commitments of the RL Banks pursuant to Section 1.13 or 12.04(b) or otherwise, it is hereby agreed that, with respect to all outstanding Letters of Credit and Unpaid Drawings, there shall be an automatic adjustment to the participations pursuant to this Section 2.04 to reflect the new RL Percentages of the assigning and assignee Banks. (b) In determining whether to pay under any Letter of Credit, no Letter of Credit Issuer shall have any obligation relative to the Participants other than to determine that any --16-- documents required to be delivered under such Letter of Credit have been delivered and that they appear to comply on their face with the requirements of such Letter of Credit. Any action taken or omitted to be taken by any Letter of Credit Issuer under or in connection with any Letter of Credit issued by it if taken or omitted in the absence of gross negligence or willful misconduct, shall not create for such Letter of Credit Issuer any resulting liability. (c) In the event that any Letter of Credit Issuer makes any payment under any Letter of Credit issued by it and the Borrower shall not have reimbursed such amount in full to such Letter of Credit Issuer pursuant to Section 2.03(a), such Letter of Credit Issuer shall promptly notify the Agent, and the Agent shall promptly notify each Participant of such failure, and each Participant shall promptly and unconditionally pay to the Agent for the account of such Letter of Credit Issuer, the amount of such Participant's RL Percentage of such payment in U.S. Dollars and in same day funds; provided, however, that -------- ------- no Participant shall be obligated to pay to the Agent its RL Percentage of such unreimbursed amount for any wrongful payment made by such Letter of Credit Issuer under a Letter of Credit issued by it as a result of acts or omissions constituting willful misconduct or gross negligence on the part of such Letter of Credit Issuer. If the Agent so notifies any Participant required to fund a payment under a Letter of Credit prior to 11:00 A.M. (New York time) on any Business Day, such Participant shall make available to the Agent for the account of the respective Letter of Credit Issuer such Participant's RL Percentage of the amount of such payment on such Business Day in same day funds. If and to the extent such Participant shall not have so made its RL Percentage of the amount of such payment available to the Agent for the account of the respective Letter of Credit Issuer, such Participant agrees to pay to the Agent for the account of such Letter of Credit Issuer, forthwith on demand such amount, together with interest thereon, for each day from such date until the date such amount is paid to the Agent for the account of such Letter of Credit Issuer at the overnight Federal Funds rate. The failure of any Participant to make available to the Agent for the account of the respective Letter of Credit Issuer its RL Percentage of any payment under any Letter of Credit issued by it shall not relieve any other Participant of its obligation hereunder to make avail able to the Agent for the account of such Letter of Credit Issuer its RL Percentage of any payment under any such Letter of Credit on the date required, as specified above, but no Participant shall be responsible for the failure of any other Participant to make available to the Agent for the account of such Letter of Credit Issuer such other Participant's RL Percentage of any such payment. (d) Whenever any Letter of Credit Issuer receives a payment of a reimbursement obligation as to which the Agent has received for the account of such Letter of Credit Issuer any payments from the Participants pursuant to clause (c) above, such Letter of Credit Issuer shall promptly pay to the Agent and the Agent shall promptly pay to each Participant which has paid its RL Percentage thereof, in U.S. Dollars and in same day funds, an amount equal to such Participant's RL Percentage of the principal amount thereof and interest thereon accruing after the purchase of the respective participations. (e) The obligations of the Participants to make payments to the Agent for the account of the respective Letter of Credit Issuer with respect to Letters of Credit issued by it shall be irrevocable and not subject to counterclaim, set-off or other defense or any other qualification or --17-- exception whatsoever and shall be made in accordance with the terms and conditions of this Agreement under all circumstances, including, without limitation, any of the following circumstances: (i) any lack of validity or enforceability of this Agreement or any of the other Credit Documents; (ii) the existence of any claim, set-off, defense or other right which the Borrower may have at any time against a beneficiary named in a Letter of Credit, any transferee of any Letter of Credit (or any Person for whom any such transferee may be acting), the Agent, any Letter of Credit Issuer, any Bank, or other Person, whether in connection with this Agreement, any Letter of Credit, the transactions contemplated herein or any unrelated transactions (including any underlying transaction between the Borrower or any of its Subsidiaries and the beneficiary named in any such Letter of Credit); (iii) any draft, certificate or other document presented under the Letter of Credit proving to be forged, fraudulent, invalid or insufficient in any respect or any statement therein being untrue or inaccurate in any respect; (iv) the surrender or impairment of any security for the performance or observance of any of the terms of any of the Credit Documents; or (v) the occurrence of any Default or Event of Default. 2.05 Increased Costs. If after the date hereof, the adoption or --------------- effectiveness of any applicable law, rule or regulation, or any change therein, or any change in the interpretation or administration thereof by any governmental authority, central bank or comparable agency charged with the interpretation or administration thereof, or compliance by any Letter of Credit Issuer or any Participant with any request or directive (whether or not having the force of law) by any such authority, central bank or comparable agency shall either (i) impose, modify or make applicable any reserve, deposit, capital adequacy or similar requirement against Letters of Credit issued by such Letter of Credit Issuer or such Participant's participation therein, or (ii) impose on any Letter of Credit Issuer or any Participant any other conditions affecting this Agreement, any Letter of Credit or such Participant's participation therein; and the result of any of the foregoing is to increase the cost to such Letter of Credit Issuer or such Participant of issuing, maintaining or participating in any Letter of Credit, or to reduce the amount of any sum received or receivable by such Letter of Credit Issuer or such Participant hereunder, then, upon written demand to the Borrower by such Letter of Credit Issuer or such Participant (a copy of which notice shall be sent by such Letter of Credit Issuer or such Participant to the Agent), accompanied by the certificate described in the last sentence of this Section 2.05, the Borrower shall pay to such Letter of Credit Issuer or such Participant such additional amount or amounts as will com pensate such Letter of Credit Issuer or such Participant for such increased cost or reduction. A certificate submitted to the Borrower by such Letter of Credit Issuer or such Participant, as the case may be (a copy of which certificate shall be sent by such Letter of Credit Issuer or such Participant to the Agent), setting forth the basis for the determination of such additional amount or amounts necessary to compensate such Letter of Credit Issuer or such --18-- Participant as aforesaid shall be final and conclusive and binding on the Borrower absent manifest error, although the failure to deliver any such certificate shall not release or diminish the Borrower's obligations to pay additional amounts pursuant to this Section 2.05 upon subsequent receipt of such certificate. SECTION 3. Fees; Commitments. ----------------- 3.01 Fees. (a) The Borrower shall pay to the Agent for distribution ---- to each Bank a commitment fee (the "Commitment Fee") for the period from the Effective Date to but not including the date the Total Commitment has been terminated, computed at the rate of 1/2 of 1% per annum on the daily Aggregate Unutilized Commitment of such Bank. Accrued Commitment Fees shall be due and payable in arrears on the Initial Borrowing Date and thereafter, in arrears on each Quarterly Payment Date and the date upon which the Total Revolving Loan Commitment is terminated. (b) The Borrower shall pay to the Agent for the account of the RL Banks pro rata on the basis of their RL Percentages, a fee in respect of each --- ---- Letter of Credit (the "Letter of Credit Fee") computed at a rate per annum equal to the Applicable Eurodollar Margin then in effect with respect to Revolving Loans on the daily Stated Amount of such Letter of Credit. Accrued Letter of Credit Fees shall be due and payable quarterly in arrears on each Quarterly Payment Date and upon the first day after the termination of the Total Revolving Loan Commitment upon which no Letters of Credit remain outstanding. (c) The Borrower shall pay to the Agent for the account of the respective Letter of Credit Issuer a fee in respect of each Letter of Credit issued by such Letter of Credit Issuer (the "Facing Fee") computed at the rate of 1/4 of 1% per annum on the daily Stated Amount of such Letter of Credit; provided, that in no event shall the annual Facing Fee with respect to each - -------- Letter of Credit be less than $500; it being agreed that, on the date of issuance of any Letter of Credit and on each anniversary thereof prior to the termination of such Letter of Credit, if $500 will exceed the amount of Facing Fees that will accrue with respect to such Letter of Credit for the immediately succeeding 12-month period, the full $500 shall be payable on the date of issuance of such Letter of Credit and on each such anniversary thereof prior to the termination of such Letter of Credit. Except as provided in the immediately preceding sentence, accrued Facing Fees shall be due and payable quarterly in arrears on each Quarterly Payment Date and upon the first day after the termination of the Total Revolving Loan Commitment upon which no Letters of Credit remain outstanding. (d) The Borrower hereby agrees to pay directly to the respective Letter of Credit Issuer upon each issuance of, payment under, and/or amendment of, a Letter of Credit issued by it such amount as shall at the time of such issuance, payment or amendment be the administrative charge which such Letter of Credit Issuer is customarily charging for issuances of, payments under or amendments of, letters of credit issued by it. (e) The Borrower shall pay to the Agent, for its own account, such fees as may be agreed to from time to time between the Borrower and the Agent, when and as due. --19-- (f) All computations of Fees shall be made in accordance with Section 12.07(b). 3.02 Voluntary Termination or Reduction of Total Unutilized Revolving ---------------------------------------------------------------- Loan Commitment. (a) Upon at least two Business Days' prior written notice (or - --------------- telephonic notice promptly confirmed in writing) to the Agent at its Notice Office (which notice the Agent shall promptly transmit to each of the Banks), the Borrower shall have the right, without premium or penalty, to terminate or partially reduce the Total Unutilized Revolving Loan Commitment; provided that -------- (x) any such termination or partial reduction shall apply to proportionately and permanently reduce the Revolving Loan Commitment of each of the RL Banks and (y) any partial reduction pursuant to this Section 3.02 shall be in the amount of at least $1,000,000. (b) In the event of certain refusals by a Bank to consent to certain proposed changes, waivers, discharges or terminations with respect to this Agreement which have been approved by the Required Banks as provided in Section 12.12(b), the Borrower shall have the right, upon five Business Days' prior written notice to the Agent at its Notice Office (which notice the Agent shall promptly transmit to each of the Banks), to terminate the entire Revolving Loan Commitment of such Bank, so long as all Loans, together with accrued and unpaid interest, Fees and all other amounts, due and owing to such Bank are repaid concurrently with the effectiveness of such termination pursuant to Section 4.01(b) and the Borrower shall pay to the Agent at such time an amount in cash and/or Cash Equivalents equal to such Bank's RL Percentage of the outstanding Letters of Credit (which cash and/or Cash Equivalents shall be held by the Agent as security for the obligations of the Borrower hereunder in respect of the outstanding Letters of Credit pursuant to a cash collateral agreement to be entered into in form and substance reasonably satisfactory to the Agent, which shall permit certain investments in Cash Equivalents reasonably satisfactory to the Agent until the proceeds are applied to the secured obligations) (at which time Annex I shall be deemed modified to reflect such changed amounts), and at such time, such Bank shall no longer constitute a "Bank" for purposes of this Agreement, except with respect to indemnifications under this Agreement (including, without limitation, Sections 1.10, 1.11, 2.05, 4.04, 12.01 and 12.06), which shall survive as to such repaid Bank. 3.03 Mandatory Adjustments of Commitments, etc. (a) The Total ------------------------------------------ Commitment shall terminate in its entirety on May 15, 1996 unless the Initial Borrowing Date has occurred on or before such date. (b) Each of the Total A Term Loan Commitment, Total B Term Loan Commitment, the Total C Term Loan Commitment and the Total D Term Loan Commitment shall terminate on the Initial Borrowing Date, after giving effect to the making of Term Loans on such date. (c) The Total Revolving Loan Commitment (and the Revolving Loan Commitment of each Bank) shall terminate on the earlier of (x) the date on which a Change of Control Event occurs and (y) the Revolving Loan Maturity Date. (d) The Total Revolving Loan Commitment shall be reduced (i) on the second Business Day following the Accounts Receivable Facility Transaction Date, by an amount equal to --20-- the Accounts Receivable Facility Proceeds and (ii) on the second Business Day after each date after the Accounts Receivable Facility Transaction Date on which the holders of Investor Certificates fund any increase in the net invested amount of such Investor Certificates, by the respective increase; provided that -------- after the aggregate reduction to the Total Revolving Loan Commitment pursuant to clauses (i) and/or (ii) above is in an amount equal to $50,000,000, no such further reduction shall be required pursuant to this Section 3.03(d) unless and until the sum (such sum, the "Aggregate Net Invested Amount") of (x) the Accounts Receivable Facility Proceeds plus (y) the sum of the respective increases under clause (ii) above exceeds $75,000,000; provided further, that on -------- ------- the second Business Day following any date on which the Aggregate Net Invested Amount is increased above $75,000,000, an amount equal to such increase above $75,000,000 shall be applied (at the option of the Borrower) either to (A) reduce the Total Revolving Loan Commitment and/or (B) prepay the A Term Loans pursuant to Section 4.02(A)(j) (such election (which may be to apply all or part of such increase to the Total Revolving Loan Commitment and/or all or part of such increase to the A Term Loans, so long as the full amount of such increase is applied) to be evidenced by a written notice to be delivered by the Borrower to the Agent on or prior to the second Business Day following the date of such increase, which notice shall specify the amount of such increase to be applied to each of the Total Revolving Loan Commitment and the A Term Loans, it being understood that if the Borrower fails to give such notice then the full amount of such increase shall be applied to reduce the Total Revolving Loan Commitment). (e) On each date upon which a mandatory repayment of Term Loans pursuant to Section 4.02(A)(c), (d), (e), (f), (g) or (h) is required (and exceeds in amount the aggregate principal amount of Term Loans then outstanding) or would be required if an unlimited amount of Term Loans were then outstanding, the Total Revolving Loan Commitment shall be permanently reduced by the amount, if any, by which the amount required to be applied pursuant to said Sections (determined as if an unlimited amount of Term Loans were actually outstanding) exceeds the aggregate principal amount of Term Loans then outstanding. (f) Each reduction or adjustment of the Total A Term Loan Commitment, the Total B Term Loan Commitment, the Total C Term Loan Commitment, the Total D Term Loan Commitment or the Total Revolving Loan Commitment pursuant to this Section 3.03 (or pursuant to Section 4.02) shall apply proportionately to the A Term Loan Commitment, the B Term Loan Commitment, the C Term Loan Commitment, the D Term Loan Commitment or the Revolving Loan Commitment, as the case may be, of each Bank with such a Commitment. SECTION 4. Payments. -------- 4.01 Voluntary Prepayments. (a) The Borrower shall have the right --------------------- to prepay the Loans made to it, in whole or in part, without premium or penalty except as otherwise pro vided in this Agreement, from time to time on the following terms and conditions: (i) the Borrower shall give the Agent at its Notice Office written notice (or telephonic notice promptly con firmed in writing) of its intent to prepay such Loans, whether such Loans are A Term Loans, B Term Loans, C Term Loans, D Term Loans, Revolving Loans or Swingline Loans, the amount of such prepayment and (in the case of Eurodollar Loans) the specific Borrowing(s) pursuant to which made, which notice --21-- shall be given by the Borrower prior to 11:00 A.M. (New York time) (x) at least one Business Day prior to the date of such prepayment in the case of Term Loans or Revolving Loans maintained as Base Rate Loans, (y) on the date of such prepayment in the case of Swingline Loans and (z) at least three Business Days prior to the date of such prepayment in the case of Eurodollar Loans, which notice shall, except in the case of Swingline Loans, promptly be transmitted by the Agent to each of the Banks; (ii) each prepayment shall be in an aggregate principal amount of at least $1,000,000 (or $500,000 in the case of Swingline Loans); provided, that no partial prepayment of Eurodollar Loans made pursuant -------- to a Borrowing shall reduce the aggregate principal amount of the Loans outstanding pursuant to such Borrowing to an amount less than the Minimum Borrowing Amount applicable thereto; (iii) each prepayment in respect of any Loans made pursuant to a Borrowing shall be applied pro rata among such Loans; --- ---- provided, that at the Borrower's election in connection with any prepayment of - -------- Revolving Loans pursuant to this Section 4.01, such prepayment shall not be applied to any Revolving Loans of a Defaulting Bank at any time when the aggregate amount of Revolving Loans of any Non-Defaulting Bank exceeds such Non- Defaulting Bank's RL Percentage of all Revolving Loans then outstanding; (iv) each prepayment of Term Loans pursuant to this Section 4.01 must consist of a prepayment of A Term Loans (in an amount equal to the A TL Percentage of such prepayment), B Term Loans (in an amount equal to the B TL Percentage of such prepayment), C Term Loans (in an amount equal to the C TL Percentage of such prepayment) and D Term Loans (in an amount equal to the D TL Percentage of such prepayment); (v) each prepayment of A Term Loans pursuant to this Section 4.01 shall reduce the then remaining Scheduled A Repayments on a pro rata basis --- ---- (based upon the then remaining principal amount of each such Scheduled A Repayment); (vi) each prepayment of B Term Loans pursuant to this Section 4.01 shall reduce the then remaining Scheduled B Repayments on a pro rata basis --- ---- (based upon the then remaining principal amount of each such Scheduled B Repayment); (vii) each prepayment of C Term Loans pursuant to this Section 4.01 shall reduce the then remaining Scheduled C Repayments on a pro rata basis --- ---- (based upon the then remaining principal amount of each such Scheduled C Repayment); and (viii) each prepayment of D Term Loans pursuant to this Section 4.01 shall reduce the then remaining Scheduled D Repayments on a pro rata basis --- ---- (based upon the then remaining principal amount of each such Scheduled D Repayment). (b) In the event of certain refusals by a Bank to consent to certain proposed changes, waivers, discharges or terminations with respect to this Agreement which have been approved by the Required Banks as provided in Section 12.12(b), the Borrower shall have the right, upon five Business Days' prior written notice to the Agent at its Notice Office (which notice the Agent shall promptly transmit to each of the Banks) to repay all Loans, together with accrued and unpaid interest, Fees and all other amounts due and owing to such Bank in accordance with said Section 12.12(b), so long as (A) in the case of the repayment of Revolving Loans of any RL Bank pursuant to this clause (b), the Revolving Loan Commitment of such RL Bank is terminated concurrently with such repayment pursuant to Section 3.02(b) (at which time Annex I shall be deemed modified to reflect the changed Revolving Loan Commitments) and (B) in the case of the repayment of Loans of any Bank, the consents required by Section 12.12(b) in connection with the repayment pursuant to this clause (b) shall have been obtained. --22-- 4.02 Mandatory Prepayments. --------------------- (A) Requirements: ------------ (a) If on any date the sum of (i) the aggregate outstanding principal amount of Revolving Loans and Swingline Loans (after giving effect to all other repayments thereof on such date) plus (ii) the Letter of Credit Outstandings on such date exceeds the Total Revolving Loan Commitment as then in effect, the Borrower shall repay on such date the principal of Swingline Loans, and if no Swingline Loans are or remain outstanding, Revolving Loans, in an aggregate amount equal to such excess. If, after giving effect to the prepayment of all outstanding Swingline Loans and Revolving Loans, the aggregate amount of Letter of Credit Outstandings exceeds the Total Revolving Loan Commitment as then in effect, the Borrower agrees to pay to the Agent an amount in cash and/or Cash Equivalents equal to such excess (up to the aggregate amount of Letter of Credit Outstandings at such time) and the Agent shall hold such payment as security for the obligations of the Borrower hereunder pursuant to a cash collateral agreement to be entered into in form and substance reasonably satisfactory to the Agent (which shall permit certain investments in Cash Equivalents satisfactory to the Agent until the proceeds are applied to the secured obligations). (b) (i) The Borrower shall be required to repay the principal amount of A Term Loans on each date set forth below in the amount set forth opposite such date below (each such repayment, as the same may be reduced as provided in Sections 4.01 and 4.02(B), a "Scheduled A Repayment"):
Scheduled A Repayment Date Amount -------------------------- ------ the last Business Day in March, 1997 $ 3,000,000 the last Business Day in June, 1997 $ 3,000,000 the last Business Day in September, 1997 $ 3,000,000 the last Business Day in December, 1997 $ 3,000,000 the last Business Day in March, 1998 $ 4,500,000 the last Business Day in June, 1998 $ 4,500,000 the last Business Day in September, 1998 $ 4,500,000 the last Business Day in December, 1998 $ 4,500,000 the last Business Day in March, 1999 $ 8,000,000 the last Business Day in June, 1999 $ 8,000,000 the last Business Day in September, 1999 $ 8,000,000 the last Business Day in December, 1999 $ 8,000,000 the last Business Day in March, 2000 $11,500,000 the last Business Day in June, 2000 $11,500,000 the last Business Day in September, 2000 $11,500,000 the last Business Day in December, 2000 $11,500,000
--23-- the last Business Day in March, 2001 $19,250,000 the last Business Day in June, 2001 $19,250,000 the last Business Day in September, 2001 $19,250,000 A Term Loan Maturity Date $19,250,000
(ii) The Borrower shall be required to repay the principal amount of B Term Loans on each date set forth below in the amount set forth opposite such date below (each such repayment, as the same may be reduced as provided in Sections 4.01 and 4.02(B), a "Scheduled B Repayment"):
Scheduled B Repayment Date Amount -------------------------- ------ the last Business Day in March, 1997 $ 280,000 the last Business Day in June, 1997 $ 280,000 the last Business Day in September, 1997 $ 280,000 the last Business Day in December, 1997 $ 280,000 the last Business Day in March, 1998 $ 280,000 the last Business Day in June, 1998 $ 280,000 the last Business Day in September, 1998 $ 280,000 the last Business Day in December, 1998 $ 280,000 the last Business Day in March, 1999 $ 280,000 the last Business Day in June, 1999 $ 280,000 the last Business Day in September, 1999 $ 280,000 the last Business Day in December, 1999 $ 280,000 the last Business Day in March, 2000 $ 280,000 the last Business Day in June, 2000 $ 280,000 the last Business Day in September, 2000 $ 280,000 the last Business Day in December, 2000 $ 280,000 the last Business Day in March, 2001 $ 280,000 the last Business Day in June, 2001 $ 280,000 the last Business Day in September, 2001 $ 280,000 the last Business Day in December, 2001 $ 280,000 the last Business Day in March, 2002 $21,100,000 the last Business Day in June, 2002 $21,100,000 the last Business Day in September, 2002 $21,100,000 B Term Loan Maturity Date $21,100,000
--24-- (iii) The Borrower shall be required to repay the principal amount of C Term Loans on each date set forth below in the amount set forth opposite such date below (each such repayment, as the same may be reduced as provided in Sections 4.01 and 4.02(B), a "Scheduled C Repayment"):
Scheduled C Repayment Date Amount -------------------------- ------ the last Business Day in March, 1997 $ 280,000 the last Business Day in June, 1997 $ 280,000 the last Business Day in September, 1997 $ 280,000 the last Business Day in December, 1997 $ 280,000 the last Business Day in March, 1998 $ 280,000 the last Business Day in June, 1998 $ 280,000 the last Business Day in September, 1998 $ 280,000 the last Business Day in December, 1998 $ 280,000 the last Business Day in March, 1999 $ 280,000 the last Business Day in June, 1999 $ 280,000 the last Business Day in September, 1999 $ 280,000 the last Business Day in December, 1999 $ 280,000 the last Business Day in March, 2000 $ 280,000 the last Business Day in June, 2000 $ 280,000 the last Business Day in September, 2000 $ 280,000 the last Business Day in December, 2000 $ 280,000 the last Business Day in March, 2001 $ 280,000 the last Business Day in June, 2001 $ 280,000 the last Business Day in September, 2001 $ 280,000 the last Business Day in December, 2001 $ 280,000 the last Business Day in March, 2002 $ 280,000 the last Business Day in June, 2002 $ 280,000 the last Business Day in September, 2002 $ 280,000 the last Business Day in December, 2002 $ 280,000 the last Business Day in March, 2003 $20,820,000 the last Business Day in June, 2003 $20,820,000 the last Business Day in September, 2003 $20,820,000 C Term Loan Maturity Date $20,820,000
(iv) The Borrower shall be required to repay the principal amount of D Term Loans on each date set forth below in the amount set forth opposite such date below (each such repayment as the same may be reduced as provided in Sections 4.01 and 4.02(B), a "Scheduled D Repayment"): --25--
Scheduled D Repayment Date Amount -------------------------- ------ the last Business Day in March, 1997 $300,000 the last Business Day in June, 1997 $300,000 the last Business Day in September, 1997 $300,000 the last Business Day in December, 1997 $300,000 the last Business Day in March, 1998 $300,000 the last Business Day in June, 1998 $300,000 the last Business Day in September, 1998 $300,000 the last Business Day in December, 1998 $300,000 the last Business Day in March, 1999 $300,000 the last Business Day in June, 1999 $300,000 the last Business Day in September, 1999 $300,000 the last Business Day in December, 1999 $300,000 the last Business Day in March, 2000 $300,000 the last Business Day in June, 2000 $300,000 the last Business Day in September, 2000 $300,000 the last Business Day in December, 2000 $300,000 the last Business Day in March, 2001 $300,000 the last Business Day in June, 2001 $300,000 the last Business Day in September, 2001 $300,000 the last Business Day in December, 2001 $300,000 the last Business Day in March, 2002 $300,000 the last Business Day in June, 2002 $300,000 the last Business Day in September, 2002 $300,000 the last Business Day in December, 2002 $300,000 the last Business Day in March, 2003 $300,000 the last Business Day in June, 2003 $300,000 the last Business Day in September, 2003 $300,000 the last Business Day in December, 2003 $300,000 the last Business Day in March, 2004 $21,650,000 the last Business Day in June, 2004 $21,650,000 the last Business Day in September, 2004 $21,650,000 D Term Loan Maturity Date $21,650,000
(c) On the Business Day after the date of receipt thereof by Holdings and/or any of its Subsidiaries of Proceeds from any Asset Sale, an amount equal to 100% of the Net Proceeds from --26-- such Asset Sale shall be applied as a mandatory repayment of principal of the Term Loans (with the A TL Percentage of such amount to be applied as a repayment of the A Term Loans, the B TL Percentage of such amount to be applied as a repayment of the B Term Loans, the C TL Percentage of such amount to be applied as a repayment of the C Term Loans and the D TL Percentage of such amount to be applied as a repayment of the D Term Loans, in each case subject to modification of such application as set forth in Section 4.02(C)), provided that (w) with -------- respect to no more than $5,000,000 in the aggregate of such Proceeds in any fiscal year of the Borrower (excluding Proceeds received from the B&J Asset Sale, any Designated Real Property Sale and any Designated Asset Sale), the Net Proceeds therefrom shall not be required to be so applied on such date to the extent that no payment Default, or Event of Default, then exists and the Borrower delivers a certificate to the Agent on or prior to such date stating that such Net Proceeds shall be used to purchase assets used or to be used in the businesses referred to in Section 8.01(a) (including, without limitation, capital stock of a corporation engaged in any such business) within 180 days following the date of such Asset Sale (which certificate shall set forth the estimates of the proceeds to be so expended), provided, that (1) if all or any -------- portion of such Net Proceeds not so applied to the repayment of Term Loans are not so used (or contractually committed to be used) within such 180 day period, such remaining portion shall be applied on the last day of such period as a mandatory repayment of principal of outstanding Term Loans as provided above in this Section 4.02(A)(c) and (2) if all or any portion of such Net Proceeds are not required to be applied on the 180th day referred to in clause (1) above because such amount is contractually committed to be used and subsequent to such date such contract is terminated or expires without such portion being so used, then such remaining portion shall be applied on the date of such termination or expiration as a mandatory repayment of principal of outstanding Term Loans as provided in this Section 4.02(A)(c); (x) notwithstanding anything to the contrary contained above, in the event of an Asset Sale constituting the B&J Asset Sale, only $20 million of the Net Proceeds resulting therefrom shall be required to be applied as a mandatory repayment of Term Loans pursuant to this Section 4.02(A)(c) and such repayment shall be applied solely to the A Term Loans; (y) notwithstanding anything to the contrary contained above, in the event of an Asset Sale constituting a Designated Real Property Sale, only 80% of such Net Proceeds resulting from any such Designated Real Property Sale shall be required to be applied as a mandatory repayment of Term Loans as provided above in this Section 4.02(A)(c); and (z) notwithstanding anything to the contrary contained above, in the event of an Asset Sale constituting a Designated Asset Sale, the Net Proceeds therefrom shall not be required to be so applied on such date to the extent that no payment Default, or Event of Default, then exists and the Borrower delivers a certificate to the Agent on or prior to such date stating that such Net Proceeds shall be used to purchase assets used or to be used in the businesses referred to in Section 8.01(a) (including, without limitation, capital stock of a corporation engaged in any such business) within 360 days following the date of such Designated Asset Sale (which certificate shall set forth the estimates of the proceeds to be so expended), provided that -------- if all or any portion of such Net Proceeds not so applied to the repayment of Term Loans are not so used within such 360 day period, such remaining portion (to the extent theretofore received by Holdings and/or any of its Subsidiaries in the form of cash) shall be applied on the last day of such period as a mandatory repayment of principal of outstanding Term Loans as provided in this Section 4.02(A)(c). --27-- (d) On the Business Day after the date of the receipt thereof by Holdings and/or any of its Subsidiaries, an amount equal to 100% of the cash proceeds (net of underwriting discounts and commissions and other reasonable costs associated therewith) of the sale or issuance of preferred or common equity of (or cash capital contributions to) Holdings or any of its Subsidiaries (other than (w) issuances of Holdings Common Stock and Permitted Holdings PIK Securities by Holdings as consideration in connection with any Permitted Acquisition, (x) issuances of Holdings Common Stock or Holdings Class L Common Stock (including as a result of the exercise of any options with regard thereto) to management of Holdings and its Subsidiaries, (y) issuances of Baxter Preferred Stock to Baxter in accordance with the terms of the Baxter Acquisition Documents and this Agreement and (z) equity contributions to any Subsidiary of the Borrower made by the Borrower or any other Subsidiary of the Borrower) shall be applied as a mandatory repayment of principal of the Term Loans (with the A TL Percentage of such amount to be applied as a repayment of the A Term Loans, the B TL Percentage of such amount to be applied as a repayment of the B Term Loans, the C TL Percentage of such amount to be applied as a repayment of the C Term Loans and the D TL Percentage of such amount to be applied as a repayment of the D Term Loans, in each case subject to modification of such application as set forth in Section 4.02(C)); provided that (i) $30,000,000 of cash equity -------- contributions in the aggregate from Bain Capital, GS Capital and/or their respective Related Parties shall not be required to be applied as provided above in this Section 4.02(A)(d) so long as such equity contributions are substantially contemporaneously contributed to the capital of the Borrower as an equity contribution or loaned to the Borrower (such loan to be evidenced by the Borrower Subordinated Note) (the cash contributions made pursuant to this clause (i), "Permitted Equity Proceeds"), and (ii) only 50% of such proceeds resulting from the registered initial public offering of Holdings Common Stock, or the issuance of Holdings common stock pursuant to a Permitted Strategic Equity Issuance, shall be applied as provided above in this Section 4.02(A)(d). (e) On the date of the receipt thereof by Holdings and/or any of its Subsidiaries, an amount equal to 100% of the proceeds (net of underwriting discounts and commissions and other reasonable costs associated therewith) of the incurrence of Indebtedness by Holdings and/or any of its Subsidiaries (other than Indebtedness permitted to be incurred by Section 8.04 as in effect on the Effective Date) shall be applied as a mandatory repayment of principal of the Term Loans (with the A TL Percentage of such amount to be applied as a repayment of the A Term Loans, the B TL Percentage of such amount to be applied as a repayment of the B Term Loans, the C TL Percentage of such amount to applied as a repayment of the C Term Loans and the D TL Percentage of such amount to be applied as a repayment of the D Term Loans, in each case subject to modification of such application as set forth in Section 4.02(C)). (f) On each Excess Cash Payment Date, an amount equal to 75% of Excess Cash Flow of the Borrower and its Subsidiaries for the most recent Excess Cash Flow Period ending prior to such Excess Cash Payment Date shall be applied as a mandatory repayment of principal of the Term Loans (with the A TL Percentage of such amount to be applied as a repayment of the A Term Loans, the B TL Percentage of such amount to be applied as a repayment of the B Term Loans, the C TL Percentage of such amount to be applied as a repayment of the C Term Loans and the D TL Percentage of such amount to be applied as a repayment of the D Term Loans, in each case subject to modification of such application as set forth in Section 4.02(C)). --28-- (g) Within 10 days following each date on which Holdings or any of its Subsidiaries receives any proceeds from any Recovery Event, an amount equal to 100% of the proceeds of such Recovery Event (net of reasonable costs and taxes incurred in connection with such Recovery Event) shall be applied as a mandatory repayment of principal of the Term Loans (with the A TL Percentage of such amount to be applied as a repayment of the A Term Loans, the B TL Percentage of such amount to be applied as a repayment of the B Term Loans, the C TL Percentage of such amount to be applied as a repayment of the C Term Loans and the D TL Percentage of such amount to be applied as a repayment of the D Term Loans, in each case subject to modification of such application as set forth in Section 4.02(C)), provided that so long as no Default or Event of -------- Default then exists and such proceeds do not exceed $100,000,000, such proceeds shall not be required to be so applied on such date to the extent that the Borrower has delivered a certificate to the Agent on or prior to such date stating that such proceeds shall be used to replace or restore any properties or assets in respect of which such proceeds were paid within 360 days following the date of the receipt of such proceeds (which certificate shall set forth the estimates of the proceeds to be so expended), and provided further, that (i) if ---------------- the amount of such proceeds exceeds $100,000,000, then the entire amount and not just the portion in excess of $100,000,000 shall be applied as a mandatory repayment of Term Loans as provided above in this Section 4.02(A)(g), (ii) if all or any portion of such proceeds not required to be applied to the repayment of Term Loans pursuant to the preceding proviso are not so used (or contractually committed to be used) within 360 days after the date of the receipt of such proceeds, such remaining portion shall be applied on the last day of such period as a mandatory repayment of principal of the Term Loans as provided in this Section 4.02(A)(g) and (iii) if all or any portion of such proceeds are not required to be applied on the 360th day referred to in clause (ii) above because such amount is contractually committed to be used and subsequent to such date such contract is terminated or expires without such portion being so used, then such remaining portion shall be applied on the date of such termination or expiration as a mandatory repayment of principal of outstanding Term Loans as provided in this Section 4.02(A)(g). (h) On the date of the receipt thereof by Holdings and/or any of its Subsidiaries of a Pension Plan Refund, an amount equal to 100% of such Pension Plan Refund shall be applied as a mandatory repayment of principal of Term Loans (with the A TL Percentage of such amount to be applied as a repayment of the A Term Loans, the B TL Percentage of such amount to be applied as a repayment of the B Term Loans, the C TL Percentage of such amount to be applied as a repayment of the C Term Loans and the D TL Percentage of such amount to be applied as a repayment of the D Term Loans, in each case subject to modification of such application as set forth in Section 4.02(C)). (i) Notwithstanding anything to the contrary contained elsewhere in this Agreement, (i) all then outstanding Swingline Loans shall be repaid in full on the Swingline Expiry Date and (ii) all other then outstanding Loans of the respective Facility shall be repaid in full on the Maturity Date for such Facility. (j) On the second Business Day following each date on which the Aggregate Net Invested Amount in respect of the Accounts Receivable Facility is increased to an amount in excess --29-- of $75,000,000, all or a portion of such increase shall be applied as a mandatory prepayment of the A Term Loans (as and to the extent elected by the Borrower pursuant to Section 3.03(d)). (B) Application: ----------- (a) Any amount required to be applied to A Term Loans, B Term Loans, C Term Loans or D Term Loans, as the case may be, shall apply to the repayment of the outstanding principal amount of A Term Loans, B Term Loans, C Term Loans and D Term Loans, respectively of the respective Facility. (b) All repayments of A Term Loans, B Term Loans, C Term Loans and D Term Loans shall be applied in the following manner: (i) if required pursuant to Section 4.02(A)(c) as a result of the B&J Asset Sale, first to reduce the Scheduled A Repayments in direct order ----- of maturity to and including the Scheduled A Repayment to occur on the last Business Day of December, 1998, and second, to the extent in excess ------ thereof, to reduce the then remaining Scheduled A Repayments pro rata based --- ---- on the then remaining Scheduled A Repayments (after giving effect to all reductions thereto pursuant to the preceding provisions of this clause (b)(i)); and (ii) if required pursuant to Section 4.02(A)(c) other than as a result of the B&J Asset Sale, or Section 4.02(A)(d), (e), (f), (g), (h) or (j), to reduce the then remaining Scheduled Repayments of the respective Facility pro rata based on the then remaining Scheduled Repayments of the --- ---- respective Facility. (c) With respect to each repayment of Loans required by this Section 4.02, the Borrower may designate the Types of Loans which are to be repaid and the specific Borrowing(s) under the affected Facility pursuant to which made; provided, that (i) Eurodollar Loans made pursuant to a specific -------- Facility may be designated for repayment pursuant to this Section 4.02 only on the last day of an Interest Period applicable thereto unless all Eurodollar Loans made pursuant to such Facility with Interest Periods ending on such date of required prepayment and all Base Rate Loans made pursuant to such Facility have been paid in full; (ii) if any repayment of Eurodollar Loans made pursuant to a single Borrowing shall reduce the outstanding Loans made pursuant to such Borrowing to an amount less than the Minimum Borrowing Amount, such Borrowing shall be immediately converted into Base Rate Loans; and (iii) each repayment of any Loans made pursuant to a Borrowing shall be applied pro rata among such --- ---- Loans; provided, that no repayment pursuant to Section 4.02(A)(a) shall be -------- applied to any Revolving Loans of a Defaulting Bank at any time when the aggregate amount of the Revolving Loans of any Non-Defaulting Bank exceeds such Non-Defaulting Bank's RL Percentage of Revolving Loans then outstanding. In the absence of a designation by the Borrower as described in the preceding sentence, the Agent shall, subject to the above, make such designation in its sole discretion with a view, but no obligation, to minimize breakage costs owing under Section 1.11. --30-- (C) Waiver of Certain Mandatory Repayments by B, C and D Banks -------------------------------------- Notwithstanding anything to the contrary contained in this Section 4.02 or elsewhere in this Agreement (including, without limitation, in Section 12.12), the Borrower shall have the option, in its sole discretion, to give the Banks with outstanding B Terms Loans (the "B Banks"), C Term Loans (the "C Banks") and D Term Loans (the "D Banks") the option to waive a mandatory repayment of such Loans pursuant to Section 4.02(A)(c), (d), (e)(i), (e)(ii), (f), (g) and/or (h) (each such repayment, a "Waivable Mandatory Repayment") upon the terms and provisions set forth in this Section 4.02(C). If the Borrower elects to exercise the option referred to in the preceding sentence, the Borrower shall give to the Agent written notice of its intention to give the B Banks, the C Banks and the D Banks the right to waive a Waivable Mandatory Repayment at least five Business Days prior to such repayment, which notice the Agent shall promptly forward to all B Banks, C Banks and D Banks (indicating in such notice the amount of such repayment to be applied to each such Bank's outstanding Term Loans under such Facilities). The Borrower's offer to permit such Banks to waive any such Waivable Mandatory Repayment may apply to all or part of such repayment, provided that any offer to waive part of such -------- repayment must be made ratably to such Banks on the basis of their outstanding B Term Loans, C Term Loans and D Term Loans. In the event any such B Bank, C Bank or D Bank desires to waive such Bank's right to receive any such Waivable Mandatory Repayment in whole or in part, such Bank shall so advise the Agent no later than the close of business two Business Days after the date of such notice from the Agent, which notice shall also include the amount such Bank desires to receive in respect of such repayment. If any Bank does not reply to the Agent within the two Business Days, it will be deemed not to have waived any part of such repayment. If any Bank does not specify an amount it wishes to receive, it will be deemed to have accepted 100% of the total payment. In the event that any such Bank waives all or part of such right to receive any such Waivable Mandatory Repayment, the Agent shall apply 100% of the amount so waived by such Bank to the A Term Loans in accordance with Section 4.02(B). 4.03 Method and Place of Payment. Except as otherwise specifically --------------------------- provided herein, all payments under this Agreement shall be made to the Agent for the ratable account of the Banks entitled thereto, not later than 12:00 Noon (New York time) on the date when due and shall be made in immediately available funds and in U.S. Dollars at the Payment Office, it being understood that written, telex or facsimile transmission notice by the Borrower to the Agent to make a payment from the funds in the Borrower's account at the Payment Office shall constitute the making of such payment to the extent of such funds held in such account. Any payments under this Agreement which are made later than 12:00 Noon (New York time) shall be deemed to have been made on the next succeeding Business Day. Whenever any payment to be made hereunder shall be stated to be due on a day which is not a Business Day, the due date thereof shall be extended to the next succeeding Business Day and, with respect to payments of principal, interest shall be payable during such extension at the applicable rate in effect immediately prior to such extension. 4.04 Net Payments. (a) All payments made by the Borrower hereunder ------------ or under any Note will be made without setoff, counterclaim or other defense. Except as provided in Section 4.04(b), all such payments will be made free and clear of, and without deduction or withholding for, --31-- any present or future taxes, levies, imposts, duties, fees, assessments or other charges of whatever nature now or hereafter imposed by any jurisdiction or by any political subdivision or taxing authority thereof or therein with respect to such payments (but excluding, except as provided in the second succeeding sentence, any tax imposed on or measured by the net income or net profits of a Bank pursuant to the laws of the jurisdiction in which it is organized or the jurisdiction in which the principal office or applicable lending office of such Bank is located or any subdivision thereof or therein) and all interest, penalties or similar liabilities with respect thereto (all such non-excluded taxes, levies, imposts, duties, fees, assessments or other charges being referred to collectively as "Taxes"). If any Taxes are so levied or imposed, the Borrower agrees to pay the full amount of such Taxes, and such additional amounts as may be necessary so that every payment of all amounts due under this Agreement or under any Note, after withholding or deduction for or on account of any Taxes, will not be less than the amount provided for herein or in such Note. If any amounts are payable in respect of Taxes pursuant to the preceding sentence, the Borrower agrees to reimburse each Bank, upon the written request of such Bank, for taxes imposed on or measured by the net income or net profits of such Bank pursuant to the laws of the jurisdiction in which the principal office or applicable lending office of such Bank is located or under the laws of any political subdivision or taxing authority of any such jurisdiction in which the principal office or applicable lending office of such Bank is located and for any withholding of taxes as such Bank shall determine are payable by, or withheld from, such Bank in respect of such amounts so paid to or on behalf of such Bank pursuant to the preceding sentence and in respect of any amounts paid to or on behalf of such Bank pursuant to this sentence. The Borrower will furnish to the Agent within 45 days after the date the payment of any Taxes is due pursuant to applicable law certified copies of tax receipts evidencing such payment by the Borrower. The Borrower agrees to indemnify and hold harmless each Bank, and reimburse such Bank upon its written request, for the amount of any Taxes so levied or imposed and paid by such Bank. (b) Each Bank that is not a United States person (as such term is defined in Section 7701(a)(30) of the Code) agrees to deliver to the Borrower and the Agent on or prior to the Effective Date, or in the case of a Bank that is an assignee or transferee of an interest under this Agreement pursuant to Section 1.13 or 12.04 (unless the respective Bank was already a Bank hereunder immediately prior to such assignment or transfer), on the date of such assignment or transfer to such Bank, (i) two accurate and complete original signed copies of Internal Revenue Service Form 4224 or 1001 (or successor forms) certifying to such Bank's entitlement to a complete exemption from United States withholding tax with respect to payments to be made under this Agreement and under any Note, or (ii) if the Bank is not a "bank" within the meaning of Section 881(c)(3)(A) of the Code and cannot deliver either Internal Revenue Service Form 1001 or 4224 pursuant to clause (i) above, (x) a certificate substantially in the form of Exhibit C (any such certificate, a "Section 4.04(b)(ii) Certificate") and (y) two accurate and complete original signed copies of Internal Revenue Service Form W-8 (or successor form) certifying to such Bank's entitlement to a complete exemption from United States withholding tax with respect to payments of interest to be made under this Agreement and under any Note. In addition, each Bank agrees that from time to time after the Effective Date, when a lapse in time or change in circumstances renders the previous certification obsolete or inaccurate in any material respect, it will deliver to the Borrower and the Agent two new accurate and complete original signed copies of Internal Revenue Service Form 4224 or 1001, or Form W-8 --32-- and a Section 4.04(b)(ii) Certificate, as the case may be, and such other forms as may be required in order to confirm or establish the entitlement of such Bank to a continued exemption from or reduction in United States withholding tax with respect to payments under this Agreement and any Note, or it shall immediately notify the Borrower and the Agent of its inability to deliver any such Form or Certificate. Notwithstanding anything to the contrary contained in Section 4.04(a), but subject to Section 12.04(b) and the immediately succeeding sentence, (x) the Borrower shall be entitled, to the extent it is required to do so by law, to deduct or withhold income or similar taxes imposed by the United States (or any political subdivision or taxing authority thereof or therein) from inter est, fees or other amounts payable hereunder for the account of any Bank which is not a United States person (as such term is defined in Section 7701(a)(30) of the Code) for U.S. Federal income tax purposes to the extent that such Bank has not provided to the Borrower U.S. Internal Revenue Service Forms that establish a complete exemption from such deduction or withholding and (y) the Borrower shall not be obligated pursuant to Section 4.04(a) hereof to gross- up pay ments to be made to a Bank in respect of income or similar taxes imposed by the United States if (I) such Bank has not provided to the Borrower the Internal Revenue Service Forms required to be provided to the Borrower pursuant to this Section 4.04(b) or (II) in the case of a payment, other than interest, to a Bank described in clause (ii) above, to the extent that such Forms do not establish a complete exemption from withholding of such taxes. Notwithstanding anything to the contrary contained in the preceding sentence or elsewhere in this Section 4.04 and except as set forth in Section 12.04(b), the Borrower agrees to pay additional amounts and to indemnify each Bank in the manner set forth in Section 4.04(a) (without regard to the identity of the jurisdiction requiring the deduction or withholding) in respect of any amounts deducted or withheld by it as described in the immediately preceding sentence as a result of any changes after the Effective Date in any applicable law, treaty, governmental rule, regulation, guideline or order, or in the interpretation thereof, relating to the deducting or withholding of income or similar Taxes. SECTION 5. Conditions Precedent. The obligation of each Bank to make -------------------- each Loan to the Borrower hereunder, and the obligation of any Letter of Credit Issuer to issue each Letter of Credit hereunder, is subject, at the time of each such Credit Event (except as otherwise hereinafter indicated), to the satisfaction of the following conditions: 5.01 Execution of Agreement; Notes. On or prior to the Initial ----------------------------- Borrowing Date, (i) the Effective Date shall have occurred and (ii) there shall have been delivered to the Agent for the account of each Bank the appropriate A Term Note, B Term Note, C Term Note, D Term Note and Revolving Note, if any, and to BTCo the Swingline Note, in each case executed by the Borrower and in the amount, maturity and as otherwise provided herein. 5.02 No Default; Representations and Warranties. At the time of ------------------------------------------ each Credit Event and also after giving effect thereto (i) there shall exist no Default or Event of Default and (ii) all representations and warranties contained herein or in the other Credit Documents in effect at such time shall be true and correct in all material respects with the same effect as though such representations and warranties had been made on and as of the date of such Credit Event, unless stated to relate to a specific earlier date, in which case such representations and warranties shall be true and correct in all material respects as of such earlier date. --33-- 5.03 Officer's Certificate. On the Initial Borrowing Date, the --------------------- Agent shall have received a certificate dated such date signed by an appropriate officer of the Borrower stating that all of the applicable conditions set forth in Sections 5.02, 5.07, 5.08 and 5.09 exist as of such date. 5.04 Opinions of Counsel. On the Initial Borrowing Date, the Agent ------------------- shall have received opinions, addressed to the Agent and each of the Banks and dated the Initial Borrowing Date, from (i) Kirkland & Ellis, counsel to the Credit Parties, which opinion shall cover the mat ters contained in Exhibit D and such other matters incident to the transactions contemplated herein as the Agent may reasonably request and (ii) local counsel to the Credit Parties reasonably satisfactory to the Agent, which opinions shall cover such matters incident to the transactions contemplated herein and in the other Credit Documents as the Agent may reasonably request and shall be in form and substance reasonably satisfactory to the Agent. 5.05 Corporate Proceedings. (a) On the Initial Borrowing Date, the --------------------- Agent shall have received from each Credit Party a certificate, dated the Initial Borrowing Date, signed by the chairman, a vice chairman, the president or any vice-president of such Credit Party, and attested to by the secretary or any assistant secretary of such Credit Party, in the form of Exhibit E with appropriate insertions, together with copies of the Certificate of Incorporation and By-Laws of such Credit Party and the resolutions of such Credit Party referred to in such certificate and all of the foregoing (including each such Certificate of Incorporation and By-Laws) shall be reasonably satisfactory to the Agent. (b) On the Initial Borrowing Date, all corporate and legal proceedings and all instruments and agreements in connection with the transactions contemplated by this Agreement and the other Documents shall be reasonably satisfactory in form and substance to the Agent, and the Agent shall have received all information and copies of all certificates, documents and papers, including good standing certificates, bring-down certificates and any other records of corporate proceedings and governmental approvals, if any, which the Agent reasonably may have requested in connection therewith, such documents and papers, where appropriate, to be certified by proper corporate or governmental authorities. (c) On the Initial Borrowing Date, unless and to the extent otherwise agreed by the Agent, the Agent shall have received evidence of the amendment to the certificate of incorporation (or equivalent organizational document) and by- laws of each Foreign Subsidiary whose capital stock is to be pledged pursuant to the Pledge Agreement permitting the granting of a security interest in such Foreign Subsidiary's capital stock pursuant to the Pledge Agreement, in form and substance satisfactory to the Agent and local counsel to the Agent. (d) On the Initial Borrowing Date, the ownership and capital structure (including, without limitation, the terms of any capital stock, options, warrants or other securities issued by Holdings or any of its Subsidiaries) and management of Holdings and its Subsidiaries shall be in form and substance satisfactory to the Agent and the Required Banks. --34-- 5.06 Adverse Change, etc. On or prior to the Initial Borrowing Date, -------------------- nothing shall have occurred since December 31, 1995 (and neither the Banks nor the Agent shall have become aware of any facts or conditions not previously known) which the Required Banks or the Agent shall determine (a) has, or could reasonably be expected to have, a material adverse effect on the rights or remedies of the Banks or the Agent, or on the ability of any Credit Party to perform its obligations to them hereunder or under any other Credit Document or (b) has, or could reasonably be expected to have, a Material Adverse Effect. 5.07 Litigation. On the Initial Borrowing Date, there shall be no ---------- actions, suits or proceedings pending or threatened (a) with respect to this Agreement or any other Document or (b) which the Agent or the Required Banks shall determine could reasonably be expected to (i) have a Material Adverse Effect or (ii) have a material adverse effect on the Transaction, the rights or remedies of the Banks or the Agent hereunder or under any other Credit Document or on the ability of any Credit Party to perform its respective obligations to the Banks or the Agent hereunder or under any other Credit Document. 5.08 Approvals. On or prior to the Initial Borrowing Date, all --------- necessary governmental (domestic and foreign) and third party approvals in connection with the Transaction, the transactions contemplated by the Documents and otherwise referred to herein or therein shall have been obtained and remain in effect (other than any such approvals with respect to the Acquisition which the Borrower reasonably believes both individually and in the aggregate are not material to the operations of the Borrower and its Subsidiaries taken as a whole), and all applicable waiting periods shall have expired without any action being taken by any competent authority which restrains, prevents or imposes materially adverse conditions upon the consummation of the Transaction, the transactions contemplated by the Documents and otherwise referred to herein or therein. Additionally, there shall not exist any judgment, order, injunction or other restraint issued or filed or a hearing seeking injunctive relief or other restraint pending or notified prohibiting or imposing materially adverse conditions upon the consummation of the Transaction or the making of Loans. 5.09 Consummation of the Transaction. (a) On the Initial Borrowing ------------------------------- Date, those elements of the Acquisition contemplated to be consummated on such date pursuant to the Acquisition Documents shall have been consummated in accordance with such Acquisition Documents and all applicable laws, and each of the conditions precedent to the consummation of the Acquisition set forth in the Acquisition Documents shall have been satisfied and not waived except with the consent of the Agent and the Required Banks to the reasonable satisfaction of the Agent and the Required Banks. (b) On or prior to the Initial Borrowing Date, (i) the Borrower shall have received gross cash proceeds of at least $350,000,000 from the issuance of the Senior Subordinated Notes (it being understood that such cash proceeds shall include all amounts directly applied to pay underwriting and placement commissions and discounts and related fees), and (ii) the Borrower shall have utilized the full amount of such cash consideration to make payments owing in connection with the --35-- Transaction prior to utilizing any proceeds of A Term Loans, B Term Loans, C Term Loans or D Term Loans for such purpose. (c) (i) On the Initial Borrowing Date, the total commitments in respect of the Indebtedness to be Refinanced shall have been terminated, and all loans with respect thereto shall have been repaid in full, together with interest thereon, all letters of credit issued thereunder shall have been terminated (or incorporated hereunder as Existing Letters of Credit pursuant to Section 2.01(d)) and all other amounts owing pursuant to the Indebtedness to be Refinanced shall have been repaid in full and all documents in respect of the Indebtedness to be Refinanced and all guarantees with respect thereto shall have been terminated (except as to indemnification provisions, which may survive) and be of no further force and effect. (ii) On or prior to the Initial Borrowing Date, the Borrower shall have commenced and consummated the Existing Senior Subordinated Notes Tender Offer/Consent Solicitation, pursuant to which the Borrower shall have repurchased all Existing Senior Subordinated Notes issued by it to the extent tendered and not withdrawn pursuant to the Existing Senior Subordinated Notes Tender Offer/Consent Solicitation and shall duly cancel all Existing Senior Subordinated Notes so purchased (it being understood that in any event (x) at least a majority of the aggregate outstanding principal amount of all Existing Senior Subordinated Notes shall have been tendered and purchased pursuant to the Existing Senior Subordinated Notes Tender Offer/Consent Solicitation and (y) the Borrower shall have purchased the Existing Senior Subordinated Notes so tendered solely with proceeds of Senior Subordinated Notes). The Existing Senior Subordinated Notes Tender Offer/Consent Solicitation shall have been consummated in accordance with all applicable law and in accordance with the Existing Senior Subordinated Notes Tender Offer/Consent Solicitation Documents. In the event that 100% of the Existing Senior Subordinated Notes have not been accepted for payment by the Borrower pursuant to the Existing Senior Subordinated Notes Tender Offer/Consent Solicitation and the Existing Senior Subordinated Notes Tender Offer/Consent Solicitation has otherwise been consummated, the Borrower shall have received at such time sufficient Existing Senior Subordinated Note Consents pursuant of the Existing Senior Subordinated Notes Tender Offer/Consent Solicitation to authorize the execution and delivery of the Existing Senior Subordinated Notes Indenture Supplement, and the Borrower and the trustee under the Existing Senior Subordinated Note Indenture shall have duly executed and delivered the Existing Senior Subordinated Notes Indenture Supplement and all conditions to the effectiveness thereof shall have been satisfied. (iii) On the Initial Borrowing Date, the creditors in respect of the Indebtedness to be Refinanced shall have terminated and released all security interests and Liens on the assets owned by Holdings and its Subsidiaries. The Agent shall have received such releases of security interests in and Liens on the assets owned by Holdings and its Subsidiaries as may have been requested by the Agent, which releases shall be in form and substance reasonably satisfactory to the Agent. Without limiting the foregoing, there shall have been delivered (i) proper termination statements (Form UCC-3 or the appropriate equivalent) for filing under the UCC of each jurisdiction where a financing statement (Form UCC-1 or the appropriate equivalent) was filed with respect to Holdings or any of its Subsidiaries in connection with the security interests created with respect to --36-- the Indebtedness to be Refinanced and the documentation related thereto, (ii) termination or reassignment of any security interest in, or Lien on, any patents, trade marks, copyrights, or similar interests of Holdings or any of its Subsidiaries on which filings have been made, (iii) terminations of all mortgages, leasehold mortgages, deeds of trust and leasehold deeds of trust created with respect to property of Holdings or any of its Subsidiaries, in each case, to secure the obligations in respect of the Indebtedness to be Refinanced, all of which shall be in form and substance reasonably satisfactory to the Agent, and (iv) all collateral owned by Holdings or any of its Subsidiaries in the possession of any of the creditors in respect of the Indebtedness to be Refinanced or any collateral agent or trustee under any related security document shall have been returned to Holdings or such Subsidiary. (d) On or prior to the Initial Borrowing Date, there shall have been delivered to the Banks true and correct copies of all Documents entered into in connection with the Transaction (including, without limitation, all of the Acquisition Documents, the Refinancing Documents, the Existing Senior Subordinated Notes Tender Offer/Consent Solicitation Documents and the Senior Subordinated Note Documents), and all of the terms and conditions of such Documents (including, without limitation, with respect to the Senior Subordinated Notes, amortization, maturities, interest rates, covenants, defaults, remedies, sinking fund provisions, and subordination provisions), as well as the structure of the Transaction and the ownership inter ests in Holdings after giving effect to the Transaction, shall be in form and substance reasonably satisfactory to the Agent and the Required Banks. (e) On the Initial Borrowing Date, the Agent shall have received evidence in form, scope and substance reasonably satisfactory to it that the matters set forth in this Section 5.09 have been satisfied on such date. 5.10 Security Documents. (a) On the Initial Borrowing Date, ------------------ Holdings, the Borrower and each Subsidiary Guarantor shall have duly authorized, executed and delivered a Pledge Agreement in the form of Exhibit F, together with such changes (or with such other documents) as may be requested by the Collateral Agent in connection with local law (as modified, amended or supplemented from time to time in accordance with the terms thereof and hereof, the "Pledge Agreement") and shall have delivered to the Collateral Agent, as pledgee thereunder, all of the Pledged Securities referred to therein, endorsed in blank in the case of promissory notes or accompanied by executed and undated stock powers in the case of capital stock, and the Pledge Agreement under such other documents shall be in full force and effect. (b) On the Initial Borrowing Date, Holdings, the Borrower and each Subsidiary Guarantor shall have duly authorized, executed and delivered a Security Agreement in the form of Exhibit G, together with such changes (or with such other documents) as may be requested by the Collateral Agent in connection with local law (as modified, amended or supplemented from time to time in accordance with the terms thereof and hereof, the "Security Agreement") covering all of the Security Agreement Collateral, together with: --37-- (A) executed copies of Financing Statements (Form UCC-1 and/or UCC-3) or appropriate local equivalent in appropriate form for filing under the UCC or appropriate local equivalent of each jurisdiction as may be necessary to perfect the security interests purported to be created by the Security Agreement; (B) certified copies of Requests for Information or Copies (Form UCC- 11), or equivalent reports, each of a recent date listing all effective financing statements that name the Seller, Holdings, the Borrower or any of their respective Domestic Subsidiaries or a division or operating unit of any such Person, as debtor and that are filed in the jurisdictions referred to in clause (A) above, together with copies of such financing statements (none of which shall cover the Collateral except (x) those with respect to which appropriate termination statements executed by the secured lender thereunder have been delivered to the Agent and (y) to the extent evidencing Permitted Liens); (C) evidence of the completion of all other recordings and filings of, or with respect to, the Security Agreement as may be necessary or, in the opinion of the Collateral Agent, desirable to perfect the security interests intended to be created by the Security Agreement; and (D) evidence that all other actions necessary or, in the reasonable opinion of the Collateral Agent, desirable to perfect the security interests purported to be created by the Security Agreement have been taken; and the Security Agreement and such other documents shall be in full force and effect. 5.11 Subsidiary Guaranty. On the Initial Borrowing Date, each ------------------- Subsidiary Guarantor shall have duly authorized, executed and delivered a Subsidiary Guaranty in the form of Exhibit H (as modified, amended or supplemented from time to time in accordance with the terms hereof and thereof, the "Subsidiary Guaranty"), and the Subsidiary Guaranty shall be in full force and effect. 5.12 Mortgages; Title Insurance; Surveys, etc. (a) On the Initial ----------------------------------------- Borrowing Date, the Collateral Agent shall have received fully executed counterparts of deeds of trust, mortgages and similar documents in each case in form and substance satisfactory to the Collateral Agent (as amended, modified or supplemented from time to time in accordance with the terms hereof and thereof, each a "Mortgage" and, collectively, the "Mortgages") covering all the Mortgaged Properties located in the United States, and arrangements reasonably satisfactory to the Collateral Agent shall be in place to provide that counterparts of such Mortgages shall be recorded on the Initial Borrowing Date in all places to the extent necessary or desirable, in the judgment of the Collateral Agent, effectively to create a valid and enforceable first priority Lien, subject only to Permitted Encumbrances, on each such Mortgaged Property in favor of the Collateral Agent (or such other trustee as may be required or desired under local law) for the benefit of the Secured Creditors. (b) On the Initial Borrowing Date, the Collateral Agent shall have received mortgagee title insurance policies (or binding commitments to issue such title insurance policies) issued --38-- by title insurers reasonably satisfactory to the Collateral Agent (the "Mortgage Policies") in amounts reasonably satisfactory to the Collateral Agent and assuring the Collateral Agent that the Mortgages are valid and enforceable first priority mortgage Liens on the respective Mortgaged Properties, free and clear of all defects and encumbrances except Permitted Encumbrances. Such Mortgage Policies shall be in form and substance reasonably satisfactory to the Collateral Agent and (i) shall include an endorsement for future advances under this Agreement, the Notes and the Mortgages and for any other matter that the Collateral Agent in its discretion may reasonably request (to the extent available in the respective jurisdiction of each Mortgaged Property), (ii) shall not include an exception for mechanics' liens and (iii) shall provide for affirmative insurance and such reinsurance (including direct access agreements) as the Collateral Agent in its discretion may reasonably request. (c) On the Initial Borrowing Date, the Collateral Agent shall have also received surveys in form and substance reasonably satisfactory to the Collateral Agent of each Mortgaged Property designated as "owned" on Annex III hereto, dated a recent date acceptable to the Collateral Agent, certified in a manner reasonably satisfactory to the Collateral Agent by a licensed professional surveyor reasonably satisfactory to the Collateral Agent. The Collateral Agent shall also have received such estoppel letters, landlord waiver letters, non-disturbance letters and similar assurances as may have been requested by the Collateral Agent, which letters shall be in form and substance reasonably satisfactory to the Collateral Agent. 5.13 Plans; Collective Bargaining Agreements; Existing Indebtedness -------------------------------------------------------------- Agreements; Shareholders' Agreements; Management Agreements; Employment - ----------------------------------------------------------------------- Agreements; Non-Compete Agreements; Tax Allocation Agreements; Material - ----------------------------------------------------------------------- Contracts. On or prior to the Initial Borrowing Date, there shall have been - --------- delivered to the Banks copies, certified as true and correct by an appropriate officer of the Borrower, of: (a) any Plans that are to be assumed by Holdings or any of its Subsidiaries after giving effect to the consummation of the Transaction and for each such Plan (i) that is a "single-employer plan" (as defined in Section 4001(a)(15) of ERISA) the most recently completed actuarial valuation prepared therefor by such Plan's regular enrolled actuary and the Schedule B, "Actuarial Information" to the IRS Form 5500 (Annual Report) most recently filed with the Internal Revenue Service and (ii) that is a "multiemployer plan" (as defined in Section 4001(a)(3) of ERISA), each of the documents referred to in clause (i) either in the possession of Holdings, any Subsidiary of Holdings or any ERISA Affiliate or reasonably available thereto from the sponsor or trustees of such Plan; (b) any collective bargaining agreements or any other similar agreement or arrangement covering the employees of Holdings or any of its Subsidiaries that are to remain in effect after giving effect to the consummation of the Transaction (collectively, the "Collective Bargaining Agreements"); (c) all agreements evidencing or relating to the Existing Indebtedness that are to remain in effect after giving effect to the consummation of the Transaction (collectively, the "Existing Indebtedness Agreements"); --39-- (d) (A) the Stockholders' Agreement, (B) the Subscription Agreement, (C) the Registration Rights Agreement and (D) all other agreements entered into by Holdings or any of its Subsidiaries governing the terms and relative rights of its capital stock, and any agreements entered into by shareholders relating to any such entity with respect to their capital stock, in each case that are to remain in effect after giving effect to the consummation of the Transaction (collectively, the "Shareholders' Agreements"); (e) (A) the Consulting Agreement and (B) any other material agreements (or the forms thereof) with members of, or with respect to, the management of Holdings or any of its Subsidiaries that are to remain in effect after giving effect to the consummation of the Transaction (collectively, the "Management Agreements"); (f) any employment agreements entered into by Holdings or any of its Subsidiaries (collectively, the "Employment Agreements"); (g) any non-compete agreement entered into by Holdings or any of its Subsidiaries (collectively, the "Non-Compete Agreements"); (h) any tax sharing or tax allocation agreements entered into by Holdings or any of its Subsidiaries (collectively, the "Tax Allocation Agreements"); and (i) all material contracts and licenses of Holdings or any of its Subsidiaries that are to remain in effect after giving effect to the consummation of the Transaction (collectively, the "Material Contracts"); all of which Plans, Collective Bargaining Agreements, Existing Indebtedness Agreements, Shareholders' Agreements, Management Agreements, Employment Agreements, Non-Compete Agreements, Tax Allocation Agreements and Material Contracts shall be in form and substance reasonably satisfactory to the Agent and shall be in full force and effect on the Initial Borrowing Date. 5.14 Solvency Opinions; Environmental Analyses; Insurance Analyses; -------------------------------------------------------------- Financial Statements. On the Initial Borrowing Date, the Agent shall have - -------------------- received: (a) a solvency opinion from Murray, Devine & Co., Inc., addressed to the Agent and each of the Banks and dated the Initial Borrowing Date and supporting the conclusions, that, after giving effect to the Transaction and the incurrence of all financ ings contemplated herein, the Borrower (on a stand-alone basis) and Holdings and its Subsidiaries (on a consolidated basis) are not insolvent and will not be rendered insolvent by the indebtedness incurred in connection herewith, will not be left with unreasonably small capital with which to engage in their respective businesses and will not have incurred debts beyond their ability to pay such debts as they mature and become due; --40-- (b) environmental assessments from Environ Corporation in respect of the Acquired Business, the results of which shall be in form and substance satisfactory to the Agent and the Required Banks; (c) analyses and evidence of insurance complying with the requirements of Section 7.03 for the business and properties of Holdings and its Subsidiaries (including, without limitation, the Acquired Business), in scope, form and substance satisfactory to the Agent and the Required Banks and naming the Collateral Agent as an additional insured and/or loss payee, and stating that such insurance shall not be cancelled or revised without 30 days prior written notice by the insurer to the Collateral Agent; and (d) the annual audited income statement and statement of net assets to be sold (and related supplemental cash flow information including depreciation and capital expenditures) for the Acquired Business for the two most recently completed fiscal years and management's discussion and analysis of the trends evidenced by such historical financial results, and all of the foregoing shall be in form and substance reasonably satisfactory to the Agent and the Required Banks. 5.15 Pro Forma Balance Sheets. On or prior the Initial Borrowing ------------------------ Date, there shall have been delivered to the Agent, an unaudited pro forma --- ----- consolidated balance sheet of each of Holdings and its Subsidiaries and the Borrower and its Subsidiaries after giving effect to the Transaction and prepared in accordance with GAAP, together with a related funds flow statement, which pro forma balance sheets and funds flow statement shall be reasonably --- ----- satisfactory in form and substance to the Agent and the Required Banks. 5.16 Projections. On or prior to the Initial Borrowing Date, the ----------- Banks shall have received the financial projections (the "Projections") set forth on Annex IV hereto, which include the projected results of Holdings and its Subsidiaries for the nine fiscal years ended after the Initial Borrowing Date. 5.17 Existing Indebtedness. On the Initial Borrowing Date and after --------------------- giving effect to the Transaction and the Loans incurred on the Initial Borrowing Date, neither Holdings nor any of its Subsidiaries shall have any preferred stock outstanding except for the Baxter Preferred Stock, or any Indebtedness outstanding except for Indebtedness permitted under Section 8.04. On and as of the Initial Borrowing Date, all of the Existing Indebtedness shall remain outstanding after giving effect to the Transaction and the other transactions contemplated hereby without any default or events of default existing thereunder or arising as a result of the Transaction and the other transactions contemplated hereby (except to the extent amended or waived by the parties thereto on terms and conditions reasonably satisfactory to the Agent and the Required Banks). On and as of the Initial Borrowing Date, the Agent and the Required Banks shall be satisfied with the amount of and the terms and conditions of all Existing Indebtedness. --41-- 5.18 Payment of Fees. On the Initial Borrowing Date, all costs, fees --------------- and expenses, and all other compensation contemplated by this Agreement, due to the Agent or the Banks (including, without limitation, legal fees and expenses) shall have been paid to the extent due. 5.19 Notice of Borrowing; Letter of Credit Request. The Agent shall --------------------------------------------- have received a Notice of Borrowing satisfying the requirements of Section 1.03 with respect to each incurrence of Loans, and the Agent and the respective Letter of Credit Issuer shall have received a Letter of Credit Request satisfying the requirements of Section 2.02 with respect to each issuance of a Letter of Credit. The acceptance of the benefits of each Credit Event shall constitute a representation and warranty by each Credit Party to each of the Banks that all of the applicable conditions specified above exist as of the date of such Credit Event. All of the certificates, legal opinions and other documents and papers referred to in this Section 5, unless otherwise specified, shall be delivered to the Agent at its Notice Office for the account of each of the Banks and, except for the Notes, in sufficient counterparts for each of the Banks and shall be satisfactory in form and substance to the Agent and the Required Banks. SECTION 6. Representations, Warranties and Agreements. In order to ------------------------------------------ induce the Banks to enter into this Agreement and to make the Loans and issue and/or participate in the Letters of Credit provided for herein, each of Holdings and the Borrower makes the following representations, warranties and agreements with the Banks in each case after giving effect to the Transaction, all of which shall survive the execution and delivery of this Agreement, the making of the Loans and the issuance of the Letters of Credit (with the occurrence of each Credit Event being deemed to constitute a representation and warranty that the matters specified in this Section 6 are true and correct in all material respects on and as of the date of each such Credit Event, unless stated to relate to a specific earlier date in which all representations and warranties shall be true and correct in all material respects as of such earlier date): 6.01 Corporate Status. Holdings and each of its Subsidiaries (i) is ---------------- a duly organized and validly existing corporation in good standing under the laws of the jurisdiction of its organization, (ii) has the corporate power and authority to own its property and assets and to transact the business in which it is engaged and presently proposes to engage and (iii) is duly qualified and is authorized to do business and is in good standing in all jurisdictions where it is required to be so qualified and where the failure to be so qualified would have a Material Adverse Effect. 6.02 Corporate Power and Authority. Each Credit Party has the ----------------------------- corporate power and authority to execute, deliver and carry out the terms and provisions of the Documents to which it is a party and has taken all necessary corporate action to authorize the execution, delivery and performance of the Documents to which it is a party. Each Credit Party has duly executed and delivered each Document to which it is a party and each such Document constitutes the legal, valid and binding obligation of such Credit Party enforceable in accordance with its terms, except to the extent that the enforceability thereof may be limited by applicable bankruptcy, insolvency, --42-- reorganization, moratorium or similar laws generally affecting creditors' rights and by equitable principles (regardless of whether enforcement is sought in equity or at law). 6.03 No Violation. Neither the execution, delivery or performance by ------------ any Credit Party of the Documents to which it is a party nor compliance by them with the terms and provisions thereof, nor the consummation of the transactions contemplated herein or therein, (i) will contravene any applicable provision of any law, statute, rule or regulation, or any order, writ, injunction or decree of any court or governmental instrumentality, (ii) will conflict or be in consistent with or result in any breach of, any of the terms, covenants, conditions or provisions of, or constitute a default under, or (other than pursuant to the Security Documents and the Accounts Receivable Facility Documents) result in the creation or imposition of (or the obligation to create or impose) any Lien upon any of the property or assets of Holdings or any of its Subsid iaries pursuant to the terms of any indenture, mortgage, deed of trust, loan agreement, credit agreement or any other material agreement or instrument to which Holdings or any of its Subsidiaries is a party or by which it or any of its property or assets are bound or to which it may be subject or (iii) will violate any provision of the Certificate of Incorporation or By-Laws of Holdings or any of its Subsidiaries. 6.04 Litigation. There are no actions, suits or proceedings pending ---------- or, to the knowledge of Holdings or any of its Subsidiaries, threatened, with respect to Holdings or any of its Subsidiaries (i) that are likely to have a Material Adverse Effect or (ii) that could reasonably be expected to have a material adverse effect on the rights or remedies of the Banks or on the ability of any Credit Party to perform its respective obligations to the Banks hereunder and under the other Credit Documents to which it is, or will be, a party. Additionally, there does not exist any judgment, order or injunction prohibiting or imposing material adverse conditions upon the occurrence of any Credit Event. 6.05 Use of Proceeds; Margin Regulations. (a) The proceeds of all ----------------------------------- Term Loans shall be utilized to finance the Transaction and to pay fees and expenses incurred in connection therewith. (b) The proceeds of Revolving Loans and Swingline Loans shall be utilized for the general corporate and working capital purposes of the Borrower and its Subsidiaries; provided that proceeds of Revolving Loans and Swingline -------- Loans in an aggregate amount not to exceed $65,000,000 may be used to finance the Transaction. (c) Neither the making of any Loan hereunder, nor the use of the proceeds thereof, will violate the provisions of Regulation G, T, U or X of the Board of Governors of the Federal Reserve System and no part of the proceeds of any Loan will be used to purchase or carry any Margin Stock or to extend credit for the purpose of purchasing or carrying any Margin Stock. 6.06 Governmental Approvals. No order, consent, approval, license, ---------------------- authoriza tion, or validation of, or filing, recording or registration with, or exemption by, any foreign or domestic governmental or public body or authority, or any subdivision thereof, is required to authorize or is required in connection with (i) the execution, delivery and performance of any Credit Document or --43-- (ii) the legality, validity, binding effect or enforceability of any Credit Document. No order, consent, approval, license, authorization, or validation of, or filing, recording or registration with, or exemption by, any foreign or domestic governmental or public body or authority, or any subdivision thereof, is required to authorize or is required in connection with (i) the execution, delivery and performance of any Document (other than any Credit Document) or (ii) the legality, validity, binding effect or enforceability of any Document (other than any Credit Document), except (x) to the extent obtained or made or (y) where the failure to obtain or make any of the foregoing, individually or in the aggregate, is not reasonably likely to have a Material Adverse Effect. 6.07 Investment Company Act. Neither Holdings nor any of its ---------------------- Subsidiaries is an "investment company" or a company "controlled" by an "investment company," within the meaning of the Investment Company Act of 1940, as amended. 6.08 Public Utility Holding Company Act. Neither Holdings nor any of ---------------------------------- its Subsidiaries is a "holding company," or a "subsidiary company" of a "holding company," or an "affiliate" of a "holding company" or of a "subsidiary company" of a "holding company," within the meaning of the Public Utility Holding Company Act of 1935, as amended. 6.09 True and Complete Disclosure. All factual information (taken as ---------------------------- a whole) heretofore or contemporaneously furnished by or on behalf of Holdings or any of its Subsidiaries in writing to the Agent or any Bank (including, without limitation, all information contained in the Documents) for purposes of or in connection with this Agreement or any transaction contemplated herein is, and all other such factual information (taken as a whole) hereafter furnished by or on behalf of any such Persons in writing to the Agent or any Bank will be, true and accurate in all material respects on the date as of which such information is dated or certified and not incomplete by omitting to state any material fact necessary to make such information (taken as a whole) not misleading at such time in light of the circumstances under which such information was provided. 6.10 Financial Condition; Financial Statements. (a) On and as of ----------------------------------------- the Initial Borrowing Date, on a pro forma basis after giving effect to the --- ----- Transaction and to all Indebtedness incurred, and to be incurred (including, without limitation, the Loans and the Senior Subordinated Notes), and Liens created, and to be created, by each Credit Party in connection therewith, with respect to each of Holdings and its Subsidiaries (on a consolidated basis) and of the Borrower (on a stand-alone basis) (x) the sum of the assets, at a fair valuation, of each of Holdings and its Subsidiaries (on a consolidated basis), and of the Borrower (on a stand-alone basis) will exceed its debts, (y) it has not incurred nor intended to, nor believes that it will, incur debts beyond its ability to pay such debts as such debts mature and (z) it will have sufficient capital with which to conduct its business. For purposes of this Section 6.10, "debt" means any liability on a claim, and "claim" means (i) right to payment whether or not such a right is reduced to judgment, liquidated, unliquidated, fixed, contingent, matured, unmatured, disputed, undisputed, legal, equitable, secured or unsecured or (ii) right to an equitable remedy for breach of performance if such breach gives rise to a payment, whether or not such right to an equitable remedy is reduced to judgment, fixed, contingent, matured, unmatured, disputed, undisputed, secured or unsecured. --44-- (b) The statements of financial condition of Holdings and its Subsidiaries at December 31, 1995 and the related statements of income and cash flows and changes in shareholders' equity of Holdings and its Subsidiaries for the fiscal year ended as of said date, copies of which have heretofore been furnished to each Bank, present fairly in all material respects the consolidated financial position of Holdings and its Subsidiaries at the date of said statements and the results for the periods covered thereby. All such financial statements have been prepared in accordance with GAAP consistently applied except to the extent provided in the notes to said financial statements. (c) The statements of net assets to be sold of the Acquired Business at December 31, 1994 and at December 31, 1995 and the related statements of income and supplemental cash flow information of the Acquired Business for the fiscal years ended as of said dates, copies of which have heretofore been furnished to each Bank, present fairly in all material respects the net assets of the Acquired Business at the dates of said statements and the results for the periods covered thereby. All such financial statements have been prepared in accordance with GAAP consistently applied except to the extent provided in the notes to said financial statements. (d) Since December 31, 1995, nothing has occurred that has had or could reasonably be expected to have a Material Adverse Effect. (e) Except as fully reflected in the financial statements described in Section 6.10(b) and the Indebtedness incurred under this Agreement and the Senior Subordinated Notes, there were as of the Initial Borrowing Date (and after giving effect to any Loans made on such date), no liabilities or obligations (excluding current obligations incurred in the ordinary course of business) with respect to Holdings or any of its Subsidiaries of any nature whatsoever (whether absolute, accrued, contingent or otherwise and whether or not due), and neither Holdings nor the Borrower know of any basis for the assertion against Holdings or any of its Subsidiaries of any such liability or obligation which, either individually or in the aggregate, are or would be reasonably likely to have, a Material Adverse Effect. (f) The Projections are based on good faith estimates and assumptions made by the management of Holdings, and on the Initial Borrowing Date such management believed that the Projections were reasonable and attainable, it being recognized by the Banks, however, that projections as to future events are not to be viewed as facts and that the actual results during the period or periods covered by the Projections probably will differ from the projected results and that the differences may be material. There is no fact known to Holdings or any of its Subsidiaries which would have a Material Adverse Effect, which has not been disclosed herein or in such other documents, certificates and statements furnished to the Banks for use in connection with the transactions contemplated hereby. 6.11 Security Interests. On and after the Initial Borrowing Date, ------------------ each of the Security Documents creates (or after the execution and delivery thereof will create), as security for the Obligations, a valid and enforceable perfected security interest in and Lien on all of the Collateral subject thereto, superior to and prior to the rights of all third Persons and subject to no other Liens (except that the Security Agreement Collateral, the Mortgaged Properties and the collateral covered --45-- by the Additional Security Documents may be subject to Permitted Liens relating thereto), in favor of the Collateral Agent. No filings or recordings are required in order to perfect the security interests created under any Security Document except for filings or recordings required in connection with any such Security Document which shall have been made on or prior to the Initial Borrowing Date as contemplated by Section 5.10(b) or on or prior to the execution and delivery thereof as contemplated by Sections 7.11, 7.16 and 8.16. 6.12 Representations and Warranties in Other Documents. All ------------------------------------------------- representations and warranties set forth in the other Documents were true and correct in all material respects as of the time such representations and warranties were made and shall be true and correct in all material respects as of the Initial Borrowing Date as if such representations and warranties were made on and as of such date, unless stated to relate to a specific earlier date, in which case such representations and warranties shall be true and correct in all material respects as of such earlier date, in each case except to the extent that the failure of any such representation and warranty to be true and correct in all material respects, either individually or in the aggregate with other such representations and warranties, is not reasonably likely to have a Material Adverse Effect. 6.13 Transaction. At the time of consummation thereof, the ----------- Transaction shall have been consummated in all material respects in accordance with the terms of the Documents and all applicable laws. At the time of consummation thereof, all consents and approvals of, and filings and registrations with, and all other actions in respect of, all governmental agencies, authorities or instrumentalities required in order to make or consummate the Transaction have been obtained, given, filed or taken or waived and are or will be in full force and effect (or effective judicial relief with respect thereto has been obtained) except where the failure to obtain, give, file, or take would not reasonably be expected to have a Material Adverse Effect. All applicable waiting periods with respect thereto have or, prior to the time when required, will have, expired without, in all such cases, any action being taken by any competent authority which restrains, prevents, or imposes material adverse conditions upon the Transaction. Additionally, there does not exist any judgment, order or injunction prohibiting or imposing material adverse conditions upon the Transaction, or the performance by Holdings and its Subsidiaries of their obligations under the Documents and all applicable laws. 6.14 Special Purpose Corporation. Holdings has no significant assets --------------------------- (other than the capital stock of the Borrower, Borrower Subordinated Notes issued to it from time to time in accordance with the terms of this Agreement and immaterial assets used for the performance of those activities permitted to be performed by Holdings pursuant to Section 8.01(b)) or liabil ities (other than under this Agreement and the other Credit Documents, those liabilities under the other Documents and Baxter Acquisition Documents to which it is a party, those liabilities permitted to be incurred by Holdings pursuant to Section 8.01(b) and, as and when issued from time to time in accordance with the terms of this Agreement, Baxter PIK Notes, Permitted Holdings PIK Securities and Shareholder Subordinated Notes). 6.15 Compliance with ERISA. (a) Each Plan is in substantial --------------------- compliance with ERISA and the Code; no Reportable Event has occurred with respect to a Plan; no Plan is insolvent --46-- or in reorganization; no Plan has an Unfunded Current Liability; no Plan has an accumulated or waived funding deficiency, has permitted decreases in its funding standard account or has applied for a waiver of the minimum funding standard or an extension of any amortization period within the meaning of Section 412 of the Code; all contributions required to be made with respect to a Plan and a Foreign Pension Plan have been timely made; neither Holdings nor any Subsidiary of Holdings nor any ERISA Affiliate has incurred any material liability to or on account of a Plan pursuant to Section 409, 502(i), 502(l), 515, 4062, 4063, 4064, 4069, 4201, 4204 or 4212 of ERISA or Section 401(a)(29), 4971, 4975 or 4980 of the Code or reasonably expects to incur any material liability (including any indirect, contingent or secondary liability) under any of the foregoing Sections with respect to any Plan (other than liabilities of any ERISA Affiliate which could not, by operation of law or otherwise, become a liability of Holdings or any of its Subsidiaries); no proceedings have been instituted to terminate, or to appoint a trustee to administer, any Plan; no condition exists which presents a material risk to Holdings or any Subsidiary of Holdings or any ERISA Affiliate of incurring a liability to or on account of a Plan pursuant to the foregoing provisions of ERISA and the Code; using actuarial assumptions and computation methods consistent with subpart 1 of subtitle E of Title IV of ERISA, the aggregate liabilities of Holdings and its Subsidiaries and its ERISA Affiliates to all Plans which are multiemployer plans (as defined in Section 4001(a)(3) of ERISA) in the event of a complete withdrawal therefrom, as of the close of the most recent fiscal year of each such Plan ended prior to the date of the most recent Credit Event, would not result in a Material Adverse Effect; no lien imposed under the Code or ERISA on the assets of Holdings or any Subsidiary of Holdings or any ERISA Affiliate exists or is likely to arise on account of any Plan; and Holdings and its Subsidiaries do not maintain or contribute to any employee welfare benefit plan (as defined in Section 3(1) of ERISA) which provides benefits to retired employees or other former employees (other than as required by Section 601 of ERISA) or any employee pension benefit plan (as defined in Section 3(2) of ERISA) the obligations with respect to which could reasonably be expected to have a Material Adverse Effect. (b) Each Foreign Pension Plan has been maintained in substantial compliance with its terms and with the requirements of any and all applicable laws, statutes, rules, regulations and orders and has been maintained, where required, in good standing with applicable regulatory authorities. Neither Holdings nor any of its Subsidiaries has incurred any material obligation in connection with the termination of or withdrawal from any Foreign Pension Plan. The present value of the accrued benefit liabilities (whether or not vested) under each Foreign Pension Plan which is funded, determined as of the end of the most recently ended fiscal year of the Borrower on the basis of actuarial assumptions, each of which is reasonable, did not exceed the current value of the assets of such Foreign Pension Plan, and for each Foreign Pension Plan which is not funded, the obligations of such Foreign Pension Plan are properly accrued. 6.16 Capitalization. (a) On the Initial Borrowing Date, the -------------- authorized capital stock of Holdings shall consist of (i) 15,000,000 shares of common stock, $0.01 par value per share (such authorized shares of common stock, together with any subsequently authorized shares of common stock of Holdings, the "Holdings Common Stock"), of which 9,399,996 shares shall be issued and outstanding, (ii) 2,000,000 shares of Class L common stock, $0.01 par value per share (such authorized shares of --47-- Class L common stock, together with any subsequently authorized shares of Class L common stock of Holdings, the "Holdings Class L Common Stock"), of which 1,044,444 shares shall be issued and outstanding, and (iii) 100,000 shares of Baxter Preferred Stock, of which 10,000 shares shall be issued and outstanding and owned by Baxter. All such outstanding shares have been duly and validly issued, are fully paid and nonassessable. Except as set forth on Annex XIV hereto, Holdings does not have outstanding any securities con vertible into or exchangeable for its capital stock or outstanding any rights to subscribe for or to purchase, or any options for the purchase of, or any agreement providing for the issuance (contingent or otherwise) of, or any calls, commitments or claims of any character relating to, its capital stock. (b) On the Initial Borrowing Date and after giving effect to the Transaction and the other transactions contemplated hereby, the authorized capital stock of the Borrower shall consist of 1,000 shares of common stock, $0.01 par value per share, all of which shares shall be issued and outstanding and owned by Holdings. All such outstanding shares have been duly and validly issued and are fully paid and nonassessable. The Borrower does not have outstanding any securities convertible into or exchangeable for its capital stock or outstanding any rights to subscribe for or to purchase, or any options for the purchase of, or any agreements providing for the issuance (contingent or otherwise) of, or any calls, commitments or claims of any character relating to, its capital stock. 