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EXHIBIT 4.6
AMENDMENT NO. 5
THIS AMENDMENT NO. 5, dated as of December 12, 1997 (the "Amendment")
relating to the Credit Agreement referenced below, by and among NATIONAL MEDICAL
CARE, INC., a Delaware corporation, certain subsidiaries and affiliates party to
the Credit Agreement and identified on the signature pages hereto, and
NATIONSBANK, N.A., as Paying Agent for and on behalf of the Lenders. Terms used
but not otherwise defined shall have the meanings provided in the Credit
Agreement.
W I T N E S S E T H
WHEREAS, a $2.5 billion credit facility has been extended to National
Medical Care, Inc. and certain subsidiaries and affiliates pursuant to the terms
of that Credit Agreement dated as of September 27, 1996 (as amended and
modified, the "Credit Agreement") among National Medical Care, Inc., the other
Borrowers, Guarantors and Lenders identified therein, and NationsBank, N.A., as
Paying Agent;
WHEREAS, the Credit Parties desire to confirm that the issuance of
certain investment securities issued by a newly-formed special purpose
Luxembourg subsidiary of Holdings in connection with acquisitions of stock and
assets by the Company and its Subsidiaries, and the related obligations of
certain members of the Consolidated Group in connection therewith, are permitted
by the terms of the Credit Agreement;
WHEREAS, the Company has requested modification of certain financial
covenants and certain other changes to the Credit Agreement more fully set forth
herein;
WHEREAS, the requested consents and modifications described herein
require the consent of the Required Lenders; and
WHEREAS, the Required Lenders have consented to the requested
modifications on the terms and conditions set forth herein and have authorized
the Paying Agent to enter into this Amendment on their behalf to give effect to
this Amendment;
NOW, THEREFORE, IN CONSIDERATION of these premises and other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties hereto agree as follows:
A. The Credit Agreement is amended and modified in the following
respects:
1. The Managing Agents and Required Lenders hereby consent to the
issuance of investment securities by FMC Finance to the SPV Trusts and the
incurrence of related obligations of the Consolidated Group to each other and in
favor of the SPV Trusts in connection with acquisitions of stock and assets by
the Company and its Subsidiaries, in
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substantially the form described in Exhibit A attached, or such other form not
less favorable in any material respect to the Lenders and waive compliance with
the provisions of the Credit Agreement to the extent that any such transaction
would conflict with such provisions. Also attached as part of Exhibit A is a
letter from KPMG as to the equity treatment of such investment securities under
GAAP.
2. In Section 1.1,
(a) The definition of "Consolidated EBITDA" is amended by inserting
the following at the end thereof:
; provided, that for purposes of calculating the Consolidated
Leverage Ratio, Consolidated EBITDA shall be determined as if any
Person, property, business or asset acquired by the Consolidated Group
during such period had been so acquired as of the first day of such
period (where officer's certificates and supporting information have
been delivered in connection therewith).
(b) The definition of "Consolidated Funded Debt" is hereby amended
by inserting the following at the end thereof:
, less the amount of any Indebtedness to the SPV Trusts permitted by
Section 8.1(l), to the extent that Holdings and its Subsidiaries have
lent an equivalent amount to the SPV Trusts pursuant to clause (xviii)
of the definition of Permitted Investment.
(c) The definition of "Indebtedness" is hereby amended by inserting
the following proviso at the end of the first sentence thereof:
; provided, that the investment securities issued by FMC Finance in
connection with a Permitted Genu(beta)schein Transaction shall not be
deemed to be Indebtedness hereunder.
(d) The definition of "Equity Transaction" is hereby amended by
inserting the following proviso at the end thereof:
; and provided further, that the issuance of investment securities
by FMC Finance in connection with a Permitted Genu(beta)schein
Transaction shall be deemed to be an Equity Transaction.
(e) The obligations of any member of the Consolidated Group under
any Option Agreement entered into with any SPV Trust in connection with any
Permitted Genu(beta)schein Transaction to buy or sell any investment securities
issued to the SPV Trusts by FMC Finance shall not be considered "Guaranty
Obligations" as such term is used and defined in the Credit Agreement.
