-----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, Q039D0hGFNUQI4uJOFwCL0/OAtDfBoaVPP+KpTyiCR+bbCIGfIY2+RW2C0WvuQEV 6P65dkz/JNennIw3CqGnXg== 0000950123-01-504994.txt : 20021127 0000950123-01-504994.hdr.sgml : 20021127 20010802132727 ACCESSION NUMBER: 0000950123-01-504994 CONFORMED SUBMISSION TYPE: F-4 PUBLIC DOCUMENT COUNT: 36 FILED AS OF DATE: 20010802 FILER: COMPANY DATA: COMPANY CONFORMED NAME: FRESENIUS MEDICAL CARE CORP CENTRAL INDEX KEY: 0001019600 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-NURSING & PERSONAL CARE FACILITIES [8050] FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: F-4 SEC ACT: 1933 Act SEC FILE NUMBER: 333-66558 FILM NUMBER: 01695995 BUSINESS ADDRESS: STREET 1: ELSE-KRONER STRASSE 1 CITY: BAD HOMBURG STATE: I8 ZIP: 00000 BUSINESS PHONE: 0114961726092525 MAIL ADDRESS: STREET 1: ELSE-KRONER STRASSE 1 CITY: BAD HOMBURG STATE: I8 FILER: COMPANY DATA: COMPANY CONFORMED NAME: FRESENIUS MEDICAL CARE GERMANY CO CENTRAL INDEX KEY: 0001026614 STANDARD INDUSTRIAL CLASSIFICATION: SURGICAL & MEDICAL INSTRUMENTS & APPARATUS [3841] FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: F-4 SEC ACT: 1933 Act SEC FILE NUMBER: 333-66558-01 FILM NUMBER: 01695990 BUSINESS ADDRESS: STREET 1: BORKENBERG 14 CITY: OBERURSEL 61440 GERM STATE: I8 ZIP: 00000 MAIL ADDRESS: STREET 1: OBERURSEL 61440 GERM STATE: I8 ZIP: 00000 FILER: COMPANY DATA: COMPANY CONFORMED NAME: FMC TRUST FINANCE SARL LUXEMBOURG III CENTRAL INDEX KEY: 0001145970 FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: F-4 SEC ACT: 1933 Act SEC FILE NUMBER: 333-66558-02 FILM NUMBER: 01695991 BUSINESS ADDRESS: STREET 1: L-2557 7A RUE ROBERT STUMPER CITY: LUXEMBOURG BUSINESS PHONE: 0113522984441 MAIL ADDRESS: STREET 1: L-2557 7A RUE ROBERT STUMPER CITY: LUXEMBOURG FILER: COMPANY DATA: COMPANY CONFORMED NAME: FRESENIUS MEDICAL CARE CAPITAL TRUST V CENTRAL INDEX KEY: 0001145966 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: F-4 SEC ACT: 1933 Act SEC FILE NUMBER: 333-66558-03 FILM NUMBER: 01695992 BUSINESS ADDRESS: STREET 1: 95 HAYDEN AVE CITY: LEXINGTON STATE: MA ZIP: 02173 BUSINESS PHONE: 7814029000 MAIL ADDRESS: STREET 1: 95 HAYDEN AVE CITY: LEXINGTON STATE: MA ZIP: 02173 FILER: COMPANY DATA: COMPANY CONFORMED NAME: FRESENIUS MEDICAL CARE CAPITAL TRUST IV CENTRAL INDEX KEY: 0001145968 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: F-4 SEC ACT: 1933 Act SEC FILE NUMBER: 333-66558-04 FILM NUMBER: 01695993 BUSINESS ADDRESS: STREET 1: 95 HAYDEN AVE CITY: LEXINGTON STATE: MA ZIP: 02173 BUSINESS PHONE: 7814029000 MAIL ADDRESS: STREET 1: 95 HAYDEN AVE CITY: LEXINGTON STATE: MA ZIP: 02173 FILER: COMPANY DATA: COMPANY CONFORMED NAME: FRESENIUS MEDICAL CARE HOLDINGS INC /NY/ CENTRAL INDEX KEY: 0000042872 STANDARD INDUSTRIAL CLASSIFICATION: SURGICAL & MEDICAL INSTRUMENTS & APPARATUS [3841] IRS NUMBER: 133461988 STATE OF INCORPORATION: NY FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: F-4 SEC ACT: 1933 Act SEC FILE NUMBER: 333-66558-05 FILM NUMBER: 01695994 BUSINESS ADDRESS: STREET 1: TWO LEDGEMONT CENTER STREET 2: 95 HAYDEN AVE CITY: LEXINGTON STATE: MA ZIP: 02420 BUSINESS PHONE: 6174029000 FORMER COMPANY: FORMER CONFORMED NAME: GRACE W R & CO /CT/ DATE OF NAME CHANGE: 19900423 FORMER COMPANY: FORMER CONFORMED NAME: GRACE W R & CO /NY/ DATE OF NAME CHANGE: 19920703 FORMER COMPANY: FORMER CONFORMED NAME: FRESENIUS NATIONAL MEDICAL CARE HOLDINGS INC DATE OF NAME CHANGE: 19961015 F-4 1 y51284f-4.txt FORM F-4 1 AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON AUGUST 2, 2001 REGISTRATION NO. 333- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ------------------------ FORM F-4 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 FRESENIUS MEDICAL CARE AKTIENGESELLSCHAFT (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) FRESENIUS MEDICAL CARE CORPORATION (TRANSLATION OF REGISTRANT'S NAME INTO ENGLISH) GERMANY (STATE OR OTHER JURISDICTION OF INCORPORATION OR ORGANIZATION) 3841 (PRIMARY STANDARD INDUSTRIAL CLASSIFICATION CODE NUMBER) N/A (I.R.S. EMPLOYER IDENTIFICATION NUMBER) ELSE-KRONER STR. 1 61346 BAD HOMBURG V.D.H., GERMANY TELEPHONE: 011-49-6172-609-0 (ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES) FRESENIUS MEDICAL CARE DEUTSCHLAND GMBH (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) FRESENIUS MEDICAL CARE GERMANY CO. (TRANSLATION OF REGISTRANT'S NAME INTO ENGLISH) GERMANY (STATE OR OTHER JURISDICTION OF INCORPORATION OR ORGANIZATION) N/A (I.R.S. EMPLOYER IDENTIFICATION NUMBER) ELSE-KRONER STR. 1 61346 BAD HOMBURG V.D.H., GERMANY TELEPHONE: 011-49-6172-609-0 (ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES) FRESENIUS MEDICAL CARE HOLDINGS, INC. (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) NEW YORK (STATE OR OTHER JURISDICTION OF INCORPORATION OR ORGANIZATION) 13-3461988 (I.R.S. EMPLOYER IDENTIFICATION NUMBER) 95 HAYDEN AVENUE LEXINGTON, MASSACHUSETTS 02173 TELEPHONE: (781) 402-9000 (ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES) FRESENIUS MEDICAL CARE CAPITAL TRUST IV (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS TRUST AGREEMENT) DELAWARE (STATE OR OTHER JURISDICTION OF INCORPORATION OR ORGANIZATION) TO BE APPLIED FOR (I.R.S. EMPLOYER IDENTIFICATION NUMBER) C/O FRESENIUS MEDICAL CARE HOLDINGS, INC. 95 HAYDEN AVENUE LEXINGTON, MASSACHUSETTS 02173 TELEPHONE: (781) 402-9000 (ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES) FRESENIUS MEDICAL CARE CAPITAL TRUST V (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS TRUST AGREEMENT) DELAWARE (STATE OR OTHER JURISDICTION OF INCORPORATION OF ORGANIZATION) TO BE APPLIED FOR (I.R.S. EMPLOYER IDENTIFICATION NUMBER) C/O FRESENIUS MEDICAL CARE HOLDINGS, INC. 95 HAYDEN AVENUE LEXINGTON, MASSACHUSETTS 02173 TELEPHONE: (781) 402-9000 (ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES) FMC TRUST FINANCE S.A.R.L. LUXEMBOURG-III (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) FMC TRUST FINANCE LUXEMBOURG-III LIMITED COMPANY (TRANSLATION OF REGISTRANT'S NAME INTO ENGLISH) LUXEMBOURG (STATE OR OTHER JURISDICTION OF INCORPORATION OR ORGANIZATION) N/A (I.R.S. EMPLOYER IDENTIFICATION NUMBER) L-2557 LUXEMBOURG 7A RUE ROBERT STUMPER TELEPHONE: 011-352-298-444-1 (ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES) FRESENIUS MEDICAL CARE HOLDINGS, INC. 95 HAYDEN AVENUE LEXINGTON, MASSACHUSETTS 02173 TELEPHONE: (781) 402-9000 (NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF AGENT FOR SERVICE OF PROCESS IN THE UNITED STATES FOR FRESENIUS MEDICAL CARE AKTIENGESELLSCHAFT, FRESENIUS MEDICAL CARE DEUTSCHLAND GMBH AND FMC TRUST FINANCE S.A.R.L. LUXEMBOURG-III) DR. BEN J. LIPPS FRESENIUS MEDICAL CARE HOLDINGS, INC. 95 HAYDEN AVENUE LEXINGTON, MA 02173 TELEPHONE: 617-402-9000 (NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF AGENT FOR SERVICE) ------------------------ COPY TO: DR. ULRICH WAGNER O'MELVENY & MYERS LLP 153 EAST 53RD STREET NEW YORK, NEW YORK 10022 (212) 326-2000 (continued on next page) - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 2 (continued from previous page) APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as practicable after the effective date of this Registration Statement. If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [ ] ---------- If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [ ] ---------- ------------------------ CALCULATION OF REGISTRATION FEE
- -------------------------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------------------------- AMOUNT PROPOSED MAXIMUM PROPOSED MAXIMUM AMOUNT OF TITLE OF EACH CLASS TO BE OFFERING PRICE AGGREGATE REGISTRATION OF SECURITIES TO BE REGISTERED REGISTERED PER UNIT OFFERING PRICE(1) FEE - -------------------------------------------------------------------------------------------------------------------------------- 7 7/8% USD Trust Preferred Securities of Fresenius Medical Care Capital Trust IV...................................... $225,000,000 100% $225,000,000 $56,250 - -------------------------------------------------------------------------------------------------------------------------------- 7 3/8% E Trust Preferred Securities of Fresenius Medical Care Capital Trust V....................................... E300,000,000 E300,000,000 $65,625(2) $262,500,000(2) 100% $262,500,000(2) - -------------------------------------------------------------------------------------------------------------------------------- 7 7/8% Senior Subordinated Notes of FMC Trust Finance S.a.r.l. Luxembourg-III(3)(4).................... $225,000,000 100% $225,000,000 NA - -------------------------------------------------------------------------------------------------------------------------------- 7 3/8% Senior Subordinated Notes of FMC Trust Finance S.a.r.l. Luxembourg-III(3)(4).................... E300,000,000 100% E300,000,000 NA $262,500,000(2) $262,500,000(2) - -------------------------------------------------------------------------------------------------------------------------------- Fresenius Medical Care AG Guarantees with respect to the Trust Preferred Securities(4)(5)........................ NA - -------------------------------------------------------------------------------------------------------------------------------- Guarantees with respect to the Senior Subordinated Notes by Fresenius Medical Care AG, Fresenius Medical Care Holdings, Inc. and Fresenius Medical Care Deutschland GmbH(4)(5)............. NA - -------------------------------------------------------------------------------------------------------------------------------- Total..................................... $487,500,000(2)(6) 100% $487,500,000(2)(6) $121,875(2) - -------------------------------------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------------------------------------
(1) Estimated solely for the purpose of computing the Registration Fee. (2) Euro (E) have been translated into US dollars at the noon buying rate on July 30, 2001 in New York City for cable transfers, as certified by the Federal Reserve Bank of New York, solely for purposes of computing the amount of the Registration Fee. (3) The Senior Subordinated Notes will be acquired by Fresenius Medical Care Capital Trust IV and Fresenius Medical Care Capital Trust V in exchange for Senior Subordinated Notes currently held by them. (4) This Registration Statement is deemed to cover the Senior Subordinated Notes of FMC Trust Finance S.a.r.l. Luxembourg-III, the rights of holders of Senior Subordinated Notes of FMC Trust Finance S.a.r.l. Luxembourg-III under the Indentures (including the Guaranties), the rights of holders of Trust Preferred Securities of Fresenius Medical Care Capital Trust IV and Fresenius Medical Care Capital Trust V under the Trust Agreements, the rights of holders of Trust Preferred Securities under the Guarantees of Fresenius Medical Care AG, the Expense Agreements entered into by Fresenius Medical Care AG and certain backup undertakings as described herein. (5) No separate consideration will be received for such Guarantees. (6) Such amount represents the aggregate liquidation amount of the Trust Preferred Securities. 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. 3 THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER TO SELL THESE SECURITIES AND IT IS NOT SOLICITING AN OFFER TO BUY THESE SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED. Subject to completion dated August 2, 2001 [FRESENIUS MEDICAL CARE LOGO] PROSPECTUS FRESENIUS MEDICAL CARE CAPITAL TRUST IV Offer to Exchange any and all of its outstanding 7 7/8% Trust Preferred Securities (Liquidation Amount $1,000 per Trust Preferred Security), for 7 7/8% Trust Preferred Securities (Liquidation Amount $1,000 per Trust Preferred Security and Guaranteed on a Senior Subordinated Basis to the Extent Described in this Prospectus by Fresenius Medical Care AG) Which Have Been Registered under the U.S. Securities Act of 1933 FRESENIUS MEDICAL CARE CAPITAL TRUST V Offer to Exchange any and all of its outstanding 7 3/8% Trust Preferred Securities (Liquidation Amount E1,000 per Trust Preferred Security), for 7 3/8% Trust Preferred Securities (Liquidation Amount E1,000 per Trust Preferred Security and Guaranteed on a Senior Subordinated Basis to the Extent Described in this Prospectus by Fresenius Medical Care AG) Which Have Been Registered under the U.S. Securities Act of 1933 - The terms of the trust preferred securities to be issued in the exchange offers are substantially identical to the outstanding trust preferred securities, except for transfer restrictions and registration rights relating to the outstanding trust preferred securities. - We intend to list the trust preferred securities to be issued in the exchange offers on the Luxembourg Stock Exchange. THE EXCHANGE OFFER FOR THE 7 7/8% TRUST PREFERRED SECURITIES WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON -- , 2001, UNLESS EXTENDED. THE EXCHANGE OFFER FOR THE 7 3/8% TRUST PREFERRED SECURITIES WILL EXPIRE AT 5:00 P.M., LONDON TIME, ON -- , 2001, UNLESS EXTENDED. SEE "RISK FACTORS" ON PAGE 15 FOR INFORMATION THAT SHOULD BE CONSIDERED IN CONNECTION WITH THIS OFFERING. NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. The date of this Prospectus is -- , 2001 4 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- TABLE OF CONTENTS
PAGE ---- Regulatory Issues Related to the Exchange Offers............ ii Forward-Looking Statements.................................. iii Presentation of Financial and Other Information............. iii Summary..................................................... 1 Risk Factors................................................ 15 The Trusts.................................................. 26 The Note Issuer............................................. 27 Accounting Treatment........................................ 27 Use of Proceeds............................................. 27 Capitalization.............................................. 28 The Exchange Offers......................................... 29 Selected Historical Financial Data of Fresenius Medical Care AG........................................................ 41 Management's Discussion and Analysis of Financial Condition and Results of Operations -- Fresenius Medical Care AG.... 43 Selected Historical Financial Data of FMCH.................. 64 Management's Discussion and Analysis of Financial Condition and Results of Operations -- FMCH......................... 66 Business.................................................... 76 Management of Fresenius Medical Care........................ 115 Security Ownership of Principal Shareholders................ 123 Description of the Trust Preferred Securities............... 128 Description of the Trust Guarantees......................... 147 Description of the Notes.................................... 151 Relationship Among the Trust Preferred Securities, the Notes and the Trust Guarantees.................................. 182 Description of the Old Securities........................... 184 Plan of Distribution........................................ 184 Tax Considerations.......................................... 186 Service of Process and Enforcement of Civil Liabilities..... 192 Experts..................................................... 192 Legal Matters............................................... 192 Where You Can Find More Information......................... 193 Incorporation of Certain Documents by Reference............. 193 General Information......................................... 194 Index to Financial Statements............................... F-1
- -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Until , 25 days after the date of this prospectus, all dealers that buy, sell or trade the trust preferred securities, whether or not participating in this offering, may be required to deliver a prospectus. i 5 REGULATORY ISSUES RELATED TO THE EXCHANGE OFFERS Germany. This prospectus may not be publicly distributed in the Federal Republic of Germany. We acknowledge that the offer of the trust preferred securities is subject to restrictions provided in the German Securities Selling Prospectus Act (Wertpapier-Verkaufsprospektgesetz). No German selling prospectus has been or will be prepared, and there is no public offering in Germany. In particular, the trust preferred securities may not be offered in Germany other than under circumstances where the German Securities Selling Prospectus Act or all other applicable rules and regulations provide for an exemption from the requirement to publish a selling prospectus in connection with the offering, the issue, distribution and sale of securities in Germany. United Kingdom. We have not authorized the trust preferred securities to be offered to the public in the United Kingdom, within the meaning of the UK Public Offers of Securities Regulations 1995, as amended, and neither this prospectus, nor any other document issued in connection with the exchange offers, may be passed on to any person in the United Kingdom, unless that person is of a kind described in Article 11(3) of the Financial Services Act 1986 (Investment Advertisements) (Exemptions) Order 1996, as amended, or is a person to whom the document may otherwise lawfully be issued or passed on. All applicable provisions of the Financial Services Act 1986 must be complied with in respect of anything done in relation to the trust preferred securities in, from or otherwise involving the United Kingdom. The Netherlands. In connection with the initial offering of trust preferred securities, the initial purchasers have represented and agreed that they have not, directly or indirectly, offered or sold and will not, directly or indirectly, offer or sell in The Netherlands any trust preferred securities other than to persons who trade or invest in securities in the conduct of a profession or business (which include banks, stockbrokers, insurance companies, pension funds, other institutional investors and finance companies and treasury departments of large enterprises). Italy. This document has not been submitted to the clearance procedure of Commissione Nazionale per le Societa e la Borsa ("CONSOB") and, therefore, the trust preferred securities may not be offered, sold or delivered, nor may copies of this prospectus or of any other document relating to the trust preferred securities be distributed in Italy, except to professional investors (operatori qualificati), as defined in Article 31.2 of CONSOB Regulation No. 11522 of July 1, 1998. France. The trust preferred securities may not be directly or indirectly offered or sold to the public, and offers and sales of the trust preferred securities will only be made in France to qualified investors or to a close circle of investors, in accordance with Article 6-11 of Ordinance no. 67-833 dated September 28, 1967, as amended, and Decree no. 98-880 dated October 1, 1998. Accordingly, this document has not been submitted to the Commission des Operations de Bourse. Neither this prospectus nor any other offering material may be distributed to the public in France. Les titres ne pourront pas etre offerts ou vendus directement ou indirectement au public en France et ne pourront l'etre qu'a des investisseurs qualifies ou a un cercle restreint d'investisseurs