6.17 Subsidiaries. On and as of the Initial Borrowing Date and after ------------ giving effect to the consummation of the Transaction, Holdings has no Subsidiaries other than the Borrower and its Subsidiaries, and the Borrower has no Subsidiaries other than those Subsidiaries listed on Annex V. Annex V correctly sets forth, as of the Initial Borrowing Date and after giving effect to the Transaction, the percentage ownership (direct and indirect) of Holdings in each class of capital stock of each of its Subsidiaries and also identifies the direct owner thereof. All outstanding shares of capital stock of each Subsidiary of the Borrower have been duly and validly issued, are fully paid and nonassessable and have been issued free of preemptive rights. No Subsidiary of the Borrower has outstanding any securities convertible into or exchangeable for its capital stock or outstanding any right to subscribe for or to purchase, or any options or warrants for the purchase of, or any agreement providing for the issuance (contingent or otherwise) of or any calls, commitments or claims of any character relating to, its capital stock or any stock appreciation or similar rights. 6.18 Intellectual Property. Holdings and each of its Subsidiaries --------------------- owns or holds a valid license to use all the material patents, trademarks, permits, service marks, trade names, technology, know-how and formulas or other rights with respect to the foregoing, free from restrictions that are materially adverse to the use thereof, that are used in the operation of the business of Holdings and each of its Subsidiaries as presently conducted. 6.19 Compliance with Statutes, etc. Holdings and each of its ------------------------------ Subsidiaries is in compliance with all applicable statutes, regulations and orders of, and all applicable restrictions imposed by, all governmental bodies, domestic or foreign, in respect of the conduct of its business and the ownership of its property (including compliance with all applicable Environmental Laws with respect to any Real Property or governing its business and the requirements of any permits issued under such Environmental Laws with respect to any such Real Property or the operations of Holdings --48-- or any of its Subsidiaries), except such non-compliance as is not likely to, individually or in the aggregate, have a Material Adverse Effect. 6.20 Environmental Matters. (a) Holdings and each of its --------------------- Subsidiaries have complied with, and on the date of each Credit Event are in compliance with, all applicable Environmental Laws and the requirements of any permits issued under such Environmental Laws. There are no pending or, to the best knowledge of Holdings and the Borrower, past or threatened Environmental Claims against Holdings or any of its Subsidiaries or any Real Property owned or operated by Holdings or any of its Subsidiaries that individually or in the aggregate would reasonably be expected to have a Material Adverse Effect. There are no facts, circumstances, conditions or occurrences on any Real Property owned or operated by Holdings or any of its Subsidiaries or, to the best knowledge of Holdings and the Borrower, on any property adjoining or in the vicinity of any such Real Property that would reasonably be expected (i) to form the basis of an Environmental Claim against Holdings or any of its Subsidiaries or any such Real Property that individually or in the aggregate would reasonably be expected to have a Material Adverse Effect or (ii) to cause any such Real Property to be subject to any restrictions on the ownership, occupancy, use or transferability of such Real Property by Holdings or any of its Subsidiaries under any applicable Environmental Law. (b) Hazardous Materials have not at any time been generated, used, treated or stored on, or transported to or from, any Real Property owned or operated by Holdings or any of its Subsidiaries where such generation, use, treatment or storage has violated or would reasonably be expected to violate any Environmental Law. Hazardous Materials have not at any time been Released on or from any Real Property owned or operated by Holdings or any of its Subsidiaries. There are not now any underground storage tanks located on any Real Property owned or operated by Holdings or any of its Subsidiaries. (c) Notwithstanding anything to the contrary in this Section 6.20, the represen tations made in this Section 6.20 shall only be untrue if the aggregate effect of all restrictions, fail ures, noncompliance, Environmental Claims, Releases and presence of underground storage tanks, in each case of the types described above, would reasonably be expected to have a Material Adverse Effect. 6.21 Properties. All Real Property owned or leased by Holdings or ---------- any of its Subsidiaries as of the Initial Borrowing Date and after giving effect to the Transaction, and the nature of the interest therein, is correctly set forth in Annex III. Holdings and each of its Subsi diaries has good and marketable title to, or a validly subsisting leasehold interest in, all material properties owned or leased by it, including all Real Property reflected in Annex III or in the financial statements referred to in Section 6.10(b) or (c), free and clear of all Liens, other than Permitted Liens. 6.22 Labor Relations. Neither Holdings nor any of its Subsidiaries --------------- is engaged in any unfair labor practice that could reasonably be expected to have a Material Adverse Effect. There is (i) no unfair labor practice complaint pending against Holdings or any of its Subsidiaries or, to the best knowledge of Holdings and the Borrower, threatened against any of them, before the --49-- National Labor Relations Board, and no grievance or arbitration proceeding arising out of or under any collective bargaining agreement is so pending against Holdings or any of its Subsidiaries or, to the best knowledge of Holdings and the Borrower, threatened against any of them, (ii) no strike, labor dispute, slowdown or stoppage pending against Holdings or any of its Subsidiaries or, to the best knowledge of Holdings and the Borrower, threatened against Holdings or any of its Subsidiaries and (iii) to the best knowledge of Holdings and the Borrower, no union representation question existing with respect to the employees of Holdings or any of its Subsidi aries and, to the best knowledge of Holdings and the Borrower, no union organizing activities are taking place, except (with respect to any matter specified in clause (i), (ii) or (iii) above, either individually or in the aggregate) such as is not reasonably likely to have a Material Adverse Effect. 6.23 Tax Returns and Payments. All Federal, material state and other ------------------------ material returns, statements, forms and reports for taxes (the "Returns") required to be filed by or with respect to the income, properties or operations of the Acquired Business and of Holdings and/or any of its Subsidiaries have been timely filed with the appropriate taxing authority. The Returns accurately reflect all liability for taxes of the Acquired Business and of Holdings and its Subsidiaries, as the case may be, for the periods covered thereby. The Acquired Business and Holdings and each of its Subsidiaries have paid all taxes payable by them other than taxes which are not yet due and payable, and other than those contested in good faith by appropriate proceedings and for which adequate reserves have been established in accordance with GAAP. Except as disclosed in the financial statements referred to in Section 6.10(b), there is no material action, suit, proceeding, investigation, audit, or claim now pending or, to the knowledge of Holdings and the Borrower, threatened by any authority regarding any taxes relating to the Acquired Business or to Holdings or any of its Subsidiaries. As of the Initial Borrowing Date, neither the Acquired Business nor Holdings or any of its Subsidiaries has entered into an agreement or waiver or been requested to enter into an agreement or waiver extending any statute of limitations relating to the payment or collection of taxes of the Acquired Business, Holdings or any of its Subsidiaries, or is aware of any circumstances that would cause the taxable years or other taxable periods of the Acquired Business or Holdings or any of its Subsidiaries not to be subject to the normally applicable statute of limitations. Neither the Acquired Business nor Holdings or any of its Subsidiaries have provided, with respect to themselves or property held by them, any consent under Section 341 of the Code. Neither the Acquired Business nor Holdings or any of its Subsidiaries has incurred, or will incur, any material tax liability in connec tion with the Transaction and the other transactions contemplated hereby. Notwithstanding any thing contained in this Section 6.23 to the contrary, neither Holdings nor the Borrower will be in breach of any of the representations or warranties set forth in this Section 6.23 to the extent that such Credit Parties have a right to be indemnified by the Seller or any of its Affiliates under the Acquisition Agreement in respect of such taxes or other liabilities and then only so long as such Credit Parties are proceeding diligently to enforce such indemnification and are so indemnified by the Seller within 90 days after requesting or demanding same. 6.24 Existing Indebtedness. Annex VII sets forth a true and complete --------------------- list of all Indebtedness of Holdings and its Subsidiaries as of the Initial Borrowing Date and which is to remain outstanding after giving effect to the Transaction and the incurrence of Loans on such date (excluding Indebtedness permitted under Section 8.04(a) and Sections 8.04(c)-(t), the "Existing Indebtedness"), --50-- in each case showing the aggregate principal amount thereof and the name of the respective borrower and any other entity which directly or indirectly guaranteed such debt. 6.25 Subordination. (a) The subordination provisions contained in ------------- the Senior Subordinated Note Documents are enforceable against the Borrower and the holders thereof, and all Obligations shall be within the definition of "Senior Debt" included in such subordination provisions. (b) On and after the issuance of any Baxter PIK Notes, the subordination provisions contained in the Baxter PIK Note Documents shall be enforceable against Holdings and the holder thereof, and all Obligations shall be within the definition of "Superior Debt" included in such subordination provisions. SECTION 7. Affirmative Covenants. Holdings and the Borrower hereby --------------------- covenant and agree that on the Effective Date and thereafter for so long as this Agreement is in effect and until the Commitments have terminated, no Letters of Credit or Notes are outstanding and the Loans and Unpaid Drawings, together with interest, Fees and all other Obligations (other than any indemnities described in Section 12.13 hereof which are not then due and payable) incurred hereunder, are paid in full: 7.01 Information Covenants. Holdings will furnish to each Bank: --------------------- (a) Monthly Reports. Within 30 days after the end of each fiscal --------------- month of Holdings (or 75 days, in the case of each fiscal month ending on or prior to May 31, 1996 and 60 days, in the case of each fiscal month commencing June 1, 1996 and ending on or prior to December 31, 1996), the consolidated balance sheet of Holdings and its Subsidiaries as at the end of such month and the related consolidated statements of income and retained earnings and of cash flows for such month and for the elapsed por tion of the fiscal year ended with the last day of such month, in the case of financial state ments delivered pursuant to this Section 7.01(a) after June 30, 1997, setting forth com parative figures for the corresponding month in the prior fiscal year, all of which shall be certified by the chief financial officer or other Authorized Officer of Holdings, subject to normal year-end audit adjustments. (b) Quarterly Financial Statements. Within 45 days after the close ------------------------------ of each quarterly accounting period in each fiscal year of Holdings (or 60 days, in the case of the quarterly accounting period ended June 30, 1996), the consolidated balance sheet of Holdings and its Subsidiaries as at the end of such quarterly accounting period and the related consolidated statements of income and retained earnings and of cash flows for such quarterly accounting period and for the elapsed portion of the fiscal year ended with the last day of such quarterly accounting period, all of which shall be in reasonable detail and certified by the chief financial officer or other Authorized Officer of Holdings that they fairly present the financial condition of Holdings and its Subsidiaries as of the dates indicated and the results of their operations and changes in their cash flows for the per iods indicated, subject to normal year-end audit adjustments. --51-- (c) Annual Financial Statements. Within 90 days after the close of --------------------------- each fiscal year of Holdings, the consolidated balance sheet of Holdings and its Subsidiaries as at the end of such fiscal year and the related consolidated statements of income and retained earnings and of cash flows for such fiscal year (and separate supplemental information setting forth comparable budgeted figures for such fiscal year and, commencing with the fiscal year ending December 31, 1997, comparative consolidated figures for the preceding year) certified by Price Waterhouse LLP or such other independent certified public accountants of recognized national standing as shall be reasonably acceptable to the Agent, in each case to the effect that such statements fairly present the financial condition of Holdings and its Subsidiaries as of the dates indicated and the results of their operations and changes, together with a certificate of such accounting firm stating that in the course of its regular audit of the business of Holdings and its Subsidiaries, which audit was conducted in accordance with generally accepted auditing standards, no Default or Event of Default which has occurred and is continuing has come to their attention or, if such a Default or Event of Default has come to their attention a statement as to the nature thereof. (d) Budgets, etc. Not more than 60 days after the commencement of ------------- each fiscal year of the Borrower (or 90 days, in the case of the fiscal year commencing January 1, 1997), budgets of the Borrower and its Subsidiaries in reasonable detail for each of the four fiscal quarters of such fiscal year and for each of the four fiscal quarters of the immediately succeeding fiscal year, in each case as customarily prepared by management for its internal use setting forth, with appropriate discussion, the principal assumptions upon which such budgets are based. Together with each delivery of financial statements pursuant to Section 7.01(b) and (c) in respect of each fiscal period ending on or after March 31, 1997, a comparison of the current year to date financial results (other than in respect of the balance sheets included therein) against the budgets required to be submitted pursuant to this clause (d) shall be presented. (e) Officer's Certificates. At the time of the delivery of the ---------------------- financial statements provided for in Section 7.01(b) and (c), a certificate of the chief financial officer or other Authorized Officer of Holdings to the effect that no Default or Event of Default exists or, if any Default or Event of Default does exist, specifying the nature and extent thereof, which certificate shall set forth the calculations required to establish whether Holdings and its Subsidiaries were in compliance with the provisions of Sections 8.04, 8.07(vi), (vii) and (viii) and 8.09 through and including 8.13, as at the end of such fiscal quarter or year, as the case may be. In addition, at the time of the delivery of the financial statements provided for in Section 7.01(c), a certificate of the chief financial officer or other Authorized Officer of Holdings setting forth the amount of, and calculations required to establish the amount of, Excess Cash Flow for the Excess Cash Flow Period ending on the last day of the respective fiscal year. Further, at the time that Holdings either contributes any cash to the Borrower the proceeds of which are not required to be used to repay Term Loans as provided in clause (i) of the final proviso to Section 4.02(A)(d) or makes a Borrower Subordinated Loan pursuant to Section 8.06(t), a certificate of the chief financial officer or other Authorized --52-- Officer of Holdings setting forth the intended use by the Borrower or its Subsidiaries of such proceeds. (f) Notice of Default or Litigation. Promptly, and in any event ------------------------------- within five Business Days (or 10 Business Days in the case of clause (y) below) after any Senior Officer of Holdings or any of its Subsidiaries obtains knowledge thereof, notice of (x) the occurrence of any event which constitutes a Default or an Event of Default, which notice shall specify the nature thereof, the period of existence thereof and what action Holdings or the Borrower proposes to take with respect thereto and shall state that such notice is a "notice of default" and (y) the commencement of, or threat of, or any significant development in, any litigation or governmental proceeding pending against Holdings or any of its Subsidiaries which is likely to have a Material Adverse Effect, or a material adverse effect on the ability of any Credit Party to perform its respective obligations here under or under any other Credit Document. (g) Auditors' Reports. Promptly upon receipt thereof, a copy of each ----------------- report or "management letter" submitted to Holdings or any of its Subsidiaries by its independent accountants in connection with any annual, interim or special audit made by them of the books of Holdings or any of its Subsidiaries. (h) Environmental Matters. Promptly after obtaining knowledge of any --------------------- of the following, written notice of: (i) any pending or threatened material Environmental Claim against Holdings or any of its Subsidiaries or any Real Property owned or operated by Holdings or any of its Subsidiaries; (ii) any condition or occurrence on any Real Property owned or operated by Holdings or any of its Subsidiaries that (x) results in material non compliance by Holdings or any of its Subsidiaries with any applicable Environmental Law or (y) could reasonably be anticipated to form the basis of a material Environmental Claim against Holdings or any of its Subsidiaries or any such Real Property; (iii) any condition or occurrence on any Real Property owned or operated by Holdings or any of its Subsidiaries that could reasonably be antici pated to cause such Real Property to be subject to any material restrictions on the ownership, occupancy, use or transferability by Holdings or its Subsidiary, as the case may be, of its interest in such Real Property under any Environmental Law; and (iv) the taking of any material removal or remedial action in response to the actual or alleged presence of any Hazardous Material on any Real Property owned or operated by Holdings or any of its Subsidiaries where Holdings or any of its Subsidiaries is or is reasonably expected to be responsible for the cost of such action or where the taking of such action could reasonably be expected to materially --53-- interfere with the operations of Holdings or any of its Subsidiaries at such Real Property. All such notices shall describe in reasonable detail the nature of the claim, investigation, condition, occurrence or removal or remedial action and Holdings' or the Borrower's response thereto. In addition, Holdings agrees to provide the Banks with copies of all material communications by Holdings or any of its Subsidiaries with any Person, government or governmental agency relating to Environmental Claims, and such detailed reports of any Environmental Claim as may reasonably be requested by the Agent or the Required Banks. (i) Accounts Receivable Facility Transaction Date. The Borrower --------------------------------------------- shall provide the Agent 15 Business Days' prior written notice of the Accounts Receivable Facility Transaction Date. (j) Other Information. Promptly upon transmission thereof, copies of ----------------- any filings and registrations with, and reports to, the SEC by Holdings or any of its Subsidiaries and copies of all financial statements, proxy statements, notices and reports as Holdings or any of its Subsidiaries shall generally send to analysts or the holders of their capital stock or of the Baxter PIK Notes, Permitted Holdings PIK Securities or Senior Subordinated Notes in their capacity as such holders (in each case to the extent not theretofore delivered to the Banks pursuant to this Agreement) and, with reasonable promptness, such other information or documents (financial or otherwise) as the Agent on its own behalf or on behalf of any Bank may reasonably request from time to time. 7.02 Books, Records and Inspections. Holdings will, and will cause ------------------------------ each of its Subsidiaries to, permit, upon notice to the chief financial officer or other Authorized Officer of Holdings or the Borrower, (x) officers and designated representatives of the Agent or any Bank to visit and inspect any of the properties or assets of Holdings and any of its Subsidiaries in whomsoever's possession, and to examine the books of account of Holdings and any of its Subsidiaries and discuss the affairs, finances and accounts of Holdings and of any of its Subsidiaries with, and be advised as to the same by, their officers and independent accountants, all at such reasonable times and intervals and to such reasonable extent as the Agent or any Bank may desire and (y) the Agent, at the request of the Required Banks, to conduct, at Holdings' and the Borrower's expense, an audit of the accounts receivable and/or inventories of the Borrower and its Subsidiaries at such times (but no more frequently than once a year unless an Event of Default has occurred and is continuing) as the Required Banks shall reasonably require. 7.03 Insurance. Holdings will, and will cause each of its --------- Subsidiaries to, at all times from and after the Effective Date maintain in full force and effect insurance with reputable and solvent insurance carriers in such amounts, covering such risks and liabilities and with such deductibles or self- insured retentions as are in accordance with normal industry practice. At any time that insurance at the levels described in Annex VI is not being maintained by Holdings and its Subsidiaries, Holdings will notify the Banks in writing thereof and, if thereafter notified by the Agent to do so, Holdings will obtain insurance at such levels to the extent then generally available (but in --54-- any event within the deductible or self-insured retention limitations set forth in the preceding sentence) or otherwise as are acceptable to the Agent. Holdings will furnish to the Agent on the Initial Borrowing Date and on each date on which financial statements are delivered pursuant to Section 7.01(c) a summary of the insurance carried in respect of Holdings and its Subsidiaries and the assets of Holdings and its Subsidiaries together with certificates of insurance and other evidence of such insurance, if any, naming the Collateral Agent as an additional insured and/or loss payee. 7.04 Payment of Taxes. Holdings will pay and discharge, and will ---------------- cause each of its Subsidiaries to pay and discharge, all taxes, assessments and governmental charges or levies imposed upon it or upon its income or profits, or upon any properties belonging to it, prior to the date on which material penalties attach thereto, and all lawful claims for sums that have become due and payable which, if unpaid, might become a Lien not otherwise permitted under Section 8.03(a) or charge upon any properties of Holdings or any of its Subsidiaries; provided, that neither Holdings nor any of its Subsidiaries shall -------- be required to pay any such tax, assessment, charge, levy or claim which is being contested in good faith and by proper proceedings if it has maintained adequate reserves with respect thereto in accordance with GAAP. 7.05 Corporate Franchises. Holdings will do, and will cause each of -------------------- its Subsidiaries to do, or cause to be done, all things necessary to preserve and keep in full force and effect its existence and its material rights, franchises and authority to do business; provided, however, that any transaction -------- ------- permitted by Section 8.02 will not constitute a breach of this Section 7.05. 7.06 Compliance with Statutes, etc. Holdings will, and will cause ----------------------------- each of its Subsidiaries to, comply with all applicable statutes, regulations and orders of, and all applicable restrictions imposed by, all governmental bodies, domestic or foreign, in respect of the conduct of its business and the ownership of its property (including applicable statutes, regulations, orders and restrictions relating to environmental standards and controls) other than such non-compliance as would not have a Material Adverse Effect or a material adverse effect on the ability of any Credit Party to perform its obligations under any Credit Document to which it is a party. 7.07 Compliance with Environmental Laws. (a) Holdings will pay, and ---------------------------------- will cause each of its Subsidiaries to pay, all costs and expenses incurred by it in keeping in compliance with all Environmental Laws, and will keep or cause to be kept all Real Properties free and clear of any Liens imposed pursuant to such Environmental Laws; and (b) neither Holdings nor any of its Subsidiaries will generate, use, treat, store, release or dispose of, or permit the generation, use, treatment, storage, release or disposal of, Hazardous Materials on any Real Property, or transport or permit the transportation of Hazardous Materials to or from any such Real Property, unless the failure to comply with the requirements specified in clause (a) or (b) above, either individually or in the aggregate, would not reasonably be expected to have a Material Adverse Effect. If Holdings or any of its Subsidiaries, or any tenant or occupant of any Real Property, cause or permit any intentional or unintentional act or omission resulting in the presence or Release of any Hazardous Material (except in compliance with applicable Environmental Laws), each of Holdings and the Borrower agrees to undertake, and/or to cause any of its Subsidiaries, tenants or occupants to undertake, at their sole expense, any clean up, removal, remedial or other action required pursuant to --55-- Environmental Laws to remove and clean up any Hazardous Materials from any Real Property; provided that neither Holdings nor any of its Subsidiaries shall be -------- required to comply with any such order or directive which is being con tested in good faith and by proper proceedings so long as it has maintained adequate reserves with respect to such compliance to the extent required in accordance with GAAP. 7.08 ERISA. As soon as possible and, in any event, within 10 days ----- after Holdings or any Subsidiary of Holdings or any ERISA Affiliate knows or has reason to know of the occurrence of any of the following events to the extent that one or more of such events is reasonably likely to result in a material liability to Holdings or any Subsidiary of Holdings, Holdings will deliver to each of the Banks a certificate of the chief financial officer or other Authorized Officer of Holdings setting forth details as to such occurrence and the action, if any, which Holdings, such Subsidiary or such ERISA Affiliate is required or proposes to take, together with any notices required or proposed to be given to or filed with or by Holdings, such Subsidiary, such ERISA Affiliate, the PBGC, a Plan participant or the Plan administrator with respect thereto: that a Reportable Event has occurred, that an accumulated funding deficiency has been incurred or an application may be or has been made to the Secretary of the Treasury for a waiver or modification of the minimum funding standard (including any required installment payments) or an extension of any amortization period under Section 412 of the Code with respect to a Plan; that a contribution required to be made to a Plan or Foreign Pension Plan has not been timely made; that a Plan has been or may be terminated, reorganized, partitioned or declared insolvent under Title IV of ERISA; that a Plan has an Unfunded Current Liability giving rise to a lien under ERISA or the Code; that proceedings may be or have been instituted to terminate or appoint a trustee to administer a Plan; that a proceeding has been instituted pursuant to Section 515 of ERISA to collect a delinquent contribution to a Plan; that Holdings, any Subsidiary of Holdings or any ERISA Affiliate will or may incur any liability (including any contingent or secondary liability) to or on account of the termination of or withdrawal from a Plan under Section 4062, 4063, 4064, 4069, 4201, 4204 or 4212 of ERISA or with respect to a Plan under Section 401(a)(29), 4971, 4975 or 4980 of the Code or Section 409, 502(i) or 502(l) of ERISA; or that Holdings or any Subsidiary of Holdings has or may incur any liability under any employee welfare benefit plan (within the meaning of Section 3(1) of ERISA) that provides benefits to retired employees or other former employees (other than as required by Section 601 of ERISA) or any employee pension benefit plan (as defined in Section 3(2) of ERISA). At the request of any Bank, Holdings will deliver to such Bank a complete copy of the annual report (Form 5500) of each Plan required to be filed with the Internal Revenue Service. In addition, at the request of any Bank, copies of annual reports and any notices received by Holdings or any Subsidiary of Holdings or any ERISA Affiliate with respect to any Plan or Foreign Pension Plan shall be delivered to such Bank no later than 10 days after the date of any such request. 7.09 Good Repair. Holdings will, and will cause each of its ----------- Subsidiaries to, ensure that its material properties and equipment used in its business are kept in good repair, working order and condition, normal wear and tear and damage by casualty excepted, and, subject to Section 8.09, that from time to time there are made in such properties and equipment all needful and proper repairs, renewals, replacements, extensions, additions, betterments and improvements thereto, to the extent and in the manner useful or customary for companies in similar businesses. --56-- 7.10 End of Fiscal Years; Fiscal Quarters. Holdings will, for ------------------------------------ financial reporting purposes, cause (i) each of its, and each of its Subsidiaries', fiscal years to end on December 31 of each year and (ii) each of its, and each of its Subsidiaries', fiscal quarters to end on March 31, June 30, September 30 and December 31 of each year. 7.11 Additional Security; Further Assurances. (a) Holdings will, and --------------------------------------- will cause each of its Domestic Subsidiaries (and subject to Section 7.16, each of its Foreign Subsidiaries) to, grant to the Collateral Agent security interests and mortgages in such assets and properties of Holdings and its Subsidiaries as are not covered by the Security Documents, and as may be requested from time to time by the Agent or the Required Banks (collectively, the "Additional Security Documents"). All such security interests and mortgages shall be granted pursuant to documentation reasonably satisfactory in form and substance to the Agent and shall constitute valid and enforceable perfected security interests and mortgages superior to and prior to the rights of all third Persons and subject to no other Liens except for Permitted Liens. The Additional Security Documents or instruments related thereto shall have been duly recorded or filed in such manner and in such places as are required by law to establish, perfect, preserve and protect the Liens in favor of the Collateral Agent required to be granted pursuant to the Additional Security Documents and all taxes, fees and other charges payable in connection therewith shall have been paid in full. (b) Holdings will, and will cause each of its Subsidiaries to, at the expense of Holdings and the Borrower, make, execute, endorse, acknowledge, file and/or deliver to the Collateral Agent from time to time such vouchers, invoices, schedules, confirmatory assignments, conveyances, financing statements, transfer endorsements, powers of attorney, certificates, real property surveys, reports and other assurances or instruments and take such further steps relating to the collateral covered by any of the Security Documents as the Collateral Agent may reasonably require. Furthermore, Holdings shall cause to be delivered to the Collateral Agent such opinions of counsel, title insurance and other related documents as may be reasonably requested by the Agent to assure themselves that this Section 7.11 has been complied with. (c) If the Agent or the Required Banks determine that they are required by law or regulation to have appraisals prepared in respect of the Real Property of Holdings and its Subsidiaries constituting Collateral, the Borrower shall provide to the Agent appraisals which satisfy the applicable requirements of the Real Estate Appraisal Reform Amendments of the Financial Institution Reform, Recovery and Enforcement Act of 1989 and which shall be in form and substance satisfactory to the Agent. (d) Holdings and the Borrower agree that each action required above by this Section 7.11 shall be completed as soon as possible, but in no event later than 90 days after such action is either requested to be taken by the Agent or the Required Banks or required to be taken by Holdings and its Subsidiaries pursuant to the terms of this Section 7.11; provided that in no -------- event shall Holdings or the Borrower be required to take any action, other than using its reasonable efforts, to obtain consents from third parties with respect to its compliance with this Section 7.11. --57-- 7.12 Interest Rate Protection. The Borrower shall no later than 90 ------------------------ days following the Initial Borrowing Date enter into, and thereafter maintain, Interest Rate Protection Agreements, satisfactory to the Agent, with a term of at least three years, establishing a fixed or maximum interest rate acceptable to the Agent in respect of at least 50% of the outstanding Term Loans, it being understood and agreed that the Interest Rate Protection Agreements entered into by the Borrower in connection with the Existing Credit Agreement may remain outstanding and shall constitute a part of the interest rate protection program required by this Section 7.12. 7.13 Register. The Borrower hereby designates the Agent to serve as -------- the Borrower's agent, solely for purposes of this Section 7.13, to maintain a register (the "Register") on which it will record the Commitments from time to time of each of the Banks, the Loans made by each of the Banks and each repayment in respect of the principal amount of the Loans of each Bank. Failure to make any such recordation, or any error in such recordation shall not affect the Borrower's obligations in respect of such Loans. With respect to any Bank, the transfer of the Commitments of such Bank and the rights to the principal of, and interest on, any Loan made pursuant to such Commitments shall not be effective until such transfer is recorded on the Register maintained by the Agent with respect to ownership of such Commitments and Loans and prior to such recordation all amounts owing to the transferor with respect to such Commitments and Loans shall remain owing to the transferor. The registration of assignment or transfer of all or part of any Commitments and Loans shall be recorded by the Agent on the Register only upon the acceptance by the Agent of a properly executed and delivered Assignment and Assumption Agreement pursuant to Section 12.04(b). Coincident with the delivery of such an Assignment and Assumption Agreement to the Agent for acceptance and registration of assignment or transfer of all or part of a Loan, or as soon thereafter as practicable, the assigning or transferor Bank shall surrender the Note evidencing such Loan, and thereupon one or more new Notes in the same aggregate principal amount shall be issued to the assigning or transferor Bank and/or the new Bank. The Borrower agrees to indemnify the Agent from and against any and all losses, claims, damages and liabilities of whatsoever nature which may be imposed on, asserted against or incurred by the Agent in performing its duties under this Section 7.13. 7.14 Maintenance of Corporate Separateness. Holdings will, and will ------------------------------------- cause each of its Subsidiaries to, satisfy customary corporate formalities, including the maintenance of corporate records. Neither the Borrower nor any Subsidiary of the Borrower shall make any payment to a creditor of Holdings (other than a Guaranteed Creditor pursuant to any Credit Document or an Interest Rate Protection Agreement or Other Hedging Agreement entered into with any such Guaranteed Creditor) in respect of any liability of Holdings, and no bank account of Holdings shall be commingled with any bank account of the Borrower or any Subsidiary of the Borrower. Any financial statements distributed to any creditors of Holdings shall, to the extent permitted by GAAP, clearly establish the corporate separateness of Holdings from the Borrower and each of the Borrower's Subsidiaries. Finally, neither the Borrower nor any of its Subsidiaries shall take any action, or conduct its affairs in a manner, which is likely to result in the corporate existence of Holdings on the one hand and of the Borrower or any Subsidiary of the Borrower on the other hand being ignored, or in the assets and liabilities of the Borrower or any Subsidiary of the Borrower --58-- being substantively consolidated with those of Holdings in a bankruptcy, reorganization or other insolvency proceeding. 7.15 Baxter PIK Notes; Baxter Preferred Stock; Permitted Holdings PIK ---------------------------------------------------------------- Securities. (a) Holdings shall pay any and all interest on any Baxter PIK - ---------- Notes issued in accordance with this Agreement through the issuance of additional Baxter PIK Notes, rather than in cash, except to the extent cash Dividends to Holdings are otherwise permitted to be paid in accordance with the terms of Section 8.07(v) for the purpose of paying cash interest on the Baxter PIK Notes in accordance with the terms thereof. (b) Holdings shall pay all dividends on the Baxter Preferred Stock through the issuance of additional shares of Baxter Preferred Stock, rather than in cash, except to the extent cash dividends on the Baxter Preferred Stock are permitted to be paid in accordance with the terms of Section 8.07(vi); provided -------- that in lieu of issuing additional shares of Baxter Preferred Stock as dividends, Holdings may increase the liquidation preference of the shares of the Baxter Preferred Stock in respect of which such dividends have accrued. (c) Holdings shall pay all dividends or interest, as the case may be, on the Permitted Holdings PIK Securities through the issuance of additional Permitted Holdings PIK Securities rather than in cash; provided that in lieu of -------- issuing additional Permitted Holdings PIK Securities as dividend or interest payments, Holdings may increase the liquidation preference or outstanding amount, as the case may be, of the outstanding Permitted Holdings PIK Securities in respect of which such dividends or interest have accrued. 7.16 Foreign Subsidiaries Security. If following a change in the ----------------------------- relevant sections of the Code or the regulations, rules, rulings, notices or other official pronouncements issued or promulgated thereunder, counsel for the Borrower acceptable to the Agent and the Required Banks does not within 30 days after a request from the Agent or the Required Banks deliver evidence, in form and substance satisfactory to the Agent and the Required Banks, with respect to any Foreign Subsidiary which has not already had all of its stock pledged pursuant to the Pledge Agreement that (i) a pledge (x) of 66-2/3% or more of the total combined voting power of all classes of capital stock of such Foreign Subsidiary entitled to vote, and (y) of any promissory note issued by such Foreign Subsidiary to Holdings or any of its Domestic Subsidiaries, (ii) the entering into by such Foreign Subsidiary of a security agreement in substantially the form of the Security Agreement and (iii) the entering into by such Foreign Subsidiary of a guaranty in substantially the form of the Subsidiary Guaranty, in any such case would cause the undistributed earnings of such Foreign Subsidiary as determined for Federal income tax purposes to be treated as a deemed dividend to such Foreign Subsidiary's United States parent for Federal income tax purposes, then in the case of a failure to deliver the evidence described in clause (i) above, that portion of such Foreign Subsidiary's outstanding capital stock or any promissory notes so issued by such Foreign Subsidiary, in each case not theretofore pledged pursuant to the Pledge Agreement shall be pledged to the Collateral Agent for the benefit of the Secured Creditors pursuant to the Pledge Agreement (or another pledge agreement in substantially similar form, if needed), and in the case of a failure to deliver the evidence described in clause (ii) above, such Foreign Subsidiary shall execute and deliver the Security Agree- --59-- ment (or another security agreement in substantially similar form, if needed), granting the Secured Creditors a security interest in all of such Foreign Subsidiary's assets and securing the Obligations of the Borrower under the Credit Documents and under any Interest Rate Protection Agreement or Other Hedging Agreement and, in the event the Subsidiary Guaranty shall have been executed by such Foreign Subsidiary, the obligations of such Foreign Subsidiary thereunder, and in the case of a failure to deliver the evidence described in clause (iii) above, such Foreign Subsidiary shall execute and deliver the Subsidiary Guaranty (or another guaranty in substantially similar form, if needed), guaranteeing the Obligations of the Borrower under the Credit Documents and under any Interest Rate Protection Agreement or Other Hedging Agreement, in each case to the extent that the entering into such Security Agreement or Subsidiary Guaranty is permitted by the laws of the respective foreign jurisdiction and with all documents delivered pursuant to this Section 7.16 to be in form and substance reasonably satisfactory to the Agent and the Required Banks. 7.17 Contributions; Payments. (a) Holdings will contribute as an ----------------------- equity contribution to the capital of the Borrower upon its receipt thereof, any cash proceeds (net of reasonable costs associated with such sale or issuance) received by Holdings from any sale or issuance of its preferred or common equity or any cash capital contributions received by Holdings, provided that to the extent permitted by Section 8.06(t), Holdings may lend proceeds of Permitted Equity Proceeds to the Borrower. (b) The Borrower will use the proceeds of all equity contributions received by it from Holdings as provided in clause (a) above toward the repayment of Term Loans to the extent required by Section 4.02. 7.18 Accounts Receivable Facility Transaction. On the Accounts ---------------------------------------- Receivable Facility Transaction Date, (i) there shall have been delivered to the Agent and the Required Banks true and correct copies of all Accounts Receivable Facility Documents, certified as such by an officer of the Borrower, and all of the terms and conditions of the Accounts Receivable Facility Documents shall be in form and substance reasonably satisfactory to the Agent and the Required Banks, (ii) the Accounts Receivable Facility Transaction, including all of the terms and conditions thereof, shall have been duly approved by the board of directors of the Borrower, and all Accounts Receivable Facility Documents shall be in full force and effect, (iii) each of the conditions precedent to the consummation of the Accounts Receivable Facility Transaction shall have been satisfied and not waived except with the consent of the Agent and the Required Banks to the reasonable satisfaction of the Agent and the Required Banks, (iv) each of the representations and warranties of the Designated Credit Parties and the Receivables Entity contained in the Accounts Receivable Facility Documents shall be true and correct in all material respects, (v) the Accounts Receivable Facility Transaction shall have been consummated in all material respects in accordance with all applicable law and the Accounts Receivable Facility Documents and (vi) the Borrower and/or the other Designated Credit Parties shall have received the Accounts Receivable Facility Proceeds and used the same to make any prepayment and/or satisfy any cash collateral requirement required under Section 4.02(A)(a) as a result of the reduction to the Total Revolving Loan Commitment on such date under Section 3.03(d). --60-- SECTION 8. Negative Covenants. Holdings and the Borrower hereby ------------------ covenant and agree that as of the Effective Date and thereafter for so long as this Agreement is in effect and until the Commitments have terminated, no Letters of Credit (other than Letters of Credit, together with all Fees that have accrued and will accrue thereon through the stated termination date of such Letters of Credit, which have been supported in a manner satisfactory to the respective Letter of Credit Issuer in its sole and absolute discretion) or Notes are outstanding and the Loans and Unpaid Drawings, together with interest, Fees and all other Obligations (other than any indemnities described in Section 12.13 hereof which are not then due and payable) incurred hereunder, are paid in full: 8.01 Changes in Business. (a) Holdings and its Subsidiaries will not ------------------- engage in any business other than the business engaged in by the Acquired Business and Holdings and its Subsidiaries as of the Effective Date and activities directly related thereto, and similar or related businesses. (b) Notwithstanding the foregoing, Holdings will engage in no business other than (i) its ownership of the capital stock of the Borrower, Borrower Subordinated Notes and those obligations of officers and employees of Holdings and its Subsidiaries to the extent permitted by Section 8.06(e) and having those liabilities which it is responsible for under this Agreement and the other Documents to which it is a party, (ii) the issuance of the Shareholder Subordinated Notes, the Baxter Preferred Stock, the Baxter PIK Notes, the Permitted Holdings PIK Securities, shares of Holdings Common Stock and options and warrants to purchase Holdings Common Stock and shares of Holdings Class L Common Stock and options and warrants to purchase Holdings Class L Common Stock, (iii) Permitted Strategic Equity Issuances and (iv) activities associated with expenses paid with dividends made by the Borrower pursuant to Section 8.07(iii). Notwithstanding the foregoing, Holdings may engage in those activities that are incidental to (a) the maintenance of its corporate existence in compliance with applicable law, (b) legal, tax and accounting matters in connection with any of the foregoing activities and (c) the entering into, and performing its obligations under, this Agreement and the other Documents to which it is a party. (c) Notwithstanding the foregoing, the Receivables Entity will not engage in any business other than purchasing accounts receivable and related assets from the Designated Credit Parties and the related transactions pursuant to the terms of the Accounts Receivable Facility Documents. (d) Notwithstanding the foregoing and anything to the contrary contained in this Agreement, (i) Dade Export will not engage in any business other than activities that are incidental to (a) the maintenance of its corporate existence in compliance with applicable law and (b) legal, tax and accounting matters in connection with any of the foregoing activities and (ii) Holdings will not, and will not permit any of its Subsidiaries to, (x) sell or transfer assets to Dade Export, (y) make advances, loans, investments or cash contributions to Dade Export or (z) engage in any other transaction with Dade Export; provided, that -------- Dade Export may be dissolved or liquidated into any other Wholly-Owned Domestic Subsidiary of the Borrower in accordance with the terms of Section 8.02(z). --61-- 8.02 Consolidation, Merger, Sale or Purchase of Assets, etc. ------------------------------------------------------ Holdings will not, and will not permit any of its Subsidiaries to, wind up, liquidate or dissolve its affairs or enter into any transaction of merger or consolidation, or convey, sell, lease or otherwise dispose of (or agree to do any of the foregoing at any future time) all or any part of its property or assets (other than inventory in the ordinary course of business through distribution arrangements, vendor financial service programs or otherwise), or enter into any partnerships, joint ventures or sale-leaseback transactions, or purchase or otherwise acquire (in one or a series of related transactions) any part of the property or assets (other than purchases or other acquisitions of inventory, materials and equipment in the ordinary course of business) of any Person, except that the following shall be permitted: (a) the Acquisition; (b) the Borrower and its Subsidiaries may lease as lessee or lessor or license as licensee or licensor real or personal property (including, without limitation, the real property subject to any Designated Real Property Sale after the consummation thereof pursuant to clause (s) below) in the ordinary course of business and otherwise in compliance with this Agreement, so long as any such lease or license by the Borrower or any of its Subsidiaries in its capacity as lessor or licensor, as the case may be, does not prohibit the granting of a Lien by the Borrower or any of its Subsidiaries pursuant to the Mortgages in the real property covered by such lease or pursuant to the Security Agreement in the personal property covered by such lease or license, as the case may be; (c) Capital Expenditures by the Borrower and its Subsidiaries to the extent not in violation of Section 8.09; (d) the advances, investments and loans permitted pursuant to Section 8.06; (e) the Borrower and its Subsidiaries may sell or discount, in each case without recourse, accounts receivables arising in the ordinary course of business, but only in connection with the compromise or collection thereof; (f) the Borrower and its Subsidiaries may sell or exchange specific items of equipment, so long as the purpose of each such sale or exchange is to acquire (and results within 90 days of such sale or exchange in the acquisition of) replacement items of equipment which are the functional equivalent of the item of equipment so sold or exchanged; (g) the Borrower and its Subsidiaries may, in the ordinary course of business, license as licensee or licensor patents, trademarks, copyrights and know-how to or from third Persons, so long as any such license by the Borrower or any of its Subsidiaries in its capacity as licensor is permitted to be assigned pursuant to the Security Agreement (to the extent that a security interest in such patents, trademarks, copyrights and know- how is granted thereunder) and does not otherwise prohibit the granting of a Lien by the Borrower or any --62-- of its Subsidiaries pursuant to the Security Agreement in the intellectual property covered by such license; (h) any Foreign Subsidiary may be merged with and into, or be dissolved or liquidated into, or transfer any of its assets to, any Wholly- Owned Foreign Subsidiary (other than the Receivables Entity) so long as (i) such Wholly-Owned Foreign Subsidiary is the surviving corporation of any such merger, dissolution or liquidation and (ii) in each case at least 65% of the total combined voting power of all classes of capital stock of all first-tier Foreign Subsidiaries are pledged pursuant to the Pledge Agreement; (i) the assets of any Foreign Subsidiary may be transferred to the Borrower or any of its Wholly-Owned Domestic Subsidiaries (other than the Receivables Entity), and any Foreign Subsidiary may be merged with and into, or be dissolved or liquidated into, the Borrower or any of its Wholly-Owned Domestic Subsidiaries (other than the Receivables Entity) so long as the Borrower or such Wholly-Owned Domestic Subsidiary is the surviving corporation of any such merger, dissolution or liquidation; (j) the Borrower or any of its Wholly-Owned Domestic Subsidiaries (other than the Receivables Entity) may transfer to one or more Wholly- Owned Foreign Subsidiaries those assets theretofore transferred to the Borrower or such Wholly-Owned Domestic Subsidiary by a Foreign Subsidiary (whether by merger, liquidation, dissolution or otherwise) pursuant to clause (i) of this Section 8.02; (k) the Borrower and its Subsidiaries (other than the Receivables Entity) may sell or otherwise transfer inventory to their respective Subsidiaries for resale by such Subsidiaries, and Subsidiaries of the Borrower may sell or otherwise transfer inventory to the Borrower for resale by the Borrower so long as the security interest granted to the Collateral Agent for the benefit of the Secured Creditors pursuant to the Security Agreement in the inventory so transferred shall remain in full force and effect and perfected (to at least the same extent as in effect immediately prior to such transfer); (l) the Borrower may contribute cash to (x) one or more Wholly-Owned Domestic Subsidiaries (other than the Receivables Entity) formed after the Initial Borrowing Date in accordance with Section 8.16, so long as the aggregate amount of such cash so contributed to all such Domestic Subsidiaries does not exceed $5,000,000 and (y) the Receivables Entity, so long as the aggregate amount of such cash so contributed to the Receivables Entity does not exceed $500,000; (m) the Borrower and its Domestic Subsidiaries may transfer assets (other than inventory) to Wholly-Owned Foreign Subsidiaries (other than the Receivables Entity) so long as (x) the aggregate fair market value of all such assets (other than intellectual property) so transferred (determined in good faith by the Board of Directors or senior management of the Borrower) to all such Foreign Subsidiaries does not exceed $20,000,000 and (y) the aggregate fair market value of all such intellectual property so transferred (determined in --63-- good faith by the Board of Directors or senior management of the Borrower) to all such Foreign Subsidiaries does not exceed $20,000,000; (n) assets of the Borrower and its Domestic Subsidiaries (other than Dade Diagnostics P.R., Inc. and any other Domestic Subsidiary owning assets or having operations in Puerto Rico) constituting non-U.S. operations may be transferred to Wholly-Owned Foreign Subsidiaries of the Borrower; (o) (x) the Borrower and/or its Subsidiaries may enter into factoring arrangements with respect to accounts receivable arising in Japan, Spain or Italy in connection with business activities in any such country and (y) the Borrower and its Domestic Subsidiaries may sell or otherwise transfer accounts receivable between or among themselves in the ordinary course of business; (p) each of the Borrower and its Subsidiaries may sell assets, provided that (x) the aggregate sale proceeds from all assets subject to -------- such sales pursuant to this clause (p) shall not exceed $5,000,000 in any fiscal year of the Borrower and (y) the Net Proceeds therefrom are either applied to repay Term Loans as provided in Section 4.02(A)(c) or reinvested to the extent permitted by Section 4.02(A)(c); (q) each of the Borrower and its Subsidiaries may sell other assets, provided that the aggregate sale proceeds from all assets subject to such -------- sales pursuant to this clause (q) shall not exceed $500,000 in any fiscal year of the Borrower; (r) the Borrower and its Subsidiaries may effect any Designated Asset Sale, provided that (x) any such Designated Asset Sale is at fair market value (as determined in good faith by the Board of Directors or senior management of the Borrower) and (y) the Net Proceeds therefrom are either applied to repay Term Loans as provided in Section 4.02(A)(c) or reinvested to the extent permitted by Section 4.02(A)(c); (s) the Borrower may effect any Designated Real Property Sale, provided that (x) any such Designated Real Property Sale is for at least -------- 80% in cash and at fair market value (as determined in good faith by the Board of Directors or senior management of the Borrower), (y) the Net Proceeds therefrom are applied to repay Term Loans to the extent required by Section 4.02(A)(c), and (z) no payment Default or Event of Default then exists or would result therefrom; (t) the Borrower and its Subsidiaries may effect the B&J Asset Sale, provided that (x) the B&J Asset Sale generates Net Proceeds of at least -------- $20,000,000 and is at fair market value (as determined in good faith by the Board of Directors or senior management of the Borrower) and (y) the Net Proceeds therefrom are applied to repay Term Loans to the extent required by Section 4.02(A)(c); --64-- (u) so long as no Default or Event of Default then exists or would result therefrom, the Borrower may acquire assets or the capital stock of any Person (any such acquisition permitted by this clause (u), a "Permitted Acquisition"), provided, that (i) such Person (or the assets so acquired) -------- was, immediately prior to such acquisition, engaged (or used) primarily in the businesses permitted pursuant to Section 8.01(a), (ii) if such acquisition is structured as a stock acquisition, then either (A) the Person so acquired becomes a Wholly-Owned Subsidiary of the Borrower or (B) such Person is merged with and into the Borrower or a Wholly-Owned Subsidiary of the Borrower (with the Borrower or such Wholly-Owned Subsidiary being the surviving corporation of such merger), and in any case, all of the provisions of Section 8.16 have been complied with in respect of such Person, (iii) any Liens or Indebtedness assumed or issued in connection with such acquisition are otherwise permitted under Section 8.03 or 8.04, as the case may be, (iv) the only consideration paid in connection with such Permitted Acquisition consists of cash, Holdings Common Stock and/or Permitted Holdings PIK Securities, (v) the aggregate amount of cash, Holdings Common Stock (valued by an independent financial institution or appraisal firm reasonably satisfactory to the Agent or, after the initial public offering of Holdings Common Stock, based on the then current trading price for such Holdings Common Stock) and Permitted Holdings PIK Securities (valued at the aggregate liquidation preference thereof in the case of preferred stock and the aggregate face amount thereof in the case of indebtedness) expended by the Borrower in connection with any such acquisition (or series of related acquisitions) shall not exceed $40,000,000 and (vi) the aggregate amount of cash expended by the Borrower in connection with any such acquisition (or series of related acquisitions) shall not exceed an amount equal to the lesser of (I) $25,000,000 and (II) the sum of (x) $10,000,000 less the aggregate amount of such $10,000,000 previously utilized to make Permitted Acquisitions plus (y) the Excess Proceeds Amount at the time of such acquisition; (v) the Borrower may transfer assets (other than accounts receivable and inventory) to Dade Diagnostics P.R., Inc. so long as (x) the aggregate fair market value of all such assets so transferred (determined in good faith by the Board of Directors or senior management of the Borrower) to Dade Diagnostics P.R., Inc. does not exceed $10,000,000 and (y) the security interests granted to the Collateral Agent for the benefit of the Secured Creditors pursuant to the Security Documents in the assets so transferred shall remain in full force and effect and perfected (to at least the same extent as in effect immediately prior to such transfer); (w) the Borrower may lease as lessor equipment, machinery or its Real Property to one or more Wholly-Owned Domestic Subsidiaries of the Borrower so long as (x) such lease is for fair market value (determined in good faith by the Board of Directors or senior management of the Borrower) and (y) the security interests granted to the Collateral Agent for the benefit of the Secured Creditors pursuant to the Security Documents in the assets so leased shall remain in full force and effect and perfected (to at least the same extent as in effect immediately prior to such transfer); --65-- (x) any Domestic Subsidiary of the Borrower may transfer assets (other than accounts receivable and inventory) to the Borrower or to any other Wholly-Owned Domestic Subsidiary of the Borrower (other than the Receivables Entity) so long as the security interests granted to the Collateral Agent for the benefit of the Secured Creditors pursuant to the Security Documents in the assets so transferred shall remain in full force and effect and perfected (to at least the same extent as in effect immediately prior to such transfer); (y) any Wholly-Owned Domestic Subsidiary of the Borrower (other than the Receivables Entity) may merge with and into the Borrower so long as (i) the Borrower is the surviving corporation of such merger and (ii) the security interests granted to the Collateral Agent for the benefit of the Secured Creditors pursuant to the Security Documents in the assets of such Wholly-Owned Domestic Subsidiary so merged shall remain in full force and effect and perfected (to at least the same extent as in effect immediately prior to such merger); (z) any Domestic Subsidiary of the Borrower (other than the Receivables Entity) may merge with and into, or be dissolved or liquidated into, any other Wholly-Owned Domestic Subsidiary of the Borrower (other than the Receivables Entity) so long as (i) such Wholly-Owned Domestic Subsidiary of the Borrower is the surviving corporation of such merger, dissolution or liquidation and (ii) the security interests granted to the Collateral Agent for the benefit of the Secured Creditors pursuant to the Security Documents in the assets of such Domestic Subsidiary shall remain in full force and effect and perfected (to at least the same extent as in effect immediately prior to such merger, dissolution or liquidation); (aa) on and after the Accounts Receivable Facility Transaction Date, the Designated Credit Parties may (x) contribute cash to the Receivables Entity the proceeds of which are used to acquire accounts receivable and related assets from the Designated Credit Parties or to fund the Seller Account and (y) transfer and reacquire accounts receivable and related assets to and from the Receivables Entity, in each case pursuant to, and in accordance with the terms of, the Accounts Receivable Facility Documents; (bb) on and after the Accounts Receivable Facility Transaction Date, the Receivables Entity may transfer and reacquire accounts receivable and related assets (to the extent acquired from Designated Credit Parties as provided in clause (aa) above) pursuant to, and in accordance with the terms of, the Accounts Receivable Facility Documents; (cc) the Borrower and any of its Subsidiaries may sell, transfer or otherwise dispose of assets (including patents, trademarks, copyrights and know-how) in the ordinary course of business that, in the reasonable business judgment of the Borrower or such Subsidiary, are determined to be uneconomical, negligible or obsolete in the conduct of its business; (dd) the Borrower and any of its Subsidiaries may (x) effect Seeded Instrument Sales in connection with its Vendor Financing Program and (y) effect Seeded Instrument Transactions in connection with its Alternate Vendor Financing Program, so long as the --66-- aggregate outstanding amount of Capitalized Lease Obligations of the Borrower and its Subsidiaries under such Seeded Instrument Transactions shall not exceed $20,000,000 at any time; (ee) upon the termination of the Distribution Agreement or any other distribution agreement in effect as of the Effective Date between the Borrower and/or any of its Subsidiaries and Baxter and/or any of its Affiliates or VWR, the Borrower and/or any such Subsidiary may repurchase inventory transferred to Baxter, any such Affiliate or VWR but not yet distributed at the time of such termination; and (ff) the Borrower and its Subsidiaries may put or otherwise transfer accounts receivables to Baxter and/or its Affiliates in accordance with the terms of the Baxter Acquisition Documents. To the extent the Required Banks waive the provisions of this Section 8.02 with respect to the sale or other disposition of any Collateral, or any Collateral is sold as permitted by this Section 8.02 (and such Collateral is permitted to be released from the Liens created by the respective Security Document), such Collateral in each case shall be sold or otherwise disposed of free and clear of the Liens created by the Security Documents and the Agent shall take such actions (including, without limitation, directing the Collateral Agent to take such actions) as are appropriate in connection therewith. 8.03 Liens. Holdings will not, and will not permit any of its ----- Subsidiaries to, create, incur, assume or suffer to exist any Lien upon or with respect to any property or assets of any kind (real or personal, tangible or intangible) of Holdings or any of its Subsidiaries, whether now owned or hereafter acquired, or sell any such property or assets subject to an understanding or agreement, contingent or otherwise, to repurchase such property or assets (including sales of accounts receivable or notes with recourse to Holdings or any of its Subsidiaries) or assign any right to receive income, except for the following (collectively, the "Permitted Liens"): (a) inchoate Liens for taxes, assessments or governmental charges or levies not yet due or Liens for taxes, assessments or governmental charges or levies being contested in good faith by appropriate proceedings and for which adequate reserves have been established in accordance with GAAP; (b) Liens in respect of property or assets of the Borrower or any of its Subsidiaries imposed by law which were incurred in the ordinary course of business and which have not arisen to secure Indebtedness for borrowed money, such as carriers', warehousemen's and mechanics' Liens, statutory landlord's Liens, and other similar Liens arising in the ordinary course of business, and which either (x) do not in the aggregate materially detract from the value of such property or assets or materially impair the use thereof in the operation of the business of the Borrower or any of its Subsidiaries or (y) are being contested in good faith by appropriate proceedings, which proceedings have the effect of preventing the forfeiture or sale of the property or asset subject to such Lien; --67-- (c) Liens created by or pursuant to this Agreement and the Security Documents; (d) Liens in existence on the Initial Borrowing Date which are listed, and the property subject thereto described, in Annex VIII, without giving effect to any extensions or renewals thereof; (e) Liens arising from judgments, decrees or attachments in circumstances not constituting an Event of Default under Section 9.09; (f) Liens incurred or deposits made (x) in the ordinary course of business in connection with workers' compensation, unemployment insurance and other types of social security, or to secure the performance of tenders, statutory obligations, surety and appeal bonds, bids, government contracts, performance and return-of-money bonds and other similar obligations incurred in the ordinary course of business (exclusive of obligations in respect of the payment for borrowed money); and (y) to secure the performance of leases of Real Property, to the extent incurred or made in the ordinary course of business consistent with past practices; (g) licenses, leases or subleases granted to third Persons not interfering in any material respect with the business of the Borrower or any of its Subsidiaries; (h) easements, rights-of-way, restrictions, minor defects or irregularities in title and other similar charges or encumbrances not interfering in any material respect with the ordinary conduct of the business of the Borrower or any of its Subsidiaries; (i) Liens arising from precautionary UCC financing statements regarding operating leases permitted by this Agreement; (j) any interest or title of a licensor, lessor or sublessor under any lease permitted by this Agreement; (k) Liens created pursuant to Capital Leases permitted pursuant to Section 8.04(f); (l) Permitted Encumbrances; (m) Liens arising pursuant to purchase money mortgages or security interests securing Indebtedness representing the purchase price (or financing of the purchase price within 90 days after the respective purchase) of assets acquired after the Initial Borrowing Date, provided -------- that (i) any such Liens attach only to the assets so purchased, (ii) the Indebtedness secured by any such Lien does not exceed 100%, nor is less than 70%, of the lesser of the fair market value or the purchase price of the property being purchased at the time of the incurrence of such Indebtedness and (iii) the Indebtedness secured thereby is permitted to be incurred pursuant to Section 8.04(f); --68-- (n) any lease by the Borrower or any of its Subsidiaries (as lessee) of the property sold pursuant to any Designated Real Property Sale; (o) Liens on property or assets acquired pursuant to a Permitted Acquisition, or on property or assets of a Subsidiary of the Borrower in existence at the time such Subsidiary is acquired pursuant to a Permitted Acquisition, provided that (i) any Indebtedness that is secured by such -------- Liens is permitted to exist under Section 8.04(l), and (ii) such Liens are not incurred in contemplation of such Permitted Acquisition and do not attach to any other asset of the Borrower or any of its Subsidiaries; (p) Liens (i) granted by the Designated Credit Parties in favor of the Receivables Entity consisting of UCC-1 financing statements filed to effect the sale of accounts receivable and related assets pursuant to the Accounts Receivable Facility Documents, (ii) granted by the Receivables Entity on those accounts receivable and related assets acquired by it pursuant to the Accounts Receivable Facility Documents to the extent that such Liens are created by the Accounts Receivable Facility Documents and (iii) consisting of the right of setoff granted to any financial institution acting as a lockbox bank in connection with the Accounts Receivable Facility; (q) Liens securing Indebtedness permitted pursuant to clause (x) of Section 8.04(j), so long as any such Lien attaches only to the assets of the respective Foreign Subsidiary which is the obligor under such Indebtedness; (r) Liens on any interest of the Borrower or any of its Subsidiaries in the equipment subject to the Vendor Financing Program securing the recourse obligations owing to a financial institution party to the Vendor Financing Program, to the extent such obligations are permitted under Section 8.04(s); and (s) additional Liens incurred by the Borrower and its Subsidiaries so long as the value of the property subject to such Liens, and the Indebtedness and other obligations secured thereby, do not exceed $5,000,000. 8.04 Indebtedness. Holdings will not, and will not permit any of its ------------ Subsidiaries to, contract, create, incur, assume or suffer to exist any Indebtedness, except: (a) Indebtedness incurred pursuant to this Agreement and the other Credit Documents; (b) Existing Indebtedness outstanding on the Initial Borrowing Date and listed on Annex VII, without giving effect to any subsequent extension, renewal or refinancing thereof except as permitted pursuant to Section 8.06(l); (c) Indebtedness of Holdings incurred under Baxter PIK Notes (1) issued (x) as payment for indemnity obligations of Holdings under the Tax Indemnity Letter and (y) after --69-- December 20, 1999 (so long as no Default or Event of Default exists at such time or would result therefrom) in exchange for outstanding shares of Baxter Preferred Stock in accordance with the terms thereof, provided, in -------- the case of this clause (y) that the aggregate principal amount of such Baxter PIK Notes shall not exceed the aggregate liquidation preference of the Baxter Preferred Stock so exchanged and (2) representing interest payments on Baxter PIK Notes previously issued under clause (1) above (whether or not represented by the issuance of additional Baxter PIK Notes), as issued in accordance with the terms thereof; (d) Indebtedness of the Borrower incurred under the Senior Subordinated Notes in an aggregate principal amount not to exceed $350,000,000 (as reduced by any repayments of principal thereof); (e) Indebtedness under Interest Rate Protection Agreements entered into to protect the Borrower against fluctuations in interest rates in respect of the Obligations; (f) Capitalized Lease Obligations and Indebtedness of the Borrower and its Subsidiaries incurred pursuant to purchase money Liens, provided, -------- that (x) all such Capitalized Lease Obligations are permitted under Section 8.09 and (y) the sum of (i) the aggregate Capitalized Lease Obligations (other than up to $20,000,000 of outstanding Capitalized Lease Obligations outstanding at any time in connection with the Alternate Vendor Financing Program) plus (ii) the aggregate principal amount of such purchase money Indebtedness outstanding at any time (A) during the period (taken as one accounting period) from the Effective Date and ending on December 31, 1996, shall not exceed $15,000,000, and (B) during any fiscal year of the Borrower thereafter shall not exceed the amount set forth opposite such fiscal year as set forth below:
Fiscal Year Ending Amount ------------------ ------ December 31, 1997 $15,500,000 December 31, 1998 $16,000,000 December 31, 1999 $16,500,000 December 31, 2000 $17,000,000 December 31, 2001 $17,500,000 December 31, 2002 $18,000,000 December 31, 2003 $18,500,000 December 31, 2004 $19,000,000
(g) Indebtedness constituting Intercompany Loans to the extent permitted by Section 8.06(g); (h) Indebtedness of Holdings under the Shareholder Subordinated Notes; (i) Indebtedness under Other Hedging Agreements providing protection against fluctuations in currency values in connection with the Borrower's or any of its Subsidiaries' --70-- operations so long as management of the Borrower or such Subsidiary, as the case may be, has determined that the entering into of such Other Hedging Agreements are bona fide hedging activities; ---- ---- (j) Indebtedness (x) of Foreign Subsidiaries under lines of credit extended by third Persons to any such Foreign Subsidiary the proceeds of which Indebtedness are used for such Foreign Subsidiary's working capital purposes, provided that the aggregate principal amount of all such -------- Indebtedness outstanding at any time for all Foreign Subsidiaries shall not exceed $35,000,000 (the "Foreign Subsidiary Working Capital Indebtedness") and (y) consisting of guaranties by the Borrower of any such Foreign Subsidiary Working Capital Indebtedness (including, without limitation, letters of credit issued for the account of the Borrower and its Subsidiaries and in favor of lenders in respect of any such Foreign Subsidiary Working Capital Indebtedness); (k) Indebtedness of Foreign Subsidiaries to the Borrower and its Domestic Subsidiaries (other than the Receivables Entity) as a result of any investment made pursuant to Section 8.06(o); (l) Indebtedness of a Subsidiary acquired pursuant to a Permitted Acquisition (or Indebtedness assumed at the time of a Permitted Acquisition of an asset securing such Indebtedness), provided that (i) such -------- Indebtedness was not incurred in connection with or in anticipation of such Permitted Acquisition, (ii) such Indebtedness does not constitute debt for borrowed money (other than debt for borrowed money incurred in connection with industrial revenue or industrial development bond financings), it being understood and agreed that Capitalized Lease Obligations and purchase money Indebtedness shall not constitute debt for borrowed money for purposes of this clause (l), and (iii) at the time of such Permitted Acquisition such Indebtedness does not exceed 10% of the total value of the assets of the Subsidiary so acquired, or of the asset so acquired, as the case may be; (m) Indebtedness consisting of guaranties (x) by the Borrower of Indebtedness and leases permitted to be incurred by Domestic Wholly-Owned Subsidiaries (other than the Receivables Entity), (y) by Domestic Subsidiaries (other than the Receivables Entity) of Indebtedness (other than the Senior Subordinated Notes) and leases permitted to be incurred by the Borrower or other Domestic Wholly-Owned Subsidiaries and (z) by Foreign Subsidiaries of Indebtedness and leases permitted to be incurred by other Foreign Wholly-Owned Subsidiaries; (n) Indebtedness consisting of a guaranty by the Borrower of the severance obligations of Dade Diagnostika GmbH, a German Subsidiary of the Borrower, as required by the German Workers' Council; (o) Indebtedness of the Borrower constituting Borrower Subordinated Loans to the extent permitted by Section 8.06(t) and to the extent permitted by Section 4.12 of the Senior --71-- Subordinated Note Indenture (without giving effect to clause (xvi) of the definition of Permitted Indebtedness contained therein); (p) Indebtedness of the Receivables Entity under the Accounts Receivable Facility Documents; (q) Indebtedness consisting of a guaranty by the Borrower of the obligations of the other Designated Credit Parties under the Accounts Receivable Facility Documents; (r) Indebtedness of the Borrower or any of its Subsidiaries arising in the ordinary course of business of the Borrower or such Subsidiary and owing to a financial institution providing netting services to the Borrower and its Subsidiaries, provided that (i) such Indebtedness was incurred in -------- respect of the provision of such netting services with respect to intercompany Indebtedness permitted to be made pursuant to this Agreement and (ii) such Indebtedness does not remain outstanding for more than 3 days from the date of its incurrence; (s) Indebtedness consisting of the recourse to the Borrower and its Subsidiaries by financial institutions party to the Vendor Financing Program for lease obligations owing to such financial institutions by third party customers of the Borrower and/or such Subsidiaries, provided that the -------- aggregate amount of such Indebtedness outstanding at any time shall not exceed $10,000,000; (t) Indebtedness of the Borrower or any of its Subsidiaries consisting of the financing of insurance premiums in the ordinary course of business; (u) Indebtedness of the Borrower or any of its Subsidiaries consisting of take-or-pay obligations contained in supply agreements entered into in the ordinary course of business; (v) Indebtedness of Holdings incurred under Permitted Holdings PIK Securities, provided that the aggregate outstanding principal amount of -------- Permitted Holdings PIK Securities constituting Indebtedness shall not exceed $10,000,000 plus the amount of interest on such Permitted Holdings PIK Securities paid in kind or through accretion; and (w) additional Indebtedness of the Borrower and its Domestic Subsidiaries not otherwise permitted hereunder not exceeding $15,000,000 in aggregate principal amount at any time outstanding. 8.05 Designated Senior Debt. Holdings will not, and will not permit ---------------------- any of its Subsidiaries to (i) designate any Indebtedness (other than the Obligations) as "Designated Senior Debt" for purposes of, and as defined in, the Senior Subordinated Note Indenture or (ii) designate any documents with respect to any Indebtedness (other than this Agreement) as the "Bank Credit Agreement" as defined in the Senior Subordinated Note Indenture for purposes of the receipt of --72-- notices by the Agent, and delivery of blockage notices pursuant to the subordination provisions of the Senior Subordinated Note Documents. 8.06 Advances, Investments and Loans. Holdings will not, and will ------------------------------- not permit any of its Subsidiaries to, lend money or credit or make advances to any Person, or purchase or acquire any stock, obligations or securities of, or any other interest in, or make any capital contribution to, any Person, or purchase or own a futures contract or otherwise become liable for the purchase or sale of currency or other commodities at a future date in the nature of a futures contract, or hold any cash, Cash Equivalents or Foreign Cash Equivalents, except: (a) the Borrower and its Subsidiaries may invest in cash and Cash Equivalents; (b) the Borrower and its Subsidiaries may acquire and hold receivables owing to it, if created or acquired in the ordinary course of business and payable or dischargeable in accordance with customary trade terms of the Borrower or such Subsidiary; (c) the Borrower and its Subsidiaries may acquire and own investments (including debt obligations) received in connection with the bankruptcy or reorganization of suppliers and customers and in good faith settlement of delinquent obligations of, and other disputes with, customers and suppliers arising in the ordinary course of business; (d) Interest Rate Protection Agreements entered into in compliance with Section 8.04(e) shall be permitted; (e) Holdings may acquire and hold obligations of one or more officers or other employees of Holdings or its Subsidiaries in connection with such officers' or employees' acquisition of shares of Holdings Common Stock or Holdings Class L Common Stock so long as no cash is paid by Holdings or any of its Subsidiaries in connection with the acquisition of any such obligations; (f) deposits made in the ordinary course of business consistent with past practices to secure the performance of leases shall be permitted; (g) the Borrower may make intercompany loans and advances to any of its Subsidiaries (other than the Receivables Entity) and any Subsidiary of the Borrower (other than the Receivables Entity) may make intercompany loans and advances to the Borrower or any other Subsidiary of the Borrower (collectively, "Intercompany Loans"), provided, that (w) at no time shall -------- the aggregate outstanding principal amount of all Intercompany Loans made pursuant to this clause (g) by the Borrower and its Domestic Subsidiaries to Foreign Subsidiaries, when added to the amount of contributions, capitalizations and forgiveness theretofore made pursuant to Section 8.06(m)(1), exceed $50,000,000 (determined without regard to any write- downs or write-offs of such loans and advances), provided that, in addition to such $50,000,000, Intercompany Loans may also be made by the Borrower and its Domestic Subsidiaries to Foreign Subsidiaries in an amount up to the Excess Proceeds --73-- Amount at the time of any such loan, (x) each Intercompany Loan made by a Foreign Subsidiary to the Borrower or a Domestic Subsidiary shall contain the subordination provisions set forth on Exhibit I, (y) each Intercompany Loan shall be evidenced by an Intercompany Note and (z) each such Intercompany Note (other than (1) Intercompany Notes issued by Foreign Subsidiaries to the Borrower or Domestic Subsidiaries and (2) Intercompany Notes held by Foreign Subsidiaries) shall be pledged to the Collateral Agent pursuant to the Pledge Agreement; (h) loans and advances by the Borrower and its Subsidiaries to employees of Holdings and its Subsidiaries for moving and travel expenses and other similar expenses, in each case incurred in the ordinary course of business, in an aggregate outstanding principal amount not to exceed $6,000,000 at any time (determined without regard to any write-down or write-offs of such loans and advances) shall be permitted; (i) Holdings may make equity contributions to the capital of the Borrower; (j) Foreign Subsidiaries may invest in Foreign Cash Equivalents; (k) Other Hedging Agreements may be entered into in compliance with Section 8.04(i); (l) advances, loans and investments in existence on the Initial Borrowing Date and listed on Annex XI shall be permitted, without giving effect to any additions thereto or replacements thereof (except those additions or replacements which are existing obligations as of the Initial Borrowing Date), provided that those loans outstanding to Subsidiaries on -------- the Initial Borrowing Date may be repaid and reborrowed (including after any such loans may have been capitalized or forgiven as permitted by clause (m) of this Section 8.06) so long as the aggregate outstanding principal amount of all such loans does not exceed that aggregate principal amount outstanding on the Initial Borrowing Date; (m) the Borrower and its Domestic Subsidiaries (other than the Receivables Entity) may (1) make cash capital contributions to Foreign Subsidiaries, and may capitalize or forgive any Indebtedness owed to them by a Foreign Subsidiary and outstanding under clause (g) of this Section 8.06, provided that the aggregate amount of such contributions, -------- capitalizations and forgiveness, when added to the aggregate outstanding principal amount of Intercompany Loans made to Foreign Subsidiaries under such clause (g) (determined without regard to any write-downs or write-offs thereof) shall not exceed an amount equal to $50,000,000, provided that, in -------- addition to such $50,000,000, such contributions, capitalizations and forgiveness may be made at any time in an amount up to the Excess Proceeds Amount at such time, and (2) capitalize or forgive any Indebtedness owed to them by a Foreign Subsidiary and outstanding under clause (l) of this Section 8.06; (n) Permitted Acquisitions shall be permitted; --74-- (o) the Borrower and its Subsidiaries may make investments in their respective Subsidiaries in connection with the transfers of those assets permitted to be transferred pursuant to Sections 8.02(h), (i) and (j), it being understood that the Borrower and its Subsidiaries may convert any investment initially made as an equity investment to intercompany Indebtedness held by the Borrower or such Subsidiary; (p) the Borrower and its Domestic Subsidiaries may make and hold investments in their respective Foreign Subsidiaries to the extent that such investments arise from the sale of inventory in the ordinary course of business by the Borrower or such Domestic Subsidiary to such Foreign Subsidiaries for resale by such Foreign Subsidiaries (including any such investments resulting from the extension of the payment terms with respect to such sales); (q) the Borrower and its Subsidiaries may hold additional investments in their respective Subsidiaries to the extent that such investments reflect an increase in the value of such Subsidiaries; (r) the Borrower and its Subsidiaries may capitalize one or more foreign sales corporations created in accordance with Section 8.16 with cash contributions in an aggregate amount not to exceed $200,000 for all such foreign sales corporations; (s) the Borrower and its Subsidiaries may make transfers of assets to their respective Subsidiaries in accordance with Section 8.02(k), (l), (m), (n), (v) and (x); (t) Holdings may make intercompany loans to the Borrower on a subordinated basis (collectively, "Borrower Subordinated Loans") so long as (x) all such Borrower Subordinated Loans are evidenced by a Borrower Subordinated Note and (y) the proceeds used by Holdings to make such Borrower Subordinated Loans come from the Permitted Equity Proceeds; (u) the Borrower and its Subsidiaries may acquire and hold debt and/or equity securities as partial consideration for a sale of assets pursuant to Section 8.02(r), (s) or (t) to the extent permitted by any such Section; (v) the Borrower and the other Designated Credit Parties may make an initial cash capital contribution to the Receivables Entity on the Accounts Receivable Facility Transaction Date as provided in the Accounts Receivable Facility Documents, so long as the Receivables Entity uses all of the proceeds of such contribution on such date to purchase accounts receivable from the Borrower and the other Designated Credit Parties and/or to fund the Seller Account, and the Borrower and/or such other Designated Credit Parties may hold the capital stock of the Receivables Entity issued to them so long as such capital stock has been duly pledged and delivered to the Collateral Agent pursuant to the Pledge Agreement; (w) on or after the Accounts Receivable Facility Transaction Date, the Borrower and the other Designated Credit Parties may hold one or more Receivables Purchase Money --75-- Notes issued by the Receivables Entity and may maintain the Seller Account with the Receivables Entity and may make extensions of credit to the Receivables Entity pursuant to such Receivables Purchase Money Notes and Seller Account for the purpose of enabling the Receivables Entity to purchase accounts receivables pursuant to the Accounts Receivable Facility Documents so long as such Receivables Purchase Money Notes have been duly pledged and delivered to the Collateral Agent pursuant to the Pledge Agreement; (x) on or after the Accounts Receivable Facility Transaction Date, the Receivables Entity may invest those accounts receivable purchased from the Designated Credit Parties in the master trust for the Accounts Receivable Facility pursuant to, and in accordance with the terms of, the Accounts Receivable Facility Documents; and (y) in addition to investments permitted by clauses (a) through (x) above, so long as no Default or Event of Default then exists or would result therefrom, the Borrower and its Subsidiaries (other than the Receivables Entity) may make additional loans, advances and investments to or in a Person so long as the amount of any such loan, advance or investment (at the time of the making thereof) does not exceed an amount equal to (x) $7,500,000 less the aggregate amount of such $7,500,000 previously used to make loans, advances and investments pursuant to this clause (y) to the extent same are then still outstanding (determined without regard to any write-downs or write-offs thereof and net of cash repayments of principal in the case of loans and cash equity returns (whether as a dividend or redemption) in the case of equity investments) plus (y) the Excess Proceeds Amount at the time of such loan, advance or investment; provided, that (1) no single loans, advance or investment (or -------- series of related loans, advances or investments) in excess of $20,000,000 may be made, (2) any loan, advance or investment made with Excess Proceeds shall be in or to a Person of which the Borrower owns (directly or indirectly) at least a majority economic and voting interest (including the interest purchased or to be purchased with the respective investment) and (3) neither the Borrower nor any of its Subsidiaries may make or own any investment in Margin Stock. 8.07 Dividends, etc. Holdings will not, and will not permit any -------------- of its Subsidiaries to, declare or pay any dividends (other than dividends payable solely in common stock of Holdings or any such Subsidiary, as the case may be) or return any capital to, its stockholders or authorize or make any other distribution, payment or delivery of property or cash to its stockholders as such, or redeem, retire, purchase or otherwise acquire, directly or indirectly, for a consideration, any shares of any class of its capital stock, now or hereafter outstanding (or any warrants for or options or stock appreciation rights in respect of any of such shares), or set aside any funds for any of the foregoing purposes, and Holdings will not permit any of its Subsidiaries to purchase or otherwise acquire for consideration any shares of any class of the capital stock of Holdings or any other Subsidiary, as the case may be, now or hereafter outstanding (or any options or warrants or stock appreciation rights issued by such Person with respect to its capital stock) (all of the foregoing "Dividends"), except that: --76-- (i) any Subsidiary of the Borrower may pay Dividends to the Borrower or any Wholly-Owned Subsidiary of the Borrower; (ii) (a) Holdings may redeem or purchase shares of Holdings Common Stock or Holdings Class L Common Stock or options to purchase Holdings Common Stock or Holdings Class L Common Stock, respectively, held by former employees of Holdings or any of its Subsidiaries following the termination of their employment, provided that (w) the only consideration paid by -------- Holdings in respect of such redemptions and/or purchases shall be cash and Shareholder Subordinated Notes, (x) the sum of (A) the aggregate amount paid by Holdings in cash in respect of all such redemptions and/or purchases plus (B) the aggregate amount of all principal and interest payments made on Shareholder Subordinated Notes, shall not exceed $1,000,000 in any fiscal year of Holdings, provided that such Holdings -------- after December 20, 1994 from the sale or issuance of Holdings Common Stock or Holdings Class L Common Stock, as the case may be, to management of Holdings or any of its Subsidiaries and (y) at the time of any cash payment permitted to be made pursuant to this Section 8.07(ii), including any cash payment under a Shareholder Subordinated Note, no Default or Event of Default shall then exist or result therefrom; and (b) so long as no Default or Event of Default then exists or would result therefrom, the Borrower may pay cash Dividends to Holdings so long as Holdings promptly uses such proceeds for the purposes described in clause (ii)(a) of this Section 8.07; (iii) the Borrower may pay cash Dividends to Holdings so long as the proceeds thereof are promptly used by Holdings to (x) pay operating expenses in the ordinary course of business (including, without limitation, professional fees and expenses) and other similar corporate overhead costs and expenses, provided that the aggregate amount of cash Dividends paid -------- pursuant to this clause (x) shall not during any fiscal year of the Borrower exceed $1,500,000 or (y) pay salaries or other compensation of employees who perform services for Holdings and the Borrower, provided that -------- the aggregate amount of cash Dividends paid pursuant to this clause (y) shall not during any fiscal year of the Borrower exceed $2,000,000; (iv) the Borrower may pay cash Dividends to Holdings in the amounts and at the times of any payment by Holdings in respect of taxes, provided -------- that (x) the amount of cash Dividends paid pursuant to this clause (v) to enable Holdings to pay federal income taxes at any time shall not exceed the lesser of (A) the amount of such federal income taxes owing by Holdings at such time for the respective period and (B) the amount of such federal income taxes that would be owing by the Borrower and its Subsidiaries on a consolidated basis for such period if determined without regard to Holdings' ownership of the Borrower and (y) any refunds shall promptly be returned by Holdings to the Borrower; (v) after December 20, 1999, on the Business Day immediately preceding the date on which a scheduled interest payment is due on any outstanding Baxter PIK Notes (or, in the event that a Default or Event of Default shall then exist, on the first Business Day when --77-- no Default or Event of Default shall be continuing), the Borrower may pay a cash Dividend to Holdings in an amount not to exceed the aggregate amount of the interest payment due as provided in the Baxter PIK Notes, so long as (w) on the Business Day immediately after the receipt of such cash Dividends Holdings utilizes the full amount thereof to make such required interest payment on the Baxter PIK Notes to the extent then due and payable in accordance with the terms of the Baxter PIK Notes, (x) no Default or Event of Default then exists or would result therefrom, (y) such cash Dividends are otherwise not prohibited to be made at such time pursuant to Senior Subordinated Notes, and (z) at the time of any such proposed cash Dividends, the Borrower's Interest Coverage Ratio shall have been no less than, and the Borrower's Leverage Ratio shall have been no greater than, the applicable target ratios set forth on Annex X hereto for the then most recently ended Test Period, in each case determined on a pro forma basis as --- ----- if such cash dividends constituted cash interest expense of the Borrower and had been paid during such period; (vi) Holdings may pay regularly scheduled Dividends on the Baxter Preferred Stock pursuant to the terms thereof solely through the issuance of additional shares of Baxter Preferred Stock, provided that in lieu of -------- issuing additional shares of Baxter Preferred Stock as Dividends, Holdings may increase the liquidation preference of the shares of the Baxter Preferred Stock in respect of which such Dividends have accrued, provided -------- further, that after December 20, 1999, on the Business Day immediately ------- preceding the date on which a scheduled dividend payment is due on the Baxter Preferred Stock (or, in the event that a Default or Event of Default shall then exist, on the first Business Day when no Default or Event of Default shall be continuing), the Borrower may pay a cash Dividend to Holdings in an amount not to exceed the aggregate amount of the dividend payment due as provided in the Baxter Preferred Stock, so long as (w) on the Business Day immediately after the receipt of such cash Dividends Holdings utilizes the full amount thereof to make such required dividend payment on the Baxter Preferred Stock to the extent then due and payable in accordance with the terms of the Baxter Preferred Stock, (x) no Default or Event of Default then exists or would result therefrom, (y) such cash Dividends are otherwise not prohibited to be made at such time pursuant to the Senior Subordinated Notes, and (z) at the time of any such proposed cash Dividends, the Borrower's Interest Coverage Ratio shall have been no less than, and the Borrower's Leverage Ratio shall have been no greater than, the applicable target ratios set forth on Annex X hereto for the then most recently ended Test Period, in each case determined on a pro forma --- ----- basis as if such cash dividends constituted cash interest of the Borrower and had been paid during such period; (vii) after December 20, 1999, so long as no Default or Event of Default then exists or would result therefrom, Holdings may issue Baxter PIK Notes in exchange for its then outstanding Baxter Preferred Stock, provided that the aggregate principal amount of Baxter PIK Notes so issued -------- shall not exceed the aggregate liquidation preference of such Baxter Preferred Stock at such time; (viii) so long as no Default or Event of Default then exists or would result therefrom, (x) Holdings may use cash to repurchase or redeem shares of Baxter Preferred Stock, --78-- together with all accrued dividends thereon, so long as (I) the shares of Baxter Preferred Stock so repurchased or redeemed are retired and not thereafter resold or reissued and (II) the aggregate amount expended pursuant to any such repurchase or redemption of shares of Baxter Preferred Stock by Holdings shall not exceed an amount equal to 80% of the total accreted value of the Baxter Preferred Stock so repurchased or redeemed at the time of such repurchase or redemption and (y) the Borrower may pay cash Dividends to Holdings to enable Holdings to repurchase or redeem Baxter Preferred Stock as permitted in the immediately preceding clause (x), so long as the proceeds thereof are promptly used by Holdings to effect such repurchase or redemption; and (ix) Holdings may pay regularly scheduled Dividends on the Permitted Holdings PIK Securities (to the extent issued as preferred stock) pursuant to the terms thereof solely through the issuance of additional shares of such Permitted Holdings PIK Securities, provided -------- that in lieu of issuing additional shares of such Permitted Holdings PIK Securities as Dividends, Holdings may increase the liquidation preference of the shares of Permitted Holdings PIK Securities in respect of which such Dividends have accrued. 8.08 Transactions with Affiliates. Holdings will not, and will ---------------------------- not permit any of its Subsidiaries to, enter into any transaction or series of transactions with any Affiliate other than in the ordinary course of business and on terms and conditions substantially as favorable to Holdings or such Subsidiary as would be obtainable by Holdings or such Subsidiary at the time in a comparable arm's-length transaction with a Person other than an Affiliate; provided, that the following shall in any event be permitted: -------- (i) the Transaction; (ii) the payment on the Initial Borrowing Date of one time consulting fees to Bain Capital, GS Capital and/or their respective Related Parties in an aggregate amount (for Bain Capital, GS Capital and all such Related Parties taken together) not to exceed $15,000,000 (plus reasonable out-of-pocket expenses incurred by Bain Capital, GS Capital and/or their respective Related Parties in providing services to the Borrower); (iii) the payment, on a quarterly basis, of management fees to Bain Capital and GS Capital and their respective Related Parties in an aggregate amount (for all such Persons taken together) not to exceed $750,000 in any fiscal quarter of the Borrower, provided that if during any -------- fiscal quarter of the Borrower a Default or Event of Default exists, only one-half of such fee for such fiscal quarter may be paid; (iv) the reimbursement of Bain Capital and GS Capital and their respective Related Parties for their reasonable out-of-pocket expenses incurred by them in connection with performing management services to the Borrower and its Subsidiaries under the Consulting Agreement; (v) Holdings and the Borrower and its Domestic Subsidiaries may make any payments required under the Holdings Tax Allocation Agreement; and (vi) the transactions contemplated by the Accounts Receivable Facility Documents. Notwithstanding anything to the contrary contained in this Section 8.08, at no time will Holdings or any of its Subsidiaries make any payments to Bain Capital, GS Capital or any of their respective Related Parties in an amount which would exceed that amount permitted to be paid pursuant to the Senior Subordinated Note Indenture at such time. --79-- 8.09 Capital Expenditures. (a) (i) Holdings will not, and will not -------------------- permit any of its Subsidiaries to, make any Capital Expenditures, except that, subject to clause (ii) below, during any fiscal year the Borrower and its Subsidiaries may make Capital Expenditures so long as the aggregate amount of such Capital Expenditures does not exceed in any such fiscal year set forth below the amount set forth opposite such fiscal year below:
Fiscal Year Ending Amount ------------------ ------ December 31, 1996 $74,000,000 December 31, 1997 $62,000,000 December 31, 1998 $56,000,000 December 31, 1999 $60,000,000 December 31, 2000 $61,000,000 December 31, 2001 $63,000,000 December 31, 2002 $66,000,000 December 31, 2003 $69,000,000 December 31, 2004 $71,000,000