(f) The provisos to the definition of "Material Subsidiary" are
hereby deleted and the following inserted in their place:
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; provided however, that the Subsidiaries of Bio-Medical
Applications Management Co., Inc., NMC Homecare, Inc. and Lifechem Inc.
shall not be considered Material Subsidiaries hereunder; and provided
further that (i) for purposes of determining whether the FMC Trust is a
Material Subsidiary hereunder, the subordinated notes given by Holdings
to the FMC Trust in connection with the Refinancing Securities shall
not be considered as assets for purposes hereof, nor shall interest
thereon be considered for purposes of determining Consolidated EBITDA
under this definition, and (ii) for purposes of determining whether any
special purpose Subsidiary of Holdings that issues Additional Subdebt
and/or Additional Subdebt Securities is a Material Subsidiary
hereunder, the proceeds of such Additional Subdebt Securities shall not
be considered as assets for purposes hereof, to the extent that such
proceeds have been lent or contributed to another member of the
Consolidated Group, and any interest in respect of any such loan shall
not be considered for the purposes of determining Consolidated EBITDA
under this definition.
(g) New subsections (xvii), (xviii), (xix) and (xx) are hereby added
to the definition of "Permitted Investments", and subsection (xvii) thereof is
renumbered to be subsection (xxi) instead, as follows:
(xvii) Investments by Holdings and its Subsidiaries in FMC Finance
or any special purpose subsidiary of Holdings that issues Additional
Subdebt or Additional Subdebt Securities;
(xviii) Investments by Holdings or its Subsidiaries in the SPV
Trusts in connection with Permitted Genu(beta)schein Transactions;
(xix) Investments by NMC in FMC Finance or Holdings in connection
with Permitted Genu(beta)schein Transactions;
(xx) Investments by a Subsidiary of Holdings that is not a Credit
Party in any Credit Party;
(h) Subsection (xii) of the definition of "Permitted Liens" is
hereby amended by inserting the words "and the Additional Subdebt Securities"
after the words "Refinancing Securities" in the fourth line thereof, the words
"or the Additional Subdebt Securities" after the words "Refinancing Securities"
in the eighth line thereof, and the words "or, in the case of the Additional
Subdebt Securities, on terms and conditions substantially similar to the Lien
securing the Refinancing Securities" at the end thereof.
(i) In the definition of "Permitted Receivables Financing" the words
"; provided that" are deleted and replaced with "; provided that with respect to
(A) each Securitization Transaction entered into by a Domestic Subsidiary of
Holdings with respect to receivables originating in and payable in the United
States or any state thereof and (B) other Securitization Transactions which
shall exceed $15 million in any instance or $75 million in the aggregate, then".
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(j) The following definitions in Section 1.1 are amended or added to
read as follows:
"Additional Subdebt" shall have the meaning given such term in
Section 8.1(m).
"Additional Subdebt Securities" means securities issued by a special
purpose subsidiary of Holdings on terms substantially similar to the
terms of the Refinancing Securities or on such other terms not less
favorable in any material respect to the Lenders, in an amount not to
exceed the amount of any Additional Subdebt and any Investment by any
member of the Consolidated Group in the issuer of such securities;
provided that the proceeds thereof are lent to or otherwise invested in
Holdings or its Subsidiaries.
"Excluded Securitization Transaction" means (i) the accounts
receivable financing facility of the Company contemplated by the Trade
Receivables Purchase and Sale Agreement dated as of December 30, 1991
among Bio-Medical Applications Management Co., Inc., as seller, and
Xxxxxx, X.X., as investor, and Citicorp North America, Inc., as agent,
as amended and supplemented, and any Permitted Receivables Financing
entered into in replacement thereof, and (ii) any other Permitted
Receivables Financing; but only to the extent that the aggregate
Attributed Principal Amount thereof shall not exceed $400,000,000 (any
greater amount being subject to the mandatory prepayment provisions of
Section 3.3(b)(iii) hereof).
"FMC Finance" means Fresenius Medical Care Finance, S.A., a
Luxembourg stock corporation, a special purpose corporation formed by
Holdings to issue investment securities in connection with, and as
referenced in the definition of, Permitted Genu(beta)schein
Transactions.