au sens de l'Article 6-11 de l'Ordonnance no. 67-833 du 28 Septembre 1967, telle que modifiee et du Decret no. 98-880 du 1 Octobre 1998. Par consequent, ce prospectus n'a pas ete soumis au visa de la Commission des Operations de Bourse. Ni ce document ni aucun autre document promotionnel ne pourront etre communiques au public en France. Belgium. The trust preferred securities may not be offered or sold directly or indirectly by way of a public offering in Belgium. Consequently, in Belgium, the trust preferred securities will only be available for subscription pursuant to the offering to registered Belgian credit institutions, European Economic Area banks having a branch in Belgium, registered Belgian stockbroking companies, investment funds registered with the Belgian Banking and Finance Commission or Insurance Companies and pension funds registered with the Belgian Insurance Control Authority, provided in each case that these institutions are investing for their own account. ii 6 FORWARD-LOOKING STATEMENTS This prospectus includes forward-looking statements. All statements other than statements of historical fact included in this prospectus, including the statements under the headings "Summary," "Management's Discussion and Analysis of Financial Condition and Results of Operations -- Fresenius Medical Care AG," "Management's Discussion and Analysis of Financial Condition and Results of Operations -- FMCH," "Risk Factors," and "Business" and elsewhere in this prospectus regarding our financial condition or plans to increase revenues and statements regarding other future events or prospects, are forward-looking statements. The words "may," "will," "expect," "anticipate," "believe," "future," "continue," "help," "estimate," "plan," "intend," "should," "shall" or the negative or other variations thereof as well as other statements regarding matters that are not historical fact, are or may constitute forward-looking statements. We have based these forward-looking statements on management's current view with respect to future events and financial performance. These views reflect the best judgment of our executives but involve a number of risks and uncertainties which could cause actual results to differ materially from those predicted in our forward-looking statements and from past results, performance or achievements. Although we believe that the estimates and the projections reflected in the forward-looking statements are reasonable, such estimates and projections may prove to be incorrect, and our actual results may differ from those described in our forward-looking statements as a result of the following risks, uncertainties and assumptions, among others: - our business development, operating development and financial condition; - our expectations of growth in the patient population regarding renal dialysis products and services; - our expansion and acquisition plans and our capital expenditures budget; - the impact of our expansion on our revenue potential, cost basis and margins; - our ability to remain competitive in the markets for our products and services; - the effects of regulatory developments, legal proceedings and our settlement of government investigations into our business; - possible changes in government reimbursement policies and those of private payors; - our significant debt and the impact of exchange rate fluctuations; and - our ability to meet our obligations and develop and maintain additional sources of financing. We do not intend to update or revise any forward-looking statements whether as a result of new information, future events or otherwise. All subsequent written or oral forward-looking statements attributable to us or persons acting on our behalf, are expressly qualified in their entirety by the cautionary statements contained throughout this prospectus. As a result of these risks, uncertainties and assumptions, you should not place undue reliance on these forward-looking statements. PRESENTATION OF FINANCIAL AND OTHER INFORMATION CURRENCY For the purposes of this prospectus, (1) "U.S. dollars" or "$" means the lawful currency of the United States of America, (2) "DM" or "Deutsche Mark" means the currency of Germany prior to January 1, 1999 and (3) "E" or "euro" means the single currency introduced at the start of the third stage of European Economic and Monetary Union on January 1, 1999 pursuant to the Treaty of Rome establishing the European Economic Community, as amended by the Treaty on the European Union, signed at Maastricht on February 7, 1992 and the lawful currency of Germany on and after January 1, 1999. Effective January 1, 1999, Germany and ten other member states of the European Union introduced the euro as their common currency and established fixed conversion rates between their existing sovereign currencies and the euro. These countries now form a new "euro zone." The euro is a fully convertible currency. iii 7 ROUNDING Some numerical figures included in this prospectus have been subject to rounding adjustments. Accordingly, numerical figures shown as totals in certain tables may not be an arithmetic aggregation of the figures which precede them. In accordance with US GAAP, unless otherwise indicated, our consolidated financial statements and the consolidated financial statements of Fresenius Medical Care Holdings, Inc. have been prepared and are presented in $ thousands. iv 8 SUMMARY You should read this summary together with the more detailed information regarding Fresenius Medical Care AG, the trust preferred securities, and the historical consolidated financial statements appearing elsewhere in this prospectus. You will find the definitions of all capitalized terms used in this offering circular in the sections entitled "Description of the Trust Preferred Securities," "Description of the Trust Guarantees," and "Description of the Notes" as well as elsewhere in this prospectus. OUR STRATEGY Our objective is to focus on generating revenue growth that exceeds market growth of the dialysis industry, measured by growth in the patient population, while maintaining our leading position in the market and increasing earnings at a faster pace than revenue growth. We believe that we are well positioned to meet our objectives by focusing on the following strategies: - Continuing to provide high standards of patient care; - Expanding our presence in attractive growth markets worldwide; - Increasing our spectrum of dialysis services; - Offering complete dialysis product lines with recurring disposable products revenue streams; and - Extending our position as an innovator in product and process technology. OUR BUSINESS We are the world's largest kidney dialysis company engaged in both providing dialysis care and manufacturing dialysis products, based on publicly reported revenues and patients treated. We provide dialysis treatment to over 98,600 patients at our approximately 1,350 clinics located in 18 countries. In the United States, we also provide inpatient dialysis services, therapeutic apheresis, hemoperfusion and other services under contract to hospitals. We also develop and manufacture a complete range of dialysis equipment, systems and disposable products, which we sell to customers in over 100 countries. We are able to use the information we gain when treating patients in developing new and improved products. We believe that our size, our activities in both dialysis care and dialysis products and our concentration in specific geographic areas allow us to operate more cost-effectively than many of our competitors. For the year ended December 31, 2000, we had revenues of $4.2 billion and EBITDA of $914 million. We derived 73% of our revenues in 2000 from our North America operations and 27% from our International operations. The two major dialysis methods commonly used today to treat chronic kidney failure, also called end-stage renal disease, or ESRD, are hemodialysis and peritoneal dialysis: - Hemodialysis removes toxins and excess fluids from the blood outside the patient's body by passing the blood through a specially designed filter, called a dialyzer, which functions as an artificial kidney. A hemodialysis machine controls the blood's movement from the patient, through the dialyzer and back to the patient. The majority of hemodialysis patients obtain treatment at outpatient dialysis clinics, such as ours, where hemodialysis treatments are provided with the assistance of a nurse or technician under the general supervision of a physician. - Peritoneal dialysis removes toxins from the blood by using the peritoneum, the membrane lining covering the internal organs located in the abdominal area, to function as a natural filter to remove wastes. The patient introduces sterile peritoneal dialysis solution into his or her abdomen through a surgically attached tube and, after a prescribed time period, drains the solution, excess fluids and wastes through the same tube. Peritoneal dialysis patients typically administer their own treatments in their own homes and workplaces. COMPREHENSIVE RENAL THERAPY SOLUTIONS Dialysis Care. We are the world's leading provider of dialysis services for the treatment of ESRD, based on the number of patients treated worldwide. We provide dialysis services on both an outpatient 1 9 basis at our clinics and under contract at hospitals. We treat approximately 26% of the dialysis patients in the United States. We have developed proprietary databases containing clinical information and outcome analyses for approximately 73,400 ESRD patients that we have treated. This information helps us improve the dialysis therapy and treatment outcomes at our clinics, resulting in reduced mortality rates for our patients. We believe that physicians, hospitals and managed care plans refer their ESRD patients to our clinics for treatment due to: - our reputation for quality patient care and treatment; - our extensive network of dialysis clinics; and - our technologically advanced products for dialysis treatment. For the three-month period ended March 31, 2001 dialysis services accounted for 73% of our total revenue. Dialysis Products. We are the world's largest manufacturer and distributor of equipment and related products for hemodialysis and the second largest manufacturer of peritoneal dialysis products. Our comprehensive product line includes hemodialysis machines, peritoneal dialysis solutions in plastic bags with the necessary tubing and connectors, and disposable products. We develop innovative and technologically advanced dialysis products, including the Fresenius Medical Care Polysulfone(R) dialyzers, which provide more thorough, rapid dialysis than dialyzers using other fibers, and the stay-safe(R) peritoneal dialysis system, which is the first mass-produced peritoneal dialysis system manufactured primarily with environmentally-friendly plastics. We continually seek to develop or introduce innovative dialysis products. For the three-month period ended March 31, 2001, dialysis products accounted for 27% of our revenue. THE RENAL CARE INDUSTRY ESRD is the stage of advanced chronic kidney disease that is characterized by the irreversible loss of kidney function and requires routine kidney dialysis treatment or kidney transplantation to sustain life. The scarcity of compatible kidneys limits transplants. Therefore, most patients suffering from ESRD must rely on dialysis, which is the removal of toxins and excess fluids from the body by artificial means. According to information published by the Centers for Medicare and Medicaid Services (formerly the Health Care Financing Administration) of the United States Department of Health and Human Services, the number of patients receiving chronic dialysis services in the United States grew to approximately 259,500 in 1999. We believe that over the next five to ten years, the number of patients suffering from ESRD in the United States will continue to grow at a compound annual rate of approximately 8.4%. The European Dialysis and Transplantation Association estimated that the total worldwide dialysis patients exceed 920,000 in 1998, growing at annual rates of 7% for hemodialysis patients and 8% for peritoneal dialysis patients. Hemodialysis generally is more effective at eliminating toxins than peritoneal dialysis, but requires capital investments in equipment and higher ongoing costs. Consequently, hemodialysis is more prevalent in wealthier countries while peritoneal dialysis is used mostly in developing nations. We believe that as disposable income in wealthier areas increases, hemodialysis is likely to replace peritoneal dialysis as the primary method of treatment. RECENT DEVELOPMENTS On January 5, 2001, we acquired Everest Healthcare Services Corporation of Oak Park, Illinois, "Everest," for $341 million, which includes assumed debt and the issuance of 2.25 million preference shares. Everest owns, operates or manages approximately 70 clinic facilities providing therapy to approximately 6,800 patients in the eastern and central United States. Everest also conducts extracorporeal 2 10 blood services and acute dialysis businesses which provide acute dialysis, apheresis and hemoperfusion services to approximately 100 hospitals in the United States. In June, 2001, we completed offerings pursuant to Rule 144A and Regulation S under the Securities Act of $225 million aggregate liquidation amount of dollar-denominated 7 7/8% trust preferred securities due 2011 and E300 million aggregate liquidation amount of euro-denominated 7 3/8 trust preferred securities due 2011. The net proceeds of those offerings were approximately $468 million. In connection with those offerings we amended our senior credit facility, effective June 6, 2001. The amendment eliminated our obligation to apply the proceeds of our issuance of subordinated debt (which includes the offerings of trust preferred securities) to prepayments of the term portion of the facility and increased the amount of subordinated debt we may incur (exclusive of the 9% notes) from $950 million to $1.2 billion. On July 2, 2001, our affiliate, Fresenius Medical Care Cardiovascular Holdings, Inc., purchased Edwards Lifesciences Cardiovascular Resources Inc., a leading provider of perfusion, autotransfusion and other blood-related procedures. The purchase price was $45 million, subject to customary closing adjustments. We own 45% of Fresenius Medical Care Cardiovascular Holdings, Inc. Institutional investors own the remaining 55%. FMCH will provide management and staffing for the business. ORGANIZATION The following table illustrates our ownership structure and organization, including our ownership of FMC Trust Finance S.a.r.l. Luxembourg - III, the issuer of the senior subordinated notes and the common securities of Fresenius Medical Care Capital Trust IV and Fresenius Medical Care Capital Trust V, the issuers of the trust preferred securities. [MEDICAL FLOW CHART] 3 11 THE EXCHANGE OFFERS The USD Exchange Offer........ Fresenius Medical Care Capital Trust IV, a statutory business trust organized under the laws of Delaware, "Trust IV," is offering to exchange, the "USD exchange offer," up to $225,000,000 aggregate liquidation amount of its 7 7/8% trust preferred securities, the "USD trust preferred securities," which have been registered under the U.S. Securities Act of 1933, as amended, the "U.S. Securities Act," for the same liquidation amount of its outstanding 7 7/8% trust preferred securities, the "old USD trust preferred securities." The principal asset of Trust IV consists of $225,225,000 aggregate principal amount of 7 7/8% senior subordinated notes of FMC Trust Finance S.a.r.l. Luxembourg - III, the "note issuer." In connection with the USD exchange offer: - Fresenius Medical Care is offering to exchange its guarantee with respect to the USD trust preferred securities, the "USD trust guarantee," for a like guarantee in respect of the old USD trust preferred securities, the "old USD trust guarantee;" - The note issuer is offering to exchange a new issue of U.S. dollar-denominated 7 7/8% senior subordinated notes due 2011, the "USD notes," for the same aggregate principal amount of its U.S. dollar-denominated 7 7/8% senior subordinated notes due 2011, the "old USD notes;" and - Fresenius Medical Care and its subsidiaries, FMCH and FMC Deutschland, are offering to exchange their joint and several guaranties of the USD notes, the "USD note guaranties," for like guaranties in respect of the old USD notes, the "old USD note guaranties." The USD exchange offer consists of this prospectus, as it may be amended or supplemented from time to time, and the related letter of transmittal. The Euro Exchange Offer....... Fresenius Medical Care Capital Trust V, a statutory business trust organized under the laws of Delaware, "Trust V," is offering to exchange, the "Euro exchange offer," up to E300,000,000 aggregate liquidation amount of its 7 3/8% trust preferred securities, the "Euro trust preferred securities," which have been registered under the U.S. Securities Act, for the same liquidation amount of its outstanding 7 3/8% trust preferred securities, the "old Euro trust preferred securities." The principal asset of Trust V consists of E300,300,000 aggregate principal amount of 7 3/8% senior subordinated notes of the note issuer. In connection with the Euro exchange offer: - Fresenius Medical Care is offering to exchange its guarantee with respect to the Euro trust preferred securities, the "Euro trust guarantee," for a like guarantee in respect of the old Euro trust preferred securities, the "old Euro trust guarantee;" 4 12 - The note issuer is offering to exchange a new issue of Euro-denominated 7 3/8% senior subordinated notes due 2011, the "Euro notes," for the same aggregate principal amount of its Euro-denominated 7 3/8% senior subordinated notes due 2011, the "old Euro notes;" and - Fresenius Medical Care, FMCH and FMC Deutschland, are offering to exchange their joint and several guaranties of the Euro notes, the "Euro note guaranties," for like guaranties in respect of the old Euro notes, the "old Euro note guaranties." The Euro exchange offer consists of this prospectus, as it may be amended or supplemented from time to time, and the related letter of transmittal. Expiration Dates.............. The USD exchange offer will expire at 5:00 pm, Eastern Daylight time, on --, 2001 and the Euro exchange offer will expire at 5:00 pm London time on --, 2001. We may extend the expiration date of either or both exchange offers and, if we extend the expiration date of an exchange offer, its expiration date will be the latest date to which we extend it. Conditions to the Exchange Offers........................ The exchange offers are subject to specified conditions which are described below under the heading "The Exchange Offers -- Conditions to the Exchange Offers." There is no minimum liquidation amount of old USD or old Euro trust preferred securities that must be tendered in either exchange offer, and neither exchange offer is conditioned upon the consummation of the other exchange offer. Discretion.................... We may, at any time or from time to time, in our sole discretion but subject to applicable law: - delay our acceptance of old USD or old Euro trust preferred securities for exchange; - terminate either or both exchange offers if specified conditions are not satisfied; and - extend the expiration date of either or both exchange offers and retain all old USD or old Euro trust preferred securities that were tendered, subject to your right to withdraw securities that you tendered Withdrawal Rights............. You may withdraw old USD or old Euro trust preferred securities that you tendered at any time on or prior to the expiration date of the applicable exchange offer. To do so, you must deliver a withdrawal notice to the appropriate exchange agent and follow the procedures described under "The Exchange Offers -- Withdrawal Rights." Procedures for Tendering Old Trust Preferred Securities.... To tender old USD or old Euro trust preferred securities, you must sign and complete the appropriate letter of transmittal in accordance with its instructions and forward the letter of transmittal by mail, facsimile or hand delivery, together with any other required documents, to the exchange agent for the USD 5 13 Exchange Offer or to Euroclear or Clearstream, in the case of the Euro Exchange Offer. In addition, you must either include the old USD or old Euro trust preferred securities you are tendering together with the letter of transmittal or, with respect to tenders of old USD trust preferred securities only, comply with the guaranteed delivery procedures. Certain broker, dealers, commercial banks, trust companies and other nominees who are making book-entry delivery to an exchange agent may also tender old USD trust preferred securities by delivering an agent's message prior to the expiration date of the applicable exchange offer. If you hold your old USD or old Euro trust preferred securities through a broker, dealer, commercial bank, trust company or other nominee, you should contact that person promptly if you wish to tender your securities in an exchange offer. See "The Exchange Offers -- Procedures for Tendering Old Trust Preferred Securities." Resales of Trust Preferred Securities.................... We and the trusts are making the exchange offers in reliance on the position of the staff of the U.S. Securities and Exchange Commission set forth in interpretive letters issued to unrelated parties in other transactions. Based on these interpretive letters, we believe that you may offer for resale, resell and otherwise transfer the USD trust preferred securities or the Euro trust preferred securities that will be issued in the exchange offers without complying with the registration and prospectus delivery requirements of the U.S. Securities Act, provided that: - you are acquiring USD trust preferred securities or Euro trust preferred securities in an exchange offer in the ordinary course of your business; - you are not participating, you do not intend to participate, and you have no arrangement or understanding with any person to participate, in the distribution of the USD or the Euro trust preferred securities that you receive in an exchange offer; - you are not a broker or dealer who purchased the outstanding trust preferred securities directly from a trust for resale pursuant to Rule 144A or any other available exemption under the U.S. Securities Act; and - you are not an affiliate of ours. If you are a broker-dealer that holds old USD or old Euro trust preferred securities that you acquired for your own account as a result of market-making or other trading activities and you exchange those securities for USD or Euro trust preferred securities in an exchange offer, you must deliver a prospectus meeting the requirements of the U.S. Securities Act in connection with your resales of the USD or Euro trust preferred securities that you acquire in an exchange offer. Based on the interpretive letters described in the preceding paragraph, we believe that unless you are an affiliate of Fresenius Medical Care or a trust, you may fulfill your prospectus delivery obligation with this prospectus, as we may amend it from time to time. 6 14 This does not apply, however, if your old USD or old Euro trust preferred securities represent an unsold allotment from the original offer and sale of the old USD or the old Euro trust preferred securities. Neither we nor either trust has sought its own interpretive letter from the staff, and we cannot assure you that that staff would make a similar determination with respect to either or both exchange offers as it has in prior interpretive letters to third parties. If our belief is inaccurate and you transfer any trust preferred securities without delivering a prospectus that meets the requirements of the U.S. Securities Act, or without an exemption from those requirements, you may incur liability under that act. While we do not believe that any such liability should exist, we do not assume or indemnify you against any such liability. We are not making the exchange offers to, and we will not accept tenders for exchange from, holders of outstanding trust preferred securities in any jurisdiction in which the exchange offers or acceptance of the exchange offers would not be in compliance with the securities or blue sky laws of the jurisdiction in question. The Exchange Agents........... The exchange agent with respect to the USD exchange offer is State Street Bank and Trust Company. The exchange agent with respect to the Euro exchange offer is Deutsche Bank AG London. The addresses, telephone numbers and facsimile numbers of the exchange agents are listed under "The Exchange Offers -- Exchange Agents." Use of Proceeds............... Neither we nor either trust will receive any cash proceeds from the issuance of the USD trust preferred securities and the Euro trust preferred securities in the exchange offers. For information regarding our use of the proceeds of the original offerings of the old USD trust preferred securities and the old Euro trust preferred securities, see "Use of Proceeds." Certain Tax Consequences...... Holders of old USD trust preferred securities and old Euro trust preferred securities should review the information set forth under "Tax Considerations" prior to tendering their securities in the exchange offers. Additional Information........ In this prospectus, (i) "exchange offers" refers to the USD exchange offer and the Euro exchange offer; (ii) "trust preferred securities" refers to the USD trust preferred securities and the Euro trust preferred securities and "old trust preferred securities" refers to the old USD trust preferred securities and the old Euro trust preferred securities; (iii) "trust guarantees" refers to the USD trust guarantee and the Euro trust guarantee and "old trust guarantees" refers to the old USD trust guarantee and the old Euro trust guarantee; (iv) "notes" refers to the USD notes and the Euro notes and "old notes" refers to the old USD notes and the old Euro notes; and (v) "note guaranties" refers to the USD note guaranties and the Euro note guaranties and "old note 7 15 guaranties" refers to the old USD note guaranties and the old Euro note guaranties. THE TRUST PREFERRED SECURITIES The Trusts.................... Trust IV and Trust V are statutory business trusts under the laws of the State of Delaware. Substantially all the assets of Trust IV will consist of the USD notes to be issued by the note issuer. Substantially all the assets of Trust V will consist of the Euro notes to be issued by the note issuer. Securities Offered............ $225 million in aggregate liquidation amount of 7 7/8% USD trust preferred securities and E300 million in aggregate liquidation amount of 7 3/8% Euro trust preferred securities. Distributions................. Distributions on the trust preferred securities will be cumulative, will accrue from the date of original issuance (June 6, 2001 for the USD trust preferred securities and June 15, 2001 for the Euro trust preferred securities) and will be payable at the annual rate of 7 7/8% of the stated liquidation amount of $1,000 per USD trust preferred security or the annual rate of 7 3/8% of the stated liquidation amount of E1,000 per Euro trust preferred security. Distributions will be payable quarterly in arrears on each March 15, June 15, September 15 and December 15, commencing September 15, 2001. Liquidation Preference........ In the event of any liquidation of a trust, you will be entitled to receive an amount equal to the aggregate of the stated liquidation amount of $1,000 per USD trust preferred security or E1,000 per Euro trust preferred security, as the case may be, plus any accrued and unpaid distributions to the date of payment, unless notes are distributed to you. The holders of the common securities will be entitled to receive distributions upon any such liquidation pro rata with you, except that if an event of default has occurred and is continuing under the applicable trust declaration, the trust preferred securities will have a priority over the common securities. See "Description of the Trust Preferred Securities -- Liquidation Distribution Upon Dissolution." The Note Issuer............... FMC Trust Finance S.a.r.l. Luxembourg - III, a private limited company organized under the laws of Luxembourg, wholly owned by Fresenius Medical Care AG. The Notes..................... $225,225,000 aggregate principal amount of 7 7/8% senior subordinated USD notes due 2011 and E300,300,000 aggregate principal amount of 7 3/8% senior subordinated Euro notes due 2011. The notes will mature on June 15, 2011. The USD notes will bear interest at the annual rate of 7 7/8% and the Euro notes will bear interest at the annual rate of 7 3/8%, in each case payable quarterly in arrears on each March 14, June 14, September 14 and December 14, commencing September 14, 2001. The notes will be subordinate in right of payment to all senior indebtedness of the note issuer, Fresenius Medical Care AG and the other note guarantors. As of March 31, 2001, on a pro forma basis, after giving effect to the consummation of the offerings of old 8 16 trust preferred securities and the application of the net proceeds from these offerings, there would have been approximately $0.8 billion of total consolidated senior indebtedness (excluding the USD notes and the Euro notes and excluding the 9% notes due 2006, the 7 3/8% notes due 2008 and the 7 7/8% notes due 2008 that rank equally with the notes on a consolidated basis and a $209 million subordinated intercompany note). This indebtedness would be effectively senior to the notes and we will have or be permitted to incur $1.4 billion of total consolidated senior subordinated indebtedness consisting of: - the notes; and - the following senior subordinated notes issued in connection with prior trust preferred securities transactions and ranking equally with the notes: - $450 million of 7 7/8% senior subordinated notes due 2008; - DM300 million of 7 3/8% senior subordinated notes due 2008; and - $360 million of 9% senior subordinated notes due 2006. The USD notes rank equally with the Euro notes. The 7 7/8% notes due 2008, the 7 3/8% notes due 2008 and the 9% notes due 2006 rank equally on a senior subordinated basis with the notes on a consolidated basis. The notes will have provisions with respect to interest and other terms substantially similar or analogous to those of the trust preferred securities. See "Description of the Notes." Mandatory Redemption.......... The trust preferred securities will be subject to mandatory redemption upon the repayment of the notes at their stated maturity June 15, 2011, upon acceleration, earlier redemption or otherwise. See "Description of the Trust Preferred Securities -- Mandatory Redemption." Change of Control Redemption.................... Upon the occurrence of a change of control, you have the right to require the applicable trust to redeem all or any part of your trust preferred securities at a redemption price in cash equal to 101% of their liquidation amount plus any accrued and unpaid distributions. Upon the occurrence of such an event, the trust will exercise the right to require the note issuer to redeem the USD or Euro notes in an amount equal to the trust preferred securities and the common securities to be redeemed by the holders of such securities. See "Description of the Trust Preferred Securities -- Change of Control Redemption" and "Description of the Notes -- Change of Control." Trust Guarantee............... Fresenius Medical Care AG will irrevocably and unconditionally guarantee, on a senior subordinated basis and to the extent set forth in this prospectus, to the extent that each trust has funds legally available at such time, the payment in full of: 9 17 - any accumulated and unpaid distributions required to be paid on the trust preferred securities; - the redemption price with respect to the trust preferred securities called for redemption; and - generally, the liquidation amount of the trust preferred securities to the extent of the assets of each trust legally available for distribution to holders of trust preferred securities. The trust guarantees will be unsecured and will be subordinate and junior in right of payment to all senior indebtedness of the trusts and Fresenius Medical Care AG and will rank equally with all other senior subordinated indebtedness of Fresenius Medical Care AG. See "Description of the Trust Guarantee -- General." Note Guaranties............... Fresenius Medical Care AG will unconditionally guarantee the obligations of the note issuer under the notes on a senior subordinated basis. See "Description of the Notes -- Note Guaranties." Fresenius Medical Care Holdings, Inc. and Fresenius Medical Care Deutschland GmbH, both of which are subsidiaries of Fresenius Medical Care AG, will each unconditionally guarantee, jointly and severally, on a senior subordinated basis, the obligations of the note issuer under the notes. The guarantees of Fresenius Medical Care AG and the two subsidiary guarantors will be subordinate in right of payment to all senior indebtedness of the note issuer and Fresenius Medical Care AG and the two subsidiary guarantors, respectively. Each subsidiary guaranty will not exceed the maximum amount that can be guaranteed by the applicable subsidiary guarantor without rendering the subsidiary guaranty, as it relates to such subsidiary guarantor, voidable under applicable laws affecting the rights of creditors generally or under applicable law of Germany. See "Description of the Notes -- Note Guaranties." Fresenius Medical Care AG and the subsidiary guarantors have also guaranteed on a senior subordinated basis $450 million aggregate principal amount of 7 7/8% notes due 2008, DM300 million aggregate principal amount of 7 3/8% notes due 2008 and $360 million aggregate principal amount of 9% notes due 2006, each issued by FMC Trust Finance S.a.r.l. Luxembourg, a wholly owned subsidiary of Fresenius Medical Care AG. See "Description of the Notes -- Ranking and Subordination" in this prospectus. You can find financial information regarding the subsidiary guarantors in Note 23 of the notes to consolidated financial statements of Fresenius Medical Care AG and Note 10 of the notes to condensed consolidated financial statements of Fresenius Medical Care AG. Voting Rights................. Except in the limited circumstances described in this prospectus, you will have no voting rights. See "Description of the Trust Preferred Securities -- Voting Rights." 10 18 Tax Event or Investment Company Event Redemption or Distribution................ Upon the occurrence of a "tax event" or an "investment company event" affecting a trust, as those terms are defined under "Description of the Trust Preferred Securities -- Tax Event or Investment Company Event Redemption or Distribution," except in certain limited circumstances, Fresenius Medical Care AG will cause the trustees of that trust to liquidate the trust and distribute USD notes or Euro notes, as the case may be, to you. In certain circumstances, the note issuer will have the right to redeem the USD notes or the Euro notes in whole (but not in part) at 100% of the principal amount plus accrued and unpaid interest, instead of distributing the notes. In that case, the applicable trust will redeem all the common and trust preferred securities at the liquidation amount per trust preferred security plus accrued and unpaid distributions. In the case of a tax event, Fresenius Medical Care AG may also elect to cause the trust preferred securities to remain outstanding and cause the note issuer to pay additional interest on the USD notes or the Euro notes. See "Description of the Trust Preferred Securities -- Tax Event or Investment Company Event Redemption or Distribution." Form of the Trust Preferred Securities.................... The trust preferred securities will be available in book-entry form only. We expect the trust preferred securities sold in this offering will be represented by one or more global certificates. The global certificate or certificates representing the USD trust preferred securities will be deposited with, or on behalf of, Depository Trust Company, "DTC", and registered in its name or the name of its nominee. The global certificate representing the Euro trust preferred securities will be deposited with Deutsche Bank AG London as common depositary for Morgan Guaranty Trust Company of New York, Brussels office, operator of the Euroclear System and Clearstream Banking, societe anonyme, and registered in the nominee name of the common depositary. Beneficial interests in the global certificates representing the USD trust preferred securities will be shown on records maintained by DTC and its participants, and beneficial interests in the global certificates representing the Euro trust preferred securities will be shown on records maintained by Euroclear and Clearstream, Luxembourg and their participants. Transfers of interests in the global certificates will be effected only through the records of DTC and its participants or Euroclear and Clearstream, Luxembourg and their participants, as the case may be. After the initial issuance of the global certificate, trust preferred securities in certificated form will be issued in exchange for the global certificates only in the limited circumstances set forth in the trust declaration governing the trust preferred securities. See "Description of the Trust Preferred Securities -- Book-Entry, Delivery and Form." Use of Proceeds............... Neither we nor the trusts will receive any cash proceeds from the issuance of the trust preferred securities in the exchange 11 19 offers. In connection with the exchange offers, the note issuer will issue USD notes to Trust IV and Euro notes to Trust V having, in each case, an aggregate principal amount equal to the aggregate liquidation amount of USD trust preferred securities or Euro trust preferred securities issued in the exchange offer, as the case may be. Each trust will retire and cancel the old trust preferred securities surrendered in exchange for the trust preferred securities. See "Use of Proceeds." Listing....................... We intend to list the trust preferred securities on the Luxembourg Stock Exchange. RISK FACTORS Investing in the trust preferred securities involves substantial risks. See the "Risk Factors" section of this prospectus for a description of risks you should carefully consider before investing in the trust preferred securities. ADDITIONAL INFORMATION Fresenius Medical Care AG is a stock corporation (Aktiengesellschaft) organized under the laws of Germany. It was incorporated on August 5, 1996. Fresenius Medical Care AG is registered with the commercial register of the local court (Amtsgericht) of Hof an der Saale, Germany under HRB 2460. Our registered office (Sitz) is Hof an der Saale, Germany. Our business address is Else-Kroner-Strasse 1, 61352 Bad Homburg, Germany, telephone +49(0)6172-609-0. In this offering circular, (1) Fresenius Medical Care refers to Fresenius Medical Care AG only and not to any of its subsidiaries, (2) "we," "us" and "our" refer to Fresenius Medical Care AG and its subsidiaries on a consolidated basis, (3) "FMCH" refers to Fresenius Medical Care Holdings, Inc., a New York corporation and its subsidiaries, (4) "FMC Deutschland" refers to Fresenius Medical Care Deutschland GmbH, a German private limited company, (5) "FMC Finance, Luxembourg" or "the note issuer" refers to FMC Trust Finance S.a.r.l. Luxembourg - III, a private limited company (Societe a responsabilite limitee) organized under the laws of Luxembourg and (6) "NMC" or "National Medical Care" refers to National Medical Care, Inc., a Delaware corporation and its subsidiaries. 12 20 SUMMARY SELECTED CONSOLIDATED FINANCIAL INFORMATION OF FRESENIUS MEDICAL CARE The following table summarizes the consolidated financial information for our business as of and for each of the years 1998 through 2000 and as of and for the three-month periods ended March 31, 2000 and 2001. For each of the years ended, we derived the selected financial information from our consolidated financial statements. For each of the years ended, we prepared our financial statements in accordance with US GAAP and KPMG Deutsche Treuhand-Gesellschaft Aktiengesellschaft Wirtschaftsprufungsgesellschaft, independent accountants, audited these financial statements. We derived the selected consolidated financial data as of and for the three-month periods ended March 31, 2001 and 2000 from our unaudited interim consolidated financial statements. We prepared our unaudited consolidated financial statements on a basis substantially consistent with our audited consolidated financial statements. You should read this information together with our consolidated financial statements and the notes to those statements appearing elsewhere in this prospectus and the information under "Selected Historical Financial Data of Fresenius Medical Care AG" and "Management's Discussion and Analysis and Results of Operations -- Fresenius Medical Care AG."