; provided, that (x) in the event that the aggregate amount of Capital -------- Expenditures made in fiscal year 1996 constituting Stand Alone Expenditures and TOA Expenditures exceeds $24,000,000, then Capital Expenditures in such fiscal year may exceed $74,000,000 by an amount equal to such excess (but in any event not to exceed $87,000,000); and (y) in the event that Capital Expenditures in fiscal year 1996 exceed $74,000,000 as a result of preceding clause (x), the amount of Capital Expenditures otherwise permitted to be made pursuant to this Section 8.09(a)(i) in fiscal year 1997 shall be reduced by the excess amount so expended in 1996. (ii) Subject to Section 8.09(g), if for any fiscal year of the Borrower commencing with the fiscal year ending on December 31, 1998, (x) the Consolidated EBITDA of Holdings for the immediately preceding fiscal year is less than the projected Consolidated EBITDA of Holdings set forth on Annex IX for such immediately preceding fiscal year (the amount by which such actual Consolidated EBITDA is less than such projected Consolidated EBITDA, the "Deficiency"), then the amount of Capital Expenditures permitted to be made in such fiscal year pursuant to this Section 8.09(a) shall be (A) the amount set forth in clause (a)(i) above opposite such fiscal year (as same may have been modified by the proviso to such clause (a)(i)) minus (B) the Deficiency ----- multiplied by 0.25 and (y) the Consolidated EBITDA of Holdings for the immediately preceding fiscal year is more --80-- than the projected Consolidated EBITDA of Holdings set forth on Annex IX for such immediately preceding fiscal year (the amount by which such actual Consolidated EBITDA exceeds such projected Consolidated EBITDA, the "Surplus"), then the amount of Capital Expenditures permitted to be made in such fiscal year pursuant to this Section 8.09(a) shall be (A) the amount set forth in clause (a)(i) above opposite such fiscal year (as same may have been modified by the proviso to such clause (a)(i)) plus (B) the Surplus multiplied by 0.25. (b) Notwithstanding the foregoing, (i) in the event that the amount of Capital Expenditures made in fiscal year 1996 and constituting Stand Alone Expenditures and TOA Expenditures is less than $24,000,000, 100% of such unutilized amount may be carried forward and utilized to make Capital Expenditures in fiscal year 1997; (ii) in the event that the amount of Capital Expenditures made in fiscal year 1996 and not constituting Stand Alone Expenditures or TOA Expenditures is less than $50,000,000, such unutilized amount may be carried forward and utilized to make Capital Expenditures in succeeding years; (iii) in the event that the amount of Capital Expenditures made in fiscal years 1996 and 1997 and constituting Stand Alone Expenditures and TOA Expenditures is less than $37,000,000, 100% of such unutilized amount may be carried forward and utilized to make Capital Expenditures in fiscal year 1998; (iv) in the event that the amount of Capital Expenditures made in fiscal year 1997 and not constituting Stand Alone Expenditures or TOA Expenditures is less than $50,000,000, such unutilized amount may be carried forward and utilized to make Capital Expenditures in succeeding years; and (v) in the event that the amount of Capital Expenditures permitted to be made by the Borrower and its Subsidiaries pursuant to clause (a) above in any fiscal year commencing with fiscal year 1998 (before giving effect to any increase in such permitted expenditure amount pursuant to this clause (b)) is greater than the amount of such Capital Expenditures made by the Borrower and its Subsidiaries during such fiscal year, such excess may be carried forward and utilized to make Capital Expenditures in succeeding fiscal years. The aggregate amount of unutilized Capital Expenditures carried forward from one fiscal year to one or more later fiscal years is called the "Rollover Amount." Notwithstanding the foregoing, (x) in no event shall the aggregate Rollover Amount permitted to be carried forward from a fiscal year exceed the amount of Capital Expenditures permitted to be made in such fiscal year under clause (a) above minus the amount of Capital Expenditures made during such fiscal year under such clause (a), and (y) in no event shall the aggregate amount of Capital Expenditures made by the Borrower and its Subsidiaries during any fiscal year (commencing with fiscal year 1997) pursuant to Section 8.09(a) exceed the sum of (I) 125% of the amount set forth opposite such fiscal year as set forth in the table in such Section 8.09(a) (as modified by the proviso to clause (i) of such Section 8.09(a) and clause (ii) of such Section plus (II) for fiscal years 1997 and 1998 only, the amount of the unutilized Stand Alone Expenditures and TOA Expenditures carried forward to such fiscal year from the prior fiscal year as provided above in this Section 8.09(b). (c) Notwithstanding the foregoing, the Borrower and its Subsidiaries may make Capital Expenditures (which Capital Expenditures will not be included in any determination under the foregoing clause (a)) with the insurance proceeds received by the Borrower or any of its Subsidiaries from any Recovery Event so long as such Capital Expenditures are to replace or restore any properties or assets in respect of which such proceeds were paid within 360 days following the --81-- date of the receipt of such insurance proceeds to the extent such insurance proceeds are not required to be applied to repay Term Loans pursuant to Section 4.02(A)(g). (d) Notwithstanding the foregoing, but subject to Section 8.09(g), the Borrower and its Subsidiaries may make Capital Expenditures (which Capital Expenditures will not be included in any determination under the foregoing clause (a)) with the net cash proceeds of Asset Sales (including Designated Asset Sales), to the extent such net cash proceeds are not required to be applied to repay Term Loans pursuant to Section 4.02(A)(c) and are not added to the Excess Proceeds Amount. (e) Notwithstanding the foregoing, but subject to Section 8.09(g), the Borrower and its Subsidiaries may make Capital Expenditures at any time in an aggregate amount equal to the Excess Proceeds Amount at such time (which Capital Expenditures will not be included in any determination under the foregoing clause (a)). (f) Notwithstanding the foregoing, the Borrower and its Subsidiaries may incur Capitalized Lease Obligations under and in connection with the Alternate Vendor Financing Program in an aggregate outstanding amount not to exceed $20,000,000 at any time (which Capitalized Lease Obligations will not be included in any determination under the foregoing clause (a)). (g) Notwithstanding the foregoing, in no event shall the aggregate amount of additional Capital Expenditures permitted to be made in any fiscal year as a result of the operation of Section 8.09(a)(ii), (d) and (e) exceed $15,000,000. 8.10 Minimum Consolidated EBITDA. The Borrower will not permit --------------------------- Consolidated EBITDA for any Test Period ending on a date set forth below to be less than the amount set forth opposite such date:
Minimum Consolidated Date EBITDA ---- --------------------- September 30, 1996 $ 36,900,000 December 31, 1996 $ 73,900,000 March 31, 1997 $111,300,000 June 30, 1997 $152,300,000 September 30, 1997 $154,100,000 December 31, 1997 $164,100,000 March 31, 1998 $165,000,000 June 30, 1998 $166,200,000 September 30, 1998 $167,300,000 December 31, 1998 $168,600,000 March 31, 1999 $171,500,000 June 30, 1999 $175,200,000 September 30, 1999 $178,800,000
--82-- December 31, 1999 $183,200,000 March 31, 2000 $186,400,000 June 30, 2000 $190,400,000 September 30, 2000 $194,400,000 December 31, 2000 $199,100,000 March 31, 2001 $203,600,000 June 30, 2001 $209,300,000 September 30, 2001 $214,900,000 December 31, 2001 $221,700,000 March 31, 2002 $223,900,000 June 30, 2002 $226,700,000 September 30, 2002 $229,600,000 December 31, 2002 $233,000,000 March 31, 2003 $235,400,000 June 30, 2003 $238,300,000 September 30, 2003 $241,300,000 December 31, 2003 $244,900,000 March 31, 2004 $247,400,000 June 30, 2004 $250,500,000 September 30, 2004 $253,700,000
8.11 Interest Coverage Ratio. The Borrower will not permit the ----------------------- Interest Coverage Ratio for any Test Period ending on a date set forth below to be less than the ratio set forth opposite such date :
Date Ratio ---- ----- September 30, 1996 1.45:1.0 December 31, 1996 1.50:1.0 March 31, 1997 1.50:1.0 June 30, 1997 1.55:1.0 September 30, 1997 1.55:1.0 December 31, 1997 1.65:1.0 March 31, 1998 1.70:1.0 June 30, 1998 1.70:1.0 September 30, 1998 1.75:1.0 December 31, 1998 1.75:1.0 March 31, 1999 1.80:1.0 June 30, 1999 1.85:1.0 September 30, 1999 1.90:1.0 December 31, 1999 1.95:1.0 March 31, 2000 2.00:1.0 June 30, 2000 2.05:1.0 September 30, 2000 2.10:1.0
--83-- December 31, 2000 2.20:1.0 March 31, 2001 2.25:1.0 June 30, 2001 2.35:1.0 September 30, 2001 2.45:1.0 December 31, 2001 2.55:1.0 March 31, 2002 2.65:1.0 June 30, 2002 2.70:1.0 September 30, 2002 2.80:1.0 December 31, 2002 2.90:1.0 March 31, 2003 3.00:1.0 June 30, 2003 3.15:1.0 September 30, 2003 3.25:1.0 December 31, 2003 3.40:1.0 March 31, 2004 3.55:1.0 June 30,2004 3.75:1.0 September 30, 2004 3.75:1.0
8.12 Current Ratio. The Borrower will not permit the Current Ratio ------------- at any time to be less than 1.25: 1.0. 8.13 Leverage Ratio. The Borrower will not permit the Leverage Ratio -------------- at any time during a fiscal quarter set forth below to be more than the ratio set forth opposite such fiscal quarter:
Fiscal Quarter Ending Ratio --------------------- ----- September 30, 1996 25.50:1.0 December 31, 1996 12.75:1.0 March 31, 1997 8.40:1.0 June 30, 1997 6.00:1.0 September 30, 1997 5.95:1.0 December 31, 1997 5.55:1.0 March 31, 1998 5.50:1.0 June 30, 1998 5.40:1.0 September 30, 1998 5.30:1.0 December 31, 1998 5.20:1.0 March 31, 1999 5.10:1.0 June 30, 1999 4.95:1.0 September 30, 1999 4.80:1.0 December 31, 1999 4.65:1.0 March 31, 2000 4.50:1.0 June 30, 2000 4.35:1.0 September 30, 2000 4.20:1.0 December 31, 2000 4.05:1.0 March 31, 2001 3.85:1.0
--84-- June 30, 2001 3.70:1.0 September 30, 2001 3.50:1.0 December 31, 2001 3.30:1.0 March 31, 2002 3.20:1.0 June 30, 2002 3.05:1.0 September 30, 2002 2.95:1.0 December 31, 2002 2.80:1.0 March 31, 2003 2.65:1.0 June 30, 2003 2.55:1.0 September 30, 2003 2.40:1.0 December 31, 2003 2.25:1.0 March 31, 2004 2.15:1.0 June 30, 2004 2.00:1.0 September 30, 2004 2.00:1.0
8.14 Limitation on Voluntary Payments and Modifications of ----------------------------------------------------- Indebtedness; Modifications of Certificate of Incorporation, By-Laws and Certain - -------------------------------------------------------------------------------- Other Agreements; Issuance of Capital Stock; etc. Holdings will not, and will - ------------------------------------------------- not permit any of its Subsidiaries to: (i) make (or give any notice in respect of) any voluntary or optional payment or prepayment on or redemption or acquisition for value of any Senior Subordinated Note, any Permitted Holdings PIK Security or any Baxter PIK Note or make any interest payment on any Baxter PIK Note except to the extent permitted by Section 8.07(v); provided, that the Series B Senior Subordinated -------- Notes may be issued in exchange for the Series A Senior Subordinated Notes in accordance with the terms of the Senior Subordinated Note Indenture; (ii) make (or give any notice in respect of) any principal or interest payment on, or any redemption or acquisition for value of, any Shareholder Subordinated Note, except to the extent permitted by Section 8.07(ii); (iii) amend or modify, or permit the amendment or modification of, any provision of any Senior Subordinated Note Document, any Baxter PIK Note Document, any Borrower Subordinated Note or any Shareholder Subordinated Note; (iv) amend or modify, or permit the amendment or modification of, or terminate or permit the termination of, the Distribution Agreement, except that (x) the Distribution Agreement may be terminated as to one or more businesses or product lines pursuant to the terms of the Distribution Agreement in connection with the sale of such business or product line in accordance with the terms of this Agreement and (y) Holdings and/or the Borrower may make any such amendment or modification or effect any such termination so long as in the good faith judgment of the Board of Directors or senior management of the Borrower, after giving effect to any such amendment, modification or termination, the Borrower and its Subsidiaries will have a distribution network which, taken as a whole (taking into account all other contemporaneous actions in respect of other arrangements with Baxter), is substanti- --85-- ally as advantageous to the Borrower, and in no event materially more expensive taken as a whole, as the distribution network of the Borrower and its Subsidiaries in effect immediately prior to any such amendment, modification or termination, provided that Holdings or the Borrower shall promptly notify, in -------- writing, the Agent of any such amendment, modification or termination and shall deliver together with any such notice a copy of such executed amendment, modification or termination; (v) amend, modify or change in any way adverse to the interests of the Banks, any Management Agreement (including, without limitation, the Consulting Agreement), the terms of any Baxter Preferred Stock, the Services Agreement, any Tax Allocation Agreement, the Tax Indemnity Letter, its Certificate of Incorporation (including, without limitation, by the filing or modification of any certificate of designation) or By-Laws, or any agreement entered into by it, with respect to its capital stock (including any Shareholders' Agreement (including, without limitation, the Stockholders' Agreement, the Subscription Agreement and the Registration Rights Agreement)), or enter into any new agreement with respect to its capital stock which would be adverse to the interests of the Banks; (vi) amend or modify, or permit the amendment or modification of, any provision of any Permitted Holdings PIK Security in any manner inconsistent with the definition of Permitted Holdings PIK Security; (vii) issue any class of capital stock other than (x) in the case of the Borrower and its Subsidiaries, non-redeemable common stock and (y) in the case of Holdings, (1) the issuance of Baxter Preferred Stock as permitted pursuant to Section 8.07(vi), (2) the issuance of Holdings Common Stock or Permitted Holdings PIK Securities as consideration for a Permitted Acquisition pursuant to Section 8.02(u) and (3) issuances of Holdings Common Stock or Holdings Class L Common Stock where, after giving effect to such issuance, no Event of Default will exist under Section 9.10 and to the extent the proceeds thereof are applied in accordance with Sections 4.02(A)(d) and 7.17; (viii) make (or give any notice in respect of) any principal or interest payment on, or any redemption or acquisition for value of, any Borrower Subordinated Note; or (ix) at any time after the Accounts Receivable Facility Transaction Date, amend or modify, or permit the amendment or modification of, any provision of any Accounts Receivable Facility Document, except as permitted by the definition thereof. 8.15 Limitation on Certain Restrictions on Subsidiaries. Holdings -------------------------------------------------- will not, and will not permit any of its Subsidiaries to, directly or indirectly, create or otherwise cause or suffer to exist or become effective any encumbrance or restriction on the ability of any such Subsidiary to (a) pay dividends or make any other distributions on its capital stock or any other interest or participation in its profits owned by Holdings or any Subsidiary of Holdings, or pay any Indebtedness owed to Holdings or a Subsidiary of Holdings, (b) make loans or advances to Holdings or any of Holdings' Subsidiaries or (c) transfer any of its properties or assets to Holdings or any of Holdings' --86-- Subsidiaries, except for such encumbrances or restrictions existing under or by reason of (i) applicable law, (ii) this Agreement and the other Credit Documents, (iii) customary provisions restricting subletting or assignment of any lease governing a leasehold interest of the Borrower or a Subsidiary of the Borrower, (iv) customary provisions restricting assignment of any licensing agreement entered into by the Borrower or a Subsidiary of the Borrower in the ordinary course of business, (v) the Senior Subordinated Note Documents, (vi) customary provisions restricting the transfer of assets subject to Liens permitted under Sections 8.03(k), (m) and (o), (vii) any document or instrument evidencing Foreign Subsidiary Working Capital Indebt edness so long as such encumbrance or restriction only applies to the Foreign Subsidiary incurring such Indebtedness and (viii) the Accounts Receivable Facility Documents. 8.16 Limitation on the Creation of Subsidiaries. Notwithstanding anything ------------------------------------------ to the contrary contained in this Agreement, Holdings will not, and will not permit any of its Subsidiaries to, establish, create or acquire after the Initial Borrowing Date any Subsidiary; provided that, (a) the Borrower and its -------- Wholly-Owned Subsidiaries (other than the Receivables Entity) shall be permitted to establish or create (x) Subsidiaries as a result of investments made pursuant to Section 8.06(r) and (y) Wholly-Owned Subsidiaries so long as (i) at least 30 days' prior written notice thereof (or such lesser notice as is acceptable to the Agent) is given to the Agent, (ii) the capital stock of such new Subsidiary is pledged pursuant to, and to the extent required by, this Agreement and the Pledge Agreement and the certificates, if any, representing such stock, together with stock powers duly executed in blank, are delivered to the Collateral Agent, (iii) such new Subsidiary (other than a Foreign Subsidiary except to the extent otherwise required pursuant to Section 7.16) executes a counterpart of the Subsidiary Guaranty, the Pledge Agreement and the Security Agreement, and (iv) to the extent requested by the Agent or the Required Banks, takes all actions required pursuant to Section 7.11 and (b) the Receivables Entity may become a Subsidiary of the Borrower. In addition, each new Wholly-Owned Subsidiary (other than the Receivables Entity) shall execute and deliver, or cause to be executed and delivered, all other relevant documentation of the type described in Section 5 as such new Subsidiary would have had to deliver if such new Subsidiary were a Credit Party on the Initial Borrowing Date. SECTION 9. Events of Default. Upon the occurrence of any of the ----------------- following specified events (each, an "Event of Default"): 9.01 Payments. The Borrower shall (i) default in the payment when -------- due of any principal of the Loans or (ii) default, and such default shall continue for three or more days, in the payment when due of any Unpaid Drawing, any interest on the Loans or any Fees or any other amounts owing hereunder or under any other Credit Document; or 9.02 Representations, etc. Any representation, warranty or --------------------- statement made by Holdings, the Borrower or any other Credit Party herein or in any other Credit Document or in any statement or certificate delivered pursuant hereto or thereto shall prove to be untrue in any material respect on the date as of which made or deemed made; or --87-- 9.03 Covenants. Any Credit Party shall (a) default in the due --------- performance or observance by it of any term, covenant or agreement contained in Sections 7.11, 7.14, 7.17, 7.18 or 8, or (b) default in the due performance or observance by it of any term, covenant or agreement (other than those referred to in Section 9.01, 9.02 or clause (a) of this Section 9.03) contained in this Agreement and such default shall continue unremedied for a period of at least 30 days after notice to the defaulting party by the Agent or the Required Banks; or 9.04 Default Under Other Agreements. (a) Holdings or any of its ------------------------------ Subsidiaries shall (i) default in any payment with respect to any Indebtedness (other than the Obligations) beyond the period of grace, if any, provided in the instrument or agreement under which Indebtedness was created or (ii) default in the observance or performance of any agreement or condition relating to any such Indebtedness or contained in any instrument or agreement evidencing, securing or relating thereto, or any other event shall occur or condition exist, the effect of which default or other event or condition is to cause, or to permit the holder or holders of such Indebtedness (or a trustee or agent on behalf of such holder or holders) to cause any such Indebtedness to become due prior to its stated maturity; or (b) any Indebtedness (other than the Obligations) of Holdings or any of its Subsidiaries shall be declared to be due and payable, or shall be required to be prepaid other than by a regularly scheduled required prepayment or as a mandatory prepayment (unless such required prepayment or mandatory prepayment results from a default thereunder or an event of the type that constitutes an Event of Default), prior to the stated maturity thereof; provided, that it shall not constitute an Event of Default pursuant to clause - -------- (a) or (b) of this Section 9.04 unless the principal amount of any one issue of such Indebtedness, or the aggregate amount of all such Indebtedness referred to in clauses (a) and (b) above, exceeds $10,000,000 at any one time; or 9.05 Bankruptcy, etc. Holdings or any of its Subsidiaries shall ---------------- commence a voluntary case concerning itself under Title 11 of the United States Code entitled "Bankruptcy," as now or hereafter in effect, or any successor thereto (the "Bankruptcy Code"); or an involuntary case is commenced against Holdings or any of its Subsidiaries and the petition is not controverted within 10 days, or is not dismissed within 60 days, after commencement of the case; or a custodian (as defined in the Bankruptcy Code) is appointed for, or takes charge of, all or substantially all of the property of Holdings or any of its Subsidiaries; or Holdings or any of its Subsidiaries commences any other proceeding under any reorganization, arrangement, adjustment of debt, relief of debtors, dissolution, insolvency or liquidation or similar law of any jurisdiction whether now or hereafter in effect relating to Holdings or any of its Subsidiaries; or there is commenced against Holdings or any of its Subsidiaries any such proceeding which remains undismissed for a period of 60 days; or Holdings or any of its Subsidiaries is adjudicated insolvent or bankrupt; or any order of relief or other order approving any such case or proceeding is entered; or Holdings or any of its Subsidiaries suffers any appointment of any custodian or the like for it or any substantial part of its property to continue undischarged or unstayed for a period of 60 days; or Holdings or any of its Subsidiaries makes a general assignment for the benefit of creditors; or any corporate action is taken by Holdings or any of its Subsidiaries for the purpose of effecting any of the foregoing; or 9.06 ERISA. (a) Any Plan shall fail to satisfy the minimum funding ----- standard required for any plan year or part thereof or a waiver of such standard or extension of any --88-- amortization period is sought or granted under Section 412 of the Code, any Plan shall have had or is likely to have a trustee appointed to administer such Plan, any Plan is, shall have been or is likely to be terminated or the subject of termination proceedings under ERISA, any Plan shall have an Unfunded Current Liability, a contribution required to be made to a Plan or a Foreign Pension Plan has not been timely made, Holdings or any Subsidiary of Holdings or any ERISA Affiliate has incurred or is likely to incur a liability to or on account of a Plan under Section 409, 502(i), 502(l), 515, 4062, 4063, 4064, 4069, 4201, 4204 or 4212 of ERISA or Section 401(a)(29), 4971, 4975 or 4980 of the Code, or Holdings or any Subsidiary of Holdings has incurred or is likely to incur liabilities pursuant to one or more employee welfare benefit plans (as defined in Section 3(1) of ERISA) which provide benefits to retired employees or other former employees (other than as required by Section 601 of ERISA) or employee pension benefit plans (as defined in Section 3(2) of ERISA) or Foreign Pension Plans; (b) there shall result from any such event or events the imposition of a lien, the granting of a security interest, or a liability or a material risk of incurring a liability; and (c) which lien, security interest or liability which arises from such event or events, in the opinion of the Required Banks, will have a Material Adverse Effect; or 9.07 Security Documents. (a) Except in each case to the extent ------------------ resulting from the failure of the Collateral Agent to retain possession of the applicable Pledged Securities, any Security Document shall cease to be in full force and effect, or shall cease to give the Collateral Agent the Liens, rights, powers and privileges purported to be created thereby in favor of the Collateral Agent, or (b) any Credit Party shall default in the due performance or observance of any term, covenant or agreement on its part to be performed or observed pursuant to any such Security Document and such default shall continue beyond any cure or grace period specifically applicable thereto pursuant to the terms of such Security Document; or 9.08 Guaranties. The Guaranties or any provision thereof shall ---------- cease to be in full force and effect, or any Guarantor or any Person acting by or on behalf of such Guarantor shall deny or disaffirm such Guarantor's obligations under any Guaranty or any Guarantor shall default in the due performance or observance of any material term, covenant or agreement on its part to be performed or observed pursuant to any Guaranty; or 9.09 Judgments. One or more judgments or decrees shall be entered --------- against Holdings or any of its Subsidiaries involving a liability (not paid or not fully covered by insurance) in excess of $10,000,000 for all such judgments and decrees and all such judgments or decrees shall not have been vacated, discharged or stayed or bonded pending appeal within 60 days from the entry thereof; or 9.10 Ownership. A Change of Control Event shall have occurred; or --------- 9.11 Distribution Agreement. The Distribution Agreement or any ---------------------- material provision thereof shall cease to be in full force and effect as a result of a default thereunder by Holdings, the Borrower or any of their respective Subsidiaries in the payment or performance of any of their obligations thereunder; provided that (i) no Event of Default shall exist -------- hereunder as a result of the Distribution Agreement or a material portion thereof no longer being in full force or effect as a result --89-- of such a default, which default is being contested in good faith by the Borrower so long as during the period while such contest is pending the Borrower either has the benefit of the Distribution Agreement or has arranged for an alternate distribution network providing substantially equivalent benefits to the Borrower and its Subsidiaries and (ii) this Section 9.11 shall cease to have any effect after the first consecutive four fiscal quarter period (taken as one accounting period) during which the percentage of the gross revenues of the Borrower and its Subsidiaries which are subject to or obtained through the Distribution Agreement is less than 15%; or 9.12 Accounts Receivable Facility. At any time after the Accounts ---------------------------- Receivable Facility Transaction Date, an early amortization event shall occur under the Accounts Receivable Facility Documents; then, and in any such event, and at any time thereafter, if any Event of Default shall then be continuing, the Agent shall, upon the written request of the Required Banks, by written notice to the Borrower, take any or all of the following actions, without prejudice to the rights of the Agent or any Bank to enforce its claims against any Guarantor or the Borrower, except as otherwise specifically provided for in this Agreement (provided, that if an Event of Default specified in Sec tion 9.05 -------- shall occur with respect to the Borrower, the result which would occur upon the giving of written notice by the Agent as specified in clauses (i) and (ii) below shall occur automatically without the giving of any such notice): (i) declare the Total Commitment (or the unutilized portion thereof) terminated, whereupon the Commitment of each Bank (or the unutilized portion thereof) shall forthwith terminate immediately and any Commitment Fees shall forthwith become due and payable without any other notice of any kind; (ii) declare the principal of and any accrued interest in respect of all Loans and all Obligations owing hereunder (including Unpaid Drawings) to be, whereupon the same shall become, forthwith due and payable without presentment, demand, protest or other notice of any kind, all of which are hereby waived by the Borrower; (iii) enforce, as Collateral Agent (or direct the Collateral Agent to enforce), any or all of the Liens and security interests created pursuant to the Security Documents; (iv) terminate any Letter of Credit which may be terminated in accordance with its terms; and (v) direct the Borrower to pay (and the Borrower hereby agrees upon receipt of such notice, or upon the occurrence of any Event of Default specified in Section 9.05, to pay) to the Collateral Agent at the Payment Office such additional amounts of cash, to be held as security for the Borrower's reimbursement obligations in respect of Letters of Credit then outstanding, equal to the aggregate Stated Amount of all Letters of Credit then outstanding. SECTION 10. Definitions. As used herein, the following terms shall ----------- have the meanings herein specified unless the context otherwise requires. Defined terms in this Agreement shall include in the singular number the plural and in the plural the singular: "A Term Loan" shall have the meaning provided in Section 1.01(A)(a). "A Term Loan Commitment" shall mean, with respect to each Bank, the amount set forth opposite such Bank's name in Annex I directly below the column entitled "A Term Loan Commitment," as the same may be reduced or terminated pursuant to Section 3.03 and/or 9 or otherwise modified pursuant to Section 1.13 and/or 12.04(b). --90-- "A Term Loan Facility" shall mean the Facility evidenced by the Total A Term Loan Commitment. "A Term Loan Maturity Date" shall mean December 31, 2001. "A Term Note" shall have the meaning provided in Section 1.05(a). "A TL Percentage" shall mean, at any time, a fraction (expressed as a percentage) the numerator of which is equal to the aggregate principal amount of all A Term Loans outstanding at such time and the denominator of which is equal to the aggregate principal amount of all Term Loans outstanding at such time. "Accounts Receivable Facility" shall mean the transactions contemplated by the Accounts Receivable Facility Purchase Agreement. "Accounts Receivable Facility Documents" shall mean the Accounts Receivable Facility Pooling and Servicing Agreement, the Accounts Receivable Facility Purchase Agreement, the Accounts Receivable Facility Revolving Certificate Purchase Agreement and each of the other documents and agreements entered into in connection therewith, including all documents and agreements relating to the issuance, funding and/or purchase of Investor Certificates and Purchased Interests, in each case as such documents and agreements may be amended, modified, supplemented, refinanced or replaced from time to time so long as (i) any such amendments, modifications, supplements, refinancing or replacements do not impose any conditions or requirements on Holdings or any of its Subsidiaries that are more restrictive in any material respect than those in existence on the Accounts Receivable Facility Transaction Date, (ii) any such amendments, modifications, supplements, refinancings or replacements are not adverse to the interests of the Banks and (iii) any such amendments, modifications, supplements, refinancing or replacements are otherwise in form and substance reasonably satisfactory to the Agent. "Accounts Receivable Facility Pooling and Servicing Agreement" shall mean the Pooling and Servicing Agreement, among the Receivables Entity, as transferor, the Borrower, as servicer, and the Trustee, as the same may be amended, modified, supplemented, refinanced or replaced from time to time in accordance with the terms thereof and hereof, which Accounts Receivable Facility Pooling and Servicing Agreement shall be in form and substance reasonably satisfactory to the Agent and the Required Banks. "Accounts Receivable Facility Proceeds" shall mean the initial net invested amount of Investor Certificates in respect of the Accounts Receivable Facility on the Accounts Receivable Facility Transaction Date, which amount shall be satisfactory to the Agent and the Required Banks. "Accounts Receivable Facility Purchase Agreement" shall mean the Receivables Purchase Agreement, among the Borrower and the other Designated Credit Parties, as sellers, and the Receivables Entity, as buyer, as the same may be amended, modified, supplemented, refinanced or replaced from time to time in accordance with the terms thereof and hereof, which Accounts --91-- Receivable Facility Purchase Agreement shall be in form and substance reasonably satisfactory to the Agent and the Required Banks. "Accounts Receivable Facility Revolving Certificate Purchase Agreement" shall mean the Revolving Certificate Purchase Agreement, among the Receivables Entity, the Borrower, as the initial servicer, the purchasers party thereto, and BTCo, as Agent, as the same may be amended, modified, supplemented, refinanced or replaced from time to time in accordance with the terms thereof and hereof, which Revolving Certificate Purchase Agreement shall be in form and substance reasonably satisfactory to the Agent and the Required Banks. "Accounts Receivable Facility Transaction" shall mean the consummation of the Accounts Receivable Facility and related transactions contemplated by the Accounts Receivable Facility Documents. "Accounts Receivable Facility Transaction Date" shall mean the date of the consummation of the Accounts Receivable Facility Transaction in accordance with the requirements of Section 7.18. "Acquired Business" shall mean the assets acquired by the Borrower pursuant to the Acquisition Documents. "Acquisition" shall mean the acquisition by the Borrower for cash of the assets of the in vitro diagnostics division of the Seller pursuant to, and -- ----- in accordance with the terms of, the Acquisition Documents. "Acquisition Agreements" shall mean (i) the Asset Purchase and Sale Agreement, dated as of December 11, 1995, as in effect on the Initial Borrowing Date, between Dade Chemistry Systems Inc. and the Seller, as amended, modified or supplemented from time to time in accordance with the terms thereof and hereof and (ii) each of the agreements listed on Annex XIII hereto. "Acquisition Documents" shall mean the Acquisition Agreement, the IVD Services Agreement and all other purchase and other agreements, instruments and documents relating to the Acquisition. "Additional Security Documents" shall have the meaning provided in Section 7.11. "Adjusted Certificate of Deposit Rate" shall mean, on any day, the sum (rounded to the nearest 1/100 of 1%) of (1) the rate obtained by dividing (x) the most recent weekly average dealer offering rate for negotiable certificates of deposit with a three-month maturity in the secondary market as published in the most recent Federal Reserve System publication entitled "Select Interest Rates," published weekly on Form H.15 as of the date hereof, or if such publication or a substitute containing the foregoing rate information shall not be published by the Federal Reserve System for any week, the weekly average offering rate determined by the Agent on the basis of quotations for such certificates received by it from three certificate of deposit dealers in New York of recognized --92-- standing or, if such quotations are unavailable, then on the basis of other sources reasonably selected by the Agent, by (y) a percentage equal to 100% minus the stated maximum rate of all reserve requirements as specified in Regulation D applicable on such day to a three-month certificate of deposit of a member bank of the Federal Reserve System in excess of $100,000 (including, without limitation, any marginal, emergency, supplemental, special or other reserves), plus (2) the then daily net annual assessment rate as estimated by the Agent for determining the current annual assessment payable by BTCo to the Federal Deposit Insurance Corporation for insuring three month certificates of deposit. "Affiliate" shall mean, with respect to any Person, any other Person directly or indirectly controlling (including but not limited to all directors and officers of such Person), controlled by, or under direct or indirect common control with such Person. A Person shall be deemed to control a corporation if such Person possesses, directly or indirectly, the power (i) to vote 5% or more of the securities having ordinary voting power for the election of directors of such corporation or (ii) to direct or cause the direction of the management and policies of such corporation, whether through the ownership of voting securities, by contract or otherwise. "Agent" shall have the meaning provided in the first paragraph of this Agreement and shall include any successor to the Agent appointed pursuant to Section 11.10. "Aggregate Net Invested Amount" shall have the meaning provided in Section 3.03(e). "Aggregate Unutilized Commitment" with respect to any Bank at any time shall mean the sum of (i) such Bank's A Term Loan Commitment at such time, if any, (ii) such Bank's B Term Loan Commitment at such time, if any, (iii) such Bank's C Term Loan Commitment at such time, if any, (iv) such Bank's D Term Loan Commitment at such time, if any, and (v) such Bank's Revolving Loan Commitment at such time less the sum of (x) the aggregate outstanding principal amount of ---- all Revolving Loans made by such Bank and (y) such Bank's RL Percentage of the Letter of Credit Outstandings at such time. "Agreement" shall mean this Credit Agreement, as the same may be from time to time modified, amended and/or supplemented. "Alternate Vendor Financing Program" shall mean a vendor financial services program between the Borrower and/or one or more Subsidiaries of the Borrower and a financial institution pursuant to which the Borrower and/or such Subsidiary effects Seeded Instrument Transactions with such financial institution and third party customers of the Borrower and/or such Subsidiary conducting business in Spain, Italy or Japan. "Applicable Base Rate Margin" shall mean (i) in the case of A Term Loans and Revolving Loans, 1.75%, less the then applicable Interest Reduction Discount, if any, (ii) in the case of B Term Loans, 2.25%, (iii) in the case of C Term Loans, 2.50% and (iv) in the case of D Term Loans, 2.75%. --93-- "Applicable Eurodollar Margin" shall mean (i) in the case of A Term Loans and Revolving Loans, 2.75%, less the then applicable Interest Reduction Discount, if any, (ii) in the case of B Term Loans, 3.25%, (iii) in the case of C Term Loans, 3.50%, and (iv) in the case of D Term Loans, 3.75%. "Asset Sale" shall mean any sale, transfer or other disposition by Holdings or any of its Subsidiaries to any Person other than the Borrower or any Wholly-Owned Subsidiary of the Borrower of any asset (including, without limitation, any capital stock or other securities of another Person) of Holdings or such Subsidiary other than (i) sales, transfers or other dispositions of inventory made in the ordinary course of business and (ii) sales of assets pursuant to Section 8.02(e), (f), (g), (o), (q), (aa), (bb), (cc), (dd) and (ff). "Assignment and Assumption Agreement" shall mean the Assignment and Assumption Agreement substantially in the form of Exhibit J (appropriately completed). "Authorized Officer" shall mean the Chief Executive Officer, President, Chief Financial Officer, Treasurer, Controller or Secretary or any other senior officer of Holdings or the Borrower designated as such in writing to the Agent by Holdings or the Borrower, in each case to the extent reasonably acceptable to the Agent. "B Banks" shall have the meaning provided in Section 4.02(C). "B Term Loan" shall have the meaning provided in Section 1.01(A)(b). "B Term Loan Commitment" shall mean, with respect to each Bank, the amount set forth opposite such Bank's name in Annex I directly below the column entitled "B Term Loan Commitment," as the same may be terminated pursuant to Section 3.03 and/or 9 or otherwise modified pursuant to Section 1.13 and/or 12.04(b). "B Term Loan Facility" shall mean the Facility evidenced by the Total B Term Loan Commitment. "B Term Loan Maturity Date" shall mean December 31, 2002. "B Term Note" shall have the meaning provided in Section 1.05(a). "B TL Percentage" shall mean, at any time, a fraction (expressed as a percentage) the numerator of which is equal to the aggregate principal amount of all B Term Loans outstanding at such time and the denominator of which is equal to the aggregate principal amount of all Term Loans outstanding at such time. "B&J" shall mean Burdick & Jackson, Inc., a Delaware corporation and a Wholly-Owned Subsidiary of the Borrower. --94-- "B&J Asset Sale" shall mean a sale by the Borrower or any of its Subsidiaries of all of the capital stock of, or all or substantially all of, the assets of B&J. "Bain Capital" shall mean Bain Capital, Inc. a Delaware corporation. "Bank" shall have the meaning provided in the first paragraph of this Agreement. "Bank Default" shall mean (i) the refusal (which has not been retracted) of an RL Bank to make available its portion of any Borrowing (including any Mandatory Borrowing) or to fund its portion of any unreimbursed payment under Section 2.04(c) or (ii) an RL Bank having notified the Agent and/or the Borrower that it does not intend to comply with the obligations under Section 1.01(A)(e), 1.01(C) or 2.04(c), in the case of either clause (i) or (ii) above as a result of the appointment of a receiver or conservator with respect to such Bank at the direction or request of any regulatory agency or authority. "Bankruptcy Code" shall have the meaning provided in Section 9.05. "Base Rate" at any time shall mean the higher of (x) the rate which is 1/2 of 1% in excess of the Adjusted Certificate of Deposit Rate and (y) the Prime Lending Rate. "Base Rate Loan" shall mean each Loan bearing interest at the rates provided in Section 1.08(a). "Baxter" shall mean Baxter Healthcare Corporation, a Delaware corporation. "Baxter Acquisition" shall mean the Acquisition under, and as defined in, the Existing Credit Agreement. "Baxter Acquisition Documents" shall mean the Acquisition Documents under, and as defined in, the Existing Credit Agreement. "Baxter PIK Note Documents" shall mean and include each of the documents and other agreements entered into (including, without limitation, the Baxter PIK Notes) relating to the issuance by Holdings of the Baxter PIK Notes, as in effect on December 20, 1994 (to the extent thereof) and as the same may be entered into, modified, supplemented or amended from time to time pursuant to the terms hereof and thereof. "Baxter PIK Notes" shall mean unsecured junior subordinated notes issued by Holdings (and not guaranteed or supported in any way by the Borrower or any of its Subsidiaries or any other Person) in favor of Baxter, in the form of Exhibit L. "Baxter Preferred Stock" shall mean the preferred stock of Holdings held by Baxter and having an original aggregate liquidation preference of not more than $40,000,000 and an aggregate liquidation preference as of the Effective Date of not more than $13,000,000, in the form --95-- attached hereto as Exhibit N, as amended modified or supplemented from time to time in accordance with the terms hereof and thereof. "Borrower" shall have the meaning provided in the first paragraph of this Agreement. "Borrower Subordinated Loans" shall have the meaning provided in Section 8.06(t). "Borrower Subordinated Note" shall mean an unsecured junior subordinated Note issued by the Borrower (and not guaranteed or supported in any way by any Subsidiary of the Borrower) in the form of Exhibit O, as amended, modified or supplemented from time to time in accordance with the terms hereof and thereof. "Borrowing" shall mean the incurrence of one Type of Loan pursuant to a single Facility by the Borrower from all of the Banks having Commitments with respect to such Facility on a pro rata basis on a given date (or resulting from --- ---- conversions on a given date), having in the case of Eurodollar Loans the same Interest Period; provided, that Base Rate Loans incurred pursuant to Section -------- 1.10(b) shall be considered part of any related Borrowing of Eurodollar Loans. "BTCo" shall mean Bankers Trust Company, in its individual capacity, and any successor corporation thereto by merger, consolidation or otherwise. "Business Day" shall mean (i) for all purposes other than as covered by clause (ii) below, any day excluding Saturday, Sunday and any day which shall be in the City of New York a legal holiday or a day on which banking institutions are authorized by law or other governmental actions to close and (ii) with respect to all notices and determinations in connection with, and payments of principal and interest on, Eurodollar Loans, any day which is a Business Day described in clause (i) and which is also a day for trading by and between banks in U.S. dollar deposits in the interbank Eurodollar market. "C Banks" shall have the meaning provided in Section 4.02(C). "C Term Loan" shall have the meaning provided in Section 1.01(A)(c). "C Term Loan Commitment" shall mean, with respect to each Bank, the amount set forth opposite such Bank's name in Annex I directly below the column entitled "C Term Loan Commitment," as the same may be terminated pursuant to Section 3.03 and/or 9 or otherwise modified pursuant to Section 1.13 and/or 12.04(b). "C Term Loan Facility" shall mean the Facility evidenced by the Total C Term Loan Commitment. "C Term Loan Maturity Date" shall mean December 31, 2003. "C Term Note" shall have the meaning provided in Section 1.05(a). --96-- "C TL Percentage" shall mean, at any time a fraction (expressed as a percentage) the numerator of which is equal to the aggregate principal amount of all C Term Loans outstanding at such time and the denominator of which is equal to the aggregate principal amount of all Term Loans outstanding at such time. "Capital Expenditures" shall mean, with respect to any Person, without duplication, all expenditures by such Person which should be capitalized in accordance with GAAP, including, without duplication, all such expenditures with respect to fixed or capital assets (including, without limitation, expenditures for maintenance and repairs which should be capitalized in accordance with GAAP), all such expenditures relating to instruments leased to, rented to, or otherwise seeded to, customers, and the amount of all Capitalized Lease Obligations incurred by such Person. "Capital Lease," as applied to any Person, shall mean any lease of any property (whether real, personal or mixed) by that Person as lessee which, in conformity with GAAP, is accounted for as a capital lease on the balance sheet of that Person. "Capitalized Lease Obligations" shall mean all obligations under Capital Leases of the Borrower or any of its Subsidiaries in each case taken at the amount thereof accounted for as liabilities in accordance with GAAP. "Cash Equivalents" shall mean (i) securities issued or directly and fully guaranteed or insured by the United States of America or any agency or instrumentality thereof (provided, that the full faith and credit of the United -------- States of America is pledged in support thereof) having maturities of not more than twelve months from the date of acquisition, (ii) U.S. dollar denominated time deposits, certificates of deposit and bankers acceptances of (x) any Bank or (y) any bank whose short-term commercial paper rating from Standard & Poor's Corporation ("S&P") is at least A-1 or the equivalent thereof or from Moody's Investors Service, Inc. ("Moody's") is at least P-1 or the equivalent thereof (any such bank or Bank, an "Approved Bank"), in each case with maturities of not more than twelve months from the date of acquisition, (iii) commercial paper issued by any Approved Bank or by the parent company of any Approved Bank and commercial paper issued by, or guaranteed by, any industrial or financial company with a short-term commercial paper rating of at least A-1 or the equivalent thereof by S&P or at least P-1 or the equivalent thereof by Moody's, or guaranteed by any industrial company with a long term unsecured debt rating of at least A or A2, or the equivalent of each thereof, from S&P or Moody's, as the case may be, and in each case maturing within twelve months after the date of acquisition, (iv) marketable direct obligations issued by any state of the United States of America or any political subdivision of any such state or any public instrumentality thereof maturing within twelve months from the date of acquisition thereof and, at the time of acquisition, having one of the two highest ratings obtainable from either S&P or Moody's and (v) investments in money market funds substantially all the assets of which are comprised of securities of the types described in clauses (i) through (iv) above. "Change of Control Event" shall mean (a) Holdings shall cease to own directly 100% on a fully diluted basis of the economic and voting interest in the Borrower's capital stock or (b) Bain Capital, GS Capital and/or their respective Related Parties shall cease to own on a fully diluted --97-- basis in the aggregate at least 51% of the economic and voting interest in Holdings' capital stock or (c) Bain Capital shall cease to own on a fully diluted basis in the aggregate at least 51% of the economic and voting interest in Holdings' capital stock owned by Bain Capital, GS Capital and their respective Related Parties or (d) a "Change of Ownership" or similar event shall occur as provided in the Baxter PIK Notes or the Baxter Preferred Stock, so long as any Baxter PIK Notes or any Baxter Preferred Stock, as the case may be, is outstanding or (e) any "Change of Control" as such term is defined in the Senior Subordinated Note Indenture, or any successor or similar provision, shall occur. "Code" shall mean the Internal Revenue Code of 1986, as amended from time to time, and the regulations promulgated and rulings issued thereunder. Section references to the Code are to the Code, as in effect at the date of this Agreement and any subsequent provisions of the Code amendatory thereof, supplemental thereto or substituted therefor. "Collateral" shall mean all of the Collateral as defined in each of the Security Documents. "Collateral Agent" shall mean the Agent acting as collateral agent for the Secured Creditors. "Collective Bargaining Agreements" shall have the meaning provided in Section 5.13. "Commitment" shall mean, with respect to each Bank, such Bank's A Term Loan Commitment, B Term Loan Commitment, C Term Loan Commitment, D Term Loan Commitment and Revolving Loan Commitment. "Commitment Fee" shall have the meaning provided in Section 3.01(a). "Consolidated Current Assets" shall mean, at any time, the current assets (other than cash, Cash Equivalents and deferred income taxes to the extent included in current assets) of the Borrower and its Subsidiaries (including, without duplication, the interests in accounts receivable represented by the transferor certificate held by the Receivables Entity) at such time determined on a consolidated basis. "Consolidated Current Liabilities" shall mean, at any time, the current liabilities of the Borrower and its Subsidiaries determined on a consolidated basis, but excluding (i) deferred income taxes, (ii) the current portion of and accrued but unpaid interest on any Indebtedness under this Agreement and any other long-term Indebtedness which would otherwise be included therein and (iii) short-term borrowings of Foreign Subsidiaries unless the proceeds thereof are used to finance current assets of such Foreign Subsidiaries. "Consolidated Debt" shall mean, at any time, all Indebtedness of the Borrower and its Subsidiaries determined on a consolidated basis (excluding Indebtedness arising pursuant to --98-- deferred warranties or contracts or other similar obligations and any deferred revenue under the Vendor Financing Program or the Alternate Vendor Financing Program). "Consolidated EBIT" shall mean, for any period, Consolidated Net Income, before (i) total interest expense (inclusive of amortization of deferred financing fees and any other original issue discount) of the Borrower and its Subsidiaries determined on a consolidated basis, (ii) the write-off of inventory step-up and in-process research and development costs in accordance with purchase accounting, (iii) the documented incurrence of duplicate transition costs arising from the Acquisition and the Baxter Acquisition not in excess of $6,000,000 per year in the aggregate during the term of the Services Agreement, the Distribution Agreement and the distribution and transition services agreements between the Borrower or its Subsidiaries and the Seller or its Affiliates, (iv) any non-cash charges deducted in determining Consolidated Net Income for such period and related to the issuance by Holdings of stock, warrants or options to management (or any exercise of any such warrants or options), (v) any non-recurring cash charges and non-cash provisions deducted in determining Consolidated Net Income for such period and related to the Borrower's integration plan during the three-year period following the Initial Borrowing Date, provided that the aggregate amount of charges and provisions -------- added back pursuant to this clause (v) for all periods shall not exceed $15,000,000 (it being understood and agreed that these charges and provisions are considered part of, and not additive to, the Restructuring Reserves), (vi) any net non-cash charges in each period, including, without limitation, those non-cash charges with respect to provisions required for recourse terms under the Vendor Financing Program and (vii) provisions for taxes based on income and foreign with holding taxes, and determined without giving effect to any extraordinary gains or losses but with giving effect to gains or losses from sales of assets sold in the ordinary course of business. "Consolidated EBITDA" shall mean, for any period, Consolidated EBIT, adjusted by adding thereto the amount of all depreciation expense and amortization expense that were deducted in determining Consolidated EBIT for such period. "Consolidated Interest Expense" shall mean, for any period, total interest expense (including that attributable to Capital Leases in accordance with GAAP) of the Borrower and its Subsidiaries determined on a consolidated basis with respect to all outstanding Indebtedness of the Borrower and its Subsidiaries, including, without limitation, all commissions, discounts and other fees and charges owed with respect to letters of credit and bankers' acceptance financing and net costs or benefits under Interest Rate Protection Agreements, but excluding, however, amortization of any payments made to obtain any Interest Rate Protection Agreements and deferred financing costs and any interest expense on deferred compensation arrangements to the extent included in total interest expense. "Consolidated Net Income" shall mean, for any period, the net income (or loss), after provision for taxes, of the Borrower and its Subsidiaries (including as a Subsidiary for this purpose the Receivables Entity although the definition of Subsidiary might require otherwise) on a consolidated basis for such period taken as a single accounting period but excluding any unrealized losses and gains for such period resulting from mark-to-market of Other Hedging Agreements and any tender premiums or consent fees paid and any write-off of deferred financing costs incurred as --99-- a result of the contemplated refinancing of the Existing Senior Subordinated Notes and the Existing Credit Agreement. "Consulting Agreement" shall mean, collectively, (i) the Advisory Agreement, dated as of December 20, 1994 by and among Holdings, the Borrower and Bain Capital, as amended, modified or supplemented from time to time, in accordance with the terms hereof and thereof and (ii) the Advisory Agreement, dated as of December 20, 1994 by and among Holdings, the Borrower and GS Capital, as amended, modified or supplemented from time to time, in accordance with the terms hereof and thereof. "Contingent Obligations" shall mean as to any Person any obligation of such Person guaranteeing or intended to guarantee any Indebtedness, leases, dividends or other obligations ("primary obligations") of any other Person (the "primary obligor") in any manner, whether directly or indirectly, including, without limitation, any obligation of such Person, whether or not contingent, (a) to purchase any such primary obligation or any property constituting direct or indirect security therefor, (b) to advance or supply funds (x) for the purchase or payment of any such primary obligation or (y) to maintain working capital or equity capital of the primary obligor or otherwise to maintain the net worth or solvency of the primary obligor, (c) to purchase property, securities or services primarily for the purpose of assuring the owner of any such primary obligation of the ability of the primary obligor to make payment of such primary obligation or (d) otherwise to assure or hold harmless the owner of such primary obligation against loss in respect thereof; provided, however, -------- ------- that the term Contingent Obligation shall not include endorsements of instruments for deposit or collection or standard contractual indemnities entered into, in each case in the ordinary course of business. The amount of any Contingent Obligation shall be deemed to be an amount equal to the stated or determinable amount of the primary obligation in respect of which such Contingent Obligation is made or, if not stated or deter minable, the maximum reasonably anticipated liability in respect thereof (assuming such Person is required to perform thereunder) as determined by such Person in good faith. "Credit Documents" shall mean this Agreement, the Notes, the Guaranties and each Security Document. "Credit Event" shall mean the making of a Loan (other than a Revolving Loan made pursuant to a Mandatory Borrowing) or the issuance of a Letter of Credit. "Credit Party" shall mean Holdings, the Borrower and each Subsidiary Guarantor. "Current Ratio" shall mean the ratio of Consolidated Current Assets to Consolidated Current Liabilities. "D Banks" shall have the meaning provided in Section 4.02(C). "D Term Loan" shall have the meaning provided in Section 1.01(A)(d). --100--- "D Term Loan Commitment" shall mean, with respect to each Bank, the amount set forth opposite such Bank's name in Annex I directly below the column entitled "D Term Loan Commitment," as the same may be terminated pursuant to Section 3.03 and/or 9 or otherwise modified pursuant to Section 1.13 and/or 12.04(b). "D Term Loan Facility" shall mean the Facility evidenced by the Total D Term Loan Commitment. "D Term Loan Maturity Date" shall mean December 31, 2004. "D Term Note" shall have the meaning provided in Section 1.05(a). "D TL Percentage" shall mean, at any time, a fraction (expressed as a percentage) the numerator of which is equal to the aggregate principal amount of all D Term Loans outstanding at such time and the denominator of which is equal to the aggregate principal amount of all Term Loans outstanding at such time. "Dade Diagnostics P.R., Inc." shall mean Dade Diagnostics P.R., Inc., a Delaware corporation. "Dade Export" shall mean Dade Export Corporation, a Delaware corporation. "Dade Lytening, Inc." shall mean Dade Lytening Systems, Inc. a Massachusetts corporation. "Default" shall mean any event, act or condition which with notice or lapse of time, or both, would constitute an Event of Default. "Defaulting Bank" shall mean any Bank with respect to which a Bank Default is in effect. "Designated Asset Sale" shall mean a sale by the Borrower or any of its Subsidiaries of (i) all or substantially all of the assets used primarily in the Borrower's immunohematology product line, (ii) all of the capital stock of, or all or substantially all of the assets of, Dade Lytening, Inc., and (iii) their existing investment in Spectral Diagnostics, Inc. "Designated Credit Parties" shall mean the Borrower and those Subsidiary Guarantors that are from time to time party to the Accounts Receivable Facility Documents. "Designated Real Property Sale" shall mean a sale by the Borrower or any of its Subsidiaries of (i) the Real Property owned by the Borrower or any such Subsidiary located adjacent to 1584 Raley Ct., Sacramento, California and/or (ii) any other undeveloped Real Property owned --101-- by the Borrower or any of its Subsidiaries as of the Initial Borrowing Date (after giving effect to the consummation of the Transaction on such date). "Distribution Agreement" shall mean the Amended and Restated Exclusive Distribution Agreement, dated as of December 19, 1994, as amended and restated in its entirety as of September 15, 1995, by and between the Borrower and Baxter, as the same may be amended, modified or supplemented from time to time, in accordance with the terms hereof and thereof. "Dividends" shall have the meaning provided in Section 8.07. "Documents" shall mean the Credit Documents, the Acquisition Documents, the Refinancing Documents, the Senior Subordinated Note Documents, and, on and after the Accounts Receivable Facility Transaction Date, the Accounts Receivable Facility Documents. "Domestic Subsidiary" shall mean each Subsidiary of the Borrower which is not a Foreign Subsidiary. "Effective Date" shall have the meaning provided in Section 12.10. "Eligible Transferee" shall mean and include a commercial bank, investment company, financial institution or other "accredited investor" (as defined in Regulation D of the Securities Act). "Employment Agreements" shall have the meaning provided in Section 5.13. "Environmental Claims" shall mean any and all administrative, regulatory or judicial actions, suits, demands, demand letters, claims, liens, notices of non-compliance or violation, investigations or proceedings relating in any way to any violation (or alleged violation) by Holdings or any of its Subsidiaries under any Environmental Law (hereafter "Claims") or any permit issued under any such law, including, without limitation, (a) any and all Claims by governmental or regulatory authorities for enforcement, cleanup, removal, response, remedial or other actions or damages pursuant to any applicable Environmental Law, and (b) any and all Claims by any third party seeking damages, contribution, indemnification, cost recovery, compensation or injunctive relief resulting from Hazardous Materials or arising from alleged injury or threat of injury to health, safety or the environment. "Environmental Law" shall mean any federal, state or local statute, law, rule, regulation, ordinance, code, policy or rule of common law now or hereafter in effect and in each case as amended, and any judicial or administrative interpretation thereof, including any judicial or administrative order, consent, decree or judgment (for purposes of this definition (collectively, "Laws")), relating to the environment or Hazardous Materials or health and safety to the extent health and safety issues arise under the Occupational Safety and Health Act of 1970, as amended, or any such similar Laws. --102-- "ERISA" shall mean the Employee Retirement Income Security Act of 1974, as amended from time to time, and the regulations promulgated and the rulings issued thereunder. Section references to ERISA are to ERISA as in effect at the date of this Agreement and any subsequent provisions of ERISA amendatory thereof, supplemental thereto or substituted therefor. "ERISA Affiliate" shall mean each person (as defined in Section 3(9) of ERISA) which together with Holdings or any Subsidiary of Holdings would be deemed to be a "single employer" within the meaning of Section 414(b), (c), (m) or (o) of the Code. "Eurodollar Loans" shall mean each Loan bearing interest at the rates provided in Section 1.08(b). "Eurodollar Rate" shall mean, with respect to each Interest Period for a Eurodollar Loan, (i) the arithmetic average (rounded to the nearest 1/100 of 1%) of the offered quotation to first-class banks in the interbank Eurodollar market by the Agent for U.S. dollar deposits of amounts in same day funds comparable to the outstanding principal amount of the Eurodollar Loan of the Agent for which an interest rate is then being determined with maturities comparable to the Interest Period to be applicable to such Eurodollar Loan, determined as of 10:00 A.M. (New York time) on the date which is two Business Days prior to the commencement of such Interest Period divided (and rounded upward to the next whole multiple of 1/16 of 1%) by (ii) a percentage equal to 100% minus the then stated maximum rate of all reserve requirements (including, without limitation, any marginal, emergency, supplemental, special or other reserves) applicable to any member bank of the Federal Reserve System in respect of Eurocurrency liabilities as defined in Regulation D (or any successor category of liabil ities under Regulation D). "Event of Default" shall have the meaning provided in Section 9. "Excess Cash Flow" shall mean, for any period, (i) the sum of (A) Consolidated Net Income for such period, plus (B) the amount of all non-cash ---- charges (including, without limitation or duplication, depreciation, amortization and non-cash interest expense) included in determining Consolidated Net Income for such period, plus (C) the decrease, if any, in Working Capital ---- from the first day to the last day of such period (except to the extent that such decrease occurs as a result of an increase in the Accounts Receivable Facility or as a result of the put or other transfer of accounts receivable to Baxter and/or its Affiliates pursuant to Section 8.02(ff), plus (D) any cash ---- reimbursement from the Seller required pursuant to the Acquisition Agreement for purchase price adjustments, minus (ii) the sum of (A) any non-cash credits ----- (including from sales of assets) included in determining Consolidated Net Income for such period, (B) gains from sales of assets (other than sales of inventory in the ordinary course of business) included in determining Consolidated Net Income for such period, (C) an amount equal to (1) all Capital Expenditures (excluding Capital Expenditures made pursuant to Section 8.09(c), (d) or (e)) made during such period that are not financed by Indebtedness (including Capitalized Lease Obligations but excluding Loans hereunder) plus (or minus, if negative) (2) the Rollover Amount for such period to be carried forward to the next period less the Rollover Amount (if any) for the preceding period carried forward to the current period, (D) the aggregate principal amount of permanent principal payments of Indebtedness for bor- --103-- rowed money of the Borrower and its Subsidiaries (other than repayments of Loans, provided that repayments of Loans shall be deducted in determining Excess Cash Flow if such repayments were (x) required as a result of a Scheduled A Repayment, a Scheduled B Repayment, a Scheduled C Repayment or a Scheduled D Repayment under Section 4.02(A)(b) or (y) made as a voluntary prepayment with internally generated funds (but in the case of a voluntary prepayment of Revolving Loans, only to the extent accompanied by a voluntary reduction to the Total Revolving Loan Commitment)) during such period, (E) non-cash charges added back in a previous period pursuant to clause (i)(B) above to the extent any such charge has become a cash item in the current period, (F) the increase, if any, in Working Capital from the first day to the last day of such period, (G) costs incurred by Holdings during such period and paid for with the proceeds of dividends paid by the Borrower pursuant to Section 8.07(iii), to the extent not deducted in determining Consolidated Net Income for such period, (H) any cash payment to the Seller required pursuant to the Acquisition Agreement for purchase price adjustments, (I) cash expenses incurred by the Borrower during such period in connection with its offer to exchange its Series B Senior Subordinated Notes for its Series A Senior Subordinated Notes to the extent not deducted in determining Consolidated Net Income for such period, (J) any cash Restructuring Expenditures incurred during such period to the extent not deducted in determining Consolidated Net Income for such period, (K) any Restructuring Reserves maintained on the consolidated balance sheet of Holdings and its Subsidiaries as at the end of such period, (L) any tender premiums or consent fees paid by Holdings or any of its Subsidiaries during such period as a result of the contemplated refinancing of the Existing Senior Subordinated Notes and Existing Credit Agreement and (M) any cash disbursements made during such period against non-current liabilities (such as transition reserves and deferred taxes) to the extent not deducted in determining Consolidated Net Income. "Excess Cash Flow Period" shall mean (i) the period from and including the day following the Initial Borrowing Date to and including December 31, 1997 and (ii) with respect to each fiscal year thereafter, such fiscal year. "Excess Cash Payment Date" shall mean the date occurring 90 days after the last day of a fiscal year of the Borrower (beginning with its fiscal year ending on December 31, 1997). "Excess Proceeds" shall mean (i) the portion of the net proceeds received by Holdings after the Effective Date from the registered initial public offering of Holdings Common Stock and/or from the issuance of Holdings common stock pursuant to a Permitted Strategic Equity Issuance, in each case which is permitted to be retained by Holdings pursuant to Section 4.02(A)(d), to the extent contributed to the Borrower in accordance with Section 7.17, (ii) the portion of Net Proceeds received by the Borrower after the Effective Date from any Designated Real Property Sale which is permitted to be retained by the Borrower pursuant to Section 4.02(A)(c), in each case as and when received in the form of cash, (iii) the portion of Excess Cash Flow of the Borrower and its Subsidiaries which is permitted to be retained by the Borrower pursuant to Section 4.02(A)(f), (iv) the portion of Net Proceeds received by the Borrower after the Effective Date from the B&J Asset Sale which is permitted to be retained by the Borrower pursuant to Section 4.02(A)(c), as and when received in the form of cash and (v) 100% of the Permitted Equity Proceeds received by --104-- Holdings from time to time, to the extent contributed or loaned to the Borrower in accordance with Section 4.02(A)(d). "Excess Proceeds Amount" shall initially be $0, which amount shall be (A) increased (i) on each Excess Cash Payment Date so long as any repayment --------- required pursuant to Section 4.02(A)(f) has been made, by an amount equal to 25% of Excess Cash Flow for the immediately preceding Excess Cash Flow Period, (ii) on the date of the receipt by Holdings of the proceeds from the registered initial public offering of Holdings Common Stock and/or from the issuance of Holdings common stock pursuant to a Permitted Strategic Equity Issuance, in each case so long as any repayment pursuant to Section 4.02(A)(d) has been made and Holdings has contributed such proceeds to the Borrower in accordance with Section 7.17, by an amount equal to 50% of the net proceeds from such offering, (iii) on the date of receipt by the Borrower or any of its Subsidiaries of the Net Proceeds from the B&J Asset Sale so long as any repayment pursuant to Section 4.02(A)(c) has been made, by an amount equal to the portion of such Net Proceeds permitted to be retained by the Borrower pursuant to Section 4.02(A)(c) (to the extent in the form of cash, including cash received upon the liquidation of or principal payment on any non-cash asset previously received), (iv) on each date of receipt by the Borrower or any of its Subsidiaries of the Net Proceeds from any Designated Real Property Sale so long as any repay ment pursuant to Section 4.02(A)(c) has been made, by an amount equal to 20% of such Net Proceeds (to the extent in the form of cash, including cash received upon the liquidation of or principal payment on any non-cash asset previously received), and (v) on the date of the receipt by Holdings of any Permitted Equity Proceeds so long as Holdings has contributed or loaned such Permitted Equity Proceeds to the Borrower in accordance with Section 4.02(A)(d), by an amount equal to 100% of such Permitted Equity Proceeds, and (B) reduced (i) on each Excess Cash Payment ------- Date where Excess Cash Flow for the immediately preceding Excess Cash Flow Period is a negative number, by such amount, (ii) at the time any Capital Expenditure is made pursuant to Section 8.09(d), by the amount thereof, (iii) at the time any Permitted Acquisition is made, by the amount of Excess Proceeds expended in connection therewith, (iv) at the time any investment is made pursuant to Section 8.06(y), by the amount of Excess Proceeds expended in connection therewith, (v) at the time when Holdings redeems or repurchases Baxter Preferred Stock pursuant to Section 8.07(viii), by the aggregate amount so expended by Holdings in connection therewith, (vi) at the time when the Borrower or any Domestic Subsidiary makes an Intercompany Loan to a Foreign Subsidiary pursuant to Section 8.06(g), by the amount (if any) of Excess Proceeds expended in connection therewith, and (vii) at the time when the Borrower or any Domestic Subsidiary makes a contribution to or a capitalization or forgiveness of Indebtedness of any Foreign Subsidiary pursuant to Section 8.06(m), by the amount (if any) of Excess Proceeds expended in connection therewith (it being understood that the Excess Proceeds Amount may be reduced to an amount below zero after giving effect to the reductions enumerated in clause (B) above). "Existing Credit Agreement" shall mean the Credit Agreement, dated as of December 20, 1994, among Holdings, the Borrower, the financial institutions from time to time party thereto and BTCo, as Agent, as in effect on the Effective Date. "Existing Indebtedness" shall have the meaning provided in Section 6.24. --105-- "Existing Indebtedness Agreements" shall have the meaning provided in Section 5.13. "Existing Letters of Credit" shall have the meaning provided in Section 2.01(d). "Existing Senior Subordinated Note Consent" shall mean each written consent permitting the Borrower to enter into the Existing Senior Subordinated Note Indenture Supplement from a holder of one or more Existing Senior Subordinated Notes entitled to consent to such Existing Senior Subordinated Note Indenture Supplement. "Existing Senior Subordinated Note Indenture" shall mean the Indenture entered into by and between the Borrower and IBJ Schroder Bank & Trust Company, as trustee thereunder, as in effect on the Initial Borrowing Date. "Existing Senior Subordinated Note Indenture Supplement" shall mean the Supplemental Indenture to the Existing Senior Subordinated Note Indenture in form and substance satisfactory to the Agent. "Existing Senior Subordinated Notes" shall mean the Borrower's 13% Senior Subordinated Notes due 2005, as in effect on the Initial Borrowing Date. "Existing Senior Subordinated Notes Tender Offer/Consent Solicitation" shall mean the tender offer by the Borrower to repurchase all outstanding Existing Senior Subordinated Notes and the solicitation of the Existing Senior Subordinated Note Consents from the holders of the Existing Senior Subordinated Notes. "Existing Senior Subordinated Notes Tender Offer/Consent Solicitation Documents" shall mean the Borrower's Offer to Purchase and Consent Solicitation, dated as of April 9, 1996, the Existing Senior Subordinated Note Consents, the Existing Senior Subordinated Note Indenture Supplement and each of the other agreements and documents entered into in connection with the Existing Senior Subordinated Notes Tender Offer/Consent Solicitation. "Facility" shall mean any of the credit facilities established under this Agreement, i.e., the A Term Loan Facility, the B Term Loan Facility, the C --- Term Loan Facility, the D Term Loan Facility or the Revolving Loan Facility. "Facing Fee" shall have the meaning provided in Section 3.01(c). "Fees" shall mean all amounts payable pursuant to, or referred to in, Section 3.01. "Foreign Cash Equivalents" shall mean certificates of deposit or bankers acceptances of any bank organized under the laws of Canada, Japan or any country that is a member of the European Economic Community whose short-term commercial paper rating from S&P is at least A-1 or the equivalent thereof or from Moody's is at least P-1 or the equivalent thereof, in each case with maturities of not more than twelve months from the date of acquisition. --106-- "Foreign Pension Plan" shall mean any plan, fund (including, without limitation, any superannuation fund) or other similar program established or maintained outside the United States of America by Holdings or any one or more of its Subsidiaries primarily for the benefit of employees of Holdings or such Subsidiaries residing outside the United States of America, which plan, fund or other similar program provides, or results in, retirement income, a deferral of income in contemplation of retirement or payments to be made upon termination of employment, and which plan is not subject to ERISA or the Code. "Foreign Subsidiary" shall mean each Subsidiary of the Borrower that is incorporated under the laws of any jurisdiction other than the United States of America, any State thereof, or any territory thereof. "Foreign Subsidiary Working Capital Indebtedness" shall have the meaning provided in Section 8.04(j). "GAAP" shall mean generally accepted accounting principles in the United States of America as in effect from time to time; it being understood and agreed that determinations in accordance with GAAP for purposes of Section 8, including defined terms as used therein, are subject (to the extent provided therein) to Section 12.07(a). "GS Capital" shall mean G.S. Capital Partners, L.P., a Delaware limited partnership. "Guaranteed Creditors" shall mean and include each of the Agent, the Collateral Agent, the Banks and each party (other than any Credit Party) party to an Interest Rate Protection Agreement or Other Hedging Agreement to the extent such party constitutes a Secured Creditor under the Security Documents. "Guaranteed Obligations" shall mean (i) the full and prompt payment when due (whether at the stated maturity, by acceleration or otherwise) of the principal and interest on each Note issued by the Borrower to each Bank, and Loans made, under this Agreement and all reimbursement obligations and Unpaid Drawings with respect to Letters of Credit, together with all the other obligations (including obligations which, but for the automatic stay under Section 362(a) of the Bankruptcy Code, would become due) and liabilities (including, without limitation, indemnities, fees and interest thereon) of the Borrower to such Bank now existing or hereafter incurred under, arising out of or in connection with this Agreement or any other Credit Document and the due performance and compliance with all the terms, conditions and agreements contained in the Credit Documents by the Borrower and (ii) the full and prompt payment when due (whether by acceleration or otherwise) of all obligations (including obligations which, but for the automatic stay under Section 362(a) of the Bankruptcy Code, would become due) of the Borrower owing under any such Interest Rate Protection Agreement or Other Hedging Agreement entered into by the Borrower or any of its Subsidiaries with any Bank or any affiliate thereof (even if such Bank subsequently ceases to by a Bank under this Agreement for any reason) so long as such Bank or affiliate participates in such Interest Rate Protection Agreement or Other Hedging Agreement, and their --107-- subsequent assigns, if any, whether now in existence or hereafter arising, and the due performance and compliance with all terms, conditions and agreements contained therein. "Guarantor" shall mean Holdings and each Subsidiary Guarantor. "Guaranty" shall mean and include each of the Holdings Guaranty and the Subsidiary Guaranty. "Hazardous Materials" shall mean (a) any petrochemical or petroleum products, radioactive materials, asbestos in any form that is or could become friable, urea formaldehyde foam insulation, transformers or other equipment that contain dielectric fluid containing levels of polychlorinated biphenyls, and radon gas; and (b) any chemicals, materials or substances defined as or included in the definition of "hazardous substances," "hazardous wastes," "hazardous materials," "restricted hazardous materials," "extremely hazardous wastes," "restrictive hazardous wastes," "toxic substances," "toxic pollutants," "contaminants" or "pollutants," or words of similar meaning and regulatory effect. "Holdings" shall have the meaning provided in the first paragraph of this Agreement. "Holdings Class L Common Stock" shall have the meaning provided in Section 6.16. "Holdings Common Stock" shall have the meaning provided in Section 6.16. "Holdings Guaranty" shall mean the guaranty of Holdings pursuant to Section 13. "Holdings Tax Allocation Agreement" shall mean the Tax Sharing Agreement, dated as of December 20, 1994, among Holdings and the Borrower and its Domestic Subsidiaries. "Indebtedness" of any Person shall mean without duplication (i) all indebtedness of such Person for borrowed money, (ii) the deferred purchase price of assets or services payable to the sellers thereof or any of such seller's assignees which in accordance with GAAP would be shown on the liability side of the balance sheet of such Person but excluding deferred rent as determined in accordance with GAAP, (iii) the face amount of all letters of credit issued for the account of such Person and, without duplication, all drafts drawn thereunder, (iv) all Indebtedness of a second Person secured by any Lien on any property owned by such first Person, whether or not such Indebtedness has been assumed, (v) all Capitalized Lease Obligations of such Person, (vi) all obligations of such Person to pay a specified purchase price for goods or services whether or not delivered or accepted, i.e., take-or-pay and similar ---- obligations, (vii) all obligations under Interest Rate Protection Agreements and Other Hedging Agreements and (viii) all Contingent Obligations of such Person, provided, that Indebtedness shall not include trade payables and accrued - -------- expenses, in each case arising in the ordinary course of business. "Indebtedness to be Refinanced" shall mean the indebtedness arising pursuant to the Existing Credit Agreement. --108-- "Initial Borrowing Date" shall mean the date upon which the Term Loans are initially incurred hereunder. "Intercompany Loan" shall have the meaning provided in Section 8.06(g). "Intercompany Notes" shall mean promissory notes, in the form of Exhibit K, evidencing Intercompany Loans. "Interest Coverage Ratio" shall mean, for any period, the ratio of Consolidated EBITDA to Consolidated Interest Expense for such period. "Interest Period," with respect to any Eurodollar Loan, shall mean the interest period applicable thereto, as determined pursuant to Section 1.09. "Interest Rate Protection Agreement" shall mean any interest rate swap agreement, interest rate cap agreement, interest rate collar agreement, interest rate hedging agreement or other similar agreement or arrangement. "Interest Reduction Discount" shall mean initially zero, provided -------- that from and after the first day of any Margin Reduction Period (the "Start Date") to and including the last day of such Margin Reduction Period (the "End Date"), the Interest Reduction Discount shall be the respective percentage per annum set forth in clause (A), (B) or (C) below if, but only if, as of the last day of the most recent fiscal quarter or year, as the case may be, ended immediately prior to such Start Date (the "Test Date"), the condition set forth in clause (A), (B) or (C) below is met: (A) 1/4 of 1% if the Leverage Ratio on such Test Date is less than 3.5:1.0; or (B) 1/2 of 1% if the Leverage Ratio on such Test Date is less than 3.0:1.00; or (C) 3/4 of 1% if the Leverage Ratio on such Test Date is less than 2.5:1.00. Notwithstanding anything to the contrary contained above in this definition, the Interest Reduction Discount shall be zero at any time when an Event of Default shall exist. "Investor Certificate" shall have the meaning provided in the Accounts Receivable Pooling and Servicing Agreement. "IVD Services Agreement" shall mean the Transition Services Agreement, dated as of the Initial Borrowing Date, between the Borrower and the Seller, as amended, modified or supplemented from time to time in accordance with the terms hereof and thereof. "L/C Supportable Indebtedness" shall mean (i) Foreign Subsidiary Working Capital Indebtedness, (ii) obligations of the Borrower or its Subsidiaries incurred in the ordinary course of business with respect to insurance obligations and workers' compensation, surety bonds and other --109-- similar statutory obligations and (iii) such other obligations of the Borrower or any of its Subsidiaries as are reasonably acceptable to the Agent and the respective Letter of Credit Issuer and otherwise permitted to exist pursuant to the terms of this Agreement. "Leasehold" of any Person shall mean all of the right, title and interest of such Person as lessee or licensee in, to and under leases or licenses of land, improvements and/or fixtures. "Letter of Credit" shall have the meaning provided in Section 2.01(a). "Letter of Credit Fee" shall have the meaning provided in Section 3.01(b). "Letter of Credit Issuer" shall mean BTCo, and any RL Bank which at the request of the Borrower and with the consent of the Agent agrees, in such RL Bank's sole discretion, to become a Letter of Credit Issuer for the purpose of issuing Letters of Credit pursuant to Section 2. "Letter of Credit Outstandings" shall mean, at any time, the sum of, without duplication, (i) the aggregate Stated Amount of all outstanding Letters of Credit and (ii) the aggregate amount of all Unpaid Drawings in respect of all Letters of Credit. "Letter of Credit Request" shall have the meaning provided in Section 2.02(a). "Leverage Ratio" shall mean, at any time, the ratio of Consolidated Debt at such time (excluding any Indebtedness under the Accounts Receivable Facility to the extent otherwise included in Consolidated Debt) to Consolidated EBITDA for the Test Period then last ended. "Lien" shall mean any mortgage, pledge, security interest, encumbrance, lien or charge of any kind (including any agreement to give any of the foregoing, any conditional sale or other title retention agreement, any financing or similar statement or notice filed under the UCC or any similar recording or notice statute, and any lease having substantially the same effect as the foregoing). "Loan" shall mean each and every Loan made by any Bank hereunder, including A Term Loans, B Term Loans, C Term Loans, D Term Loans, Revolving Loans or Swingline Loans. "Majority Banks" of any Facility shall mean those Non-Defaulting Banks which would constitute the Required Banks under, and as defined in, this Agreement if all outstanding Obligations of the other Facilities under this Agreement were repaid in full and all Commitments with respect thereto were terminated. "Management Agreements" shall have the meaning provided in Section 5.13. "Mandatory Borrowing" shall have the meaning provided in Section 1.01(C). --110-- "Margin Reduction Period" shall mean each period which shall commence on a date on which the financial statements are delivered pursuant to Section 7.01(b) or (c), as the case may be, and which shall end on the earlier of (i) the date of actual delivery of the next financial statements pursuant to Section 7.01(b) or (c), as the case may be, and (ii) the latest date on which the next financial statements are required to be delivered pursuant to Section 7.01(b) or (c), as the case may be; provided that no Margin Reduction Period shall commence -------- on a date occurring prior to the date of delivery of financial statements pursuant to Section 7.01(b) in respect of the fiscal quarter ending June 30, 1997. "Margin Stock" shall have the meaning provided in Regulation U. "Material Adverse Effect" shall mean a material adverse effect on the business, properties, assets, liabilities, condition (financial or otherwise) or prospects of the Acquired Business, the Borrower, Holdings, Holdings and its Subsidiaries taken as a whole or the Borrower and its Subsidiaries taken as a whole. "Material Contracts" shall have the meaning provided in Section 5.13(i). "Maturity Date" with respect to any Facility shall mean either the A Term Loan Maturity Date, the B Term Loan Maturity Date, the C Term Loan Maturity Date, the D Term Loan Maturity Date or the Revolving Loan Maturity Date, as the case may be. "Maximum Funding Amount" shall mean the sum of (x) with respect to outstanding Investor Certificates and Purchased Interests that have fixed principal amounts, such principal amounts and (y) with respect to Investor Certificates or Purchased Interests that have variable principal amounts, the Receivables Stated Amounts thereof. "Maximum Swingline Amount" shall mean $10,000,000. "Minimum Borrowing Amount" shall mean (i) for Base Rate Loans (other than Swingline Loans), $1,000,000; (ii) for Eurodollar Loans, $2,000,000 and (iii) for Swingline Loans, $500,000. "Mortgage" shall have the meaning provided in Section 5.12(a). "Mortgage Policies" shall have the meaning provided in Section 5.12(b). "Mortgaged Properties" shall mean and include (i) all Real Properties owned and leased by Holdings and its Domestic Subsidiaries to the extent designated as such on Annex III and (ii) each Real Property subjected to a mortgage in favor of the Collateral Agent for the bene fit of the Secured Creditors pursuant to Section 7.11. "NAIC" shall have the meaning provided in Section 1.10(c). --111-- "Net Proceeds" shall mean, with respect to any Asset Sale, the Proceeds resulting therefrom net of (a) cash expenses of sale (including brokerage fees, if any, transfer taxes and payment of principal, premium and interest of Indebtedness other than the Loans required to be repaid as a result of such Asset Sale) and (b) incremental income taxes paid or payable as a result thereof. "Non-Compete Agreements" shall have the meaning provided in Section 5.13. "Non-Defaulting Bank" shall mean each Bank other than a Defaulting Bank. "Note" shall mean each A Term Note, each B Term Note, C Term Note, D Term Note, each Revolving Note and the Swingline Note. "Notice of Borrowing" shall have the meaning provided in Section 1.03. "Notice of Conversion" shall have the meaning provided in Section 1.06. "Notice Office" shall mean the office of the Agent located at One Bankers Trust Plaza, New York, New York 10006 or such other office as the Agent may designate to Holdings, the Borrower and the Banks from time to time. "Obligations" shall mean all amounts, direct or indirect, contingent or absolute, of every type or description, and at any time existing, owing to the Agent, the Collateral Agent or any Bank pursuant to the terms of this Agreement or any other Credit Document. "Other Hedging Agreements" shall mean any foreign exchange contracts, currency swap agreements or other similar agreements or arrangements designed to protect against fluctuations in currency values. "Participant" shall have the meaning provided in Section 2.04(a). "Payment Office" shall mean the office of the Agent located at One Bankers Trust Plaza, New York, New York 10006 or such other office as the Agent may designate to Holdings, the Borrower and the Banks from time to time. "PBGC" shall mean the Pension Benefit Guaranty Corporation established pursuant to Section 4002 of ERISA, or any successor thereto. "Pension Plan Refund" shall mean any cash payments (net of reasonable costs associated therewith, including income, excise and other taxes payable thereon) received by Holdings and/or of its Subsidiaries from any return of any surplus assets from any single Plan or Foreign Pension Plan. "Permitted Acquisition" shall have the meaning provided in Section 8.02(u). --112-- "Permitted Covenant" shall mean (i) any periodic reporting covenant, (ii) any covenant restricting payments by Holdings with respect to any securities of Holdings which are junior to the Permitted Holdings PIK Securities, (iii) any covenant the default of which can only result in an increase in the amount of any redemption price, repayment amount, dividend rate or interest rate, (iv) any covenant the default of which gives rise only to rights or remedies which are subject to subordination terms reasonably acceptable to the Agent, (v) any covenant providing board observance rights with respect to Holdings' board of directors and (vi) any other covenant that does not adversely affect the interests of the Banks (as reasonably determined by the Agent). "Permitted Encumbrances" shall mean (i) those liens, encumbrances and other matters affecting title to any Mortgaged Property listed in the Mortgage Policies in respect thereof and found, on the date of delivery of such Mortgage Policies to the Agent in accordance with the terms hereof, reasonably acceptable by the Agent, (ii) as to any particular Mortgaged Property at any time, such easements, encroachments, covenants, rights of way, minor defects, irregularities or encumbrances on title which do not, in the reasonable opinion of the Agent, materially impair such Mortgaged Property for the purpose for which it is held by the mortgagor thereof, or the lien held by the Collateral Agent, (iii) municipal and zoning ordinances, which are not violated in any material respect by the existing improvements and the present use made by the mortgagor thereof of the Premises (as defined in the respective Mortgage), (iv) general real estate taxes and assessments not yet delinquent, and (v) such other items as the Agent may consent to (such consent not to be unreasonably withheld). "Permitted Equity Proceeds" shall have the meaning provided in Section 4.02(A)(d). "Permitted Holdings PIK Securities" shall mean any preferred stock or subordinated promissory note of Holdings (or any security of Holdings that is convertible or exchangeable into any preferred stock or subordinated promissory note of Holdings), so long as the terms of any such preferred stock, subordinated promissory note or security of Holdings (i) do not provide any collateral security, (ii) do not provide any guaranty or other support by the Borrower or any Subsidiaries of the Borrower, (iii) do not contain any mandatory put, redemption, repayment, sinking fund or other similar provision occurring before the eleventh anniversary of the Initial Borrowing Date, (iv) do not require the cash payment of dividends or interest before the eleventh anniversary of the Initial Borrowing Date, (v) do not contain any covenants other than any Permitted Covenant, (vi) do not grant the holders thereof any voting rights except for (x) voting rights required to be granted to such holders under applicable law and (y) limited customary voting rights on fundamental matters such as mergers, consolidations, sales of substantial assets, or liquidations involving Holdings, and (vii) are otherwise reasonably satisfactory to the Agent. "Permitted Liens" shall have the meaning provided in Section 8.03. "Permitted Strategic Equity Issuance" shall mean any issuance of Holdings common stock to a Person, so long as (i) the purpose of such investment in Holdings by such Person is to form or enhance a strategic alliance or relationship with Holdings and/or its Subsidiaries and (ii) after --113-- giving effect to any such issuance of Holdings common stock, such Person and its Affiliates shall not own more than 20% of the common stock of Holdings on a fully diluted basis. "Person" shall mean any individual, partnership, joint venture, firm, corporation, limited liability company, association, trust or other enterprise or any government or political subdivision or any agency, department or instrumentality thereof. "Plan" shall mean any multiemployer or single-employer plan as defined in Section 4001 of ERISA, which is maintained or contributed to by (or to which there is an obligation to contribute of) Holdings, any of its Subsidiaries or any ERISA Affiliate and each such plan for the five calendar year period immediately following the latest date on which Holdings, any of its Subsidiaries or any ERISA Affiliate maintained, contributed to or had an obligation to contribute to such plan. "Pledge Agreement" shall have the meaning provided in Section 5.10(a). "Pledged Securities" shall mean all the Pledged Securities as defined the Pledge Agreement. "Prime Lending Rate" shall mean the rate which BTCo announces from time to time as its prime lending rate, the Prime Lending Rate to change when and as such prime lending rate changes. The Prime Lending Rate is a reference rate and does not necessarily represent the lowest or best rate actually charged to any customer. BTCo may make commercial loans or other loans at rates of interest at, above or below the Prime Lending Rate. "Proceeds" shall mean, with respect to any Asset Sale, the aggregate cash payments (including any cash received by way of deferred payment pursuant to a note receivable issued in connection with such Asset Sale, other than the portion of such deferred payment con stituting interest, but only as and when so received) received by Holdings and/or any of its Sub sidiaries from such Asset Sale. "Projections" shall have the meaning provided in Section 5.16. "Purchased Interest" shall have the meaning provided in the Accounts Receivable Pooling and Servicing Agreement. "Quarterly Payment Date" shall mean the last Business Day of each March, June, September and December. "Real Property" of any Person shall mean all of the right, title and interest of such Person in and to land, improvements and fixtures, including Leaseholds. "Receivables Entity" shall mean a Wholly-Owned Subsidiary of the Borrower which engages in no activities other than in connection with the financing of accounts receivable of the --114-- Designated Credit Parties and which is designated (as provided below) as the Receivables Entity (a) no portion of the Indebtedness or any other obligations (contingent or otherwise) of which (i) is guaranteed by Holdings or any other Subsidiary of Holdings (excluding guarantees of obligations (other than the principal of, and interest on, Indebtedness)) pursuant to Standard Securitization Undertakings, (ii) is recourse to or obligates Holdings or any other Subsidiary of Holdings in any way other than pursuant to Standard Securitization Undertakings or (iii) subjects any property or asset of Holdings or any other Subsidiary of Holdings, directly or indirectly, con tingently or otherwise, to the satisfaction thereof, other than pursuant to Standard Securitization Undertakings, (b) with which neither Holdings nor any of its Subsidiaries has any contract, agreement, arrangement or understanding (other than pursuant to the Accounts Receivable Facility Documents (including with respect to fees payable in the ordinary course of business in connection with the servicing of accounts receivable and related assets)) on terms less favorable to Holdings or such Subsidiary than those that might be obtained at the time from persons that are not Affiliates of Holdings, and (c) to which neither Holdings nor any other Subsidiary of Holdings has any obligation to maintain or preserve such entity's financial condition or cause such entity to achieve certain levels of operating results. Any such designation shall be evidenced to the Agent by filing with the Agent an officer's certificate of the Borrower certifying that, to the best of such officer's knowledge and belief after consultation with counsel, such designation com plied with the foregoing conditions. "Receivables Purchase Money Note" shall mean those purchase money notes issued by the Receivables Entity to the Designated Credit Parties pursuant to the terms of the Accounts Receivable Facility Documents. "Receivable Stated Amount" shall mean, with respect to an Investor Certificate or a Purchased Interest, the maximum amount of the funding commitment with respect thereto. "Recovery Event" shall mean the receipt by Holdings or any of its Subsidiaries of any insurance or condemnation proceeds payable (i) by reason of any theft, physical destruction or damage or any other similar event with respect to any properties or assets of Holdings or any of its Subsidiaries, (ii) by reason any condemnation, taking, seizing or similar event with respect to any properties or assets of Holdings or any of its Subsidiaries and (iii) under any policy of insurance required to be maintained under Section 7.03. "Refinancing" shall mean and include (i) the refinancing and repayment in full of all amounts outstanding under, and the termination in full of all commitments and letters of credit (other than letters of credit incorporated hereunder as Existing Letters of Credit pursuant to Section 2.01(d)) in respect of, the Indebtedness to be Refinanced and (ii) the repurchase, retirement or redemption by the Borrower of all or a portion (as and to the extent permitted under Section 5.09(c)(ii)) of the outstanding Existing Senior Subordinated Notes. "Refinancing Documents" shall mean each of the agreements, documents and instruments entered into in connection with the Refinancing. --115-- "Registration Rights Agreement" shall mean the Registration Rights Agreement, dated as of December 20, 1994, among Holdings, the Borrower, Bain Capital and GS Capital, as the same may be amended, modified or supplemented from time to time, in accordance with the terms hereof and thereof. "Register" shall have the meaning provided in Section 7.13. "Regulation D" shall mean Regulation D of the Board of Governors of the Federal Reserve System as from time to time in effect and any successor to all or a portion thereof establishing reserve requirements. "Regulation U" shall mean Regulation U of the Board of Governors of the Federal Reserve System as from time to time in effect and any successor to all or a portion thereof establishing margin requirements. "Related Party" shall mean (i) in the case of GS Capital, (a) stockholders or partners of GS Capital on the Effective Date or (b) any trust, corporation, partnership or other entity, the beneficiaries, stockholders, partners, owners or Persons beneficially holding an 80% or more controlling interest of which consist of GS Capital and/or such other Persons referred to in the immediately preceding clause (i)(a), and (ii) in the case of Bain Capital, any Affiliate of Bain Capital on the Effective Date, provided that for purposes -------- of the definition of "Change of Control Event," the term Related Party shall not include (x) any portfolio company of Bain Capital or any Affiliate of Bain Capital or (y) any officer or director of Holdings or any of its Subsidiaries if not also a partner or stockholder of Bain Capital on the Effective Date. "Release" means disposing, discharging, injecting, spilling, pumping, leaking, leaching, dumping, emitting, escaping, emptying, seeping, placing, pouring and the like, into or upon any land or water or air, or otherwise entering into the environment. "Replaced Bank" shall have the meaning provided in Section 1.13. "Replacement Bank" shall have the meaning provided in Section 1.13. "Reportable Event" shall mean an event described in Section 4043(c) of ERISA with respect to a Plan other than those events as to which the 30-day notice period is waived under subsection .13, .14, .16, .18, .19 or .20 of PBGC Regulation Section 2615. "Required Banks" shall mean Non-Defaulting Banks the sum of whose outstand ing Term Loans and Revolving Loan Commitments (or, if after the Total Revolving Loan Commitment has been terminated, outstanding Revolving Loans and RL Percentages of outstanding Swingline Loans and Letter of Credit Outstandings) constitute greater than 50% of the sum of (i) the total outstanding Term Loans of Non-Defaulting Banks and (ii) the Total Revolving Loan Commitment less the aggregate Revolving Loan Commitments of Defaulting Banks (or, if after the Total Revolving Loan Commitment has been terminated, the total outstanding Revolving Loans of Non- --116-- Defaulting Banks and the aggregate RL Percentages of all Non-Defaulting Banks of the total outstanding Swingline Loans and Letter of Credit Outstandings at such time). "Restructuring Expenditures" shall mean nonrecurring charges arising out of the restructuring, consolidation, severance or