"Permitted Genu(beta)schein Transaction" means the issuance of
investment securities by FMC Finance in an aggregate amount up to $250
million (or the Dollar Equivalent thereof (as determined, in each case,
on the date of issuance thereof)) and the incurrence of related
obligations by members of the Consolidated Group to other members of
the Consolidated Group and in favor of the SPV Trusts, in all material
respects in the form described in Exhibit A to Amendment No. 5 dated as
of December __, 1997, or such other form not less favorable in any
material respect to the Lenders.
"SPV Trusts" means, collectively, the trusts to which investment
securities are issued by FMC Finance in connection with Permitted
Genu(beta)schein Transactions.
3. Section 2.5(a) is amended by deleting the reference to "THIRTY
MILLION DOLLARS ($30,000,000)" in the definition of Domestic Swingline Committed
Amount in the seventh and eighth lines thereof and replacing it with a reference
to "FIFTY MILLION DOLLARS ($50,000,000)".
4. Section 3.3(b) (Mandatory Reductions in Revolving Commitments and
Mandatory Repayments) is hereby amended as follows:
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(a) In clause (ii) (Equity and Subordinated Debt Transactions), by
adding the following parenthetical after the words "Equity Transaction" in
the second line thereof:
"(other than the issuance of Additional Subdebt Securities")
(b) In clause (ii) (Equity and Subordinated Debt Transactions) by
adding the words "and the Additional Subdebt" at the end of clause (B)
thereof; and
(c) In clause (ii) (Equity and Subordinated Debt Transactions) by
adding a new clause (D) thereto just before the proviso as follows:
(D) forty percent (40%) of the Net Proceeds of the Additional
Subdebt (by an equivalent amount being invested in the Company as
additional equity and applied by the Company as set forth in subsection
(iv) below);
5. The financial covenant in Section 7.9(b) relating to the
Consolidated Leverage Ratio is hereby amended to read as follows:
(b) Consolidated Leverage Ratio. There shall be maintained, as of
the end of each fiscal quarter to occur during the periods shown, a
Consolidated Leverage Ratio of not greater than:
Closing Date through December 30, 1998 4.35:1.0
December 31, 1998 through December 30, 1999 3.75:1.0
December 31, 1999 through December 30, 2000 3.25:1.0
December 31, 2000 and thereafter 3.00:1.0
6. Reference is made to the joinder provisions of Section 7.11. It is
agreed that if after giving effect to a Permitted Genu(beta)schein Transaction,
FMC Finance shall constitute a Material Subsidiary, then, notwithstanding
language contained therein to the contrary, the Company shall have a period of
six (6) weeks from the date of this amendment to comply with the requirements of
Section 7.11.
7. Section 8.1 (Indebtedness) is hereby amended as follows:
(a) Clause (d) is amended by deleting the words "$70,000,000 at any
time outstanding;" in the last line thereof and inserting the following
reference:
$90 million outstanding at any time until December 31, 1997, $150
million outstanding at any time from January 1, 1998 to December 31,
1998, and $200 million outstanding at any time thereafter;
(b) The reference in clause (e) to "$204,000,000" is increased and
amended to read "$400,000,000."
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(c) Clauses (f) and (i) are amended to read as follows:
(f) other Funded Debt of Foreign Subsidiaries of Holdings (other
than intercompany Funded Debt permitted by Sections 8.1(b) and 8.5) of up
to $400 million in the aggregate amount at any time outstanding (which
Funded Debt may be guaranteed by Holdings and its Subsidiaries other than
the Company and its Subsidiaries to the extent provided herein); provided,
however, that (i) neither the Company nor any of its Subsidiaries shall
have any obligation with respect to such Funded Debt permitted by this
subsection (f), (ii) the principal amount of the Indebtedness permitted by
this subsection (f) shall be reduced by the principal amount of any
Indebtedness outstanding pursuant to Section 8.1(j) and (iii) no more than
$250 million in aggregate principal amount of such Funded Debt at any time
outstanding may be guaranteed by Holdings;
(i) in addition to other indebtedness permitted by this Section
8.1, Indebtedness of the Company and its Subsidiaries of up to $150 million
in the aggregate principal amount at any time outstanding; provided that
amounts in excess of $50 million must be specifically subordinated in right
of payment to the Obligations during the continuance of a Default or Event
of Default hereunder on terms reasonably acceptable to the Paying Agent; it
being understood and agreed that any Indebtedness that has been
subordinated to the payment of the Obligations pursuant to the provisions
hereof shall not be considered a Subordinated Debt Transaction for purposes
of Section 3.3 or Subordinated Debt for purposes of Section 8.9.