THREE MONTHS ENDED MARCH 31, YEAR ENDED DECEMBER 31, --------------- -------------------------- 2001 2000 2000 1999(A) 1998(B) ------ ------ ------ ------- ------- (UNAUDITED) (AUDITED) (IN MILLIONS, EXCEPT RATIOS) STATEMENT OF OPERATIONS DATA: Net revenues........................................... $1,159 $1,001 $4,201 $3,840 $3,506 Cost of revenues....................................... 769 648 2,734 2,463 2,243 ------ ------ ------ ------ ------ Gross profit........................................... 390 353 1,467 1,377 1,263 Selling, general and administrative.................... 225 199 814 785 743 Research and development............................... 8 9 32 32 31 Special charge for Settlement(A)....................... -- -- -- 601 -- ------ ------ ------ ------ ------ Operating income (loss)................................ 157 145 621 (41) 489 Interest expense, net.................................. 52 55 216 218 220 ------ ------ ------ ------ ------ Earnings (loss) before income taxes.................... 105 90 405 (259) 269 Income (loss) from continuing operations before cumulative effect of change.......................... 55 45 212 (249) 132 Net income (loss)...................................... $ 55 $ 45 $ 212 $ (249) $ 19 ====== ====== ====== ====== ====== OTHER DATA: EBITDA(a).............................................. 237 216 914 844 768 Net cash provided by operating activities.............. 77 101 391 351 268 Net cash used in investing activities.................. 179 91 482 254 280 Net cash provided by (used in) financing activities.... 111 -- 156 (79) 13 Depreciation and amortization.......................... 79 71 293 284 279 Capital expenditures................................... 64 47 228 160 159 Rental expenses (operating leases only)................ 53 45 193 161 122 Ratio of EBITDA to net interest expense(b)............. 4.5x 3.9x 4.2x 3.9x 3.5x Ratio of total debt and trust preferred securities to EBITDA(c)(d)......................................... 3.1x 3.1x 2.9x 3.0x 3.4x Ratio of fixed charges to earnings(e).................. 0.4x 0.4x 0.4x -- 0.5x
13 21
THREE MONTHS ENDED MARCH 31, YEAR ENDED DECEMBER 31, --------------- ---------------------------- 2001 2000 2000 1999(A) 1998(B) ------ ------ ------ ------- --------- (UNAUDITED) (AUDITED) (IN MILLIONS) BALANCE SHEET DATA: Cash and cash equivalents............................. $ 73 $ 46 $ 65 $ 35 $ 32 Working capital....................................... 278 97 191 (229) 448 Total assets.......................................... 6,391 5,740 5,979 5,752 5,679 Total debt(f)......................................... 1,471 1,344 1,237 1,228 1,296 Total trust preferred securities...................... 945 957 952 964 988 Total liabilities..................................... 3,619 3,360 3,300 3,750 3,322 Shareholders' equity (net assets)..................... 2,772 2,380 2,679 2,002 2,357
- --------------- (A) On January 18, 2000, FMCH, NMC and certain other affiliated companies executed definitive agreements with the U.S. government to settle (1) matters concerning violations of federal laws then under investigation and (2) NMC's claims with respect to outstanding Medicare receivables for intradialytic parenteral nutrition therapy. We refer to these agreements, the related payments and our corporate integrity agreement collectively as the Settlement. Under the Settlement, FMCH made initial cash payments of approximately $286 million and entered into a note payable for the remainder of the payment obligations. You can find a more detailed discussion of the final terms of the Settlement in "Management's Discussion and Analysis of Financial Condition and Results of Operations -- Fresenius Medical Care AG" and in Note 2 of the notes to our consolidated financial statements. (B) Includes the effect of an accounting change. See Note 1 of the notes to our consolidated financial statements. (a) As used above, EBITDA means earnings before interest, income taxes, depreciation and amortization and, for 1999, the special charge for the Settlement. We are not presenting EBITDA here as a measure of our operating results. Our management believes that presentation of EBITDA is helpful to investors as a measure of our ability to generate cash and to service debt. Management also believes that presentation of EBITDA is helpful to investors because EBITDA is used to determine compliance with some of the covenants in our senior credit agreement and the indentures relating to both our outstanding trust preferred securities and the trust preferred securities we are currently offering. However, you should not construe EBITDA as an alternative to net earnings determined in accordance with US GAAP or to cash flow from operations, investing activities or financing activities or as a measure of cash flows. (b) In calculating the ratio of EBITDA to net interest expense, we included distributions on our outstanding trust preferred securities in interest. (c) As of March 31, 2001 and March 31, 2000, this ratio compares total debt and trust preferred securities at these dates to EBITDA for the twelve months ended March 31, 2001 and March 31, 2000. (d) In calculating the ratio of total debt and trust preferred securities to EBITDA, total debt includes accounts receivables facilities of $444 million, $335 million, $445 million, $335 million and $306 million, for the three months ended March 31, 2001 and 2000 and for the years ended December 31, 2000, 1999 and 1998, respectively. (e) In calculating the ratio of fixed charges to earnings, earnings consist of income before taxes plus fixed charges. Fixed charges consist of interest expense and amortization of deferred financing fees, plus one-third of rental expense under operating leases, the portion which we consider to be representative of an interest factor. Earnings were deficient in covering fixed charges by $260 million for the year ended 1999 due to the one-time settlement charge. (f) Total debt includes short-term borrowings from third parties, short-term borrowings from related parties, note payable related to the Settlement and long-term debt and capital lease obligations, including current portion. 14 22 RISK FACTORS An investment in our trust preferred securities involves a high degree of risk. You should carefully consider the risks described below, together with all of the other information included in this prospectus before you decide to invest in our trust preferred securities. If any of the following events actually occurs, our business, financial condition and results of operations could be harmed. If our business, financial condition or results of operations are harmed, the trading price of our trust preferred securities could decline and you could lose all or part of your investment. RISKS RELATING TO THE TRUST PREFERRED SECURITIES WE ARE SUBSTANTIALLY LEVERAGED AND DEPENDENT UPON OUR SUBSIDIARIES FOR SUBSTANTIALLY ALL OF OUR OPERATING INCOME. IF WE AND OUR SUBSIDIARIES ARE UNABLE TO GENERATE SUFFICIENT CASH TO ENABLE US TO MAKE INTEREST AND OTHER PAYMENTS TO THE NOTE ISSUER, THE NOTE ISSUER'S ABILITY TO MAKE INTEREST PAYMENTS ON THE NOTES WILL BE LIMITED, AND THE TRUST WOULD NOT BE ABLE TO MAKE PAYMENTS ON THE TRUST PREFERRED SECURITIES We are substantially leveraged. As of March 31, 2001, on a pro forma basis after giving effect to the consummation of our offerings of the old trust preferred securities and the application of the net proceeds from those offerings, our total consolidated liabilities would have been $3.6 billion, including our obligations with respect to all trust preferred securities of approximately $1.4 billion, our total consolidated assets would have been $6.4 billion and our shareholders' equity would have been $2.8 billion. Our substantial level of debt presents the risk that we might not generate sufficient cash to service our indebtedness, including the guarantee of the notes, or that our leveraged capital structure could limit our ability to finance the acquisition and development of additional projects, to compete effectively or to operate successfully under adverse economic conditions. See "Selected Historical Financial Data of Fresenius Medical Care AG" and "Capitalization." If we and our subsidiaries were not to make payments on our obligations to the note issuer, the note issuer would be unable to make payments on the notes and, as a result, the trust would be unable to make payments on the trust preferred securities as and when required. In such an event, you would not be able to rely on the trust guarantee since distributions or other payments on the trust preferred securities are subject to the trust guarantee only if and to the extent that the note issuer or a note guarantor has made a payment to the trust of interest or principal on the notes. WE OBTAIN SUBSTANTIALLY ALL OF OUR INCOME FROM OUR SUBSIDIARIES, AND OUR HOLDING COMPANY STRUCTURE MAY LIMIT OUR ABILITY TO REALIZE ON THE ASSETS OF OUR SUBSIDIARIES We are a holding company and, consequently we derive substantially all our operating income from our subsidiaries. Our right to receive any assets of any of our subsidiaries or other affiliates upon any reorganization or liquidation, and the right of the holders of the notes to participate in the distribution of or realize proceeds from those assets, will effectively be subordinated to the claims of the creditors of those subsidiaries and affiliates, including their trade creditors and holders of debt they have issued. In addition to our senior indebtedness, our subsidiaries have significant liabilities which would effectively be senior to the notes. THE TRUSTS WILL HAVE NO ASSETS OTHER THAN THE NOTES AND THE NOTE GUARANTIES, AND NO SOURCE OF INCOME OTHER THAN PAYMENTS ON THE NOTES AND THE NOTE GUARANTIES Each trust exists for the exclusive purpose of: - issuing and selling the trust securities representing undivided beneficial interests in the assets of the trust; - investing the proceeds of the trust securities in USD notes or in Euro notes, as applicable; - consummating an exchange offer; and - engaging in only those other activities necessary, convenient or incidental thereto. Accordingly, the notes, the trust guarantee, the note guaranties and the right to reimbursement of expenses under an expense agreement will be a trust's sole assets, and payments under the notes and the 15 23 expense agreement will be a trust's sole revenue. The note issuer will issue the notes to each trust and advance or distribute the proceeds of the notes to us and our subsidiaries. Therefore, the only assets of the note issuer are intercompany receivables that were created when the note issuer advanced or distributed the proceeds from the notes to us and our subsidiaries. A trust's ability to make distributions or other payments on its trust preferred securities is wholly dependent upon the note issuer making interest and other payments on the notes as and when required. The note issuer's ability to make interest and other payments on the notes is wholly dependent upon us and our subsidiaries making payments on the intercompany obligations that we owe to the note issuer as and when required. Each declaration of trust provides that we shall pay for all debts and obligations, other than with respect to the trust preferred securities, and all costs and expenses of the trust, including any taxes and all costs and expenses with respect thereto to which the trust may become subject, except for U.S. withholding taxes. There is no assurance that we will have sufficient resources to enable us to pay any such debts, obligations, costs and expenses on behalf of the trust. Our senior credit facility includes covenants which, among other things, restrict or have the effect of restricting our ability and the abilities of our subsidiaries to dispose of assets, incur debt, pay dividends, create liens or make capital expenditures, investments or acquisitions, and which may otherwise limit our activities as well as those of our subsidiaries. Our senior credit facility also includes certain covenants that will require us to maintain a minimum consolidated net worth and a minimum consolidated fixed charge ratio (ratio of EBITDA to fixed charges) and we are subject to a limit on our consolidated leverage ratio (ratio of consolidated funded debt to EBITDA). The breach of any of these covenants could result in a default under our senior credit facility. THE TRUST GUARANTEES, THE NOTE GUARANTIES AND THE NOTES ARE SUBORDINATE TO OUR SENIOR INDEBTEDNESS AND THE SENIOR INDEBTEDNESS OF OUR SUBSIDIARIES Our obligations under the trust guarantees, the note guarantors' obligations under the note guaranties, and the note issuer's obligations under the notes are subordinate and junior in right of payment to all present and future senior indebtedness of each of the note guarantors and the note issuer. We may not pay principal, including redemption payments, if any, premium, if any, or interest on the notes if any specified senior indebtedness, or any other senior indebtedness having an outstanding principal amount at the time of determination in excess of $25 million, is not paid when due or any other default on specified senior indebtedness occurs and the maturity of the specified senior indebtedness is accelerated in accordance with its terms, unless, in either case, the default has been cured or waived and any such acceleration has been rescinded or such specified senior indebtedness has been paid in full. As of March 31, 2001, on a pro forma basis after giving effect to the offerings of old trust preferred securities and the application of the net proceeds from those offerings, the note guarantors and the note issuer had $0.8 billion of total consolidated senior indebtedness (excluding the notes and excluding the 9% notes due 2006, the 7 3/8% notes due 2008, and the 7 7/8% notes due 2008 that rank equally with the notes on a consolidated basis and a $209 million subordinated intercompany note), including liabilities as guarantors under our senior credit facility. In addition, our subsidiaries that are not note guarantors have significant additional liabilities which would be effectively senior to the notes and, after this offering we will have or be permitted to incur approximately $1.4 billion of total consolidated senior subordinated indebtedness consisting of: - the notes; and - the following senior subordinated notes issued in connection with prior trust preferred transactions; -- $450 million of 7 7/8% senior subordinated notes due 2008; -- DM300 million of 7 3/8% senior subordinated notes due 2008; and -- $360 million of 9% senior subordinated notes due 2006. 