discontinuance of any portion of the operations of any entities or businesses of Holdings and its Subsidiaries in connection with the Acquisition and the Baxter Acquisition. "Restructuring Reserves" shall mean reserves maintained on the consolidated balance sheet of Holdings and its Subsidiaries with respect to Restructuring Expenditures. "Returns" shall have the meaning provided in Section 6.23. "Revolving Loan" shall have the meaning provided in Section 1.01(A)(e). "Revolving Loan Commitment" shall mean, with respect to each Bank, the amount set forth opposite such Bank's name in Annex I directly below the column entitled "Revolving Loan Commitment," as the same may be reduced from time to time pursuant to Section 3.02, 3.03, 4.01(b) and/or 9 or otherwise modified pursuant to Section 1.13 and/or 12.04(b). "Revolving Loan Facility" shall mean the Facility evidenced by the Total Revolving Loan Commitment. "Revolving Loan Maturity Date" shall mean December 31, 2001. "Revolving Note" shall have the meaning provided in Section 1.05(a). "RL Bank" shall mean at any time each Bank with a Revolving Loan Commitment or with outstanding Revolving Loans. "RL Percentage" shall mean at any time for each RL Bank, the percentage obtained by dividing such RL Bank's Revolving Loan Commitment by the Total Revolving Loan Commitment; provided, that if the Total Revolving Loan -------- Commitment has been terminated, the RL Percentage of each RL Bank shall be determined by dividing such RL Bank's Revolving Loan Commitment immediately prior to such termination by the Total Revolving Loan Commitment immediately prior to such termination. "Rollover Amount" shall have the meaning provided in Section 8.09(b). "Scheduled A Repayment" shall have the meaning provided in Section 4.02(A)(b)(i). "Scheduled B Repayment" shall have the meaning provided in Section 4.02(A)(b)(ii). "Scheduled C Repayment" shall have the meaning provided in Section 4.02(A)(b)(iii). --117-- "Scheduled D Repayment" shall have the meaning provided in Section 4.02(A)(b)(iv). "Scheduled Repayment" shall mean any Scheduled A Repayment, Scheduled B Repayment, Scheduled C Repayment and Scheduled D Repayment. "SEC" shall mean the Securities and Exchange Commission or any successor thereto. "Section 4.04(b)(ii) Certificate" shall have the meaning provided in Section 4.04(b)(ii). "Secured Creditors" shall have the meaning provided in the respective Security Documents. "Security Agreement" shall have the meaning provided in Section 5.10(b). "Security Agreement Collateral" shall mean all "Collateral" as defined in the Security Agreement. "Security Documents" shall mean and include the Security Agreement, the Pledge Agreement, each Mortgage, each Additional Security Document, if any and each other document or instrument entered into pursuant to Sections 5.10 and 7.16, if any, in each case as and when executed and delivered in accordance with the terms of this Agreement and as the same may be amended, modified or supplemented from time to time in accordance with the terms thereof and hereof. "Seeded Instrument Sale" shall mean the sale, transfer or other disposition of seeded instruments of the Borrower and/or one or more of its Subsidiaries to a financial institution. "Seeded Instrument Transaction" shall mean a transaction in which (i) the Borrower and/or one or more of its Subsidiaries sells a seeded instrument to a financial institution, (ii) such financial institution leases such instrument back to the Borrower or such Subsidiary and (iii) the Borrower or such Subsidiary subleases such seeded instruments to third party customers of the Borrower or such Subsidiary conducting business in Spain, Italy or Japan. "Seller" shall mean, collectively, E.I. du Pont de Nemours & Co., a Delaware corporation, and its Affiliates. "Seller Account" shall have the meaning provided in the Accounts Receivable Facility Documents. "Senior Officer" shall mean Chief Executive Officer, President, Chief Financial Officer, Treasurer, Controller or Secretary or any other senior officer of Holdings or any of its Subsidiaries with knowledge of, or responsibility for, the financial affairs of such Person. --118-- "Senior Subordinated Note Documents" shall mean and include each of the docu ments and other agreements entered into (including, without limitation, the Senior Subordinated Note Indenture) relating to the issuance by the Borrower of the Senior Subordinated Notes, as in effect on the Initial Borrowing Date (to the extent thereof) and as the same may be entered into, modified, supplemented or amended from time to time pursuant to the terms hereof and thereof. "Senior Subordinated Note Indenture" shall mean the Indenture entered into by and between the Borrower and IBJ Schroder Bank & Trust Company, as trustee thereunder, as in effect on the Initial Borrowing Date and as the same may be modified, amended or supplemented from time to time in accordance with the terms hereof and thereof. "Senior Subordinated Notes" shall mean the Series A Senior Subordinated Notes and any Series B Senior Subordinated Notes issued in exchange therefor in accordance with the terms of the Senior Subordinated Note Indenture. "Series A Senior Subordinated Notes" shall mean the Borrower's 11-1/8% Senior Subordinated Notes due 2006, as in effect on the Initial Borrowing Date and as the same may be modified, supplemented or amended from time to time pursuant to the terms hereof and thereof. "Series B Senior Subordinated Notes" shall mean the Borrower's 11-1/8% Series B Senior Subordinated Notes due 2006 issued in exchange for Series A Senior Subordinated Notes, in the form set forth in the Senior Subordinated Note Indenture as in effect on the Initial Borrowing Date, and as such Series B Senior Subordinated Notes may be modified, supplemented or amended from time to time, pursuant to the terms hereof and thereof. "Services Agreement" shall mean, collectively, (i) the Transition Services Agreement, dated as of December 20, 1994, among Holdings, the Borrower and Baxter, as amended, modified or supplemented from time to time, in accordance with the terms hereof and thereof and (ii) the IVD Services Agreement. "Shareholder Subordinated Note" shall mean an unsecured junior subordinated note issued by Holdings (and not guaranteed or supported in any way by the Borrower or any of its Subsidiaries) in the form of Exhibit M, as the same may be amended, modified or supplemented from time to time pursuant to the terms hereof and thereof. "Shareholders' Agreements" shall have the meaning set forth in Section 5.13(d). "Stand Alone Expenditures" shall mean Capital Expenditures made by the Borrower or any of its Subsidiaries to achieve stand alone functionality with respect to the entities or businesses acquired pursuant to the Acquisition or the Baxter Acquisition and any relocation expenditures made in connection with the Acquisition or the Baxter Acquisition. "Standard Securitization Undertakings" means representations, warranties, covenants and indemnities entered into by Holdings or any Subsidiary thereof in connection with the Accounts --119-- Receivable Facility which are reasonably customary in an off-balance-sheet accounts receivable transaction. "Stated Amount" of each Letter of Credit shall mean at any time the maximum amount available to be drawn thereunder (regardless of whether any conditions for drawing could then be met). "Stockholders' Agreement" shall mean the Stockholders' Agreement, dated as of December 20, 1994 among GS Capital, Holdings, Bain Capital Fund IV, L.P., Bain Capital Fund IV-B, L.P., BCIP Associates, BCIP Trust Associates, L.P., Bridge Street Fund 1994, L.P., Stone Street Fund 1994, L.P. and Randolph Street Partners, as amended, modified or supplemented from time to time, in accordance with the terms hereof and thereof. "Subscription Agreement" shall mean the Subscription Agreement dated as of December 20, 1994 among Holdings, Bain Capital Fund IV, L.P., Bain Capital Fund IV-B, L.P., BCIP Associates, BCIP Trust Associates, L.P., Randolph Street Partners, GS Capital Partners, L.P., Bridge Street Fund 1994, L.P. and Stone Street Fund 1994, L.P., as amended, modified or supplemented from time to time, in accordance with the terms hereof and thereof. "Subsidiary" of any Person shall mean and include (i) any corporation more than 50% of whose stock of any class or classes having by the terms thereof ordinary voting power to elect a majority of the directors of such corporation (irrespective of whether or not at the time stock of any class or classes of such corporation shall have or might have voting power by reason of the happening of any contingency) is at the time owned by such Person directly or indirectly through Subsidiaries and (ii) any partnership, association, joint venture or other entity in which such Person directly or indirectly through Subsidiaries, has more than a 50% equity interest at the time. "Subsidiary Guarantor" shall mean each Subsidiary of the Borrower (other than a Foreign Subsidiary except to the extent otherwise provided in Section 7.16) that is or becomes a party to the Subsidiary Guaranty. "Subsidiary Guaranty" shall have the meaning provided in Section 5.11. "Supermajority Banks" of any Facility shall mean those Non-Defaulting Banks which would constitute the Required Banks under, and as defined in, this Agreement if (x) all outstanding Obligations of the other Facilities under this Agreement were repaid in full and all Commitments with respect thereto were terminated and (y) the percentage "50%" contained therein were changed to "66- 2/3%." "Swingline Expiry Date" shall mean the date which is five Business Days prior to the Revolving Loan Maturity Date. "Swingline Loan" shall have the meaning provided in Section 1.01(B). --120-- "Swingline Note" shall have the meaning provided in Section 1.05(a). "Syndication Date" shall have the meaning provided in Section 1.01(A)(a). "Tax Allocation Agreements" shall have the meaning provided in Section 5.13(h). "Tax Indemnity Letter" shall mean the Tax Law Change Indemnity Letter, dated December 16, 1994, between Holdings and Baxter International Inc. "Taxes" shall have the meaning provided in Section 4.04. "Term Loan" shall mean each A Term Loan, each B Term Loan, each C Term Loan and each D Term Loan. "Term Loan Commitment" shall mean, with respect to each Bank at any time, the sum of the A Term Loan Commitment, the B Term Loan Commitment, the C Term Loan Commitment and the D Term Loan Commitment of such Bank at such time. "Term Loan Facilities" shall mean the A Term Loan Facility, the B Term Loan Facility, the C Term Loan Facility and the D Term Loan Facility. "Test Period" shall mean (i) for any determination made prior to June 30, 1997, the period from July 1, 1996 to the last day of the fiscal quarter of the Borrower then last ended and (ii) for any determination made thereafter, the four consecutive fiscal quarters of the Borrower then last ended. "TOA Expenditures" shall mean the expenditures intended to be made by the Borrower and its Subsidiaries in 1996 and 1997 to replace existing MLA instruments held by customers with TOA instruments. "Total A Term Loan Commitment" shall mean the sum of the A Term Loan Commitments of each of the Banks. "Total B Term Loan Commitment" shall mean the sum of the B Term Loan Commitments of each of the Banks. "Total C Term Loan Commitment" shall mean the sum of the C Term Loan Commitments of each of the Banks. "Total Commitment" shall mean the sum of the Total Term Loan Commitment and the Total Revolving Loan Commitment. "Total D Term Loan Commitment" shall mean the sum of the D Term Loan Commitments of each of the Banks. --121-- "Total Revolving Loan Commitment" shall mean the sum of the Revolving Loan Commitments of each of the RL Banks. "Total Term Loan Commitment" shall mean the sum of the Total A Term Loan Commitment, the Total B Term Loan Commitment, the Total C Term Loan Commitment and the Total D Term Loan Commitment. "Total Unutilized Revolving Loan Commitment" shall mean, at any time, (i) the Total Revolving Loan Commitment at such time less (ii) the sum of the aggregate principal amount of all Revolving Loans and Swingline Loans at such time plus the Letter of Credit Outstandings at such time. "Transaction" shall mean, collectively, (i) the Acquisition, (ii) the Refinancing, (iii) the issuance by the Borrower of the Senior Subordinated Notes, (iv) the Existing Senior Subordinated Notes Tender Offer/Consent Solicitation, (v) the occurrence of Credit Events hereunder on the Initial Borrowing Date, (vi) such other transactions as contemplated by the Documents and (vii) the payment of fees and expenses in connection with the foregoing. "Trustee" shall mean the trustee under the Accounts Receivable Facility, the Supplement to the Accounts Receivable Pooling and Servicing Agreement and the Accounts Receivable Facility Pooling and Servicing Agreement, which trustee shall be satisfactory to the Agent in its reasonable discretion. "Type" shall mean any type of Loan determined with respect to the interest option applicable thereto, i.e., a Base Rate Loan or a Eurodollar Loan. ----- "UCC" shall mean the Uniform Commercial Code as in effect from time to time in the relevant jurisdiction. "Unfunded Current Liability" of any Plan shall mean the amount, if any, by which the actuarial present value of the accumulated plan benefits under the Plan as of the close of its most recent plan year exceeds the fair market value of the assets allocable thereto, each determined in accordance with Statement of Financial Accounting Standards No. 35, based upon the actuarial assumptions used by the Plan's actuary in the most recent annual valuation of the Plan. "Unpaid Drawing" shall have the meaning provided in Section 2.03(a). "U.S. Dollars" and the sign "$" shall each mean freely transferable lawful money of the United States of America. "Vendor Financing Program" shall mean a vendor financial services program between the Borrower and/or one or more of its Subsidiaries and a financial institution pursuant to which (i) the Borrower and/or such Subsidiary effects Seeded Instrument Sales to such financial institution and --122-- (ii) such financial institution leases the seeded instruments so acquired to third party customers of the Borrower and/or such Subsidiary. "VWR" shall mean VWR Scientific Products Corporation. "Waivable Mandatory Repayment" shall have the meaning provided in Section 4.02(C). "Wholly-Owned Subsidiary" shall mean, as to any Person, (i) any corporation 100% of whose capital stock (other than director's qualifying shares and/or other nominal amounts of shares required to be held other than by such Person under applicable law) is at the time owned by such Person and/or one or more Wholly-Owned Subsidiaries of such Person and (ii) any partnership, association, joint venture or other entity in which such Person and/or one or more Wholly-Owned Subsidiaries of such Person has a 100% equity interest at such time. "Working Capital" shall mean the excess of Consolidated Current Assets over Consolidated Current Liabilities. "Written," "written" or "in writing" shall mean any form of written communication or a communication by means of telex, facsimile device, telegraph or cable. SECTION 11. The Agent. --------- 11.01 Appointment. Each Bank hereby irrevocably designates and ----------- appoints BTCo as Agent of such Bank (such term to include for purposes of this Section 11, BTCo acting as Collateral Agent) to act as specified herein and in the other Credit Documents, and each such Bank hereby irrevocably authorizes BTCo as the Agent to take such action on its behalf under the provisions of this Agreement and the other Credit Documents and to exercise such powers and perform such duties as are expressly delegated to the Agent by the terms of this Agreement and the other Credit Documents, together with such other powers as are reasonably incidental thereto. The Agent agrees to act as such upon the express conditions contained in this Section 11. Notwithstanding any provision to the contrary elsewhere in this Agreement or in any other Credit Document, the Agent shall not have any duties or responsibilities, except those expressly set forth herein or in the other Credit Documents, or any fiduciary relationship with any Bank, and no implied covenants, functions, responsibilities, duties, obligations or liabilities shall be read into this Agreement or otherwise exist against the Agent. The provisions of this Section 11 are solely for the benefit of the Agent and the Banks, and neither Holdings nor any of its Subsidiaries shall have any rights as a third party beneficiary of any of the provisions hereof. In performing its functions and duties under this Agreement, the Agent shall act solely as agent of the Banks and the Agent does not assume and shall not be deemed to have assumed any obligation or relationship of agency or trust with or for Holdings or any of its Subsidiaries. 11.02 Delegation of Duties. The Agent may execute any of its duties -------------------- under this Agreement or any other Credit Document by or through agents or attorneys-in-fact and shall be --123-- entitled to advice of counsel concerning all matters pertaining to such duties. The Agent shall not be responsible for the negligence or misconduct of any agents or attorneys-in-fact selected by it with reasonable care except to the extent otherwise required by Section 11.03. 11.03 Exculpatory Provisions. Neither the Agent nor any of its ---------------------- officers, directors, employees, agents, attorneys-in-fact or affiliates shall be (i) liable for any action lawfully taken or omitted to be taken by it or such Person in its capacity as Agent under or in connection with this Agreement or the other Credit Documents (except for its or such Person's own gross negligence or willful misconduct) or (ii) responsible in any manner to any of the Banks for any recitals, statements, representations or warranties made by Holdings, any of its Subsidiaries or any of their respective officers contained in this Agreement or the other Credit Documents, any other Document or in any certificate, report, statement or other document referred to or provided for in, or received by the Agent under or in connection with, this Agreement or any other Document or for any failure of Holdings or any of its Subsidiaries or any of their respective officers to perform its obligations hereunder or thereunder. The Agent shall not be under any obligation to any Bank to ascertain or to inquire as to the observance or performance of any of the agreements contained in, or conditions of, this Agreement or the other Documents, or to inspect the properties, books or records of Holdings or any of its Subsidiaries. The Agent shall not be responsible to any Bank for the effectiveness, genuineness, validity, enforceability, col lectability or sufficiency of this Agreement or any other Document or for any representations, warranties, recitals or statements made herein or therein or made in any written or oral statement or in any financial or other statements, instruments, reports, certificates or any other documents in connection herewith or therewith furnished or made by the Agent to the Banks or by or on behalf of Holdings or any of its Subsidiaries to the Agent or any Bank or be required to ascertain or inquire as to the performance or observance of any of the terms, conditions, provisions, coven ants or agreements contained herein or therein or as to the use of the proceeds of the Loans or of the existence or possible existence of any Default or Event of Default. 11.04 Reliance by Agent. The Agent shall be entitled to rely, and ----------------- shall be fully protected in relying, upon any note, writing, resolution, notice, consent, certificate, affidavit, letter, cablegram, telegram, facsimile, telex or teletype message, statement, order or other docu ment or conversation believed by it to be genuine and correct and to have been signed, sent or made by the proper Person or Persons and upon advice and statements of legal counsel (including, without limitation, counsel to Holdings or any of its Subsidiaries), independent accountants and other experts selected by the Agent. The Agent shall be fully justified in failing or refusing to take any action under this Agreement or any other Credit Document unless it shall first receive such advice or concurrence of the Required Banks as it deems appropriate or it shall first be indemnified to its satisfaction by the Banks against any and all liability and expense which may be incurred by it by reason of taking or continuing to take any such action. The Agent shall in all cases be fully protected in acting, or in refraining from acting, under this Agreement and the other Credit Documents in accordance with a request of the Required Banks (or all of the Banks, to the extent required by this Agreement), and such request and any action taken or failure to act pursuant thereto shall be binding upon all the Banks. --124-- 11.05 Notice of Default. The Agent shall not be deemed to have ----------------- knowledge or notice of the occurrence of any Default or Event of Default hereunder unless the Agent has actually received notice from a Bank, Holdings or the Borrower referring to this Agreement, describing such Default or Event of Default and stating that such notice is a "notice of default." In the event that the Agent receives such a notice, the Agent shall give prompt notice thereof to the Banks. The Agent shall take such action with respect to such Default or Event of Default as shall be reasonably directed by the Required Banks; provided, that, unless and until the Agent shall have received such directions, - -------- the Agent may (but shall not be obligated to) take such action, or refrain from taking such action, with respect to such Default or Event of Default as it shall deem advisable in the best interests of the Banks. 11.06 Non-Reliance on Agent and Other Banks. Each Bank expressly ------------------------------------- acknowledges that neither the Agent nor any of its respective officers, directors, employees, agents, attor neys-in-fact or affiliates have made any representations or warranties to it and that no act by the Agent hereinafter taken, including any review of the affairs of Holdings or any of its Subsidiaries, shall be deemed to constitute any representation or warranty by the Agent to any Bank. Each Bank represents to the Agent that it has, independently and without reliance upon the Agent or any other Bank, and based on such documents and information as it has deemed appropriate, made its own appraisal of and investigation into the business, assets, operations, property, financial and other condition, prospects and creditworthiness of Holdings and its Subsidiaries and made its own decision to make its Loans hereunder and enter into this Agreement. Each Bank also represents that it will, independently and without reliance upon the Agent or any other Bank, and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit analysis, appraisals and decisions in taking or not taking action under this Agreement, and to make such investigation as it deems necessary to inform itself as to the busi ness, assets, operations, property, financial and other condition, prospects and creditworthiness of Holdings and its Subsidiaries. The Agent shall not have any duty or responsibility to provide any Bank with any credit or other information concerning the business, operations, assets, prop erty, financial and other condition, prospects or creditworthiness of Holdings or any of its Subsidiaries which may come into the possession of the Agent or any of its officers, directors, employees, agents, attorneys-in-fact or affiliates. 11.07 Indemnification. The Banks agree to indemnify the Agent in its --------------- capacity as such ratably according to their respective "percentages" as used in determining the Required Banks at such time, from and against any and all liabilities, obligations, losses, damages, pen alties, actions, judgments, suits, costs, reasonable expenses or disbursements of any kind whatso ever which may at any time (including, without limitation, at any time following the payment of the Obligations) be imposed on, incurred by or asserted against the Agent in its capacity as such in any way relating to or arising out of this Agreement or any other Credit Document, or any documents contemplated by or referred to herein or the transactions contemplated hereby or any action taken or omitted to be taken by the Agent under or in connection with any of the foregoing, but only to the extent that any of the foregoing is not paid by Holdings or any of its Subsidiaries; provided, that no Bank shall be liable to -------- the Agent for the payment of any portion of such lia bilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or dis bursements resulting primarily from the gross negligence or willful misconduct of the Agent. To the extent any Bank would be required to --125-- indemnify the Agent pursuant to the immediately preceding sentence but for the fact that it is a Defaulting Bank, such Defaulting Bank shall not be entitled to receive any portion of any payment or other distribution hereunder until each other Bank shall have been reimbursed for the excess, if any, of the aggregate amount paid by such Bank under this Section 11.07 over the aggregate amount such Bank would have been obligated to pay had such first Bank not been a Defaulting Bank. If any indemnity furnished to the Agent for any purpose shall, in the opinion of the Agent be insufficient or become impaired (other than as a result of the gross negligence or willful misconduct of the Agent), the Agent may call for additional indemnity and cease, or not commence, to do the acts indemnified against until such additional indemnity is furnished. The agreements in this Section 11.07 shall survive the payment of all Obligations. 11.08 Agent in its Individual Capacity. The Agent and its affiliates -------------------------------- may make loans to, accept deposits from and generally engage in any kind of business with Holdings and its Subsidiaries as though the Agent were not the Agent hereunder. With respect to the Loans made by it and all Obligations owing to it, the Agent shall have the same rights and powers under this Agreement as any Bank and may exercise the same as though it were not the Agent and the terms "Bank" and "Banks" shall include the Agent in its individual capacity. 11.09 Holders. The Agent may deem and treat the payee of any Note as ------- the owner thereof for all purposes hereof unless and until a written notice of the assignment, transfer or endorsement thereof, as the case may be, shall have been filed with the Agent. Any request, authority or consent of any Person or entity who, at the time of making such request or giving such authority or consent, is the holder of any Note shall be conclusive and binding on any subsequent holder, transferee, assignee or indorsee, as the case may be, of such Note or of any Note or Notes issued in exchange therefor. 11.10 Resignation of the Agent; Successor Agent. The Agent may resign ----------------------------------------- as the Agent upon 20 days' notice to the Banks. Upon the resignation of the Agent, the Required Banks shall appoint from among the Banks a successor Agent which is a bank or a trust company for the Banks subject, to the extent that no payment Default or Event of Default has occurred and is then continuing, to prior approval by the Borrower (such approval not to be unreasonably withheld or delayed), whereupon such successor agent shall succeed to the rights, powers and duties of the Agent, and the term "Agent" shall include such successor agent effective upon its appointment, and the resigning Agent's rights, powers and duties as the Agent shall be terminated, without any other or further act or deed on the part of such former Agent or any of the parties to this Agreement. If a successor Agent shall not have been so appointed within such 20 day period after the date such notice of resignation was given by the Agent, the Agent's resignation shall become effective and the Banks shall thereafter perform all duties of the Agent hereunder and/or under any other Credit Documents until such time, if any, as the Required Banks appoint a successor Agent as provided above. After the resignation of the Agent hereunder, the provisions of this Section 11 shall inure to its benefit as to any actions taken or omitted to be taken by it while it was Agent under this Agreement. --126-- SECTION 12. Miscellaneous. ------------- 12.01 Payment of Expenses, etc. The Borrower hereby agrees to: (i) ------------------------- whether or not the transactions herein contemplated are consummated, pay all reasonable out-of-pocket costs and expenses of the Agent (including, without limitation, the reasonable fees and disburse ments of White & Case and local counsel) in connection with the negotiation, preparation, execution and delivery of the Credit Documents and the documents and instruments referred to therein and any amendment, waiver or consent relating thereto and in connection with the Agent's syndication efforts with respect to this Agreement; (ii) pay all reasonable out-of-pocket costs and expenses of the Agent and each of the Banks in connection with the enforcement of the Credit Documents and the documents and instruments referred to therein and, after an Event of Default shall have occurred and be continuing, the protection of the rights of the Agent and each of the Banks thereunder (including, without limitation, the reasonable fees and disbursements of counsel (including in-house counsel) for the Agent and for each of the Banks); (iii) pay and hold each of the Banks harmless from and against any and all present and future stamp and other similar taxes with respect to the foregoing matters and save each of the Banks harmless from and against any and all liabilities with respect to or resulting from any delay or omission (other than to the extent attributable to such Bank) to pay such taxes; and (iv) indemnify the Agent, the Collateral Agent and each Bank, its officers, directors, trustees, employees, representatives and agents from and hold each of them harmless against any and all losses, liabilities, claims, damages or expenses incurred by any of them as a result of, or arising out of, or in any way related to, or by reason of, (a) any investigation, litigation or other proceeding (whether or not the Agent, the Collateral Agent or any Bank is a party thereto and whether or not any such investigation, litigation or other proceeding is between or among the Agent, the Collateral Agent, any Bank, any Credit Party or any third Person or otherwise) related to the entering into and/or performance of this Agreement or any other Document or the use of the proceeds of any Loans hereunder or the Transaction or the consummation of any other transactions contemplated in any Document (but excluding any such losses, liabilities, claims, damages or expenses to the extent incurred by reason of the gross negligence or willful misconduct of the Person to be indemnified), or (b) the actual or alleged presence of Hazardous Materials in the air, surface water or groundwater or on the surface or subsurface of any Real Property or any Environmental Claim, in each case, including, without limitation, the reasonable fees and disbursements of counsel and independent consultants incurred in connection with any such investigation, litigation or other proceeding. 12.02 Right of Setoff; Collateral Matters. (a) In addition to any ----------------------------------- rights now or hereafter granted under applicable law or otherwise, and not by way of limitation of any such rights, upon the occurrence of an Event of Default, each Bank is hereby authorized at any time or from time to time, without presentment, demand, protest or other notice of any kind to Holdings or any of its Subsidiaries or to any other Person, any such notice being hereby expressly waived, to set off and to appropriate and apply any and all deposits (general or special) and any other Indebtedness at any time held or owing by such Bank (including, without limitation, by branches and agencies of such Bank wherever located) to or for the credit or the account of Holdings or any of its Subsidiaries against and on account of the Obligations of Holdings or any of its Subsidiaries to such Bank under this Agreement or under any of the other Credit Documents, including, without limitation, all interests in Obligations of Holdings or any of its Subsidiaries purchased by such Bank pursuant to --127-- Section 12.06(b), and all other claims of any nature or description arising out of or connected with this Agreement or any other Credit Document, irrespective of whether or not such Bank shall have made any demand hereunder and although said Obligations shall be contingent or unmatured. (b) NOTWITHSTANDING THE FOREGOING SUBSECTION (a), AT ANY TIME THAT THE LOANS OR ANY OTHER OBLIGATION SHALL BE SECURED BY REAL PROPERTY LOCATED IN CALIFORNIA, NO BANK SHALL EXERCISE A RIGHT OF SETOFF, BANKER'S LIEN OR COUNTERCLAIM OR TAKE ANY COURT OR ADMINISTRATIVE ACTION OR INSTITUTE ANY PROCEEDING TO ENFORCE ANY PROVISION OF THIS AGREEMENT OR ANY NOTE THAT IS NOT TAKEN BY THE REQUIRED BANKS OR APPROVED IN WRITING BY THE REQUIRED BANKS IF SUCH SETOFF OR ACTION OR PROCEEDING WOULD OR MIGHT (PURSUANT TO SECTIONS 580a, 580b, 580d AND 726 OF THE CALIFORNIA CODE OF CIVIL PROCEDURE OR SECTION 2924 OF THE CALIFORNIA CIVIL CODE, IF APPLICABLE, OR OTHERWISE) AFFECT OR IMPAIR THE VALIDITY, PRIORITY OR ENFORCEABILITY OF THE LIENS GRANTED TO THE COLLATERAL AGENT PURSUANT TO THE SECURITY DOCUMENTS OR THE ENFORCEABILITY OF THE NOTES AND OTHER OBLIGATIONS HEREUNDER, AND ANY ATTEMPTED EXERCISE BY ANY BANK OF ANY SUCH RIGHT WITHOUT OBTAINING SUCH CONSENT OF THE REQUIRED BANKS SHALL BE NULL AND VOID. THIS SUBSECTION (b) SHALL BE SOLELY FOR THE BENEFIT OF EACH OF THE BANKS HEREUNDER. 12.03 Notices. Except as otherwise expressly provided herein, all ------- notices and other communications provided for hereunder shall be in writing (including telegraphic, telex, facsimile or cable communication) and mailed, telegraphed, telexed, telecopied, cabled or deliv ered, if to any Credit Party, at the address specified opposite its signature below or in the other relevant Credit Documents, as the case may be; if to any Bank, at its address specified for such Bank on Annex II; or, at such other address as shall be designated by any party in a written notice to the other parties hereto. All such notices and communications shall be mailed, telegraphed, telexed, telecopied or cabled or sent by overnight courier, and shall be effective when received. 12.04 Benefit of Agreement. (a) This Agreement shall be binding upon -------------------- and inure to the benefit of and be enforceable by the respective successors and assigns of the parties hereto; provided, however, no Credit Party may assign or -------- ------- transfer any of its rights, obligations or interest hereunder or under any other Credit Document without the prior written consent of all of the Banks and, provided further, that (x) no Bank may transfer or assign all or any portion of - ---------------- its Commitments hereunder except as provided in Section 12.04(b), and (y) although any Bank may grant participations in its rights hereunder pursuant to this Section 12.04(a), such Bank shall remain a "Bank" for all purposes hereunder and the participant shall not constitute a "Bank" hereunder and, provided further, that no Bank shall grant any participation under which the - ---------------- participant shall have rights to approve any amendment to or waiver of this Agreement or any other Credit Document except to the extent such amendment or waiver would (i) extend the final scheduled maturity of any Loan, Note or Letter of Credit (unless such Letter of Credit is not extended beyond the Revolving Loan Maturity Date) in which such participant is participating, or reduce the rate or extend the time of payment of --128-- interest or Fees thereon (except in connection with a waiver of applicability of any post-default increase in interest rates) or reduce the principal amount thereof, or increase the amount of the participant's participation over the amount thereof then in effect (it being understood that a waiver of any Default or Event of Default or of a man datory reduction in the Total Commitment shall not constitute a change in the terms of such participation, and that an increase in any Commitment or Loan shall be permitted without the consent of any participant if the participant's participation is not increased as a result thereof), (ii) consent to the assignment or transfer by the Borrower of any of its rights and obligations under this Agreement or (iii) release all or substantially all of the Collateral under all of the Security Documents (except as expressly provided in the Credit Documents) supporting the Loans hereunder in which such participant is participating. In the case of any such participation, the participant shall not have any rights under this Agreement or any of the other Credit Documents (the participant's rights against such Bank in respect of such participation to be those set forth in the agreement executed by such Bank in favor of the participant relating thereto) and all amounts payable by the Borrower hereunder shall be determined as if such Bank had not sold such participation. (b) Notwithstanding the foregoing, any Bank (or any Bank together with one or more other Banks) may (x) assign all or a portion of its Revolving Loan Commitment (and related outstanding Obligations hereunder) and/or its outstanding Term Loans to its parent company and/or any affiliate of such Bank which is at least 50% owned by such Bank or its parent company or to one or more Banks or (y) assign all, or if less than all, a portion equal to at least $5,000,000 in the aggregate for the assigning Bank or assigning Banks, of such Revolving Loan Commitments and outstanding principal amount of Term Loans hereunder to one or more Eligible Transferees, each of which assignees shall become a party to this Agreement as a Bank by execution of an Assignment and Assumption Agreement, provided that (i) at such time Annex I shall be deemed -------- modified to reflect the Commitments (and/or outstanding Term Loans, as the case may be) of such new Bank and of the existing Banks, (ii) upon surrender of the old Notes, new Notes will be issued, at the Borrower's expense, to such new Bank and to the assigning Bank, such new Notes to be in conformity with the requirements of Section 1.05 (with appropriate modifications) to the extent needed to reflect the revised Commitments (and/or outstanding Term Loans, as the case may be), (iii) the consent of the Agent shall be required in connection with any such assignment pursuant to clause (y) of this Section 12.04(b) (which consent shall not be unreasonably withheld or delayed) and (iv) the Agent shall receive at the time of each such assignment, from the assigning or assignee Bank, the payment of a non-refundable assignment fee of $2,500 and, provided -------- further , that such tansfer or assignment will not by the Agent on the Register - ------- pursuant to Section 7.13 hereof. To the extent of any assignment pursuant to this Section 12.04(b), the assigning Bank shall be relieved of its obligations hereunder. At the time of each assignment pursuant to this Section 12.04(b) to a Person which is not already a Bank hereunder and which is not a United States person (as such term is defined in Section 7701(a)(30) of the Code) for Federal income tax purposes, the respective assignee Bank shall provide to the Borrower and the Agent the appropriate Internal Revenue Service Forms (and, if applicable a Section 4.04(b)(ii) Certificate) described in Section 4.04(b). To the extent that an assignment of all or any portion of a Bank's Commitments and related outstanding Obligations pursuant to Section 1.13 or this Section 12.04(b) would, at the time of such assignment, result in increased costs under Section 1.10 or 1.11 from those being charged by the --129-- respective assigning Bank prior to such assignment, then the Borrower shall not be obligated to pay such increased costs (although the Borrower shall be obligated to pay any other increased costs of the type described above resulting from changes after the date of the respective assignment). (c) Nothing in this Agreement shall prevent or prohibit any Bank from pledging its Loans and Notes hereunder to a Federal Reserve Bank in support of borrowings made by such Bank from such Federal Reserve Bank. 12.05 No Waiver; Remedies Cumulative. No failure or delay on the part ------------------------------ of the Agent or any Bank in exercising any right, power or privilege hereunder or under any other Credit Document and no course of dealing between any Credit Party and the Agent or any Bank shall operate as a waiver thereof; nor shall any single or partial exercise of any right, power or privilege hereunder or under any other Credit Document preclude any other or further exercise thereof or the exercise of any other right, power or privilege hereunder or thereunder. The rights and remedies herein expressly provided are cumulative and not exclusive of any rights or remedies which the Agent or any Bank would otherwise have. No notice to or demand on any Credit Party in any case shall entitle any Credit Party to any other or further notice or demand in similar or other circumstances or constitute a waiver of the rights of the Agent or the Banks to any other or further action in any circumstances without notice or demand. 12.06 Payments Pro Rata. (a) The Agent agrees that promptly after its ----------------- receipt of each payment from or on behalf of any Credit Party in respect of any Obligations of such Credit Party, it shall, except as otherwise provided in this Agreement, distribute such payment to the Banks (other than any Bank that has consented in writing to waive its pro rata share of such payment) pro rata based --- ---- upon their respective shares, if any, of the Obligations with respect to which such payment was received. (b) Each of the Banks agrees that, if it should receive any amount hereunder (whether by voluntary payment, by realization upon security, by the exercise of the right of setoff or banker's lien, by counterclaim or cross action, by the enforcement of any right under the Credit Documents, or otherwise) which is applicable to the payment of the principal of, or interest on, the Loans, Unpaid Drawings or Fees, of a sum which with respect to the related sum or sums re ceived by other Banks is in a greater proportion than the total of such Obligation then owed and due to such Bank bears to the total of such Obligation then owed and due to all of the Banks immediately prior to such receipt, then such Bank receiving such excess payment shall purchase for cash without recourse or warranty from the other Banks an interest in the Obligations of the respective Credit Party to such Banks in such amount as shall result in a proportional participa tion by all of the Banks in such amount; provided, that -------- if all or any portion of such excess amount is thereafter recovered from such Bank, such purchase shall be rescinded and the purchase price restored to the extent of such recovery, but without interest. 12.07 Calculations; Computations. (a) The financial statements to be -------------------------- furnished to the Banks pursuant hereto shall be made and prepared in accordance with GAAP consistently applied throughout the periods involved (except as set forth in the notes thereto or as otherwise disclosed in --130-- writing by Holdings or the Borrower to the Banks); provided, that except as -------- otherwise specifically provided herein, all computations determining compliance with Sections 4.02 and 8, including definitions used therein, shall utilize accounting principles and policies in effect at the time of the preparation of, and in conformity with those used to prepare, the December 31, 1995 financial statements delivered to the Banks pursuant to Section 6.10(b), but shall not give effect to purchase accounting adjustments required or permitted by APB 16 (including non-cash write-ups and non-cash charges relating to inventory, fixed assets and in-process research and development, in each case arising in connection with the Acquisition) and APB 17 (including non-cash charges relating to intangibles and goodwill arising in connection with the Acquisition). (b) All computations of interest and Fees hereunder shall be made on the actual number of days elapsed over a year of 360 days. 12.08 Governing Law; Submission to Jurisdiction; Venue. (a) THIS ------------------------------------------------ AGREEMENT AND THE OTHER CREDIT DOCUMENTS AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER AND THEREUNDER SHALL BE CONSTRUED IN ACCORDANCE WITH AND BE GOVERNED BY THE LAW OF THE STATE OF NEW YORK. Any legal action or proceeding with respect to this Agreement or any other Credit Document may be brought in the courts of the State of New York or of the United States for the Southern District of New York, and, by execution and delivery of this Agreement, each Credit Party hereby irrevocably accepts for itself and in respect of its property, generally and unconditionally, the jurisdiction of the aforesaid courts. Each Credit Party hereby further irrevocably waives any claim that any such courts lack jurisdiction over such Credit Party, and agrees not to plead or claim, in any legal action or proceeding with respect to this Agreement or any other Credit Document brought in any of the aforesaid courts, that any such court lacks jurisdiction over such Credit Party. Each Credit Party irrevocably consents to the service of process in any such action or proceeding by the mailing of copies thereof by registered or certified mail, postage prepaid, to such Credit Party, at its address for notices pursuant to Section 12.03, such service to become effective 30 days after such mailing. Each Credit Party hereby irrevocably waives any objection to such service of process and further irrevocably waives and agrees not to plead or claim in any action or proceeding commenced hereunder or under any other Credit Document that service of process was in any way invalid or ineffective. Nothing herein shall affect the right of the Agent, any Bank or the holder of any Note to serve process in any other manner permitted by law or to commence legal proceedings or otherwise proceed against any Credit Party in any other jurisdiction. (b) Each Credit Party hereby irrevocably waives any objection which it may now or hereafter have to the laying of venue of any of the aforesaid actions or proceedings arising out of or in connection with this Agreement or any other Credit Document brought in the courts referred to in clause (a) above and hereby further irrevocably waives and agrees not to plead or claim in any such court that any such action or proceeding brought in any such court has been brought in an inconvenient forum. 12.09 Counterparts. This Agreement may be executed in any number of ------------ counterparts and by the different parties hereto on separate counterparts, each of which when so executed and --131-- delivered shall be an original, but all of which shall together constitute one and the same instrument. A complete set of counterparts executed by all the parties hereto shall be lodged with Holdings, the Borrower and the Agent. 12.10 Effectiveness. This Agreement shall become effective on the date ------------- (the "Effective Date") on which Holdings, the Borrower and each of the Banks shall have signed a counterpart hereof (whether the same or different counterparts) and shall have delivered the same to the Agent at the Notice Office or, in the case of the Banks, shall have given to the Agent telephonic (confirmed in writing), written, telex or facsimile notice (actually received) at such office that the same has been signed and mailed to it. The Agent will give Holdings, the Borrower and each Bank prompt written notice of the occurrence of the Effective Date. 12.11 Headings Descriptive. The headings of the several sections and -------------------- subsections of this Agreement are inserted for convenience only and shall not in any way affect the meaning or construction of any provision of this Agreement. 12.12 Amendment or Waiver; etc. (a) Neither this Agreement nor any ------------------------- other Credit Document nor any terms hereof or thereof may be changed, waived, discharged or terminated unless such change, waiver, discharge or termination is in writing signed by the respective Credit Parties party thereto and the Required Banks, provided that no such change, waiver, discharge or termination -------- shall, without the consent of each Bank (other than a Defaulting Bank) (with Obligations being directly affected in the case of following clause (i)), (i) extend the final scheduled maturity of any Loan or Note or extend the stated maturity of any Letter of Credit beyond the Revolving Loan Maturity Date, or reduce the rate or extend the time of payment of interest or Fees thereon, or reduce the principal amount thereof, (ii) release all or substantially all of the Collateral (except as expressly provided in the Security Documents) under all the Security Documents, (iii) amend, modify or waive any provision of this Section 12.12, (iv) reduce the percentage specified in the definition of Required Banks (it being understood that, with the consent of the Required Banks, additional extensions of credit pursuant to this Agreement may be included in the determination of the Required Banks on substantially the same basis as the extensions of Term Loans and Revolving Loan Commitments are included on the Effective Date) or (v) consent to the assignment or transfer by the Borrower of any of its rights and obligations under this Agreement; provided -------- further, that no such change, waiver, discharge or termination shall (1) - ------- increase the Commitments of any Bank over the amount thereof then in effect without the consent of such Bank (it being understood that waivers or modifications of conditions precedent, covenants, Defaults or Events of Default or of a mandatory reduction in the Total Commitment shall not constitute an increase of the Commitment of any Bank, and that an increase in the available portion of any Commitment of any Bank shall not constitute an increase in the Commitment of such Bank), (2) without the consent of BTCo, amend, modify or waive any provision of Section 2 or alter its rights or obligations with respect to Letters of Credit or Swingline Loans, (3) without the consent of the Agent, amend, modify or waive any provision of Section 11 as same applies to the Agent or any other provision as same relates to the rights or obligations of the Agent, (4) without the consent of the Collateral Agent, amend, modify or waive any provision relating to the rights or obligations of the Collateral Agent, (5) without the consent of the Majority Banks of each Facility which is being allocated a lesser prepayment, repayment or com- --132-- mitment reduction as a result of the actions described below (or without the consent of the Majority Banks of each Facility in the case of an amendment to the definition of Majority Banks), amend the definition of Majority Banks or alter the required application of any prepay ments or repayments (or commitment reduction), as between the various Facilities pursuant to Section 4.01(a) or 4.02(B)(b) (although the Required Banks may waive, in whole or in part, any such prepayment, repayment or commitment reduction so long as the application, as amongst the various Facilities, of any such prepayment, repayment or commitment reduction which is still required to be made is not altered) or (6) without the consent of the Supermajority Banks of the respective Facility, amend the definition of Supermajority Banks or amend downward, waive or reduce any Scheduled Repayment of such affected Facility. (b) If, in connection with any proposed change, waiver, discharge or termination to any of the provisions of this Agreement as contemplated by clause (a)(i) through (v), inclusive, of the first proviso to Section 12.12(a), the consent of the Required Banks is obtained but the consent of one or more of such other Banks whose consent is required is not obtained, then the Borrower shall have the right, so long as all non-consenting banks whose individual consent is required are treated as described in either clause (A) or (B) below, to either (A) replace each such non-consenting Bank or Banks with one or more Replacement Banks pursuant to Section 1.13 so long as at the time of such replacement, each such Replacement Bank consents to the proposed change, waiver, discharge or termination or (B) terminate such non-consenting Bank's Commitments and repay in full its outstanding Loans, in accordance with Sections 3.02(b) and/or 4.01(b), provided that, unless the Commitments terminated and Loans repaid pursuant to - -------- preceding clause (B) are immediately replaced in full at such time through the addition of new Banks or the increase of the Commitments and/or outstanding Loans of existing Banks (who in each case must specifically consent thereto), then in the case of any action pursuant to preceding clause (B) the Required Banks (determined before giving effect to the proposed action) shall specifically consent thereto, provided further, that the Borrower shall not have ---------------- the right to replace a Bank solely as a result of the exercise of such Bank's rights (and the withholding of any required consent by such Bank) pursuant to the second proviso to Section 12.12(a). 12.13 Survival. All indemnities set forth herein including, without -------- limitation, in Section 1.10, 1.11, 2.05, 4.04, 11.07 or 12.01, shall survive the execution and delivery of this Agreement and the making and repayment of the Loans. 12.14 Domicile of Loans. Each Bank may transfer and carry its Loans ----------------- at, to or for the account of any branch office, subsidiary or affiliate of such Bank; provided, that the Borrower shall not be responsible for costs arising -------- under Section 1.10, 1.11, 2.05 or 4.04 resulting from any such transfer (other than a transfer pursuant to Section 1.12) to the extent such costs would not otherwise be applicable to such Bank in the absence of such transfer. 12.15 Confidentiality. (a) Each of the Banks agrees that it will use --------------- its best efforts not to disclose without the prior consent of the Borrower (other than to its employees, auditors, counsel or other professional advisors, to affiliates or to another Bank if the Bank or such Bank's holding or parent company in its sole discretion determines that any such party should have access --133-- to such information) any information with respect to Holdings, the Borrower or any of its Subsidiaries which is furnished pursuant to this Agreement; provided, -------- that any Bank may disclose any such information (a) as has become generally available to the public or has become available to such Bank on a non- confidential basis, (b) as may be required or appropriate in any report, statement or testimony submitted to any municipal, state or Federal regulatory body having or claiming to have jurisdiction over such Bank or to the Federal Reserve Board, the Federal Deposit Insurance Corporation, the NAIC or similar organizations (whether in the United States or elsewhere) or their successors, (c) as may be required or appropriate in response to any summons or subpoena or in connection with any litigation, (d) in order to comply with any law, order, regulation or ruling applicable to such Bank, and (e) to any prospective transferee in connection with any contemplated transfer of any of the Notes or any interest therein by such Bank; provided, that such prospective transferee -------- agrees to be bound by the provisions of this Section 12.15 to the same extent as such Bank. (b) Each of Holdings and the Borrower hereby acknowledges and agrees that each Bank may share with any of its affiliates any information related to Holdings or any of its Subsidiaries (including, without limitation, any nonpublic customer information regarding the creditworthiness of Holdings and its Subsidiaries, provided that such Persons shall be subject to the provisions of this Section 12.15 to the same extent as such Bank). 12.16 Waiver of Jury Trial. EACH OF THE PARTIES TO THIS AGREEMENT -------------------- HEREBY IRREVOCABLY WAIVES ALL RIGHT TO A TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS AGREEMENT, THE OTHER CREDIT DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY. SECTION 13. Holdings Guaranty. ----------------- 13.01 The Guaranty. In order to induce the Banks to enter into this ------------ Agreement and to extend credit hereunder and in recognition of the direct benefits to be received by Holdings from the proceeds of the Loans and the issuance of the Letters of Credit, Holdings hereby agrees with the Banks as follows: Holdings hereby unconditionally and irrevocably guarantees as primary obligor and not merely as surety the full and prompt payment when due, whether upon maturity, acceleration or otherwise, of any and all of the Guaranteed Obligations of the Borrower to the Guaranteed Creditors. If any or all of the Guaranteed Obligations of the Borrower to the Guaranteed Creditors becomes due and payable hereunder, Holdings unconditionally promises to pay such indebtedness to the Agent and/or the Banks, or order, on demand, together with any and all expenses which may be incurred by the Agent or the Banks in collecting any of the Guaranteed Obligations. If claim is ever made upon any Guaranteed Creditor for repayment or recovery of any amount or amounts received in payment or on account of any of the Guaranteed Obligations and any of the aforesaid payees repays all or part of said amount by reason of (i) any judgment, decree or order of any court or administrative body having jurisdiction over such payee or any of its property or (ii) any settlement or compromise of any such claim effected by such payee with any such claimant (including the Borrower), then and in such event Holdings agrees that any such judgment, decree, --134-- order, settlement or compromise shall be binding upon Holdings, notwithstanding any revocation of this Guaranty other instrument evidencing any liability of the Borrower, and Holdings shall be and remain liable to the aforesaid payees hereunder for the amount so repaid or recovered to the same extent as if such amount had never originally been received by any such payee. 13.02 Bankruptcy. Additionally, Holdings unconditionally and ---------- irrevocably guarantees the payment of any and all of the Guaranteed Obligations of the Borrower to the Guaranteed Creditors whether or not due or payable by the Borrower upon the occurrence of any of the events specified in Section 9.05, and unconditionally promises to pay such indebtedness to the Guaranteed Creditors, or order, on demand, in lawful money of the United States. 13.03 Nature of Liability. The liability of Holdings hereunder is ------------------- exclusive and independent of any security for or other guaranty of the Guaranteed Obligations of the Borrower whether executed by Holdings, any other guarantor or by any other party, and the liability of Holdings hereunder is not affected or impaired by (a) any direction as to application of payment by the Borrower or by any other party, or (b) any other continuing or other guaranty, undertaking or maximum liability of a guarantor or of any other party as to the Guaranteed Obligations of the Borrower, or (c) any payment on or in reduction of any such other guaranty or undertaking, or (d) any dissolution, termination or increase, decrease or change in personnel by the Borrower, or (e) any payment made to any Guaranteed Creditor on the Guaranteed Obligations which any such Guaranteed Creditor repays to the Borrower pursuant to court order in any bankruptcy, reorganization, arrangement, moratorium or other debtor relief proceeding, and Holdings waives any right to the deferral or modification of its obligations hereunder by reason of any such proceeding. 13.04 Independent Obligation. The obligations of Holdings hereunder ---------------------- are inde pendent of the obligations of any other guarantor, any other party or the Borrower, and a separate action or actions may be brought and prosecuted against Holdings whether or not action is brought against any other guarantor, any other party or the Borrower and whether or not any other guarantor, any other party or the Borrower be joined in any such action or actions. Holdings waives, to the full extent permitted by law, the benefit of any statute of limitations affecting its liability hereunder or the enforcement thereof. Any payment by the Borrower or other circumstance which operates to toll any statute of limitations as to the Borrower shall operate to toll the statute of limitations as to any Guarantor. 13.05 Authorization. Holdings authorizes the Guaranteed Creditors ------------- without notice or demand (except as shall be required by applicable statute and cannot be waived), and without affecting or impairing its liability hereunder, from time to time to: (a) change the manner, place or terms of payment of, and/or change or extend the time of payment of, renew, increase, accelerate or alter, any of the Guaranteed Obligations (including any increase or decrease in the rate of interest thereon), any security therefor, or any liability incurred directly or indirectly in respect thereof, and the Guaranty herein made shall apply to the Guaranteed Obligations as so changed, extended, renewed or altered; --135-- (b) take and hold security for the payment of the Guaranteed Obligations and sell, exchange, release, surrender, realize upon or otherwise deal with in any manner and in any order any property by whomsoever at any time pledged or mortgaged to secure, or howsoever securing, the Guaranteed Obligations or any liabilities (including any of those hereunder) incurred directly or indirectly in respect thereof or hereof, and/or any offset thereagainst; (c) exercise or refrain from exercising any rights against the Borrower or others or otherwise act or refrain from acting; (d) release or substitute any one or more endorsers, guarantors, the Borrower or other obligors; (e) settle or compromise any of the Guaranteed Obligations, any security there for or any liability (including any of those hereunder) incurred directly or indirectly in respect thereof or hereof, and may subordinate the payment of all or any part thereof to the payment of any liability (whether due or not) of the Borrower to its creditors other than the Guaranteed Creditors; (f) apply any sums by whomsoever paid or howsoever realized to any liability or liabilities of the Borrower to the Guaranteed Creditors regardless of what liability or liabilities of Holdings or the Borrower remain unpaid; (g) consent to or waive any breach of, or any act, omission or default under, this Agreement or any of the instruments or agreements referred to herein, or otherwise amend, modify or supplement this Agreement or any of such other instruments or agreements; and/or (h) take any other action which would, under otherwise applicable principles of common law, give rise to a legal or equitable discharge of Holdings from its liabilities under this Guaranty. 13.06 Reliance. It is not necessary for any Guaranteed Creditor to -------- inquire into the capacity or powers of the Borrower or the officers, directors, partners or agents acting or purporting to act on their behalf, and any Guaranteed Obligations made or created in reliance upon the professed exercise of such powers shall be guaranteed hereunder. 13.07 Subordination. Any of the indebtedness of the Borrower relating ------------- to the Guaranteed Obligations now or hereafter owing to Holdings is hereby subordinated to the Guaranteed Obligations of the Borrower owing to the Guaranteed Creditors; and if the Agent so requests at a time when an Event of Default exists, all such indebtedness relating to the Guaranteed Obligations of the Borrower to Holdings shall be collected, enforced and received by Holdings for the benefit of the Guaranteed Creditors and be paid over to the Agent on behalf of the Guaranteed Creditors on account of the Guaranteed Obligations of the Borrower to the Guaranteed Creditors, but without affecting or impairing in any manner the liability of Holdings under the other provisions of this --136-- Guaranty. Prior to the transfer by Holdings of any note or negotiable instrument evidencing any of the indebtedness relating to the Guaranteed Obligations of the Borrower to Holdings, Holdings shall mark such note or negotiable instrument with a legend that the same is subject to this subordination. Without limiting the generality of the foregoing, Holdings hereby agrees with the Guaranteed Creditors that it will not exercise any right of subrogation which it may at any time otherwise have as a result of this Guaranty (whether contractual, under Section 509 of the Bankruptcy Code or otherwise) until all Guaranteed Obligations have been irrevocably paid in full in cash. 13.08 Waiver. (a) Holdings waives any right (except as shall be ------ required by applicable statute and cannot be waived) to require any Guaranteed Creditor to (i) proceed against the Borrower, any other guarantor or any other party, (ii) proceed against or exhaust any security held from the Borrower, any other guarantor or any other party or (iii) pursue any other remedy in any Guaranteed Creditor's power whatsoever. Holdings waives any defense based on or arising out of any defense of the Borrower, any other guarantor or any other party, other than payment in full of the Guaranteed Obligations, based on or arising out of the disability of the Borrower, any other guarantor or any other party, or the validity, legality or unenforceability of the Guaranteed Obligations or any part thereof from any cause, or the cessation from any cause of the liability of the Borrower other than payment in full of the Guaranteed Obligations. The Guaranteed Creditors may, at their election, foreclose on any security held by the Agent, the Col lateral Agent or any other Guaranteed Creditor by one or more judicial or nonjudicial sales, whether or not every aspect of any such sale is commercially reasonable (to the extent such sale is permitted by applicable law), or exercise any other right or remedy the Guaranteed Creditors may have against the Borrower or any other party, or any security, without affecting or impairing in any way the liability of Holdings hereunder except to the extent the Guaranteed Obligations have been paid. Holdings waives any defense arising out of any such election by the Guaranteed Creditors, even though such election operates to impair or extinguish any right of reimbursement or subrogation or other right or remedy of Holdings against the Borrower or any other party or any security. (b) Holdings waives all presentments, demands for performance, protests and notices, including without limitation notices of nonperformance, notices of protest, notices of dishonor, notices of acceptance of this Guaranty, and notices of the existence, creation or incur ring of new or additional Guaranteed Obligations. Holdings assumes all responsibility for being and keeping itself informed of the Borrower's financial condition and assets, and of all other cir cumstances bearing upon the risk of nonpayment of the Guaranteed Obligations and the nature, scope and extent of the risks which Holdings assumes and incurs hereunder, and agrees that the Agent and the Banks shall have no duty to advise Holdings of information known to them regard ing such circumstances or risks. (c) Holdings hereby acknowledges and affirms that it understands that to the extent the Guaranteed Obligations are secured by real property located in the State of California, Holdings shall be liable for the full amount of its liability hereunder notwithstanding foreclosure on such real property by trustee sale or any other reason impairing Holdings' or any secured creditor's right to proceed against the Borrower or any other guarantor of the Guaranteed Obligations. --137-- (d) Holdings hereby waives, to the fullest extent permitted by applicable law, all rights and benefits under Sections 580a, 580b, 580d and 726 of the California Code of Civil Procedure. Holdings hereby further waives, to the fullest extent permitted by applicable law, without limiting the generality of the foregoing or any other provision hereof, all rights and benefits which might otherwise be available to Holdings under Sections 2787 through 2855, inclusive, 2899 and 3433 of the California Civil Code. (e) Holdings further understands, is aware and hereby acknowledges that if the Guaranteed Creditors elect to nonjudicially foreclose on any real property security located in the State of California any right of subrogation of Holdings against any Credit Party may be impaired or extinguished and that as a result of such impairment or extinguishment of subrogation rights, Holdings may have a defense to a deficiency judgment arising out of the operation of Section 580d of the California Code of Civil Procedure and related principles of estoppel. Holdings waives all rights and defenses arising out of an election of remedies by the Banks, even though that election of remedies, such as a nonjudicial foreclosure with respect to security for a guaranteed obligation, has destroyed the guarantor's rights of subrogation and reimbursement against the principal by the operation of Section 580d of the Code of Civil Procedure or otherwise. 13.09 Nature of Liability. It is the desire and intent of Holdings ------------------- and the Secured Creditors that this Guaranty shall be enforced against Holdings to the fullest extent permissible under the laws and public policies applied in each jurisdiction in which enforcement is sought. If, however, and to the extent that, the obligations of Holdings under this Guaranty shall be adjudicated to be invalid or unenforceable for any reason (including, without limitation, because of any applicable state or federal law relating to fraudulent conveyances or transfers), then the amount of the Guaranteed Obligations of Holdings shall be deemed to be reduced and Holdings shall pay the maximum amount of the Guaranteed Obligations which would be permissible under applicable law. * * * --138-- IN WITNESS WHEREOF, the parties hereto have caused their duly authorized officers to execute and deliver this Agreement as of the date first above written. Address: - ------- 1717 Deerfield Road DIAGNOSTICS HOLDING, INC. Deerfield, Illinois 60015 Attention: Michael P. Bucklo Colin R. Silvester /s/John Connaughton By -------------------- Title: Vice President and Assistant Treasurer 1717 Deerfield Road DADE INTERNATIONAL INC. Deerfield, Illinois 60015 Attention: Michael P. Bucklo Colin R. Silvester /s/ Colin R. Silvester By _______________________ Title: Vice President and Treasurer -139- BANKERS TRUST COMPANY, Individually and as Agent /s/ Christopher Kinslow By ----------------------- Title: Vice President -140- THE FIRST NATIONAL BANK OF BOSTON /s/ Diane Exter By ----------------------- Title: Director -141- THE BANK OF NOVA SCOTIA /s/ F.C.H. Ashby By ----------------------- Title: Senior Manager Loan Operations -142- CAISSE NATIONALE DE CREDIT AGRICOLE /s/ Dean Balice By ----------------------- Title: Senior Vice President and Branch Manager -143- THE FIRST NATIONAL BANK OF CHICAGO /s/ Catherine Frank By ------------------------ Title: Assistant Vice President -144- GENERAL ELECTRIC CAPITAL CORPORATION /s/ Cheryl Boyd By ----------------------- Title: Authorized Signatory -145- THE NIPPON CREDIT BANK, LTD. /s/ Clifford Abramsky By ---------------------- Title: Vice President and Manager -146- THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY /s/ John E. Schlifske By_______________________ Title:Vice President -147- VAN KAMPEN AMERICAN CAPITAL PRIME RATE INCOME TRUST /s/ Kathleen A. Zarn By________________________ Title: Vice President -148- PROTECTIVE LIFE INSURANCE COMPANY /s/ Mark K. Okada By_______________________ Title: CFA, Principal Protective Asset Management Co. -149- SANWA BUSINESS CREDIT /s/ Michael J. Cox By_______________________ Title: Vice President -150- ABN AMRO BANK, N.V. Chicago Branch /s/ David C. Sagers By________________________________ Title: Vice President /s/ Frederick P. Engler By________________________________ Title: Group Vice President -151- BANK OF TOKYO-MITSUBISHI TRUST COMPANY /s/ Paul P. Malecki By_________________________ Title: Vice President -152- DAI-ICHI KANGYO BANK /s/ Takeshi Hemmi By_______________________ Title: Vice President -153- SAKURA BANK /s/ Hajime Miyagi By__________________________ Title: Joint General Manager -154- SOCIETE GENERALE /s/ John M. Stack By________________________ Title: Vice President -155- MERRILL LYNCH SENIOR FLOATING RATE FUND, INC. /s/ Anthony R. Clemente By____________________________ Title: Authorized Signatory -156- SOUTHERN PACIFIC THRIFT AND LOAN By /s/ Charles D. Martorano ---------------------------- Title: Senior Vice President -157- IMPERIAL BANK By /s/ Ray Vadalma ---------------------------- Title: Senior Vice President -158- PRIME INCOME TRUST By /s/ Rafael Scalari --------------------- Title: Vice President -159- CHL HIGH YIELD LOAN PORTFOLIO, a Unit of Chemical Bank By /s/ James P. Ferguson -------------------------- Title: Managing Director -160- PILGRIM PRIME RATE FUND By /s/ Michael J. Bacevich ----------------------- Title: Vice President -161- USL CAPITAL CORPORATION By /s/ John Hause ----------------------------- Title: President Municipal & Corporate Financing -162- CITIBANK HIGH YIELD By /s/ Hans L. Christensen ------------------------- Title: Vice President -163- CRESCENT/MACH I PARTNERS, L.P. By TCW Asset Management Company its Investment Manager /s/ Justin Driscoll By____________________________ Title: Vice President -164- THE FUJI BANK LIMITED /s/ Peter L. Chinnici By__________________________ Title: Joint General Manager -165- EX-10.2 9 SECURITY AGREEMENT DATED 05/07/96 EXHIBIT 10.2 SECURITY AGREEMENT among DIAGNOSTICS HOLDING, INC., DADE INTERNATIONAL INC., CERTAIN OTHER SUBSIDIARIES OF DIAGNOSTICS HOLDING, INC. and BANKERS TRUST COMPANY, as Collateral Agent Dated as of May 7, 1996 TABLE OF CONTENTS -----------------
Page ---- ARTICLE I SECURITY INTERESTS............................................ 2 1.1. Grant of Security Interests ..................................... 2 1.2. Power of Attorney ............................................... 3 ARTICLE II GENERAL REPRESENTATIONS, WARRANTIES AND COVENANTS ................................................. 3 2.1. Necessary Filings ............................................... 3 2.2. No Liens ........................................................ 3 2.3. Other Financing Statements ...................................... 4 2.4. Chief Executive Office; Records ................................. 4 2.5. Location of Inventory and Equipment ............................. 5 2.6. Recourse ........................................................ 5 2.7. Trade Names; Change of Name ..................................... 5 ARTICLE III SPECIAL PROVISIONS CONCERNING RECEIVABLES; CONTRACT RIGHTS; INSTRUMENTS ................. 6 3.1. Additional Representations and Warranties ....................... 6 3.2. Maintenance of Records .......................................... 6 3.3. Direction to Account Debtors; Contracting Parties; etc............ 7 3.4. Modification of Terms; etc........................................ 7 3.5. Collection ....................................................... 7 3.6. Instruments ...................................................... 8 3.7. Further Actions .................................................. 8 ARTICLE IV SPECIAL PROVISIONS CONCERNING TRADEMARKS...................... 8 4.1. Additional Representations and Warranties ........................ 8 4.2. Licenses and Assignments ......................................... 9 4.3. Infringements .................................................... 9 4.4. Preservation of Marks ............................................ 9
(i)
Page ---- 4.5. Maintenance of Registration ...................................... 9 4.6. Future Registered Marks .......................................... 10 4.7. Remedies ......................................................... 10 ARTICLE V SPECIAL PROVISIONS CONCERNING PATENTS, COPYRIGHTS AND TRADE SECRETS ......................... 11 5.1. Additional Representations and Warranties ........................ 11 5.2. Licenses and Assignments ......................................... 11 5.3. Infringements .................................................... 12 5.4. Maintenance of Patents ........................................... 12 5.5. Prosecution of Patent Application ................................ 12 5.6. Other Patents and Copyrights ..................................... 12 5.7. Remedies ......................................................... 12 ARTICLE VI PROVISIONS CONCERNING ALL COLLATERAL ............................ 13 6.1. Protection of Collateral Agent's Security ........................ 13 6.2. Warehouse Receipts Non-Negotiable ................................ 14 6.3. Further Actions .................................................. 14 6.4. Financing Statements ............................................. 14 ARTICLE VII REMEDIES UPON OCCURRENCE OF EVENT OF DEFAULT ...................................................... 14 7.1. Remedies; Obtaining the Collateral Upon Default .................. 14 7.2. Remedies; Disposition of the Collateral .......................... 16 7.3. Waiver of Claims ................................................. 17 7.4. Application of Proceeds .......................................... 17 7.5. Remedies Cumulative .............................................. 19 7.6. Discontinuance of Proceedings .................................... 19 ARTICLE VIII INDEMNITY ..................................................... 20 8.1. Indemnity ........................................................ 20 8.2. Indemnity Obligations Secured by Collateral; Survival ............ 21 ARTICLE IX DEFINITIONS ................................................... 21
(ii)
Page ---- ARTICLE X MISCELLANEOUS .................................................. 26 10.1. Notices ......................................................... 27 10.2. Waiver; Amendment ............................................... 27 10.3. Obligations Absolute ............................................ 28 10.4. Successors and Assigns .......................................... 28 10.5. Headings Descriptive ............................................ 28 10.6. Governing Law ................................................... 28 10.7. Assignor's Duties ............................................... 28 10.8. Termination; Release ............................................ 29 10.9. Counterparts .................................................... 29 10.10. The Collateral Agent ........................................... 30 10.11. Additional Assignors ........................................... 30
(ii) SECURITY AGREEMENT ------------------ SECURITY AGREEMENT, dated as of May 7, 1996, among each of the undersigned (each, an "Assignor" and, together with any other entity that becomes a party hereto pursuant to Section 10.11 hereof, the "Assignors") and Bankers Trust Company, as Collateral Agent (the "Collateral Agent"), for the benefit of the Secured Creditors (as defined below). Except as otherwise defined herein, terms used herein and defined in the Credit Agreement (as defined below) shall be used herein as therein defined. W I T N E S S E T H : ------------------- WHEREAS, Diagnostics Holding, Inc. ("Holdings"), Dade International Inc. (the "Borrower"), various financial institutions from time to time party thereto (the "Banks"), and Bankers Trust Company, as Agent (the "Agent," and together with the Collateral Agent and the Banks, the "Bank Creditors"), have entered into a Credit Agreement, dated as of May 7, 1996 (as amended, modified or supplemented from time to time, the "Credit Agreement"), providing for the making of Loans to the Borrower and the issuance of, and participation in, Letters of Credit for the account of the Borrower, all as contemplated therein; WHEREAS, the Borrower may from time to time be party to one or more (i) interest rate agreements, interest rate cap agreements, interest rate collar agreements or other similar agreements or arrangements, (ii) foreign exchange contracts, currency swap agreements or similar agreements or arrangements designed to protect against the fluctuations in currency values and/or (iii) other types of hedging agreements from time to time (each such agreement or arrangement with an Other Creditor (as hereinafter defined), an "Interest Rate Protection Agreement or Other Hedging Agreement"), with a Bank or an affiliate of a Bank (each such Bank or affiliate, even if the respective Bank subsequently ceases to be a Bank under the Credit Agreement for any reason, together with such Bank's or affiliate's successors and assigns, collectively, the "Other Creditors", and together with the Bank Creditors, the "Secured Creditors"); WHEREAS, pursuant to the Holdings Guaranty, Holdings has guaranteed to the Secured Creditors the payment when due of all obligations and liabilities of the Borrower under or with respect to the Credit Documents and the Interest Rate Protection Agreements or Other Hedging Agreements; WHEREAS, pursuant to the Subsidiary Guaranty, each Assignor (other than Holdings and the Borrower) has jointly and severally guaranteed to the Secured Creditors the payment when due of all obligations and liabilities of the Borrower under or with Page 2 respect to the Credit Documents and the Interest Rate Protection Agreements or Other Hedging Agreements; WHEREAS, it is a condition precedent to the making of Loans to the Borrower under the Credit Agreement that the Assignors shall have executed and delivered to the Collateral Agent this Agreement; and WHEREAS, each Assignor desires to execute this Agreement to satisfy the conditions described in the preceding paragraph; NOW, THEREFORE, in consideration of the benefits accruing to each Assignor, the receipt and sufficiency of which are hereby acknowledged, each Assignor hereby makes the following representations and warranties to the Collateral Agent and hereby covenants and agrees with the Collateral Agent as follows: ARTICLE I SECURITY INTERESTS 1.1. Grant of Security Interests. (a) As security for the --------------------------- prompt and complete payment and performance when due of all of its Obligations, each Assignor does hereby assign and transfer unto the Collateral Agent, and does hereby pledge and grant to the Collateral Agent for the benefit of the Secured Creditors, a continuing security interest of first priority in, all of the right, title and interest of such Assignor in, to and under all of the following, whether now existing or hereafter from time to time acquired: (i) each and every Receivable, (ii) all Contracts (other than Excluded Contracts except to the extent provided in the definition thereof), together with all Contract Rights arising thereunder, (iii) all Inventory, (iv) all Equipment, (v) all Marks, together with the registrations and right to all renewals thereof, and the goodwill of the business of such Assignor symbolized by the Marks, (vi) all Patents and Copyrights, (vii) all computer programs of such Assignor and all intellectual property rights therein (to the extent not constituting Excluded Contracts) and all other proprietary information of such Assignor, including, but not limited to, trade secrets, (viii) all other Goods, General Intangibles, Chattel Paper, Documents and Instruments, (ix) the Cash Collateral Account and all monies, securities and instruments deposited or required to be deposited in such Cash Collateral Account, and (x) all Proceeds and products of any and all of the foregoing (all of the above, collectively, the "Collateral"). Notwithstanding the foregoing, the term "Collateral" shall not include any Specified Asset that is transferred to the Receivables Entity pursuant to (but only after the execution and delivery of) the Accounts Receivable Facility Documents. Page 3 (b) The security interest of the Collateral Agent under this Agreement extends to all Collateral of the kind which is the subject of this Agreement which any Assignor may acquire at any time during the continuation of this Agreement. 1.2. Power of Attorney. Each Assignor hereby constitutes and ----------------- appoints the Collateral Agent its true and lawful attorney, irrevocably, with full power after the occurrence of and during the continuance of an Event of Default (in the name of such Assignor or otherwise) to act, require, demand, receive, compound and give acquittance for any and all monies and claims for monies due or to become due to such Assignor under or arising out of the Collateral, to endorse any checks or other instruments or orders in connection therewith and to file any claims or take any action or institute any proceedings which the Collateral Agent may deem to be reasonably necessary or advisable to protect the interests of the Secured Creditors, which appointment as attorney is coupled with an interest. ARTICLE II GENERAL REPRESENTATIONS, WARRANTIES AND COVENANTS Each Assignor represents, warrants and covenants, which representations, warranties and covenants shall survive execution and delivery of this Agreement, as follows: 2.1. Necessary Filings. All filings, registrations and ----------------- recordings necessary or appropriate to create, preserve and perfect the security interest granted by such Assignor to the Collateral Agent hereby in respect of the Collateral have been accomplished (or will have been accomplished on the day immediately following the Initial Borrowing Date) and the security interest granted to the Collateral Agent pursuant to this Agreement in and to the Collateral creates a perfected security interest therein prior to the rights of all other Persons therein and subject to no other Liens (other than Permitted Liens) and is entitled to all the rights, priorities and benefits afforded by the Uniform Commercial Code or other relevant law as enacted in any relevant jurisdiction to perfected security interests, in each case to the extent that the Collateral consists of the type of property in which a security interest may be perfected by filing a financing statement under the Uniform Commercial Code as enacted in any relevant jurisdiction or in the United States Patent and Trademark Office or United States Copyright Office. 2.2. No Liens. Such Assignor is, and as to Collateral acquired -------- by it from time to time after the date hereof such Assignor will be, the owner of, or has rights in, all Collateral free from any Lien, security interest, encumbrance or other right, title or interest Page 4 of any Person (other than Permitted Liens), and such Assignor shall defend the Collateral to the extent of its rights therein against all claims and demands of all Persons at any time claiming the same or any interest therein adverse to the Collateral Agent. 2.3. Other Financing Statements. As of the date hereof, there -------------------------- is no financing statement (or similar statement or instrument of registration under the law of any jurisdiction) covering or purporting to cover any interest of any kind in the Collateral (other than financing statements filed in respect of Permitted Liens), and so long as the Total Commitment has not been terminated or any Note remains unpaid or any of the Obligations remain unpaid or any Interest Rate Protection Agreement or Other Hedging Agreement or Letter of Credit remains in effect (other than Letters of Credit, together with all Fees that have accrued and will accrue thereon through the stated termination date of such Letters of Credit, which have been supported in a manner satisfactory to the Letter of Credit issuer in its sole and absolute discretion) or any Obligations are owed with respect thereto, such Assignor will not execute or authorize to be filed in any public office any financing statement (or similar statement or instrument of registration under the law of any jurisdiction) or statements relating to the Collateral, except financing statements filed or to be filed in respect of and covering the security interests granted hereby by such Assignor or as permitted by the Credit Agreement. 2.4. Chief Executive Office; Records. The chief executive ------------------------------- office of such Assignor is located at the address or addresses indicated on Annex A hereto for such Assignor. Such Assignor will not move its chief executive office except to such new location as such Assignor may establish in accordance with the last sentence of this Section 2.4. The originals of all documents evidencing all Receivables and Contract Rights of such Assignor and the only original books of account and records of such Assignor relating thereto are, and will continue to be, kept at such chief executive office, at one or more of the locations set forth on Annex A hereto or at such new locations as such Assignor may establish in accordance with the last sentence of this Section 2.4. All Receivables and Contract Rights of such Assignor are, and will continue to be, maintained at, and controlled and directed (including, without limitation, for general accounting purposes) from, the office locations described above or such new location established in accordance with the last sentence of this Section 2.4. No Assignor shall establish new locations for such offices until it shall have given to the Collateral Agent notice of its intention to do so. Such Assignor shall give to the Collateral Agent written notice of any such relocation of its chief executive office within 10 days following such relocation, clearly describing such new location and providing such other information in connection therewith as the Collateral Agent may reasonably request and with respect to such new location, it shall take all action, reasonably satisfactory to the Collateral Agent, to maintain the security interest of the Collateral Agent in the Collateral intended to be granted hereby at all times fully perfected and in full force and effect. Page 5 2.5. Location of Inventory and Equipment. All Inventory and ----------------------------------- Equipment held on the date hereof by each Assignor is located at one of the locations shown on Annex B hereto for such Assignor (other than (i) immaterial portions of Inventory (x) sold on consignment or held on display for demonstration purposes or (y) transferred to another location in connection with a sale of such Inventory in the ordinary course of business, so long as such sale occurs within 60 days from the date of such transfer and (ii) various spare parts held for maintenance or repair of Equipment). The temporary absence of Equipment constituting "seeded instruments" of any Assignor pursuant to a Contract with any customer of such Assignor entered into in the ordinary course of its business and consistent with its past practices under which such Equipment is used in connection with goods sold by such Assignor from the locations set forth on Annex B hereto, shall not be deemed in violation of this Section 2.5. Each Assignor agrees that all Inventory and Equipment now held or subsequently acquired by it shall be kept at (or shall be in transport to) any one of the locations shown on Annex B hereto, or such new location as such Assignor may establish in accordance with the last sentence of this Section 2.5 (other than (i) immaterial portions of Inventory (x) sold on consignment or held on display for demonstration purposes or (y) may be transferred to another location in connection with a sale of such Inventory in the ordinary course of business, so long as such sale occurs within 30 days from the date of such transfer or (ii) various spare parts held for maintenance or repair of Equipment). Any Assignor may establish a new location for Inventory and Equipment only if (i) it shall have given to the Collateral Agent notice of its intention to do so, (ii) within 10 days following any such relocation, it shall give to the Collateral Agent written notice of such relocation, clearly describing such new location and providing such other information in connection therewith as the Collateral Agent may request and (iii) with respect to such new location, it shall have taken all action reasonably satisfactory to the Collateral Agent to maintain the security interest of the Collateral Agent in the Collateral intended to be granted hereby at all times fully perfected and in full force and effect. 2.6. Recourse. This Agreement is made with full recourse to -------- each Assignor and pursuant to and upon all the warranties, representations, covenants and agreements on the part of such Assignor contained herein, in the other Credit Documents, in the Interest Rate Protection Agreements or Other Hedging Agreements and otherwise in writing in connection herewith or therewith. 2.7. Trade Names; Change of Name. No Assignor has or operates --------------------------- in any jurisdiction under, or in the preceding 12 months has had or has operated in any jurisdiction under, any trade names, fictitious names or other names except its legal name and such other trade or fictitious names as are listed on Annex C hereto. No Assignor shall change its legal name or assume or operate in any jurisdiction under any trade, fictitious or other name except those names listed on Annex C hereto and new names established in accordance with the last sentence of this Section 2.7. No Assignor shall assume or operate Page 6 in any jurisdiction under any new trade, fictitious or other name until (i) it shall have given to the Collateral Agent notice of its intention to do so, (ii) within 10 days following any assumption of, or operation under, such new name, it shall give to the Collateral Agent written notice of such assumption or operation, clearly describing such new name and the jurisdictions in which such new name shall be used and providing such other information in connection therewith as the Collateral Agent may reasonably request and (iii) with respect to such new name, it shall have taken all action requested by the Collateral Agent, to maintain the security interest of the Collateral Agent in the Collateral intended to be granted hereby at all times fully perfected and in full force and effect. ARTICLE III SPECIAL PROVISIONS CONCERNING RECEIVABLES; CONTRACT RIGHTS; INSTRUMENTS 3.1. Additional Representations and Warranties. As of the time ----------------------------------------- when each of its Receivables arises, each Assignor shall be deemed to have represented and warranted that such Receivable, and all records, papers and documents relating thereto (if any) are what they purport to be, and that all papers and documents (if any) relating thereto will be the only original writings evidencing and embodying such obligation of the account debtor named therein (other than copies created for general accounting purposes). 3.2. Maintenance of Records. Each Assignor will keep and ---------------------- maintain at its own cost and expense accurate records of its Receivables and Contracts, records of all payments received, all credits granted thereon, all merchandise returned and all other dealings therewith, and such Assignor will make the same available on such Assignor's premises to the Collateral Agent for inspection, at such Assignor's own cost and expense, at any and all reasonable times upon prior notice to an Authorized Officer of such Assignor. Upon the occurrence and during the continuance of an Event of Default and at the request of the Collateral Agent, such Assignor shall, at its own cost and expense, deliver all tangible evidence of its Receivables and Contract Rights (including, without limitation, all documents evidencing the Receivables and all Contracts) and such books and records to the Collateral Agent or to its representatives (copies of which evidence and books and records may be retained by such Assignor). Upon the occurrence and during the continuance of an Event of Default and if the Collateral Agent so directs, such Assignor shall legend, in form and manner reasonably satisfactory to the Collateral Agent, the Receivables and the Contracts, as well as books, records and documents (if any) of such Assignor evidencing or pertaining to such Receivables and Contracts with an appropriate reference to the fact that such Receivables and Contracts have been assigned to the Collateral Agent and that the Collateral Agent has a security interest therein. Page 7 3.3. Direction to Account Debtors; Contracting Parties; etc. ------------------------------------------------------- Upon the occurrence and during the continuance of an Event of Default, and if the Collateral Agent so directs any Assignor, such Assignor agrees (x) to cause all payments on account of the Receivables and Contracts to be made directly to the Cash Collateral Account, (y) that the Collateral Agent may, at its option, directly notify the obligors with respect to any Receivables and/or under any Contracts to make payments with respect thereto as provided in the preceding clause (x) and (z) that the Collateral Agent may enforce collection of any such Receivables and Contracts and may adjust, settle or compromise the amount of payment thereof, in the same manner and to the same extent as such Assignor. Without notice to or assent by any Assignor, the Collateral Agent may apply any or all amounts then in, or thereafter deposited in, the Cash Collateral Account which application shall be effected in the manner provided in Section 7.4 of this Agreement. The costs and expenses (including reasonable attorneys' fees) of collection, whether incurred by the Assignor or the Collateral Agent, shall be borne by the relevant Assignor. The Collateral Agent shall deliver a copy of each notice referred to in the preceding clause (y) to the relevant Assignor; provided, that the failure by the Collateral Agent to so notify such Assignor - -------- shall not affect the effectiveness of such notice or the other rights of the Collateral Agent created by this Section 3.3. 3.4. Modification of Terms; etc. No Assignor shall rescind or --------------------------- cancel any indebtedness evidenced by any Receivable or under any Contract, or modify in any material respect any term thereof or make any material adjustment with respect thereto, or extend or renew the same, or compromise or settle any material dispute, claim, suit or legal proceeding relating thereto, or sell any Receivable or Contract, or interest therein, without the prior written consent of the Collateral Agent, except as permitted by Section 3.5 hereof. Each Assignor will duly fulfill all obligations on its part to be fulfilled under or in connection with the Receivables and Contracts and will do nothing to impair the rights of the Collateral Agent in the Receivables or Contracts. 3.5. Collection. Each Assignor shall endeavor in accordance ---------- with reasonable business practices to cause to be collected from the account debtor named in each of its Receivables or obligor under any Contract, as and when due (including, without limitation, amounts which are delinquent, such amounts to be collected in accordance with generally accepted lawful collection procedures) any and all amounts owing under or on account of such Receivable or Contract, and apply forthwith upon receipt thereof all such amounts as are so collected to the outstanding balance of such Receivable or under such Contract, except that, prior to the occurrence of an Event of Default, any Assignor may allow in the ordinary course of business as adjustments to amounts owing under its Receivables and Contracts (i) an extension or renewal of the time or times of payment, or settlement for less than the total unpaid balance, which such Assignor finds appropriate in accordance with reasonable business judgment and (ii) a refund or credit due as a result of Page 8 returned or damaged merchandise or improperly performed services or for other reasons which such Assignor finds appropriate in accordance with reasonable business judgment. The reasonable costs and expenses (including, without limitation, attorneys' fees) of collection, whether incurred by an Assignor or the Collateral Agent, shall be borne by the relevant Assignor. 3.6. Instruments. If any Assignor owns or acquires any ----------- Instrument constituting Collateral, such Assignor will within 10 Business Days notify the Collateral Agent thereof, and upon request by the Collateral Agent will promptly deliver such Instrument to the Collateral Agent appropriately endorsed to the order of the Collateral Agent as further security hereunder. 3.7. Further Actions. Each Assignor will, at its own expense, --------------- make, execute, endorse, acknowledge, file and/or deliver to the Collateral Agent from time to time such vouchers, invoices, schedules, confirmatory assignments, conveyances, financing statements, transfer endorsements, powers of attorney, certificates, reports and other assurances or instruments and take such further steps relating to its Receivables, Contracts, Instruments and other property or rights covered by the security interest hereby granted, as the Collateral Agent may reasonably require. ARTICLE IV SPECIAL PROVISIONS CONCERNING TRADEMARKS 4.1. Additional Representations and Warranties. Each Assignor ----------------------------------------- represents and warrants that it is the true and lawful owner of or otherwise has the right to use the registered Marks listed in Annex D hereto for such Assignor and that said listed Marks constitute all the United States marks and applications for United States marks registered in the United States Patent and Trademark Office that such Assignor presently owns or uses in connection with its business. Each Assignor represents and warrants that it owns, is licensed to use or otherwise has the right to use all Marks that it uses. Each Assignor further warrants that it has no knowledge of any third party claim that any aspect of such Assignor's present or contemplated business operations infringes or will infringe any trademark, service mark or trade name. Each Assignor represents and warrants that it is the true and lawful owner of or otherwise has the right to use all U.S. trademark registrations and applications listed in Annex D hereto and that said registrations are valid, subsisting, have not been cancelled and that such Assignor is not aware of any third-party claim that any of said registrations is invalid or unenforceable, or is not aware that there is any reason that any of said registrations is invalid or unenforceable, or is not aware that there is any reason that any of said applications will not pass to registration. Each Assignor Page 9 represents and warrants that upon the recordation of a Grant of Security Interest in United States Trademarks and Patents in the form of Annex G hereto in the United States Patent and Trademark Office, together with filings on Form UCC-1 pursuant to this Agreement, all filings, registrations and recordings necessary or appropriate to perfect the security interest granted to the Collateral Agent in the United States Marks covered by this Agreement under federal law will have been accomplished. Each Assignor agrees to execute such a Grant of Security Interest in United States Trademark and Patents covering all right, title and interest in each United States Mark, and the associated goodwill, of such Assignor, and to record the same. Each Assignor hereby grants to the Collateral Agent an absolute power of attorney to sign, upon the occurrence and during the continuance of an Event of Default, any document which may be required by the United States Patent and Trademark Office in order to effect an absolute assignment of all right, title and interest in each Mark, and record the same. 4.2. Licenses and Assignments. Except as otherwise permitted by ------------------------ the Credit Agreement or this Agreement, each Assignor hereby agrees not to divest itself of any right under any Mark absent prior written approval of the Collateral Agent. 4.3. Infringements. Each Assignor agrees, promptly upon ------------- learning thereof, to notify the Collateral Agent in writing of the name and address of, and to furnish such pertinent information that may be available with respect to, any party who such Assignor believes is infringing or diluting or otherwise violating in any material respect any of such Assignor's rights in and to any Mark, or with respect to any party claiming that such Assignor's use of any Mark violates in any material respect any property right of that party. Each Assignor further agrees, unless otherwise agreed by the Collateral Agent, to prosecute any Person infringing any Mark in accordance with reasonable business practices. 