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EXHIBIT 99.5
PROMISSORY NOTE
$5,835,707.00 Pennsauken, New Jersey
September 30, 1994
FOR VALUE RECEIVED, MEDIQ/PRN LIFE SUPPORT SERVICES, INC., a
Delaware corporation ("Maker"), hereby unconditionally promises to pay to the
order of KCI THERAPEUTIC SERVICES, INC., a Delaware corporation ("Payee"), in
installments as hereinafter provided, the principal amount of FIVE MILLION
EIGHT HUNDRED THIRTY-FIVE THOUSAND SEVEN HUNDRED SEVEN AND NO/100 DOLLARS
($5,835,707). All past due principal hereof shall bear interest from the
maturity thereof until paid at the lesser of the Default Rate (hereinafter
defined) and the maximum rate of interest per annum permitted by applicable
law.
As used in this Note, the following terms shall have the
respective meanings indicated below:
"Default Rate" shall mean the sum of the Prime Rate in effect from
day to day plus five percent (5%) per annum.
"Prime Rate" shall mean the rate of interest per annum established
from time to time by Bank of America National Trust and Savings Association in
San Francisco, California ("BOA"), and designated as its reference lending rate
of interest, which may not necessarily be the lowest interest rate charged by
BOA. In the event that BOA does not announce a rate designated by it as its
reference rate, then the Prime Rate under this Note shall be deemed to be the
variable rate of interest per annum which is the general reference rate
designated by BOA as its "prime rate", "base rate" or other similar rate and
which Payee or any subsequent holder hereof determines to be comparable to the
Prime Rate as described above. In the event that BOA shall cease to have any of
the rates described in the preceding sentence, then the Prime Rate shall be
calculated using that variable rate of interest per annum established by
NationsBank of Texas, N.A., San Antonio, Texas, or such other financial
institution satisfactory to Payee, which institution may be chosen by Payee, or
any subsequent holder hereof, in its sole discretion and changed by Payee, or
any subsequent holder hereof, in its sole discretion exercised in good faith,
from time to time, any such change to become effective on the date of such
change.
The principal amount hereof shall be repaid in ten (10) equal
monthly installments of $583,570.70, with the first such monthly installment
being due and payable on December 31, 1994 and continuing regularly and monthly
thereafter on the last day of each successive calendar month until September
30, 1995 (the "Maturity Date") on which date the entire outstanding unpaid
principal balance and interest hereof shall be due and payable.
Payments of principal and interest, if applicable, shall be made
in lawful money of the United States of America by wire transfer of immediately
available funds or cash or bank
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cashier's check at 8023 Vantage Drive, San Antonio, Texas 78230 or at such
other place as Payee shall designate to Maker in writing.
Payee expressly agrees that Maker shall be entitled to offset
against the last to mature portion of the indebtedness evidenced hereby, any
and all payments owed by Payee or any of its Affiliates (as defined in the
Asset Purchase Agreement (hereinafter defined)) to MEDIQ/PRN Life Support
Services-I, Inc., a Delaware corporation ("PRN-I") pursuant to Section 11.1 of
that certain Asset Purchase Agreement (the "Asset Purchase Agreement") dated
August 23, 1994, as amended by Amendment No. 1 to Asset Purchase Agreement
dated as of September 30, 1994, by and among MEDIQ Incorporated, a Delaware
corporation ("MEDIQ"), PRN-I, PRN Holdings, Inc. ("Holdings") (Maker, MEDIQ,
Holdings, and PRN-I are sometimes collectively referred to herein as the "MEDIQ
Group"), Kinetic Concepts, Inc. ("KCI") and Payee.
Any check, draft, money order or other instrument given in payment
of all or any portion hereof may be accepted by Payee and handled in collection
in the customary manner, but the same shall not constitute payment hereunder or
diminish any rights of Payee except to the extent that actual cash proceeds of
such instrument are unconditionally received by Payee.
Maker may prepay this Note in whole or in part at any time without
premium or penalty. All prepayments hereunder shall be applied first to accrued
but unpaid interest, then to discharge any expenses for which Payee may be
entitled to receive reimbursement under the terms of this Note, and lastly, to
installments of principal due hereunder in the inverse order of their maturity.