16 24 We and the note guarantors have guaranteed all the senior subordinated debt listed above. Although our ability and the ability of our subsidiaries to incur indebtedness is restricted under the indentures governing the notes and our senior credit facility, we and our subsidiaries will have the ability to incur substantial additional indebtedness, which may be senior to the notes. Each of the note guarantors will unconditionally guarantee, jointly and severally, on a senior subordinated basis, the note issuer's obligations pursuant to the notes. Our note guaranties will not be limited in amount. The note guaranties of FMCH and FMC Deutschland each will be limited to an amount not to exceed the maximum amount that can be guaranteed by the guarantor party thereto without rendering such note guaranty, as it relates to such guarantor, voidable under applicable law relating to fraudulent conveyance or fraudulent transfer or similar laws affecting the rights of creditors generally or under applicable law of Germany. If the note guaranty of FMCH or FMC Deutschland were to be rendered voidable, it could be subordinated by a court to all other indebtedness (including guarantees and other contingent liabilities) of the guarantor. Depending on the amount of such indebtedness, such guarantor's liability on its note guaranty could be reduced to zero as a result of such subordination. Subject to limitations described under "Description of the Trust Guarantees," a note guarantor may consolidate with, merge with or into, or transfer all or substantially all its assets to any other person; provided, however, that if such other person is not the note issuer, the other person must expressly assume the note guarantor's obligations under its note guaranties. However, subject to some limitations, upon the sale or other disposition of all or substantially all the assets of FMCH or FMC Deutschland, in each case to a person other than the note issuer or its affiliates, the selling note guarantor will be released and relieved from all its obligations under its note guaranties. See "Description of the Notes -- Note Guaranties." IF THE NOTE ISSUER WERE TO DEFAULT ON ITS OBLIGATIONS UNDER THE NOTES, THE TRUSTS WOULD LACK AVAILABLE FUNDS FOR THE PAYMENT OF DISTRIBUTIONS OR AMOUNTS PAYABLE ON REDEMPTION OF THE TRUST PREFERRED SECURITIES OR OTHERWISE, AND IN SUCH EVENT, YOU WOULD NOT BE ABLE TO RELY UPON THE TRUST GUARANTEES FOR PAYMENT OF THOSE AMOUNTS The guarantee trustee will hold the trust guarantees for your benefit. If the note issuer were to default on its obligations under the notes, the trusts would lack available funds for the payment of distributions or amounts payable on redemption of the trust preferred securities or otherwise. In that case, you would not be able to rely upon the trust guarantees for payment of those amounts. Instead, you could rely on the enforcement: - by the preferred trustee of its rights as registered holder of the notes against the note issuer pursuant to the terms of the notes or against the note guarantors under the terms of the note guaranties; or - by a special trustee, elected by 25% in liquidation amount of the trust preferred securities, of a trust's rights under the notes and the note guaranties, or - if the preferred trustee or the special trustee do not enforce the trust's rights against the note issuer, by you of your right of direct action against the note issuer on behalf of the trust to enforce payments on the notes. The trust declarations provide that, by your acceptance of the trust declaration, you are deemed to have agreed to the provisions of the applicable trust guarantee (including the subordination provisions) and the applicable indenture. WE MAY NOT BE ABLE TO MAKE A CHANGE OF CONTROL REDEMPTION UPON DEMAND You have the right to require the applicable trust to redeem all or any part of your trust preferred securities upon the occurrence of a change of control at a redemption price equal to 101% of the liquidation amount plus any accrued and unpaid distributions. In that case, the trust will have and must exercise its right to require the note issuer to redeem notes in an amount equal to the trust preferred 17 25 securities and common securities to be redeemed by the holders. The note issuer and the trusts do not have, and may not in the future have, any assets other than certain intercompany receivables and the notes, respectively. As a result, the note issuer's ability to prepay the notes and the ability of the trusts to prepay the trust securities will depend upon receipts from us and our subsidiaries. We cannot assure you that if an event that requires us to redeem the trust securities occurs, we will have, or have access to, sufficient funds to pay the required purchase price for all of the trust securities and notes tendered by holders. Our senior credit facility also may preclude us from purchasing trust securities or notes upon a change of control and provides that some changes in control would constitute a default under our senior credit facility. IN THE EVENT OF A TAX EVENT WHICH RESULTS IN A TRUST BEING TREATED AS AN ASSOCIATION TAXABLE AS A CORPORATION, THE DISTRIBUTION WOULD LIKELY CONSTITUTE A TAXABLE EVENT TO HOLDERS OF THE TRUST PREFERRED SECURITIES We will, except under limited circumstances, cause the trustees to dissolve a trust upon the occurrence of a tax event or investment company event with respect to that trust as defined in the covenants contained in the applicable indenture and, after satisfaction of liabilities to creditors of the trust, cause the note issuer to distribute the notes, on proportionate basis to the holders of the trust securities. The note issuer will have the right, in certain circumstances, to redeem the notes, in whole, but not in part, at 100% of principal amount plus accrued and unpaid interest, instead of distributing those notes. In that case, the trust will redeem the trust preferred securities in whole at the liquidation amount of $1,000 or E1,000 per trust preferred security, as applicable, plus accrued and unpaid distributions. If a tax event occurs, we may also elect to cause the trust preferred securities to remain outstanding and cause the note issuer to pay additional interest on the notes. Under current U.S. federal income tax law, a distribution of the notes would not be a taxable event to you. However, if a tax event occurs that results in the trust being treated as an association taxable as a corporation, the distribution would likely constitute a taxable event to you. See "Tax Considerations -- United States -- United States Holders -- Receipt of Notes or Cash Upon Liquidation of the Issuer." We can give no assurance as to the market prices for the trust preferred securities or notes that may be distributed in exchange for trust preferred securities if a dissolution or liquidation of the trust were to occur. Accordingly, trust preferred securities that you acquire in this offering or in the secondary market, or any notes distributed on dissolution and liquidation of the trust, may trade at a discount to the price that you paid to purchase the trust preferred securities. Because you may receive notes upon the occurrence of a tax event or investment company event, as a prospective investor in trust preferred securities you are also making an investment decision with regard to the notes and should carefully review all the information regarding the notes contained in this offering circular. HOLDERS OF TRUST PREFERRED SECURITIES WILL HAVE LIMITED VOTING RIGHTS Except in limited circumstances, you will have no voting rights. The right to vote to appoint, remove or replace the trustees, or increase or decrease their number, is vested in the holder(s) of the common securities. See "Description of the Trust Preferred Securities -- Voting Rights." The trust preferred securities and any old trust preferred securities issued by each trust which remain outstanding after completion of the exchange offers will vote together as a single class for purposes of determining whether holders of the required percentage in outstanding liquidation amount of trust preferred securities issued by a trust have taken certain actions or exercised certain rights under the applicable declaration of trust. See "Descriptions of the Trust Preferred Securities -- Voting Rights," and "-- Modification of the Declarations." HOLDERS OF TRUST PREFERRED SECURITIES MAY RECOGNIZE A CAPITAL LOSS The trust preferred securities may trade at a price that does not fully reflect the value of accrued but unpaid interest with respect to the underlying notes. For U.S. federal income tax purposes, if you are a 18 26 United States holder and you dispose of your trust preferred securities between record dates for payments of distributions, you will nevertheless be required to recognize accrued but unpaid interest on the notes through the date of disposition in income as ordinary income, and to add that amount to your adjusted tax basis in your proportional share of the underlying notes deemed disposed. To the extent the selling price is less than your adjusted tax basis, which will include all accrued but unpaid interest, you will recognize a capital loss. Subject to limited exceptions, capital losses cannot be applied to offset ordinary income for U.S. federal income tax purposes. See "Tax Considerations -- United States -- United States Holders -- The Deductibility of Capital Losses is Subject to Significant Limitations." THE CHARACTERISTICS OF THE TRUST PREFERRED SECURITIES MAY AFFECT THE TRADING MARKET FOR THE TRUST PREFERRED SECURITIES AND THE NOTES There is no existing market for the trust preferred securities. Although we intend to apply to list the trust preferred securities on the Luxembourg Stock Exchange, we can give no assurance as to: - whether the listing of the trust preferred securities on the Luxembourg Stock Exchange will occur; - whether a market for the trust preferred securities will develop; - the liquidity of any market that may develop for the trust preferred securities; - your ability to sell your trust preferred securities, or - the price at which you would be able to sell your trust preferred securities. Future trading prices of the trust preferred securities will depend on many factors, including, among other things, prevailing interest rates, our operating results and the market for similar securities. In connection with the original offerings of the old trust preferred securities, the initial purchasers advised us that they intend to make a market in the trust preferred securities, subject to the limits imposed by the Securities Act and the U.S. Securities Exchange Act of 1934, as amended, the "Exchange Act," and subject to any limits imposed during the pendency of any registration statement or shelf registration statement. The initial purchasers are not obligated to make a market in the trust preferred securities, and may discontinue such market-making at any time without notice. Therefore, we can give no assurance as to the liquidity of the trading market for the trust preferred securities. In addition, such market-making activities may be limited during the exchange offers and/or the pendency of any shelf registration statement relating to the trust preferred securities. THE EXCHANGE OFFERS COULD ADVERSELY AFFECT ANY MARKET FOR OLD TRUST PREFERRED SECURITIES THAT ARE NOT EXCHANGED We did not register the old trust preferred securities under the U.S. Securities Act or any state securities laws and they may not be offered, sold or otherwise transferred except in compliance with the registration requirements of the U.S. Securities Act and any other applicable securities laws, or pursuant to an exemption from the registration requirement or in a transaction that is not subject to those requirements. Transfer of old trust preferred securities without registration also requires compliance with certain other conditions and restrictions. Old trust preferred securities which remain outstanding after consummation of the exchange offers will continue to bear a legend reflecting the restrictions on transfer without registration. In addition, subject to limited exceptions, upon completion of the exchange offers, holders of old trust preferred securities which remain outstanding will not be entitled to any rights to have the old trust preferred securities registered under the U.S. Securities Act or to any similar rights under the registration rights agreements that we entered into when we issued the old trust preferred securities. We and the trusts do not intend to register under the U.S. securities act any old trust preferred securities which remain outstanding after completion of the exchange offers, subject to limited exceptions if they apply. To the extent that old trust preferred securities are tendered and accepted in the exchange offers, your ability to sell old trust preferred securities that remain outstanding after the exchange offers could be adversely affected. 19 27 Upon completion of the exchange offers, holders of old trust preferred securities will not be entitled to any increase in the distribution rate on those securities or to any further registration rights under the registration rights agreements, except under limited circumstances. See "Description of the Trust Preferred Securities." RISKS RELATING TO LITIGATION AND REGULATORY MATTERS IN THE UNITED STATES IF WE DO NOT COMPLY WITH THE MANY GOVERNMENTAL REGULATIONS APPLICABLE TO OUR BUSINESS OR WITH THE CORPORATE INTEGRITY AGREEMENT BETWEEN US AND THE U.S. GOVERNMENT, WE COULD BE EXCLUDED FROM GOVERNMENT HEALTH CARE REIMBURSEMENT PROGRAMS OR OUR AUTHORITY TO CONDUCT BUSINESS COULD BE TERMINATED, EITHER OF WHICH WOULD RESULT IN A MATERIAL DECREASE IN OUR REVENUE Our operations in both our provider business and our products business are subject to extensive governmental regulation in virtually every country in which we operate. The applicable regulations, which differ from country to country, relate in general to the safety and efficacy of medical products and supplies, the operation of manufacturing facilities, laboratories and dialysis clinics, the rate of, and accurate reporting and billing for, government and third-party reimbursement, and compensation of medical directors and other financial arrangements with physicians and other referral sources. We are also subject to other laws of general applicability, including antitrust laws. Fresenius Medical Care Holdings is party to a corporate integrity agreement with the U.S. government that we entered into in connection with the Settlement. This agreement requires that FMCH staff and maintain a comprehensive compliance program, including a written code of conduct, training programs, regulatory compliance policies and procedures, annual audits and periodic reporting to the government. The corporate integrity agreement permits the U.S. government to exclude FMCH and its subsidiaries from participation in U.S. federal health care programs if there is a material breach of the agreement that FMCH does not cure within 30 days after FMCH receives written notice of the breach. We derive approximately 40% of our consolidated revenue from U.S. federal health care benefit programs. Consequently, if FMCH commits a material breach of the corporate integrity agreement that results in the exclusion of FMCH or its subsidiaries from continued participation in those programs, it would significantly decrease our revenue and have a material adverse effect on our business, financial condition and results of operations. While we rely upon our management structure, regulatory and legal resources, and the effective operation of our compliance program to direct, manage and monitor these activities, if employees, deliberately or inadvertently, failed to adhere to these regulations then our authority to conduct business could be terminated or our operations could be significantly curtailed. Any such terminations or reductions could materially reduce our revenues with a resulting adverse impact on our business, financial condition and results of operations. A REDUCTION IN U.S. GOVERNMENT REIMBURSEMENT FOR DIALYSIS CARE WOULD MATERIALLY DECREASE OUR REVENUES For the twelve months ended December 31, 2000, approximately 40% of our consolidated revenues resulted from U.S. federal health care benefit programs, such as Medicare and Medicaid reimbursement. Legislative changes may affect all Medicare reimbursement rates for the services we provide, as well as the scope of Medicare coverage. A decrease in Medicare reimbursement rates or covered services could have a material adverse effect on our business, financial condition and results of operations. A CHANGE IN REIMBURSEMENT FOR OR UTILIZATION OF EPO COULD MATERIALLY REDUCE OUR REVENUE AND OPERATING PROFITS Reimbursement and revenue from the administration of erythropoetin, or EPO, accounted for approximately 28% of dialysis care revenue in our North America segment for the twelve months ended December 31, 2000. EPO is produced by a single manufacturer, Amgen Inc., which is our sole supplier. Our current contract with Amgen Inc. covers the period from January 2001 to December 2001 and includes price guarantees and volume and outcome based discounts. A reduction in reimbursement for 20 28 EPO, a significant change in utilization of EPO, an interruption of supply or an inability to obtain satisfactory purchase terms for EPO could reduce our revenues from, or increase our costs in connection with, administration of EPO, which could materially adversely affect our business, financial condition and results of operations. Amgen Inc. has announced a 3.9% increase in its wholesaler acquisition price for EPO effective May 9, 2001. Because our purchase contract with Amgen Inc. contains pricing protection through December 31, 2001, our purchase price for EPO will be unaffected by the increase through that date. CREDITORS OF W.R. GRACE & CO.-CONN. HAVE ASSERTED CLAIMS AGAINST US We were formed in 1996 as a result of a series of transactions with W.R. Grace & Co. which we refer to as the Merger. At the time of the Merger, a W.R. Grace & Co. subsidiary known as W.R. Grace & Co.-Conn. had, and continues to have, significant liabilities arising out of product-liability related litigation, pre-Merger tax claims and other claims unrelated to National Medical Care, its dialysis business prior to the Merger. In connection with the Merger, W.R. Grace & Co.-Conn. agreed to indemnify us against all liabilities of W.R. Grace & Co., whether relating to events occurring before or after the Merger, other than liabilities arising from or relating to National Medical Care operations. Proceedings have been brought against W.R. Grace & Co. and FMCH by plaintiffs claiming to be creditors of W.R. Grace & Co.-Conn., principally alleging that the Merger was a fraudulent conveyance, violated the Uniform Fraudulent Transfer Act and constituted a conspiracy. In addition, the Merger was consummated as a tax free reorganization. Pre-Merger tax claims or tax claims that would arise if events were to violate the tax-free nature of the Merger could be the obligation of FMCH, our principal subsidiary. Subject to certain representations made by W.R. Grace & Co.-Conn., FMCH and Fresenius AG, W.R. Grace & Co.-Conn. also agreed to indemnify us against any such tax liability. W.R. Grace & Co.