4.4. Preservation of Marks. Each Assignor agrees to use its --------------------- Marks in interstate commerce during the time in which this Agreement is in effect, sufficiently to preserve such Marks as trademarks or service marks under the laws of the United States; provided, that, to the extent permitted by the -------- Credit Agreement, no Assignor shall be obligated to preserve any Mark in the event such Assignor determines, in its reasonable business judgment, that the preservation of such Mark is no longer desirable in the conduct of its business. 4.5. Maintenance of Registration. Each Assignor shall, at its --------------------------- own expense, diligently process all documents required by the Trademark Act of 1946, 15 U.S.C. (S)(S) 1051 et seq. to maintain trademark registrations, -- --- including but not limited to affidavits of use and applications for renewals of registration in the United States Patent and Trademark Office for all of its registered Marks pursuant to 15 U.S.C. (S)(S) 1058(a), 1059 and 1065, and shall pay all fees and disbursements in connection therewith and shall not Page 10 abandon any such filing of affidavit of use or any such application of renewal prior to the exhaustion of all administrative and judicial remedies without prior written consent of the Collateral Agent; provided, that no Assignor shall -------- be obligated to maintain registration of any Mark in the event that such Assignor determines, in its reasonable business judgment, that such maintenance of such Mark is no longer necessary or desirable in the conduct of its business. Each Assignor agrees to notify the Collateral Agent three (3) months prior to the dates on which the affidavits of use or the applications for renewal registration are due with respect to any registered Mark that the affidavits of use or the renewal is being processed or being abandoned, as the case may be. 4.6. Future Registered Marks. If any Mark registration issues ----------------------- hereafter to any Assignor as a result of any application now or hereafter pending before the United States Patent and Trademark Office, within 30 days of receipt of such certificate, such Assignor shall deliver to the Collateral Agent a copy of such certificate, and an assignment for security in such Mark, to the Collateral Agent and at the expense of such Assignor, confirming the assignment for security in such Mark to the Collateral Agent hereunder, the form of such security to be substantially the same as the form hereof or in such other form as may be reasonably satisfactory to the Collateral Agent. 4.7. Remedies. If an Event of Default shall occur and be -------- continuing, the Collateral Agent may, by written notice to the relevant Assignor, take any or all of the following actions: (i) declare the entire right, title and interest of such Assignor in and to each of the Marks, together with all trademark rights and rights of protection to the same, vested in the Collateral Agent for the benefit of the Secured Creditors, in which event such rights, title and interest shall immediately vest, in the Collateral Agent for the benefit of the Secured Creditors, and the Collateral Agent shall be entitled to exercise the power of attorney referred to in Section 4.1 hereof to execute, cause to be acknowledged and notarized and record said absolute assignment with the applicable agency; (ii) take and use or sell the Marks and the goodwill of such Assignor's business symbolized by the Marks and the right to carry on the business and use the assets of such Assignor in connection with which the Marks have been used; and (iii) direct such Assignor to refrain, in which event such Assignor shall refrain, from using the Marks in any manner whatsoever, directly or indirectly, and, if requested by the Collateral Agent, change such Assignor's corporate name to eliminate therefrom any use of any Mark and execute such other and further documents that the Collateral Agent may request to further confirm this and to transfer ownership of the Marks and registrations and any pending trademark application in the United States Patent and Trademark Office to the Collateral Agent. Page 11 ARTICLE V SPECIAL PROVISIONS CONCERNING PATENTS, COPYRIGHTS AND TRADE SECRETS 5.1. Additional Representations and Warranties. Each Assignor ----------------------------------------- represents and warrants that it is the true and lawful owner of all rights in (i) all material United States trade secrets and proprietary information necessary to operate the business of the Assignor (the "Trade Secret Rights"), (ii) the Patents listed in Annex E hereto for such Assignor and that said Patents constitute all the United States patents and applications for United States patents that such Assignor now owns and (iii) the Copyrights listed in Annex F hereto for such Assignor and that said Copyrights constitute all registrations of United States copyrights and applications for United States copyright registrations that such Assignor now owns. Each Assignor further warrants that it has no knowledge of any third party claim that any aspect of such Assignor's present or contemplated business operations infringes or will infringe any patent or any copyright or such Assignor has misappropriated any trade secret or proprietary information. Each Assignor represents and warrants that upon the recordation of a Grant of Security Interest in United States Trademarks and Patents in the form of Annex G hereto in the United States Patent and Trademark Office and the recordation of a Grant of Security Interest in United States Copyrights in the form of Annex H hereto in the United States Copyright Office, together with filings on Form UCC-1 pursuant to this Agreement, all filings, registrations and recordings necessary or appropriate to perfect the security interest granted to the Collateral Agent in the United States Patents and United States Copyrights covered by this Agreement under federal law will have been accomplished. Each Assignor agrees to execute such a Grant of Security Interest in United States Trademarks and Patents covering all right, title and interest in each United States Patent of such Assignor and to record the same, and to execute such a Grant of Security Interest in United States Copyrights covering all right, title and interest in each United States Copyright of such Assignor and to record the same. Each Assignor hereby grants to the Collateral Agent an absolute power of attorney to sign, upon the occurrence and during the continuance of any Event of Default, any document which may be required by the United States Patent and Trademark Office or the United States Copyright Office in order to effect an absolute assignment of all right, title and interest in each Patent and Copyright, and to record the same. 5.2. Licenses and Assignments. Except as otherwise permitted by ------------------------ the Credit Agreement or this Agreement, each Assignor hereby agrees not to divest itself of any right under any Patent or Copyright absent prior written approval of the Collateral Agent. Page 12 5.3. Infringements. Each Assignor agrees, promptly upon ------------- learning thereof, to furnish the Collateral Agent in writing with all pertinent information available to such Assignor with respect to any infringement, contributing infringement or active inducement to infringe any of such Assignor's rights in and to in any Patent or Copyright or to any claim that such Assignor's practice of any Patent or use of any Copyright violates any property right of a third party, or with respect to any misappropriation of any Trade Secret Right or any claim that such Assignor's practice of any Trade Secret Right violates any property right of a third party. Each Assignor further agrees, absent direction of the Collateral Agent to the contrary, diligently to prosecute any Person infringing any Patent or Copyright or any Person misappropriating any Trade Secret Right in accordance with commercially reasonable business practices. 5.4. Maintenance of Patents. At its own expense, each Assignor ---------------------- shall make timely payment of all post-issuance fees required pursuant to 35 U.S.C. (S) 41 to maintain in force rights under each Patent, absent prior written consent of the Collateral Agent; provided, that, to the extent permitted -------- by the Credit Agreement, no Assignor shall be obligated to maintain any Patent in the event such Assignor determines, in its reasonable business judgment, that the maintenance of such Patent is no longer necessary or desirable in the conduct of its business. 5.5. Prosecution of Patent Application. At its own expense, ---------------------------------- each Assignor shall diligently prosecute all applications for United States Patents listed in Annex E hereto for such Assignor and shall not abandon any such application prior to exhaustion of all administrative and judicial remedies, absent written consent of the Collateral Agent; provided, that, to the -------- extent permitted by the Credit Agreement, no Assignor shall be obligated to prosecute any application in the event such Assignor determines, in its reasonable business judgment, that the prosecuting of such application is no longer necessary or desirable in the conduct of its business. 5.6. Other Patents and Copyrights. Within 30 days of the ---------------------------- acquisition or issuance of a United States Patent, registration of a Copyright, or acquisition of a registered Copyright, or of filing of an application for a United States Patent or Copyright, the relevant Assignor shall deliver to the Collateral Agent a copy of said Copyright or certificate or registration of, or application therefor, said Patents, as the case may be, with an assignment for security as to such Patent or Copyright, as the case may be, to the Collateral Agent and at the expense of such Assignor, confirming the assignment for security, the form of such assignment for security to be substantially the same as the form hereof or in such other form as may be reasonably satisfactory to the Collateral Agent. 5.7. Remedies. If an Event of Default shall occur and be -------- continuing, the Collateral Agent may by written notice to the relevant Assignor, take any or all of the Page 13 following actions: (i) declare the entire right, title, and interest of such Assignor in each of the Patents and Copyrights vested in the Collateral Agent for the benefit of the Secured Creditors, in which event such right, title, and interest shall immediately vest in the Collateral Agent for the benefit of the Secured Creditors, in which case the Collateral Agent shall be entitled to exercise the power of attorney referred to in Section 5.1 hereof to execute, cause to be acknowledged and notarized and to record said absolute assignment with the applicable agency; (ii) take and practice or sell the Patents and Copyrights; and (iii) direct such Assignor to refrain, in which event such Assignor shall refrain, from practicing the Patents and using the Copyrights directly or indirectly, and such Assignor shall execute such other and further documents as the Collateral Agent may request further to confirm this and to transfer ownership of the Patents and Copyrights to the Collateral Agent for the benefit of the Secured Creditors. ARTICLE VI PROVISIONS CONCERNING ALL COLLATERAL 6.1. Protection of Collateral Agent's Security. Each Assignor ----------------------------------------- will do nothing to impair the rights of the Collateral Agent in the Collateral. Each Assignor will at all times keep its Inventory and Equipment insured in favor of the Collateral Agent, at such Assignor's own expense to the extent and in the manner provided in the Credit Agreement; all policies or certificates with respect to such insurance (and any other insurance maintained by such Assignor) (i) shall be endorsed to the Collateral Agent's reasonable satisfaction for the benefit of the Collateral Agent (including, without limitation, by naming the Collateral Agent as additional insured and loss payee) and (ii) shall state that such insurance policies shall not be cancelled or revised without 30 days' prior written notice thereof by the insurer to the Collateral Agent; and certified copies of such policies or certificates shall be deposited with the Collateral Agent. If any Assignor shall fail to insure its Inventory and Equipment in accordance with the preceding sentence, or if any Assignor shall fail to so endorse and deposit all policies or certificates with respect thereto, the Collateral Agent shall have the right (but shall be under no obligation) to procure such insurance and such Assignor agrees to promptly reimburse the Collateral Agent for all costs and expenses of procuring such insurance. Except as otherwise permitted to be retained by the relevant Assignor pursuant to the Credit Agreement, the Collateral Agent shall, at the time such proceeds of such insurance are distributed to the Secured Creditors, apply such proceeds in accordance with Section 7.4 hereof. Each Assignor assumes all liability and responsibility in connection with the Collateral acquired by it and the liability of such Assignor to pay the Obligations shall in no way be affected or diminished by reason of the fact that such Collateral may be lost, destroyed, stolen, damaged or for any reason what soever unavailable to such Assignor. Page 14 6.2. Warehouse Receipts Non-Negotiable. Each Assignor agrees --------------------------------- that if any warehouse receipt or receipt in the nature of a warehouse receipt is issued with respect to any of its Inventory, such warehouse receipt or receipt in the nature thereof shall not be "negotiable" (as such term is used in Section 7-104 of the Uniform Commercial Code as in effect in any relevant jurisdiction or under other relevant law). 6.3. Further Actions. Each Assignor will, at its own expense, --------------- make, execute, endorse, acknowledge, file and/or deliver to the Collateral Agent from time to time such lists, descriptions and designations of its Collateral, warehouse receipts, receipts in the nature of warehouse receipts, bills of lading, documents of title, vouchers, invoices, sche dules, confirmatory assignments, conveyances, financing statements, transfer endorsements, powers of attorney, certificates, reports and other assurances or instruments and take such further steps relating to the Collateral and other property or rights covered by the security interest hereby granted, which the Collateral Agent deems reasonably appropriate or advisable to perfect, preserve or protect its security interest in the Collateral. 6.4. Financing Statements. Each Assignor agrees to execute and -------------------- deliver to the Collateral Agent such financing statements, in form reasonably acceptable to the Collateral Agent, as the Collateral Agent may from time to time reasonably request or as are necessary or desirable in the opinion of the Collateral Agent to establish and maintain a valid, enforceable, first priority perfected security interest in the Collateral as provided herein and the other rights and security contemplated hereby all in accordance with the Uniform Commercial Code as enacted in any and all relevant jurisdictions or any other relevant law. Each Assignor will pay any applicable filing fees, recordation taxes and related expenses relating to its Collateral. Each Assignor hereby authorizes the Collateral Agent to file any such financing statements without the signature of such Assignor where permitted by law. ARTICLE VII REMEDIES UPON OCCURRENCE OF EVENT OF DEFAULT 7.1. Remedies; Obtaining the Collateral Upon Default. Each ----------------------------------------------- Assignor agrees that, if any Event of Default shall have occurred and be continuing, then and in every such case, the Collateral Agent, in addition to any rights now or hereafter existing under applicable law, shall have all rights as a secured creditor under the Uniform Commercial Code in all relevant jurisdictions and may: (i) personally, or by agents or attorneys, immediately take possession of the Collateral or any part thereof, from such Assignor or any other Person who then Page 15 has possession of any part thereof with or without notice or process of law, and for that purpose may enter upon such Assignor's premises where any of the Collateral is located and remove the same and use in connection with such removal any and all services, supplies, aids and other facilities of such Assignor; (ii) instruct the obligor or obligors on any agreement, instrument or other obligation (including, without limitation, the Receivables and the Contracts) constituting the Collateral to make any payment required by the terms of such agreement, instrument or other obligation directly to the Collateral Agent; (iii) withdraw all monies, securities and instruments in the Cash Collateral Account for application to the Obligations in accordance with Section 7.4 hereof; (iv) sell, assign or otherwise liquidate any or all of the Collateral or any part thereof in accordance with Section 7.2 hereof, or direct the relevant Assignor to sell, assign or otherwise liquidate any or all of the Collateral or any part thereof, and, in each case, take possession of the proceeds of any such sale or liquidation; (v) take possession of the Collateral or any part thereof, by directing the relevant Assignor in writing to deliver the same to the Collateral Agent at any place or places designated by the Collateral Agent, in which event such Assignor shall at its own expense: (x) forthwith cause the same to be moved to the place or places so designated by the Collateral Agent and there delivered to the Collateral Agent; (y) store and keep any Collateral so delivered to the Collateral Agent at such place or places pending further action by the Collateral Agent as provided in Section 7.2 hereof; and (z) while the Collateral shall be so stored and kept, provide such guards and maintenance services as shall be necessary to protect the same and to preserve and maintain them in good condition; and (vi) license or sublicense, whether on an exclusive or nonexclusive basis, any Marks, Patents or Copyrights included in the Collateral for such term and on such conditions and in such manner as the Collateral Agent shall in its sole judgment determine (taking into account such provisions as may be necessary to protect and preserve such Marks, Patents or Copyrights); Page 16 it being understood that each Assignor's obligation so to deliver the Collateral is of the essence of this Agreement and that, accordingly, upon application to a court of equity having jurisdiction, the Collateral Agent shall be entitled to a decree requiring specific per formance by such Assignor of said obligation. The Secured Creditors agree that this Agreement may be enforced only by the action of the Agent or the Collateral Agent, in each case acting upon the instructions of the Required Banks (or, after the date on which all Credit Document Obligations have been paid in full, the holders of at least the majority of the outstanding Other Obligations) and that no other Secured Creditor shall have any right individually to seek to enforce or to enforce this Agreement or to realize upon the security to be granted hereby, it being understood and agreed that such rights and remedies may be exercised by the Agent or the Collateral Agent or the holders of at least a majority of the outstanding Interest Rate Obligations, as the case maybe, for the benefit of the Secured Creditors upon the terms of this Agreement. 7.2. Remedies; Disposition of the Collateral. Any Collateral --------------------------------------- repossessed by the Collateral Agent under or pursuant to Section 7.1 hereof and any other Collateral whether or not so repossessed by the Collateral Agent, may be sold, assigned, leased or otherwise disposed of under one or more contracts or as an entirety, and without the neces sity of gathering at the place of sale the property to be sold, and in general in such manner, at such time or times, at such place or places and on such terms as the Collateral Agent may, in compliance with any mandatory requirements of applicable law, determine to be commercially reasonable. Any of the Collateral may be sold, leased or otherwise disposed of, in the condition in which the same existed when taken by the Collateral Agent or after any overhaul or repair at the expense of the relevant Assignor which the Collateral Agent shall determine to be commercially reasonable. Any such disposition which shall be a private sale or other private proceedings permitted by such requirements shall be made upon not less than 10 days' written notice to the relevant Assignor specifying the time at which such disposition is to be made and the intended sale price or other consideration therefor, and shall be subject, for the 10 days after the giving of such notice, to the right of the relevant Assignor or any nominee of such Assignor to acquire the Collateral involved at a price or for such other consideration at least equal to the intended sale price or other consideration so specified. Any such disposition which shall be a public sale permitted by such requirements shall be made upon not less than 10 days' written notice to the relevant Assignor specifying the time and place of such sale and, in the absence of applicable re quirements of law, shall be by public auction (which may, at the Collateral Agent's option, be subject to reserve), after publication of notice of such auction not less than 10 days prior thereto in two newspapers in general circulation in the City of New York. To the extent permitted by any such requirement of law, the Collateral Agent may bid for and become the purchaser of the Collateral or any item thereof, offered for sale in accordance with this Section without accountability to the relevant Assignor. If, under mandatory requirements of applicable law, the Collateral Agent shall be required to make disposition of the Page 17 Collateral within a period of time which does not permit the giving of notice to the relevant Assignor as hereinabove specified, the Collateral Agent need give such Assignor only such notice of disposition as shall be reasonably practicable in view of such mandatory requirements of applicable law. 7.3. Waiver of Claims. Except as otherwise provided in this ---------------- Agreement, EACH ASSIGNOR HEREBY WAIVES, TO THE EXTENT PERMITTED BY APPLICABLE LAW, NOTICE AND JUDICIAL HEARING IN CONNECTION WITH THE COLLATERAL AGENT'S TAKING POSSESSION OR THE COLLATERAL AGENT'S DISPOSITION OF ANY OF THE COLLATERAL, INCLUDING, WITHOUT LIMITATION, ANY AND ALL PRIOR NOTICE AND HEARING FOR ANY PREJUDGMENT REMEDY OR REMEDIES AND ANY SUCH RIGHT WHICH SUCH ASSIGNOR WOULD OTHERWISE HAVE UNDER THE CONSTITUTION OR ANY STATUTE OF THE UNITED STATES OR OF ANY STATE, and each Assignor hereby further waives, to the extent permitted by law: (i) all damages occasioned by such taking of possession except any damages which are the direct result of the Collateral Agent's gross negligence or willful misconduct; (ii) all other requirements as to the time, place and terms of sale or other requirements with respect to the enforcement of the Collateral Agent's rights here under; and (iii) all rights of redemption, appraisement, valuation, stay, extension or moratorium now or hereafter in force under any applicable law in order to prevent or delay the enforcement of this Agreement or the absolute sale of the Collateral or any portion thereof, and each Assignor, for itself and all who may claim under it, insofar as it or they now or hereafter lawfully may, hereby waives the benefit of all such laws. Any sale of, or the grant of options to purchase, or any other realization upon, any Collateral shall operate to divest all right, title, interest, claim and demand, either at law or in equity, of the relevant Assignor therein and thereto, and shall be a perpetual bar both at law and in equity against such Assignor and against any and all Persons claiming or at tempting to claim the Collateral so sold, optioned or realized upon, or any part thereof, from, through and under such Assignor. 7.4. Application of Proceeds. (a) All moneys collected by the ----------------------- Collateral Agent (or, to the extent the Pledge Agreement, the Mortgages or the Additional Security Documents require proceeds of collateral under such Security Documents to be applied in Page 18 accordance with the provisions of this Agreement, the Pledgee or Mortgagee under such other Security Document) upon any sale or other disposition of the Collateral, together with all other moneys received by the Collateral Agent hereunder, shall be applied as follows: (i) first, to the payment of all Obligations owing the Collateral Agent of the type provided in clauses (iii) and (iv) of the definition of Obligations; (ii) second, to the extent proceeds remain after the application pursuant to the preceding clause (i), an amount equal to the outstanding Obligations shall be paid to the Secured Creditors as provided in Section 7.4(c) hereof with each Secured Creditor receiving an amount equal to its outstanding Obligations or, if the proceeds are insufficient to pay in full all such Obligations, its Pro Rata Share (as defined below) of the amount remaining to be distributed; and (iii) third, to the extent proceeds remain after the application pursuant to the preceding clauses (i) and (ii) and following the termination of this Agreement pursuant to Section 10.8 hereof, to the relevant Assignor or, to the extent directed by such Assignor or a court of competent jurisdiction, to whomever may be lawfully entitled to receive such surplus. (b) For purposes of this Agreement, "Pro Rata Share" shall mean, when calculating a Secured Creditor's portion of any distribution or amount, that amount (expressed as a percentage) equal to a fraction the numerator of which is the then unpaid amount of such Secured Creditor's Obligations and the denominator of which is the then outstanding amount of all Obligations. (c) All payments required to be made to the Bank Creditors hereunder shall be made to the Agent under the Credit Agreement for the account of the Bank Creditors and all payments required to be made to the Other Creditors hereunder shall be made directly to the respective Other Creditor. (d) For purposes of applying payments received in accordance with this Section 7.4, the Collateral Agent shall be entitled to rely upon (i) the Agent under the Credit Agreement and (ii) the Other Creditors for a determination (which the Agent, each Other Creditor and the Secured Creditors agree (or shall agree) to provide upon request of the Collateral Agent) of the outstanding Obligations owed to the Bank Creditors or the Other Creditors, as the case may be. Unless it has actual knowledge (including by way of written notice from a Bank Creditor or an Other Creditor) to the contrary, the Agent under the Credit Agreement, in furnishing information pursuant to the preceding sentence, and the Collateral Agent, in acting hereunder, shall be entitled to assume that (x) no Credit Document Obligations other than principal, interest and regularly accruing fees are owing Page 19 to any Bank Creditor and (y) no Interest Rate Protection Agreement or Other Hedging Agreement, or Other Obligations in respect thereof, are in existence. (e) It is understood that the Assignors shall remain jointly and severally liable to the extent of any deficiency between the amount of the proceeds of the Collateral and the aggregate amount of the sums referred to in clause (a) of this Section 7.4 with respect to the relevant Assignor. 7.5. Remedies Cumulative. Each and every right, power and ------------------- remedy hereby specifically given to the Collateral Agent shall be in addition to every other right, power and remedy specifically given under this Agreement, the Interest Rate Protection Agreements or Other Hedging Agreements, the other Credit Documents or now or hereafter existing at law, in equity or by statute and each and every right, power and remedy whether specifically herein given or otherwise existing may be exercised from time to time or simultaneously and as often and in such order as may be deemed expedient by the Collateral Agent. All such rights, powers and remedies shall be cumulative and the exercise or the beginning of the exercise of one shall not be deemed a waiver of the right to exercise any other or others. No delay or omission of the Collateral Agent in the exercise of any such right, power or remedy and no renewal or extension of any of the Obligations shall impair any such right, power or remedy or shall be construed to be a waiver of any Default or Event of Default or an acquiescence therein. No notice to or demand on any Assignor in any case shall entitle it to any other or further notice or demand in similar or other circumstances or constitute a waiver of any of the rights of the Collateral Agent to any other or further action in any circumstances without notice or demand. In the event that the Collateral Agent shall bring any suit to enforce any of its rights hereunder and shall be entitled to judgment, then in such suit the Collateral Agent may recover reasonable expenses, including attorneys' fees, and the amounts thereof shall be included in such judgment. 7.6. Discontinuance of Proceedings. In case the Collateral ----------------------------- Agent shall have instituted any proceeding to enforce any right, power or remedy under this Agreement by foreclosure, sale, entry or otherwise, and such proceeding shall have been discontinued or abandoned for any reason or shall have been determined adversely to the Collateral Agent, then and in every such case the relevant Assignor, the Collateral Agent and each holder of any of the Obligations shall be restored to their former positions and rights hereunder with respect to the Collateral subject to the security interest created under this Agreement, and all rights, remedies and powers of the Collateral Agent shall continue as if no such proceeding had been instituted. Page 20 ARTICLE VIII INDEMNITY 8.1. Indemnity. (a) Each Assignor jointly and severally agrees --------- to indemnify, reimburse and hold the Collateral Agent, each other Secured Creditor and their respective successors, permitted assigns, employees, agents and servants (hereinafter in this Section 8.1 referred to individually as "Indemnitee," and collectively as "Indemnitees") harmless from any and all liabilities, obligations, damages, injuries, penalties, claims, demands, actions, suits, judgments and any and all costs, expenses or disbursements (including attorneys' fees and expenses) (for the purposes of this Section 8.1 the foregoing are collectively called "expenses") of whatsoever kind and nature imposed on, asserted against or incurred by any of the Indemnitees in any way relating to or arising out of this Agreement, any Interest Rate Protection Agreement or Other Hedging Agreement, any other Credit Document or any other document executed in connection herewith or therewith or in any other way connected with the administration of the transactions contemplated hereby or thereby or the enforcement of any of the terms of, or the preservation of any rights under any thereof, or in any way relating to or arising out of the manufacture, ownership, ordering, purchase, delivery, control, acceptance, lease, financing, possession, operation, condition, sale, return or other disposition, or use of the Collateral (including, without limitation, latent or other defects, whether or not discoverable), the violation of the laws of any country, state or other governmental body or unit, any tort (including, without limitation, claims arising or imposed under the doctrine of strict liability, or for or on account of injury to or the death of any Person (including any Indemnitee), or property damage), or contract claim; provided that no Indemnitee shall be indemnified pursuant to this Section 8.1(a) for losses, damages or liabilities to the extent caused by the gross negligence or willful misconduct of such Indemnitee. Each Assignor agrees that upon written notice by any Indemnitee of the assertion of such a liability, obligation, damage, injury, penalty, claim, demand, action, suit or judgment, the relevant Assignor shall assume full responsibility for the defense thereof. Each Indemnitee agrees to use its best efforts to promptly notify the relevant Assignor of any such assertion of which such Indemnitee has knowledge. (b) Without limiting the application of Section 8.1(a) hereof, each Assignor agrees, jointly and severally, to pay, or reimburse the Collateral Agent for any and all reasonable fees, costs and expenses of whatever kind or nature incurred in connection with the creation, preservation or protection of the Collateral Agent's Liens on, and security interest in, the Collateral, including, without limitation, all fees and taxes in connection with the recording or filing of instruments and documents in public offices, payment or discharge of any taxes or Liens upon or in respect of the Collateral, premiums for insurance with respect to the Collateral and all other fees, costs and expenses in connection with Page 21 protecting, maintaining or preserving the Collateral and the Collateral Agent's interest therein, whether through judicial proceedings or otherwise, or in defending or prosecuting any actions, suits or proceedings arising out of or relating to the Collateral. (c) Without limiting the application of Section 8.1(a) or (b) hereof, each Assignor agrees, jointly and severally, to pay, indemnify and hold each Indemnitee harmless from and against any loss, costs, damages and expenses which such Indemnitee may suffer, expend or incur in consequence of or growing out of any misrepresentation by any Assignor in this Agreement, any Interest Rate Protection Agreement or Other Hedging Agreement, any other Credit Document or in any writing contemplated by or made or delivered pursuant to or in connection with this Agreement, any Interest Rate Protection Agreement or Other Hedging Agreement or any other Credit Document. (d) If and to the extent that the obligations of any Assignor under this Section 8.1 are unenforceable for any reason, such Assignor hereby agrees to make the maximum contribution to the payment and satisfaction of such obligations which is permissible under applicable law. 8.2. Indemnity Obligations Secured by Collateral; Survival. Any ----------------------------------------------------- amounts paid by any Indemnitee as to which such Indemnitee has the right to reimbursement shall constitute Obligations secured by the Collateral. The indemnity obligations of each Assignor contained in this Article VIII shall continue in full force and effect notwithstanding the full payment of all the Notes issued under the Credit Agreement, the termination of all Interest Rate Protection Agreements or Other Hedging Agreements and the payment of all other Obligations and notwithstanding the discharge thereof. ARTICLE IX DEFINITIONS The following terms shall have the meanings herein specified. Such definitions shall be equally applicable to the singular and plural forms of the terms defined. "Agent" shall have the meaning provided in the recitals to this Agreement. "Agreement" shall mean this Security Agreement as the same may be modified, supplemented or amended from time to time in accordance with its terms. "Assignor" shall have the meaning provided in the first paragraph of this Agreement. Page 22 "Bank Creditors" shall have the meaning provided in the recitals to this Agreement. "Banks" shall have the meaning provided in the recitals to this Agreement. "Borrower" shall have the meaning provided in the recitals to this Agreement. "Cash Collateral Account" shall mean a non-interest bearing cash collateral account maintained with, and in the sole dominion and control of, the Collateral Agent for the benefit of the Secured Creditors. "Chattel Paper" shall have the meaning provided in the Uniform Commercial Code as in effect on the date hereof in the State of New York. "Class" shall have the meaning provided in Section 10.2 of this Agreement. "Collateral" shall have the meaning provided in Section 1.1(a) of this Agreement. "Collateral Agent" shall have the meaning provided in the first paragraph of this Agreement. "Contract Rights" shall mean all rights of any Assignor (including, without limitation, all rights to payment) under each Contract (including each Excluded Contract to the extent provided in the definition thereof). "Contracts" shall mean all contracts (other than Excluded Contracts except to the extent provided in the definition thereof) between any Assignor and one or more additional parties (including, without limitation, any Interest Rate Protection Agreements or Other Hedging Agreements). "Copyrights" shall mean any United States or foreign copyright owned by any Assignor, including any registrations of any Copyrights, in the United States Copyright Office or the equivalent thereof in any foreign country, as well as any application for a United States copyright registration now or hereafter made with the United States Copyright Office by any Assignor. "Credit Agreement" shall have the meaning provided in the recitals to this Agreement. Page 23 "Credit Document Obligations" shall have the meaning provided in the definition of "Obligations" in this Article IX. "Default" shall mean any event which, with notice or lapse of time, or both, would constitute an Event of Default. "Documents" shall have the meaning provided in the Uniform Commercial Code as in effect on the date hereof in the State of New York. "Equipment" shall mean any "equipment," as such term is defined in the Uniform Commercial Code as in effect on the date hereof in the State of New York, now or hereafter owned by any Assignor and, in any event, shall include, but shall not be limited to, all machinery, equipment, furnishings, movable trade fixtures and vehicles now or hereafter owned by any Assignor and any and all additions, substitutions and replacements of any of the foregoing, wherever located, together with all attachments, components, parts, equipment and accessories installed thereon or affixed thereto. "Excluded Contracts" shall mean one or more Contracts which constitute a Specified Asset or which by their terms would be breached by the grant of the security interests created therein pursuant to the terms of this Agreement (it being understood and agreed, however, that notwithstanding the foregoing, all rights to payment for money due or to become due pursuant to any Excluded Contract shall be subject to the security interests created pursuant to this Agreement (except to the extent that such right constitutes a Specified Asset)). "Event of Default" shall mean any Event of Default under, and as defined in, the Credit Agreement and shall in any event, without limitation, include any payment default on any of the Obligations after the expiration of any applicable grace period. "General Intangibles" shall have the meaning provided in the Uniform Commercial Code as in effect on the date hereof in the State of New York. "Goods" shall have the meaning provided in the Uniform Commercial Code as in effect on the date hereof in the State of New York. "Holdings" shall have the meaning provided in the recitals to this Agreement. "Indemnitee" shall have the meaning provided in Section 8.1 of this Agreement. Page 24 "Instrument" shall have the meaning provided in the Uniform Commercial Code as in effect on the date hereof in the State of New York. "Interest Rate Protection Agreements or Other Hedging Agreements" shall have the meaning provided in the recitals to this Agreement. "Inventory" shall mean merchandise, inventory and goods, and all additions, substitutions and replacements thereof, wherever located, together with all goods, supplies, incidentals, packaging materials, labels, materials and any other items used or usable in manufacturing, processing, packaging or shipping same; in all stages of production -- from raw materials through work- in-process to finished goods -- and all products and proceeds of whatever sort and wherever located and any portion thereof which may be returned, rejected, reclaimed or repossessed by the Collateral Agent from any Assignor's customers, and shall specifically include all "inventory" as such term is defined in the Uniform Commercial Code as in effect on the date hereof in the State of New York, now or hereafter owned by any Assignor. "Liens" shall mean any security interest, mortgage, pledge, lien, claim, charge, encumbrance, title retention agreement, lessor's interest in a financing lease or analogous instrument, in, of, or on any Assignor's property. "Marks" shall mean all right, title and interest in and to any United States or foreign trademarks, service marks and trade names now held or hereafter acquired by any Assignor, including any registration of any trademarks and service marks, or the equivalent thereof in any foreign country in the United States Patent and Trademark Office and any trade dress including logos and/or designs used by any Assignor in the United States or any foreign country. "Obligations" shall mean (i) the full and prompt payment when due (whether at the stated maturity, by acceleration or otherwise) of all obligations (including obligations which, but for the automatic stay under Section 362(a) of the Bankruptcy Code, would become due) and liabilities of each Assignor, now existing or hereafter incurred under, arising out of or in connection with any Credit Document to which such Assignor is a party and the due performance and compliance by each Assignor with the terms of each such Credit Document (all such obligations and liabilities under this clause (i), except to the extent consisting of obligations or indebtedness with respect to Interest Rate Protection Agreements or Other Hedging Agreements, being herein collectively called the "Credit Document Obligations"); (ii) the full and prompt payment when due (whether at the stated maturity, by acceleration or otherwise) of all obligations (including obligations which, but for the automatic stay under Section 362(a) of the Bankruptcy Code, would become due) and liabilities of each Assignor now existing or hereafter incurred under, arising out of or Page 25 in connection with any Interest Rate Protection Agreement or Other Hedging Agreement including, in the case of Assignors other than the Borrower, all obligations of such Assignor under its Guaranty in respect of Interest Rate Protection Agreements or Other Hedging Agreements (all such obligations and liabilities under this clause (ii) being herein collectively called the "Other Obligations"); (iii) any and all sums advanced by the Collateral Agent in order to preserve the Collateral or preserve its security interest in the Collateral; (iv) in the event of any proceeding for the collection or enforcement of any indebtedness, obligations, or liabilities of each Assignor referred to in clauses (i) and (ii), after an Event of Default shall have occurred and be continuing, the reasonable expenses of re-taking, holding, preparing for sale or lease, selling or otherwise disposing of or realizing on the Collateral, or of any exercise by the Collateral Agent of its rights hereunder, together with reasonable attorneys' fees and court costs; and (v) all amounts paid by any Indemnitee as to which such Indemnitee has the right to reimbursement under Section 8.1 of this Agreement. "Other Creditors" shall have the meaning provided in the recitals to this Agreement. "Other Obligations" shall have the meaning provided in the definition of "Obligations" in this Article IX. "Patents" shall mean any United States or foreign patent to which any Assignor now or hereafter has title and any divisions or continuations thereof, as well as any application for a United States or foreign patent now or hereafter made by any Assignor. "Proceeds" shall have the meaning provided in the Uniform Commercial Code as in effect in the State of New York on the date hereof or under other relevant law and, in any event, shall include, but not be limited to, (i) any and all proceeds of any insurance, indemnity, warranty or guaranty payable to the Collateral Agent or any Assignor from time to time with respect to any of the Collateral, (ii) any and all payments (in any form whatsoever) made or due and payable to any Assignor from time to time in connection with any requisition, confiscation, condemnation, seizure or forfeiture of all or any part of the Collateral by any governmental authority (or any person acting under color of governmental authority) and (iii) any and all other amounts from time to time paid or payable under or in connection with any of the Collateral. "Pro Rata Share" shall have the meaning provided in Section 7.4(b) of this Agreement. Page 26 "Receivables" shall mean any "account" as such term is defined in the Uniform Commercial Code as in effect on the date hereof in the State of New York, now or hereafter owned by any Assignor and, in any event, shall include, but shall not be limited to, all of such Assignor's rights to payment for goods sold or leased or services performed by such Assignor, whether now in existence or arising from time to time hereafter, including, without limitation, rights evidenced by an account, note, contract, security agreement, chattel paper, or other evidence of indebtedness or security, together with (a) all security pledged, assigned, hypothecated or granted to or held by such Assignor to secure the foregoing, (b) all of any Assignor's right, title and interest in and to any goods, the sale of which gave rise thereto, (c) all guarantees, endorsements and indemnifications on, or of, any of the foregoing, (d) all powers of attorney for the execution of any evidence of indebtedness or security or other writing in connection therewith, (e) all books, records, ledger cards, and invoices relating thereto, (f) all evidences of the filing of financing statements and other statements and the registration of other instruments in connection therewith and amendments thereto, notices to other creditors or secured parties, and certificates from filing or other registration officers, (g) all credit information, reports and memoranda relating thereto and (h) all other writings related in any way to the foregoing; provided, that the term -------- Receivable shall not include any Receivable that is transferred to the Receivables Entity pursuant to (but only after the execution and delivery of) the Accounts Receivable Facility Documents. "Requisite Creditors" shall have the meaning provided in Section 10.2 of this Agreement. "Secured Creditors" shall have the meaning provided in the recitals to this Agreement. "Specified Asset" shall have the meaning provided in the Accounts Receivable Facility Documents. "Termination Date" shall have the meaning provided in Section 10.8 of this Agreement. "Trade Secret Rights" shall have the meaning provided in Section 5.1 of this Agreement. ARTICLE X MISCELLANEOUS Page 27 10.1. Notices. Except as otherwise specified herein, all notices, ------- requests, demands or other communications to or upon the respective parties hereto shall be deemed to have been duly given or made when delivered to the party to which such notice, request, demand or other communication is required or permitted to be given or made under this Agreement, addressed: (a) if to any Assignor, at its address set forth opposite its signature below; (b) if to the Collateral Agent: Bankers Trust Company One Bankers Trust Plaza New York, New York 10006 Attention: Mary Kay Coyle Telephone No.: (212) 250-9094 Facsimile No.: (212) 250-7218; (c) if to any Bank Creditor (other than the Collateral Agent), at such address as such Bank Creditor shall have specified in the Credit Agreement; (d) if to any Other Creditor, at such address as such Other Creditor shall have specified in writing to each Assignor and the Collateral Agent; or at such other address as shall have been furnished in writing by any Person described above to the party required to give notice hereunder. 10.2. Waiver; Amendment. None of the terms and conditions of this ----------------- Agreement may be changed, waived, modified or varied in any manner whatsoever unless in writing duly signed by each Assignor directly affected thereby and the Collateral Agent (with the consent of (x) either the Required Banks or, to the extent required by Section 12.12 of the Credit Agreement, all of the Banks at all times prior to the time on which all Credit Document Obligations have been paid in full or (y) the holders of at least a majority of the outstanding Other Obligations at all times after the time on which all Credit Document Obligations have been paid in full); provided, that any change, waiver, modification or -------- variance affecting the rights and benefits of a single Class of Secured Creditors (and not all Secured Creditors in a like or similar manner) shall require the written consent of the Requisite Creditors of such Class of Secured Creditors. For the purpose of this Agreement the term "Class" shall mean each class of Secured Creditors, i.e., whether (x) the Bank Creditors as holders of ---- the Credit Document Obligations or (y) the Other Creditors as the holders of the Other Obligations. For the purpose of this Agreement, the term "Requisite Creditors" of any Class shall mean each of (x) with respect to the Credit Page 28 Document Obligations, the Required Banks and (y) with respect to the Other Obligations, the holders of at least a majority of all obligations outstanding from time to time under the Interest Rate Protection Agreements or Other Hedging Agreements. 10.3. Obligations Absolute. The obligations of each Assignor -------------------- hereunder shall remain in full force and effect without regard to, and shall not be impaired by, (a) any bankruptcy, insolvency, reorganization, arrangement, readjustment, composition, liquidation or the like of such Assignor; (b) any exercise or non-exercise, or any waiver of, any right, remedy, power or privilege under or in respect of this Agreement, any other Credit Document or any Interest Rate Protection Agreement or Other Hedging Agreement; or (c) any amendment to or modification of any Credit Document or any Interest Rate Protection Agreement or Other Hedging Agreement or any security for any of the Obligations; whether or not any Assignor shall have notice or knowledge of any of the foregoing. 10.4. Successors and Assigns. This Agreement shall be binding upon ---------------------- each Assignor and its successors and assigns and shall inure to the benefit of the Collateral Agent and its successors and assigns; provided, that no Assignor -------- may transfer or assign any or all of its rights or obligations hereunder without the prior written consent of the Collateral Agent. All agreements, statements, representations and warranties made by each Assignor herein or in any certificate or other instrument delivered by such Assignor or on its behalf under this Agreement shall be considered to have been relied upon by the Secured Creditors and shall survive the execution and delivery of this Agreement, the other Credit Documents and the Interest Rate Protection Agreements or Other Hedging Agreements regardless of any investigation made by the Secured Creditors or on their behalf. 10.5. Headings Descriptive. The headings of the several sections of -------------------- this Agreement are inserted for convenience only and shall not in any way affect the meaning or construction of any provision of this Agreement. 10.6. Governing Law. THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS ------------- OF THE PARTIES HEREUNDER SHALL BE CONSTRUED IN ACCORDANCE WITH AND BE GOVERNED BY THE LAW OF THE STATE OF NEW YORK. 10.7. Assignor's Duties. It is expressly agreed, anything herein ----------------- contained to the contrary notwithstanding, that each Assignor shall remain liable to perform all of the obligations, if any, assumed by it with respect to the Collateral and the Collateral Agent shall not have any obligations or liabilities with respect to any Collateral by reason of or arising out of this Agreement, nor shall the Collateral Agent be required or obligated in any manner to perform or fulfill any of the obligations of each Assignor under or with respect to any Collateral. Page 29 10.8. Termination; Release. (a) After the Termination Date, this -------------------- Agreement shall terminate (provided that all indemnities set forth herein including, without limitation, in Section 8.1 hereof shall survive such termination) and the Collateral Agent, at the request and expense of the respective Assignor, will promptly execute and deliver to such Assignor a proper instrument or instruments (including Uniform Commercial Code termination statements on form UCC-3) acknowledging the satisfaction and termination of this Agreement, and will duly assign, transfer and deliver to such Assignor (without recourse and without any representation or warranty) such of the Collateral as may be in the possession of the Collateral Agent and as has not theretofore been sold or otherwise applied or released pursuant to this Agreement. As used in this Agreement, "Termination Date" shall mean the date upon which the Total Commitment and all Interest Rate Protection Agreements or Other Hedging Agreements have been terminated, no Note or Letter of Credit is outstanding (other than Letters of Credit, together with all Fees that have accrued and will accrue thereon through the stated termination date of such Letters of Credit, which have been supported in a manner satisfactory to the Letter of Credit Issuer in its sole and absolute discretion) and all other Obligations (other than any indemnities described in Section 8.1 hereof and in Section 12.13 of the Credit Agreement which are not then due and payable) have been paid in full. (b) In the event that any part of the Collateral is sold or otherwise disposed of in connection with a sale or other disposition permitted by Section 8.02 of the Credit Agreement or is otherwise released at the direction of the Required Banks (or all the Banks if required by Section 12.12 of the Credit Agreement), the Collateral Agent, at the request and expense of such Assignor, will duly release from the security interest created hereby and assign, transfer and deliver to such Assignor (without recourse and without any representation or warranty) such of the Collateral as is then being (or has been) so sold or released and as may be in the possession of the Collateral Agent and has not theretofore been released pursuant to this Agreement. (c) At any time that the respective Assignor desires that Collateral be released as provided in the foregoing Section 10.8(a) or (b), it shall deliver to the Collateral Agent a certificate signed by an Authorized Officer stating that the release of the respective Collateral is permitted pursuant to Section 10.8(a) or (b) hereof. 10.9. Counterparts. This Agreement may be executed in any number of ------------ counterparts and by the different parties hereto on separate counterparts, each of which when so executed and delivered shall be an original, but all of which shall together constitute one and the same instrument. A set of counterparts executed by all the parties hereto shall be lodged with the Borrower and the Collateral Agent. Page 30 10.10. The Collateral Agent. The Collateral Agent will hold in -------------------- accordance with this Agreement all items of the Collateral at any time received under this Agreement. It is expressly understood and agreed that the obligations of the Collateral Agent as holder of the Collateral and interests therein and with respect to the disposition thereof, and otherwise under this Agreement, are only those expressly set forth in this Agreement and as provided in the Uniform Commercial Code in the State of New York. The Collateral Agent shall act hereunder on the terms and conditions set forth in Section 11 of the Credit Agreement. 10.11. Additional Assignors. It is understood and agreed that any -------------------- Subsidiary of Holdings that is required to execute a counterpart of this Agreement after the date hereof pursuant to Sections 7.16 and/or 8.16 of the Credit Agreement shall automatically become an Assignor hereunder by executing a counterpart hereof and delivering the same to the Collateral Agent. * * * Page 31 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed and delivered by their duly authorized officers as of the date first above written. Address: DIAGNOSTICS HOLDING, INC., as an Assignor 1717 Deerfield Road Deerfield, Illinois Attention: Michael P. Bucklo Colin R. Silvester By /s/ John Connaughton ______________________________ Title: Vice President and Assistant Address: DADE INTERNATIONAL INC., as an Assignor 1717 Deerfield Road Deerfield, Illinois Attention: Michael P. Bucklo Colin R. Silvester By /s/ Colin R. Silvester ______________________________ Title: Vice President and Treasurer Address: BURDICK & JACKSON, INC., as an Assignor 1953 S. Harvey Street Muskegon, Michigan Attention: Michael P. Bucklo Colin R. Silvester By /s/ Colin R. Silvester ______________________________ Title: Vice President and Treasurer Page 32 Address: DADE FINANCE, INC., as an Assignor 1717 Deerfield Road Deerfield, Michigan Attention: Michael P. Bucklo Colin R. Silvester By /s/ Colin R. Silvester ______________________________ Title: Vice President and Treasurer Address: DADE LYTENING SYSTEMS INC., as an Assignor 35 Cherry Hill Drive Danvers, Massachusetts Attention: Michael P. Bucklo Colin R. Silvester By /s/ Colin R. Silvester ______________________________ Title: Vice President and Treasurer Address: DADE MICROSCAN, INC., as an Assignor 1584 Enterprise Boulevard West Sacramento, California Attention: Michael P. Bucklo Colin R. Silvester By /s/ Colin R. Silvester ______________________________ Title: Vice President and Treasurer Address: DADE CHEMISTRY SYSTEMS INC., as an Assignor _______________________________ _______________________________ Attention: Michael P. Bucklo Colin R. Silvester By /s/ Colin R. Silvester ______________________________ Title: Vice President and Treasurer Page 33 BANKERS TRUST COMPANY, as Collateral Agent By /s/ Christopher Kinslow __________________________________ Title: Vice Presient EX-10.3 10 PLEDGE AGREEMENT DATED 05/07/96 EXHIBIT 10.3 PLEDGE AGREEMENT ---------------- PLEDGE AGREEMENT, dated as of May 7, 1996 (as amended, modified or supplemented from time to time, this "Agreement"), made by each of the undersigned (each, a "Pledgor" and, together with any other entity that becomes a party hereto pursuant to Section 22 hereof, the "Pledgors"), in favor of BANKERS TRUST COMPANY, as Collateral Agent (the "Pledgee"), for the benefit of the Secured Creditors (as defined below). Except as otherwise defined herein, terms used herein and defined in the Credit Agreement (as defined below) shall be used herein as therein defined. W I T N E S S E T H : - - - - - - - - - - WHEREAS, Diagnostics Holding, Inc. ("Holdings"), Dade International Inc. (the "Borrower"), various financial institutions from time to time party thereto (the "Banks"), and Bankers Trust Company, as Agent (together with any successor agent, the "Agent", and together with the Pledgee and the Banks, the "Bank Creditors"), have entered into a Credit Agreement, dated as of May 7, 1996 (as amended, modified or supplemented from time to time, the "Credit Agreement"), providing for the making of Loans to the Borrower and the issuance of, and participation in, Letters of Credit for the account of the Borrower, all as contemplated therein; WHEREAS, the Borrower may from time to time be party to one or more (i) interest rate agreements, interest rate cap agreements, interest rate collar agreements or other similar agreements or arrangements, (ii) foreign exchange contracts, currency swap agreements or similar agreements or arrangements designed to protect against the fluctuations in currency values and/or (iii) other types of hedging agreements from time to time (each such agreement or arrangement with an Other Creditor (as hereinafter defined), an "Interest Rate Protection Agreement or Other Hedging Agreement"), with a Bank or an affiliate of a Bank (each such Bank or affiliate, even if the respective Bank subsequently ceases to be a Bank under the Credit Agreement for any reason, together with such Bank's or affiliate's successors and assigns, collectively, the "Other Creditors," and together with Bank Creditors, the "Secured Creditors"); WHEREAS, pursuant to the Holdings Guaranty, Holdings has guaranteed to the Secured Creditors the payment when due of all obligations and liabilities of the Borrower under or with respect to the Credit Documents and the Interest Rate Protection Agreements or Other Hedging Agreements; Page 2 WHEREAS, pursuant to the Subsidiary Guaranty, each Pledgor (other than Holdings and the Borrower) has jointly and severally guaranteed to the Secured Creditors the payment when due of all obligations and liabilities of the Borrower under or with respect to the Credit Documents and the Interest Rate Protection Agreements or Other Hedging Agreements; WHEREAS, it is a condition precedent to the making of Loans to the Borrower under the Credit Agreement that each Pledgor shall have executed and delivered to the Pledgee this Agreement; and WHEREAS, each Pledgor desires to execute this Agreement to satisfy the conditions described in the preceding paragraph; NOW, THEREFORE, in consideration of the benefits accruing to each Pledgor, the receipt and sufficiency of which are hereby acknowledged, each Pledgor hereby makes the following representations and warranties to the Pledgee and hereby covenants and agrees with the Pledgee as follows: 1. SECURITY FOR OBLIGATIONS. This Agreement is made by each Pledgor for the benefit of the Secured Creditors to secure: (i) the full and prompt payment when due (whether at the stated maturity, by acceleration or otherwise) of all obligations and liabilities (including obligations which, but for the automatic stay under Section 362(a) of the Bankruptcy Code, would become due) of such Pledgor, now existing or hereafter incurred under, arising out of or in connection with any Credit Document to which such Pledgor is a party and the due performance and compliance by such Pledgor with the terms of each such Credit Document (all such obligations and liabilities under this clause (i), except to the extent consisting of obligations or indebtedness with respect to Interest Rate Protection Agreements or Other Hedging Agreements, being herein collectively called the "Credit Document Obligations"); (ii) the full and prompt payment when due (whether at the stated maturity, by acceleration or otherwise) of all obligations (including obligations which, but for the automatic stay under Section 362(a) of the Bankruptcy Code, would become due) and liabilities of such Pledgor, now existing or hereafter incurred under, arising out of or in connection with any Interest Rate Protection Agreement or Other Hedging Agreement including, in the case of Pledgors other than the Borrower, all obligations of such Pledgor under its Guaranty in respect of Interest Page 3 Rate Protection Agreements or Other Hedging Agreements (all such obligations and liabilities under this clause (ii) being herein collectively called the "Other Obligations"); (iii) any and all sums advanced by the Pledgee in order to preserve the Collateral (as hereinafter defined) or preserve its security interest in the Collateral; (iv) in the event of any proceeding for the collection or enforcement of any indebtedness, obligations, or liabilities referred to in clauses (i), (ii) and (iii) above, after an Event of Default (such term, as used in this Agreement, shall mean any Event of Default under, and as defined in, the Credit Agreement, or any payment default by the Borrower under any Interest Rate Protection Agreement or Other Hedging Agreement and shall in any event include, without limitation, any payment default (after the expiration of any applicable grace period) on any of the Obligations (as hereinafter defined)) shall have occurred and be continuing, the reasonable expenses of retaking, holding, preparing for sale or lease, selling or otherwise disposing or realizing on the Collateral, or of any exercise by the Pledgee of its rights hereunder, together with reasonable attorneys' fees and court costs; and (v) all amounts paid by any Secured Creditor as to which such Secured Creditor has the right to reimbursement under Section 11 of this Agreement; all such obligations, liabilities, sums and expenses set forth in clauses (i) through (v) of this Section 1 being herein collectively called the "Obligations". 2. DEFINITION OF STOCK, NOTES, SECURITIES, ETC. As used herein: (i) the term "Stock" shall mean (x) with respect to corporations incorporated under the laws of the United States or any State or territory thereof (each, a "Domestic Corporation"), all of the issued and outstanding shares of capital stock of any Domestic Corporation at any time owned by each Pledgor and (y) with respect to corporations not Domestic Corporations (each, a "Foreign Corporation"), all of the issued and outstanding shares of capital stock at any time directly owned by any Pledgor of any Foreign Corporation, provided that, except as provided in the -------- last sentence of this Section 2, such Pledgor shall not be required to pledge hereunder more than 65% of the total combined voting power of all classes of capital stock of any Foreign Corporation entitled to vote; (ii) the term "Notes" shall mean (x) all Intercompany Notes at any time issued to each Pledgor and (y) all other promissory notes from time to time issued to, or held by, each Pledgor; provided, that, except as provided in the last sentence of this Section -------- 2, no Pledgor shall be required to pledge hereunder any promissory notes (including Intercompany Notes) issued to such Pledgor by any Subsidiary of such Pledgor which is a Foreign Corporation Page 4 and (iii) the term "Securities" shall mean all of the Stock and Notes. Each Pledgor represents and warrants that on the date hereof (i) each Subsidiary of such Pledgor, and the direct ownership thereof, is listed in Annex A hereto; (ii) the Stock held by such Pledgor consists of the number and type of shares of the stock of the corporations as described in Annex B hereto; (iii) such Stock constitutes that percentage of the issued and outstanding capital stock of the issuing corporation as is set forth in Annex B hereto; (iv) the Notes held by such Pledgor consist of the promissory notes described in Annex C hereto where such Pledgor is listed as the Lender; and (v) on the date hereof, such Pledgor owns no other Securities. In the circumstances and to the extent provided in Section 7.16 of the Credit Agreement, the 65% limitation set forth in clause (i)(y) and the limitation in the proviso of clause (ii) in each case of this Section 2 and in Section 3.2 hereof shall no longer be applicable and such Pledgor shall duly pledge and deliver to the Pledgee such of the Securities not theretofore required to be pledged hereunder. 3. PLEDGE OF SECURITIES, ETC. 3.1. Pledge. To secure the Obligations and for the purposes set forth in ------ Section 1 hereof, each Pledgor hereby: (i) grants to the Pledgee a security interest in all of the Collateral owned by such Pledgor; (ii) pledges and deposits as security with the Pledgee the Securities owned by such Pledgor on the date hereof, and delivers to the Pledgee certificates or instruments therefor, duly endorsed in blank in the case of Notes and accompanied by undated stock powers duly executed in blank by such Pledgor in the case of Stock, or such other instruments of transfer as are acceptable to the Pledgee; and (iii) assigns, transfers, hypothecates, mortgages, charges and sets over to the Pledgee all of such Pledgor's right, title and interest in and to such Securities (and in and to all certificates or instruments evidencing such Securities), to be held by the Pledgee, upon the terms and conditions set forth in this Agreement. 3.2. Subsequently Acquired Securities. If any Pledgor shall acquire (by -------------------------------- purchase, stock dividend or otherwise) any additional Securities at any time or from time to time after the date hereof, such Pledgor will forthwith pledge and deposit such Securities (or certificates or instruments representing such Securities) as security with the Pledgee and deliver to the Pledgee certificates therefor or instruments thereof, duly endorsed in blank in the case of Notes and accompanied by undated stock powers duly executed in blank in the case of Stock, or such other instruments of transfer as are acceptable to the Pledgee, and will promptly thereafter deliver to the Pledgee a certificate executed by any Authorized Officer of such Pledgor describing such Securities and certifying that the same have been duly pledged with the Pledgee hereunder. Subject to the last sentence of Section 2 hereof, no Pledgor shall be required at any time to pledge hereunder (x) any Stock which is more than 65% of the total combined voting power of all classes of capital stock of any Foreign Page 5 Corporation entitled to vote or (y) any promissory notes (including Intercompany Notes) issued to such Pledgor by any Subsidiary of such Pledgor which is a Foreign Corporation. 3.3. Uncertificated Securities. Notwithstanding anything to the contrary ------------------------- contained in Sections 3.1 and 3.2 hereof, if any Securities (whether now owned or hereafter acquired) are uncertificated securities, the respective Pledgor shall promptly notify the Pledgee thereof, and shall promptly take all actions required to perfect the security interest of the Pledgee under applicable law (including, in any event, under Sections 8-313 and 8-321 of the New York UCC, if applicable). Each Pledgor further agrees to take such actions as the Pledgee deems reasonably necessary or desirable to effect the foregoing and to permit the Pledgee to exercise any of its rights and remedies hereunder, and agrees to provide an opinion of counsel reasonably satisfactory to the Pledgee with respect to any such pledge of uncertificated Securities promptly upon request of the Pledgee. 3.4 Definition of Pledged Stock, Pledged Notes, Pledged Securities and ------------------------------------------------------------------ Collateral. All Stock at any time pledged or required to be pledged hereunder - ---------- is hereinafter called the "Pledged Stock," all Notes at any time pledged or required to be pledged hereunder are hereinafter called the "Pledged Notes," all of the Pledged Stock and Pledged Notes together are hereinafter called the "Pledged Securities," which together with all dividends and interest thereon, as the case may be, and all proceeds thereof, including any securities and moneys received and at the time held by the Pledgee hereunder, is hereinafter called the "Collateral." 4. APPOINTMENT OF SUB-AGENTS; ENDORSEMENTS, ETC. The Pledgee shall have the right to appoint one or more sub-agents for the purpose of retaining physical possession of the Pledged Securities, which may be held (in the discretion of the Pledgee) in the name of such Pledgor, endorsed or assigned in blank or in favor of the Pledgee or any nominee or nominees of the Pledgee or a sub-agent appointed by the Pledgee. The Pledgee agrees to promptly notify the relevant Pledgor after the appointment of any sub-agent; provided, however, that -------- ------- the failure to give such notice shall not affect the validity of such appointment. 5. VOTING, ETC., WHILE NO EVENT OF DEFAULT. Unless and until (i) an Event of Default shall have occurred and be continuing and (ii) written notice thereof shall have been given by the Pledgee to the relevant Pledgor (provided, that if -------- an Event of Default specified in Section 9.05 of the Credit Agreement shall occur, no such notice shall be required), each Pledgor shall be entitled to exercise any and all voting and other consensual rights pertaining to the Pledged Securities and to give all consents, waivers or ratifications in respect thereof; provided, that no vote shall be cast or any consent, waiver or -------- ratification given or any action taken which would violate or be inconsistent with any of Page 6 the terms of this Agreement, any other Credit Document or any Interest Rate Protection Agreement or Other Hedging Agreement (collectively, the "Secured Debt Agreements"), or which would have the effect of impairing the position or interests of the Pledgee or any other Secured Creditor. All such rights of such Pledgor to vote and to give consents, waivers and ratifications shall cease in case an Event of Default shall occur and be continuing, and Section 7 hereof shall become applicable. 6. DIVIDENDS AND OTHER DISTRIBUTIONS. Unless an Event of Default shall have occurred and be continuing, all cash dividends payable in respect of the Pledged Stock and all payments in respect of the Pledged Notes shall be paid to the respective Pledgor; provided, that all cash dividends payable in respect of -------- the Pledged Stock which are determined by the Pledgee to represent in whole or in part an extraordinary, liquidating or other distribution in return of capital shall be paid, to the extent so determined to represent an extraordinary, liquidating or other distribution in return of capital, to the Pledgee and retained by it as part of the Collateral. Subject to the last sentence of Section 3.2 hereof, Pledgee shall also be entitled to receive directly, and to retain as part of the Collateral: (i) all other or additional stock or other securities or property (other than cash) paid or distributed by way of dividend or otherwise in respect of the Pledged Stock; (ii) all other or additional stock or other securities or property (including cash) paid or distributed in respect of the Pledged Stock by way of stock-split, spin-off, split-up, reclassification, combination of shares or similar rearrangement; and (iii) all other or additional stock or other securities or property (including cash) which may be paid in respect of the Collateral by reason of any consolidation, merger, exchange of stock, conveyance of assets, liquidation or similar corporate reorganization. 7. REMEDIES IN CASE OF EVENT OF DEFAULT. In case an Event of Default shall have occurred and be continuing, the Pledgee shall be entitled to exercise all of the rights, powers and remedies (whether vested in it by this Agreement or by any other Secured Debt Agreement or by law) for the protection and enforcement of its rights in respect of the Collateral, and the Pledgee shall be entitled, without limitation, to exercise the following rights, which each Pledgor hereby agrees to be commercially reasonable: (i) to receive all amounts payable in respect of the Collateral payable to such Pledgor under Section 6 hereof; Page 7 (ii) to transfer all or any part of the Pledged Securities into the Pledgee's name or the name of its nominee or nominees (the Pledgee agrees to promptly notify the relevant Pledgor after such transfer; provided, --------- however, that the failure to give such notice shall not affect the validity -------- of such transfer); (iii) to accelerate any Pledged Note which may be accelerated in accordance with its terms, and take any other action to collect upon any Pledged Note (including, without limitation, to make any demand for payment thereon); (iv) subject to the giving of written notice to the relevant Pledgor in accordance with clause (ii) of Section 5 hereof, to vote all or any part of the Pledged Stock (whether or not transferred into the name of the Pledgee) and give all consents, waivers and ratifications in respect of the Collateral and otherwise act with respect thereto as though it were the outright owner thereof (each Pledgor hereby irrevocably constituting and appointing the Pledgee the proxy and attorney-in-fact of such Pledgor, with full power of substitution to do so); and (v) at any time or from time to time to sell, assign and deliver, or grant options to purchase, all or any part of the Collateral, or any interest therein, at any public or private sale, without demand of performance, advertisement or notice of intention to sell or of the time or place of sale or adjournment thereof or to redeem or otherwise (all of which are hereby waived by each Pledgor), for cash, on credit or for other property, for immediate or future delivery without any assumption of credit risk, and for such price or prices and on such terms as the Pledgee in its absolute discretion may determine; provided, that at least 10 days' written --------- notice of the time and place of any such sale shall be given to such Pledgor. Each Pledgor hereby waives and releases to the fullest extent permitted by law any right or equity of redemption with respect to the Collateral, whether before or after sale hereunder, and all rights, if any, of marshalling the Collateral and any other security for the Obligations or otherwise. At any such sale, unless prohibited by applicable law, the Pledgee on behalf of the Secured Creditors may bid for and purchase all or any part of the Collateral so sold free from any such right or equity of redemption. Neither the Pledgee nor any Secured Creditor shall be liable for failure to collect or realize upon any or all of the Collateral or for any delay in so doing nor shall any of them be under any obligation to take any action whatsoever with regard thereto. 8. REMEDIES, ETC., CUMULATIVE. Each right, power and remedy of the Pledgee provided for in this Agreement or any other Secured Debt Agreement or now or hereafter existing at law or in equity or by statute shall be cumulative and concur- Page 8 rent and shall be in addition to every other such right, power or remedy. The exercise or beginning of the exercise by the Pledgee or any other Secured Creditor of any one or more of the rights, powers or remedies provided for in this Agreement or any other Secured Debt Agreement or now or here after existing at law or in equity or by statute or otherwise shall not preclude the simultaneous or later exercise by the Pledgee or any other Secured Creditor of all such other rights, powers or remedies, and no failure or delay on the part of the Pledgee or any other Secured Creditor to exercise any such right, power or remedy shall operate as a waiver thereof. The Secured Creditors agree that this Agreement may be enforced only by the action of the Agent or the Pledgee, in each case acting upon the instructions of the Required Banks (or, after the date on which all Credit Document Obligations have been paid in full, the holders of at least the majority of the outstanding Other Obligations) and that no other Secured Creditor shall have any right individually to seek to enforce or to enforce this Agreement or to realize upon the security to be granted hereby, it being understood and agreed that such rights and remedies may be exercised by the Agent or the Pledgee or the holders of at least a majority of the outstanding Other Obligations, as the case maybe, for the benefit of the Secured Creditors upon the terms of this Agreement. 9. APPLICATION OF PROCEEDS. (a) All moneys collected by the Pledgee upon any sale or other disposition of the Collateral pursuant to the terms of this Agreement, to gether with all other moneys received by the Pledgee hereunder, shall be applied in the manner provided in the Security Agreement. (b) It is understood and agreed that the Pledgors shall remain jointly and severally liable to the extent of any deficiency between the amount of the proceeds of the Collateral hereunder and the aggregate amount of the Obligations. 10. PURCHASERS OF COLLATERAL. Upon any sale of the Collateral by the Pledgee hereunder (whether by virtue of the power of sale herein granted, pursuant to judicial process or otherwise), the receipt of the Pledgee or the officer making the sale shall be a sufficient discharge to the purchaser or purchasers of the Collateral so sold, and such purchaser or purchasers shall not be obligated to see to the application of any part of the purchase money paid over to the Pledgee or such officer or be answerable in any way for the misapplication or nonapplication thereof. 11. INDEMNITY. Each Pledgor jointly and severally agrees (i) to indemnify and hold harmless the Pledgee in such capacity and each other Secured Creditor from and against any and all claims, demands, losses, judgments and liabilities of whatsoever kind or nature, and (ii) to reimburse the Pledgee and each other Secured Creditor for all costs and expenses, including attorneys' fees, growing out of or resulting from this Page 9 Agreement or the exercise by the Pledgee of any right or remedy granted to it hereunder or under any other Secured Debt Agreement except, with respect to clauses (i) and (ii) above, for those arising from the Pledgee's or such other Secured Creditor's gross negligence or willful misconduct. In no event shall the Pledgee be liable, in the absence of gross negligence or willful misconduct on its part, for any matter or thing in connection with this Agreement other than to account for moneys actually received by it in accordance with the terms hereof. If and to the extent that the obligations of the Pledgors under this Section 11 are unenforceable for any reason, each Pledgor hereby agrees to make the maximum contribution to the payment and satisfaction of such obligations which is permissible under applicable law. 12. FURTHER ASSURANCES. Each Pledgor agrees that it will join with the Pledgee in executing and, at such Pledgor's own expense, file and refile under the applicable UCC or appropriate local equivalent, such financing statements, continuation statements and other documents in such offices as the Pledgee may deem reasonably necessary or appropriate and wherever required or permitted by law in order to perfect and preserve the Pledgee's security interest in the Collateral and hereby authorizes the Pledgee to file financing statements and amendments thereto relative to all or any part of the Collateral without the signature of such Pledgor where permitted by law, and agrees to do such further acts and things and to execute and deliver to the Pledgee such additional conveyances, assignments, agreements and instruments as the Pledgee may reasonably require or deem advisable to carry into effect the purposes of this Agreement or to further assure and confirm unto the Pledgee its rights, powers and remedies hereunder. 13. THE PLEDGEE AS AGENT. The Pledgee will hold in accordance with this Agreement all items of the Collateral at any time received under this Agreement. It is expressly understood and agreed that the obligations of the Pledgee as holder of the Collateral and interests therein and with respect to the disposition thereof, and otherwise under this Agreement, are only those expressly set forth in this Agreement. The Pledgee shall act hereunder on the terms and conditions set forth herein and in Section 11 of the Credit Agreement. 14. TRANSFER BY PLEDGORS. Except for sales or dispositions of Colla teral permitted pursuant to the Credit Agreement, no Pledgor will sell or otherwise dispose of, grant any option with respect to, or mortgage, pledge or otherwise encumber any of the Collateral or any interest therein (except in accordance with the terms of this Agreement). 15. REPRESENTATIONS, WARRANTIES AND COVENANTS OF PLEDGOR. Each Pledgor represents, warrants and covenants that (i) it is the legal, record Page 10 and beneficial owner of, and has good and marketable title to, all Securities pledged by it hereunder, subject to no pledge, lien, mortgage, hypothecation, security interest, charge, option or other encumbrance whatsoever, except the liens and security interests created by this Agreement and liens permitted under clauses (a) and (e) of Section 8.03 of the Credit Agreement; (ii) it has full power, authority and legal right to pledge all the Securities pledged by it pursuant to this Agreement; (iii) this Agreement has been duly authorized, executed and delivered by such Pledgor and constitutes a legal, valid and binding obligation of such Pledgor enforceable in accordance with its terms, except to the extent that the enforceability hereof may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting creditors' rights generally and by equitable principles (regardless of whether enforcement is sought in equity or at law); (iv) no consent of any other party (including, without limitation, any stockholder or creditor of such Pledgor or any of its Subsidiaries) and no consent, license, permit, approval or authorization of, exemption by, notice or report to, or registration, filing or declaration with, any governmental authority is required to be obtained by such Pledgor in connection with the execution, delivery or performance of this Agreement, or in connection with the exercise of its rights and remedies pursuant to this Agreement, except as may be required in connection with the disposition of the Securities by laws affecting the offering and sale of securities generally; (v) the execution, delivery and performance of this Agreement by such Pledgor does not violate any provision of any applicable law or regulation or of any order, judgment, writ, award or decree of any court, arbitrator or governmental authority, domestic or foreign, or of the certificate of incorporation or by-laws of such Pledgor or of any securities issued by such Pledgor or any of its Subsidiaries, or of any mortgage, indenture, lease, deed of trust, agreement, instrument or undertaking to which such Pledgor or any of its Subsidiaries is a party or which purports to be binding upon such Pledgor or any of its Subsidiaries or upon any of their respective assets and will not result in the creation or imposition of any lien or encumbrance on any of the assets of such Pledgor or any of its Subsidiaries except as contemplated by this Agreement; (vi) all the shares of Stock of Subsidiaries of Holdings have been duly and validly issued, are fully paid and nonassessable; (vii) each of the Pledged Notes constituting Intercompany Notes, when executed by the obligor thereof, will be the legal, valid and binding obligation of such obligor, enforceable in accordance with its terms, except to the extent that the enforceability thereof may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting creditors' rights generally and by equitable principles (regardless of whether enforcement is sought in equity or at law); and (viii) the pledge and assignment of the Securities pursuant to this Agreement, together with the delivery of the Securities pursuant to this Agreement (which delivery has been made), creates a valid and perfected first security interest in such Securities and the proceeds thereof, subject to no prior lien or encumbrance or to any agreement purporting to grant to any third party a lien or encumbrance on the property or assets of such Pledgor which would include the Securities. Page 11 Each Pledgor covenants and agrees that it will defend the Pledgee's right, title and security interest in and to the Securities and the proceeds thereof against the claims and demands of all persons whomsoever; and such Pledgor covenants and agrees that it will have like title to and right to pledge any other property at any time hereafter pledged to the Pledgee as Collateral hereunder and will likewise defend the right thereto and security interest therein of the Pledgee and the other Secured Creditors. 16. PLEDGORS' OBLIGATIONS ABSOLUTE, ETC. The obligations of each Pledgor under this Agreement shall be absolute and unconditional and shall remain in full force and effect without regard to, and shall not be released, suspended, discharged, terminated or otherwise affected by, any circumstance or occurrence whatsoever, including, without limitation: (i) any renewal, extension, amendment or modification of or addition or supplement to or deletion from any Secured Debt Agreement or any other instrument or agreement referred to therein, or any assignment or transfer of any thereof; (ii) any waiver, consent, extension, indulgence or other action or inaction under or in respect of any such agreement or instrument or this Agreement; (iii) any furnishing of any additional security to the Pledgee or its assignee or any acceptance thereof or any release of any security by the Pledgee or its assignee; (iv) any limitation on any party's liability or obligations under any such instrument or agreement or any invalidity or unenforceability, in whole or in part, of any such instrument or agreement or any term thereof; or (v) any bankruptcy, insolvency, reorganization, composition, adjustment, dissolution, liquidation or other like proceeding relating to such Pledgor or any Subsidiary of such Pledgor, or any action taken with respect to this Agreement by any trustee or receiver, or by any court, in any such proceeding, whether or not such Pledgor shall have notice or knowledge of any of the foregoing. 17. REGISTRATION, ETC. (a) If an Event of Default shall have occurred and be continuing and any Pledgor shall have received from the Pledgee a written request or requests that such Pledgor cause any registration, qualification or compliance under any Federal or state securities law or laws to be effected with respect to all or any part of the Pledged Stock, such Pledgor as soon as practicable and at its expense will use its reasonable efforts to cause such registration to be effected (and be kept effective) and will use its reasonable efforts to cause such qualification and compliance to be effected (and be kept effective) as may be so requested and as would permit or facilitate the sale and distribution of such Pledged Stock, including, without limitation, registration under the Securities Act of 1933 as then in effect (or any similar statute then in effect), appropriate qualifications under applicable blue sky or other state securities laws and appropriate compliance with any other government requirements; provided, that the Pledgee shall furnish to such Pledgor such -------- information regarding the Pledgee as such Pledgor may request in writing and as shall be required in connection with any such registration, Page 12 qualification or compliance. Such Pledgor will cause the Pledgee to be kept reasonably advised in writing as to the progress of each such registration, qualification or compliance and as to the completion thereof, will furnish to the Pledgee such number of prospectuses, offering circulars or other documents incident thereto as the Pledgee from time to time may reasonably request, and will indemnify the Pledgee, each other Secured Creditor and all others participating in the distribution of the Pledged Stock against all claims, losses, damages and liabilities caused by any untrue statement (or alleged untrue statement) of a material fact contained therein (or in any related registration statement, notification or the like) or by any omission (or alleged omission) to state therein (or in any related registration statement, notification or the like) a material fact required to be stated therein or necessary to make the statements therein not misleading, except insofar as the same may have been caused by an untrue statement or omission based upon information furnished in writing to such Pledgor by the Pledgee or such other Secured Creditor expressly for use therein. (b) If at any time when the Pledgee shall determine to exercise its right to sell all or any part of the Pledged Securities pursuant to Section 7 hereof, such Pledged Securities or the part thereof to be sold shall not, for any reason whatsoever, be effectively registered under the Securities Act of 1933, as then in effect, the Pledgee may, in its sole and absolute discretion, sell such Pledged Securities or part thereof by private sale in such manner and under such circumstances as the Pledgee may deem necessary or advisable in order that such sale may legally be effected without such registration; provided, that -------- at least 10 days' notice of the time and place of any such sale shall be given to such Pledgor. Without limiting the generality of the foregoing, in any such event the Pledgee, in its sole and absolute discretion: (i) may proceed to make such private sale notwithstanding that a registration statement for the purpose of registering such Pledged Securities or part thereof shall have been filed under such Securities Act; (ii) may approach and negotiate with a single possible purchaser to effect such sale; and (iii) may restrict such sale to a purchaser who will represent and agree that such purchaser is purchasing for its own account, for investment, and not with a view to the distribution or sale of such Pledged Securities or part thereof. In the event of any such sale, the Pledgee shall incur no responsibility or liability for selling all or any part of the Pledged Securities at a price which the Pledgee, in its sole and absolute discretion, may in good faith deem reasonable under the circumstances, notwithstanding the possibility that a substantially higher price might be realized if the sale were deferred until after registration as aforesaid. 18. TERMINATION, RELEASE. (a) After the Termination Date (as defined below), this Agreement shall terminate (provided that all indemnities set forth herein including, without limitation, in Section 11 hereof shall survive any such termination) and the Pledgee, at the request and expense of the respective Pledgor, will promptly execute and deliver to such Pledgor a proper instrument or instruments Page 13 acknowledging the satisfaction and termination of this Agreement, and will duly release from the security interest created hereby and assign, transfer and deliver to such Pledgor (without recourse and without any representation or warranty) such of the Collateral as may be in the possession of the Pledgee and as has not theretofore been sold or otherwise applied or released pursuant to this Agreement. As used in this Agreement, "Termination Date" shall mean the date upon which the Total Commitment and all Interest Rate Protection Agreements or Other Hedging Agreements have been terminated, no Note (as defined in the Credit Agreement) or Letter of Credit is outstanding (other than Letters of Credit, together with all Fees that have accrued and will accrue thereon through the stated termination date of such Letters of Credit, which have been supported in a manner satisfactory to the Letter of Credit Issuer in its sole and absolute discretion) and all other Obligations (other than indemnities described in Section 11 hereof and in Section 12.13 of the Credit Agreement which are not then due and payable) have been paid in full. (b) In the event that any part of the Collateral is sold or otherwise disposed of in connection with a sale or other disposition permitted by Section 8.02 of the Credit Agreement or is otherwise released at the direction of the Required Banks (or all the Banks if required by Section 12.12 of the Credit Agreement), the Pledgee, at the request and expense of such Pledgor will duly release from the security interest created hereby and assign, transfer and deliver to such Pledgor (without recourse and without any representation or warranty) such of the Collateral as is then being (or has been) so sold or released and as may be in possession of the Pledgee and has not theretofore been released pursuant to this Agreement. (c) At any time that a Pledgor desires that Collateral be released as provided in the foregoing Section 18(a) or (b), it shall deliver to the Pledgee a certificate signed by an Authorized Officer of such Pledgor stating that the release of the respective Collateral is permitted pursuant to Section 18(a) or (b). 19. NOTICES, ETC. All notices and other communications hereunder shall be in writing and shall be delivered or mailed by first class mail, postage prepaid, addressed: Page 14 (a) if to any Pledgor, at its address set forth opposite its signature below; (b) if to the Pledgee, at: Bankers Trust Company One Bankers Trust Plaza New York, New York 10006 Attention: Mary Kay Coyle Telephone No.:(212) 250-9094 Telecopier No.:(212) 250-7218 (c) if to any Bank (other than the Pledgee), at such address as such Bank shall have specified in the Credit Agreement; (d) if to any Other Creditor, at such address as such Other Creditor shall have specified in writing to each Pledgor and the Pledgee; or at such other address as shall have been furnished in writing by any Person described above to the party required to give notice hereunder. 20. WAIVER; AMENDMENT. None of the terms and conditions of this Agreement may be changed, waived, modified or varied in any manner whatsoever unless in writing duly signed by each Pledgor directly affected thereby and the Pledgee (with the written consent of either (x) the Required Banks (or all the Banks if required by Section 12.12 of the Credit Agreement) at all times prior to the time on which all Credit Document Obligations have been paid in full or (y) the holders of at least a majority of the outstanding Other Obligations at all times after the time on which all Credit Document Obligations have been paid in full); provided, that any change, waiver, modification or variance affecting -------- the rights and benefits of a single Class (as defined below) of Secured Creditors (and not all Secured Creditors in a like or similar manner) shall require the written consent of the Requisite Creditors (as defined below) of such Class. For the purpose of this Agreement, the term "Class" shall mean each class of Secured Creditors, i.e., whether (i) the Bank Creditors as holders of ---- the Credit Document Obligations or (ii) the Other Creditors as holders of the Other Obligations. For the purpose of this Agreement, the term "Requisite Creditors" of any Class shall mean each of (i) with respect to the Credit Document Obligations, the Required Banks and (ii) with respect to the Other Obligations, the holders of at least a majority of all obligations outstanding from time to time under the Interest Rate Protection Agreements or Other Hedging Agreements. Page 15 21. MISCELLANEOUS. This Agreement shall be binding upon the successors and assigns of each Pledgor and shall inure to the benefit of and be enforceable by the Pledgee and its successors and assigns. THIS AGREEMENT SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH AND GOVERNED BY THE LAW OF THE STATE OF NEW YORK. The headings in this Agreement are for purposes of reference only and shall not limit or define the meaning hereof. This Agreement may be executed in any number of counterparts, each of which shall be an original, but all of which shall constitute one instrument. 22. ADDITIONAL PLEDGORS. It is understood and agreed that any Subsidiary of Holdings that is required to execute a counterpart of this Agreement after the date hereof pursuant to Sections 7.16 and/or 8.16 of the Credit Agreement shall automatically become a Pledgor hereunder by executing a counterpart hereof and delivering the same to the Pledgee. * * * Page 16 IN WITNESS WHEREOF, each Pledgor and the Pledgee have caused this Agreement to be executed by their duly elected officers duly authorized as of the date first above written. Address: DIAGNOSTICS HOLDING, INC., as a Pledgor 1717 Deerfield Road Deerfield, Illinois Attention: Michael P. Bucklo Colin R. Silvester By /s/ John Connaughton ______________________________ Title: Vice President and Assistant Treasurer Address: DADE INTERNATIONAL INC., as a Pledgor 1717 Deerfield Road Deerfield, Illinois Attention: Michael P. Bucklo By /s/ Colin Sylvester Colin R. Silvester ______________________________ Title: Vice President and Treasurer Address: BURDICK & JACKSON, INC., as a Pledgor 1953 S. Harvey Street Muskegon, Michigan Attention: Michael P. Bucklo Colin R. Silvester By /s/ Colin Sylvester ______________________________ Title: Vice President and Treasurer Page 17 Address: DADE DIAGNOSTICS OF P.R., INC., as a Pledgor Road 115 22.6 Aguada Industrial Area Aguada, Puerto Rico Attention: Michael P. Bucklo By /s/ Colin Sylvester Colin R. Silvester ______________________________ Title: Vice President and Treasurer Address: DADE FINANCE, INC., as a Pledgor 1717 Deerfield Road Deerfield, Michigan Attention: Michael P. Bucklo By /s/ Colin Sylvester Colin R. Silvester ______________________________ Title: Vice President and Treasurer Address: DADE LYTENING SYSTEMS INC., as a Pledgor 35 Cherry Hill Drive Danvers, Massachusetts Attention: Michael P. Bucklo Colin R. Silvester By /s/ Colin Sylvester ______________________________ Title: Vice President and Treasurer Address: DADE MICROSCAN, INC., as a Pledgor 1584 Enterprise Boulevard West Sacramento, California Attention: Michael P. Bucklo Colin R. Silvester By /s/ Colin Sylvester ______________________________ Title: Vice President and Treasurer Page 18 Address: DADE CHEMISTRY SYSTEMS INC., as a Pledgor _____________________ Attention: Michael P. Bucklo Colin R. Silvester By /s/ Colin Sylvester ______________________________ Title: Vice President and Treasurer BANKERS TRUST COMPANY, as Collateral Agent, as Pledgee By /s/ Christopher Kinslow _____________________________ Title: Vice President EX-10.5 11 TRANSITIONAL SERVICES AGREEMENT EXHIBIT 10.5 TRANSITIONAL SERVICES AGREEMENT ------------------------------- AGREEMENT, entered into as of May 7, 1996 and effective as of the 30th day of April, 1996 (the "Effective Date"), by and between E. I. DU PONT DE NEMOURS AND COMPANY, a Delaware corporation, with its principal place of business at 1007 Market Street, Wilmington, Delaware 19898, acting on its own behalf and on behalf of its subsidiaries and/or affiliates listed in Exhibit I ("Du Pont"), --------- and DADE CHEMISTRY SYSTEMS INC., a Delaware corporation, with its principal place of business at 1717 Deerfield Road, Deerfield, Illinois 60015, acting on its own behalf and on behalf of its subsidiaries and/or affiliates listed in Exhibit II ("Dade") (Dade and Du Pont are at times referred to herein - ---------- individually as a "Party" and collectively as the "Parties"). W I T N E S S E T H - - - - - - - - - - WHEREAS, Du Pont and Dade have entered into an Asset Purchase and Sale Agreement dated December 11, 1995, as amended and restated on May 7, 1996 (the "Purchase Agreement") pursuant to which Dade agreed to purchase those assets of Du Pont's In Vitro Diagnostics business as described in the Purchase Agreement (the "Business"); and WHEREAS, as set forth in Paragraph 10.08 of the Purchase Agreement, Du Pont agreed to make available to Dade certain transitional administrative and support services for the Business for a limited period after the completion of the sale in accordance with the terms of this Agreement. NOW, THEREFORE, subject to the terms, conditions, covenants and provisions of this Agreement, Du Pont and Dade mutually covenant and agree as follows: ARTICLE 1 SERVICES PROVIDED ----------------- 1.01 Transitional Services. Upon the terms and subject to the conditions --------------------- set forth in this Agreement, Du Pont will provide to Dade for the Business each of those administrative and support services listed in Appendix A, which is ---------- attached to and made part of this Agreement, in the countries set forth in that Appendix (hereinafter referred to individually as a "Transitional Service", and collectively as the "Transitional Services"), during the time period for each Transitional Service set forth on Appendix A (hereinafter referred to as the ---------- "Time Periods" for all of the Transitional Services, and the "Time Period" for each Transitional Service). The Transitional Services selected by 1 Dade pursuant to this Agreement are listed on Exhibit III attached hereto. ----------- 1.02 Personnel. In providing the Transitional Services, Du Pont, as it --------- deems necessary or appropriate in its sole discretion, may (a) use such personnel of Du Pont or its affiliates, and (b) employ the services of third parties to the extent such third party services are routinely utilized to provide similar services to other Du Pont businesses or are reasonably necessary for the efficient performance of any of such Transitional Services. 1.03 Representatives. Du Pont and Dade shall each nominate a --------------- representative to act as the primary contact person for the provision of all of the Transitional Services (collectively, the "Primary Coordinators"). The initial Primary Coordinators shall be Jerry Hamilton for Dade and Richard E. Gies for Du Pont. The initial coordinators for each specific Transitional Service shall be the individuals named in the description of such Transitional Service in Appendix A (the "Service Coordinators"). Du Pont and Dade shall ---------- advise each other in writing of any change in the Primary Coordinators and any Service Coordinator. Du Pont and Dade agree that all communications relating to the provision of the Transitional Services shall be directed to the Primary Coordinators. 