Subject to the subordination contained herein, Maker shall be required to
prepay this Note in whole or in part to the full extent of any Prepayment
Offering Proceeds (as defined herein) which may be realized from time to time
from any Subsidiary Equity Offering (as hereinafter defined) or any MEDIQ
Equity Offering (as hereinafter defined). For purposes hereof "Prepayment
Offering Proceeds" shall mean (i) with respect to a Subsidiary Equity Offering,
an amount equal to fifty percent (50%) of the Net Proceeds (as hereinafter
defined) equal to or less than $20,000,000, or (ii) with respect to a MEDIQ
Equity Offering, an amount equal to the product obtained by multiplying (x) an
amount equal to fifty percent (50%) of the Net Proceeds equal to or less than
$20,000,000, by (y) a fraction having a numerator equal to the total pro- forma
combined gross revenues for the previous four (4) fiscal quarters of the
Subsidiaries (as defined herein) on a consolidated basis and a denominator
equal to the sum of the pro-forma unconsolidated gross revenues for the
previous four (4) fiscal quarters of MEDIQ, plus, without duplication, (a) the
sum of the products derived by multiplying (i) the pro-forma unconsolidated
gross revenues for the previous four (4) fiscal quarters of each of the
Subsidiaries by (ii) the daily average percentage of capital stock directly or
indirectly owned by MEDIQ in the respective Subsidiary over the same period,
plus (b) the sum of the products of the pro-forma unconsolidated gross revenues
for the previous four (4) fiscal quarters of each company in which, at any time
during the relevant period, twenty percent (20%) or more of the capital stock
of such company was directly or indirectly owned by MEDIQ multiplied by the
daily average percentage of capital stock directly or indirectly owned by MEDIQ
in such company during the relevant period, all as determined using generally
accepted accounting principles consistently applied ("GAAP"), other than
principles of consolidation. Notwithstanding anything contained
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in this Note to the contrary, in connection with any MEDIQ Equity Offering, if
the fraction derived from the calculation described in clause (y) above is less
than 1/2, no mandatory prepayment shall be due. Any such mandatory prepayment
will be due five (5) business days after the Prepayment Offering Proceeds are
realized by the party entitled thereto. For purposes hereof, "Net Proceeds"
shall mean an amount equal to the cumulative gross proceeds resulting from any
and all Subsidiary Equity Offerings and MEDIQ Equity Offerings, from and after
the date hereof, minus (x) any underwriter's fees, discounts and commissions
and other reasonable and customary fees and expenses incurred in connection
with such offerings, (y) any success fee paid to Congress Financial Corporation
in connection with such offerings, but not to exceed one-half of one percent
(.5%) of the gross proceeds resulting from such offerings, and (z) any unpaid
portion of any closing fee paid to Congress Financial Corporation, but not to
exceed $75,000 in the aggregate. For purposes hereof, a "Subsidiary Equity
Offering" shall mean a primary or secondary offering and sale of Equity
Securities (as defined herein) of any of the Subsidiaries for cash. A "MEDIQ
Equity Offering" shall mean a primary offering and sale of Equity Securities
of MEDIQ for cash. For purposes hereof "Equity Securities" shall mean any (i)
capital stock or other equity interests, (ii) other right(s) with respect to
any such capital stock or other equity interests, (iii) offers, options (other
than employee stock options), obligations, warrants, rights, subscriptions,
agreements, claims of any character, or commitments of any kind (contingent or
otherwise) relating to the issuance, conversion, exchange, registration,
voting, sale or transfer of any such capital stock or equity interests, or (iv)
any debenture, bond, note or other instrument that may be converted into or
exchanged for any capital stock or other equity instrument. For purposes
hereof "Subsidiaries" or "Subsidiary" means Holdings, PRN-I, Maker, and/or any
other entity that is wholly or partially owned or controlled by Holdings. For
purposes hereof an entity is "controlled by" another person or entity if such
other person or entity is in possession, direct or indirect, of the power to
direct or cause the direction of, the management and policies of the entity,
whether by ownership, contract or otherwise. For purposes hereof "pro-forma"
revenues for any entity means for any relevant period (a) the actual revenues
of said entity over the relevant period plus (b) the actual revenues during the
relevant period of any business acquired by the entity during the relevant
period, as accounted for in accordance with GAAP and Regulation S-X promulgated
by the Securities and Exchange Commission under the Securities Act of 1933. As
an example and without limiting the generality of the foregoing, the revenues
of Maker shall include the revenues of Payee from the Division (as defined in
the Asset Purchase Agreement) for that portion of the relevant period that
precedes the effective time of the sale of the assets under the Asset Purchase
Agreement. Notwithstanding anything contained herein to the contrary, the
mandatory prepayment provisions set forth herein are and shall at all times be
subordinate to the repayment of the Holdings Notes and the $2,956,957 Note
(each as hereinafter defined) and Maker shall have no obligation to make any
mandatory prepayments to the extent, but only to the extent, that there remains
any unpaid principal and/or interest under the Holdings Notes or the $2,956,957
Note at the time any Prepayment Offering Proceeds are realized by the party
entitled to such proceeds; provided, however, that the foregoing shall not
apply with respect to the Holdings Notes in the event that at the time any
Prepayment Offering Proceeds are realized payment of the Holdings Notes is
prohibited or restricted.