-Conn. and some of its subsidiaries have filed for reorganization under Chapter 11 of the U.S. Bankruptcy Code. If the Merger is determined to be a fraudulent transfer and if material damages are proved by the plaintiffs, or if W.R. Grace & Co. is unable to satisfy its Merger-related or pre-Merger tax obligations, and if we are not able to collect on the indemnities from W.R. Grace & Co. as a result of the bankruptcy proceedings or otherwise, and if we are unable to collect on the indemnities from any affiliates or former affiliates of W.R. Grace & Co. or their insurers, and if we are not able to collect against any party that may have received proceeds from W.R. Grace & Co., a judgment could have a material adverse effect on our business, financial condition and results of operations. WE ARE DEFENDANTS IN LITIGATION BY PRIVATE INSURANCE COMPANIES ALLEGING INAPPROPRIATE BILLING PRACTICES FMCH, NMC and its subsidiaries are defendants in litigation brought by private payors alleging inappropriate billing practices for nutritional therapy, diagnostic and clinical laboratory tests and misrepresentations. FMCH, NMC and its subsidiaries believe that there are substantial defenses to the claims asserted, have filed counterclaims and intend to vigorously defend the lawsuits. Other private payors have contacted FMCH and have asserted that NMC received excess payments and may file their own lawsuit seeking reimbursement and other damages from NMC. Although we cannot predict the ultimate outcome of these proceedings, an adverse result could have a material adverse effect on our business, financial condition and result of operations since an adverse determination could result in substantial liability or changes in our reimbursement arrangements with private payors. IF THE POSITION OF THE U.S. CENTERS FOR MEDICARE AND MEDICAID SERVICES IN THE OBRA 93 DISPUTE IS ULTIMATELY UPHELD, WE COULD BE OBLIGATED TO REFUND UP TO $120 MILLION TO MEDICARE Under the U.S. Omnibus Budget Reconciliation Act of 1993, as initially interpreted by the U.S. Centers for Medicare and Medicaid Services (formerly known as the Health Care Financing Administration), which administers the Medicare and Medicaid programs, employer health plans were the primary payor for ESRD dual-eligible patients -- i.e., patients age 65 and over who are eligible for Medicare and covered by an employer health plan. The original interpretation resulted in increased revenue for NMC because, during the 18-month period, the rate paid by the employer health plan was 21 29 generally higher than the Medicare rate. In April 1995, the U.S. Health Care Financing Administration announced a new interpretation of the U.S. Omnibus Budget Reconciliation Act of 1993 which retroactively eliminated the 18-month period in which the employer health plan was the primary payor for dual eligible patients. NMC has obtained a permanent injunction against the retroactive implementation of this revised interpretation. Its motion for a declaratory judgment against implementation on a going-forward basis, and the government's motion for a declaratory judgment that the rule was validly applied on a prospective basis, are both pending. It is not clear at this time whether the government intends to appeal the rulings. As of July 1, 1995, NMC ceased to recognize the incremental revenue realized under the original implementation, but continued to bill employer health plans as primary payors until December 31, 1995. If the government should appeal and be successful in reversing the rulings, thereby upholding the government's retroactive implementation of its revised interpretation, NMC may be required to refund the payments received from employer health plans for services provided after August 10, 1993 under the original implementation and to rebill Medicare for the same services. This refunding and rebilling would result in a net loss to NMC of approximately $120 million for billing through December 31, 1995. AS HEALTH MAINTENANCE ORGANIZATIONS AND OTHER MANAGED CARE PLANS GROW IN THE UNITED STATES, AMOUNTS PAID FOR OUR SERVICES AND PRODUCTS BY NON-GOVERNMENTAL PAYORS MAY DECREASE We obtain a significant portion of our revenues from reimbursement provided by non-governmental third-party payors in the United States. Although non-governmental payors generally pay higher reimbursement rates than governmental payors, managed care plans generally negotiate lower reimbursement rates than indemnity insurance plans. Some managed care plans also utilize a capitated fee structure or limit reimbursement for ancillary services. As managed care programs have increased market share, we have experienced increased pressure to reduce the amounts paid for our services and products. These trends may be accelerated if future changes to the U.S. Medicare ESRD program require private payors to assume a greater percentage of the total cost of care given to dialysis patients over the term of their illness, or if managed care plans otherwise significantly increase their enrollment of renal patients. If substantially more of our patients join managed care plans or such plans reduce reimbursements, our revenues from non-governmental payors could decrease, and our financial condition and results of operations could be materially adversely affected. PROPOSALS FOR HEALTH CARE REFORM COULD DECREASE OUR REVENUES Proposals to modify the current health care system in the United States to improve access to health care and control its costs are continually being considered by the federal and certain state governments. We anticipate that the U.S. Congress and state legislatures will continue to review and assess alternative health care reform proposals, and we cannot predict whether these reform proposals will be adopted, when they may be adopted or what impact they may have on us. Any spending decreases or other significant changes in the Medicare program could reduce our revenues and profitability and have a material adverse effect on our business, financial condition and results of operations. Other countries, especially those in western Europe, have also considered health care reform proposals and could materially alter their government-sponsored health care programs by reducing reimbursement payments. Any reduction could affect the pricing of our products and the profitability of our services, especially as we expand our international business. This potential development could have a material adverse effect on our business, financial condition and results of operations. 22 30 RISKS RELATING TO OUR BUSINESS OUR COMPETITORS COULD DEVELOP SUPERIOR TECHNOLOGY, IMPACT OUR PRODUCT SALES, OR DRIVE UP ACQUISITION PRICES, WHICH WOULD ADVERSELY AFFECT OUR ABILITY TO MAKE ACQUISITIONS We face numerous competitors in both our dialysis services business and our dialysis products business, some of which may possess substantial financial, marketing or research and development resources. Competition could materially adversely affect the future pricing and sale of our products and services. In particular, technological innovation has historically been a significant competitive factor in the dialysis products business. The introduction of new products by competitors could render one or more of our products obsolete. We are engaged in both manufacturing dialysis products and providing dialysis services. We compete in the dialysis services business with many customers of our products business. As a result, independent dialysis clinics, those operated by other chains and dialysis centers acquired by other products manufacturers may elect to limit or terminate their purchases of our dialysis products so as to avoid purchasing products manufactured by a competitor. Possible purchase reductions could decrease our product revenues, with a material adverse effect on our business, financial condition and results of operations. We also compete with other dialysis products and services companies in seeking selected acquisitions. If we are not able to continue to effect acquisitions in the provider business upon reasonable terms, particularly in our International segment, this could adversely affect the growth of our business and our future growth prospects. WE FACE PRODUCTS LIABILITY AND OTHER CLAIMS WHICH COULD RESULT IN SIGNIFICANT LIABILITY Health care companies are subject to claims alleging negligence, products liability, breach of warranty, malpractice and other legal theories that may involve large claims and significant defense costs whether or not liability is ultimately imposed. Health care products may also be subject to recalls. Although liability claims and recalls have not had a material adverse effect on our businesses in the past, we cannot assure that we will not suffer one or more significant claims or product recalls in the future. Product liability claims or recalls could result in judgments against us or significant compliance costs, which could materially adversely affect our business, financial condition and results of operations. While we have been able to obtain liability insurance in the past, it is possible that such insurance may not be available in the future, either on acceptable terms or at all. A successful claim in excess of the limits of our insurance coverage could have a material adverse effect on our results of operations and financial condition. Liability claims, regardless of their merit or eventual outcome, also may have a material adverse effect on our business and reputation, which could in turn reduce our revenues and profitability. IF PHYSICIANS AND OTHER REFERRAL SOURCES CEASE REFERRING PATIENTS TO OUR DIALYSIS CLINICS OR CEASE PURCHASING OUR DIALYSIS PRODUCTS, OUR REVENUES WOULD DECREASE Our dialysis services business depends upon patients choosing our clinics as the location for their treatments. Patients may select a clinic based, in whole or in part, on the recommendation of their physician. We believe that physicians and other clinicians typically consider a number of factors when recommending a particular dialysis facility to an ESRD patient, including, but not limited to, the quality of care at a clinic, the competency of a clinic's staff, convenient scheduling, and a clinic's location and physical condition. Clinicians may change their facility recommendations at any time, which may result in the movement of our existing patients to competing clinics, including clinics established by the clinicians themselves. At most of our clinics, a relatively small number of physicians account for the referral of all or a significant portion of the patient base. If a significant number of physicians ceased referring their patients to our clinics, this could reduce our dialysis care revenue and materially adversely affect our overall 23 31 operations. Our operations are also affected by referrals from hospitals, managed care plans and other sources. The decision to purchase our dialysis products and other services or competing dialysis products and other services will be made in some instances by medical directors and other referring physicians at our dialysis clinics and by the managing medical personnel and referring physicians at other dialysis clinics, subject to applicable regulatory requirements. A decline in physician recommendations or purchases of our products or ancillary services could reduce our dialysis product and other services revenue, and could materially adversely affect our business, financial condition and results of operations. IF WE ARE UNABLE TO ATTRACT AND RETAIN SKILLED MEDICAL, TECHNICAL AND ENGINEERING PERSONNEL, WE MAY BE UNABLE TO MANAGE OUR GROWTH OR CONTINUE OUR TECHNOLOGICAL DEVELOPMENT Our continued growth in the provider business will depend upon our ability to attract and retain skilled employees, such as highly skilled nurses and other medical personnel. Competition for those employees is intense. Moreover, we believe that future success in the provider business will depend significantly on our ability to attract and retain qualified physicians to serve as medical directors of our dialysis clinics. Our dialysis products business depends on the development of new products, technologies and treatment concepts. Competition is also intense for skilled engineers and other technical research and development personnel. If we are unable to obtain the services of key personnel, the ability of our officers and key employees to manage our growth would suffer and our operations could suffer in other respects. These factors could also preclude us from integrating acquired companies into our operations, which could increase our costs and prevent us from realizing synergies from acquisitions. Lack of skilled research and development personnel could impair our technological development, which would increase our costs and impair our reputation for production of technologically advanced products. WE FACE ADDITIONAL COSTS AND UNCERTAINTIES FROM INTERNATIONAL OPERATIONS We intend to expand our international presence. As a result, we expect that revenues from countries other than the United States and Germany will account for an increasing portion of future revenues. Revenues from international operations are subject to a number of risks, including the following: - Fluctuations in currency exchange rates could adversely affect profitability; - We may face difficulties in enforcing and collecting accounts receivable under some countries' legal systems; - Local regulations may restrict our ability to obtain a direct ownership interest in dialysis clinics, operate our clinics or conduct other operations; - Political instability, especially in developing countries, could disrupt our operations; - Some customers and governments may have longer payment cycles, with resulting adverse effects on our cash flow; and - Some countries could impose additional taxes or restrict the import of our products. Any one or more of these factors, or any difficulty in integrating businesses we acquire into our operations, could increase our costs, reduce our revenues, or disrupt our operations, with possible material adverse effects on our business, financial condition and results of operations. OTHER RISKS BECAUSE WE ARE NOT ORGANIZED UNDER U.S. LAW, WE ARE SUBJECT TO CERTAIN LESS DETAILED DISCLOSURE REQUIREMENTS UNDER U.S. FEDERAL SECURITIES LAWS Under pooling agreements that we have entered into for the benefit of minority holders of our Ordinary shares and holders of our Preference shares, we have agreed to file quarterly reports with the 24 32 SEC, to prepare annual and quarterly financial statements in accordance with US GAAP, and to file information with the SEC with respect to annual and general meetings of our shareholders. However, we are a "foreign private issuer," as defined in the SEC's regulations, and consequently we are not subject to all of the same disclosure requirements applicable to U.S. companies. We are exempt from the SEC's proxy rules, and our annual reports contain less detailed disclosure than reports of U.S. issuers regarding such matters as management, executive compensation and outstanding options, beneficial ownership of our securities and certain related party transactions. Also, our officers, directors and beneficial owners of more than 10% of our equity securities are exempt from the reporting requirements and short-swing profit recovery provisions of Section 16 of the Exchange Act. These limits on available information about our company may adversely affect the market prices for our securities. 25 33 THE TRUSTS Each trust is a statutory business trust formed under the laws of the State of Delaware under a declaration of trust executed by Fresenius Medical Care, as sponsor of the trust, the note issuer and the trustees of the trust, and by the filing of a certificate of trust with the Secretary of State of the State of Delaware on February 12, 1998 in the case of Trust IV and June 1, 2001 in the case of Trust V. In connection with the offerings of the old trust preferred securities, we acquired common securities of Trust IV in an aggregate liquidation amount of $225,000 and of Trust V in an aggregate liquidation amount of E300,000, representing all of each trust's common securities. The common securities of each trust will rank equally with its trust preferred securities, except that, if an event of default occurs and is continuing under the trust declaration, our rights as the holder of the common securities to receive distributions and payments upon liquidation, redemption and otherwise will be subordinated to your rights as holders of the trust preferred securities. See "Description of Trust Preferred Securities -- Subordination of Common Securities." The assets of each trust will consist of the notes and the note guaranties. Each trust exists for the exclusive purpose of issuing and selling the trust securities representing undivided beneficial interests in the assets of that trust, investing the proceeds of the trust securities in the notes, consummating an exchange offer and engaging in only those other activities necessary, convenient or incidental to those purposes. Accordingly, the USD notes or the Euro notes, a company guarantee, the note guaranties and the right to reimbursement of expenses under the related expense agreement will be the sole assets of each trust, and payments under the notes and the related expense agreement will be the sole revenue of the trust. Each trust has a term of approximately 29 years, but may be terminated earlier as provided in its trust declaration. Each trust's business and affairs are and will be conducted by the trustees, whom we have appointed as sole holder of the common securities. Under the trust declaration, initially there will be five trustees. Three of the trustees, the "company trustees," are individuals who are our employees or officers. The fourth trustee, the preferred trustee, is a financial institution that is unaffiliated with us. The fifth trustee, the Delaware trustee, is an entity which maintains its principal place of business in the State of Delaware. Initially, State Street Bank and Trust Company, a national banking association duly organized and existing under the laws of Massachusetts, is the preferred trustee, and First Union Trust Company, N.A., a Delaware banking corporation, is the Delaware trustee. We, as holders of the common securities, will be able to remove any of the corporate trustees. State Street Bank and Trust Company also is the indenture trustee under the trust guarantees, the "guarantee trustee," and under the indentures, "indenture trustee." See "Description of the Trust Guarantee" and "Description of the Trust Preferred Securities." The preferred trustee will hold title to the notes for your benefit and will have the power to exercise all rights, powers and privileges under the indentures as the holder of the notes. In addition, the preferred trustee will maintain exclusive control of segregated non-interest bearing bank accounts of each trust, the "property accounts," to hold all payments made in respect of notes for your benefit. The guarantee trustee will hold the trust guarantees for your benefit. As the direct or indirect holder of all the common securities, we will have the right to appoint, remove or replace any of the trustees of each trust and to increase or decrease the number of trustees, provided that the number of trustees of each trust must be at least three, a majority of which must be company trustees. We, as holders of the common securities or, if an event of default under a declaration of trust has occurred and is continuing, the holders of a majority in liquidation amount of the trust preferred securities, will be entitled to appoint, remove or replace the preferred trustee and/or the Delaware trustee. In no event will you have the right to vote to appoint, remove or replace the company trustees; only we, as holders of the common securities may do so. The duties and obligations of each of the trustees will be governed by the trust declarations. In each trust declaration, we will agree to pay for all fees and expenses related to the trust, including fees and expenses of the trustees and any income taxes, duties and other governmental charges, and all costs and expenses with respect to the trust or to which the trust may become subject, except for U.S. withholding taxes, and we have also agreed to pay all fees and expenses related to the offerings of the old trust preferred 26 34 securities and the exchange offers and to pay, directly or indirectly, all ongoing costs, expenses and liabilities of each trust. See "Description of the Notes." Your rights as holders of the trust preferred securities, including economic rights, rights to information and voting rights, if any, are set forth in the