(d) New subsections (l) and (m) are added to the end to read as
follows:
(l) Indebtedness of any member of the Consolidated Group to the
SPV Trusts in connection with a Permitted Genu(beta)schein Transaction and
Indebtedness of the SPV Trusts to any other person assumed by FMC Finance
in connection with a Permitted Genu(beta)schein Transaction as partial
consideration for the issuance of investment securities; and
(m) subordinated debt issued by Holdings or any special purpose
Subsidiary of Holdings in an aggregate amount not to exceed $500 million
(or the approximate Dollar Equivalent thereof on the date on which the
amount of any portion thereof that is issued in a Foreign Currency is
fixed) (the "Additional Subdebt") and Guaranty Obligations relating thereto
issued by the Holdings and Subsidiaries of Holdings; provided that (i) none
of the Subsidiaries of the Company shall guarantee or otherwise become
obligated with respect to the Additional Subdebt, (ii) in the case of any
such Guaranty Obligations, any such Person which provides a guaranty in
connection with the Additional Subdebt shall also be a Guarantor hereunder;
and (iii) such Additional Subdebt shall mature no earlier than September
30, 2004 and be subordinated on terms no less favorable to the Lenders than
the terms of the subordinated debt related to and included within
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the definition of Refinancing Securities subject to review and confirmation
by the Paying Agent prior to the issuance thereof.
8. Section 8.4 (Consolidation, Merger, etc.) is hereby amended as
follows:
(a) a new subsection (v) is hereby added to clause (c) thereof,
and subsection (v) thereof is renumbered to be subsection (vi) instead, as
follows:
(v) sales to other members of the Consolidated Group for
fair consideration,
(b) In Section 8.4(d), (i) the words "Except as otherwise
permitted by Section 8.4(b)(i) and Section 8.4(b)(ii)," are hereby deleted
from the beginning thereof and adding the words "Except as otherwise
permitted by Section 8.4(b)(i), Section 8.4(b)(ii) or Section 8.4(c)(v),"
are hereby added in place thereof; and (ii) the reference in the third line
thereof to "subclause (xiii)" is amended to refer to "subclause (xiv)".
9. New subsections (vi) and (vii) are hereby added to the end of
Section 8.7 (Ownership of Equity Interests), and subsection (vi) is renumbered
to be subsection (viii) instead, as follows:
(vi) issuance, sale or transfer of investment securities by FMC
Finance in connection with a Permitted Genu(beta)schein Transaction, and
(vii) issuance of Additional Subdebt Securities,
10. Clause (B) of Section 8.10(b)(ii) is amended to read as follows:
(B) with respect to the Company, not more than 37.5% of Consolidated
Net Income of the Company for the prior fiscal year until such time as at least
$250 million in principal amount of Additional Subdebt shall have been issued,
and thereafter not more than 50% of Consolidated Net Income of the Company for
the prior fiscal year.
11. Section 8.11 (Sale Leaseback) is hereby amended as follows:
The words "Except as permitted pursuant to Section 8.1(d) hereof,"
at the beginning thereof are deleted and replaced with the following:
Except (x) as permitted pursuant to Section 8.1(d) hereof, and (y)
with respect to assets sold and leased back pursuant to Operating
Leases that do not constitute Indebtedness, if the aggregate fair
market value of the assets so sold and leased back, together with the
outstanding Indebtedness permitted under Section 8.1(d), does not
exceed $90 million outstanding at any time until December 31, 1997,
$150 million outstanding at any time from January 1, 1998 to December
31, 1998 and $200 million outstanding at any time thereafter,
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12. Section 8.12 (No Further Negative Pledges) is hereby amended by
inserting the words "except in connection with the issuance of the Refinancing
Securities or any Additional Subdebt" immediately before the words "or requiring
the grant of any security for such obligation" in the penultimate line thereof.