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The payment of this Note and the performance of Maker's
obligations hereunder is guaranteed by MEDIQ and Holdings pursuant to the terms
of those two (2) certain Guaranty Agreements dated of even date herewith,
being in favor of Payee and executed by MEDIQ and Holdings, respectively
(respectively, the "MEDIQ Guaranty" and the "Holdings Guaranty").
The occurrence of any of the following shall constitute an Event
of Default hereunder: (a) default in any payment by Maker hereunder when due or
a default by any member of the MEDIQ Group of its respective obligations to
escrow any disputed offset amounts pursuant to the terms of the Section 11.6 of
the Asset Purchase Agreement and such default continues uncured for five (5)
days after the date any such payment or escrow was due; provided, however, that
if in any consecutive twelve (12) month period Maker defaults two times in
making payments when due hereunder and/or any member or members of the MEDIQ
Group defaults two times in making any required escrow deposits pursuant to the
Asset Purchase Agreement, any such subsequent default shall immediately
constitute an Event of Default hereunder without the passage of any grace
period; (b) any other default occurs under this Note and such default remains
uncured for thirty (30) days after the delivery of notice from Payee to Maker;
(c) default occurs under the MEDIQ Guaranty and/or the Holdings Guaranty; (d)
any failure by PRN-I, Holdings or MEDIQ to fully perform and carry out, in any
material respect, each and every of the respective agreements and undertakings
of such entities as set forth, in that certain Negative Covenants Agreement (so
called herein) dated of even date herewith and entered into by and among
Holdings, MEDIQ, PRN-I, KCI and Payee; (e) any failure by MEDIQ to perform and
carry out each and every of its agreements, covenants and undertakings as set
forth in that certain Collateral Transfer of Note (Security Agreement) (so
called herein) dated of even date herewith and executed by MEDIQ in favor of
Payee; (f) sale of all or substantially all of any of Maker's, Holdings',
PRN-I's or MEDIQ's assets, or any formal action in contemplation of the
dissolution, liquidation or termination of any of Maker's, Holdings', PRN-I's
or MEDIQ's existence; (g) institution of any proceedings by or against any of
Maker, Holdings, PRN-I or MEDIQ under any law relating to bankruptcy,
insolvency, reorganization or other form of debtor relief or any of Maker's,
Holdings', PRN-I's or MEDIQ's making an assignment for the benefit of
creditors, or the appointment of a receiver, trustee, conservator or other
judicial representative for any of Maker, Holdings, PRN-I or MEDIQ or any of
Maker's, Holdings', PRN-I's or MEDIQ's property, unless, in the case of any
such proceeding or appointment not instituted by any of Maker, Holdings, PRN-I
or MEDIQ, such proceeding or appointment is dismissed within sixty (60) days;
(h) the occurrence of any Change of Control (as hereinafter defined) without
the prior written consent of Payee; (i) the failure of any Subsidiary to make
any payment when due under any indebtedness of any Subsidiary in excess of
$3,000,000.00 or the occurrence of any breach, default or event of default
under any such indebtedness that results in the acceleration of the maturity of
any such indebtedness; or (j) if at any time during the term of this Note the
amount equal to the sum of the Tangible Equity (hereinafter defined) of MEDIQ
plus the debt of MEDIQ, on an unconsolidated basis, that is subordinate in
right of payment to the MEDIQ Guaranty is less than $50,000,000 (for purposes
of the foregoing the Tangible Equity of MEDIQ means an amount equal to the
difference between the shareholders' equity in MEDIQ and the goodwill (net of
amortization) of MEDIQ other than goodwill arising from the transactions
contemplated by the Asset Purchase
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Agreement, all as determined in accordance with generally accepted accounting
principles consistently applied).
Upon the occurrence of any Event of Default, the unpaid principal
balance hereof, together with accrued unpaid interest thereon, shall, at the
option of Payee, immediately become due and payable without presentment,
protest, demand, notice of intention to accelerate, notice of acceleration,
notice of non-payment, notice of protest, or other notice of any kind, all of
which are hereby expressly waived by Maker. If this Note is not paid at
maturity, however such maturity may be brought about, and the same is placed in
the hands of an attorney for collection, and/or if this Note is collected by
suit or through bankruptcy, probate, or other legal proceedings, the Maker
agrees to pay all reasonable attorney's fees, court costs and other expenses
incurred by Payee in connection with such collection efforts.