applicable trust declaration and the Delaware Business Trust Act, as amended. See "Description of the Trust Preferred Securities." The trust declarations, the indentures and the trust guarantees will also incorporate by reference the terms of the Trust Indenture Act of 1939, as amended. The declarations of trust, the indentures and the trust guarantees have been qualified under the Trust Indenture Act in connection with the exchange offers. The place of business and the telephone number of each trust is 95 Hayden Avenue, Lexington, Massachusetts, 02173 U.S.A. and (787) 402-9000. THE NOTE ISSUER The note issuer is a Luxembourg company and a wholly owned subsidiary of Fresenius Medical Care. The note issuer exists for the exclusive purpose of: - issuing and selling the old notes to each trust and the notes in the exchange offers; - advancing the proceeds of the notes to us and our subsidiaries; - becoming a guarantor under our senior credit facility; and - engaging in only those other activities necessary, convenient or incidental thereto. The intercompany receivables created when we and our subsidiaries received the proceeds of the old notes are the sole assets of the note issuer. The sole manager of the note issuer is Ms. Gabriele Dux. The place of business of the note issuer is 7A rue Robert Stumper, L-2557 Luxembourg. ACCOUNTING TREATMENT For financial reporting purposes, the trusts will be treated as our subsidiaries and, therefore, we will include the accounts of the trusts in our consolidated financial statements. We will present the trust preferred securities as a separate line item in our consolidated balance sheet entitled "Company-obligated mandatorily redeemable preferred securities of Fresenius Medical Care Capital Trusts holding solely Company-guaranteed debentures of subsidiary," and we will include appropriate disclosures about the trust preferred securities, the trust guarantees and the notes in the notes to our consolidated financial statements. For financial reporting purposes, we will record distributions payable on the trust preferred securities as a financing charge to earnings in our consolidated statement of operations. USE OF PROCEEDS Neither we nor either trust will receive any cash proceeds from the issuance of the USD trust preferred securities and the Euro trust preferred securities in the exchange offers. In connection with the exchange offers, the note issuer will issue USD notes to Trust IV and Euro notes to Trust V having, in each case, an aggregate principal amount equal to the aggregate liquidation amount of USD trust preferred securities or Euro trust preferred securities issued in the applicable exchange offer. Each trust will retire and cancel the old trust preferred securities surrendered in exchange for the trust preferred securities. The net proceeds from the sale of the old trust preferred securities were approximately $468 million. The trusts invested the proceeds in the old notes and we used the proceeds of the sale of the old notes to repay outstanding revolving indebtedness under our senior credit facility, to repay short term debt, including approximately E140 million of short-term debt to Fresenius AG, and for general corporate purposes. Revolving borrowings under our senior credit facility bear interest at the LIBOR rate plus an 27 35 applicable margin determined in accordance with our senior credit facility. At March 31, 2001 approximately $450.4 million of our revolving borrowings were outstanding. Our senior credit facility matures on September 30, 2003. See "Management's Discussion and Analysis of Financial Condition and Results of Operations -- Fresenius Medical Care AG -- Liquidity and Capital Resources." CAPITALIZATION The following table presents the unaudited consolidated capitalization of Fresenius Medical Care (1) as of March 31, 2001 and (2) as adjusted to reflect the sale in June 2001 of $225 million aggregate liquidation amount of old USD trust preferred securities due 2011 and E300 million aggregate liquidation amount of old Euro trust preferred securities due 2011 and our application of the net proceeds from those offerings to repay revolving indebtedness under our senior credit facility, to repay short term debt and for other general corporate purposes. For the purpose of this presentation, we have translated euros into U.S. dollars at an exchange rate of E1.00 per $.08628, based on the euro noon buying rate on June 15, 2001. See "Use of Proceeds."
MARCH 31, 2001 --------------------------- AS ADJUSTED FOR ACTUAL THE OFFERINGS -------- --------------- (IN MILLIONS) Cash and cash equivalents................................... $ 72.7 $ 72.7 ======== ======== Short term debt (including current portion of long term debt)..................................................... $ 562.1 $ 441.6 Long term debt: Revolving credit facility................................. 450.4 102.7 Term facility............................................. 390.0 390.0 Other debt and capital lease obligations.................. 68.1 68.1 -------- -------- Total long term debt (excludes trust preferred securities)......................................... 908.5 560.8 Company-obligated mandatorily redeemable preferred securities of Fresenius Medical Care Capital Trusts holding solely company-guaranteed debentures of subsidiary: 9% $ Trust Preferred Securities due 2006.................. 360.0 360.0 7 7/8% $ Trust Preferred Securities due 2008.............. 450.0 450.0 7 3/8% DM Trust Preferred Securities due 2008............. 135.5 135.5 7 7/8% $ Trust Preferred Securities due 2011.............. -- 225.0 7 3/8% E Trust Preferred Securities due 2011.............. -- 258.8 -------- -------- Total trust preferred securities..................... 945.5 1,429.3 Minority interest........................................... 21.1 21.1 Total shareholders' equity (1).............................. 2,771.7 2,771.7 -------- -------- Total capitalization.............................. $5,208.9 $5,224.5 ======== ========
- --------------- (1) On May 23, 2001, we increased our authorized capital to E316 million ($274 million). 28 36 THE EXCHANGE OFFERS In this section, where the context requires, descriptions of the voting rights, the liquidation rights and, the rights to distributions of the trust preferred securities assume that all of the outstanding old trust preferred securities will be exchanged for trust preferred securities in the exchange offers. If any old trust preferred securities are not exchanged and remain outstanding, the trust declarations provide that the old trust preferred securities and the trust preferred securities will rank equally in all respects and will have equal voting rights, liquidation rights and rights to distributions. PURPOSE OF THE EXCHANGE OFFERS On June 6, 2001, Trust IV issued $225 million aggregate liquidation amount of old USD trust preferred securities. On June 15, 2001 Trust V issued E300 million aggregate liquidation amount of old Euro trust preferred securities. In connection with the sale of the old trust preferred securities, we, FMCH, FMC Deutschland, the note issuer and the issuing trust entered into registration rights agreements with the initial purchasers of the old trust preferred securities in which we agreed to file with the Securities and Exchange Commission a registration statement for the exchange of the old trust preferred securities for the trust preferred securities and to use our reasonable efforts to cause that registration statement to become effective. We have filed copies of the registration rights agreements as exhibits to the registration statement that includes this prospectus, and you can obtain copies of those agreements from the sources described under "Where You Can Find More Information." We are making the exchange offers to satisfy our contractual obligations under the registration rights agreements. The trust preferred securities to be issued in the exchange offers will have the same form and terms as the old trust preferred securities except that: - the trust preferred securities have been registered under the U.S. Securities Act and will not be subject to the minimum liquidation amount transfer restriction and certain other restrictions on transfer applicable to the old trust preferred securities; - the trust preferred securities will not provide for any increase in their distribution rate; and - after completion of the exchange offers, holders of old trust preferred securities will not be entitled to any further registration rights under the registration rights agreements, except under limited circumstances. See "Risk Factors -- The exchange offers could adversely affect any market for old trust preferred securities that are not exchanged." We are not making the exchange offers to, and we will not accept tenders for exchange from, holders of outstanding old trust preferred securities in any jurisdiction in which the exchange offers or acceptance of the exchange offers would not be in compliance with the securities or blue sky laws of the jurisdiction in question. The following exchanges will take place as soon as practicable following expiration of the exchange offers: - each trust will exchange trust preferred securities for its old trust preferred securities in an amount corresponding to the old trust preferred securities accepted for exchange; - we will exchange our old trust guarantees for the trust guarantees; - the note issuer will exchange notes for a like aggregate principal amount of old notes corresponding to the liquidation amounts of old trust preferred securities accepted for exchange; and - we, FMCH and FMC Deutschland will exchange old note guaranties for the note guaranties. The trust preferred securities, trust guarantees, the notes and the note guaranties have been registered under the Securities Act. 29 37 In the discussion below, unless the context requires otherwise, the term "holder" with respect to the exchange offers means any person in whose name the old trust preferred securities are registered on the books of a trust or any other person who has obtained a properly completed stock power from the registered holder. Holder also includes: - in the case of the old USD trust preferred securities, any person whose old trust preferred securities are held of record by The Depository Trust Company, "DTC," or its nominee, and - in the case of old Euro trust preferred securities, any person whose old Euro trust preferred securities are held of record by Deutsche Bank AG London or its nominee as common depositary for Clearstream Luxembourg or Euroclear; and who, in either case, wishes to deliver old trust preferred securities by book-entry transfer at DTC, Clearstream Luxembourg or Euroclear, as the case may be. TERMS OF THE EXCHANGE OFFERS Trust IV hereby offers, upon the terms and subject to the conditions set forth in this prospectus and in the accompanying letter of transmittal, to exchange up to $225 million aggregate liquidation amount of USD trust preferred securities for a like aggregate liquidation amount of old USD trust preferred securities. To accept the USD exchange offer, you must properly tender your old USD trust preferred securities on or prior to the expiration date and not withdraw them. Promptly after the expiration date of the USD exchange offer, Trust IV will issue up to $225 million aggregate liquidation amount of USD trust preferred securities in exchange for a like aggregate liquidation amount of outstanding old USD trust preferred securities that are tendered and that we accept in connection with the USD exchange offer. You may tender your old USD trust preferred securities in whole or in part in a liquidation amount of not less than $100,000 or any integral multiple of $1,000 liquidation amount in excess of $100,000. Trust V hereby offers, upon the terms and subject to the conditions set forth in this prospectus and in the accompanying letter of transmittal, to exchange up to E300 million aggregate liquidation amount of Euro trust preferred securities for a like aggregate liquidation amount of old Euro trust preferred securities. To accept the Euro exchange offer, you must properly tender your old Euro trust preferred securities on or prior to the expiration date and not withdraw them. Promptly after the expiration date of the Euro exchange offer, Trust V will issue up to E300 million aggregate liquidation amount of Euro trust preferred securities in exchange for a like aggregate liquidation amount of outstanding old Euro trust preferred securities that are tendered and that we accept in connection with the Euro exchange offer. You may tender your old Euro trust preferred securities in whole or in part in a liquidation amount of not less than E100,000 or any integral multiple of E1,000 liquidation amount in excess of E100,000. There is no minimum liquidation amount of old USD or old Euro trust preferred securities that must be tendered in either exchange offer, and neither exchange offer is conditioned upon the consummation of the other exchange offer. On the date of this prospectus, $225 million aggregate liquidation amount of old USD trust preferred securities is outstanding, and E300 million aggregate liquidation amount of old Euro trust preferred securities is outstanding. As a holder of old trust preferred securities, you do not have any appraisal or dissenters' rights in connection with the exchange offers. If you do not tender your old trust preferred securities or if we do not accept your tender in connection with the exchange offers, your old trust preferred securities will remain outstanding and be entitled to the benefits of the applicable trust declaration. However, you will not have any further registration rights under the registration rights agreements, except under limited circumstances. See "Risk Factors -- The exchange offers could adversely affect any market for old trust preferred securities that are not exchanged." If we do not accept any tenders of old trust preferred securities for exchange because of an invalid tender or if certain other events described below occur, we will return the certificates for any such unaccepted old trust preferred securities, without expense, to the holders who tendered them promptly after the expiration date. 30 38 You 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 tender or exchange of old trust preferred securities in the exchange offer. See "-- Fees and Expenses" below. NONE OF FRESENIUS MEDICAL CARE, FMCH, FMC DEUTSCHLAND, THEIR DIRECTORS, OR ANY TRUSTEE OF EITHER TRUST MAKES ANY RECOMMENDATION TO HOLDERS OF OLD TRUST PREFERRED SECURITIES WHETHER TO TENDER OR REFRAIN FROM TENDERING ALL OR ANY PORTION OF YOUR OLD TRUST PREFERRED SECURITIES IN THE EXCHANGE OFFERS, AND WE HAVE NOT AUTHORIZED ANY PERSON TO MAKE ANY SUCH RECOMMENDATION. YOU MUST MAKE YOUR OWN DECISION WHETHER TO TENDER PURSUANT TO THE EXCHANGE OFFERS AND, IF YOU DETERMINE TO TENDER, THE AMOUNT OF OLD TRUST PREFERRED SECURITIES THAT YOU TENDER, BASED ON YOUR OWN FINANCIAL POSITION AND REQUIREMENTS. The term "expiration date" means, with respect to the USD exchange offer, 5:00 p.m., Eastern Daylight time, on -- , 2001 unless we extend the USD exchange offer and, with respect to the Euro exchange offer, 5:00 pm London time on -- , 2001, unless we extend the Euro exchange offer. We may extend the expiration date of either or both exchange offers and, if we do so, the term "expiration date" of that exchange offer shall be the latest date and time to which we extend it. We reserve the right, in our sole discretion but subject to applicable law, at any time and from time to time: - to delay the acceptance of the old trust preferred securities for exchange; - to terminate either or both exchange offers, whether or not we have accepted any old trust preferred securities for exchange before termination, if we determine, in our reasonable discretion, that any of the events or conditions referred to under "-- Conditions to the exchange offers" have occurred or exist or have not been satisfied; and - to extend the expiration date of either or both exchange offers and retain all old trust preferred securities that were tendered, subject, however, to your right to withdraw old trust preferred securities that you tendered by following the procedures described below under "-- Withdrawal Rights." If we amend an exchange offer in a manner we determine constitutes a material change, or if we waive a material condition of an exchange offer, we will promptly disclose the amendment or waiver in a prospectus supplement that we will distribute to you as the holders of the old trust preferred securities. If any facts or events arise which constitute a fundamental change in the information in this prospectus or if we make any material changes or material additions to the Plan of Distribution described in this prospectus, we will file a post-effective amendment to the registration statement that contains the applicable information and we will distribute an amended prospectus to holders of the old trust preferred securities. If on the date that we first give that prospectus supplement or amended prospectus to holders of old trust preferred securities, there are less than ten business days until the expiration date, we will extend either or both exchange offers so that the expiration date will be not less than ten business days following the date we distribute the prospectus supplement or amended prospectus. If we impose any delay in acceptance of tenders or if we extend, terminate or amend the exchange offers, we will give prompt oral or written notice of any such action to the exchange agents and we will publicly announce the action. In the case of an extension, we will make the announcement no later than 9:00 a.m., Eastern Daylight time, on the next business day after the previously scheduled expiration date. Subject to applicable law, our sole obligation in making any public announcement will be to issue a release to an appropriate news agency, but this will not limit the manner in which we may choose to publish, advertise or otherwise communicate any public announcement. ACCEPTANCE FOR EXCHANGE AND ISSUANCE OF TRUST PREFERRED SECURITIES In the discussion below for the USD offer, the exchange agent is State Street Bank and Trust Company and the clearing agency is DTC and, for the Euro exchange offer, the exchange agent is Deutsche Bank AG London and the clearing agencies are Euroclear and Clearstream, Luxembourg. 