13. The Lenders hereby waive compliance with the provisions of the
Credit Agreement as in effect before the execution and delivery of this
Amendment No. 5 to the extent, and only to the extent, that any transaction or
action of any member of the Consolidated Group would have been permitted by the
provisions of the Credit Agreement as amended hereby.
14. The Lenders hereby consent to allow Holdings until March 15, 1998
to provide a Guarantor Joinder Agreement and a Pledge Joinder Agreement relating
to FMC Finance (as referenced in Exhibit A) and related corporate documentation
and legal opinions pursuant to the provisions of Section 7.11.
B. The effectiveness of this Amendment is subject to receipt by the Paying
Agent of an Amendment Fee of 7.5 basis points on the aggregate amount of the
Commitments held by each of the Lenders consenting to this Amendment.
C. Except as modified hereby, all of the terms and provisions of the
Credit Agreement (and Exhibits and Schedules) remain in full force and effect.
D. The Company agrees to pay all reasonable costs and expenses of the
Paying Agent in connection with the preparation, execution and delivery of this
Amendment, including without limitation the reasonable fees and expenses of
Xxxxx & Xxx Xxxxx, PLLC.
E. This Amendment may be executed in any number of counterparts, each of
which when so executed and delivered shall be deemed an original and its shall
not be necessary in making proof of this Amendment to produce or account for
more than one such counterpart.
F. This Amendment, and the Credit Agreement as amended hereby, shall be
governed by and construed and interpreted in accordance with the laws of the
State of New York.
[Remainder of Page Intentionally Left Blank]
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IN WITNESS WHEREOF, each of the parties hereto has caused a counterpart
of this Amendment to be duly executed and delivered as of the date first above
written.
BORROWERS: NATIONAL MEDICAL CARE, INC.,
a Delaware corporation
By /s/ Xxxxxxx X. Xxxxxx
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Name: Xxxxxxx X. Xxxxxx
Title: Senior Vice President
FRESENIUS MEDICAL CARE AG
By /s/ Xxx Xxxxx
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Name: Xxx Xxxxx
Title: Chief Executive Officer
By /s/ Xx. Xxxxxxx Xxxxxxxxxxx
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Name: Xx. Xxxxxxx Xxxxxxxxxxx
Title: Treasurer
NMC DO BRASIL LTDA.,
a Brazil corporation
By /s/ Xxxx Xxxxxxxxxx
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Name: Xxxx Xxxxxxxxxx
Title: General Manager
NATIONAL MEDICAL CARE OF SPAIN, S.A.,
a Spanish corporation
By /s/ Xxxxxx Xxxxx
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Name: Xxxxxx Xxxxx
Title: Board Member
NATIONAL MEDICAL CARE OF TAIWAN, INC.,
a Delaware corporation
By /s/ Xxxxxxx X. Xxxxxx
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Name: Xxxxxxx X. Xxxxxx
Title: Assistant Secretary
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NMC CENTRO MEDICO NACIONAL, LDA.,
a Portuguese corporation
By /s/ Xxxxxxx X. Xxxxx
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Name: Xxxxxxx X. Xxxxx
Title: Board Member
NMC DE ARGENTINA, S.A.,
an Argentine corporation
By /s/ Xxxxx Xxxxxx
----------------------------------
Name: Xxxxx Xxxxxx
Title: President
FRESENIUS USA, INC.,
a Massachusetts corporation
By /s/ Xxxxx X. Xxxxxxx
----------------------------------
Name: Xxxxx X. Xxxxxxx
Title: Vice President
FRESENIUS MEDICAL CARE DEUTSCHLAND GmbH,
a German corporation
By /s/ Xxx Xxxxx By /s/ Xx. Xxxxxxx Xxxxxxxxxxx