Payee agrees that this Note is subject to the terms and provisions
of the Standstill Agreement executed by and among Congress Financial
Corporation, Maker and Payee dated of even date herewith.
No failure or delay on the part of Payee to insist on strict
performance of Maker's obligations hereunder or to exercise any remedy shall
constitute a waiver of Payee's rights in that or any other instance. No waiver
of any of Payee's rights shall be effective unless in writing, and any waiver
of any default or any instance of non-compliance shall be limited to its
express terms and shall not extend to any other default or instance of
non-compliance.
Any notice or communication required or permitted hereunder shall
be in writing and shall be sent either by (a) personal delivery service with
charges therefor billed to shipper, (b) expedited delivery service with charges
therefor billed to shipper, (c) United States Mail, postage prepaid, registered
or certified mail, return receipt requested, or (d) prepaid telegram or telex
(provided that the contents of such telegram or telex are confirmed by
expedited delivery service or by mail in the manner previously described)
addressed to Maker or Payee, as the case may be, at the address set forth in
the Asset Purchase Agreement, or at such other address as Maker or Payee may
have designated by notice to the other given as provided above. Any notice or
communication sent as hereinabove provided shall be deemed given (i) upon
receipt if sent by telegram or telex or if personally delivered (provided that
such delivery is confirmed by the courier delivery service), (ii) on the date
of deposit in a post office or other official depository under the care and
custody of the United States Postal Service, if sent by United States Mail, or
(iii) on the date of delivery to any expedited delivery service.
Notwithstanding anything contained herein to the contrary, the
term "Payee" shall mean the party so defined as Payee in the first paragraph of
this Note for so long as such party is the holder of this Note and, thereafter,
shall mean, at any time, the then holder of this Note.
Maker and any and all sureties, guarantors and endorsers of this
Note and all other parties now or hereafter liable hereon, severally waive
grace, demand, presentment for payment, protest, notice of any kind (including,
but not limited to, notice of dishonor, notice of protest,
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notice of intention to accelerate and notice of acceleration) and diligence in
collecting and bringing suit against any party hereto and agree (i) to all
extensions and partial payments, with or without notice, before or after
maturity, (ii) to any substitution, exchange or release of any security now or
hereafter given for this Note, (iii) to the release of any party primarily or
secondarily liable hereon, and (iv) that it will not be necessary for Payee, in
order to enforce payment of this Note, to first institute or exhaust Payee's
remedies against Maker or any other party liable therefor or against any
security for this Note.
Notwithstanding anything to the contrary contained in this Note or
in any other agreement entered into in connection herewith or securing the
indebtedness evidenced hereby, whether now existing or hereafter arising and
whether written or oral, it is agreed that the aggregate of all interest and
any other charges constituting interest, or adjudicated as constituting
interest, and contracted for, chargeable or receivable under this Note or
otherwise in connection with the debt evidenced hereby, shall under no
circumstances exceed the maximum amount of interest permitted by applicable
law. In the event the maturity of this Note is accelerated by reason of an
election by the holder hereof resulting from a default hereunder or under any
other document executed as security herefor or in connection herewith, or by
voluntary prepayment by Maker or otherwise, then earned interest may never
include more than the maximum rate of interest permitted by applicable law. If
from any circumstance any holder of this Note shall ever receive interest or
any other charges constituting interest, or adjudicated as constituting
interest, the amount, if any, of which would exceed the maximum rate of
interest permitted by applicable law (the "Excess Interest"), then the Excess
Interest shall be applied to the reduction of the principal amount owing on
this Note or on account of any other principal indebtedness of Maker to the
holder of this Note, and not to the payment of interest. If the Excess
Interest exceeds the unpaid balance of principal hereof and such other
indebtedness, then that portion of the Excess Interest which exceeds the unpaid
balance of principal hereof and such other indebtedness shall be refunded to
Maker. All sums paid or agreed to be paid to the holder of this Note for the
use, forbearance or detention of the indebtedness of Maker to the holder of
this Note shall be amortized, prorated, allocated and spread throughout the
full term of such indebtedness until payment in full so that the actual rate of
interest on account of such indebtedness is uniform throughout the term
thereof.
Any provision hereof found to be illegal, invalid or unenforceable
for any reason whatsoever shall not affect the validity, legality or
enforceability of the remainder hereof.