1.04 Level of Transitional Services. (a) Du Pont shall perform the ------------------------------ Transitional Services exercising the same degree of care as it exercises in performing the same or similar services for its own account, with priority equal to that provided to its own businesses or those of any of its affiliates, subsidiaries or divisions. Nothing in this Agreement shall require Du Pont to favor the Business over its own businesses or those of any of its affiliates, subsidiaries or divisions. (b) Unless otherwise specifically set forth in the Appendixes attached hereto, it is the intention of the parties that Dade's use of any Transitional Service that Dade elects to use shall not be higher than the level of use required by the Business prior to the acquisition thereof by Dade. In no event shall Dade be entitled to any new service or to increase its use of any of the Transitional Services above that level of use without the prior written consent of Du Pont, which consent may be withheld by Du Pont for any or no reason in its sole and absolute discretion. (c) Du Pont shall not be required to provide Dade extraordinary levels of Transitional Services, special studies, -2- training, or the like or the advantage of systems, equipment, facilities, training, or improvements procured, obtained or made after the Effective Date by Du Pont. (d) In addition to being subject to the terms and conditions of this Agreement for the provision of the Transitional Services, Dade agrees that the Transitional Services provided by third parties shall be subject to the terms and conditions of any agreements between Du Pont and such third parties to the extent that such terms and conditions do not conflict with the terms and conditions of this Agreement. 1.05 Limitation of Liability and Warranty. (a) In the absence of gross ------------------------------------ negligence or reckless or willful misconduct on Du Pont's part, and whether or not it is negligent, Du Pont shall not be liable for any claims, liabilities, damages, losses, costs, expenses (including, but not limited to, settlements, judgments, court costs and reasonable attorneys' fees), fines and penalties, arising out of any actual or alleged injury, loss or damage of any nature whatsoever in providing or failing to provide the Transitional Services to Dade. Notwithstanding anything to the contrary contained herein, in the event Du Pont commits an error with respect to or incorrectly performs or fails to perform any Transitional Service, at Dade's request, Du Pont shall use reasonable efforts to correct such error, re-perform or perform such Transitional Service; provided, -------- that Du Pont shall have no obligation to recreate any lost or destroyed data to the extent the same cannot be cured by the re-performance of the Transitional Service in question. (b) In no event shall Du Pont be liable for any damages caused by Dade's failure to perform Dade's responsibilities hereunder. Du Pont will not be liable to Dade for any act or omission of any other entity (other than due to a default by Du Pont in any agreement between Du Pont and such other entity) furnishing any Transitional Service. Further, in the absence of gross negligence or willful misconduct, Du Pont will have no liability for lost, altered or destroyed data in providing any Transitional Service or for any interruption of any Transitional Services relating to computer or telecommunications services. (c) NOTWITHSTANDING ANYTHING TO THE CONTRARY CONTAINED HEREIN OR AT LAW OR IN EQUITY, IN NO EVENT SHALL DUPONT BE LIABLE FOR PUNITIVE, SPECIAL, INDIRECT, INCIDENTAL OR CONSEQUENTIAL DAMAGES (INCLUDING, WITHOUT LIMITATION, DAMAGES FOR LOSS OF BUSINESS PROFITS, BUSINESS INTERRUPTION OR ANY OTHER LOSS) -3- ARISING FROM OR RELATING TO ANY CLAIM MADE UNDER THIS AGREEMENT OR REGARDING THE PROVISION OF OR THE FAILURE TO PROVIDE THE TRANSITIONAL SERVICES, EVEN IF DUPONT HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES. (d) In addition to the Transitional Services, Du Pont agrees to provide those goods and services described in Appendix B attached hereto and made a part ---------- hereof. If Du Pont will be providing any of its other goods in connection with providing the Transitional Services, such goods shall be provided in accordance with the conditions of sale set forth in Appendix C attached hereto and made a ---------- part hereof. EXCEPT AS SET FORTH IN THOSE CONDITIONS, DUPONT MAKES NO EXPRESSED OR IMPLIED WARRANTY (INCLUDING, WITHOUT LIMITATION, THE WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE) REGARDING ANY GOODS PROVIDED IN CONNECTION WITH THE TRANSITIONAL SERVICES. 1.06 No Obligation to Continue to Use Services. (a) Dade shall have no ----------------------------------------- obligation to continue to use any of the Transitional Services and may delete any Transitional Service from the Transitional Services that Du Pont is providing to Dade by giving Du Pont reasonable advance written notice of its desire to delete any or all Transitional Services; provided, that the deletion -------- of any Transitional Service can only be effective on the last day of a calendar month. Reasonable notice, for purposes of this paragraph, shall mean the time specifically stipulated in Appendix A, or in the absence of such stipulation, ---------- sufficient time for Du Pont to reduce its own and/or contract personnel used to provide the Transitional Services being deleted by Dade. (b) If any Transitional Service is deleted by Dade, Du Pont shall have the option, in its sole and absolute discretion, to discontinue any Transitional Service(s) related to such deleted Transitional Service(s) as set forth in Appendix A (which related Transitional Services have been designated by Du Pont - ---------- on the Appendices attached hereto) by providing written notice to Dade. Reasonable notice, for purposes of this paragraph, shall mean sufficient time for Dade to increase its own and/or contract personnel in order to find replacement services for such Transitional Services, which in any event shall not be longer than the time specifically stipulated in Appendix A (if so ---------- stipulated). (c) If any Transitional Service is terminated by Dade, Dade may not elect to reinstitute such Transitional Service. -4- 1.07 Information Systems. (a) Dade acknowledges and agrees that the ------------------- terms and conditions set forth on Appendix A-2 attached hereto shall apply to ------------ those Transitional Services relating to the information systems as described in Appendix A-2 (the "Information System Services"). - ------------ (b) Dade hereby agrees that neither it nor any of its employees or agents will access or use any Du Pont or third party software on Du Pont systems, other than the software and systems specifically described in Appendix A-2. ------------ (c) Dade agrees that as a condition to accessing any Du Pont computer or telecommunication systems, within 30 days of the date hereof, it shall execute and deliver the Du Pont "Electronic Information Security Agreement Form 0004", which is attached hereto as Annex I, on its own behalf and on behalf of its ------- subsidiaries listed in Exhibit II. ---------- (d) Dade agrees that within ninety (90) days following the execution of this Agreement, it shall provide to Du Pont, in form and substance reasonably acceptable to Du Pont, a written migration plan providing a detailed description, including calendar milestones, of the manner in which Dade will migrate from the Information Systems Services (including, without limitation, Du Pont's computer and telecommunications software, hardware, and equipment systems) to Dade or third party systems prior to the expiration of the Time Period for the provision of the Information Systems Services described in Appendix A-2, and a contingency plan setting forth the manner in which Dade will - ------------ provide its computer and telecommunications services, if Dade is unable to fully implement such migration plan. 1.08 Du Pont Access. To the extent reasonably required for Du Pont -------------- personnel to perform the Transitional Services, Dade shall provide Du Pont personnel with access to its equipment, office space, plants, telecommunications and computer equipment and systems, and any other areas and equipment; provided, -------- that such access shall not include the use thereof in the provision of any Transitional Service. 1.09 Certain Office Space. Dade and Du Pont acknowledge that, in addition -------------------- to the provisions for the use of office space described in Appendix A, certain ---------- employees of the Business share office space with other businesses of Du Pont, which office space is listed on Appendix D attached hereto (the "Additional ---------- Office Space"), and that the terms and conditions for the use of Additional Office Space are not addressed in this Agreement because the Additional Office Space is not significant. Du Pont -5- and Dade agree to negotiate in good faith to establish the terms and conditions (including the cost thereof) upon which Dade may utilize the Additional Office Space. 1.10 Site Services Agreement. Notwithstanding anything to the contrary ----------------------- contained herein or in any Schedule, Exhibit or Appendix attached hereto, if any Transitional Service is being provided under a certain Site Services Agreement dated the date hereof by and between Du Pont and Dade, such Transitional Service shall not be provided under this Agreement. 1.11 Financial Information. For each country for which Du Pont is --------------------- providing trial balance data in connection with the Financial Transitional Services, Du Pont shall provide trial balance data for such country together with a summary of related ledger activity as soon as possible after the end of the period in question but no later than thirty (30) days after the period in question for the first four (4) months of the term of this Agreement, and no later than fifteen (15) days after the period in question thereafter. ARTICLE 2 COMPENSATION ------------ 2.01 Consideration. (a) As consideration for the Transitional Services, ------------- Dade shall pay to Du Pont the amount specified for each Transitional Service as set forth in Appendix A. If the amount to be paid for any Transitional Service ---------- is described in Appendix A as "cost", the use of the term "cost" does not mean ---------- Du Pont's cost to provide that Transitional Service, but the cost to Dade to receive such Transitional Service from Du Pont. Upon the deletion of any Transitional Service in accordance with Paragraph 1.06 above, the compensation to be paid under this Paragraph 2.01 shall be reduced by the amount specified for such deleted Transitional Service. Upon the reduction of the level of, or the termination, of any specific Transitional Service, Du Pont and Dade shall determine in good faith a reduction of the amount to be paid by Dade hereunder due to such reduction or termination. Specifically, with respect to the Service and Security Transitional Services for Europe, to the extent that Dade vacates a facility, the price of such Transitional Service shall be reduced based upon the square footage of the vacated space as it relates to the total square footage of the space provided in connection with such Transitional Services. (b) In addition to the payments described in subparagraph (a) above, Dade shall reimburse to Du Pont an amount -6- equal to the sum of (i) all of the costs, if any, required by any third party incurred by Du Pont to obtain consents from such third parties to permit Du Pont to provide any Transitional Service to Dade hereunder (including, without limitation, amounts paid for the right to continue to use third party software for the benefit of Dade) in accordance with the terms of Section 5.09(f) of the Purchase Agreement, plus (ii) any expenditures made by Du Pont on behalf of Dade pursuant to Appendix A. Such costs and expenditures will be billed to Dade in ---------- the monthly invoice(s) described in Paragraph 2.03 below. In the event that Du Pont will be making any such disbursements of funds on behalf of Dade, before any disbursement will be made, Dade shall deposit funds equal to an estimated amount of such costs and expenditures into a bank account designated by Du Pont. 2.02 Taxes. Any taxes (other than income taxes) assessed on the provision ----- of the Transitional Services shall be paid by Dade. 2.03 Invoices. At the end of each month, each of Du Pont and its -------- affiliates or subsidiaries providing the Transitional Services will submit one invoice to Dade for (a) all Transitional Services provided to Dade and its subsidiaries by such entity, and (b) those costs and expenditures described in Paragraph 2.01(b) above incurred by such entity during such month. Such monthly invoices shall be issued no later than the fifteenth day of each month. Each invoice shall include a summary list of the previously agreed upon Transition Service for which there are fixed dollar fees, together with documentation supporting each of the invoiced amounts that are not covered by the fixed fee agreements. The total of this list and supporting detail will equal the invoice total, and will be provided under separate cover apart from the invoice. All invoices shall be sent to Dade at the following address or to such other address as Dade shall have specified by notice in writing to Du Pont: Jerry Hamilton 1717 Deerfield Road Deerfield, IL 60015-0078 Fax: (847) 267-5317 2.04 Payment of Invoices. (a) Payment of all invoices shall be made by ------------------- electronic funds transmission in U.S. Dollars, without any offset or deduction of any nature whatsoever, within thirty (30) days of the delivery of the invoice in accordance with Section 6.04 below, unless otherwise specified in Appendix A. ---------- All payments shall be made to the account stipulated in the -7- invoice or otherwise in writing to Dade by Du Pont with written confirmation of payment sent by facsimile to the person stipulated in the invoice or otherwise in writing to Dade by Du Pont. (b) If any payment is not paid when due, Du Pont shall have the right, without any liability to Dade, or anyone claiming by or through Dade, to immediately cease providing either all of the Transitional Services, or the Transitional Service(s) for which payment has not been made within ten (10) business days after the delivery of written notice thereof delivered in accordance with Section 6.04 below, which right may be exercised by Du Pont in its sole and absolute discretion, and shall not limit or otherwise affect Du Pont's right to terminate this Agreement in accordance with Article 4 below. ARTICLE 3 CONFIDENTIALITY --------------- 3.01 Obligation. (a) In addition to any obligations of confidentiality ---------- pursuant to other agreements between the Parties, without the prior written consent of the other Party, each Party shall hold in confidence and not disclose to any third party (i) any confidential information received by it from the other Party during the provision of the Transitional Services, including, without limitation, information which is not related to the Transitional Services; and (ii) with regard to Dade, the specific terms, conditions and information contained in this Agreement and any attachment hereto. (b) Each party agrees that it shall only use the information received by ---- it from the other Party in connection with the provision or receipt of the Transitional Services, and for no other purpose whatsoever. (c) For the purposes of this Agreement, confidential information shall not include information: (i) which is or becomes part of the public domain other than through breach of this Agreement or through the fault of the receiving Party; (ii) which is or becomes available to the receiving Party from a source other than the disclosing Party, which source has no obligation of confidentiality to the disclosing Party in respect thereof; -8- (iii) which is required to be disclosed by law or governmental order; or (iv) the disclosure of which is mutually agreed to by the Parties. 3.02 Effectiveness. The foregoing obligation of confidentiality shall be ------------- in effect during the term of this Agreement and any extensions thereof and for a period of ten (10) years after the termination or expiration of this Agreement. 3.03 Care and Inadvertent Disclosure. With respect to any confidential ------------------------------- information, each Party agrees as follows: (a) it shall use the same degree of care in safeguarding said information as it uses to safeguard its own information which must be held in confidence; and (b) upon the discovery of any inadvertent disclosure or unauthorized use of said information, or upon obtaining notice of such a disclosure or use from the other Party, it shall take all necessary actions to prevent any further inadvertent disclosure or unauthorized use, and, subject to the provisions of Paragraph 1.05 above, such other Party shall be entitled to pursue any other remedy which may be available to it. ARTICLE 4 TERM AND TERMINATION -------------------- 4.01 Term. This Agreement shall become effective on the Effective Date ---- and shall remain in force until the expiration of the longest Time Period unless all of the Transitional Services are deleted by Dade in accordance with Paragraph 1.06 above, or this Agreement is terminated under Paragraph 4.03, 6.07 or 6.11 below prior to the end of such period. 4.02 Extension. Subject to the earlier termination of this Agreement in --------- accordance with Paragraph 4.03, 6.07 or 6.11 below, other than with respect to the Information System Services, Dade may extend each Time Period for an additional thirty (30) days by giving Du Pont at least thirty (30) days prior written notice prior to the end of the Time Period in question. 4.03 Termination. (a) If either Party (hereafter called the "Defaulting ----------- Party") shall fail to perform or default in the performance of any of its obligations under this Agreement (other than as described in subparagraph (b) below), the other Party (hereinafter called the "Non-Defaulting Party") may give written -9- notice to the Defaulting Party specifying the nature of such failure or default and stating that the Non-Defaulting Party intends to terminate this Agreement if such failure or default is not cured within forty five (45) days of such written notice. If any failure or default so specified is not cured within such forty five (45) day period, the Non-Defaulting Party may elect to immediately terminate this Agreement; provided, however, that if the failure or default -------- ------- relates to a dispute made in good faith by the Defaulting Party, the Non- Defaulting Party may not terminate this Agreement pending the resolution of such dispute. Such termination shall be effective upon giving a written notice of termination from the Non-Defaulting Party to the Defaulting Party and shall be without prejudice to any other remedy which may be available to the Non- Defaulting Party against the Defaulting Party. (b) Notwithstanding the provisions of subparagraph (a) above, Du Pont may immediately terminate this Agreement upon written notice to Dade if Dade fails to make any payment hereunder within ten (10) business days after the delivery of written notice of non-payment in accordance with Section 6.04 below. (c) Either Party may immediately terminate this Agreement by a written notice to the other without any prior notice upon the occurrence of any of the following events: (i) the other Party enters into proceedings in bankruptcy or insolvency; (ii) the other Party shall make an assignment for benefit of creditors; (iii) a petition shall be filed against the other Party under a bankruptcy law, a corporate reorganization law, or any other law for relief of debtors (or similar law in purpose or effect); or (iv) the other Party enters into liquidation or dissolution proceedings. 4.04 Dade's Administrative and Support Services. (a) Dade acknowledges ------------------------------------------ that Du Pont is providing the Transitional Services as an accommodation to Dade to allow Dade a period of time to obtain its own administrative and support services. During the term of this Agreement, Dade agrees that, in addition to the migration plan described in Paragraph 1.07(d), it shall take all steps necessary to obtain its own administrative and support -10- services prior to the expiration of the Time Period for each Transitional Service. (b) Dade specifically agrees and acknowledges that all obligations of Du Pont to provide each Transitional Service shall immediately cease upon the expiration of the Time Period (and any extension thereof in accordance with Section 4.02) for such Transitional Service, and Du Pont's obligations to provide all of the Transitional Services shall immediately cease upon the termination of this Agreement. Upon the ceasation of Du Pont's obligation to provide any Transitional Service, Dade shall immediately cease using, directly or indirectly, such Transitional Service (including, without limitation, any and all Du Pont software or third party software provided through Du Pont, telecommunications services or equipment, or computer systems or equipment). Dade hereby agrees that Du Pont will experience a negative impact on Du Pont's businesses in providing any Transitional Service beyond the Time Period specified for such Transitional Service (and any extension thereof in accordance with Section 4.02). (c) DUPONT SHALL HAVE NO LIABILITY OF ANY KIND OR NATURE WHATSOEVER (INCLUDING, WITHOUT LIMITATION, INDIRECT, CONSEQUENTIAL, SPECIAL, INCIDENTAL OR PUNITIVE DAMAGES) TO DADE, OR TO ANYONE CLAIMING BY OR THROUGH DADE, FOR DUPONT'S CEASING TO PROVIDE ANY TRANSITIONAL SERVICE UPON THE EXPIRATION OF THE TIME PERIOD (AND ANY EXTENSION THEREOF IN ACCORDANCE WITH SECTION 4.02) FOR SUCH TRANSITIONAL SERVICE OR THE TERMINATION OF THIS AGREEMENT. DADE SHALL HOLD DUPONT HARMLESS AND WAIVES ANY AND ALL RIGHTS, AT LAW OR IN EQUITY, THAT IT MAY HAVE TO BRING ANY SUIT, INCLUDING, BUT NOT LIMITED TO, INJUNCTIVE RELIEF, OR TO ANY CLAIMS, DAMAGES, LOSS, COSTS (INCLUDING ATTORNEY FEES), ACTIONS, OR LIABILITY AGAINST DUPONT OR DUPONT'S EMPLOYEES, AGENTS, ASSIGNEES, SUBSIDIARIES OR AFFILIATES ARISING OUT OF DUPONT'S CEASING TO PROVIDE ANY TRANSITIONAL SERVICE UPON THE EXPIRATION OF THE TIME PERIOD (AND ANY EXTENSION THEREOF IN ACCORDANCE WITH SECTION 4.02) FOR SUCH TRANSITIONAL SERVICE OR THE TERMINATION OF THIS AGREEMENT. 4.05 Survival of Certain Obligations. Without prejudice to the survival ------------------------------- of the other agreements of the Parties, the following obligations shall survive the termination of this Agreement: (a) for the period set forth therein, the obligations of each Party under Articles 3, 4 and 5, and (b) Du Pont's right to receive the compensation for the Transitional Services provided, and reimbursement of the costs and expenditures -11- described in Paragraph 2.01 above incurred, prior to the effective date of termination. ARTICLE 5 INDEMNITIES ----------- 5.01 Indemnity by Du Pont. Subject to the limitations set forth in -------------------- Paragraph 1.05 above, Du Pont shall indemnify, defend and hold Dade harmless against any and all claims, liabilities, damages, losses, costs, expenses (including, but not limited to, settlements, judgments, court costs and reasonable attorney's fees), fines and penalties arising out of any actual injury, loss or damage of any nature whatsoever due or relating to the provision of or failure to provide the Transitional Services, only to the extent that such ---- amounts are a direct result of the gross negligence or reckless or willful misconduct of the personnel of Du Pont and/or any contract personnel who are managed and directed by Du Pont. 5.02 Indemnity by Dade. Without affecting any provision of the Purchase ----------------- Agreement, Dade shall indemnify, defend and hold Du Pont harmless against any and all claims, liabilities, damages losses, costs, expenses (including, but not limited to, settlements, judgments, court costs and reasonable attorneys' fees), fines and penalties arising out of any injury or death, and any loss or damage of any nature whatsoever (including, without limitation, loss of or damage to property, or damage to the environment) due or relating to the operations and activities of Dade, except to the extent that any such losses, liabilities, obligations, costs, expenses or damages are the direct result of the negligence, gross negligence or willful misconduct of the personnel of Du Pont and/or any contract personnel who are managed and directed by Du Pont. 5.03 Term of Indemnity. The indemnities contained in this Article shall ----------------- survive for a period of three (3) years after the termination of this Agreement for any reason. ARTICLE 6 MISCELLANEOUS ------------- 6.01 Amendments. This Agreement shall not be amended or modified except in ---------- writing signed by the Parties. 6.02 Successors and Assignment. This Agreement shall be binding upon and ------------------------- inure to the benefit of the Parties hereto and their respective successors and permitted assigns. No Party -12- shall assign this Agreement or any rights herein without the prior written consent of the other Party, which may be withheld for any or no reason; provided, that (a) Du Pont may assign without Dade's consent its obligations to - -------- provide any (or all) of the Transitional Services relating to Information System Services upon written notice to Dade; and (b) Dade may assign without Du Pont consent its rights and obligations hereunder to (i) any entity acquiring substantially all of the assets of the business unit or division of Dade to which this Agreement relates or (ii) any of Dade's financing sources as collateral security. 6.03 Merger. All understandings, representations, warranties and ------ agreements, if any, heretofore existing between the Parties regarding the Transitional Services are merged into this Agreement, including the Schedules, Exhibits and Appendices attached hereto, which fully and completely express the agreement of the Parties with respect to the subject matter hereof. The Parties have entered into this Agreement after adequate investigation with neither Party relying upon any statement or representation not contained in this Agreement, or the Schedules, Exhibits and Appendices attached hereto. 6.04 Notices. All invoices, notices, consents, requests, approvals, and ------- other communications provided for or required herein, and all legal process in regard thereto, must be in writing and shall be deemed validly given, made or served, (a) when delivered personally or sent by telecopy to the facsimile number indicated below with a required confirmation copy sent in accordance with subparagraph (c) below; or (b) on the next business day after delivery to a nationally-recognized express delivery service with instructions and payment for overnight delivery; or (c) on the fourth day after deposited in any depository regularly maintained by the United States postal service, postage prepaid, certified or registered mail, return receipt requested, addressed to the following addresses (unless otherwise specified in this Agreement), or to such other address as the Party to be notified shall have specified to the other Party in accordance with this paragraph: If to Du Pont: E. I. du Pont de Nemours and Company 1007 Market Street Wilmington, Delaware 19898, USA Attention: Fax Number: -13- If to Dade: Dade Chemistry Systems Inc. 1717 Deerfield Road Deerfield, IL 60015 Attn: Chief Executive Officer 6.05 Governing Law. This Agreement shall be governed by and construed in ------------- accordance with the laws of the United States of America and the State of New York. This Agreement shall not be governed by the United Nations Convention on Contracts for the International Sale of Goods. 6.06 Headings. The various headings used in this Agreement are for -------- convenience only and are not to be used in interpreting the text of the Articles or Paragraphs in which they appear or to which they relate. 6.07 Severability. Wherever possible, each provision of this Agreement ------------ shall be interpreted in such a manner as to be effective and valid under applicable law. If any portion of this Agreement is declared invalid for any reason in any jurisdiction, such declaration shall have no effect upon the remaining portions of this Agreement, which shall continue in full force and effect as if this Agreement had been executed with the invalid portions thereof deleted; provided, that the entirety of this Agreement shall continue in full -------- force and effect in all other jurisdictions. Notwithstanding the foregoing, if the portion of this Agreement which is declared invalid has the effect of reducing the compensation due hereunder or preventing the reimbursement of the costs and expenditures described in Paragraph 2.01(b) above, Du Pont, at its sole discretion, may terminate this Agreement by providing thirty (30) days written notice to Dade. 6.08 Counterparts. This Agreement may be executed in two or more ------------ counterparts, each of which shall be deemed an original, and all of which shall constitute one and the same instrument. 6.9 Rights of the Parties. Nothing expressed or implied in this Agreement --------------------- is intended or will be construed to confer upon or give any person or entity, other than the Parties and their respective subsidiaries and affiliates, any rights or remedies under or by reason of this Agreement or any transaction contemplated thereby. -14- 6.10 Reservation of Rights. Either Party's waiver of any of its remedies --------------------- afforded hereunder or at law is without prejudice and shall not operate to waive any other remedies which that Party shall have available to it, nor shall such waiver operate to waive the Party's rights to any remedies due to a future breach, whether of a similar or different nature. 6.11 Force Majeure. Any failure or omission by a Party in the performance ------------- of any obligation under this Agreement shall not be deemed a breach of this Agreement or create any liability, if the same arises from any cause or causes beyond the control of such Party, including, but not limited to, the following, which, for purposes of this Agreement shall be regarded as beyond the control of each of the Parties hereto: acts of God, fire, storm, flood, earthquake, governmental regulation or direction, acts of the public enemy, war, rebellion, insurrection, riot, invasion, strike or lockout; provided, however, that such -------- ------- Party shall resume the performance whenever such causes are removed. Notwithstanding the foregoing, if such Party cannot perform any obligation under this Agreement for a period of forty-five (45) days due to such cause or causes, either Party may terminate such obligation under this Agreement by providing written notice to the other Party. 6.12 Relationship of the Parties. It is expressly understood and agreed --------------------------- that in rendering the Transitional Services hereunder, Du Pont is acting as an independent contractor and that this Agreement does not constitute either Party as an employee, agent or other representative of the other Party for any purpose whatsoever. Neither Party has the right or authority to enter into any contract, warranty, guarantee or other undertaking in the name or for the account of the other Party, or to assume or create any obligation or liability of any kind, express or implied, on behalf of the other Party, or to bind the other Party in any manner whatsoever, or to hold itself out as having any right, power or authority to create any such obligation or liability on behalf of the other or to bind the other Party in any manner whatsoever (except as to any actions taken by either Party at the express written request and direction of the other Party). 6.13 Conflict. In case of conflict between the terms and conditions of -------- this Agreement and any Appendix, the terms and conditions of such Appendix shall control and govern as it relates to the Transitional Service to which those terms and conditions apply. -15- 6.14 Language. This Agreement is executed in the English language, and -------- any interpretation or construction of this Agreement shall be based solely on the English language official text. 6.15 Arbitration. If the dispute has not been resolved by negotiation or ----------- by mediation, then upon the written request of either Party, such dispute shall be resolved by binding arbitration conducted in accordance with the Rules of the CPR Institute for Dispute Resolution by a sole arbitrator. To the extent not governed by such rules, such arbitrator shall be directed by the Parties to set a schedule for determination of such dispute that is reasonable under the circumstances. The arbitration will be conducted in New York City. The arbitration will be governed by the United States Arbitration Act, 9 U.S.C. (S)(S) 1-16. Judgment upon the award rendered by the arbitrator may be entered by any court having jurisdiction. -16- IN WITNESS WHEREOF, the parties hereto have caused this Transitional Services Agreement to be executed the day and year first above written. E. I. DU PONT DE NEMOURS AND COMPANY By: /s/ R.H. Heath ______________________________________ Title: Attorney in Fact ___________________________________ DADE CHEMISTRY SYSTEMS INC. By: /s/ John Connaughton _______________________________________ Title: Vice President and Assistant Secretary ________________________________________ -17- EX-10.6 12 MFG. AGREEMENT AS OF 05/07/96 EXHIBIT 10.6 MANUFACTURING AGREEMENT AGREEMENT entered into May 7, 1996, effective as of April 30, 1996 by and between E.I. DU PONT DE NEMOURS AND COMPANY ("DuPont"), and DADE CHEMISTRY SYSTEMS INC. ("Dade"). WHEREAS, DuPont is a manufacturer of the parts described on Schedule A ---------- attached hereto and made a part hereof (together with any other parts to be manufactured by DuPont for Dade, the "Parts"); and WHEREAS, DuPont's Sorvall Centrifuge business (the "Centrifuge Business") manufactured the Parts for and sold the Parts to DuPont's In Vitro Diagnostic business (the "IVD Business") prior to the sale of the IVD Business by DuPont to Dade; and WHEREAS, Dade desires to continue to purchase the Parts from DuPont, and DuPont desires to continue to sell the Parts to Dade, all in accordance with the terms set forth in this Agreement. NOW, THEREFORE, the parties agree as follows: 1. SUPPLY OF PARTS. (a) DuPont agrees to sell to Dade all of Dade's --------------- requirements for the Parts; provided, that, unless otherwise agreed to in -------- writing by DuPont, DuPont shall not be required to supply more than one hundred fifty percent (150%) of the minimum requirement for any Part as set forth on Schedule A in any Contract Year (as defined in Paragraph 2 below). - ---------- (b) The Dade engineering drawings and/or specifications for the Parts have been heretofore furnished to and are currently being used by DuPont in the manufacturing of the Parts. Unless such specifications are modified as described in Paragraph 4 below, DuPont agrees to manufacture the Parts in accordance with the specifications heretofore provided by Dade. 2. PERIOD OF AGREEMENT. (a) Unless terminated as provided for under ------------------- subparagraphs (b), (c) or (d) below, this Agreement shall commence on the date set forth above and continue in effect for three (3) years ending on April 30, 1999, and thereafter, this Agreement shall continue in effect from Contract Year to Contract Year. For the purposes of this Agreement, each twelve (12) month period commencing on May 1 and ending on April 30 during the term of this Agreement shall be referred to as a "Contract Year", with the first Contract Year commencing on the date hereof and ending on April 30, 1997. (b) This Agreement may be terminated by either party providing to the other party at least twelve (12) months prior written notice; provided, that the -------- first date on which a notice of termination can become effective is at the end of the third Contract Year. No later than six (6) months prior to the effective date of any termination of this Agreement, Dade may submit to DuPont an order report (as described in Paragraph 3 below) for the period immediately following such effective date, which period shall not exceed twelve months (the "Extension Period"), and the provisions of this Agreement shall remain in effect for such period except that there shall be no minimum Total Utilized Hours (as defined in Paragraph 3(b)(i) below) for the Extension Period. Dade agrees that such order report shall not provide for Parts in excess of the purchases of Parts made during the Contract Year immediately preceding the Contract Year in which such report was delivered. Dade shall be required to purchase, and DuPont shall be required to sell, the Parts described in such order report on the terms set forth in this Agreement, except as otherwise described above. Without limiting DuPont's obligation in the immediately preceding sentence, Dade shall, in good faith, consult with DuPont in establishing its order report (if any) so that DuPont may plan its production requirements for the Extension Period. (c) Either party shall have the right to terminate this Agreement upon the breach or default by the other party of any of its obligations hereunder if such breach or default is not cured within sixty (60) days after written notice thereof. (d) In the event of termination of this Agreement, for any reason, (i) DuPont shall complete all Parts then ordered, and Dade shall purchase from DuPont such quantities of raw materials on hand as a result of Dade's commitments and forecasts under Paragraph 3 below, at DuPont's cost thereof, and those Parts then completed and thereafter completed in accordance with the terms of this Agreement, and (ii) DuPont agrees to provide to Dade up to an average of four (4) working man hours of reasonable assistance per Part to facilitate the transfer of the manufacturing of the Parts to a manufacturer selected by Dade. If DuPont is required to provide more than an average of four (4) working man hours of such assistance per Part, Dade agrees to pay DuPont for such assistance at a rate to be mutually agreed upon by Dade and DuPont at that time. 3. QUANTITY. (a) Dade's estimated purchase requirements of Parts are -------- listed on Schedule A. In order for DuPont to properly support Dade's production ---------- requirements, no later than sixty five (65) days prior to the beginning of each calendar month, Dade shall provide to DuPont an order report, which sets forth (i) a firm order for Parts for that calendar month to be supplied subject to the lead time set forth on Schedule A, which shall be designated as the "Placed ---------- Orders", and constitute a firm commitment by Dade to DuPont, and (ii) a forecast of the Parts that Dade anticipates purchasing during the twelve (12) month period following the calendar month, which shall be designated as the "Planned Orders" and is for DuPont's production planning purposes only and shall not constitute a commitment by Dade to purchase. DuPont shall promptly advise Dade of any proposed increase or decrease in lead time so that, if acceptable, Dade's commitments hereunder can be adjusted to maintain optimum - 2 - flexibility while preventing supply interruption or delay. DuPont will monitor Dade's planned orders and maintain an adequate supply of raw materials to support the planned requirements at its own risk. The parties agree to update Schedule A to reflect any additions and deletions of Parts or any change in the - ---------- annual minimum number of any such Part as provided in this Section 3. Reference in this Agreement to Schedule A shall mean such schedule as updated from time to ---------- time. (b) (i) Immediately following each Contract Year regardless of any breach by DuPont after the end of such Contract Year, Dade and DuPont shall compute the total number of standard hours for all of the Parts and other production parts order by Dade for that Contract Year (the "Total Hours Utilized") which shall be equal to the total of all of the Individual Part Hours (as hereinafter deferred) for that Contract Year. For the purposes of this Agreement, the term "Individual Part Hours" shall mean the product resulting from (A) the total number of each Part or other production part ordered by Dade during the Contract Year in question, multiplied by (B) the standard hours for such Part or other production part, as the case may be. (ii) If the Total Hours Utilized are less than 37,000 standard hours, Dade shall either (A) pay to DuPont an amount equal to such deficit multiplied by DuPont's average standard cost for labor and cash overhead charges for all Parts and other production parts for such Contract Year, or (B) order a sufficient number of Parts within sixty (60) days of the determination of such deficit so that such deficit is reduced to zero. If Dade elects to order Parts as described in clause (B) above, the standard hours associated with such Parts shall not be applied to the minimum requirements for the Contract Year in which such Parts are ordered, and all standard hours associated with Parts ordered during such Contract Year shall first reduce such deficit and then be applied to the minimum standard hours for such Contract Year. 4. MODIFICATIONS. At any time Dade may propose, in writing, ------------- modifications to the drawings and/or specifications related to the Parts, in which event both parties agree to promptly negotiate, in good faith, the inclusion of those modifications into this Agreement, and the cost thereof shall be determined in accordance with Paragraph 5(d) below. DuPont shall not make any modification to any Part without the prior written consent of Dade. 5. PRICE. (a)(i) Subject to the discount and surcharge described in ----- subparagraph (b) and (c) below, the price for each Part is set forth on Schedule -------- A, which price shall remain in effect during the first Contract Year. Within - - sixty (60) days prior to the end of each Contract Year, the parties will negotiate in good faith to determine the prices for the Parts for the next Contract Year. If the parties can not agree to each of - 3 - such prices for any Contract Year, each prices shall be increased (or decreased) for the next Contract Year by an amount equal to such price multiplied by the percentage increase (or decrease) in the Producer Price Index for All Goods (1982=100), as issued by the United States Department of Labor, Bureau of Labor Statistics (or the successor index thereto), from the first day of the Contract Year then ending (or the closest day on which such Index was reported) to the last day of such Contract Year (or the closest day on which such Index was reported). (ii) Dade and DuPont shall mutually agree to the scope of and compensation to be paid to DuPont for any product and manufacturing development work, general machining services, and tooling maintenance and repairs, all of which are not included within the terms of this Agreement. (b) If Dade purchases more than one hundred five percent (105%) of the minimum number of any Part as designated on Schedule A during any Contract ---------- Year, the price for each such Part in excess of one hundred five percent (105%) of the minimum shall be reduced by an amount equal to fifteen percent (15%) of the price thereof. (c) (i) Dade agrees that if it orders an amount equal to or greater than twenty five percent (25%) but less than ninety percent (90%) of the minimum number of any Part for a production run of such Part (a "Production Run") as determined in accordance with Table 1 set forth below, the price for ------- each Part in that Production Run shall be increased by a surcharge equal to the price of each such Part multiplied by the applicable percentage set forth in Table 2 below: - ------- TABLE 1 -------
Number of Estimated Annual Production Runs Purchases of a Part Per Contract Year ------------------- ----------------- Up to $4,999 one - Annually $5,000 to $9,999 two - one per Semi-annual Period $10,000 to 24,999 four - One per Quarter $25,000 or more twelve - One per month
- 4 - TABLE 2 -------
Percent of Applicable Minimum Requirement Surcharge for each Production Run Percentage ------------------- -------------- 90% - 100% 0 85% - 89% 3% 80% - 84% 6% 75% - 79% 9% 70% - 74% 12% 65% - 69% 15% 60% - 64% 19% 55% - 59% 25% 50% - 54% 31% 45% - 49% 39% 40% - 44% 48% 35% - 39% 60% 30% - 34% 75% 25% - 29% 100%
(ii) For any order less than twenty five percent (25%) of the minimum number of any Part in a Production Run as determined in accordance with Table 1 above, Dade shall pay to DuPont as the price of such Part an amount equal to one half of the product resulting from the minimum number units of the Parts in question required to be ordered for such Production Run multiplied by the price per such Part. (iii) In the event Dade is required to pay a surcharge under this Paragraph 5(c), the provisions of Paragraph 3(b) shall be calculated as if Dade had ordered 100% of the minimum requirement for the Production Run for which such surcharge was paid. If Dade does not place an order for any Production Run required by Section 3(c) above, no surcharge shall be payable for such failure to place an order for a Production Run. (iv) The examples on Schedule B illustrate the calculation of ---------- the surcharge and the price described in clause (ii) above. (d) The price of any Part modified in accordance with Paragraph 4 above shall be charged for any charges in the costs of materials, machining hours and supporting and other costs. 6. TERMS OF PAYMENT. Parts purchased hereunder shall be invoiced upon ---------------- shipment to Dade. Each invoice shall be payable by Dade within thirty (30) days after the delivery thereof in accordance with Paragraph 16 below. Each invoice must list the following information: the Log number, the Line number, the part number, the unit price and quantity shipped per each Part - 5 - shipped. Invoices shall be sent to the address stipulated in the Dade Purchase Order or otherwise in writing to DuPont by Dade. Payment of all invoices shall be sent to the address stipulated in the invoice or otherwise in writing to Dade by DuPont. 7. DELIVERY. (a) Delivery terms are F.O.B. Dade's warehouse. The -------- parties recognize that delivery time is of the essence, and DuPont agrees that it shall deliver Parts at the Dade delivery point on the promised delivery date. Dade and DuPont agree to develop and meet on-time delivery goals prior to signing. (b) Notwithstanding the foregoing, Dade agrees that the frequency of the delivery of each Part shall be based upon the annual purchases of such Part as set forth on Schedule A , and delivered in equal amounts in accordance with ---------- the table set forth in Paragraph 3(b) above. 8. WARRANTY AND REMEDY. (a) DuPont warrants that the Parts sold ------------------- hereunder shall be free from defects in workmanship and shall meet all specifications provided to DuPont by Dade hereunder for a period of one (1) year after the sale thereof. EXCEPT FOR THE FOREGOING DUPONT MAKES NO EXPRESS OR IMPLIED WARRANTY (INCLUDING, WITHOUT LIMITATION, THE WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE) REGARDING ANY PART. (b) Dade's SOLE remedies, and DuPont's SOLE liability for damages with respect to any claim (including, without limitation, a breach of warranty by DuPont) shall be as follows: (i) promptly replacement of any non-conforming Parts or, at DuPont's option, a refund of the purchase price of such Parts, and (ii) reimbursement of out of pocket costs reasonably incurred by Dade for removal, storage, transportation and disposal of non-conforming Parts (provided, however, non-conforming Parts shall be returned to DuPont at its request and expense). 9. LIMITATION OF LIABILITY. DuPont's sole liability and Dade's sole ----------------------- remedies for any claim are set forth in Paragraph 8(b) above. NEITHER PARTY SHALL BE LIABLE TO THE OTHER FOR INCIDENTAL, SPECIAL, PUNITIVE, INDIRECT OR CONSEQUENTIAL DAMAGES AS A RESULT OF ANY BREACH OF OR DEFAULT UNDER THIS AGREEMENT (INCLUDING, WITHOUT LIMITATION, DAMAGES FOR LOSS OF BUSINESS PROFITS, BUSINESS INTERRUPTION OR ANY OTHER LOSS), WHETHER OR NOT CAUSED BY OR RESULTING FROM THE NEGLIGENCE OF SUCH PARTY, EVEN IF SUCH PARTY HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES. 10. QUALITY. (a) Dade's quality goal is to introduce Parts produced ------- hereunder by DuPont directly into Dade's manufacturing processes. Accordingly, the Machine Shop Quality - 6 - System which has been developed by DuPont and Dade shall be the basis for 100% conformance (that is, Zero Defects). Quality improvement objectives will be established and periodically reviewed. Dade shall have the right to perform on- site audits and inspections at the DuPont's facilities for quality control purposes only, which inspections shall be conducted during normal business hours upon at least two (2) days' written notice to DuPont. Dade agrees that such audits and inspections shall not interfere with the conduct of DuPont's business. Dade further agrees that it shall not use in any way any information obtained about DuPont or its business obtained in connection with any such audit or inspection, and, Dade shall keep such information so obtained by it confidential and prevent the same from being used, disseminated or disclosed by Dade, its agents, officers, directors or other representatives in any manner or for any purpose whatsoever; provided, however, that nothing herein shall prevent -------- ------- Dade from utilizing any information which is now or in the future becomes part of the public domain other than as a result of any action or omission to act of Dade, its agents, officers, directors or other representatives. (b) DuPont will substantiate conformance to specifications in accordance with mutually established quality measurements. DuPont will comply with all governmental laws and regulations. The number of late deliveries of Parts and the number of nonconforming lots shall not exceed six during any six month period. 11. TOOLING. (a) All molds, jigs, fixtures, dies, and other equipment ------- paid for by Dade shall become the property of Dade (the "Dade Equipment"). All of the current Dade Equipment is listed on Schedule C attached hereto and made ----------- a part hereof. Tooling paid for by DuPont shall become the property of DuPont. Tooling paid for by Dade under this Agreement shall be marked "Property of Dade Chemistry Systems, Inc." and shall be leased, rent-free to DuPont. (b) Upon the termination of this Agreement, Dade shall promptly remove all of the Dade Equipment, and DuPont shall not charge Dade for the removal of the Dade Equipment so long as Dade repairs any damage to the property on which the Dade Equipment is then located. (c) DuPont shall restrict the use of the Dade Equipment to the manufacturing of the Parts ordered by Dade under this Agreement. DuPont shall modify, as directed by Dade, maintain and provide all necessary repairs, at Dade's expense, for the Dade Equipment, and DuPont shall be responsible for all damage to the Dade Equipment, unless said damage is caused by the negligence of Dade or its employees. DuPont assumes all risks and liabilities for property damage or personal injury that may arise from the installation, modification and operation of the Dade Equipment by it or on its behalf. DuPont will indemnify - 7 - Dade for all liability, loss and expense incurred by Dade resulting from any subcontractors or assigns in performance under this Agreement. This indemnity shall not apply where the cause of the liability, loss or expense is the willful misconduct or negligence of Dade. (d) Dade reserves the right to file a Uniform Commercial Code Financing Statement or such other documents as may be necessary under federal, state or local law to preserve its interest in and assure its right to recover without lien or other encumbrance any of the Dade Equipment or other tangible items in the care, possession, or control of DuPont, its employees, agents or assigns. DuPont agrees on behalf of itself, its employees, agents and assigns to cooperate fully with Dade, including the signing of any and all appropriate filing or other documents necessary to preserve Dade's interests in the Dade Equipment or other tangible items. 12. NON-DISCLOSURE OF TECHNICAL INFORMATION. The drawings and --------------------------------------- specifications furnished by Dade hereunder for the Parts are the sole property of Dade and shall be either destroyed (at Dade's direction and cost) or returned to Dade upon termination of this Agreement. DuPont agrees that the discussions regarding purchases hereunder are of a confidential nature. DuPont further agrees not to disclose to others the quantities or value of Parts that Dade has purchased or plans to purchase from DuPont or the drawings and specifications furnished by Dade, except as required by governmental authority. 13. PROPRIETARY RIGHTS. Dade shall defend and hold DuPont harmless ------------------ against all liability, loss and expense (including reasonable attorneys' fees) arising out of any claim of infringement or misappropriation of any patent covering the process for the manufacturing of the Parts so long as Dade develops such process. 14. FORCE MAJEURE. Except to the extent otherwise provided herein, no ------------- liability shall result to either party from delay in performance or from non- performance caused by circumstances beyond the control of the party affected, including, but not limited to, an act of God, fire, flood, explosion, war, action or request of governmental authority, accident, labor trouble or shortage, inability to obtain materials, power, equipment or transportation. Notwithstanding the foregoing, each of the parties hereto shall be diligent in attempting to remove such cause or causes. 15. NONDISCRIMINATION. DuPont warrants that it has complied with all ----------------- applicable laws, rules, orders and regulations of governmental authority covering the production, sale and delivery of the Parts or services specified herein, including, but not limited to, Executive Order 11246, and the rules and - 8 - regulations promulgated thereunder, the Rehabilitation Act of 1973 and the Vietnam Era Veterans Readjustment Act of 1974. 16. NOTICES. Any invoice, notice, request, demand, consent, approval, or ------- other communication required or permitted under this Agreement shall be in writing and shall be deemed to have been given (a) when personally delivered; or (b) sent by telecopy to the facsimile number indicated below, with a confirmation copy sent in accordance with subparagraph (c) below; or (c) on the next business day after delivery to a nationally-recognized express delivery service with instructions and payment for overnight delivery; or (d) on the fifth day after it is deposited in any depository regularly maintained by the United States postal service, postage prepaid, certified or registered mail, return receipt requested, addressed to the following address (unless otherwise specified in this Agreement), or to such other address as the party to be notified shall have specified to the other party in accordance with this paragraph: If to Dade: If to DuPont: Dade Chemistry Systems, Inc. Sorvall Centrifuge Business 1717 Deerfield Road 31 Pecks Lane Deerfield, IL 60015 Newtown, CT Attn: Chief Executive Officer Attn: Business Manager 17. APPLICABLE LAW. The laws of the State of Connecticut shall govern the -------------- construction of the Agreement. 18. ASSIGNMENT. Neither party may assign its obligations or rights under ---------- this Agreement, except (a) DuPont may assign all of its rights and obligations under this Agreement to the purchaser of the Centrifuge Business without the consent of Dade, and Dade hereby (i) acknowledges that such assignment will most likely occur and consents to that assignment, and (ii) agrees that after any such assignment DuPont shall have no further liability hereunder, other than with respect to the non-disclosure obligations under Paragraph 12 above, and (b) without the consent of the other party, either party may assign, its rights and obligations hereunder to (i) any entity acquiring substantially all of the assets of the business unit or division of such party to which this Agreement relates or (ii) any of such party financing sources as collateral security. 19. ENTIRETY. This Agreement constitutes the entire agreement between the -------- parties, and no modifications or supplement shall be effective unless agreed to in writing by both parties. IN WITNESS WHEREOF, the parties have caused this Agreement to be executed and delivered on the day and year first above written. - 9 - E.I. DU PONT DE NEMOURS AND COMPANY By: /s/ R.H. Heath _________________________________ Title: Attorney in Fact ______________________________ DADE CHEMISTRY SYSTEMS INC. By:/s/ John Connaughton __________________________________ Title: Vice President and Assistant Secretary _______________________________________ - 10 - EX-10.8 13 MANAGEMENT SERVICES AGREEMENT EXHIBIT 10.8 AMENDMENT NO. 1 TO MANAGEMENT SERVICES AGREEMENT ----------------------------- THIS AMENDMENT is made as of May 7, 1996, by and between Dade International Inc., a Delaware corporation (the "Company"), and Bain Capital, Inc., a Delaware ------- corporation ("Bain"). ---- The Company and Bain are parties to a Management Services Agreement, dated as of December 20, 1994 (the "Agreement"). The Company and Bain have agreed to --------- amend the Agreement in the manner set forth herein. Capitalized terms used herein but not otherwise defined have the meanings set forth in the Agreement. The parties hereto agree as follows: 1. Amendment. Section 3 of the Agreement is hereby amended by deleting --------- "$1.7 million" from such Section and replacing it with "$2.75 million." 2. Miscellaneous. Except as amended hereby, the Agreement shall remain ------------- in full force and effect. This Amendment shall be construed in accordance with the internal laws of the State of New York, without reference to its conflict of law provisions. This Amendment may be executed in two or more counterparts, each of which shall be an original, but all of which together shall constitute one and the same instrument. * * * IN WITNESS WHEREOF, the parties have executed this Amendment as of the date first written above. DADE INTERNATIONAL INC. /s/ Scott Garrett By:_________________________________ President and Chief Executive Officer Its:______________________________________ BAIN CAPITAL, INC. /s/ Stephen Pagliuca By:_________________________________ Managing Director Its:________________________________ EX-10.11 14 AMENDED & RESTATED EXCLUSIVE DIST. AGT. EXHIBIT 10.11 EXECUTION COPY AMENDED AND RESTATED EXCLUSIVE DISTRIBUTION AGREEMENT This EXCLUSIVE DISTRIBUTION AGREEMENT, dated as of December 19, 1994, as amended and restated in its entirety as of September 15, 1995, by and between DADE INTERNATIONAL INC., a Delaware corporation with its principal offices at 1717 Deerfield Road, Deerfield, Illinois 60015, hereinafter called the "Supplier" or "Dade", and BAXTER HEALTHCARE CORPORATION, a Delaware corporation with its principal offices at One Baxter Parkway, Deerfield, Illinois 60015, hereinafter called the "Distributor". RECITALS -------- 1. Distributor's parent, Baxter International Inc. ("Baxter") and Diagnostics Holding, Inc., a Delaware corporation ("Purchaser") have entered into a Purchase Agreement dated as of October 1, 1994, as amended (the "Purchase Agreement") pursuant to which Purchaser acquired from Baxter all of the outstanding shares of common stock of Supplier. 2. Supplier is a corporation formed to engage in the "Business" as defined in the Purchase Agreement and desires to distribute its products in the United States through Distributor. Distributor is experienced in the distribution of products in the health care industry and employs skilled personnel and maintains facilities for these purposes. Distributor is willing to distribute Supplier's products. 3. Distributor and VWR Scientific Products Corporation ("VWR"), are parties to an Asset Purchase Agreement dated May 24, 1995, as amended from time to time (the "VWR Purchase Agreement") pursuant to which VWR purchased Distributor's industrial distribution business, and undertook employment of various personnel and performance of certain of Distributor's obligations associated therewith. 4. Dade and VWR are parties to certain distribution agreements dated as of September 15, 1995, pursuant to which VWR distributes Dade's and its subsidiaries' products to industrial customers in, among other territories, the United States (the "VWR Distribution Agreements"). 5. Supplier, Distributor and VWR are parties to an Interim Agreement dated as of September 14, 1995, concerning the distribution of Dade's and its subsidiaries' products by VWR (the "Interim Agreement"), and which provided for the negotiation of the VWR Distribution Agreements and the amendment of this Agreement. 6. Distributor and Dade desire to amend and restate this Agreement in its entirety to reflect the VWR Purchase Agreement and the VWR Distribution Agreements. 7. Distributor and Dade acknowledge that there are various issues in dispute between Distributor and Dade and agree that the execution of the amendment and restatement of this Agreement shall not be deemed to have any effect upon the positions of the parties regarding the proper interpretation of the language contained herein. 8. Dade and Intracel Corporation ("Intracel") are parties to a Stock Purchase Agreement, dated as of November 16, 1995 (the "Bartels Stock Purchase Agreement"), pursuant to which Intracel purchased all of the outstanding shares of common stock of Bartels, Inc. ("Bartels"). In connection with the Bartels Stock Purchase Agreement, Dade has assigned its rights, duties and obligations under this Agreement (as in effect prior to the amendment and restatement effected hereby) to Intracel and Bartels with respect to the Bartels class of products (the "Bartels Assignment and Assumption"). This Amended and Restated Exclusive Distribution Agreement does not purport to affect the rights or obligations of any of the original parties to this Agreement with respect to the Bartels class of products, which rights and obligations shall continue to be governed by the terms of this Agreement without regard to the amendments included in this Amendment and Restatement. Accordingly, effective November 21, 1995, the term "Products" as used in this Amendment and Restatement shall exclude the Bartels class of products (and therefore have been omitted herefrom). The parties acknowledge that Dade and Distributor are not in agreement as to whether Dade was relieved of its obligations under the original Agreement with respect to the Bartels class of products as a result of the Bartels Assignment and Assumption. Nothing contained in this Amendment and Restatement shall affect such dispute or the interpretation of the original Agreement with respect thereto. AGREEMENT --------- In consideration of the mutual covenants contained herein, and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, Supplier and Distributor agree that this Agreement is amended and restated as follows: 1. Definitions. ----------- "Affiliate" shall mean any person, firm or corporation controlling, controlled by or under direct or indirect common control with a party hereto. For the purpose of this definition, the term "control" means the power to direct the management or policies of a party, 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. "Baxter Industrial Customers" means those Industrial Customers described on Exhibit B-2 to the extent that such customers are not being served ----------- by VWR pursuant to the VWR Distribution Agreements. "Exclusive Territory" shall mean the United States. "Products" shall mean the products of Supplier listed by Supplier's catalog number in Exhibit A, and all other products manufactured or sold by --------- Supplier after the date hereof which do not constitute "New Products" hereunder. Products shall include, without limitation: (i) all accessories for, modifications of, improvements of, substitutes for, or line extensions of the products identified in the first sentence of this definition; (ii) any kit or other combination of items that includes one or more of such products; (iii) any product identified in Section IV of Exhibit A which is being developed by or for --------- the business of Supplier but not yet sold as of the date hereof; or (iv) any such product which is offered for sale in a size or form of packaging that is different from the size or form in which it was offered for sale initially. Products shall not include components or spare parts necessary for the repair or refurbishment of Instruments. For the purposes of this Agreement, "classes of Products" shall be those separate classes identified in Section I of Exhibit A. "New Products" shall mean products which have uses or applications different from the uses or applications of the Products in existence on the date of this Agreement or at any time thereafter. By way of illustration only, a hematology system would be considered a "New Product" and would not, for example, be considered a line extension of hemostasis. "Industrial Customers" shall mean customers who purchase Products for use in, or resale to, laboratories, production plants, and other facilities (in all cases not involved in the care of human patients or the diagnosis of disease or defect for the purpose of care of human patients), including, without limitation, analytical research and development laboratories, educational institutions, environmental testing laboratories, clean room facilities, biotechnology and pharmaceutical research and production facilities, medical device manufacturers, electronic and semiconductor manufacturers, and government research facilities. "Instruments" shall mean the analytical instruments included among the Products. "Term" shall mean the period of time specified in Section 3 hereof, including any and all renewals thereof. 2. Distribution Rights. ------------------- (a) Supplier hereby grants to Distributor the exclusive right to sell the Products throughout the Exclusive Territory, subject to the following conditions and limitations: (1) During the Term of this Agreement, Supplier shall distribute Products within the Exclusive Territory only through Distributor pursuant to this Agreement; provided, however, that nothing in this Agreement shall prohibit -------- ------- Supplier from: (i) continuing to directly sell, solicit orders for or otherwise distribute those products it presently distributes that are identified on Exhibit B; (ii) continuing to distribute the Products within the Exclusive - --------- Territory only for export outside the Exclusive Territory provided that such distributors shall include only those distributors listed on Exhibit G and such --------- other distributors identified by Supplier to Distributor and provided further that Supplier uses reasonable efforts to include in its agreements entered into after the date of this Agreement with such persons exporting such Products a provision that, so long as this Agreement is in effect, such distributors will not distribute the Products in the Exclusive Territory; or (iii) distributing Products to Industrial Customers (other than to Industrial Customers of the type described on Exhibit B-2, as to which Distributor and VWR have a co-exclusive ----------- right to distribute the Products). Other than as provided in the parenthetical of the immediately preceding clause (iii), Distributor shall not have the right to distribute Products to Industrial Customers. During the period during which Distributor is performing purchasing, warehousing and invoicing services to VWR pursuant to the transition services arrangements entered into between Baxter and VWR in connection with the VWR Purchase Agreement (but in no event later than the second anniversary hereof (the "Interim Period")), Distributor shall have the right to distribute Products to VWR pursuant to such arrangements. (2) Subject to the other provisions of this Agreement, Supplier may not sell, solicit orders for or otherwise distribute the Products within the Exclusive Territory, other than through Distributor under the terms of this Agreement, without the prior written consent of Distributor. Distributor's consent will not be unreasonably withheld. In determining whether to give its consent, Distributor will give due consideration to the presence or absence of the following factors: (i) whether the Product is customized to meet the specifications of a particular customer; (ii) whether the Product is to be used solely by the customer or resold by the customer; (iii) if the Product is to be resold, whether it is an OEM product bearing the customer's trademark; (iv) whether the proposed sale of the Product to any customer is substantial in relation to the prior purchases of the same Product by such customer from Distributor; (v) whether the Product is to be delivered for use in a clinical laboratory; (vi) whether the Product is to be packaged in a form not normally carried by Distributor or delivered in a manner not normally utilized by Distributor; and (vii) whether the sale of the product will materially adversely affect Distributor's sale of Products hereunder. (3) Under no circumstances shall Distributor have any obligation to purchase any minimum quantity of Products or class of Products. (b) Distributor hereby accepts such grant, subject to the following conditions and limitations: (1) During the Term of this Agreement, except as expressly provided pursuant to the transition services arrangements (as in effect as of September 15, 1995) between Distributor and VWR pursuant to the VWR Purchase Agreement, neither Distributor nor any of its Affiliates shall, directly or indirectly: (i) manufacture, sell, lease, solicit orders for or otherwise distribute in the Exclusive Territory any product that is competitive with any of the Products; or (ii) operate, manage, advise, or otherwise assist in any manner (in each case, either alone or in association with any other person) any person in the manufacture, leasing or sale within the Exclusive Territory of products that are competitive with the Products; (iii) purchase more than a ten percent (10%) interest in a company whose annual gross revenues from the manufacture, lease or sale in the Exclusive Territory of products competitive with Products exceeds fifty million dollars ($50,000,000); or (iv) own more than a ten percent (10%) equity interest in a company whose annual gross revenues from the manufacture, lease or sale in the Exclusive Territory of products competitive with Products exceeds an amount equal to fifty million dollars ($50,000,000) times a fraction (A) the numerator of which is the value of the consumer price index for medical products in effect on the most recent month for which such index is available at the time of the acquisition of such interest and (B) the denominator of which is the value of such index as of December 14, 1994. Notwithstanding the foregoing: (x) nothing in this Agreement shall prohibit Distributor or any of its Affiliates from continuing to sell, solicit orders for or otherwise distribute the products referred to on Exhibit C --------- hereto, which Distributor is selling, soliciting orders for or otherwise distributing as of the date hereof and which are competitive with the Products; and (y) Distributor may purchase, store and sell competitive products not normally carried for non-Valuelink customers to customers as a part of the Valuelink program; provided Distributor does not: (i) advertise or promote the -------- sale to a Valuelink customer of any such competitive product; (ii) pay any commission to its sales representative having responsibility with respect to such sale; and (iii) receive from the vendor of the competitive product a margin and/or fees greater than Distributor's best reasonable estimate of its variable costs for handling such product. For the purposes of this Agreement, the Valuelink program shall be understood to be that program administered under a separate service contract that displaces the "General Stores" inventory through provision of a broad range of medical/surgical and laboratory products utilizing just-in-time deliveries in low-unit-of-measure quantities. (2) Distributor may distribute Products hereunder through sub- distributors provided the dollar volume of Products sold to sub-distributors in -------- any year does not exceed twenty percent (20%) of the dollar volume of all Products sold by Distributor in the year. (3) Except as may be agreed otherwise in writing by the parties, neither Distributor nor any of its Affiliates or sub-distributors shall directly or indirectly sell, solicit orders for or otherwise distribute to any customer located outside of the Exclusive Territory, any Product purchased by Distributor hereunder. (4) Neither Distributor nor any of its Affiliates shall grant, or cause any of its subdistributors to grant, any warranty or similar right with respect to the Products that is different from or additional to the warranty set forth in Section 6(s), or enter into any service contract on behalf of Supplier utilizing any form not approved by Supplier, without the prior written consent of Supplier. To the extent Distributor or any of its Affiliates or subdistributors grants, or is deemed to have granted, any such warranty or right, or enters into any such service contract, Distributor shall be solely responsible therefor, it being understood that the purpose of this sentence is to allocate responsibility between Distributor and Supplier and not with respect to any other party. (c) New Products may be added to this Agreement and Products may be deleted from this Agreement only by mutual written agreement of the parties; provided Distributor shall add coagulation instruments offered by Supplier as a - -------- replacement for the MLA Instruments if Distributor is offered a gross profit margin of 15% on such coagulation instruments. Notwithstanding the foregoing, Supplier may, upon giving ten (10) days written notice to Distributor delete from Exhibit A and this Agreement any Product, the manufacture and sale of which --------- has been generally discontinued by Supplier in the Exclusive Territory. Supplier shall consult with Distributor in connection with the selection or development of a substitute for any generally discontinued Product. If Supplier generally discontinues selling any class of Instruments utilizing captive reagent systems (other than Stratus or Paramax Instruments), Distributor may thereafter sell, solicit orders for or otherwise distribute instruments and reagent systems of a competitive manufacturer. (d) Notwithstanding the foregoing provisions of this Section 2, this Agreement shall not prohibit: (i) Supplier from distributing Products within the Exclusive Territory otherwise than through Distributor to the extent and during the time that Distributor shall be unable to so distribute Products because of any matter referred to in Section 10 or because Distributor is otherwise prohibited legally from selling Products to any customer or class of customer; (ii) Supplier from distributing Products to Industrial Customers within or outside the Exclusive Territory after September 15, 1995 (it being understood that Distributor and VWR have a co-exclusive right to distribute Products to Industrial Customers of the type described on Exhibit B-2 and Supplier shall not ----------- have the right to distribute Products to such customers); (iii) Distributor or its Affiliates from distributing Products that are competitive with the Products within the Exclusive Territory to the extent and during the time that Supplier shall be unable to deliver Products to Distributor because of any matter referred to in Section 10 or because Supplier is otherwise prohibited legally from selling Products to Distributor; (iv) Distributor or its Affiliates from selling, soliciting orders for or otherwise distributing anywhere in the world products that are not competitive with the Products; or (v) Distributor or its Affiliates from selling, soliciting orders for or otherwise distributing outside the Exclusive Territory products that are competitive with the Products, except as may be provided otherwise in the Purchase Agreement. (e) In the event Supplier terminates this Agreement with respect to any Products pursuant to Section 8(c)(ii) hereof, subsection 2(b)(1) shall be of no further force or effect with respect to such terminated Products from and after the earlier to occur of: (i) the six-month anniversary of the effective date of such Product termination and (ii) the expiration of the term of this Agreement (as used in this subsection 2(e), the earlier of clauses (i) or (ii) shall be deemed to be the "Termination Date"). From the effective date of such Product termination through the Termination Date, Supplier shall sell such terminated Products to Distributor on a non-exclusive basis and otherwise in accordance with the terms of this Agreement. Thereafter, Supplier shall have no obligation to sell such terminated Products to Distributor except as set forth in Section 9(a) or Section 9(b). (f) In the event Distributor terminates this Agreement with respect to any Products pursuant to Section 8(c)(i) or 8(d) hereof, subsection 2(b)(1) shall be of no further force or effect with respect to such terminated Products from and after the earlier to occur of (i) the twelve-month anniversary of the effective date of such Product termination and (ii) the expiration of the Term of this Agreement (as used in this subsection 2(f), the earlier of clauses (i) and (ii) shall be deemed to be the "Termination Date"). From the effective date of such Product termination through the Termination Date, Supplier shall sell such terminated Products to Distributor on a non-exclusive basis and otherwise in accordance with the terms of this Agreement. Thereafter, Supplier shall have no obligation to sell such terminated Products to Distributor except as set forth in Section 9(a) or Section 9(b). (g) If, at the time of enforcement of any provision of this Section 2, a court shall hold that the duration or scope of such provision is unreasonable under circumstances then existing, Supplier and Distributor agree that the maximum duration or scope reasonable under such circumstances shall be substituted for the stated duration or scope. (h) Supplier and Distributor each recognize and affirm that in the event of a material breach of any of the non-competition provisions of this Section 2, money damages would be inadequate and the damaged party would have no adequate remedy at law. Accordingly, Supplier and Distributor each agree that the damaged party shall have the right, in addition to any other rights and remedies existing in its favor, to enforce its rights and the breaching party's obligations not only by an action or actions for damages, but also by an action or actions for specific performance, injunction and/or other equitable relief in order to enforce or prevent any violations (whether anticipatory, continuing or future) of the non-competition provisions of this Section 2. 3. Term and Renewal. ---------------- The initial term of this Agreement shall begin on the date of this Agreement and end on December 31, 1999; provided that the Term of this Agreement -------- shall be automatically renewed for an additional two (2) year term, and thereafter for additional and successive terms of one (1) year each, unless and until such initial or additional term is terminated as provided in Section 8 of this Agreement. References in this Agreement to "the date of this Agreement" or words of similar import shall be deemed to mean December 16, 1994. The amendment and restatement of this Agreement embodied herein shall be deemed effective as of September 15, 1995. 4. Prices. ------ (a) The pricing provisions for all Products are set forth in Sections 4(a) through 4(d) herein. From the date of this Agreement, the initial invoice price for each Product sold by Supplier to Distributor shall be determined by Supplier. Supplier may increase or decrease the initial invoice price of any Product effective on the first day of any calendar year after 1995 by giving written notice to Distributor at least ninety (90) days prior to the effective date of the change, except Supplier may change the initial invoice price with respect to the Burdick & Jackson class of Products at the time of the execution of the amendment and restatement contemplated hereby. Supplier shall honor Distributor's purchase orders received by Supplier prior to the effective date of the price change and sell Products at the prices in effect when such orders were placed; provided any orders placed by Distributor during such ninety (90) -------- day period do not exceed one hundred ten percent (110%) of the orders placed for such Products during the three (3) month period immediately preceding the date of the notice, unless Supplier offers Distributor a volume purchase incentive during the ninety (90) day period in which case the foregoing limit shall not apply. (b) Under the Vendor Rebate system, and subject to the provisions of Section 4(b)(6), Distributor shall be entitled to receive from the sale of Products the guaranteed gross profit margins set forth in Exhibit A for each --------- class of Products, and the price paid by Distributor shall be determined from the "Actual Selling Price." It is anticipated that the "Actual Selling Price" minus the initial invoice price for each Product will produce a difference greater or less than the guaranteed gross profit margin (stated in dollars) for the Product. For the purposes of this Section 4, the "Actual Selling Price" shall be the price (excluding taxes and other add-on charges) actually charged to the customer in the case of a Product sold by Distributor, or the price used to determine the lease payments in the case of a Product leased by Distributor to a customer. If that difference is less than the guaranteed gross profit margin (stated in dollars), Distributor will be entitled to a rebate from Supplier. If that difference is greater than the guaranteed gross profit margin (stated in dollars), Supplier will be entitled to an additional payment from Distributor. The rebates due Distributor and additional payments due Supplier will be calculated in the following manner for each transaction: (1) If the difference is less than or equal to the guaranteed gross profit margin (stated in dollars), the amount of the rebate shall be equal to the difference between: (i) the invoice price; and (ii) the product of the Actual Selling Price times the difference between 1.0 and the guaranteed gross profit margin for the Product, as indicated in the following formula: Invoice | Actual ( Guaranteed )| Rebate = - | Selling X ( 1.0 - Gross Profit )| Price | Price ( Margin )| (2) If that difference is greater than the guaranteed gross profit margin (stated in dollars), the additional payment due Supplier shall be equal to the difference between: (i) the product of the Actual Selling Price times the difference between 1.0 and the guaranteed gross profit margin for the Product; and (ii) the invoice price, as indicated in the following formula: Additional | Actual ( Guaranteed )| Invoice Payment = | Selling X ( 1.0 - Gross Profit )| - Price | Price ( Margin )| For the purposes of the above formulas, the guaranteed gross profit margin shall be stated as a decimal. (3) Within ten (10) days after the end of each month, Distributor shall provide to Supplier a report identifying the Products in each class sold by Distributor during the month. This report will show total rebates due Distributor and additional payments due Supplier with respect to all sales of each class of Products by customer. The rebates and additional payments will be netted against each other, and an amount owed to or to be paid by Distributor shall be determined. (4) Distributor shall be entitled to its full gross profit margin with respect to any Products in inventory on the effective date of this Agreement, including inventory that has been paid for by Distributor and shipped by Supplier, but that has not yet been received by Distributor. (5) With respect to intracompany transfers of Products by Distributor to its Affiliates which shall be for such Affiliates' own use and not for resale to any non-Affiliate, the "Actual Selling Price" of such Products at the time of the transfer shall be deemed to be the Average Selling Price realized by Distributor on sales to customers for the calendar year immediately preceding. (6) If due to market conditions or otherwise, Distributor determines that it needs to price a Product to a customer at an Actual Selling Price that will produce a gross profit margin less than the guaranteed gross profit margin for the Product at the initial invoice price then in effect, Distributor may request that Supplier pay a rebate under the formula set forth in Section 4(b)(1) sufficient to yield the guaranteed gross profit margin. Approval of any such rebate must be obtained from Supplier in advance of Distributor's execution of a pricing agreement with a customer; provided that with regard to pricing -------- agreements in effect between Distributor and its customers for such Products as of the date of this Agreement, Supplier hereby agrees that the price to Distributor for all Products resold under such agreements shall be equal to the agreement price in effect on the date of this Agreement, less the guaranteed gross profit margin times that price. Unless Supplier agrees in writing to lower the price to Distributor, that price to Distributor will remain firm throughout the term of Distributor's agreement with each customer even if Distributor agrees to lower the price to such customer. (7) If MLA's price to Supplier for MLA disposables is higher than list price multiplied by .85, the parties will negotiate in good faith to determine how the parties will share the losses incurred in connection with the distribution of such MLA disposables to such customers. (c) Supplier agrees to provide Distributor a rebate advance calculated for each class of Products that Distributor stocks. The amount of the rebate advance will equal Distributor's inventory value for the class of Products at month end minus Distributor's account payable to Supplier for that class of Products at month end, multiplied by the average rebate percentage for that class of Products. (No advance will be due if the result is a negative number.) The average rebate percentage for a Product class will equal the total net rebates requested for the prior calendar quarter (rebates requested minus additional amounts owed, if any), divided by the sum of Distributor's cost of sales of such class for the quarter plus the total net rebates requested. The first such calculation will be made sixty (60) days after the parties convert from the use of the Top-to-Bottom approach to the Vendor Rebate approach, and will be reviewed at the beginning of each subsequent calendar quarter and adjusted as necessary based upon the rebate experience for the quarter just ended. (d) The invoice prices to Distributor for all Products under this Agreement shall not include any transportation charges, state sales taxes, or any other sales, use, inventory, delivery, value added or like taxes of any federal, state or local government, however imposed. Except for samples of Products provided by Supplier to customers or Instruments that are the subject of operating leases between Supplier and customers, Distributor shall be responsible for all such charges and taxes and shall pay Supplier any and all taxes which Supplier is required to collect or pay with respect to the sale, lease, distribution or use of Products under this Agreement. The Supplier shall own and be responsible for paying property taxes on all operating leases (including Instruments leased to customers under operating leases) that Supplier carries as fixed assets. 5. Distributor's Duties. -------------------- Distributor shall: (a) Continue to supply Products to existing customers (other than Industrial Customers after September 15, 1995 that are not Baxter Industrial Customers) of the Business in the Exclusive Territory pursuant to all contracts, commitments or other arrangements in effect as of the date of commencement of distribution activities under this Agreement. In connection therewith, Distributor shall be responsible for: (i) purchasing all Instruments that are leased to customers under capital equipment leases and assuming rights and obligations under such leases (except that Distributor may assign such leases to a third party leasing company); (ii) paying all rebates to customers with respect to Products pursuant to "Corporate Program" rebate agreements in effect on the commencement of distribution activities under this Agreement; and (iii) paying all other rebates and administrative fees owed under existing agreements with the group purchasing organizations or multi-hospital systems identified in Exhibit D; provided --------- -------- Distributor shall be entitled to charge back to Supplier the rebates and administrative fees set forth in Exhibit D for such programs. --------- (b) Submit orders for Products on Distributor's standard purchase order form or other means utilized by Distributor prior to the commencement of distribution activities hereunder, or through such other form or means as may be mutually agreed to in writing by the parties prior to its use; provided, -------- however, that unless agreed in writing to the contrary, no provision of - ------- Distributor's standard purchase order form, Supplier's acknowledgment or invoice forms, or other forms of either party shall have any effect. (c) Deliver payment via electronic funds transfer (or wire transfer if electronic funds transfer is not available) for orders of Products (other than Products included in single lot QAP inventory programs) and other amounts due under this Agreement so that such funds are available to Supplier at the close of business on the 15th of each month, or the first business day thereafter if the 15th is not a business day, for any invoices issued during the prior month and any supplemental invoices covering such month. The payment period for the purposes of the preceding sentence shall begin on the date of Supplier's invoice. With respect to the Products included in the single lot QAP inventory programs, the payment terms to Supplier shall be set to match the Distributor's Inventory Days on Hand (DIOH). At the commencement of this Agreement the payment terms for QAP Products shall be set at two hundred fifty- six (256) days. The foregoing two hundred fifty-six (256) day period shall be reviewed on June 30, 1995 and on each six-month anniversary occurring thereafter and adjusted based on the previous twelve month's average monthly DIOH. For the purposes of this Section 5(c), Distributor's QAP inventory shall be valued at the initial invoice price with respect to Products purchased under Section 4(b). A single lot QAP inventory program shall be any single lot of control Products purchased for a specific customer and maintained in inventory by Distributor in order to meet customer requirements for maintaining consistent manufacturing lot usage. Distributor shall pay interest to Supplier on any overdue payment under this Agreement at a rate per annum equal to the prime rate of interest published from time-to-time by the Wall Street Journal. ------------------- (d) Whenever feasible, consult with Supplier in the modification and improvement of Products and the development of New Products. (e) Actively advertise, promote and distribute the Products to an extent no less reasonably favorable to the Products in comparison with other products purchased for resale by Distributor (as determined as of the date of this Agreement), by methods which in Distributor's reasonable judgment are suited for the marketing of such Products, including, but not limited to, the following: (1) Promptly respond to customer requests for Product information. (2) Refer customers to Supplier's "800" hotline telephone service in response to inquiries from customers concerning the use and routine maintenance of Products and field service for repair or replacement of Products. (3) Accept returns of Products and deliver replacement of Products when and as reasonably requested by customers, including without limitation, reagents and other dated products included within the Products whose useful life has expired. Distributor's obligation to accept the return of an Instrument shall be subject to the provisions of Section 6(h). The cost of a return or replacement shall be paid by Supplier if the return or replacement is necessary due to Supplier's failure to deliver Products in accordance with its obligations to the customer or, as set forth in Section 6(p) or otherwise, to Distributor, or when otherwise agreed to by Supplier or its representatives. (4) Promptly and courteously resolve billing disputes with Supplier or customers. (5) When required by customers, provide single lot storage in excess of thirty (30) days of those reagents and control materials included in the single lot catalog numbers included in vendor codes FL and FM. (6) Coordinate the ordering of capital equipment Products with the installation of such Products, the ordering and installation of related ancillary equipment and any other processing necessary to complete such orders in each case in a timely manner consistent with past practice. (7) Promote the sale of service contracts for Instruments, such contracts to be entered into directly between Supplier and customers with Distributor acting as Supplier's agent for the purposes of executing such contracts on Supplier's behalf. Distributor shall be authorized to enter into such contracts for Supplier utilizing only the standard form of contract approved by Supplier and at no less than eighty percent (80%) of the list price established by Supplier therefor, unless another form or price is approved in advance and in writing by Supplier. Distributor shall be responsible for billing, collecting and remitting to Supplier all amounts due under such contracts. Distributor shall receive a fee for these services equal to one percent (1%) of all sums collected. Supplier shall assume the credit risk on all such contracts and shall be responsible for any collection efforts on overdue accounts. On accounts due for 120 days or more, and upon Distributor's request, Supplier shall forward to Distributor the outstanding overdue amounts. (8) Continue to administer the single lot program with respect to Products in the same manner and to the same extent as that program is conducted immediately prior to the commencement of distribution activities under this Agreement. If at any time Supplier is dissatisfied with the services provided by Distributor under this program, Supplier shall notify Distributor, and thereafter the parties shall meet to discuss Supplier's concerns and to develop a mutually agreed plan to address those concerns. The parties will follow the procedures or undertake other actions required by the agreed plan. Notwithstanding the foregoing, Supplier shall have the option to assume responsibility for the administration, stocking, and physical distribution of all single lot inventory programs for Products. If Supplier exercises this option (by delivery of written notice) on or before September 30, 1995, for each full year Supplier assumes responsibility for the single lot Program, Supplier shall receive a prepaid annual rebate of seven hundred sixty thousand dollars ($760,000), provided that such amount shall be prorated for partial years. If -------- Supplier exercises this option (by delivery of written notice) after September 30, 1995, for each full calendar year Supplier assumes responsibility for the single lot Program, Supplier will receive a prepaid annual rebate equal to forty thousand dollars ($40,000) times the number of persons who spent more than ninety percent (90%) of their time performing Distributor's single lot coordination function for the Dade class of Products, and whose positions will be eliminated as a result of Supplier's exercise of the option. Supplier will reimburse Distributor for all of Distributor's severance expenses arising out of the termination of Distributor's single lot coordinators solely as a result of the transfer, at any time, of these responsibilities to Supplier. Such reimbursement will be based on Distributor's employee severance program then in effect. Supplier will assume responsibility six (6) months after exercising the option. During the six (6) month period between Supplier's notice and assumption of responsibility, Supplier and Distributor will develop a plan for transition to Supplier's centralized management and stocking system. If during the Term of this Agreement, Supplier terminates this Agreement with respect to the Dade class of Products, Distributor shall no longer owe any such prepaid annual rebate. (9) Include Products in Distributor's catalogs and other promotional materials in such form and manner as Distributor deems reasonably appropriate. (10) Display Products in certain trade shows under the terms set forth in Exhibit E, and at such other trade shows and Distributor's national and regional - --------- sales meetings in such form and manner as Distributor deems reasonably appropriate. (11) Share with Supplier information in Distributor's possession about the Products and their ability to compete in the Exclusive Territory and to meet customers' needs. (12) Continue to offer and administer the "Advantage Now" ("Ad Now") program offered by Supplier's predecessor and Distributor during 1993, or such substitute program therefor as Distributor deems appropriate in order to respond to generally prevailing market conditions. (13) Continue to include Products in Distributor's "Corporate Rebate Program" for its manufactured products, to the extent such program is offered to Distributor's customers. Distributor shall pay any rebates due customers under agreements entered into with respect to such program. (14) Distributor shall pay rebates and national administrative fees, and be permitted to charge back to Supplier such rebates and fees, owed under agreements with group purchasing organizations and multi-hospital systems entered into by Distributor after the date of this Agreement, provided Supplier -------- approves the inclusion of Products and payment of rebates thereunder before Distributor enters into any such agreement. Notwithstanding the foregoing after September 15, 1995 Distributor shall have no obligations under this Section 5(e) with respect to Industrial Customers, except that Distributor shall promote and distribute the Products to the Baxter Industrial Customers existing at September 15, 1995 or that become customers of Distributor from time to time thereafter (so long as such customers are of the type described on Exhibit B-2) ----------- to the extent reasonably necessary to service and retain such customers in accordance with historical practices (it being understood that Distributor shall not be required to publish separate catalogs or other promotional materials or undertake any other action directed at marketing the Products solely to Industrial Customers). (f) Use Supplier's trademarks and trade names only in connection with the Products and subject to the terms of this Agreement, including but not limited to Section 7 hereof. (g) Cooperate with Supplier in providing annual and "as required" training with respect to the Products for Distributor's sales representatives and members of its multihospital/group selling organization and its account management organization. (h) Stock inventories of the Products that are listed in Exhibit A as --------- required to be stocked by Distributor at such locations and in sufficient quantities in order to provide service levels at least equal to the service levels achieved immediately prior to the commencement of distribution activities under this Agreement as determined on a monthly basis. Either party's obligation to provide any other level of service shall be subject to mutual agreement of the parties. (i) Store Products only in a manner consistent with applicable manufacturer's specifications in order to prevent damage to or deterioration of Products. (j) Give Supplier ten (10) days written notice of any and all proposed returns of Products to Supplier. Distributor shall not return any Products to Supplier without Supplier's prior written approval. Distributor shall use reasonable efforts to resell any returned Instrument that has been refurbished by Supplier to like-new condition. The price to Distributor of any returned Instrument shall be equal to the amount credited to Distributor with respect to such Instrument under Section 6(h) plus Supplier's cost of refurbishment. (k) Develop and periodically update a target customer list identifying qualified prospective purchasers of instrument systems included in the Products. (l) Except as otherwise provided herein, Distributor shall offer to its personnel such incentives and compensation programs as Distributor deems reasonably appropriate. (1) For the period beginning from the date of execution of this Agreement through December 31, 1994, Distributor shall offer those incentives and compensation programs identified in Exhibit F. --------- (2) Beginning on January 1, 1995 and continuing throughout the Term of this Agreement, Distributor shall pay commissions to its "Distribution Representatives" equal to two percent (2%) of Distributor's guaranteed gross profit margin from the sale of Products. For the purposes of this Section 5(l)(2), the term "Distribution Representative" shall be a sales representative of Distributor who is primarily responsible for, and whose compensation is primarily based upon, providing efficient and effective distribution services to hospitals, research institutions and reference laboratories (other than sales representatives who make direct sales to hospitals through Distributor's telemarketing system). In addition, Supplier may request Distributor to pay to its Distribution Representatives and telemarketing sales representatives up to three million three hundred thousand dollars ($3,300,000) in additional annual compensation with respect to sales of Products. Such additional compensation may consist of commissions, Instrument spiffs, bonuses or other incentives. The terms of any such program shall be specified by Supplier and implemented by the agreement of Distributor, which agreement will not be unreasonably withheld. Supplier shall reimburse Distributor for the excess of any such additional compensation paid in a year over the annual allowance for the year provided to Supplier under the Purchase Agreement. Supplier shall make its request for any such additional compensation program at least ninety (90) days prior to the beginning of any year in which such program is to be implemented, except that for 1995, such request will have been made, if at all, under the terms of the Purchase Agreement. If Supplier provides any such additional compensation, one million dollars ($1 million) of such additional compensation (or the total amount if less than one million dollars ($1 million) is to be provided) shall be budgeted for an incentive or incentives, and the structure and rates for such incentive or incentives shall remain constant during the year. Supplier shall provide as much information as is reasonably possible about the structure, rates, and timing of its plans for additional incentives utilizing the amount of budgeted additional compensation in excess of one million dollars ($1 million), provided that the provision of such information shall not limit Supplier's right - -------- to modify such additional incentives. The purpose of the incentive compensation program for Products described in this subsection (including the three million three hundred thousand dollars ($3.3 million) in additional annual compensation) is to establish an incentive compensation program that is relatively favorable to the Products as compared to other incentive compensation programs for other emphasis products distributed by Distributor. During the Term, if any change is made to Distributor's incentive compensation programs for other emphasis products that results in an adverse change in the relatively favorable status of the incentive compensation program for the Products (including, without limitation, changes in compensation rates or changes in participation eligibility), then Supplier and Distributor shall negotiate in good faith to restructure the incentive compensation program for Products in order to restore such relatively favorable status. For purposes of this paragraph, incentive compensation programs shall include any compensation or other benefits directly or indirectly offered by third parties including, without limitation, travel and vacation award programs. (m) Obtain and maintain for one (1) year following the expiration or termination of this Agreement, product liability insurance (containing either a vendor's endorsement or contractual liability coverage referencing the indemnification provisions contained in Section 5(q) hereof) on all Products with insurers reasonably satisfactory to Supplier with minimum limits of $1,000,000/$3,000,000 for bodily injury and $300,000 for property damage and immediately furnish to Supplier a certificate of insurance issued by the insurance carrier evidencing the foregoing endorsements, coverages and limits and that such insurance shall not be cancelable without at least fifteen (15) days prior written notice to Supplier; provided, however, that Distributor may -------- ------- satisfy its obligations under this Section 5(m) through its self-insurance program. (n) Comply (or cause compliance) in all material respects with all existing and future federal, state or other laws and regulations applicable to the conduct of Distributor's business or the possession, use and sale to its customers of Products pursuant to this Agreement, including, but not limited to, the following: (1) Give prompt written notice to Supplier if Distributor should become aware of any defect or condition (actual or alleged) which may alter the quality of the Products in any material respect or may render any of the Products in violation in any material respect of any applicable federal, state or other law or regulation, including, but not limited to, any violation which would reasonably likely require any alteration of the specifications of any Product, affect the sale of any Product, cause revocation of any federal, state or other regulatory approval with respect to any Product or its sale hereunder or give rise to a claim against Supplier by any person. (2) Make prompt return of any and all Products affected by holds or recalls, if so requested by Supplier. (3) Not alter, remove or otherwise modify the packaging, labeling or product insert sheets furnished by Supplier for the Products. (4) Keep appropriate records of all lot coded Products other than Instruments and serial numbered Instruments distributed to customers. (o) On or before the fifteenth (15) day after the end of each month of the Term, provide Supplier with a sales trace file in a format to be mutually agreed upon, including, but not limited to, information by customer with respect to all invoices and credits issued to such customer. Supplier shall pay an annual fee of one hundred fifteen thousand dollars ($115,000) for these files. Provide to Supplier sales reports and such other information as Distributor generates in the ordinary course of business immediately prior to the commencement of distribution activities under this Agreement (other than any such reports or information with respect to Industrial Customers that are not Baxter Industrial Customers); provided, the format of such reports may be -------- changed from time to time by Distributor so long as any such change is implemented by Distributor in the ordinary course of business and generally applicable to other product lines distributed by Distributor; and provided -------- further, the content of such reports may be changed with the consent of - ------- Supplier, which consent will not be unreasonably withheld. (p) Provide Supplier's personnel with reasonably adequate office, product service and parts warehouse space and related office support at Distributor's facilities; provided that, unless otherwise agreed to by Supplier -------- and Distributor, Supplier shall reimburse Distributor for the direct costs to Distributor of such space and support except that Supplier shall not be charged for non-exclusive use of common areas or any overhead costs. Such costs are currently one thousand dollars ($1000) per month per single office and related copying, facsimile, telephone and voice mail services; one dollar and twenty five cents ($1.25) per ft/2/ per month for product service work space; forty two cents ($0.42) per ft/2/ per month for warehouse space; one thousand dollars ($1,000) per month per secretary shared with one or two other persons, if Supplier requests such secretarial support. (q) Distributor shall indemnify and hold harmless Supplier and its successors, assigns, directors, officers, employees, (all of the foregoing being collectively referred to in Section 12 as "Indemnified Persons") with respect to all liabilities, damages, losses and expenses, including reasonable attorney's fees, arising out of third party claims for personal injury, wrongful death or property damage to the extent such claims are caused by any wrongful or negligent act or omission by Distributor (or its employees or other agents, including subdistributors) in its performance of the terms of this Agreement; provided that Section 12 shall apply to any claim, arbitration proceeding or - -------- court suit made or brought by any third party as to which any Indemnified Person intends to claim indemnification under this Section 5(q); and provided further, -------- ------- that this Section 5(q) shall not apply to any claim, liability, damage, loss or expense to the extent that Supplier is responsible therefor under this Agreement, including, but not limited to, any of the foregoing caused by Supplier's negligence or any failure of the Products to meet any product claim made in Supplier's labeling or product insert sheets. (r) During the Term, Distributor shall provide to Supplier, for Supplier's internal use only and not for resale, laboratory supply products manufactured by Baxter and its Affiliates. Supplier shall pay Distributor's actual cost for such laboratory supply products manufactured by Baxter and its Affiliates. (s) Historically Supplier has distributed through Distributor a line of immunology/serology/parasitology products that it did not manufacture, including ImmunoScan Line, Trans-Caddy Line, and RDT/PAC BIO Cards. As compensation for the lost revenue to Supplier due to the transfer to Distributor of all rights, responsibilities, benefits and liabilities relating to these product lines, Distributor agrees to pay to Supplier three hundred thousand dollars ($300,000) on or prior to the fifteenth day of the first month of each calendar quarter during which this Agreement remains in effect with regard to the MicroScan class of Products. (t) In return for inclusion of Instrument Laboratories blood gas controls as competitive products that Distributor may sell (see Exhibit C), --------- Distributor agrees that if during the Term of this Agreement with regard to the Dade Controls class of Products, one of the customers identified on Exhibit H --------- ceases purchasing Dade blood gas controls and begins purchasing Instrument Laboratories blood gas controls (or, thereafter, any other blood gas controls distributed by Distributor), Distributor will pay to Supplier within 30 days of the end of each calendar quarter an amount equal to Supplier's lost standard gross profit on such sales of Dade blood gas controls for such calendar quarter (determined based upon sales of an equivalent volume of such Instrument Laboratories or other blood gas controls). Such payments will continue during the period that this Agreement is in effect with regard to the Dade controls class of Products for so long as such customer continues to purchase blood gas controls from Distributor. Distributor will not solicit sales of Instrument Laboratories blood gas controls to any of the customers listed on Exhibit H, but may sell Instrument Laboratories products to --------- such customers who have been solicited by Instrument Laboratories. 