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Name: Xxx Xxxxx Name: Xx. Xxxxxxx Xxxxxxxxxxx
Title: Chief Executive Officer Title: Treasurer
FRESENIUS MEDICAL CARE GROUPE FRANCE
(formerly known as Fresenius Groupe France S.A.),
a French corporation
By /s/ Xxx Xxxxx
----------------------------------
Name: Xxx Xxxxx
Title: Board Member
FRESENIUS MEDICAL CARE HOLDING, S.p.A.,
an Italian corporation
By /s/ Xx. X. Xxxxx
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Name: Xx. X. Xxxxx
Title: Board Member
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FRESENIUS MEDICAL CARE ESPANA S.A.,
a Spanish corporation
By /s/ Xx. X. Xxxxx
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Name: Xx. X. Xxxxx
Title: Board Member
FRESENIUS MEDICAL CARE MAGYAROSZA KfG,
a Hungarian corporation
By /s/ Normal Xxxxxx
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Name: Xxxxxx Xxxxxx
Title: Board Member
GUARANTORS: FRESENIUS MEDICAL CARE HOLDINGS, INC.,
a New York corporation formerly known as WRG-NY
By /s/ Xxx Xxxxx
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Name: Xxx Xxxxx
Title: President
NATIONAL MEDICAL CARE, INC.,
a Delaware corporation
By /s/ Xxxxxxx X. Xxxxxx
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Name: Xxxxxxx X. Xxxxxx
Title: Senior Vice President
BIO-MEDICAL APPLICATIONS MANAGEMENT CO.,
INC., a Delaware corporation
By /s/ Xxxxx X. Xxxxxxx
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Name: Xxxxx X. Xxxxxxx
Title: Treasurer
NMC HOMECARE, INC.,
a Delaware corporation
By /s/ Xxxxx X. Xxxxxxx
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Name: Xxxxx X. Xxxxxxx
Title: Treasurer
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LIFECHEM, INC.,
a Delaware corporation
By /s/ Xxxxx X. Xxxxxxx
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Name: Xxxxx X. Xxxxxxx
Title: Treasurer
FRESENIUS MEDICAL CARE AG,
a German corporation
By /s/ Xxx Xxxxx By: /s/ Xx. X. Xxxxxxxxxxx
---------------------------------- -----------------------
Name: Xxx Xxxxx Name: Xx. X. Xxxxxxxxxxx
Title: Chief Executive Officer Title: Treasurer
FRESENIUS USA, INC.,
a Massachusetts corporation
By /s/ Xxxxx X. Xxxxxxx
----------------------------------
Name: Xxxxx X. Xxxxxxx
Title: Vice President
FRESENIUS MEDICAL CARE DEUTSCHLAND
GmbH, a German corporation
By /s/ Xxx Xxxxx By: /s/ Xx. X. Xxxxxxxxxxx
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Name: Xxx Xxxxx Name: Xx. X. Xxxxxxxxxxx
Title: Chief Executive Officer Title: Treasurer
FRESENIUS MEDICAL CARE GROUPE FRANCE,
a French corporation (formerly known as Fresenius
Groupe France S.A.)
By /s/ Xxx Xxxxx
----------------------------------
Name: Xxx Xxxxx
Title: Board Member
FRESENIUS SECURITIES, INC.,
a California corporation
By /s/ Xxxxx X. Xxxxxxx
----------------------------------
Name: Xxxxx X. Xxxxxxx
Title: Treasurer
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PAYING AGENT: NATIONSBANK, N.A.,
as Paying Agent for and on behalf of the Lenders
By /s/ Xxxxxx X. Xxxxxxxx
----------------------
Xxxxxx X. Xxxxxxxx
Senior Vice President
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CONSENT TO AMENDMENT NO. 5
NationsBank, N.A., as Paying Agent
000 X. Xxxxx Xxxxxx, 15th Floor
NC1-001-15-04
Xxxxxxxxx, Xxxxx Xxxxxxxx 00000
Attn: Xxxxx Xxxxxxx, Agency Services
Re: Credit Agreement dated as of September 27, 1996 (as amended
and modified, the "Credit Agreement") among National Medical
Care, Inc., the other Borrowers, Guarantors and Lenders
identified therein and NationsBank, N.A., as Paying Agent.