This Note shall be binding upon Maker's successors and assigns and
shall inure to the benefit of Payee and its successors and permitted assigns;
provided that Payee may not transfer or assign this Note or any right or
interest herein to any person or entity without Maker's prior written consent.
Maker recognizes and acknowledges that contemporaneously herewith
(i) Holdings has delivered those three (3) certain Promissory Notes
(collectively the "Holdings Notes"), each dated of even date herewith, one in
the original principal amount of $5,000,000.00, the second in the original
principal amount of $3,000,000 and the other in the original principal amount
of
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$2,000,000.00 and each being payable to the order of Payee, and (ii) PRN-I has
delivered that certain Promissory Note (the "$2,956,957 Note") dated of even
date herewith, being in the original principal amount of $2,956,957 and payable
to the order of Payee. Maker covenants and agrees that any Event of Default
under or with respect to the $2,956,957 Note and/or any or all of the Holdings
Notes, or under any other instruments relating thereto, shall also constitute
an Event of Default hereunder, entitling Payee to pursue all rights, remedies
and recourses available to it, including, without limitation, acceleration of
this Note and foreclosure of any liens securing repayment hereof.
This Note shall be construed and interpreted in accordance with,
and all issues relating to this Note or to the transaction which this Note
relates (including, without limitation, the validity and/or enforceability of
this Note or any portion of this Note) shall be governed by, the laws of the
State of Delaware (other than the conflict of law rules of the State of
Delaware), except as otherwise required by mandatory provisions of applicable
law and except to the extent that remedies provided by the laws of any state
other than Delaware are governed by the laws of said state.
The following definitions shall apply with respect to the
provisions set forth above:
"Change of Control" means (a) the acquisition after the date of
this Note, in one or more transactions, of beneficial ownership (within the
meaning of Rule 13d-3 under the Exchange Act) by (i) any Person (as hereinafter
defined) (other than a Permitted Holder) or (ii) any Persons who constitute a
group (within the meaning of Section 13(d) (3) of the Exchange Act) (other than
Permitted Holders), in either case, of any securities of MEDIQ such that, as a
result of such acquisition, such Person or group either (A) beneficially owns
(within the meaning of Rule 13d-3 under the Exchange Act), directly or
indirectly, a majority of MEDIQ's then outstanding voting securities entitled
to vote on a regular basis for a majority of the Board of Directors of MEDIQ or
(B) otherwise has the ability to elect, directly or indirectly, a majority of
the members of MEDIQ's Board of Directors, or (b) the acquisition after the
date of this Note, in one or more transactions, of beneficial ownership (with
the meaning of Rule 13(d)(3) under the Exchange Act) by (i) any Person (other
than a Permitted Holder) or (ii) any Persons who constitute a group (within the
meaning of Section 13(d)(3) of the Exchange Act) (other than Permitted
Holders), in either case, of any securities of any Subsidiary such that, as a
result of such acquisition, such Person or group either (A) beneficially owns
(within the meaning of Rule 13(d)(3) under the Exchange Act), directly or
indirectly, a majority of such Subsidiary's then outstanding voting securities
entitled to vote on a regular basis for a majority of the Board of Directors of
such Subsidiary or (B) otherwise has the ability to elect, directly or
indirectly, a majority of the members of such Subsidiary's of Board of
Directors.
"Exchange Act" means the Securities Exchange Act of 1934,
as amended.
"Permitted Holder" means (i) with respect to MEDIQ, the current
executive officers of MEDIQ as disclosed in item 10 of MEDIQ's Annual Report on
Form 10-K for the fiscal year ended September 30, 1993 (the "Executive
Officers"), (ii) with respect to Holdings, the
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Executive Officers and/or MEDIQ, (iii) with respect to Maker and PRN-I, the
Executive Officers, MEDIQ and/or Holdings and (iv) with respect to MEDIQ,
Holdings, PRN-I and Maker, Persons identified under the caption "Security
Ownership of Certain Beneficial Owners and Management" in MEDIQ's 1994 Proxy
Statement.
"Person" shall include an individual, a corporation, a joint
venture, a partnership, a trust, an unincorporated organization or a government
or any agency or political subdivision thereof.
IN WITNESS WHEREOF, the undersigned, intending to be legally
bound, has duly executed and delivered this instrument.
MEDIQ/PRN LIFE SUPPORT SERVICES, INC.,
a Delaware corporation
By: /s/ JAY M. KAPLAN
Printed Name: Jay M. Kaplan
Title: Senior Vice President
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