6. Supplier's Duties. ----------------- Supplier shall: (a) Ship all Products as directed by Distributor in accordance with the following: (1) All Products shipped to Distributor by Supplier shall be shipped collect, F.O.B. Origin; provided, however, Distributor shall be entitled to --------- ------- charge back to Supplier as a part of the monthly reconciliation under Section 4(b) Distributor's inbound freight costs pursuant to the formula and procedures utilized by Distributor immediately prior to the commencement of distribution activities under this Agreement. Distributor shall calculate the inbound freight charge back so that, given the same volume and Product mix, the dollar amount of the inbound freight charged back to Supplier will be the same amount charged under the method used immediately prior to the date of this Agreement, plus a percentage increase or less a percentage decrease equal to the percentage increase or decrease in Distributor's total combined costs of commercial freight and in the operation of Distributor's inbound freight program. (2) All Products shipped directly to Distributors' customers by Supplier ("drop shipments") shall be shipped F.O.B. Destination, Prepaid and Add, with Supplier adding the freight charges for such shipment to its invoices to Distributor; provided, however, that if Supplier utilizes any carrier or mode of --------- ------- transportation at the request of a customer or otherwise that is different from the carrier or mode customarily utilized for these purposes immediately prior to the commencement of distribution activities hereunder and which have not approved in advance by Distributor, Supplier shall be responsible for the increased cost in utilizing the carrier or mode it selects. (3) Title and risk of loss of all Products will pass to Distributor upon Supplier's delivery of such Products either to a carrier or directly to Distributor. (4) Supplier shall cooperate with Distributor or customers in pursuing claims for loss or damage to Products in transit. (5) Any deviation from the foregoing provisions of this Section 6(a) must be agreed upon by both Supplier and Distributor prior to shipment. (6) Adequately package and deliver Products to a common carrier or directly to Distributor. (b) Promptly refer all inquiries for the Products from customers (other than Industrial Customers after September 15, 1995 that are not Baxter Industrial Customers) in the Exclusive Territory to Distributor. (c) Advertise and promote the Products in such form and manner as Supplier deems appropriate. (d) Except as to Burdick & Jackson Products, assume responsibility for all operating leases in effect on the date of this Agreement. Supplier will continue to offer such operating leases as Supplier deems appropriate in its sole discretion, it being understood that if a customer does not wish to purchase an Instrument or lease an Instrument from Distributor under a capital lease, and if Supplier does not wish to offer an operating lease to such customer, the parties may lose the benefit of the sale of reagents for the Instrument to such customer. (e) Pay for factory returns, sample accounts and any amounts due under Section 4 on net thirty (30) day terms. The payment period for the purposes of the preceding sentence shall begin on the date of Distributor's invoice. Supplier shall pay interest to Distributor on any overdue payment under this Agreement at a rate per annum of equal to the prime rate of interest published from time-to-time by the Wall Street Journal. ------------------- (f) Promptly and courteously resolve billing disputes with Distributor and provide Distributor such information or assistance as Distributor may reasonably require to resolve billing disputes with customers or freight claims with carriers. (g) Provide, in a manner consistent with past practice, at Supplier's expense, all repair and maintenance services for Instruments, including without limitation: (i) the major overhaul and repair of such Products; (ii) in-warranty repair service in accordance with Section 6(s) at no cost to Distributor; (iii) out-of-warranty repair service pursuant to service contracts between Supplier and customers; provided Supplier -------- may charge back to Distributor the difference between eighty percent (80%) of Supplier's regular list price for contract services and the actual fee in the contract for any contract where Distributor has negotiated a fee with the customer more than twenty per-cent (20%) lower than Supplier's regular list price; (iv) out-of-warranty repair services on an as-needed fee-for-service basis for Products not subject to any service contract; (v) installation of Instruments as requested by Distributor at customer or demonstration sites; (vi) reasonable refurbishment of Supplier's demonstration products; and (vii) "800" telephone hot line service to respond to inquiries from customers concerning the use and routine maintenance of Products and field service for repair and replacement of Products. Supplier shall maintain a price list for all service contracts and other out-of-warranty service charges to customers, and give Distributor, and customers where applicable, at least ninety (90) days advance written notice of any change in such prices. Supplier shall maintain adequate facilities, personnel and inventories of spare parts to enable it to provide these repair and maintenance services. Some or all of the facilities and personnel required to provide such services may be located at space in Distributor's facilities pursuant to Section 5(p) hereof. (h) Accept the return of an Instrument: (i) from a customer; provided -------- Supplier has approved any such return and Distributor's credit to the customer in advance; (ii) from Distributor in a case where Distributor has leased the Instrument to a customer under a capital lease, the customer has defaulted on the lease on account of the customer's bankruptcy, and Distributor repossesses the Instrument. With respect to returns on account of a customer's bankruptcy, Supplier shall credit Distributor an amount equal to the unamortized net book value of the Instrument less, for Paramax Instruments only, that portion of the gross profit realized by Distributor and paid by such customer. The Instrument will then be refurbished by the Supplier and resold to Distributor when and as Distributor obtains a customer for the same. Distributor shall use its reasonable efforts to resell such refurbished Instrument and Distributor and Supplier shall share equally in any profit or loss arising out of such sale. Supplier shall credit Distributor for each Instrument returned for other reasons at the price at which Distributor issues its credit to the customer less the original gross margin percent applicable to the returned Instrument; provided -------- Distributor has used its best reasonable efforts to maintain the goodwill of the customer and to place a substitute Instrument with the customer. (i) Reimburse Distributor at Distributor's cost for all outdated Products shipped after the date of this Agreement included within the Dade QAP and College of American Pathologists ("CAP") programs and the single lot reagents associated with those programs. For any Product (excluding Dade QAP, CAP and associated single lot reagents) delivered to Distributor after the date of this Agreement with at least six (6) months of shelf-life remaining at the date of delivery, Supplier and Distributor shall share, on a fifty-fifty basis, the cost of Products returned by customers due to their inability to use such Products prior to the labelled expiration dates. The maximum amount subject to such sharing shall be two hundred thousand dollars ($200,000) per year; accordingly, the maximum reimbursement from Supplier to Distributor shall be one hundred thousand dollars ($100,000) per year. For any Product (excluding Dade QAP, CAP, and associated single lot reagents) delivered to Distributor after the date of this Agreement with less than six (6) months of shelf life remaining at the date of delivery, Supplier shall reimburse Distributor for any expired Products at Distributor's cost, provided that Distributor shall use its best -------- efforts to sell such Products to customers to maximize usage prior to the expiration date. Supplier acknowledges that, at the time a Product is sold by Distributor to a customer, Distributor will not be able to determine what the shelf life of the Product was at the time such Product was received by Distributor, even though Distributor will be able to determine the remaining shelf life. Therefore, to receive such reimbursement from Supplier, Distributor shall document that Distributor received, at its relevant distribution center, appropriate quantities of that specific catalog number and lot number of Product with less than six (6) months shelf life. For any Product drop-shipped by Supplier directly to a customer that cannot be used by such customer prior to the expiration date, Supplier shall negotiate with customer regarding whether such Product shall be replaced at Supplier's expense. Distributor shall pay the transportation costs for any Products returned by Distributor under this Section 6(i). (j) Furnish Distributor, at no cost to Distributor, reasonable quantities of sales literature, product insert sheets, customer instruction manuals and catalogs for each Product, as well as photographs of Products and camera-ready artwork for such materials. (k) Allow Distributor to inspect Supplier's facilities during normal business hours for the purpose of determining adherence to quality assurance and regulatory compliance standards. (l) Furnish to Distributor, when reasonably requested by Distributor from time to time and at no cost to Distributor, reasonable quantities of original factory outer cartons and packaging materials. (m) Obtain and maintain for one (1) year after the termination of this Agreement product liability insurance (containing either a vendor's endorsement or contractual liability coverage referencing the indemnification provisions contained in Section 6(t) hereof) on all Products with insurers reasonably satisfactory to Distributor with minimum limits of $1,000,000/$3,000,000 for bodily injury and $300,000 for property damage and immediately furnish to Distributor a certificate of insurance issued by the insurance carrier evidencing the foregoing endorsements, coverages and limits and that such insurance shall not be cancelable without at least fifteen (15) days prior written notice to Distributor; provided, however, that Supplier may -------- ------- satisfy its obligation under this Section 6(m) through a self-insurance program. (n) Comply (or cause compliance) in all material respects with all existing and future federal, state, or other laws and regulations applicable to the conduct of Supplier's business or the manufacture, packaging, labeling and sale to Distributor of Products pursuant to this Agreement, including, but not limited to, the following: (1) Give prompt written notice to Distributor if Supplier should become aware of any defect or condition (actual or alleged) which may alter the quality of the Products in any material respect or may render any of the Products in violation in any material respect of any applicable federal, state or other applicable law or regulation, including, but not limited to, any violation which would reasonably likely require any alteration of the specifications of any Product, affect the sale of any Product, cause revocation of any federal, state or other regulatory approval with respect to any Product or its sale hereunder or give rise to a claim against Distributor by any person. (2) Give prompt written notice to Distributor of any and all Products affected by holds or recalls. If any Products are returned to Distributor by a customer or by Distributor to Supplier due to a recall or other manufacturing defect in the Products, Supplier shall reimburse Distributor the full price of such returned Products, whose expiration date has not expired, paid by Distributor under Section 4, plus the reasonable costs and expenses incurred by Distributor in returning such Products to Supplier, including without limitation all return transportation charges. Recalls shall be initiated by written notice from Supplier. (o) Stock inventories of the Products that are listed in Exhibit A as --------- required to be stocked by Supplier, at such locations and in sufficient quantities in order for Distributor and Supplier to provide service levels at least equal to the service levels achieved immediately prior to the commencement of distribution activities under this Agreement as determined on a monthly basis. Either party's obligation to provide any other level of service shall be subject to mutual agreement of the parties. (p) Except as agreed otherwise deliver Products to Distributor having expiration dates with no less than three (3) months of shelf life remaining from the date of delivery. (q) Assist Distributor's promotion activities under Section 5(e) hereof, including, but not limited to, having Supplier's personnel accompany Distributor's sales personnel on sales presentations at such times, at such places and with expenses of customers allocated as may be agreed upon from time to time by Distributor and Supplier. Supplier's assistance shall focus particularly on promoting the technical features, capabilities and benefits of Products. Supplier shall also provide customers from time to time with reasonable quantities of sample Products at no charge, and make demonstration Products owned by Supplier available from time to time for demonstrations at customers' facilities. (r) Develop and conduct training programs for Distributor's employees with respect to the Products at such times and at such places as may be agreed upon from time to time by Distributor and Supplier. (s) Warrant to Distributor that: (i) all Products sold to Distributor or its customers pursuant to this Agreement shall not be adulterated or misbranded and the packaging or labeling thereof shall not be misleading within the meaning of applicable laws or regulations relating thereto; (ii) each Product shall be free from defects in material or workmanship and shall conform to the labeling and product insert sheets for the Product; and (iii) Supplier shall have good and marketable title to all such Products free and clear of all liens or encumbrances (other than any created by Distributor or its customers). The foregoing warranties shall commence on the date of delivery and receipt of the Products by Distributor in the case of Products shipped to Distributor, and on the date of delivery and receipt of Products by a customer in the case of Products drop shipped to a customer, and expire one (1) year thereafter (the "Warranty Period"), except that the Warranty Period for each Product the use of which is subject to an expiration date shall expire on the applicable expiration date. These warranties will not apply to any Product which has been modified, improved or refurbished other than by Supplier and will not cover any defect, malfunction or damage due to: (A) accident, neglect or willful mistreatment of the Product; (B) failure to properly store or handle a Product; (C) failure to use, operate, service or maintain the Product in accordance with Supplier's applicable operating and service manuals; or (D) failure to use or apply proper reagents or chemicals in or to the Product. Any Product which proves not to be in conformity with these warranties during the applicable Warranty Period will be repaired or replaced at the option and expense of Supplier. Supplier shall pay the reasonable transportation and other costs incurred by Distributor with respect to any Products returned to Supplier for repair or replacement under these warranties, or reimburse Distributor for any such costs. (1) THE FOREGOING WARRANTIES CONTAIN THE SOLE REMEDY FOR ANY DEFECT IN THE PRODUCTS. THE FOREGOING WARRANTIES ARE EXCLUSIVE AND IN LIEU OF ALL OTHER WARRANTIES OF ANY KIND, WHETHER STATUTORY, WRITTEN, ORAL, EXPRESS OR IMPLIED, INCLUDING ANY WARRANTIES OF FITNESS FOR A PARTICULAR PURPOSE AND MERCHANTABILITY. IN NO EVENT, WHETHER AS A RESULT OF BREACH OF CONTRACT, TORT LIABILITY (INCLUDING NEGLIGENCE) OR OTHERWISE, SHALL SUPPLIER BE LIABLE TO DISTRIBUTOR FOR ANY SPECIAL, INDIRECT, INCIDENTAL OR CONSEQUENTIAL DAMAGES. (2) ANY LIABILITY OF SUPPLIER TO DISTRIBUTOR SHALL BE LIMITED TO THE TOTAL PRICE PAID BY DISTRIBUTOR FOR THE PRODUCTS WHICH ARE THE SUBJECT OF SUCH LIABILITY PLUS ALL COSTS FOR TRANSPORTATION AND OTHER DIRECT EXPENSES INCURRED BY DISTRIBUTOR WITH RESPECT TO SUCH PRODUCTS. (t) Supplier shall indemnify and hold harmless Distributor, its Affiliates and their respective successors, assigns, directors, officers, employees (all of the foregoing being collectively referred to in Section 12 as "Indemnified Persons") with respect to all claims, liabilities, damages, losses and expenses, including reasonable attorney's fees, caused by: (i) any actual or alleged patent, copyright or trademark infringement, or violation of any other proprietary right, arising out of the purchase, sale or use of the Products pursuant to this Agreement; (ii) any actual or alleged breach of any warranty or obligation contained in Section 6(s) (subject to the limitations in Section 6(s) to the extent provided therein); (iii) any claim for personal injury, wrongful death or property damage arising out of the use of a Product; and (iv) any wrongful or negligent act or omission by Supplier (or its employees or agents) in its performance of the terms of this Agreement; provided that Section 12 -------- shall apply to any claim, arbitration proceeding or court suit made or brought by any third party as to which any Indemnified Person intends to claim indemnification under this Section 6(t); and provided, further, -------- ------- that this Section 6(t) shall not apply to any claim, liability, damage, loss or expense to the extent that Distributor is responsible therefor under this Agreement, including, but not limited to, any of the foregoing caused by Distributor's design, specifications, improper storage or handling of Products, or negligence. (u) Assist Distributor in refurbishing Instruments as required by the Agreement between Citicorp North America Inc. and Baxter Healthcare Corporation, Scientific Products Division, dated March 22, 1988 (the "Citicorp Agreement") and provide reasonable technical demonstrations and presentations in connection with remarketing such Instruments. To the extent not paid by Citicorp, Distributor will pay all such refurbishment costs. (v) At Distributor's request if agreed to by Supplier, act as sales agent for Distributor in connection with Distributor's resale and distribution of the Products throughout the Exclusive Territory, including providing sales quotations, sales support and Distributor's prices to Distributor's customers and executing sales and distribution contracts as agent for Distributor pursuant to operating guidelines, terms and conditions approved in advance and in writing by Distributor. In connection therewith, Supplier shall disclose to Distributor's customers that it is acting as agent for and on behalf of Distributor in the pricing and sale of the Products. Final authority shall remain with Distributor concerning the terms and conditions of Distributor's resale of the Products, including particularly with respect to all pricing terms. Nothing herein shall affect the provisions set forth in Section 2 concerning distribution rights granted by Supplier to Distributor or in Section 4 concerning prices for the sale of the Products from Supplier to Distributor. 7. Trademarks. ---------- (a) Supplier acknowledges that Distributor is the owner or licensee of the trademarks and trade names connoting Distributor which Supplier may elect to use in the promotion and sale of the Products and that Supplier has no right or interest in such trademarks and trade names except in accordance with Section 7(b); provided, however, that, except as permitted under Section 6.3 of the -------- ------- Purchase Agreement, in no event shall the Supplier use the trade name "Baxter" or any trademark using the word "Baxter" under this Agreement or otherwise without the consent of the owner thereof. Distributor acknowledges that Supplier is the owner or licensee of the trademarks and trade names connoting Supplier which Distributor may elect to use in the promotion and sale of the Products hereunder, and the Distributor has no right or interest in such trademarks or trade names except in accordance with Section 7(b). (b) Subject to Section 7(a) hereof, each party hereby grants to the other party a non-exclusive royalty-free license to use the trademarks and trade names owned by or licensed to such party within the Exclusive Territory on the Products (other than Products sold directly by Supplier or through a distributor other than the Distributor) and related literature and advertising during the Term of this Agreement, it being expressly understood that such license shall terminate and such use shall be discontinued upon the termination of this Agreement. Each party disclaims any rights in the trademarks and trade names owned by or licensed to the other party other than the license provided for herein. (c) Each of the parties hereto shall maintain, for all permitted uses of the other party's trademarks and trade names, quality standards which are equivalent to or stricter than the standards used by such other party from time- to-time with respect to its products and services relating to such trademarks or trade names. At the request of either party, a party shall provide copies and samples of materials that it uses which bear the trademarks or trade names of the requesting party. (d) Each of the parties hereto shall notify the other party promptly of any and all infringements or improper use by others not parties to this Agreement of the trademarks and trade names connoting the other party, should such party discover reasonable cause for believing that such infringement or improper use is taking place, and provide all information which it has available thereon. Each party shall have sole discretion and control with regard to any proceedings relating to infringement or improper use of the trademarks and trade names connoting such party. The other party may choose to be represented by its own counsel in any such proceedings but such representation shall be at the other party's sole expense. (e) Each party acknowledges that the other party would not have any adequate remedy at law for the breach by either party of any one or more of the covenants contained in this Section 7 and agrees that, in the event of such breach, the other party may, in addition to the other remedies which may be available to it, file a suit in equity to enjoin the breaching party from any further breach of any of the terms of this Section 7. 8. Termination. ----------- This Agreement may be terminated as follows: (a) Either party shall have the right to terminate this Agreement effective upon delivery of written notice to the other party if: (i) the other party makes an assignment for the benefit of creditors; (ii) the other party becomes bankrupt or insolvent or is petitioned into bankruptcy; (iii) the other party takes advantage of any federal, state or foreign insolvency act; (iv) if a receiver or receiver/manager is appointed for all or any substantial part of its property and business and such receiver or receiver/manager remains undischarged for a period of thirty (30) days; (v) if the corporate existence of the other party is terminated by voluntary or involuntary dissolution; or (vi) the other party defaults in the performance of any of its covenants or obligations contained in this Agreement and such default is not remedied to the non- defaulting party's reasonable satisfaction within two (2) months after written notice to the defaulting party of such default, or if such default is not capable of rectification within two (2) months, if the defaulting party has not promptly commenced to rectify the default within such two (2) month period, and thereafter proceeds diligently to rectify same. (b) Distributor may terminate this Agreement at any time after the four-year anniversary of the date of this Agreement by giving Supplier at least six (6) months prior written notice; provided that in no event shall Distributor -------- be entitled to deliver such notice prior to such fourth anniversary. (c) (i) Supplier may terminate this Agreement in its entirety if the sales of Products by Distributor and VWR to their customers (excluding the Burdick & Jackson and Dade Lablink classes of Products and product service billings) for 1995 are less than three hundred eighty-three million dollars ($383 million) (including sales of the Bartels class of Products). Supplier may exercise this right to terminate by giving Distributor written notice within thirty (30) days following receipt of the final statement of sales for 1995, which statement shall be delivered by Distributor to Supplier on or before January 30, 1996. (ii) Supplier also may terminate this Agreement with respect to any or all classes of Products identified in Exhibit A (including products --------- that become "Products" hereunder after the date of this Agreement) at any time after the date of this Agreement, in the case of the Burdick & Jackson class of Products, or after the eighteen-month anniversary of the date of this Agreement, in the case of all other classes of Products, by giving Distributor at least six (6) months prior written notice; provided that in no event shall Supplier be -------- entitled to deliver such notice other than in the case of the Burdick & Jackson class of Products prior to such eighteen-month anniversary. Any such terminated class of Products shall cease to be "Products" within the meaning of this Agreement. (d) In the event Supplier terminates this Agreement with respect to some but not all Products (other than the Burdick & Jackson and Bartels classes of Products) and such terminated Products represent more than forty percent (40%) of the aggregate gross profits earned by Distributor from the distribution of Products (other than the Burdick & Jackson and Bartels classes of Products) during the immediately preceding fiscal year, Distributor may terminate this Agreement with respect to all remaining Products by giving six (6) months prior written notice to Supplier. (e) Any notice given under this Section shall specifically identify the paragraph under which the termination right is being exercised, and in the case of termination under Sections 8(c) or 8(d), the class or classes of Products that are subject to the termination. 9. Procedures on Expiration or Termination. --------------------------------------- (a) On the expiration of this Agreement, or termination of this Agreement for whatever reason with respect to some or all of the Products, Supplier shall continue to honor Distributor's orders for Products up to the effective date of expiration or termination and thereafter to the extent that such orders are necessary for Distributor to satisfy orders for Products from customers having contracts with Distributor that can not be cancelled; provided -------- that, any such contract was entered into by Distributor prior to a notice of termination, or if it was entered into after the notice of termination, it was entered into in the ordinary course of business and contains terms consistent with contracts entered into prior to the notice of termination. Distributor shall pay for such Products on the terms and conditions of this Agreement. With respect to the customer contracts referred to in the previous sentence, at the end of any non-exclusive period referred to in either Section 2(e) or Section 2(f), Distributor will assign to Supplier (to the extent permitted thereunder): (i) the contract in its entirety if it relates solely to Products; or (ii) the portion of the contract related to Products if such contract covers other products sold by Distributor in addition to Products. Distributor will use reasonable efforts to obtain the consent of the customer to any such assignment. If the customer does not agree to the assignment of any such contract subject to consent (or portion thereof related to Products), and if Distributor is not able to otherwise terminate the contract with respect to Products, Supplier shall continue to supply Products to Distributor to enable Distributor to honor its obligations under the contract. (b) Supplier shall review all Ad Now and other capital lease agreements between Distributor and customers in effect on the effective date of expiration or termination. The profitability and collectability of those agreements shall be evaluated, and the present net book value determined in accordance with generally accepted accounting principles. Supplier shall have the right, but not the obligation, to purchase at the net book value determined in accordance with the previous sentence, some or all of the agreements with customers who have committed to use Products; provided -------- Distributor shall have the right to reject any such purchase to the extent the lease is a part of a combined contract with a customer for the sale or lease of products other than Products, and the revenue from the sale or lease of Products under the contract is less than thirty percent (30%) of all revenues from the combined contract. If the revenue from the sale or lease of Products under any such combined contract is greater than thirty percent (30%) of all revenues from the contract and Supplier agrees to purchase such contract, then Supplier is entitled to all revenues derived from such contract and Distributor agrees to sell the non-Dade Products to Supplier, drop-shipping them to the customer, at no more than the customer price stated on the contract excluding any equipment markup. Supplier shall continue to sell Products to Distributor to enable Distributor to supply Products under all agreements not purchased by Supplier, until such time as Distributor has collected its full receivables from such agreements, without adjustment under the immediately preceding sentence of this Section 9(b). (c) At any time after the expiration of this Agreement in its entirety or after the effective date of termination with respect to any terminated Products, upon written request from Distributor, Supplier shall repurchase for cash Distributor's inventory of the Products affected by the termination and not required to fulfill customer contracts referred to in Section 9(a) or Section 9(b): (i) in which Distributor has good and marketable title free of all liens and encumbrances; (ii) which are not obsolete and in the case of dated Products have at least ninety (90) days remaining shelf life; and (iii) which are in good, resalable condition and in their original packaging; provided, in the event of a termination, Supplier shall not be obligated to - -------- purchase any quantity of Products in a class in excess of the aggregate value of all Products in that class in Distributor's inventory on the date of the notice of termination. The purchase price of such inventory shall be equal to the net book value of the Products. Supplier may offset any payments due under this Section 9(c) against amounts then owed to Supplier by Distributor. (d) After the effective date of expiration or termination of this Agreement, nothing in this Agreement shall restrict Supplier's right to sell or otherwise dispose of the Products or Distributor's right to sell or otherwise dispose of competing products, within or outside of the Exclusive Territory. 10. Force Majeure. ------------- The obligations of either party to perform under this Agreement shall be excused during each period of delay caused by matters (not including lack of funds or other financial causes) such as strikes, shortages of raw material, government orders or acts of God, which are reasonably beyond the control of the party obligated to perform. Any delay occasioned thereby shall not constitute a default under this Agreement, and the obligations of the parties shall be suspended during the period of delay so occasioned. The obligation of any party to perform under this Agreement shall be excused with respect to any Product during the continuance of any period of delay resulting from action taken by the U.S. Food and Drug Administration against Supplier insofar as such action affects Supplier's or Distributor's ability to manufacture or sell such Product in the United States. 11. Confidentiality. --------------- (a) Supplier agrees that: (i) valuable marketing information of a confidential nature may be previously known by Supplier or disclosed by Distributor to Supplier pursuant to this Agreement; (ii) that such information shall be retained by Supplier in confidence; and (iii) that Supplier shall not, either during the term of this Agreement or for ten (10) years after its termination, publish or disclose or cause anyone else to publish or disclose any such confidential information. Notwithstanding the foregoing provisions of this Section 11(a), the above restrictions on disclosure and use shall not apply to any information which Supplier can show by written evidence was known to it at the time of receipt thereof, which is or becomes public information through no fault of Supplier, or which may subsequently be obtained from sources other than Distributor who are not bound by a confidentiality agreement with Distributor. (b) Distributor agrees that: (i) valuable marketing or technical information of a confidential nature may be previously known by Distributor or disclosed by Supplier to Distributor pursuant to this Agreement; (ii) that such information shall be retained by Distributor in confidence; (iii) that the continued access or transmittal of such technical information by Supplier to Distributor is upon the express condition that such technical information is to be used solely for the purpose of effectuating this Agreement; and (iv) that Distributor shall not, either during the term of this Agreement or for ten (10) years after its termination, publish or disclose or cause anyone else to publish or disclose any confidential marketing information of Supplier, or publish, disclose or use or cause anyone else to publish, disclose or use, any confidential technical information of Supplier. Notwithstanding the foregoing provisions of this Section 11(b), the above restrictions on disclosure and use shall not apply to any information which is or becomes public information through no fault of Distributor, or which may subsequently be obtained from sources other than Supplier who are not bound by a confidentiality agreement with Supplier. (c) Each party acknowledges that the other party would not have any adequate remedy at law for the breach by either party of any one or more of the covenants contained in this Section 11 and agrees that, in the event of such breach, the other party may, in addition to the other remedies which may be available to it, file a suit in equity to enjoin the breaching party from any further breach of any of the terms of this Section 11. 12. Third Party Claims. ------------------ If a third party shall make any claim or commence any arbitration proceeding or court suit against any one or more of the Indemnified Persons with respect to which they intend to make any claim for indemnification against Distributor under Section 5(q) or against Supplier under Section 6(t), such Indemnified Persons shall promptly give written notice to Distributor or Supplier, as the case may be, of such third party claim, arbitration proceeding or court suit and the following provisions shall apply: (a) Subject to Section 12(b), such Indemnified Persons shall have the right to conduct and control, through counsel of their choosing, the defense of any third party claim, arbitration proceeding or court suit, and such Indemnified Persons may, subject to the limitations contained herein, settle the same; provided that such Indemnified Persons shall give the indemnifying party -------- advance notice of any proposed settlement. Such Indemnified Persons shall permit the indemnifying party to participate in the defense of any such action or suit through counsel chosen by it; provided that the fees and expenses of -------- such counsel shall be borne by the indemnifying party. Any settlement with respect to a claim for money damages effected after the indemnifying party by written notice to such Indemnified Persons shall have disapproved such settlement shall discharge the indemnifying party from liability with respect to the subject matter thereof under this Agreement, and no claim for indemnification therefor shall be claimed under Section 5(q) or Section 6(t), as the case may be. If the indemnifying party disapproves any settlement with respect to a claim for money damages, the Indemnified Party shall have the right to tender the defense of such claim to the indemnifying party and, in any event, the indemnifying party shall thereafter be responsible for the full amount of all liabilities, damages, losses and expenses, including reasonable attorney fees, resulting from such claim. (b) Notwithstanding Section 12(a), if the remedy sought in any claim, arbitration proceeding or court suit referred to in this Section 12 is solely money damages, the indemnifying party shall have fifteen (15) business days after receipt of the notice referred to above in this Section 12 to notify such Indemnified Persons that it elects to conduct and control the defense of such claim, proceeding or suit. If the indemnifying party does not give the foregoing notice, such Indemnified Persons shall have the right to defend or settle such claim, proceeding or suit in the exercise of their exclusive discretion, and the indemnifying party shall, upon request from any of such Indemnified Persons, promptly pay to them in accordance with Section 5(q) or Section 6(t), as the case may be, the amount of any liabilities, damages, losses and expenses, including reasonable attorney's fees, resulting from such claim, proceeding or suit. If the indemnifying party gives the foregoing notice, the indemnifying party shall have the right to undertake, conduct and control, through counsel of its own choosing and at the sole expense of the indemnifying party, the conduct and control of the defense and any settlement of such claim, proceeding or suit, and such Indemnified Persons shall cooperate with the indemnifying party in connection therewith; provided that: (i) the indemnifying -------- party shall not thereby permit to exist any lien, encumbrance or other adverse charge upon any asset of any of such Indemnified Persons; (ii) the indemnifying party shall permit such Indemnified Persons to participate in such defense or settlement through counsel chosen by such Indemnified Persons, but the fees and expenses of such counsel shall be borne by such Indemnified Persons except as provided in clause (iii) below; and (iii) the indemnifying party shall promptly reimburse under Section 5(q) or Section 6(t), as the case may be, such Indemnified Persons for the full amount of any liabilities, damages, losses and expenses, including reasonable attorney's fees, resulting from such claim, proceeding or suit, except in each case for any fees and expenses of counsel for such Indemnified Persons incurred after the assumption of the conduct and control of such claim, proceeding or suit by the indemnifying party. So long as the indemnifying party is contesting any such claim, proceeding or suit in good faith, such Indemnified Persons shall not pay or settle any such claim, proceeding or suit; provided, however, -------- ------- that such Indemnified Persons shall have the right to pay or settle any such claim, proceeding or suit; provided, further, that in such event such -------- ------- Indemnified Persons shall be deemed to have waived any right to indemnity therefor by the indemnifying party under Section 5(q) or Section 6(t), as the case may be. 13. Miscellaneous Provisions ------------------------ (a) All notices and other communications required under this Agreement shall be in writing and shall be deemed to have been given if delivered by hand, or sent by courier or facsimile transmission; (provided that -------- in the case of facsimile transmission, a confirmation copy of the notice shall be delivered by hand or sent by courier within two (2) days of transmission), addressed, if to Supplier, to Dade International Inc., 1717 Deerfield Road, Deerfield, Illinois 60015, Attention: President (facsimile number: (708) 948- 3974), and a copy to Purchaser c/o Bain Capital, Inc., Two Copley Place, Boston, Massachusetts 02116, Attention: Mark Nunnelly (facsimile number (617) 572- 3724), and if to Distributor, to Baxter Healthcare Corporation, One Baxter Parkway, Deerfield, Illinois 60015, Attention: General Counsel (facsimile number: (708) 948-4266), with a copy to President of Baxter Distribution, 1450 Waukegan Road, Building N, McGaw Park, Illinois 60085 (facsimile number: (708) 689-5960), and a copy to Hospital Business, 1450 Waukegan Road, Building N, McGaw Park, Illinois 60085, Attention: General Counsel (facsimile number: (708) 689-6452), until notice of a change is given as provided in this Section 13(a). All notices given in accordance with this section shall be effective, if delivered by hand or by courier, at the time of delivery, and, if communicated by facsimile transmission, at the time of transmission. (b) This Agreement is the entire agreement between the parties hereto with respect to the subject matter hereof, there being no prior written or oral promises or representations not incorporated herein or therein. Without limiting the generality of the foregoing, this Agreement supersedes the Interim Agreement and the attachments thereto. (c) This Agreement shall be governed by and construed and enforced in accordance with the laws of the State of Illinois and the federal laws of the United States of America applicable therein. Any lawsuit arising from or related to this Agreement shall be brought before the United States District Court for the Northern District of Illinois or an Illinois state court sitting in Lake County, Illinois, or Cook County, Illinois. The parties hereby consent to the jurisdiction of such courts. (d) No amendment or modification of the terms of this Agreement shall be binding on either party unless reduced to writing and signed by an authorized officer of the party to be bound. The waiver by either party of any particular default by the other party shall not affect or impair the rights of the party so waiving with respect to any subsequent default of the same or a different kind; nor shall any delay or omission by either party to exercise any right arising from any default by the other affect or impair any rights which the non- defaulting party may have with respect to the same or any future default. (e) Each party represents and warrants that the terms of this Agreement do not violate any existing obligations or contracts of, or any law, rule, regulation, judgment or order binding on, such party. Each party shall indemnify and hold harmless the other party from and against any and all liabilities, damages, losses and expenses (including reasonable attorney's fees) resulting from any third party claim, arbitration proceeding or court suit which is hereafter made or brought against the other party and which alleges any such violation, all as provided in Section 12 with respect to the indemnification provided in Section 5(q) and Section 6(t). (f) Any provision of this Agreement which is prohibited or unenforceable in any jurisdiction shall be ineffective to the extent of such prohibition or unenforceability without affecting, impairing or invalidating the remaining provisions or the enforceability of this Agreement. (g) Except as provided otherwise in Section 5(e)(7) and 6(v), neither party constitutes the other as its agent, partner, joint venturer, or legal representative and neither party has express or implied authority to bind the other in any manner whatsoever by virtue of this Agreement. (h) Each party shall maintain and keep records of their activities under this Agreement in sufficient detail to enable their performance to be verified. Upon no less than five (5) business days advance written notice from a party, the records of the party receiving the notice shall be made available for inspection by the party giving the notice, or any firm of certified public accountants selected by such party, for the purpose of verifying the performance of the party receiving the notice. (i) Any reference in this Agreement to practices of either party as of or prior to the date of this Agreement will not be narrowly construed and will take into consideration a commercially reasonably period of time preceding the date of this Agreement. (j) On and after the effectiveness of the amendment and restatement contemplated hereby, each reference herein to "this Agreement," "hereunder," "hereof," "herein," or words of like import, and each reference in any other document (other than any document entered into in connection with the Bartels Stock Purchase Agreement) referring to "the U.S. Distribution Agreement," "thereunder," "thereof," or words of like import shall mean this Agreement as amended and restated. 14. Assignment. ---------- This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns; provided, however, -------- ------- that neither party shall have the right to transfer or assign its interest in this Agreement without the prior written consent of the other party, which consent shall not be unreasonably withheld; provided, further, that, -------- ------- notwithstanding the foregoing provisions of this Section 14, either party may assign its rights and obligations under this Agreement to any corporation that shall acquire all or substantially all of the party's business and assets to which this Agreement relates and who shall assume in writing all of the party's obligations hereunder and deliver a signed copy of such assumption instrument to the other party. Supplier may assign its rights hereunder with respect to all or substantially all of the Products in the classes identified in Exhibit A, in --------- connection with the sale of all or substantially of the assets of the business to which such Products relate. Notwithstanding the provisions of Section 8(b), Distributor shall have the right to terminate any partially assigned agreement effective on the earlier to occur of two (2) years from the date of the assignment or four (4) years six (6) months from the date of this Agreement; provided Distributor gives six (6) months written notice prior to the effective - -------- date of any such termination. 15. Performance. ----------- The parties acknowledge that either party may exercise some of the rights or engage in certain of the activities hereunder though an Affiliate. In particular, Burdick & Jackson, Inc. will act as Supplier with respect to the Burdick & Jackson class of Products, Dade MicroScan, Inc. will act as Supplier with respect to the Dade MicroScan class of Products and Dade Diagnostics of P.R., Inc. will act as Supplier with respect to Products manufactured by such company. Supplier represents and warrants that as of the date of this Agreement, Burdick & Jackson, Inc., Dade Diagnostics of P.R., Inc. and Dade MicroScan, Inc., are wholly owned subsidiaries of Supplier. Neither party shall be relieved of any obligation hereunder as a result of the conduct of an Affiliate, and each party shall be fully responsible for the conduct of its Affiliate. 16. Arbitration Procedure. --------------------- (a) The parties agree that they will attempt to settle any claim or controversy arising out of this Agreement through good faith negotiations in the spirit of mutual cooperation between senior business executives with authority to resolve the controversy. (b) Any dispute that cannot be resolved by the parties through good faith negotiations will then, upon the written request of either party, be resolved by binding arbitration conducted in accordance with the Rules of the CPR Institute for Dispute Resolution by a sole arbitrator who is a former judge or other mutually agreed upon individual. To the extent not governed by such rules, such arbitrator shall be directed by the parties to set a schedule for determination of such dispute that is reasonable under the circumstances. Such arbitrator shall be directed by the parties to determine the dispute in accordance with this Agreement and the substantive rules of law (but not the rules of procedure or evidence) that would be applied by a federal court. The arbitration will be conducted in the English language in the State of Illinois. The arbitration will be governed by the United States Arbitration Act, 9 U.S.C. (S)(S) 1-16 and the Patent Arbitration Act, 35 U.S.C. (S) 294. Judgment upon the award rendered by the arbitrator may be entered by any court having jurisdiction. (c) Nothing contained in this Section 16 shall prevent either party from resorting to judicial process if injunctive relief from a court is necessary to prevent serious and irreparable injury to one party or to others. The use of arbitration procedures will not be construed under the doctrine of laches, waiver or estoppel to affect adversely either party's right to assert any claim or defense. 17. Counterparts. ------------ For convenience of the parties hereto, this Agreement may be executed in one or more counterparts, each of which shall be deemed an original for all purposes. * * * IN WITNESS WHEREOF, the parties have by their duly authorized officers executed this amendment and restatement on January 31, 1996, effective as of September 15, 1995. Supplier: Distributor: - -------- ----------- DADE INTERNATIONAL INC. BAXTER HEALTHCARE CORPORATION By: /s/ John Connaughton By: /s/ John Gaither ------------------------- -------------------------- Name: John Connaughton Name: John Gaither Title: Vice President Title: Corporate Vice President ---------------------- ------------------------ Each of the following wholly owned subsidiaries of Supplier hereby agrees to perform the duties and obligations of Supplier pursuant to this Agreement regarding the class of Products supplied by each such subsidiary: BURDICK & JACKSON, INC. By: /s/ John Connaughton ------------------------ Name: John Connaughton Title: Vice President --------------------- DADE MICROSCAN, INC. By: /s/ John Connaughton ------------------------ Name: John Connaughton Title: Vice President --------------------- DADE DIAGNOSTICS OF P.R., INC. By: /s/ John Connaughton ------------------------ Name: John Connaughton Title: Vice President --------------------- AMENDMENT TO AMENDED AND RESTATED EXCLUSIVE DISTRIBUTION AGREEMENT This Amendment to that EXCLUSIVE DISTRIBUTION AGREEMENT, dated as of December 19, 1994, as amended and restated in its entirety as of September 15, 1995, is made and entered into by and between DADE INTERNATIONAL INC., a Delaware corporation with its principal offices at 1717 Deerfield Road, Deerfield, Illinois 60015, hereinafter called the "Supplier" or "Dade", and BAXTER HEALTHCARE CORPORATION, a Delaware corporation with its principal offices at One Baxter Parkway, Deerfield, Illinois 60015, hereinafter called the "Distributor". Such Agreement, as amended from time to time, is hereinafter referred to as the "Distribution Agreement". As used herein, unless the context otherwise requires, capitalized terms shall have the meanings ascribed to them in the Distribution Agreement. RECITALS -------- 1. Supplier has given Distributor a notice (the "Termination Notice") pursuant to Section 8 (c)(ii) of the Distribution Agreement that effective December 16, 1996 the Distribution Agreement shall be terminated with respect to both (a) all Products of the Stratus class of Products and (b) all Products of the Paramax class of Products. 2. Supplier and Distributor have been engaged in discussions regarding how the two parties will proceed forward under the Distribution Agreement. 3. Supplier and Distributor desire to amend the Distribution Agreement to memorialize the above-referenced discussions and the agreements between Supplier and Distributor arising therefrom. AGREEMENT --------- In consideration of the mutual covenants contained herein, and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, Supplier and Distributor agree as follows: 1. Termination of Stratus and Paramax. ---------------------------------- (a) Distributor hereby acknowledges receipt of the Termination Notice. (b) Notwithstanding the Termination Notice, the Distribution Agreement shall continue in effect unaffected by the Termination Notice with respect to the Stratus class of Products and the Paramax class of Products; provided that Supplier shall have the ability to provide notice of termination under Paragraph 8(c)(ii) of the Distribution Agreement with respect to the Paramax class of Products or Stratus class of Products on or after June 17, 1997 or, if extended pursuant to Paragraph 7, on or after June 17, 1998. Notwithstanding anything in the Distribution Agreement to the contrary, the terms "Paramax class of Products" and "Stratus class of Products" shall mean those chemistry and specialty chemistry analyzers sold under the Paramax and Stratus trade names as of the date hereof and those assays and consumables manufactured or sold by Supplier for use on such Stratus or Paramax analyzers as of the date hereof and any new assays for such analyzers. - Page 2 of 18 - (c) Effective December 16, 1996, the conditions and limitations contained in Section 2(b)(1) of the Distribution Agreement shall have no further force and effect with respect to products that are competitive with the Stratus and Paramax classes of Products. 2. Exceptions to the Distribution Agreement. Effective December 16, 1996, in ---------------------------------------- the event that any customer indicates that it prefers to purchase any Product other than through Distributor, Distributor will be deemed to have given the consent necessary, pursuant to Section 2(a)(2) of the Distribution Agreement, to allow Supplier to sell, solicit orders for or otherwise distribute Products within the Exclusive Territory other than through Distributor, subject to the provisions of this Paragraph 2. (a) Notwithstanding the foregoing, if any customer indicates that it prefers to purchase Products other than through Distributor, customer or Supplier shall confirm such preference in writing and shall send a copy of such writing to Distributor. Distributor shall have thirty (30) days following receipt of such copy to convince customer to change its preference. (b) During such thirty (30) day period, Distributor shall fill all purchase orders received from such customer and supply all Products ordered by such customer; provided, however, in the event that Distributor does not fill such purchase orders and supply such - Page 3 of 18 - Products, then Distributor agrees that Supplier may fill such purchase orders and supply such Products to that customer other than through Distributor. Following such thirty (30) day period, Supplier shall confirm with customer its preference and if customer prefers to purchase Products other than through Distributor, then Supplier shall have the right to sell, solicit orders for or otherwise distribute Products to that customer thereafter, other than through Distributor. In the event that Supplier does sell, solicit orders for or otherwise distribute Products to that customer other than through Distributor, pursuant to this Paragraph 2, Supplier shall purchase and Distributor shall assign to Supplier within ninety (90) days all such customer receivables for Product that Distributor is unable to collect. (c) Distributor shall not be entitled to any gross profit, commission, margin or any other amount on any sales of Products which, pursuant to this Paragraph 2, are not sold or distributed through Distributor. 3. Gross Profit Margin. ------------------- (a) The guaranteed gross profit margin for the Stratus and Paramax classes of Products shall remain at ten percent (10%) through December 16, 1996. - Page 4 of 18 - (b) Effective December 16, 1996, Section 4(b) and Exhibit A of the Distribution Agreement are amended to provide that the Distributor shall be entitled to receive from the sale of the Stratus and Paramax classes of Products a guaranteed gross profit margin of four percent (4%) instead of a guaranteed gross profit margin of ten percent (10%); provided that such guaranteed gross profit margin shall remain at ten percent (10%) with respect to sales of Products that are shipped by Distributor. Any decision to have Supplier ship directly to customer shall be in Supplier's sole discretion. (c) Distributor shall continue to maintain the same level of inventory of the Stratus and Paramax class of Products which it has historically maintained for such Products until such point in time when Supplier elects to ship such Products directly to customers. Distributor and Supplier shall negotiate, in good faith, to develop a transition plan, for Supplier to ship such Paramax and Stratus class of Products directly to customers. (d) The parties agree that neither party may modify its normal selling process in order to change the timing of normal customer ordering patterns for the purpose of taking advantage of a more favorable margin. 4. Incentive Compensation ---------------------- - Page 5 of 18 - (a) "Best Value Products" shall mean a select offering of third-party manufactured and Distributor self-manufactured products which perform consistently, offer the best value for the price, and provide good economics throughout the supply chain. Best Value Products are especially promoted externally to Distributor's customers and internally to Distributor's sales personnel through financial incentives. Except as provided herein, all Best Value Products are required to meet the following specific criteria: (a) the product must be a market leader as demonstrated by sales volume or have the potential to become a market leader; (b) that product must provide a return on managed capital greater than 30% after tax; and (c) the product must meet a minimum of silver status on the Supplier scoreboard. (b) Regardless of whether or not Supplier or the Products meet the definition of Best Value Products hereunder, Distributor shall promote the Stratus and Paramax classes of Products as Best Value Products for as long as Distributor distributes such Products under the Distribution Agreement. (c) In the event Distributor creates a new promotion or incentive program in addition to or in substitution of its Best Value Products program, the Stratus and Paramax classes of Products shall be granted the most favorable treatment under such new promotion or - Page 6 of 18 - incentive program, regardless of whether Supplier or the Products meet the criteria for such treatment under such program, for as long as Distributor distributes such Products under the Distribution Agreement. (d) With the exceptions and qualifications specified herein, the Stratus and Paramax classes of Products shall be the only chemistry and specialty chemistry products promoted by Distributor to any person involved in Distributor's selling process, including but not limited to Distributor's Field Sales Representatives and Health Systems Representatives, as having Best Value Products status or having the benefit of any other promotions or incentive programs. Distributor shall not provide any incentive or bonus to anyone involved in Distributor's selling process, including but not limited to Distributor's Field Sales Representatives or Health Systems Representatives, for any purpose including the purposes of the variable compensation and performance quota system nor permit any third party to directly or indirectly offer or pay any incentives or bonuses to such employees or agents involved in Distributor's selling process with respect to any chemistry analyzer competitive with the Stratus and Paramax classes of Products. (1) In addition to any commission or incentive required to be paid under the Distribution Agreement, Distributor shall - Page 7 of 18 - involved in Distributor's selling process, including but not limited to Distributor's Field Sales Representatives or Health Systems Representatives, for any purpose including the purposes of the variable compensation and performance quota system nor permit any third party to directly or indirectly offer or pay any incentives or bonuses to such employees or agents involved in Distributor's selling process with respect to any chemistry analyzer competitive with the Stratus and Paramax classes of Products. (1) In addition to any commission or incentive required to be paid under the Distribution Agreement, Distributor shall paid to the Laboratory Specialist selling such Paramax Products regardless of the volume or quantity of Paramax Product sold by that person). (2) With respect to specialty chemistry assays, the conditions and limitations imposed by this Section 4(d) shall apply only to the following assays that are performed on a specialty chemistry analyzer: creatine kinase-muscle band (CK-MB) quantitative, myoglobin quantitative, troponin-I quantitative, and any other acute chest pain, cardiac related assay. (3) The conditions and limitations imposed by this Section 4(d) shall not apply to any solicitation of or sale to any customer account of any general chemistry analyzer which performs less than 250 tests per hour. - Page 8 of 18 - create a special incentive program ("Special Incentive Program") for the Paramax class of Products which will enable Distributor's Laboratory Specialists or equivalent sales personnel to earn a separate bonus or commission in addition to the bonus or commission paid on sales of Best Value Product status Paramax Products, at a rate of two percent (2%) of gross profit for each Paramax Product sold (it being understood that such bonus or commission will be affords materially less favorable treatment than that given to Paramax class of Products under the Best Value Product program. (e) Notwithstanding anything to the contrary, in the event that Distributor promotes any chemistry analyzer as permitted above, other than an analyzer manufactured or sold by Supplier or its affiliates, as having Best Value Product status or having the benefit of any other promotion or incentive, to any person involved in Distributor's selling process for any purpose, then Supplier shall have the right to terminate any Paramax, Stratus or other chemistry programs which were created pursuant to Paragraph 6 hereof or otherwise. (f) Except as permitted under the Distribution Agreement, prior to December 17, 1997, Supplier shall take no affirmative action to implement the sale of such Stratus and Paramax classes of Products directly by Supplier or its affiliates to the customer except as otherwise permitted hereunder. - Page 9 of 18 - (4) Notwithstanding the conditions set forth in this Paragraph 4(d), Distributor may promote a Best Value Product status for other general chemistry analyzers in non-Paramax accounts only; provided that any such promotion (g) Nothing in this Paragraph 4 shall modify or limit Distributor's obligations under Paragraph 5 of the Distribution Agreement. 5. DuPont IVD Products. ------------------- The parties acknowledge that the technology and products of the worldwide in vitro diagnostics business of E.I. DuPont de Nemours and Company that -- ----- was acquired by Supplier's affiliate on May 7, 1996 (the "DuPont IVD Business") are not and shall not be considered to be Products for any purpose, including Section 8(d) of the Distribution Agreement, at any time under the Distribution Agreement. Distributor hereby releases Supplier and its affiliates from any past, present or future claim, liability expense, suit, action, damage or the like arising out of or resulting from Supplier's or its affiliates' solicitation of orders, sale or distribution of products of the IVD Business other than through Distributor, based on or related to the Distribution Agreement or that Purchase Agreement between Baxter International Inc. and Diagnostics Holding Inc. dated October 1, 1994 and amended and restated as of December 15, 1994. 6. New Business Opportunities: Business Evaluation. ------------------------------------------------ (a) Prior to October 1, 1996, Supplier and Distributor shall assemble a Steering Team which will be charged with identifying prior to - Page 10 of 18 - October 31, 1996, ways to enhance their combined business opportunities for the sale of any products, including Products. Both parties will work together to identify business opportunities that could generate $2.2 million to $5.8 million in annual incremental gross profit; such business shall be business which Supplier would not otherwise be able to generate without Distributor's assistance. The Steering Team shall focus on (i) developing and agreeing upon margins and bonus incentives (which would be calculated on a monthly basis, if possible, or on a quarterly basis and paid to Distributor within thirty (3O) days of such calculation) in order to capitalize on such opportunities; and (ii) establishing mechanisms by which Supplier's Regional Managers and Vice President of Sales and the Distributor's Lab Specialist Managers will verify incremental business secured by the participation of Distributor. In the event Supplier and Distributor agree to programs involving products relating to the DuPont IVD Business, Supplier shall perform physical distribution, invoicing and accounts receivable collection services; if a customer requires single invoicing by Distributor, Supplier will support such a business requirement. Distributor shall not promote such a single invoicing program to any IVD customers; provided, however, Distributor may promote to - Page 11 of 18 - customers its general capabilities of single invoicing as one component of its cost reduction capabilities. (b) On or before October 1, 1996, Distributor and Supplier shall jointly assemble a second Steering Team which will include senior management representatives of each party, which will be charged with reviewing and addressing performance issues, including but not limited to operations, regulations, data and pricing. Such Steering Team shall serve as the single point contact for all current and future problem resolution, program development and administration, and Distributor shall use best efforts to implement such resolutions uniformly throughout all sales regions of Distributor and, to the extent Supplier has any duties, Supplier shall use best efforts to implement such resolutions throughout its organization. Such Steering Team shall establish, on or prior to October 31, 1996, the initial performance standards for Distributor and shall develop a means of measuring such performance standards with respect to such things as financial performance, personnel commitment, customer service and QAP support, E&O exposure, refrigerator failures, pricing accuracy, and the accuracy and timeliness of lot level inventory information, lot traceability, lot segregation and hold processing. After October 31, 1996, the Steering Team shall review and update such initial standards and - Page 12 of 18 - establish such additional standards as are necessary to address any issues or problems which Supplier identifies from time to time. Once such standards are agreed to by the Steering Team, Distributor and Supplier, to the extent that Supplier has any duties under such standards, shall use their best efforts to comply with such standards. Notwithstanding anything in this Paragraph 6(b) to the contrary, nothing herein shall relieve Distributor of its obligations under Paragraph 5 of the Distribution Agreement. (c) Distributor will continue to provide to Supplier access to the domestic information systems and services provided to Supplier under the Transition Services Agreement between the parties dated December 19, 1994 up to and including May 16, 1997, on the same basis as Supplier was contractually obligated to pay for such systems and services under the Transition Services Agreement, provided that Distributor may increase charges to Supplier to offset any additional direct costs incurred. Examples of these information systems and services are Adept, Fieldwatch, SRTK, EUC and the like. Nothing in this Paragraph 6(c) shall limit or modify Distributor's obligations to provide information systems and services or Supplier's obligations to pay for such systems and services under the Distribution Agreement. - Page 13 of 18 - 7. Limitation on Further Terminations. ---------------------------------- Supplier shall not exercise its rights under Section 8(c)(ii) of the Distribution Agreement by giving Distributor the written notice required with respect to any class or classes of Products prior to June 17, 1997. Such date shall be extended to June 17, 1998, provided that the second Steering Team has reached written agreement on initial and, if applicable, subsequent performance standards to be established from time to time pursuant to Section 6(b) and Distributor shall continue to meet such performance standards. If the second Steering Team has not reached agreement on such standards or, despite Distributor's best efforts to meet the performance standards established under Paragraph 6(b), if Distributor has not in fact met those performance standards or other terms of the Distribution Agreement, such June 17, 1997 date shall not be extended. 8. Certain Termination Provisions. ------------------------------ (a) As referred to in Section 8(d) of the Distribution Agreement, the forty percent (40%) of the aggregate gross profit earned by Distributor from the distribution of Products shall be based upon calendar year 1995 rather than the applicable "preceding fiscal year". - Page 14 of 18 - (b) Supplier and Distributor agree that for purposes of Section 8(d) of the Distribution Agreement, gross profits from sales of products of the DuPont IVD Business shall not be taken into account in any respect. (c) For purposes of 8(d) only of the Distribution Agreement, the Distribution Agreement shall be deemed terminated as of December 16, 1996 with respect to the Stratus and Paramax classes of Products. (d) Distributor shall have the right to give Supplier notice of termination of the Best Value Product status of the Paramax and Stratus classes of Products or, in addition, in the case of the Paramax class of Products, the Special Incentive Program, as of June 17, 1997 to be effective December 16, 1997. In the event that Distributor gives Supplier such notice, notwithstanding anything in Paragraphs 1(b) and 7 to the contrary, Supplier shall have the right to provide notice of termination of the Distribution Agreement as to any class of Product or as to all classes of Products pursuant to the terms of the Distribution Agreement to be effective December 16, 1997 or thereafter. - Page 15 of 18 - 9. Acquisition By Dade. ------------------- In the event of an acquisition by Supplier or any of its affiliates of all or any portion of a business that includes products which would otherwise be considered Products under the Distribution Agreement ("Acquired Products"), (i) such Acquired Products, together with line extensions and other subsequent products based upon technology held by the acquired business, shall not be considered to be Products under the Distribution Agreement for any purpose at any time and (ii) the parties agree to negotiate in good faith to structure a mutually beneficial distribution arrangement for any such Acquired Products. Such negotiations shall commence no later than thirty (30) days after the closing of any such acquisition. The parties agree to negotiate in good faith to reach an agreement regarding the distribution of such Acquired Products within sixty (60) days of the commencement of negotiations (it being understood that neither party shall be obligated to in fact reach agreement, and it further being understood that any good faith negotiation would require that Distributor not demand of Supplier more favorable terms than those terms set forth in the Distribution Agreement). If the parties cannot agree on such an arrangement regarding the Acquired Products within said sixty (60) day period, then notwithstanding anything in the Distribution Agreement to the contrary, as its only right and remedy, Distributor would have the right to sell, solicit orders for and otherwise distribute products - Page 16 of 18 - that are competitive with any of the Acquired Products. Distributor shall have sixty (60) days following the end of such sixty (60) day negotiation period to exercise such right and remedy hereunder by delivering written notice of such election to Supplier. Following such notification, Supplier would have the right to sell, solicit orders for or otherwise distribute products competitive with such Acquired Products other than through Distributor. 10. This Amendment together with the Distribution Agreement constitutes the entire agreement between the parties with respect to the subject matter hereof and shall supersede all previous negotiations, commitments and writings with respect to such subject matter. 11. Counterparts. ------------ For the convenience of the parties hereto, this Amendment may be executed in one or more counterparts, each of which shall be deemed an original for all purposes. - Page 17 of 18 - IN WITNESS WHEREOF, the parties have by their duly authorized officers executed this amendment on September 26, 1996, effective as of September 26, 1996. SUPPLIER: DISTRIBUTOR: - -------- ----------- DADE INTERNATIONAL INC. BAXTER HEALTHCARE CORPORATION By: /s/ John F. Doherty By: /s/ Ron LaBrum --------------------------- --------------------------- Name: John F. Doherty Name: Ron LaBrum Title: Senior Vice President of Title: President Supply Chain ------------------------ ------------------------ Operations ---------- By: /s/ Scott T. Garrett By: /s/ Joe Damico --------------------------- --------------------------- Name: Scott T. Garrett Name: Joe Damico Title: President and Chief Title: Group Vice President ------------------------ ------------------------ Executive Officer ----------------- - Page 18 of 18 - EX-10.16 15 DIAGNOSTICS HOLDING, INC. 1996 EXEC STOCK EXHIBIT 10.16 DIAGNOSTICS HOLDING, INC. ------------------------- 1996 EXECUTIVE STOCK PURCHASE AND OPTION PLAN --------------------------------------------- 1. PURPOSE OF PLAN. This 1996 Executive Stock Purchase and Option Plan --------------- (the "1996 Plan") of Diagnostics Holding, Inc. (the "Company") is designed to provide incentives to such present and future officers and employees of the Company or its subsidiaries as may be selected in the sole discretion of the Board, and to such consultants or advisers to the Company as the Chief Executive Officer of the Company shall recommend and the Board shall approve as performing services for the Company or its subsidiaries which merit participation in this 1996 Plan (collectively, "Participants"), through the grant of Options by the Company to Participants or through the sale of Common Stock to Participants. Only those Participants who are employees of the Company and its Subsidiaries shall be eligible to receive incentive stock options. 2. DEFINITIONS. Certain terms used in this 1996 Plan have the meanings ----------- set forth below: "Board" means the Company's board of directors. ----- "Cause" means (i) the intentional disregard of a written direction from the ----- Board to a Participant to which such Participant has not objected within ten (10) days of receiving such written direction, which intentional disregard is materially injurious to the Company or any of its Subsidiaries, (ii) the knowing and intentional theft by such Participant of property of the Company or any of its Subsidiaries, which property has a substantial value, or (iii) the commission by such Participant of an act of moral turpitude which is materially injurious to the Company or any of its Subsidiaries. Class L Common" means the Company's Class L Common Stock, par value $.01 -------------- per share, or, in the event that the outstanding shares of such Class L common stock are hereafter recapitalized, converted into or exchanged for different stock or securities of the Company, such other stock or securities. "Code" means the Internal Revenue Code of 1986, as it may be amended from ---- time to time. "Common" means the Company's Common Stock, par value $.01 per share, or, in ------ the event that the outstanding shares of such common stock are hereafter recapitalized, converted into or exchanged for different stock or securities of the Company, such other stock or securities. "Common Stock" means the Class L Common and the Common. ------------ "Executive Stock" with respect to a Participant, means any Common Stock --------------- purchased by such Participant hereunder and any Common Stock issued to such Participant upon exercise of any Options granted hereunder. "Fair Market Value" of a share of Common Stock means (a) the mean between ----------------- the highest and lowest reported sale prices of a share of Common Stock on the New York Stock Exchange -- Composite Transactions Table (or, if not so reported, on any domestic stock exchanges on which the Common Stock is then listed); or (b) if the Common Stock is not listed on any domestic stock exchange, the mean between the closing high bid and low asked prices of a share of Common Stock as reported by the National Association of Securities Dealers Automated Quotation System (or, if not so reported, by the system then regarded as the most reliable source of such quotations); or (c) if the Common Stock is listed on a domestic stock exchange or quoted in the domestic over-the-counter market, but there are not reported sales or quotations, as the case may be, on the given date, the value determined pursuant to (a) or (b) above using the reported sale prices or quotations on the last previous date on which so reported; or (d) if none of the foregoing clauses apply, the fair market value of a share of Common Stock without discounts as determined in good faith by the Board and stated in writing in a notice delivered to the holders of the Common Stock involved (a "Determination Notice"). "Independent Third Party" means any person who, immediately prior to the ----------------------- contemplated transaction, does not own in excess of 5% of the Company's Common Stock on a fully-diluted basis (a "5% Owner"), who is not controlling, -------- controlled by or under common control with any such 5% Owner and who is not the spouse or descendent (by birth or adoption) of any such 5% Owner or a trust for the benefit of such 5% Owner and/or such other persons. "Investors" means the Persons listed on Schedule A hereto. --------- -2- "Option" means any option enabling the holder thereof to purchase any class ------ of Common Stock from the Company granted by the Board pursuant to the provisions of this Plan. Options to be granted under this Plan may be incentive stock options within the meaning of Section 422 of the Code ("Incentive Stock Options") or in such other form, consistent with this Plan, as the Board may determine. "Original Value" of each share of Executive Stock will be equal to the -------------- purchase price paid by the Participant for each share of Class L Common, and the price paid by the Participant for each share of Common (as proportionally adjusted for all stock splits, stock dividends and other recapitalizations affecting the Class L Common or the Common, as the case may be, subsequent to the date of adoption hereof). "Permitted Transferee" means a person to whom a Participant has transferred -------------------- Common Stock or Options pursuant to a provision hereof or of an agreement to which such Participant and the Company are parties which permitted such transfer at the time such transfer was effected. "Subsidiary" means any corporation (other than the Company) in an unbroken ---------- chain of corporations beginning with the Company if, at the time the option is granted, each of the corporations other than the last corporation in the chain owns stock possessing 50% or more of the total combined voting power of all classes of stock in one of the other corporations in such chain. 3. GRANT OF OPTIONS. The Board shall have the right and power to grant to ---------------- any Participant Options at any time prior to the termination of this Plan in such quantity, at such price, on such terms and subject to such conditions that are consistent with this Plan and established by the Board. Options granted under this Plan shall be in one of the forms described in this paragraph 3 below, or in such other form or forms as the Board may determine, and shall be subject to such additional terms and conditions and evidenced by agreements as shall be determined from time to time by the Board. a. Target Options. -------------- b. A "Tranche I Option" shall entitle a Participant to purchase from the ---------------- Company one or more shares of Common and shall have an exercise price per share of $7.00 (the "Tranche I Price"). --------------- -3- c. A "Tranche II Option" shall entitle a Participant to purchase from the ----------------- Company one or more shares of Common and shall have an exercise price per share of $16.00 (the "Tranche II Price"). ---------------- d. Tranche I Options and Tranche II Options are referred to herein as "Target Options," and the shares issued upon exercise of the Tranche I Options - --------------- or the Tranche II Options are referred to herein as "Target Option Shares". The -------------------- number of Target Option Shares, the Tranche I Price, and the Tranche II Price will be equitably adjusted for any stock split, stock dividend, reclassification or recapitalization of the Company which occurs subsequent to the date of adoption hereof. Target Options will expire (the "Expiration Date") on the --------------- earlier of the tenth anniversary of the date of adoption hereof or the date of termination of the respective Participant's employment with the Company or a Subsidiary for any reason (the "Termination Date"), provided that such ---------------- Participant will have 30 days after the Expiration Date to exercise Target Options with respect to Target Option Shares which are then exercisable pursuant to paragraph 3(a) (iv) below. Target Options are not intended to be "incentive stock options" within the meaning of Section 422A of the Internal Revenue Code. i. Exercisability. Target Options will immediately become exercisable with -------------- respect to Target Option Shares on the date immediately prior to the tenth anniversary of the date of adoption hereof (the "Vesting Date"), provided that ------------ the Vesting Date shall be accelerated with respect to Tranche I Options or Tranche II Options, as the case may be, to the date on which a Tranche I Acceleration Event or a Tranche II Acceleration Event (as defined below) occurs. For this purpose, a Tranche I Acceleration Event shall be the date on which the purchasers of the Company's Common Stock under that certain Stock Purchase Agreement dated as of December 20, 1994 (the "Stock Purchase Agreement") as set forth on Exhibit A attached hereto (collectively, the "Investors") have achieved --------- an Investor Return Multiple (as defined below) of at least three (a "Tranche I --------- Acceleration Event"); and a Tranche II Acceleration Event shall be the date on - ------------------ which the Investors have achieved an Investor Return Multiple of at least five (a "Tranche II Acceleration Event"). A Tranche I Acceleration Event and Tranche ----------------------------- II Acceleration Event are also referred to herein as "Acceleration Events". ------------------- -4- ii. Vesting of Target Option Shares. Target Option Shares shall be vested ------------------------------- immediately upon exercise of the Target Options with respect thereto. (1) Procedure for Exercise. At any time after Target Options have ---------------------- become exercisable, whether on the Vesting Date or pursuant to an Acceleration Event and prior to the Expiration Date, a Participant may exercise all or a portion of his or her Target Options with respect to Target Option Shares which have become exercisable by delivering written notice of exercise to the Company together with (A) a written acknowledgment that such Participant has read, and has been afforded an opportunity to ask questions of management of the Company regarding all financial and other information provided to such Participant regarding the Company, and (B) payment in full by delivery of a cashier's or certified check in the amount of the Tranche I Price with respect to Tranche I Options and the Tranche II Price with respect to Tranche II Options plus the amount of any additional federal and state income taxes required to be withheld by reason of the exercise of Target Options. As a condition to any exercise of a Target Option, a Participant will permit the Company to deliver to him or her all financial and other information regarding the Company and its Subsidiaries which it believes necessary to enable such Participant to make an informed investment decision. e. Determination of Investor Return Multiple. ----------------------------------------- i. "Investor Return Multiple" means the number determined by dividing Cash Inflows (as defined below) by Cash Outflows (as defined below). The calculation of Investor Return will be determined in good faith by the Board. ii. "Cash Inflows" as used herein shall include the sum of all cash ------------ payments received by the Investors on or prior to an Acceleration Event with respect to debt or equity securities of the Company purchased by the Investors (excluding all management fees, points, and other fees paid to the Investors by or on behalf of the Company and/or its Subsidiaries) prior to such Acceleration Event (whether such payments are received from the Company or any third party, and whether such payments -5- are received as interest, dividends, proceeds with respect to sale or redemption of such securities, upon a liquidation of the Company or otherwise) including reimbursement for payments made by Investors in respect of fees and expenses incurred in connection therewith. iii. "Cash Outflows" as used herein shall include the sum of all cash ------------- payments and investments made by the Investors to and in the Company and to others to acquire debt or equity securities of the Company including payments made by Investors in respect of fees and expenses incurred in connection therewith. f. Time Options. ------------ i. A "Time Option" shall entitle a Participant to purchase one or more ----------- shares of Common ("Time Option Shares") and shall have an exercise price per ------------------ share of $4.00 (the "Option Price"). The Option Price and the number of Time ------------ Option Shares will be equitably adjusted for any stock split, stock dividend, reclassification or recapitalization of the Company which occurs subsequent to the date of this Agreement. Time Options will expire on the Expiration Date, provided that a Participant will have 30 days after the Expiration Date to exercise his or her Time Option with respect to the percentage of Time Option Shares as determined pursuant to paragraph 3(b)(iii) below. Time Options are not intended to be "incentive stock options" within the meaning of Section 422A of the Internal Revenue Code. ii. Exercisability. On each date set forth below, a Time Option will -------------- have vested and become exercisable with respect to the percentage of Time Option Shares set forth opposite such date if the respective Participant is employed by the Company or a Subsidiary on such date: Cumulative Percentage Date of Time Options Exercisable - ---- --------------------------- May 7, 1997 20% May 7, 1998 40% May 7, 1999 60% May 7, 2000 80% May 7, 2001 100% -6- g. Vesting of Time Option Shares. Time Option Shares shall be vested ----------------------------- immediately upon exercise of the Time Option with respect thereto. h. Procedure for Exercise. At any time after a Time Option has become ---------------------- exercisable with respect to any Time Option Shares and prior to the Expiration Date, a Participant may exercise the Time Option with respect to the Time Option Shares above by delivering written notice of exercise to the Company, together with (a) written acknowledgment that such Participant has read and has been afforded an opportunity to ask questions of management of the Company regarding all financial and other information provided to such Participant regarding the Company and (b) payment in full by delivery of a cashier's or certified check in the amount of the Option Price with respect to such Time Option Shares plus the amount of any additional federal and state income taxes required to be withheld by reason of the exercise of the Time Option. As a condition to any exercise of a Time Option, a Participant will permit the Company and its Subsidiaries to deliver to him or her all financial and other information regarding the Company and its Subsidiaries which it believes necessary to enable such Participant to make an informed investment decision. 4. SALE OF COMMON STOCK. The Board shall have the power and authority to -------------------- sell to any Participant any class or classes of Common Stock ("Purchased Stock") --------------- at any time prior to the termination of this 1996 Plan in such quantity, at such price, on such terms and subject to such conditions that are consistent with this 1996 Plan and established by the Board. Common Stock sold under this 1996 Plan shall be subject to such terms and evidenced by agreements as shall be determined from time to time by the Board. 5. REPURCHASE OPTION. In the event that a Participant is no longer ----------------- employed by the Company or any of its Subsidiaries for any reason (the date of such termination being referred to herein as the "Termination Date"), the ---------------- Executive Stock issued to such Participant, whether held by such Participant, or one or more Permitted Transferees (as defined in paragraph 2 above), will be subject to repurchase by the Company and the Investors (solely at their option) pursuant to the terms and conditions set forth in this paragraph 5 (the "Repurchase Option"). - ------------------ -7- a. Termination Other than for Cause. If a Participant is no longer -------------------------------- employed by the Company or any of its Subsidiaries as a result of any reason other than such Participant's termination for Cause, then on or after the Termination Date, the Company may elect to purchase all (but not less than all unless the Company is unable, as described in subparagraph (f) below, to purchase all of the Executive Stock issued to such Participant at a price per share equal to (i) the Fair Market Value thereof with respect to any Termination Date occurring after May 7, 1998 (x) as determined on the Termination Date, if the Repurchase Notice (as defined in subparagraph (c) below) has been delivered within three months of the Termination Date, or (y) as determined on a date determined by the Board within 30 days prior to the delivery of the Repurchase Notice, if the Repurchase Notice is delivered after the third month following the Termination Date or (ii) 110% of the price paid for such Executive Stock by Executive, with respect to any Termination Date occurring on or prior to May 7, 1998 and at such time that the Company is not a Public Company (as defined in the Stock Purchase Agreement) (an "Early Termination"). b. Termination for Cause. If a Participant is no longer employed by the --------------------- Company or any of its Subsidiaries as a result of such Participant's termination for Cause, then on or after the Termination Date, the Company may elect to purchase all (but not less than all unless the Company is unable, as described in subparagraph (f) below, to purchase all) of the Executive Stock issued to such Participant at a price per share equal to the lower of its Original Value or the Fair Market Value thereof. c. Repurchase Procedures. The Company may elect to exercise the right to --------------------- purchase all (but not less than all unless the Company is unable, as described in subparagraph (f) below, to purchase all) of the shares of Executive Stock issued to a Participant pursuant to the Repurchase Option by delivering written notice (the "Repurchase Notice") to the holder or holders of the such Executive ----------------- Stock. The Repurchase Notice will set forth the number of shares of Executive Stock to be acquired from such holder(s), the Fair Market Value, the price paid by Executive for such shares, the aggregate consideration to be paid for such shares and the time and place for the closing of the transaction. In the event that the Company elects to purchase less than all, of such Executive Stock pursuant to the -8- terms of this paragraph 5, if any shares of such Executive Stock are held by Permitted Transferees of such Participant, the Company shall purchase the shares elected to be purchased from such holder(s) of Executive Stock, pro rata according to the number of shares of Executive Stock held by such holder(s) at the time of delivery of such Repurchase Notice (determined as nearly as practicable to the nearest share). If Executive Stock of different classes is to be purchased by the Company and Executive Stock is held by Permitted Transferees of such Participant, the number of shares of each class of Executive Stock to be purchased will be allocated among such holders, pro rata according to the total number of shares of Executive Stock to be purchased from such person. d. Investors' Rights. ----------------- i. If the Company is unable, as described in subparagraph (f) below, to purchase all of the Executive Stock (issued to a particular Participant) pursuant to the Repurchase Option prior to the 180th day following the Termination Date, the Investors will be entitled to exercise the Repurchase Option, in the manner set forth in this paragraph 5, for the Executive Stock the Company has not elected to purchase (the "Available Shares"). As soon as ---------------- practicable, but in any event within thirty (30) days after the Company determines that there will be any Available Shares, the Company will deliver written notice (the "Option Notice") to the Investors setting forth the number ------------- of Available Shares and the price for each Available Share as determined pursuant to the provisions of this paragraph 5. ii. Each of the Investors will initially be permitted to purchase its pro rata share (based upon the number of shares of Common Stock then held by such Investors) of the Available Shares. Each Investor may elect to purchase any number of the Available Shares (subject to all of the terms of this paragraph 5) by delivering written notice to the Company within 30 days after receipt of the Option Notice from the Company (such 30-day period being referred to herein as the "Investor Election Period"). ------------------------ iii. As soon as practicable but in any event within five (5) days after the expiration of the Investor Election Period, the Company will, if necessary, notify -9- the Investors electing to purchase Available Shares of any Available Shares which Investors have elected not to purchase and each of the electing Investors will be entitled to purchase the remaining Available Shares on the same terms as described above (the "Second Option Notice"); provided that if in the aggregate -------------------- such Investors elect to purchase more than the remaining Available Shares, such remaining Available Shares purchased by each such Investor will be reduced on a pro rata basis based upon the number of shares of Common Stock then held by such Investors ; and provided further that if in the aggregate such Investors elect to purchase less than all of the remaining Available Shares, the Investors shall not be permitted to purchase any of the Available Shares. Provided that, in the aggregate, the Investors elect to purchase all but not less than all of the Available Shares, each Investor may elect to purchase any of the remaining Available Shares available to such Investor by delivering written notice to the Company within 10 days after the delivery of the Second Option Notice (with such 10-day period referred to herein as the "Second Period"). ------------- iv. As soon as practicable but in any event within five (5) business days after the expiration of the Investor Election Period or the Second Investor Election Period (if any) the Company will, if necessary, notify the holder(s) of the Executive Stock as to the number of such shares being purchased from the holder(s) by each of the Investors (the "Supplemental Repurchase Notice"). At ------------------------------ the time the Company delivers a Supplemental Repurchase Notice to the holder(s) of such Executive Stock, the Company will also deliver to each electing Investor written notice setting forth the number of such shares that the Company and each Investor will acquire, the aggregate purchase price to be paid and the time and place of the closing of the transaction. v. The Company shall have the option at any time to repurchase from any Investor any shares of Common Stock purchased by such Investor pursuant to the terms hereof at a price per share equal to the amount paid therefor by such Investor plus 8% per annum from the date such Investor purchased such shares to the date of repurchase of such shares by the Company. For purposes of determining an -10- Investor Return Multiple, the amount of cash payments to, and investments by, Investors under this paragraph 5 shall not be taken into account in determining Cash Inflows and Cash Outflows. e. Closing. The closing of the transactions contemplated by this ------- paragraph 5 will take place on the date designated by the Company in the Repurchase Notice or the Supplemental Repurchase Notice, as the case may be, which date will not be more than 90 days after the delivery of such notice. The Company and/or the Investors, as the case may be, will pay for the Executive Stock to be purchased pursuant to the Repurchase Option by delivery of, in the case of each Investor, a check payable to the holder of Executive Stock in the full amount payable hereunder for such Executive Stock (the "Repurchase Price"), and in the case of the Company (i) a check payable to the holder of such Executive Stock in the amount of the Repurchase Price or (ii) if the Repurchase Price is greater than $100,000, the Company may elect to deliver a check payable to the holder of such Executive Stock in an amount equal to the greater of $100,000 or one-third (1/3) of the Repurchase Price, and a note or notes in the amount of the balance of the Repurchase Price payable in three equal annual installments beginning on the first anniversary of the closing of such purchase and bearing interest (payable quarterly) at a rate per annum equal to 8%. Any notes issued by the Company pursuant to this paragraph 5(e) shall be subject to any restrictive covenants to which the Company is subject at the time of such purchase. The Company and/or the Investors, as the case may be, will receive customary representations and warranties from each seller regarding the sale of Executive Stock, including but not limited to the representation that such seller has good and marketable title to the Executive Stock to be transferred free and clear of all liens, claims and other encumbrances. f. Restrictions on Repurchase. Notwithstanding anything to the contrary -------------------------- contained in this Plan, all repurchases of Executive Stock by the Company shall be subject to applicable restrictions contained in the Delaware General Corporation Law and in the Company's and its Subsidiaries' debt and equity financing agreements. If any such restrictions prohibit the repurchase of Executive Stock hereunder which the Company is -11- otherwise entitled to make, the Company may make such repurchases as soon as it is permitted to do so under such restrictions. 