Terms used but not otherwise defined shall have the meanings
provided in the Credit Agreement.
Amendment No. 5 dated December __, 1997 (the "Subject
Amendment") relating to the Credit Agreement
Ladies and Gentlemen:
This should serve to confirm our receipt of, and consent to, the
Subject Amendment. We hereby authorize and direct you, as Paying Agent for the
Lenders, to enter into the Subject Amendment on our behalf in accordance with
the terms of the Credit Agreement upon your receipt of such consent and
direction from the Required Lenders, and agree that Company and the other Credit
Parties may rely on such authorization.
Sincerely,
-----------------------------
[Name of Lender]
By:
-------------------------
Name:
Title:
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Exhibit A
Description of Permitted Genu(beta)schein
Transaction (including KPMG Peat Marwick letter regarding
characterization as equity)
PERMITTED GENU(beta)SCHEIN TRANSACTIONS
DESCRIPTION OF SECURITIES
1. Background. National Medical Care, Inc. ("NMC" or the "Company"; capitalized
terms used but not otherwise defined herein having the meanings assigned thereto
in the Credit Agreement) has decided to pursue an accelerated acquisition
program in light of the current consolidation and acquisition activity in the
U.S. dialysis business. Holdings and NMC wish to finance this program with
equity, but for various reasons have determined that neither the direct issuance
of Preference Shares of Holdings nor a general public offering are appropriate
at this time. Accordingly, it has structured the program described below, which
involves the issuance of investment securities (also known as
"Genu(beta)schein") by a newly-created special purpose subsidiary of Holdings,
redeemable with Preference Shares of Holdings. or cash at the option of
Holdings. These securities will be accounted for as equity in Holdings'
financial statements in accordance with U.S. GAAP.
2. Cash Consideration from NMC. The prospective seller ("Seller") will transfer
an undivided interest in its stock or assets and liabilities (together with the
assets transferred as described below, the "Acquired Property") as provided for
by the applicable purchase agreement to a subsidiary of NMC ("Acquisition Sub")
for cash.
3. Deferred Consideration from Special Purpose Trust. The Seller will transfer
the remaining undivided interest in the Acquired Property to a trust (the
"Trust"), organized under the laws of Bermuda, for promissory notes (the
"Notes"), payable on terms agreed upon by the parties. A new Trust will be
formed in connection with each acquisition. The trustee of the Trusts will be
Xxxxxxxxxx Trust Limited, a Bermuda trust company, with State Street Bank and
Trust Company as the manager of the Trusts. Each Trust will be a single purpose
vehicle, subject to certain standard terms and conditions, that may engage in
activities limited to the purchase of an interest in the Acquired Property,
issuance of the Notes, investment of cash balances, transfer of an interest in
the Acquired Property to a subsidiary of Holdings and the exercise of its rights
in connection with those transactions. The Trusts will not be controlled by
Holdings or its subsidiaries.
4. Transfer of Acquired Property from Trust in consideration of issuance of
Investment Securities. The applicable Trust will transfer its interest in the
Acquired Property to Fresenius Medical Care Finance, S.A. ("FMC Finance"), a
special purpose subsidiary of Holdings incorporated under the laws of
Luxembourg, or, at FMC Finance's direction, to the applicable Acquisition Sub,
in exchange for dividend-bearing investment securities issued by FMC Finance
(the "Investment Securities"), having a face amount and dividend equal to or
greater than the face amount of the Notes and interest payable under the Notes
issued to the Seller, and maturing in ten years. Dividends on the investment
Securities will be payable annually, but only to the
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extent that Holdings, Finance Sub's parent, has net profits. Any interest in the
Acquired Property transferred to or assumed by FMC Finance will be transferred
to and assumed by Acquisition Sub.
The Investment Securities confer no voting rights on the holder thereof, either
in FMC Finance or Holdings.