6. ADMINISTRATION OF THE PLAN. The Board shall have the power and -------------------------- authority to prescribe, amend and rescind rules and procedures governing the administration of this Plan, including, but not limited to the full power and authority (i) to interpret the terms of this Plan, the terms of any Options granted under this Plan, and the rules and procedures established by the Board governing any such Options and (ii) to determine the rights of any person under this Plan, or the meaning of requirements imposed by the terms of this Plan or any rule or procedure established by the Board. Each action of the Board shall be binding on all persons. 7. PARTICIPATION RIGHTS. At least 30 days prior to any sale or exchange -------------------- (a "Transfer") of any class of Common Stock by an Investor (other than a -------- Transfer among the Investors or an employee of the Company or its Subsidiary), such Investor (the "Transferring Stockholder") will deliver a written notice ------------------------ (the "Sale Notice") to the Company and the holders of such class of Executive ----------- Stock (the "Other Stockholders"), specifying in reasonable detail the identity ------------------ of the prospective transferee(s) and the terms and conditions of the Transfer. The Other Stockholders may elect to participate in the contemplated Transfer by delivering written notice to the Transferring Stockholder within 30 days after delivery of the Sale Notice. If any Other Stockholders have elected to participate in such Transfer, each of the Transferring Stockholder and such Other Stockholders will be entitled to sell in the contemplated Transfer, at the same price and on the same terms, a number of shares of such class of Common Stock equal to the product of (i) the quotient determined by dividing the number of shares of such class of Common Stock owned by such person by the aggregate number of shares of such class of Common Stock owned by the Transferring Stockholder and the Other Stockholders participating in such sale and (ii) the number of shares of such class of Common Stock to be sold in the contemplated Transfer. Notwithstanding the foregoing, in the event that the Transferring Stockholder intends to transfer more than one class of Common Stock, the Other Stockholders participating in such transfer shall be required to sell in the contemplated Transfer a pro rata portion of shares of all classes of Common Stock, which portion shall be -12- determined in the manner set forth immediately above. The Transferring Stockholder will use reasonable efforts to obtain the agreement of the prospective transferee(s) to the participation of the Other Stockholders in any contemplated Transfer, and the Transferring Stockholder will not Transfer any of its Securities to the prospective transferee(s) unless (i) the prospective transferee(s) agrees to allow the participation of the Other Stockholders or (ii) the Transferring Stockholder agrees to purchase the number of such class of Securities from the Other Stockholders which the Other Stockholders would have been entitled to sell pursuant to the preceding sentence. 8. ANTI-DILUTION. ------------- a. If and whenever on or after the date of adoption hereof, the Company issues or sells, or in accordance with this paragraph 8 is deemed to have issued or sold, any shares of Common Stock (including shares held in the Company's treasury) ("New Stock") some or all of which are issued and/or sold, other than pursuant to the terms hereof, to any of the Investors or any of their affiliates (the "Existing Stockholders"), then immediately upon such issuance or sale the Company shall, in a written notice (a "New Stock Notice") delivered to each Participant no later than the tenth (10th) day following such issuance or sale, offer for sale to each Participant a number of additional shares of Common Stock such that the number of shares of Common Stock, plus the number of unexercised Options, held by such Participant immediately after such issuance or sale (assuming purchase by such Participant of such additional shares) equals the number of shares of Common Stock, plus the number of unexercised Options, held by such Participant immediately prior to such issuance or sale multiplied by the total number of shares of Common Stock deemed under this paragraph 8 to be outstanding immediately after such issuance or sale, divided by the total number ----- of shares of Common Stock deemed under this paragraph 8 to be outstanding immediately prior to such issuance or sale. The New Stock Notice shall state ----- -- the number of shares offered for sale to such Participant pursuant to this paragraph 8, the purchase price per share therefor, as determined pursuant to this paragraph 8, and the time and place for the closing of the purchase in the event such Participant accepts the offer. The date of such closing shall be not more than ninety (90) days following the issuance or sale of the New Stock. -13- b. A Participant may elect to purchase all, none, or any portion not less than 20% of the Common Stock offered for sale in a New Stock Notice by delivering to the Company written notice thereof within fifteen (15) days following such Participant's receipt of such New Stock Notice. In the event any one or more Participants elect to purchase less than all of the shares offered for sale to such Participants in New Stock Notices with respect to a particular issuance or sale, the Company shall make available any such shares which such Participants elect not to purchase on a pro rata basis to all other Participants, in a manner substantially similar to that provided in paragraph 5(d) hereof with respect to Investors' Rights. c. For purposes of the computation referred to in this paragraph 8, the number of shares of Common Stock outstanding shall be deemed to include all shares issuable to the holders of any securities exercisable for, or convertible into, shares of Common Stock. For purposes of the computation of the consideration per share received, as referred to in this paragraph 8, the consideration received upon issuance or sale of securities shall be deemed to include the consideration received for all securities issued in the same transaction to the same purchaser, as appropriate under the circumstances. The Common Stock offered for sale pursuant to this paragraph 8 shall be of the same class as the New Stock; and, if the New Stock is comprised of Common Stock of more than one class, the stock offered for sale pursuant to this paragraph 8 shall be comprised of the same classes in the same proportions as the New Stock. The purchase price per share for Common Stock offered for sale pursuant to this paragraph 8 shall be equal to the price per share at which the New Stock is sold. d. The Existing Stockholders may, in their sole discretion, elect to fulfill the Company's obligations to Participants under this paragraph 8 out of such Existing Stockholders' holdings of Common Stock. In the event the Existing Stockholders fulfill the Company's obligations to Participants under this paragraph 8 with respect to an issuance or sale of Common Stock, the Company shall have no further obligations to such Participants under this paragraph 8 with respect to such issuance or sale. -14- 9. LIMITATION ON THE AGGREGATE NUMBER OF SHARES. The number of shares of -------------------------------------------- Common Stock issued under this 1996 Plan (including the number of shares of Common Stock with respect to which Options may be granted under this 1996 Plan (and which may be issued upon the exercise or payment thereof)) shall not exceed, in the aggregate, 4,800 shares of Class L Common and 113,200 shares of Common (as such numbers are equitably adjusted pursuant to the terms hereof). If any Options expire unexercised or unpaid or are canceled, terminated or forfeited in any manner without the issuance of Common Stock or payment thereunder, the shares with respect to which such Options were granted shall again be available under this 1996 Plan. Similarly, if any shares of Common Stock issued hereunder, either as Purchase Stock or upon exercise of Options, are repurchased hereunder, such shares shall again be available under this 1996 Plan for reissuance as Executive Stock. In addition, if any party other than the Company purchases shares of Common Stock in lieu of repurchase by the Company, the Company will, as promptly as legally permissible, purchase such shares from such party and such shares shall again be available under this 1996 Plan for reissuance as Executive Stock. In creating this 1996 Plan the Company and its stockholders believe that sufficient shares of Common Stock are being made available under this 1996 Plan to carry out the purposes expressed in Section 1 hereof based upon the number of key management positions and the specific people filling those positions at the time that the Company acquired Dade International, Inc. At that time there were certain positions which the Company expected to fill within one year thereafter. Over time, it may occur that the Company can be managed on a cost effective and more efficient basis with a smaller core management team. Should that occur, the Board has reserved the right to allocate the Common Stock remaining available under this 1996 Plan as a further incentive to existing core management. Should new management positions be added beyond those which existed as of December 20, 1994, when the above numbers of shares were determined, the Company's Chief Executive Officer will prepare a recommendation for the Board. If there are sufficient shares of Common Stock still remaining unallocated under the 1996 Plan he will recommend that the person filling such new position be allocated Common Stock from any shares available under this 1996 Plan at that time. Should there be insufficient Common -15- Stock available, in the opinion of the Chief Executive Officer, to carry out the purposes of this 1996 Plan, he shall prepare a recommendation for the Board which the Board will consider for presentation to the Company's shareholders, proposing an amendment to this 1996 Plan to increase the number of shares of Common Stock available hereunder in order that the individuals who fill such new positions may be added as Participants hereunder without adversely affecting the interests of then existing Participants. Shares of Common Stock to be issued upon exercise of the Options or shares of Common Stock to be sold directly hereunder may be either authorized and unissued shares, treasury shares, or a combination thereof, as the Board shall determine. 10. INCENTIVE STOCK OPTIONS. All Incentive Stock Options (i) shall have ----------------------- an exercise price per share of Common Stock of not less than 100% of the fair market value of such share on the date of grant, (ii) shall not be exercisable more than ten years after the date of grant, (iii) shall not be transferable other than by will or under the laws of descent and distribution and, during the lifetime of the Participant to whom such Incentive Stock Options were granted, may be exercised only by such Participant (or his guardian or legal representative), and (iv) shall be exercisable only during the Participant's employment by the Company or a Subsidiary, provided, however, that the Board -------- ------- may, in its discretion, provide at the time that an Incentive Stock Option is granted that such Incentive Stock Option may be exercised for a period ending no later than either (x) the termination of this 1996 Plan in the event of the Participant's death while an employee of the company or a Subsidiary, or (y) the date which is three months after termination of the Participant's employment for any other reason. The Board's discretion to extend the period during which an Incentive Stock Option is exercisable shall only apply if and to the extent that (i) the Participant was entitled to exercise such option on the date of termination, and (ii) such option would not have expired had the Participant continued to be employed by the Company or a Subsidiary. To the extent that the aggregate fair market value of stock with respect to which Incentive Stock Options are exercisable for the first time by any individual during any calendar year exceeds $100,000, such options shall be treated as options which are not Incentive Stock Options. -16- 11. LISTING, REGISTRATION AND COMPLIANCE WITH LAWS AND REGULATIONS. Each -------------------------------------------------------------- Option shall be subject to the requirement that if at any time the Board shall determine, in its discretion, that the listing, registration or qualification of the shares subject to the Option upon any securities exchange or under any state or federal securities or other law or regulation, or the consent or approval of any governmental regulatory body, is necessary or desirable as a condition to or in connection with the granting of such Option or the issue or purchase of shares thereunder, no such Option may be exercised or paid in Common Stock in whole or in part unless such listing, registration, qualification, consent or approval (a "Required Listing") shall have been effected or obtained, and the holder of the Option will supply the Company with such certificates, representations and information as the Company shall request which are reasonably necessary or desirable in order for the Company to obtain such Required Listing, and shall otherwise cooperate with the Company in obtaining such Required Listing. In the case of officers and other persons subject to Section 16(b) of the Securities Exchange Act of 1934, as amended, the Board may at any time impose any limitations upon the exercise of an Option which, in the Board's discretion, are necessary or desirable in order to comply with Section 16(b) and the rules and regulations thereunder. If the Company, as part of an offering of securities or otherwise, finds it desirable because of federal or state regulatory requirements to reduce the period during which any Options may be exercised, the Board may, in its discretion and without the consent of the holders of any such Options, so reduce such period on not less than 15 days' written notice to the holders thereof. 12. CASH PAYMENTS UPON EXERCISE. Upon the written request of the holder --------------------------- of exercisable Options which are not Incentive Stock Options, the Board may provide that such holder shall, as soon as practicable after the exercise of the Options, receive, in lieu of any issuance of Common Stock, a cash payment in such amount as the Board and such holder may agree, but not more than the excess of the Fair Market Value of a share of Common Stock (on the date the holder recognizes taxable income) over the Option's exercise price multiplied by the number of shares as to which the Option is exercised. -17- 13. ADJUSTMENT FOR CHANGE IN COMMON STOCK. In the event of a ------------------------------------- reorganization, recapitalization, stock split, stock dividend, combination of shares, merger, consolidation or other change in the Common Stock, the Board shall make appropriate changes in the number and type of shares authorized by this 1996 Plan, the number and type of shares covered by outstanding Options and the prices specified therein. 14. TAXES. The Company shall be entitled, if necessary or desirable, to ----- withhold (or secure payment from the 1996 Plan participant in lieu of withholding) the amount of any withholding or other tax due from the Company with respect to any amount payable and/or shares issuable under this 1996 Plan, and the Company may defer such payment or issuance unless indemnified to its satisfaction. 15. TERMINATION AND AMENDMENT. The Board at any time may suspend or ------------------------- terminate this 1996 Plan and make such additions or amendments as it deems advisable under this 1996 Plan, except that they may not, without further approval by the Company's stockholders, (a) increase the maximum number of shares as to which Options may be granted under this 1996 Plan, except pursuant to an express provision hereof or (b) extend the term of this 1996 Plan; provided that, subject to paragraph 11 hereof, the Board may not change any of the terms of a written agreement with respect to an Option between the Company and the holder of such Option without the approval of the holder of such Option. No Options shall be granted or shares of Common Stock issued hereunder after August ___, 2006; provided that, if the term of this 1996 Plan is otherwise extended, no Incentive Stock Options shall be granted hereunder after August ___, 2006. -18- EX-10.17 16 EXECUTIVE AGREEMENT EXHIBIT 10.17 EXECUTIVE AGREEMENT ------------------- EXECUTIVE AGREEMENT dated as of August __, 1996 among Diagnostics Holding, Inc., a Delaware corporation (the "Company"), and ____________ ("Executive"). --------- Pursuant to the Company's 1996 Executive Stock Purchase and Option Plan (the "1996 Plan"), the Company and Executive desire to enter into an agreement --------- pursuant to which Executive will purchase, and the Company will sell, _____ shares of Class L Common and _____ shares of Common. In addition, the Company desires to grant to Executive options to acquire ____ shares of Common, which options shall be divided into three grants, two grants for ____ shares of Common which will be based on performance targets and will have different exercise prices (the "Target Options") and one grant for _____ shares of Common which -------------- will be subject to time vesting (the "Time Option"). The Target Options and the ----------- Time Option are hereinafter referred to individually as an "Option" and ------ collectively as the "Options". All shares of Common Stock now or hereafter ------- acquired by Executive pursuant to the 1996 Plan are referred to herein as the "Executive Stock." - ---------------- The parties hereto agree as follows: STOCK AND OPTION PROVISIONS 1. PURCHASE AND SALE OF STOCK. -------------------------- a. Upon execution of this Agreement, Executive will purchase, and the Company will sell, ______ shares of Class L Common at a price of $44.00 per share and ______ shares of Common at a price of $4.00 per share (collectively, the "Purchased Stock"). The Company will deliver to Executive a copy of, and a --------------- receipt for, the certificate representing such Class L Common and such Common, and Executive will deliver to the Company a certified check or wire transfer of funds in the amount of $_____. Such shares of Class L Common and Common shall be fully vested immediately upon issuance. b. 83(b) Election. Within 30 days after the date hereof, Executive will -------------- make an effective election with the Internal Revenue Service under Section 83(b) of the Internal Revenue Code and the regulations promulgated thereunder. c. Representations and Warranties. In connection with the purchase and ------------------------------ sale of the Purchase Stock hereunder, Executive represents and warrants to the Company that: (i) The Purchased Stock to be acquired by Executive pursuant to this Agreement will be acquired for Executive's own account and not with a view to, or intention of, distribution thereof in violation of the Securities Act of 1933, as amended (the "1933 Act"), or any applicable state securities laws, and -------- the Purchased Stock will not be disposed of in contravention of the 1933 Act or any applicable state securities laws. (ii) Executive [IS AN EXECUTIVE OFFICER OF THE COMPANY/1/,] is sophisticated in financial matters and is able to evaluate the risks and benefits of the investment in the Purchase Stock. (iii) Executive is able to bear the economic risk of his investment in the Purchase Stock for an indefinite period of time because the Purchased Stock has not been registered under the 1933 Act and, therefore, cannot be sold unless subsequently registered under the 1933 Act or an exemption from such registration is available. (iv) Executive has had an opportunity to ask questions and receive answers concerning the terms and conditions of the offering of Purchased Stock and has had full access to such other information concerning the Company and its Subsidiaries as he has requested. (v) This Agreement constitutes the legal, valid and binding obligation of Executive, enforceable in accordance with its terms, and the execution, delivery and performance of this Agreement by Executive does not and will not conflict with, violate or cause a breach of any agreement, contract or instrument to which Executive is a party or any judgment, order or decree to which Executive is subject. d. Acknowledgment. As an inducement to the Company to sell the Purchased -------------- Stock to Executive, as a condition thereto, Executive acknowledges and agrees that neither the issuance of the Purchased Stock to Executive nor any provision contained herein shall entitle Executive to - ---------------------- /1/ To be included only where executive officer is purchasing. -2- remain in the employment of the Company and its Subsidiaries or affect the right of the Company to terminate Executive's employment at any time for any reason. e. 1996 Plan Acknowledgment. The Company and Executive acknowledge and ------------------------ agree that this Agreement has been executed and delivered, and the Purchased Stock has been issued hereunder, in connection with and as part of the compensation and incentive arrangements between the Company and Executive. 2. STOCK OPTIONS. ------------- a. Target Option Grants. The Company hereby grants to Executive, pursuant -------------------- to the Plan, the Target Options to purchase (A) _______ shares of Common (the "Tranche I Options"), with an exercise price of $7.00 (the "Tranche I Price"), - ------------------ --------------- and (B) _______ shares of Common (the "Tranche II Options") with an exercise ------------------ price of $16.00 the "Tranche II Price"). The shares issued upon exercise of the ---------------- Tranche I Options or the Tranche II Options are referred to herein as the ("Target Option Shares"). The number of Target Option Shares, the Tranche I - ---------------------- Price, and the Tranche II Price will be equitably adjusted for any stock split, stock dividend, reclassification or recapitalization of the Company which occurs subsequent to the date of this Agreement. The Target Options will expire (the "Expiration Date") on the earlier of the tenth anniversary of the date hereof or - ---------------- the date of termination of Executive's employment with the Company or a Subsidiary for any reason (the "Termination Date"), provided that Executive will ---------------- have 30 days after the Expiration Date to exercise the Target Options with respect to the Target Option Shares which are then exercisable pursuant to the terms of the 1996 Plan. b. Time Option Grant. The Company hereby grants to Executive, pursuant to ----------------- the Plan, the Time Option to purchase ______ shares of Common Stock ("Time ---- Option Shares"), at a price per share of $4.00 (the "Option Price"). The Option - ------------- ------------ Price and the number of Time Option Shares will be equitably adjusted for any stock split, stock dividend, reclassification or recapitalization of the Company which occurs subsequent to the date of this Agreement. The Time Option will expire on the Expiration Date, provided that Executive will have 30 days after the Expiration Date to exercise the Time Option with respect to the percentage of Time Option Shares as determined pursuant to the terms of the 1996 Plan. -3- c. Securities Laws Restrictions. Executive represents that when Executive ---------------------------- exercises the Options he will be purchasing Executive Stock for Executive's own account and not on behalf of others. Executive understands and acknowledges that federal and state securities laws govern and restrict Executive's right to offer, sell or otherwise dispose of any Executive Stock unless Executive's offer, sale or other disposition thereof is registered under the 1933 Act and state securities laws or, in the opinion of the Company's counsel, such offer, sale or other disposition is exempt from registration thereunder. Executive agrees that he will not offer, sell or otherwise dispose of any Executive Stock in any manner which would: (i) require the Company to file any registration statement (or similar filing under state law) with the Securities and Exchange Commission or to amend or supplement any such filing or (ii) violate or cause the Company to violate the 1933 Act, the rules and regulations promulgated thereunder or any other state or federal law. Executive further understands that the certificates for any Executive Stock Executive purchases will bear the legend set forth in paragraph 5 hereof or such other legends as the Company deems necessary or desirable in connection with the 1933 Act or other rules, regulations or laws. d. Non-Transferability of Option. The Options are personal to Executive ----------------------------- and are not transferable by Executive. Only Executive or his estate or heirs is entitled to exercise the Options. 3. REPURCHASE OPTION. In the event that Executive is no longer employed by ----------------- the Company or any of its Subsidiaries for any reason (the date of such termination being referred to herein as the "Termination Date"), the Executive ---------------- Stock, whether held by Executive, or one or more Permitted Transferees (as defined in paragraph 4 below), will be subject to repurchase by the Company and the Investors (solely at their option) pursuant to the terms and conditions set forth in the 1996 Plan (the "Repurchase Option"). ----------------- 4. RESTRICTIONS ON TRANSFER. ------------------------ a. Transfer of Executive Stock. Without the express written consent of --------------------------- the Company to transfers of Executive Stock in accordance with the terms of this Agreement, Executive will not sell, pledge or otherwise transfer any interest in any shares of Executive Stock, except pursuant to (i) the provisions of paragraphs 2, 3 and 7 hereof, (ii) the provisions of paragraph 4(b) below, (iii) -4- pursuant to the Registration Agreement, dated as of December 20, 1994, as amended, among the Company and its stockholders or (iv) pursuant to the provisions of the 1996 Plan. b. Certain Permitted Transfers. The restrictions contained in this --------------------------- paragraph 4 will not apply with respect to transfers of Executive Stock pursuant to applicable laws of descent and distribution, provided that the restrictions contained in this paragraph 4 will continue to be applicable to the Executive Stock after any such transfer and the transferees of such Executive Stock shall agree in writing to be bound by the provisions of this Agreement. Any transferee of Executive Stock pursuant to a transfer in accordance with the provisions of this subparagraph 4(b) is herein referred to as a "Permitted --------- Transferee." Upon the transfer of Executive Stock pursuant to this paragraph - ---------- 4(b), the Permitted Transferee(s) will deliver a written notice (the "Transfer -------- Notice") to the Company. The Transfer Notice will disclose in reasonable detail - ------ the identity of the Permitted Transferee(s). 5. ADDITIONAL RESTRICTIONS ON TRANSFER. ----------------------------------- a. The certificates representing the Executive Stock will bear the following legend: "THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), AND MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT OR AN EXEMPTION FROM REGISTRATION THEREUNDER. THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE ALSO SUBJECT TO ADDITIONAL RESTRICTIONS ON TRANSFER, CERTAIN REPURCHASE OPTIONS AND CERTAIN OTHER AGREEMENTS SET FORTH IN AN EXECUTIVE AGREEMENT BETWEEN THE ISSUER (THE "COMPANY") AND A CERTAIN EMPLOYEE OF THE COMPANY DATED AS OF AUGUST ______, 1996, A COPY OF WHICH MAY BE OBTAINED BY THE HOLDER HEREOF AT THE COMPANY'S PRINCIPAL PLACE OF BUSINESS WITHOUT CHARGE." b. No holder of Executive Stock may sell, transfer or dispose of any Executive Stock (except pursuant to an effective registration statement under the Securities Act of 1933) without first delivering to the Company an opinion of counsel reasonably acceptable in form and substance to the Company (which counsel shall be reasonably acceptable to the Company) that registration under the 1933 Act is not required in connection with such transfer. -5- 6. DEFINITION OF EXECUTIVE STOCK. For all purposes of this Agreement, ----------------------------- Executive Stock will continue to be Executive Stock in the hands of any holder other than Executive (except for the Company and purchasers pursuant to an offering registered under the 1933 Act or purchasers pursuant to a Rule 144 transaction), and each such other holder of Executive Stock will succeed to all rights and obligations attributable to Executive as a holder of Executive Stock hereunder. Executive Stock will also include shares of the Company's capital stock issued with respect to shares of Executive Stock by way of a stock split, stock dividend or other recapitalization. 7. SALE OF THE COMPANY. ------------------- a. If the Board and the holders of a majority of the shares of Common Stock then outstanding approve a sale of all or substantially all of the Company's assets determined on a consolidated basis or a sale of all or substantially all of the Company's outstanding capital stock (whether by merger, recapitalization, consolidation, reorganization, combination or otherwise) to any Independent Third Party or group of Independent Third Parties (collectively an "Approved Sale"), each holder of Executive Stock will vote for, consent to ------------- and raise no objections against such Approved Sale. If the Approved Sale is structured as (i) a merger or consolidation, each holder of Executive Stock will waive any dissenters rights, appraisal rights or similar rights in connection with such merger or consolidation or (ii) a sale of stock, each holder of Executive Stock will agree to sell all of his shares of Executive Stock and rights to acquire shares of Executive Stock on the terms and conditions approved by the Board and the holders of a majority of the Common Stock then outstanding. Each holder of Executive Stock will take all necessary or desirable actions in connection with the consummation of the Approved Sale as requested by the Company. b. The obligations of the holders of Common Stock with respect to the Approved Sale of the Company are subject to the satisfaction of the following conditions: (i) upon the consummation of the Approved Sale, each holder of Common Stock will receive the same form of consideration and the same portion of the aggregate consideration that such holders of Common Stock would have received if such aggregate consideration had been distributed by the Company in complete liquidation pursuant to the rights and preferences set forth in the Company's Certificate of Incorporation as in effect immediately prior to such Approved Sale; (ii) if any holders of a class -6- of Common Stock are given an option as to the form and amount of consideration to be received, each holder of such class of Common Stock will be given the same option; and (iii) each holder of then currently exercisable rights to acquire shares of a class of Common Stock will be given an opportunity to exercise such rights prior to the consummation of the Approved Sale and participate in such sale as holders of such class of Common Stock. c. If the Company or the holders of the Company's securities enter into any negotiation or transaction for which Rule 506 (or any similar rule then in effect) promulgated by the Securities Exchange Commission may be available with respect to such negotiation or transaction (including a merger, consolidation or other reorganization), the holders of Executive Stock will, at the request of the Company, appoint a purchaser representative (as such term is defined in Rule 501) reasonably acceptable to the Company. If any holder of Executive Stock appoints a purchaser representative designated by the Company, the Company will pay the fees of such purchaser representative, but if any holder of Executive Stock declines to appoint the purchaser representative designated by the Company such holder will appoint another purchaser representative, and such holder will be responsible for the fees of the purchaser representative so appointed. d. Executive and the other holders of Executive Stock (if any) will bear their pro-rata share (based upon the number of shares sold) of the costs of any sale of Executive Stock pursuant to an Approved Sale to the extent such costs are incurred for the benefit of all holders of Common Stock and are not otherwise paid by the Company or the acquiring party. Costs incurred by Executive and the other holders of Executive Stock on their own behalf will not be considered costs of the transaction hereunder. e. The provisions of this paragraph 7 will terminate upon completion of the initial public offering of the Common Stock. 8. PUBLIC OFFERING. In the event that the Board and the holders of a majority --------------- of the shares of Common Stock then outstanding approve an initial public offering and sale of Common Stock (a "Public Offering") pursuant to an effective --------------- registration statement under the Securities Act of 1933, as amended, the holders of Executive Stock will take all necessary or desirable actions in connection with the consummation of the Public Offering. In the event that such Public Offering is an -7- underwritten offering and the managing underwriters advise the Company in writing that in their opinion the Common Stock structure will adversely affect the marketability of the offering, each holder of Executive Stock will consent to and vote for a recapitalization, reorganization and/or exchange of the Common Stock into securities that the managing underwriters, the Board and holders of a majority of the shares of Common Stock then outstanding find acceptable and will take all necessary or desirable actions in connection with the consummation of the recapitalization, reorganization and/or exchange. 9. TERMINATION OF PROVISIONS RELATING TO EXECUTIVE STOCK. The provisions of ----------------------------------------------------- paragraphs 3 and 4, and the rights of Executive under paragraph 7 of the Plan, will terminate upon the first to occur of (i) an Approved Sale, or (ii) (A) the Company (or its successor as a result of merger, consolidation, reorganization or sale) becoming a reporting company under the Securities Exchange Act of 1934 as a result of the registration of its common equity securities thereunder and (B) the Investors and their affiliates collectively ceasing to own at least 50% of the aggregate number of shares of Common Stock that they own on the date hereof (as adjusted for stock splits, stock dividends and recapitalization and for exchanges in connection with a merger, consolidation, reorganization or sale). MISCELLANEOUS PROVISIONS ------------------------ 10. NOTICES. Any notice provided for in this Agreement must be in writing and ------- must be personally delivered, received by certified mail, return receipt requested, or sent by guaranteed overnight delivery service, to the Investors at the addresses indicated in the Company's records and to the other recipients at the address indicated below: To the Company: Diagnostics Holding Inc. c/o Bain Capital, Inc. Two Copley Place Boston, Massachusetts 02116 Attn: Mark Nunnelly Stephen G. Pagliuca Adam Kirsch -8- To Executive: [TO COME] or such other address or to the attention of such other person as the recipient party shall have specified by prior written notice to the sending party. Any notice under this Agreement will be deemed to have been given when so delivered or mailed. 11. SEVERABILITY. Whenever possible, each provision of this Agreement will be ------------ interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement is held to be invalid, illegal or unenforceable in any respect under any applicable law or rule in any jurisdiction, such invalidity, illegality or unenforceability will not affect any other provision or the effectiveness or validity of any provision in any other jurisdiction, and this Agreement will be reformed, construed and enforced in such jurisdiction as if such invalid, illegal or unenforceable provision had never been contained herein. 12. COMPLETE AGREEMENT. This Agreement embodies the complete agreement and ------------------ understanding among the parties and supersedes and preempts any prior understandings, agreements or representations by or among the parties, written or oral, which may have related to the subject matter hereof in any way. 13. COUNTERPARTS. This Agreement may be executed in separate counterparts, ------------ each of which will be deemed to be an original and all of which taken together will constitute one and the same agreement. 14. SUCCESSORS AND ASSIGNS. This Agreement is intended to bind and inure to ---------------------- the benefit of and be enforceable by Executive, the Company, the Investors and their respective successors and assigns, provided that Executive may not assign any of his rights or obligations, except as expressly provided by the terms of this Agreement. 15. GOVERNING LAW. The corporate law of Delaware will govern all issues ------------- concerning the relative rights of the Company and its stockholders. All other issues concerning the enforceability, validity and binding effect of this Agreement will be governed by and construed in accordance with the laws of the State of Illinois, without giving effect to any choice of law or conflict of law -9- provision or rule (whether of the State of Illinois or any other jurisdiction) that would cause the application of the law of any jurisdiction other than the State of Illinois. 16. REMEDIES. The parties hereto agree and acknowledge that money damages may -------- not be an adequate remedy for any breach of the provisions of this Agreement and that any party hereto will have the right to injunctive relief, in addition to all of its other rights and remedies at law or in equity, to enforce the provisions of this Agreement. 17. EFFECT OF TRANSFERS IN VIOLATION OF AGREEMENT. The Company will not be --------------------------------------------- required (a) to transfer on its books any shares of Executive Stock which have been sold or transferred in violation of any of the provisions set forth in this Agreement or (b) to treat as owner of such shares, to accord the right to vote as such owner or to pay dividends to any transferee to whom such shares have been transferred in violation of this Agreement. 18. AMENDMENTS AND WAIVERS. Any provision of this Agreement may be amended or ---------------------- waived only with the prior written consent of the Company, Executive and the Investors who hold 70% of the Common Stock held by the Investors. 19. THIRD PARTY BENEFICIARIES. The parties hereto acknowledge and agree that ------------------------- the Investors are third party beneficiaries of this Agreement. This Agreement will inure to the benefit of and be enforceable by the Investors and their respective successors and assigns. 20. DIAGNOSTICS HOLDING, INC. 1996 EXECUTIVE STOCK PURCHASE AND OPTION PLAN. ----------------------------------------------------------------------- The grant of Options and issuance of Executive Stock hereunder is pursuant to, and subject to all the terms and conditions of, the Company's 1996 Executive Stock Purchase and Option Plan (the "1996 Plan"), attached hereto as Exhibit A. --------- Capitalized terms defined in the 1996 Plan and otherwise not defined herein are used herein as therein defined. * * * * * -10- IN WITNESS WHEREOF, the parties have executed this Agreement on the day and year first above written. Diagnostics Holding, Inc. By: ______________________________ Title: ___________________________ ___________________________ [Executive] -11- EX-12.1 17 STATEMENT OF COMPUTATION OF RATIOS EXHIBIT 12.1 DADE INTERNATIONAL INC. ----------------------- COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES ------------------------------------------------- (Amounts in millions)
Dade (1) ------------- Dade Company Period from -------------------------- -------------- December 17, 1994 Six Months Six Months through Ended Ended December 31, 1994 June 30, 1995 1995 June 30, 1996 ----------------- ------------- ---------- -------------- Pre-tax loss from continuing operations $ (4.2) $(12.9) $ 19.9 $ (115.7) ---------- ---------- --------- ---------- Fixed charges: Interest expense and amortization of debt issuance costs on all indebtedness 1.2 15.0 30.8 23.9 Rentals (33%) .2 2.2 4.3 2.3 ---------- ---------- --------- ---------- Total fixed charges 1.4 17.2 35.1 26.2 ---------- ---------- --------- ---------- Income (Loss) before income taxes and fixed charges $ (2.8) $ 4.3 $ 55.0 $ (89.5) ========== ========== ========= ========== Ratio of earnings to fixed charges -- (2) -- (2) $ 1.6 -- (2) ========== ========== ========= ==========
(1) No ratio of earnings to fixed charges is presented for the Predecessor because the Predecessor was not allocated interest expense by Baxter. (2) In calculating the ratio of earnings to fixed charges for Dade and the Company, earnings include income (loss) before income taxes plus fixed charges. Fixed charges consist of interest expense and amortization of deferred financing fees, whether expensed or capitalized, plus one-third of rental expense under operating leases which has been deemed by management to be representative of an appropriate interest factor. As a result of the loss incurred during the period December 17, 1994 to December 31, 1994, earnings did not cover fixed charges by $4.3 million. Excluding the impact during this period of the non-recurring purchase accounting write-off of $5.6 million, the ratio of earnings to fixed charges would have been 2.0 to 1.0. As a result of the loss incurred during the six months ended June 30, 1995, earnings did not cover fixed charges by $12.9 million. Excluding the similar $40.4 million non-recurring write-off in 1995, the 1995 ratio of earnings to fixed charges for the full year 1995 and the six months ended June 30, 1995 would have been 2.7 to 1.0 and 2.6 to 1.0, respectively. As a result of the loss incurred during the six months ended June 30, 1996, earnings did not cover fixed charges by $115.7 million. Excluding the $25.5 million non-recurring, write-off of inventory step-up, the $98.1 million non-recurring, write-off of in-process research and development and the $11.4 million non-recurring restructuring charge, the ratio of earnings to fixed charges for the six months ended June 30, 1996 would have been 1.7 to 1.0. EX-21.1 18 SUBSIDIARIES OF DADE INTERNATIONAL INC. EXHIBIT 21.1 ------------ SUBSIDIARIES OF DADE INTERNATIONAL, INC. ----------------------------------------
STATE OR JURISDICTION OF SUBSIDIARY INCORPORATION OR ORGANIZATION ---------- ----------------------------- Burdick & Jackson, Inc. Delaware Dade AG Switzerland Dade B.V. The Netherlands Dade Chemistry Systems Inc. Delaware Dade Diagnosticos Lda. Portugal Dade Diagnosticos, S.L. Spain Dade Diagnostics AG Switzerland Dade Diagnostics Corporation Canada Dade Diagnostics of P.R., Inc. Delaware Dade Diagnostics Pty., Ltd. Australia Dade Diagnostics Pty., Ltd. New Zealand Dade Diagnostika GmbH Germany Dade Export Corporation Delaware Dade Finance, Inc. Delaware Dade Foreign Sales Corporation Barbados W.I. Dade International de Venezuela CA Venenzula Dade International do Brasil Equipamentos e Brazil Reagentes para Diagnosticos Ltda. Dade Ltd. Japan Dade MicroScan Inc. Delaware Dade S.A. Belgium Dade S.A. France Dade S.A. de CV Mexico Dade S.p.A. Italy
X-3 EX-23.1 19 CONSENT OF PRICE WATERHOUSE LLP - CHI EXHIBIT 23.1 CONSENT OF INDEPENDENT ACCOUNTANTS We hereby consent to the use in the Prospectus constituting part of this Registration Statement on Form S-1 of our report dated March 20, 1995 relating to the financial statements of Baxter Diagnostics, Inc. which appears in such Prospectus. We also consent to the references to us under the headings "Experts" and "Selected Financial Data" in such Prospectus. However, it should be noted that Price Waterhouse LLP has not prepared or certified such "Selected Financial Data." PRICE WATERHOUSE LLP Chicago, Illinois October 4, 1996 EX-23.2 20 CONSENT OF PRICE WATERHOUSE LLP EXHIBIT 23.2 CONSENT OF INDEPENDENT ACCOUNTANTS We hereby consent to the use in the Prospectus constituting part of this Registration Statement on Form S-1 of our report dated March 15, 1996 relating to the financial statements of Dade International Inc. which appears in such Prospectus. We also consent to the references to us under the headings "Experts" and "Selected Financial Data" in such Prospectus. However, it should be noted that Price Waterhouse LLP has not prepared or certified such "Selected Financial Data." PRICE WATERHOUSE LLP Chicago, Illinois October 4, 1996 EX-23.3 21 PRICE & WATERHOUSE LLP CONSENT - PHIL EXHIBIT 23.3 CONSENT OF INDEPENDENT ACCOUNTANTS We hereby consent to the use in the Prospectus constituting part of this Registration Statement on Form S-1 of our report dated August 2, 1996, relating to the financial statements of In Vitro Diagnostics, a division of E.I. duPont de Nemours and Company, which appears in such Prospectus. We also consent to the reference to us under the headings "Experts" in such Prospectus. PRICE WATERHOUSE LLP Philadelphia, Pennsylvania October 4, 1996 EX-23.4 22 CONSENT OF KIRKLAND & ELLIS EXHIBIT 23.4 CONSENT OF KIRKLAND & ELLIS --------------------------- The consent of Kirkland & Ellis is contained in Exhibit 5.1. EX-24.1 23 POWERS OF ATTORNEY EXHIBIT 24.1 POWERS OF ATTORNEY ------------------ The powers of attorney are included in the signature page to this registration statement. EX-25.1 24 FORM T-1 EXHIBIT 25.1 ---------------------------- SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D. C. 20549 -------------------- FORM T-1 STATEMENT OF ELIGIBILITY UNDER THE TRUST INDENTURE ACT OF 1939 OF A CORPORATION DESIGNATED TO ACT AS TRUSTEE CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY OF A TRUSTEE PURSUANT TO SECTION 305(b)(2)_ ------------------- IBJ SCHRODER BANK & TRUST COMPANY (Exact name of trustee as specified in its charter) New York 13-5375195 (Jurisdiction of incorporation (I.R.S. employer or organization if not a U.S. national bank) identification No.) One State Street, New York, New York 10004 (Address of principal executive offices) (Zip code) IBJ SCHRODER BANK & TRUST COMPANY 1 State Street New York, New York 10004 (212) 858-2000 (Name, address and telephone number of agent for service) DADE INTERNATIONAL INC. (Exact name of obligor as specified in its charter) Delaware 36-3949533 (State or other jurisdiction of (I.R.S. employer incorporation or organization) identification No.) 1717 Deerfield Road Deerfield, Illinois 60015 (Address of principal executive offices) (Zip code) -------------------- Series B 11 1/8% Senior Subordinated Notes due 2006 (Title of indenture securities) Item 1. General information Furnish the following information as to the trustee: (a) Name and address of each examining or supervising authority to which it is subject. New York State Banking Department, Two Rector Street, New York, New York Federal Deposit Insurance Corporation, Washington, D.C. Federal Reserve Bank of New York Second District, 33 Liberty Street, New York, New York (b) Whether it is authorized to exercise corporate trust powers. Yes Item 2. Affiliations with the Obligor. If the obligor is an affiliate of the trustee, describe each such affiliation. The obligor is not an affiliate of the trustee. Defaults by the Obligor. (a) State whether there is or has been a default with respect to the securities under this indenture. Explain the nature of any such default. None (b) If the trustee is a trustee under another indenture under which any other securities, or certificates of interest or participation in any other securities, of the obligor are outstanding, or is trustee for more than one outstanding series of securities under the indenture, state whether there has been a default under any such indenture or series, identify the indenture or series affected, and explain the nature of any such default. None List of exhibits. List below all exhibits filed as part of this statement of eligibility. *1. A copy of the Charter of IBJ Schroder Bank & Trust Company as amended to date. (See Exhibit 1A to Form T-1, Securities and Exchange Commission File No. 22-18460). *2. A copy of the Certificate of Authority of the trustee to Commence Business (Included in Exhibit 1 above). *3. A copy of the Authorization of the trustee to exercise corporate trust powers, as amended to date (See Exhibit 4 to Form T-1, Securities and Exchange Commission File No. 22-19146). *4. A copy of the existing By-Laws of the trustee, as amended to date (See Exhibit 4 to Form T-1, Securities and Exchange Commission File No. 22-19146). 5. Not Applicable 6. The consent of United States institutional trustee required by Section 321(b) of the Act. 7. A copy of the latest report of condition of the trustee published pursuant to law or the requirements of its supervising or examining authority. * The Exhibits thus designated are incorporated herein by reference as exhibits hereto. Following the description of such Exhibits is a reference to the copy of the Exhibit heretofore filed with the Securities and Exchange Commission, to which there have been no amendments or changes. NOTE ---- In answering any item in this Statement of Eligibility which relates to matters peculiarly within the knowledge of the obligor and its directors or officers, the trustee has relied upon information furnished to it by the obligor. Inasmuch as this Form T-1 is filed prior to the ascertainment by the trustee of all facts on which to base responsive answers to Item 2, the answer to said Item are based on incomplete information. Item 2, may, however, be considered as correct unless amended by an amendment to this Form T-1. Pursuant to General Instruction B, the trustee has responded to Items 1, 2 and 16 of this form since to the best knowledge of the trustee as indicated in Item 13, the obligor is not in default under any indenture under which the applicant is trustee. SIGNATURE --------- Pursuant to the requirements of the Trust Indenture Act of 1939, the trustee, IBJ Schroder Bank & Trust Company, a corporation organized and existing under the laws of the State of New York, has duly caused this statement of eligibility to be signed on its behalf by the undersigned, thereunto duly authorized, all in the City of New York, and State of New York, on the 3rd day of October, 1996. IBJ SCHRODER BANK & TRUST COMPANY By: /s/ Thomas McCutcheon ------------------------------ Thomas McCutcheon Assistant Vice President EXHIBIT 6 CONSENT OF TRUSTEE Pursuant to the requirements of Section 321(b) of the Trust Indenture Act of 1939, as amended, in connection with the issue by Dade International Inc., Series B 11 1/8% Senior Subordinated Notes due 2006, we hereby consent that reports of examinations by Federal, State, Territorial, or District authorities may be furnished by such authorities to the Securities and Exchange Commission upon request therefor. IBJ SCHRODER BANK & TRUST COMPANY By: /s/Thomas McCutcheon ------------------------------ Thomas McCutcheon Assistant Vice President Dated: October 3, 1996 EXHIBIT 7 CONSOLIDATED REPORT OF CONDITION OF IBJ SCHRODER BANK & TRUST COMPANY OF NEW YORK, NEW YORK AND FOREIGN AND DOMESTIC SUBSIDIARIES REPORT AS OF JUNE 30, 1996
DOLLAR AMOUNTS IN THOUSANDS -------------- ASSETS ------ Cash and balance due from depository institutions: Noninterest-bearing balances and currency and coin....................................................... $ 39,834 Interest-bearing balances................................................................................ $ 236,748 Securities: Held to Maturity............................................................................. $ 173,034 Available-for-sale........................................................................... $ 5.882 Federal funds sold and securities purchased under agreements to resell in domestic offices of the bank and of its Edge and Agreement subsidiaries and in IBFs: Federal Funds sold.................................................................................... $ 36,968 Securities purchased under agreements to resell....................................................... $ -0- Loans and lease financing receivables: Loans and leases, net of unearned income....................................................$1,668,191 LESS: Allowance for loan and lease losses...................................................$ 54,288 LESS: Allocated transfer risk reserve.......................................................$ -0- Loans and leases, net of unearned income, allowance, and reserve...................................... $ 1,613,903 Assets held in trading accounts........................................................................ $ 500 Premises and fixed assets............................................................................... $ 7,413 Other real estate owned................................................................................. $ 397 Investments in unconsolidated subsidiaries and associated companies..................................... $ -0- Customers' liability to this bank on acceptances outstanding............................................ $ 223 Intangible assets....................................................................................... $ -0- Other assets............................................................................................ $ 55,007 TOTAL ASSETS............................................................................................ $ 2,199,909
LIABILITIES -----------
Deposits: In domestic offices..................................................................................... $ 652,676 Noninterest-bearing.........................................................................$ 278,082 Interest-bearing............................................................................$ 374,594 In foreign offices, Edge and Agreement subsidiaries, and IBFs .......................................... $ 893,475 Noninterest-bearing.........................................................................$ 15,577 Interest-bearing............................................................................$ 877,898 Federal funds purchased and securities sold under agreements to repurchase in domestic offices of the bank and of its Edge and Agreement subsidiaries, and in IBFs: Federal Funds purchased................................................................................. $ 212,000 Securities sold under agreements to repurchase.......................................................... $ -0- Demand notes issued to the U.S. Treasury................................................................. $ 48,606 Trading Liabilities...................................................................................... $ 293 Other borrowed money: a) With original maturity of one year or less............................................................ $ 102,049 b) With original maturity of more than one year......................................................... $ 3,000 Mortgage indebtedness and obligations under capitalized leases........................................... $ -0- Bank's liability on acceptances executed and outstanding................................................. $ 223 Subordinated notes and debentures........................................................................ $ -0- Other liabilities......................................................................................... $ 74,608 TOTAL LIABILITIES........................................................................................ $ 1,986,930 Limited life preferred stock and related surplus......................................................... $ -0- EQUITY CAPITAL Perpetual preferred stock................................................................................ $ -0- Common Stock............................................................................................. $ 29,649 Surplus.................................................................................................. $ 217,008 Undivided profits and capital reserves................................................................... $ (34,414) Plus: Net unrealized gains (losses) on marketable equity securities...................................... $ 736 Cumulative foreign currency translation adjustments...................................................... $ -0- TOTAL EQUITY CAPITAL..................................................................................... $ 212,979 TOTAL LIABILITIES AND EQUITY CAPITAL..................................................................... $ 2,199,909
EX-27.1 25 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM CUBIST FORM S-1 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 6-MOS DEC-31-1996 JAN-01-1996 JUN-30-1996 10,900,000 0 166,100,000 0 160,200,000 431,200,000 169,600,000 0 1,044,600,000 255,400,000 350,000,000 0 0 7,000,000 (26,200,000) 1,044,600,000 353,800,000 353,800,000 208,400,000 208,400,000 239,500,000 0 23,900,000 (115,700,000) (42,800,000) (72,900,000) 0 (25,000,000) 0 (97,900,000) 0 0 EARNINGS PER SHARE ARE NOT CALCULATED BECAUSE THE COMPANY'S COMMON STOCK IS NOT PUBLICLY TRADED.
EX-99.1 26 FORM OF LETTER OF TRANSMITTAL EXHIBIT 99.1 FORM OF LETTER OF TRANSMITTAL TO TENDER FOR EXCHANGE 11 1/8% SENIOR SUBORDINATED NOTES DUE 2006 OF DADE INTERNATIONAL INC. Pursuant to the Prospectus Dated _____, 1996 - -------------------------------------------------------------------------------- THE EXCHANGE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON _______, 1996 UNLESS EXTENDED (THE "EXPIRATION DATE"). - -------------------------------------------------------------------------------- PLEASE READ CAREFULLY THE ATTACHED INSTRUCTIONS If you desire to accept the Exchange Offer, this Letter of Transmittal should be completed, signed, and submitted to the Exchange Agent: By Overnight Carrier or by Hand: By Registered or Certified Mail: - ------------------------------- ------------------------------- IBJ Schroder Bank & Trust Company IBJ Schroder Bank & Trust Company One State Street Attention: Reorganization Department Securities Processing Window P.O. Box 84 Floor SC-1 Bowling Green Station Attention: Reorganization Department New York, New York 10274-0084 New York, New York 10004 DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE WILL NOT CONSTITUTE A VALID DELIVERY. FOR ANY QUESTIONS REGARDING THIS LETTER OF TRANSMITTAL OR FOR ANY ADDITIONAL INFORMATION, YOU MAY CONTACT THE EXCHANGE AGENT BY TELEPHONE AT 212- 858-2103, OR BY FACSIMILE AT 212-858-2611. The undersigned hereby acknowledges receipt of the Prospectus dated ______, 1996 (the "Prospectus") of Dade International Inc., a Delaware corporation (the "Issuer"), and this Letter of Transmittal (the "Letter of Transmittal"), that together constitute the Issuer's offer (the "Exchange Offer") to exchange $1,000 in principal amount of its 11 1/8% Senior Subordinated Notes due 2006, Series B (the "Exchange Notes"), which have been registered under the Securities Act of 1933, as amended (the "Securities Act"), pursuant to a Registration Statement, for each $1,000 in principal amount of its outstanding 11 1/8% Senior Subordinated Notes due 2006 (the "Notes"), of which $350,000,000 aggregate principal amount is outstanding. Capitalized terms used but not defined herein have the meanings ascribed to them in the Prospectus. The undersigned hereby tenders the Notes described in Box 1 below (the "Tendered Notes") pursuant to the terms and conditions described in the Prospectus and this Letter of Transmittal. The undersigned is the registered owner of all the Tendered Notes and the undersigned represents that it has received from each beneficial owner of the Tendered Notes ("Beneficial Owners") a duly completed and executed form of "Instruction to Registered Holder and/or Book-Entry Transfer Facility Participant from Beneficial Owner" accompanying this Letter of Transmittal, instructing the undersigned to take the action described in this Letter of Transmittal. Subject to, and effective upon, the acceptance for exchange of the Tendered Notes, the undersigned hereby exchanges, assigns, and transfers to, or upon the order of, the Issuer, all right, title, and interest in, to, and under the Tendered Notes. Please issue the Exchange Notes exchanged for Tendered Notes in the name(s) of the undersigned. Similarly, unless otherwise indicated under "Special Delivery Instructions" below (Box 3), please send or cause to be sent the certificates for the Exchange Notes (and accompanying documents, as appropriate) to the undersigned at the address shown below in Box 1. The undersigned hereby irrevocably constitutes and appoints the Exchange Agent as the true and lawful agent and attorney in fact of the undersigned with respect to the Tendered Notes, with full power of substitution (such power of attorney being deemed to be an irrevocable power coupled with an interest), to (i) deliver the Tendered Notes to the Issuer or cause ownership of the Tendered Notes to be transferred to, or upon the order of, the Issuer, on the books of the registrar for the Notes and deliver all accompanying evidences of transfer and authenticity to, or upon the order of, the Issuer upon receipt by the Exchange Agent, as the undersigned's agent, of the Exchange Notes to which the undersigned is entitled upon acceptance by the Issuer of the Tendered Notes pursuant to the Exchange Offer, and (ii) receive all benefits and otherwise exercise all rights of beneficial ownership of the Tendered Notes, all in accordance with the terms of the Exchange Offer. The undersigned understands that tenders of Notes pursuant to the procedures described under the caption "The Exchange Offer" in the Prospectus and in the instructions hereto will constitute a binding agreement between the undersigned and the Issuer upon the terms and subject to the conditions of the Exchange Offer, subject only to withdrawal of such tenders on the terms set forth in the Prospectus under the caption "The Exchange Offer-Withdrawal of Tenders." All authority herein conferred or agreed to be conferred shall survive the death or incapacity of the undersigned and any Beneficial Owner(s), and every obligation of the undersigned or any Beneficial Owners hereunder shall be binding upon the heirs, representatives, successors, and assigns of the undersigned and such Beneficial Owner(s). The undersigned hereby represents and warrants that the undersigned has full power and authority to tender, exchange, assign, and transfer the Tendered Notes and that the Issuer will acquire good and unencumbered title thereto, free and clear of all liens, restrictions, charges, encumbrances, and adverse claims when the Tendered Notes are acquired by the Issuer as contemplated herein. The undersigned and each Beneficial Owner will, upon request, execute and deliver any additional documents reasonably requested by the Issuer or the Exchange Agent as necessary or desirable to complete and give effect to the transactions contemplated hereby. The undersigned hereby represents and warrants that the information set forth in Box 2 is true and correct. By accepting the Exchange Offer, the undersigned hereby represents and warrants that (i) the Exchange Notes to be acquired by the undersigned and any Beneficial Owner(s) in connection with the Exchange Offer are being acquired by the undersigned and any Beneficial Owner(s) in the ordinary course of business of the undersigned and any Beneficial Owner(s), (ii) the undersigned and each Beneficial Owner are not participating, do not intend to participate, and have no arrangement or understanding with any person to participate, in the distribution of the Exchange Notes, (iii) except as otherwise disclosed in writing herewith, neither the undersigned nor any Beneficial Owner is an "affiliate," as defined in Rule 405 under the Securities Act, of the Issuer, and (iv) the undersigned and each Beneficial Owner acknowledge and agree that any person participating in the Exchange Offer with the intention or for the purpose of distributing the Exchange Notes must comply with the registration and prospectus delivery requirements of the Securities Act of 1933, as amended (together with the rules and regulations promulgated thereunder, the "Securities Act"), in connection with a secondary resale of the Exchange Notes acquired by such person and cannot rely on the position of the Staff of the Securities and Exchange Commission (the "Commission") set forth in the no-action letters that are discussed in the section of the Prospectus entitled "The Exchange Offer." In addition, by accepting the Exchange Offer, the undersigned hereby (i) represents and warrants that, if the undersigned or any Beneficial Owner of the Notes is a Participating Broker-Dealer, such Participating Broker-Dealer acquired the Notes for its own account as a result of market-making activities or other trading activities and has not entered into any arrangement or understanding with the Company or any affiliate of the Company (within the meaning of Rule 405 under the Securities Act) to distribute the New Notes to be received in the Exchange Offer, and (ii) acknowledges that, by receiving New Notes for its own account in exchange for Notes, where such Notes were acquired as a result of market-making activities or other trading activities, such Participating Broker-Dealer will deliver a prospectus meeting the requirements of the Securities Act in connection with any resale of such New Notes. [_] CHECK HERE IF TENDERED NOTES ARE BEING DELIVERED HEREWITH. [_] CHECK HERE IF TENDERED NOTES ARE BEING DELIVERED PURSUANT TO A NOTICE OF GUARANTEED DELIVERY PREVIOUSLY DELIVERED TO THE EXCHANGE AGENT AND COMPLETE "Use of Guaranteed Delivery" BELOW (Box 4). [_] CHECK HERE IF TENDERED NOTES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER MADE TO THE ACCOUNT MAINTAINED BY THE EXCHANGE AGENT WITH THE BOOK-ENTRY TRANSFER FACILITY AND COMPLETE "Use of Book-Entry Transfer" BELOW (Box 5). PLEASE READ THIS ENTIRE LETTER OF TRANSMITTAL CAREFULLY BEFORE COMPLETING THE BOXES
- ------------------------------------------------------------------------------------------------------------------------------------ BOX 1 DESCRIPTION OF NOTES TENDERED (Attach additional signed pages, if necessary) - ------------------------------------------------------------------------------------------------------------------------------------ Aggregate Name(s) and Address(es) of Registered Note Holder(s), exactly Certificate Principal Amount Aggregate as name(s) appear(s) on Note Certificate(s) Number(s) of Represented by Principal Amount (Please fill in, if blank) Notes* Certificate(s) Tendered** ___________________________________________________________________________________________________________________________________ ___________________________________________________________________________________________________________________________________ ___________________________________________________________________________________________________________________________________ ___________________________________________________________________________________________________________________________________ ___________________________________________________________________________________________________________________________________ Total - ----------------------------------------------------------------------------------------------------------------------------------- * Need not be completed by persons tendering by book-entry transfer. ** The minimum permitted tender is $1,000 in principal amount of Notes. All other tenders must be in integral multiples of $1,000 of principal amount. Unless otherwise indicated in this column, the principal amount of all Note Certificates identified in this Box 1 or delivered to the Exchange Agent herewith shall be deemed tendered. See Instruction 4. ___________________________________________________________________________________________________________________________________
- ----------------------------------------------------------------------------------------------------------------------------------- BOX 2 BENEFICIAL OWNER(S) - ------------------------------------------------------------------------------------------------------------------------------------ State of Principal Residence of Each Principal Amount of Tendered Notes Beneficial Owner of Tendered Notes Held for Account of Beneficial Owner ____________________________________________________________________________________________________________________________________ ____________________________________________________________________________________________________________________________________ ____________________________________________________________________________________________________________________________________ ____________________________________________________________________________________________________________________________________ ____________________________________________________________________________________________________________________________________ ____________________________________________________________________________________________________________________________________ ____________________________________________________________________________________________________________________________________
- -------------------------------------------------------------------------------- BOX 3 SPECIAL DELIVERY INSTRUCTIONS (SEE INSTRUCTIONS 5, 6 AND 7) TO BE COMPLETED ONLY IF EXCHANGE NOTES EXCHANGED FOR NOTES AND UNTENDERED NOTES ARE TO BE SENT TO SOMEONE OTHER THAN THE UNDERSIGNED, OR TO THE UNDERSIGNED AT AN ADDRESS OTHER THAN THAT SHOWN ABOVE. Mail Exchange Note(s) and any untendered Notes to: Name(s): ________________________________________________________________________________ (please print) Address: ________________________________________________________________________________ ________________________________________________________________________________ ________________________________________________________________________________ (include Zip Code) Tax Identification or Social Security No.: - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- BOX 4 USE OF GUARANTEED DELIVERY (SEE INSTRUCTION 2) TO BE COMPLETED ONLY IF NOTES ARE BEING TENDERED BY MEANS OF A NOTICE OF GUARANTEED DELIVERY. Name(s) of Registered Holder(s): ________________________________________________________________________________ Date of Execution of Notice of Guaranteed Delivery:_____________________________ Name of Institution which Guaranteed Delivery:__________________________________ - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- BOX 5 USE OF BOOK-ENTRY TRANSFER (SEE INSTRUCTION 1) TO BE COMPLETED ONLY IF DELIVERY OF TENDERED NOTES IS TO BE MADE BY BOOK-ENTRY TRANSFER. Name of Tendering Institution:__________________________________________________ Account Number:_________________________________________________________________ Transaction Code Number:________________________________________________________ - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- BOX 6 TENDERING HOLDER SIGNATURE (SEE INSTRUCTIONS 1 AND 5) IN ADDITION, COMPLETE SUBSTITUTE FORM W-9 - -------------------------------------------------------------------------------- X_______________________________________ Signature Guarantee (If required by Instruction 5) X_______________________________________ (Signature of Registered Holder(s) Authorized Signature or Authorized Signatory) X ________________________________ Note: The above lines must be signed by the registered holder(s) of Notes as Name:_____________________________ their name(s) appear(s) on the Notes or (please print) by persons(s) authorized to become registered holder(s) (evidence of which Title:____________________________ authorization must be transmitted with this Letter of Transmittal). If signature is by a trustee, executor, administrator, guardian, attorney-in-fact, Name of Firm:____________________ officer, or other person acting in a (Must be an Eligible fiduciary or representative capacity, Institution such as person must set forth his or her full defined in Instruction title below. See Instruction 5. 2) Name(s):_______________________________ Address:_________________________ _______________________________ _________________________ Capacity:______________________________ _________________________ (include Zip Code) ______________________________ Street Address:________________________ Area Code and Telephone Number: ______________________________ Dated:___________________________ ______________________________ (include Zip Code) Area Code and Telephone Number: ______________________________ Tax Identification or Social Security Number: ______________________________ - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- BOX 7 BROKER-DEALER STATUS - -------------------------------------------------------------------------------- [_] Check this box if the Beneficial Owner of the Notes is a Participating Broker-Dealer and such Participating Broker-Dealer acquired the Notes for its own account as a result of market-making activities or other trading activities. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- PAYOR'S NAME: DADE INTERNATIONAL INC. - -------------------------------------------------------------------------------- Name (if joint names, list first and circle the name of the person or entity whose number you enter in Part 1 below. See instructions if your name has changed.) -------------------------------------------------- Address -------------------------------------------------- SUBSTITUTE City, State and ZIP Code -------------------------------------------------- List account number(s) here (optional) FORM W-9 -------------------------------------------------- Department of the Treasury PART 1--PLEASE PROVIDE YOUR Social Security TAXPAYER IDENTIFICATION Number or TIN NUMBER ("TIN") IN THE BOX AT RIGHT AND CERTIFY BY SIGNING AND DATING BELOW -------------------------------------------------- Internal Revenue Service PART 2--Check the box if you are NOT subject to backup withholding under the provisions of section 3406(a)(1)(C) of the Internal Revenue Code because (1) you have not been notified that you are subject to backup withholding as a result of failure to report all interest or dividends or (2) the Internal Revenue Service has notified you that you are no longer subject to backup withholding. [_] - -------------------------------------------------------------------------------- CERTIFICATION--UNDER THE PART 3-- PENALTIES OF PERJURY, I CERTIFY THAT THE INFORMATION Awaiting TIN [_] PROVIDED ON THIS FORM IS TRUE, CORRECT AND COMPLETE. SIGNATURE _______________ DATE ____________________ - -------------------------------------------------------------------------------- NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP WITHHOLDING - ---- OF 31% OF ANY PAYMENTS MADE TO YOU PURSUANT TO THE EXCHANGE OFFER. PLEASE REVIEW THE ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS. INSTRUCTIONS TO LETTER OF TRANSMITTAL FORMING PART OF THE TERMS AND CONDITIONS OF THE EXCHANGE OFFER 1. DELIVERY OF THIS LETTER OF TRANSMITTAL AND NOTES. A properly completed and duly executed copy of this Letter of Transmittal, including Substitute Form W-9, and any other documents required by this Letter of Transmittal must be received by the Exchange Agent at its address set forth herein, and either certificates for Tendered Notes must be received by the Exchange Agent at its address set forth herein or such Tendered Notes must be transferred pursuant to the procedures for book-entry transfer described in the Prospectus under the caption "Exchange Offer--Book-Entry Transfer" (and a confirmation of such transfer received by the Exchange Agent), in each case prior to 5:00 p.m., New York City time, on the Expiration Date. The method of delivery of certificates for Tendered Notes, this Letter of Transmittal and all other required documents to the Exchange Agent is at the election and risk of the tendering holder and the delivery will be deemed made only when actually received by the Exchange Agent. If delivery is by mail, registered mail with return receipt requested, properly insured, is recommended. Instead of delivery by mail, it is recommended that the Holder use an overnight or hand delivery service. In all cases, sufficient time should be allowed to assure timely delivery. No Letter of Transmittal or Notes should be sent to the Company. Neither the Issuer nor the registrar is under any obligation to notify any tendering holder of the Issuer's acceptance of Tendered Notes prior to the closing of the Exchange Offer. 2. GUARANTEED DELIVERY PROCEDURES. Holders who wish to tender their Notes but whose Notes are not immediately available, and who cannot deliver their Notes, this Letter of Transmittal or any other documents required hereby to the Exchange Agent prior to the Expiration Date must tender their Notes according to the guaranteed delivery procedures set forth below, including completion of Box 4. Pursuant to such procedures: (i) such tender must be made by or through a firm which is a member of a recognized Medallion Program approved by the Securities Transfer Association Inc. (an "Eligible Institution") and the Notice of Guaranteed Delivery must be signed by the holder; (ii) prior to the Expiration Date, the Exchange Agent must have received from the holder and the Eligible Institution a properly completed and duly executed Notice of Guaranteed Delivery (by mail or hand delivery) setting forth the name and address of the holder, the certificate number(s) of the Tendered Notes and the principal amount of Tendered Notes, stating that the tender is being made thereby and guaranteeing that, within five New York Stock Exchange trading days after the Expiration Date, this Letter of Transmittal together with the certificate(s) representing the Notes and any other required documents will be deposited by the Eligible Institution with the Exchange Agent; and (iii) such properly completed and executed Letter of Transmittal, as well as all other documents required by this Letter of Transmittal and the certificate(s) representing all Tendered Notes in proper form for transfer, must be received by the Exchange Agent within five New York Stock Exchange trading days after the Expiration Date. Any holder who wishes to tender Notes pursuant to the guaranteed delivery procedures described above must ensure that the Exchange Agent receives the Notice of Guaranteed Delivery relating to such Notes prior to 5:00 p.m., New York City time, on the Expiration Date. Failure to complete the guaranteed delivery procedures outlined above will not, of itself, affect the validity or effect a revocation of any Letter of Transmittal form properly completed and executed by an Eligible Holder who attempted to use the guaranteed delivery process. 3. BENEFICIAL OWNER INSTRUCTIONS TO REGISTERED HOLDERS. Only a holder in whose name Tendered Notes are registered on the books of the registrar (or the legal representative or attorney-in-fact of such registered holder) may execute and deliver this Letter of Transmittal. Any Beneficial Owner of Tendered Notes who is not the registered holder must arrange promptly with the registered holder to execute and deliver this Letter of Transmittal on his or her behalf through the execution and delivery to the registered holder of the Instructions to Registered Holder and/or Book-Entry Transfer Facility Participant from Beneficial Owner form accompanying this Letter of Transmittal. 4. PARTIAL TENDERS. Tenders of Notes will be accepted only in integral multiples of $1,000 in principal amount. If less than the entire principal amount of Notes held by the holder is tendered, the tendering holder should fill in the principal amount tendered in the column labeled "Aggregate Principal Amount Tendered" of the box entitled "Description of Notes Tendered" (Box 1) above. The entire principal amount of Notes delivered to the Exchange Agent will be deemed to have been tendered unless otherwise indicated. If the entire principal amount of all Notes held by the holder is not tendered, then Notes for the principal amount of Notes not tendered and Exchange Notes issued in exchange for any Notes tendered and accepted will be sent to the Holder at his or her registered address, unless a different address is provided in the appropriate box on this Letter of Transmittal, as soon as practicable following the Expiration Date. 5. SIGNATURES ON THE LETTER OF TRANSMITTAL; BOND POWERS AND ENDORSEMENTS; GUARANTEE OF SIGNATURES. If this Letter of Transmittal is signed by the registered holder(s) of the Tendered Notes, the signature must correspond with the name(s) as written on the face of the Tendered Notes without alteration, enlargement or any change whatsoever. If any of the Tendered Notes are owned of record by two or more joint owners, all such owners must sign this Letter of Transmittal. If any Tendered Notes are held in different names, it will be necessary to complete, sign and submit as many separate copies of the Letter of Transmittal as there are different names in which Tendered Notes are held. If this Letter of Transmittal is signed by the registered holder(s) of Tendered Notes, and Exchange Notes issued in exchange therefor are to be issued (and any untendered principal amount of Notes is to be reissued) in the name of the registered holder(s), then such registered holder(s) need not and should not endorse any Tendered Notes, nor provide a separate bond power. In any other case, such registered holder(s) must either properly endorse the Tendered Notes or transmit a properly completed separate bond power with this Letter of Transmittal, with the signature(s) on the endorsement or bond power guaranteed by an Eligible Institution. If this Letter of Transmittal is signed by a person other than the registered holder(s) of any Tendered Notes, such Tendered Notes must be endorsed or accompanied by appropriate bond powers, in each case, signed as the name(s) of the registered holder(s) appear(s) on the Tendered Notes, with the signature(s) on the endorsement or bond power guaranteed by an Eligible Institution. If this Letter of Transmittal or any Tendered Notes or bond powers are signed by trustees, executors, administrators, guardians, attorneys-in-fact, officers of corporations, or others acting in a fiduciary or representative capacity, such persons should so indicate when signing and, unless waived by the Issuer, evidence satisfactory to the Issuer of their authority to so act must be submitted with this Letter of Transmittal. Endorsements on Tendered Notes or signatures on bond powers required by this Instruction 5 must be guaranteed by an Eligible Institution. Signatures on this Letter of Transmittal must be guaranteed by an Eligible Institution unless the Tendered Notes are tendered (i) by a registered holder who has not completed the box set forth herein entitled "Special Delivery Instructions" (Box 3) or (ii) by an Eligible Institution. 6. SPECIAL DELIVERY INSTRUCTIONS. Tendering holders should indicate, in the applicable box (Box 3), the name and address to which the Exchange Notes and/or substitute Notes for principal amounts not tendered or not accepted for exchange are to be sent, if different from the name and address of the person signing this Letter of Transmittal. In the case of issuance in a different name, the taxpayer identification or social security number of the person named must also be indicated. 7. TRANSFER TAXES. The Issuer will pay all transfer taxes, if any, applicable to the exchange of Tendered Notes pursuant to the Exchange Offer. If, however, a transfer tax is imposed for any reason other than the transfer and exchange of Tendered Notes pursuant to the Exchange Offer, then the amount of any such transfer taxes (whether imposed on the registered holder or on any other person) will be payable by the tendering holder. If satisfactory evidence of payment of such taxes or exemption therefrom is not submitted with this Letter of Transmittal, the amount of such transfer taxes will be billed directly to such tendering holder. Except as provided in this Instruction 7, it will not be necessary for transfer tax stamps to be affixed to the Tendered Notes listed in this Letter of Transmittal. 8. TAX IDENTIFICATION NUMBER. Federal income tax law requires that the holder(s) of any Tendered Notes which are accepted for exchange must provide the Issuer (as payor) with its correct taxpayer identification number ("TIN"), which, in the case of a holder who is an individual, is his or her social security number. If the Issuer is not provided wit the correct TIN, the Holder may be subject to backup withholding and a $50 penalty imposed by the Internal Revenue Service. (If withholding results in an over-payment of taxes, a refund may be obtained.) Certain holders (including, among others, all corporations and certain foreign individuals) are not subject to these backup withholding and reporting requirements. See the enclosed "Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9" for additional instructions. To prevent backup withholding, each holder of Tendered Notes must provide such holder's correct TIN by completing the Substitute Form W-9 set forth herein, certifying that the TIN provided is correct (or that such holder is awaiting a TIN), and that (i) the holder has not been notified by the Internal Revenue Service that such holder is subject to backup withholding as a result of failure to report all interest or dividends or (ii) the Internal Revenue Service has notified the holder that such holder is no longer subject to backup withholding. If the Tendered Notes are registered in more than one name or are not in the name of the actual owner, consult the "Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9" for information on which TIN to report. The Issuer reserves the right in its sole discretion to take whatever steps are necessary to comply with the Issuer's obligation regarding backup withholding. 9. VALIDITY OF TENDERS. All questions as to the validity, form, eligibility (including time of receipt), acceptance and withdrawal of Tendered Notes will be determined by the Issuer in its sole discretion, which determination will be final and binding. The Issuer reserves the right to reject any and all Notes not validly tendered or any Notes the Issuer's acceptance of which would, in the opinion of the Issuer or their counsel, be unlawful. The Issuer also reserves the right to waive any conditions of the Exchange Offer or defects or irregularities in tenders of Notes as to any ineligibility of any holder who seeks to tender Notes in the Exchange Offer. The interpretation of the terms and conditions of the Exchange Offer (including this Letter of Transmittal and the instructions hereto) by the Issuer shall be final and binding on all parties. Unless waived, any defects or irregularities in connection with tenders of Notes must be cured within such time as the Issuer shall determine. Neither the Issuer, the Exchange Agent nor any other person shall be under any duty to give notification of defects or irregularities with respect to tenders of Notes, nor shall any of them incur any liability for failure to give such notification. Tenders of Notes will not be deemed to have been made until such defects or irregularities have been cured or waived. Any Notes received by the Exchange Agent that are not properly tendered and as to which the defects or irregularities have not been cured or waived will be returned by the Exchange Agent to the tendering holders, unless otherwise provided in this Letter of Transmittal, as soon as practicable following the Expiration Date. 10. WAIVER OF CONDITIONS. The Company reserves the absolute right to amend, waive or modify any of the conditions in the Exchange Offer in the case of any Tendered Notes. 11. NO CONDITIONAL TENDER. No alternative, conditional, irregular, or contingent tender of Notes or transmittal of this Letter of Transmittal will be accepted. 12. MUTILATED, LOST, STOLEN OR DESTROYED NOTES. Any tendering Holder whose Notes have been mutilated, lost, stolen or destroyed should contact the Exchange Agent at the address indicated herein for further instructions. 13. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES. Questions and requests for assistance and requests for additional copies of the Prospectus or this Letter of Transmittal may be directed to the Exchange Agent at the address indicated herein. Holders may also contact their broker, dealer, commercial bank, trust company or other nominee for assistance concerning the Exchange Offer. 14. ACCEPTANCE OF TENDERED NOTES AND ISSUANCE OF NOTES; RETURN OF NOTES. Subject to the terms and conditions of the Exchange Offer, the Issuer will accept for exchange all validly tendered Notes as soon as practicable after the Expiration Date and will issue Exchange Notes therefor as soon as practicable thereafter. For purposes of the Exchange Offer, the Issuer shall be deemed to have accepted tendered Notes when, as and if the Issuer has given written or oral notice (immediately followed in writing) thereof to the Exchange Agent. If any Tendered Notes are not exchanged pursuant to the Exchange Offer for any reason, such unexchanged Notes will be returned, without expense, to the undersigned at the address shown in Box 1 or at a different address as may be indicated herein under "Special Delivery Instructions" (Box 3). 15. WITHDRAWAL. Tenders may be withdrawn only pursuant to the procedures set forth in the Prospectus under the caption "The Exchange Offer." EX-99.2 27 FORM OF NOTICE OF GUARANTEED DELIVERY EXHIBIT 99.2 FORM OF NOTICE OF GUARANTEED DELIVERY WITH RESPECT TO 11 1/8% SENIOR SUBORDINATED NOTES DUE 2006 OF DADE INTERNATIONAL INC. Pursuant to the Prospectus Dated ______, 1996 This form must be used by a holder of 11 1/8% Senior Subordinated Notes due 2006 (the "Notes") of Dade International Inc., a Delaware corporation (the "Company"), who wishes to tender Notes to the Exchange Agent pursuant to the guaranteed delivery procedures described in "The Exchange Offer - Guaranteed Delivery Procedures" of the Company's Prospectus, dated ______, 1996 (the "Prospectus") and in Instruction 2 to the related Letter of Transmittal. Any holder who wishes to tender Notes pursuant to such guaranteed delivery procedures must ensure that the Exchange Agent receives this Notice of Guaranteed Delivery prior to the Expiration Date of the Exchange Offer. Capitalized terms used but not defined herein have the meanings ascribed to them in the Prospectus or the Letter of Transmittal. ________________________________________________________________________________ THE EXCHANGE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON _______, 1996 UNLESS EXTENDED (THE "EXPIRATION DATE"). ________________________________________________________________________________ IBJ SCHRODER BANK & TRUST COMPANY (THE "EXCHANGE AGENT") BY OVERNIGHT CARRIER OR BY HAND: BY REGISTERED OR CERTIFIED MAIL: IBJ SCHRODER BANK & TRUST COMPANY IBJ SCHRODER BANK & TRUST COMPANY ONE STATE STREET ATTENTION: REORGANIZATION DEPARTMENT SECURITIES PROCESSING WINDOW P.O. BOX 84 FLOOR SC-1 BOWLING GREEN STATION NEW YORK, NEW YORK 10004 NEW YORK, NEW YORK 10274-0084 ATTENTION: REORGANIZATION DEPARTMENT DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE WILL NOT CONSTITUTE A VALID DELIVERY. This form is not to be used to guarantee signatures. If a signature on a Letter of Transmittal is required to be guaranteed by an "Eligible Institution" under the instructions thereto, such signature guarantee must appear in the applicable space provided in the signature box on the Letter of Transmittal. Ladies and Gentlemen: The undersigned hereby tenders to the Company, upon the terms and subject to the conditions set forth in the Prospectus and the related Letter of Transmittal, receipt of which is hereby acknowledged, the principal amount of Notes set forth below pursuant to the guaranteed delivery procedures set forth in the Prospectus and in Instruction 2 of the Letter of Transmittal. The undersigned hereby tenders the Notes listed below: - ---------------------------------------------------------------------------------------------------------------------- CERTIFICATE NUMBER(S) (IF KNOWN) OF NOTES OR AGGREGATE PRINCIPAL AGGREGATE PRINCIPAL ACCOUNT NUMBER AT THE BOOK-ENTRY FACILITY AMOUNT REPRESENTED AMOUNT TENDERED - ---------------------------------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------- PLEASE SIGN AND COMPLETE - ---------------------------------------------------------------------------------------------------------------------- Signatures of Registered Holder(s) or Authorized Signatory:______________________ Date: ___________________, 1996 - ------------------------------------------- Address:_________________________________ - ------------------------------------------- ----------------------------------------- Name(s) of Registered Holder(s):___________ Area Code and Telephone No._______________ - ------------------------------------------- - ------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------- This Notice of Guaranteed Delivery must be signed by the Holder(s) excatly as their name(s) appear on certificates for Notes or on a security position listing as the owner of Notes, or by person(s) authorized to become Holder(s) by endorsements and documents transmitted with this Notice of Guaranteed Delivery. If signature is by a trustee, executor, administrator, guardian, attorney-in-fact, officer or other person acting in a fiduciary or representative capacity, such person must provide the following information. Please print name(s) and address(es) Name(s): _______________________________________________________________________ ________________________________________________________________________________ Capacity: ______________________________________________________________________ Address(es):____________________________________________________________________ ________________________________________________________________________________ - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- GUARANTEE (NOT TO BE USED FOR SIGNATURE GUARANTEE) The undersigned, a firm which is a member of a registered national securities exchange or of the National Association of Securities Dealers, Inc., or is a commercial bank or trust company having an office or correspondent in the United States, or is otherwise an "eligible guarantor institution" within the meaning of Rule 17Ad-15 under the Securities Exchange Act of 1934, as amended, guarantees deposit with the Exchange Agent of the Letter of Transmittal (or facsimile thereof), together with the Notes tendered hereby in proper form for transfer (or confirmation of the book-entry transfer of such Notes into the Exchange Agent's account at the Book-Entry Transfer Facility described in the prospectus under the caption "The Exchange Offer -- Guaranteed Delivery Procedures" and in the Letter of Transmittal) and any other required documents, all by 5:00 p.m., New York City time, on the fifth New York Stock Exchange trading day following the Expiration Date. Name of firm_____________________________ ___________________________________ (Authorized Signature) Address__________________________________ Name_______________________________ (Please Print) _________________________________________ Title______________________________ (Include Zip Code) Area Code and Tel. No. __________________ Dated________________________, 1996 - -------------------------------------------------------------------------------- DO NOT SEND SECURITIES WITH THIS FORM. ACTUAL SURRENDER OF SECURITIES MUST BE MADE PURSUANT TO, AND BE ACCOMPANIED BY, AN EXECUTED LETTER OF TRANSMITTAL. INSTRUCTIONS FOR NOTICE OF GUARANTEED DELIVERY 1. Delivery of this Notice of Guaranteed Delivery. A properly completed and duly executed copy of this Notice of Guaranteed Delivery and any other documents required by this Notice of Guaranteed Delivery must be received by the Exchange Agent at its address set forth herein prior to the Expiration Date. The method of delivery of this Notice of Guaranteed Delivery and any other required documents to the Exchange Agent is at the election and sole risk of the holder, and the delivery will be deemed made only when actually received by the Exchange Agent. If delivery is by mail, registered mail with return receipt requested, properly insured, is recommended. As an alternative to delivery by mail, the holders may wish to consider using an overnight or hand delivery service. In all cases, sufficient time should be allowed to assure timely delivery. For a description of the guaranteed delivery procedures, see Instruction 2 of the Letter of Transmittal. 2. Signatures on this Notice of Guaranteed Delivery. If this Notice of Guaranteed Delivery is signed by the registered holder(s) of the Notes referred to herein, the signature must correspond with the name(s) written on the face of the Notes without alteration, enlargement, or any change whatsoever. If this Notice of Guaranteed Delivery is signed by a participant of the Book-Entry Transfer Facility whose name appears on a security position listing as the owner of the Notes, the signature must correspond with the name shown on the security position listing as the owner of the Notes. If this Notice of Guaranteed Delivery is signed by a person other than the registered holder(s) of any Notes listed or a participant of the Book-Entry Transfer Facility, this Notice of Guaranteed Delivery must be accompanied by appropriate bond powers, signed as the name of the registered holder(s) appears on the Notes or signed as the name of the participant shown on the Book-Entry Transfer Facility's security position listing. If this Notice of Guaranteed Delivery is signed by a trustee, executor, administrator, guardian, attorney-in-fact, officer of a corporation, or other person acting in a fiduciary or representative capacity, such person should so indicate when signing and submit with the Letter of Transmittal evidence satisfactory to the Company of such person's authority to so act. 3. Requests for Assistance or Additional Copies. Questions and requests for assistance and requests for additional copies of the Prospectus may be directed to the Exchange Agent at the address specified in the Prospectus. Holders may also contact their broker, dealer, commercial bank, trust company, or other nominee for assistance concerning the Exchange Offer. EX-99.3 28 FORM OF TENDER INSTRUCTIONS EXHIBIT 99.3 FORM OF INSTRUCTIONS TO REGISTERED HOLDER AND/OR BOOK-ENTRY TRANSFER FACILITY PARTICIPANT FROM BENEFICIAL OWNER OF DADE INTERNATIONAL INC. 11 1/8% SENIOR SUBORDINATED NOTES DUE 2006 To Registered Holder and/or Participant of the Book-Entry Transfer Facility: The undersigned hereby acknowledges receipt of the Prospectus, dated ______, 1996 (the "Prospectus") of Dade International Inc., a Delaware corporation (the "Company"), and the accompanying Letter of Transmittal (the "Letter of Transmittal"), that together constitute the Company's offer (the "Exchange Offer"). Capitalized terms used but not defined herein have the meanings ascribed to them in the Prospectus. This will instruct you, the registered holder and/or book-entry transfer facility participant, as to action to be taken by you relating to the Exchange Offer with respect to the 11 1/8% Senior Subordinated Notes due 2006 (the "Notes") held by you for the account of the undersigned. The aggregate face amount of the Notes held by you for the account of the undersigned is (FILL IN AMOUNT): $ of the 11 1/8% Senior Subordinated Notes due 2006 With respect to the Exchange Offer, the undersigned hereby instructs you (CHECK APPROPRIATE BOX): [_] TO TENDER the following Notes held by you for the account of the undersigned (INSERT PRINCIPAL AMOUNT OF NOTES TO BE TENDERED, IF ANY): $ [_] NOT TO TENDER any Notes held by you for the account of the undersigned. If the undersigned instruct you to tender the Notes held by you for the account of the undersigned, it is understood that you are authorized (a) to make, on behalf of the undersigned (and the undersigned, by its signature below, hereby makes to you), the representation and warranties contained in the Letter of Transmittal that are to be made with respect to the undersigned as a beneficial owner, including but not limited to the representations that (i) the undersigned's principal residence is in the state of (FILL IN STATE) , (ii) the undersigned is acquiring the Exchange Notes in the ordinary course of business of the undersigned, (iii) the undersigned is not participating, does not participate, and has no arrangement or understanding with any person to participate in the distribution of the Exchange Notes, (iv) the undersigned acknowledges that any person participating in the Exchange Offer for the purpose of distributing the Exchange Notes must comply with the registration and prospectus delivery requirements of the Securities Act of 1933, as amended (the "Act"), in connection with a secondary resale transaction of the Exchange Notes acquired by such person and cannot rely on the position of the Staff of the Securities and Exchange Commission set forth in no-action letters that are discussed in the section of the Prospectus entitled "The Exchange Offer--Resales of the Exchange Notes," and (v) the undersigned is not an "affiliate," as defined in Rule 405 under the Act, of the Company; (b) to agree, on behalf of the undersigned, as set forth in the Letter of Transmittal; and (c) to take such other action as necessary under the Prospectus or the Letter of Transmittal to effect the valid tender of such Notes. - -------------------------------------------------------------------------------- SIGN HERE Name of beneficial owner(s):__________________________________________________ Signature(s):_________________________________________________________________ Name (please print):__________________________________________________________ Address:______________________________________________________________________ _______________________________________________________________________ _______________________________________________________________________ Telephone number:_____________________________________________________________ Taxpayer Identification or Social Security Number:____________________________ Date:_________________________________________________________________________ - -------------------------------------------------------------------------------- -----END PRIVACY-ENHANCED MESSAGE-----