5. Option Agreements with Holdings.
The Trust and Holdings will enter into an option agreement (the "Option
Agreement") under which the following options will be granted:
(a) Put to Holdings. The Trust, as holder of the Investment
Securities will be entitled, from time to time and subject to
certain conditions, to put all or any of the Investment
Securities to Holdings ("Put Option") in exchange for:
(i) Preference Shares of Holdings that are subject to a
firm commitment underwriting agreement and that have,
net of expenses (including underwriting commission) a
market value equal to the principal and accrued
interest on the Investment Securities subject to the
Put Option;
or
(ii) at Holding's election, cash in an equivalent amount.
(b) Call by Holdings. Under the Option Agreement, Holdings shall
have the right from time to time to call all or any of the
Investment Securities in exchange for Preference Shares of an
equivalent value (determined as in (a) above) or for cash in
an equivalent amount.
Any Preference Shares issued under the Option Agreement will be newly-issued
Preference Shares of Holdings, of the same class as those which are generally
available to the public, and will be listed on the Frankfurt Stock Exchange and
in the form of ADRs on the New York Stock Exchange, or other recognized German
or U.S. exchanges. For regulatory reasons, in certain cases, at the time of
issuance of such Preference Shares Holdings must have had (x) total assets at
the end of its most recent fiscal year exceeding $100 million, and (y)
stockholders' equity exceeding $75 million at the end of its most recent fiscal
year or on average over the previous three fiscal years.
If Holdings advises a Trust that it Plans to satisfy an option by issuing
Preference Shares, the Trust will, together with Holdings, make arrangements to
monetize such Preference Shares. Monetization of the Preference Shares by the
Trusts is likely to be through open market sales or public underwritings at
market value, although other methods of selling the Preference Shares may be
employed. Cash obtained from such sales prior to the time needed to make
payments on the Notes will be invested, so that the Trusts may have some
investment income. For this and other tax reasons, the Trusts will be Bermuda
Trusts where tax liability can be minimized or
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avoided. If any assets remain in the Trust after the exercise of the options
with respect to all of the Investment Securities, the sale of any Preference
Shares held by the Trust and the payment of its obligations under the Notes,
they will be deemed to reflect an excess payment in respect of the Investment
Securities and shall be remitted to FMC Finance.
6. Intercompany Arrangements.
For accounting purposes and to provide FMC Finance with the creditworthiness
necessary for Holdings to obtain the approval of the German Commercial Court to
issue Preference Shares in exchange for the Investment Securities, an
intercompany account will be established reflecting an obligation of NMC to FMC
Finance, subordinated to the payment of the Credit Agreement Obligations, in an
amount equal to the face amount of, and accrued interest slightly in excess of
the dividends accrued on, each separate series of Investment Securities issued
to the Trusts. As the Option Agreements are exercised and the obligations in
respect of Investment Securities are satisfied, FMC Finance will assign a
proportionate part of the intercompany receivable to Holdings.
7. Potential Variations from Standard Transactions.
Additional Put Option; other remedies
Because this type of transaction is new to the dialysis industry, some Sellers
have insisted on the additional protection of an option for the Trust to put the
Investment Securities to another member of the Consolidated Group for cash, if
neither the Seller nor Holdings has exercised its options under the Option
Agreement before the maturity date of the Seller's Notes (or an earlier agreed
date) in a way that sufficient funds have been realized for the Trust to pay the
Notes in full. For regulatory reasons, when referring physicians are not
involved, this put option is likely to be to NMC; when referring physicians are
involved this put option is likely to be to FUSA. It is possible that where
necessary Sellers may also be granted additional rights and remedies if the
exercise of the Option Agreement does not provide sufficient funds for the Notes
to be paid in full.
Overfunding of the Trust
Some Sellers have accepted this financing structure under the assumption that
they will receive installment sales treatment on the Notes issued by the Trust.
Tax counsel has suggested that Seller's reporting position on the installment
sales treatment would be enhanced if the Trust had assets other than the
Investment Security. To accommodate a Seller, when requested Holdings will
overfund the Trust by lending it an amount equal to approximately 10% of the
amount of the Investment Securities, in return for a promissory note
subordinated to the Seller's promissory note, maturing after the Seller's
promissory note is repaid. The Trust, in turn, would lend the overfunded amount
to a member of the Consolidated Group, in return for a promissory note.
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