31 39 Upon the terms and subject to the conditions of each exchange offer, each trust will exchange and issue to the relevant exchange agent trust preferred securities for old trust preferred securities that you validly tender and do not withdraw promptly after the expiration date. In all cases, we will deliver trust preferred securities in exchange for old trust preferred securities that we accept for exchange pursuant to the exchange offers only after the exchange agent (in the case of the USD exchange offer) or the clearing agencies (in the case of the Euro exchange offer) timely receive: - old trust preferred securities, or a book-entry confirmation of a book-entry transfer of old trust preferred securities into the exchange agent's account at the clearing agency; - the letter of transmittal, or a facsimile of the letter of transmittal, properly completed and duly executed, with any required signature guarantees, or, in the case of a participant in the book-entry transfer facility system, an agent's message; and - any other documents that the letter of transmittal requires. A book-entry confirmation is a timely confirmation of a book entry transfer of old trust preferred securities at the applicable clearing agency. In the case of the Euro exchange offer, old Euro trust preferred securities will be deemed to have been accepted as validly tendered when, as and if we have given oral or written notice of acceptance to the Euro exchange agent. The Euro exchange agent will act as agent for the tendering holders of old Euro trust preferred securities for the purposes of receiving new Euro trust preferred securities and delivering the new trust preferred securities to the holders. To tender in the Euro exchange offer, a holder of old Euro trust preferred securities must comply with the procedures established by Euroclear and Clearstream, Luxembourg, as appropriate, for transfer of book-entry interests through their electronic transfer systems prior to 5:00 p.m. London time on the expiration date of the Euro exchange offer. For a tender of old Euro trust preferred securities to be effective, a book-entry interest in the old Euro trust preferred securities must be transferred through Euroclear and Clearstream, Luxembourg. The exchange agent for the Euro exchange offer must receive confirmation of the required book-entry transfer prior to the expiration date of the Euro exchange offer. Subject to the terms and conditions of the USD exchange offer, if and when trust IV gives oral or written notice to the exchange agent for the USD exchange offer that the trust has accepted old USD trust preferred securities for exchange pursuant to the exchange offer, trust IV will be deemed to have accepted for exchange and to have exchanged, validly tendered old USD trust preferred securities. The exchange agent will act as the trust's agent to receive tenders of old USD trust preferred securities, letters of transmittal and related documents, and as your agent to receive old USD trust preferred securities, letters of transmittal and related documents and to transmit USD trust preferred securities to you. We will exchange old trust preferred securities for trust preferred securities promptly after the expiration date. However, if for any reason whatsoever: - we delay accepting old trust preferred securities for exchange; - we delay exchanging any old trust preferred securities for trust preferred securities, either before or after our acceptance of old trust preferred securities for exchange; or - we extend an exchange offer or we are unable to accept for exchange or exchange old trust preferred securities that have been tendered in an exchange offer, then, without prejudice to our rights under the terms of the exchange offer, we may instruct the exchange agent, on behalf of the trust, to retain old trust preferred securities that were tendered. If we do so, subject to applicable law, you may not withdraw those old trust preferred securities except in accordance with your withdrawal rights as described below under "-- Withdrawal Rights." We will announce the results of the exchange offers in the Luxembourg Wort and notify the Luxembourg Stock Exchange of the results. 32 40 By delivering a letter of transmittal, you will warrant and agree that: - you have full power and authority to tender, exchange, sell, assign and transfer old trust preferred securities; - the trust will acquire good, marketable and unencumbered title to your tendered old trust preferred securities, free and clear of all liens, restrictions, charges and encumbrances; and - the old trust preferred securities that you tendered for exchange are not subject to any adverse claims or proxies. In the letter of transmittal, you will also warrant and agree that you will, upon request, execute and deliver any additional documents which the trust or the exchange agent believe are necessary or desirable to complete the exchange, sale, assignment and transfer of the old trust preferred securities that you tendered. You will also make additional representations and warranties, as described below under "-- Procedures for Tendering Old Trust Preferred Securities -- Resale of Trust Preferred Securities." PROCEDURES FOR TENDERING OLD TRUST PREFERRED SECURITIES VALID TENDER Except as described below, you can validly tender your old USD trust preferred securities in the USD exchange offer by delivering or arranging for delivery to the exchange agent for the USD exchange offer on or prior to the expiration date of the USD exchange offer: - a properly completed and duly signed letter of transmittal, or a facsimile of the letter of transmittal, including any required signature guarantees and other required documents, and either the old trust preferred securities being tendered or a book-entry transfer as described below; or - an agent's message. You can validly tender your old Euro trust preferred securities in the Euro exchange offer by transferring or arranging for transfer of your beneficial interests in the old Euro trust preferred securities in accordance with the standard operating procedures of Euroclear and Clearstream, Luxembourg. For more information and further instructions on tendering outstanding old Euro trust preferred securities, you should contact the exchange agent for the Euro exchange offer at the address provided below under "-- Exchange Agents -- The Euro Exchange Offer." In addition, for tenders of old USD trust preferred securities only, you may tender by following the guaranteed delivery procedures described below. If you want to tender less than all your old trust preferred securities, you should fill in the amount of old trust preferred securities you are tendering in the appropriate box on the letter of transmittal. If you do not fill in any amount, you will be tendering all your old trust preferred securities. The address and telephone and facsimile numbers of each exchange agent are provided below under "-- Exchange Agents." THE METHOD YOU USE TO DELIVER CERTIFICATES, THE LETTER OF TRANSMITTAL AND ALL OTHER REQUIRED DOCUMENTS IS AT YOUR SOLE OPTION AND RISK. YOU WILL NOT HAVE MADE A VALID DELIVERY UNTIL THE EXCHANGE AGENT FOR THE USD EXCHANGE OFFER OR THE CLEARING AGENCIES FOR THE EURO TRUST PREFERRED SECURITIES ACTUALLY RECEIVE THESE DOCUMENTS. IF YOU MAKE DELIVERY BY MAIL, WE RECOMMEND USE OF REGISTERED MAIL, RETURN RECEIPT REQUESTED, PROPERLY INSURED, OR AN OVERNIGHT DELIVERY SERVICE. IN ALL CASES, YOU SHOULD ALLOW SUFFICIENT TIME TO ENSURE TIMELY DELIVERY. BOOK-ENTRY TRANSFER USD Exchange Offer The exchange agent will establish an account with respect to the old USD trust preferred securities at DTC for purposes of the USD exchange offer within two business days after the date of this prospectus. 33 41 Any financial institution that is a participant in DTC's book-entry transfer facility system may make a book-entry delivery of old USD trust preferred securities by causing DTC to transfer the old USD trust preferred securities into the exchange agent's account at DTC in accordance with DTC's transfer procedures. Unless the book-entry transfer is made with an agent's message, a holder who delivers old USD trust preferred securities through book-entry transfer must also properly complete, execute and deliver to the exchange agent a letter of transmittal, or a facsimile of the letter of transmittal, together with any required signature guarantees and other required documents, on or prior to the expiration date. Alternatively, but solely for tenders of old USD trust preferred securities, the holder must comply with the guaranteed delivery procedure set forth below. A holder who is a participant in the book-entry transfer facility system and transfers the holder's old trust preferred securities by an agent's message need not transmit the letter of transmittal to DTC to consummate the exchange. An agent's message is an electronic message from a book-entry transfer facility that is sent to and received by the exchange agent and forms a part of a book-entry confirmation. The message states that DTC has received an express acknowledgement from the participant tendering the old USD trust preferred securities that the participant has received and agrees to be bound by the letter of transmittal and/or, solely with respect to tenders of old USD trust preferred securities, the notice of guaranteed delivery discussed below. DELIVERY OF DOCUMENTS TO DTC IN ACCORDANCE WITH DTC'S PROCEDURES DOES NOT CONSTITUTE DELIVERY TO THE EXCHANGE AGENT FOR THE USD EXCHANGE OFFER. Euro Exchange Offer Promptly upon commencement of the exchange offers, the exchange agent for the Euro exchange offer will notify Euroclear and Clearstream of the commencement of the Euro exchange offer and will arrange for publication of a notice regarding the Euro exchange offer to holders of Euro trust preferred securities through Euroclear and Clearstream. The exchange agent will also arrange for distribution of this prospectus and the letter of transmittal through Euroclear and Clearstream. Euroclear and Clearstream will inform their participants of the Euro exchange offer and will send them copies of the prospectus, the letter of transmittal and the instruction letter through which holders of the Euro trust preferred securities may instruct their nominees to tender their old Euro trust preferred securities. Holders of old Euro trust preferred securities who wish to tender their securities must confirm their instructions to Euroclear and Clearstream in accordance with those agencies' standard procedures. Once Euroclear and Clearstream have received the necessary confirmation, they will block the relevant securities in their participants' accounts. On the expiration date for the Euro exchange offer, Euroclear and Clearstream will confirm the aggregate amount of old Euro trust preferred securities tendered for exchange to the exchange agent and, subject to our rights described below under "-- Determination of Validity," we will confirm our acceptance of the tendered securities. Euro trust preferred securities issued in exchange for old Euro trust preferred securities will be credited to holders' accounts as soon as the common depositary for Euroclear and Clearstream receives the certificate or certificates evidencing the Euro trust preferred securities. SIGNATURE GUARANTEES You do not have to endorse certificates for the old trust preferred securities or provide a signature guarantee on the letter of transmittal unless your certificate for the old trust preferred securities is registered in different name than the person surrendering the certificate or you complete the box entitled "Special Issuance Instructions" or "Special Delivery Instructions" in the letter of transmittal. If either case exists, the certificates for your old trust preferred securities must be duly endorsed or accompanied by a properly executed stock power, and the endorsement or signature on the stock power and on the letter of transmittal must be guaranteed by a firm or other entity that is an eligible guarantor institution under Rule 17Ad-15 under the U.S. Securities Exchange Act of 1934, Eligible guarantor institutions include, - a bank - a broker, dealer, municipal securities broker or dealer or government securities broker or dealer - a credit union 34 42 - a national securities exchange, registered securities association or clearing agency - a savings association that is a participant in a securities transfer association These requirements do not apply, however, if the party delivering the old trust preferred securities is an eligible guarantor institution. See Instruction 1 to the letter of transmittal. GUARANTEED DELIVERY OF OLD USD TRUST PREFERRED SECURITIES If you want to tender old USD trust preferred securities pursuant to the USD exchange offer and your certificates for your old USD trust preferred securities are not immediately available, time will not permit you to deliver all required documents to the exchange agent on or prior to the expiration date, or you cannot complete the procedure for book-entry transfer on a timely basis, you may still tender your old USD trust preferred securities provided that you comply with all of the following guaranteed delivery procedures: - you tender by or through an eligible guarantor institution; - the eligible guarantor institution delivers a properly completed and duly executed notice of guaranteed delivery, substantially in the form accompanying the letter of transmittal or, in the case of a participant in the book-entry transfer facility system, an agent's message, to the exchange agent on or prior to the expiration date; and - the exchange agent receives the certificates (or a book-entry confirmation) representing your old USD trust preferred securities, in proper form for transfer, together with a properly completed and duly executed letter of transmittal (or facsimile thereof), with any required signature guarantees and any other required documents or, in the case of a participant in the book-entry transfer facility system, an agent's message, within three New York Stock Exchange trading days after the date of the execution of the notice of guaranteed delivery. You may deliver the notice of guaranteed delivery to the exchange agent by hand, by facsimile or by mail. It must include a guarantee by an eligible guarantor institution in the form contained in the notice. DETERMINATION OF VALIDITY We will determine, in our sole discretion, all questions as to the form of documents, validity, eligibility, including time of receipt, and acceptance for exchange of old trust preferred securities that you tender, and our determination shall be final and binding on all parties. We reserve the absolute right, in our sole and absolute discretion, to reject any and all tenders which we determine not to be in proper form or if our counsel advises us that accepting the tender or exchange may be unlawful. We also reserve the absolute right, subject to applicable law, to waive any of the conditions of the exchange offers described under "-- Conditions to the exchange offers" or any condition or irregularity in any tender of old trust preferred securities by any particular holder even if we do not waive similar conditions or irregularities in tenders by other holders. Our interpretation of the terms and conditions of the exchange offers, including each letter of transmittal and related instructions, will be final and binding. A tender of old trust preferred securities will not be validly made until all irregularities with respect to the tender have been cured or waived. However, none of Fresenius Medical Care, a trust, our affiliates, the exchange agents or any other person will be under any duty to give any notification of any irregularities in tenders or incur any liability for failure to give any such notification. If you sign a letter of transmittal, endorsement, stock power, power of attorney, or any other document required by the letter of transmittal as a trustee, executor, administrator, guardian, attorney-in-fact, officer of a corporation or other fiduciary or representative capacity, you so indicate when signing, and unless we waive this requirement, you must also submit proper evidence satisfactory to us in our sole discretion, of your authority to act in that capacity. 35 43 Our accepting for exchange old trust preferred securities that you tender pursuant to any of the procedures described above will constitute a binding agreement, between you and the applicable trust, upon the terms and subject to the conditions of the exchange offers. If you hold your old trust preferred securities through a broker, dealer, commercial bank, trust company or other nominee or custodian, you should contact that entity promptly if you wish to participate in the exchange offers. RESALES OF TRUST PREFERRED SECURITIES We are making the exchange offer for the trust preferred securities in reliance on the position that the staff of the U.S. Securities and Exchange Commission has expressed in certain interpretive letters addressed to third parties in other transactions. We have not sought our own interpretive letter and we cannot assure that the staff would make a similar determination with respect to the exchange offers as it has in its interpretive letters to third parties. Based on these interpretations by the staff and subject to the two immediately following sentences, we believe that, unless you are a broker-dealer, you may offer for resale, resell and otherwise transfer trust preferred securities that you receive in the exchange offer without further compliance with the registration and prospectus delivery requirements of the U.S. Securities Act, provided that - you acquire the trust preferred securities in the ordinary course of your business; and - you are not participating, and you have no arrangement or understanding with any person to participate, in a distribution, within the meaning of the U.S. Securities Act, of those trust preferred securities. However, if you are an affiliate of Fresenius Medical Care or a trust, if you intend to participate in the exchange offers for the purpose of distributing trust preferred securities, or if you are a broker-dealer who purchased old trust preferred securities from a trust to resell pursuant to Rule 144A under the U.S. Securities Act or any other available exemption under that act: - you will not be able to rely on the interpretations of the staff set forth in the interpretive letters described above; - you may not tender your old trust preferred securities in the exchange offers; and - you must comply with the registration and prospectus delivery requirements of the U.S. Securities Act in connection with any sale or other transfer of your old trust preferred securities unless your sale is made pursuant to an exemption from those requirements. In addition, if you are a broker-dealer and you acquired your old trust preferred securities for your own account as a result of market-making or other trading activities and you exchange those old trust preferred securities for trust preferred securities, then you must deliver a prospectus meeting the requirements of the U.S. Securities Act in connection with any resales of your trust preferred securities. You may use this prospectus for that purpose in accordance with the conditions described below. As a condition to exchanging old trust preferred securities for trust preferred securities in the exchange offers, you must represent that - you are not an affiliate of Fresenius Medical Care or a trust; - you are acquiring trust preferred securities in the ordinary course of your business; - you have no arrangement or understanding with any person to participate in a distribution, within the meaning of the U.S. Securities Act, of the trust preferred securities you will receive; and - if you are not a broker-dealer, you are not engaged in, and do not intend to engage in, a distribution, within the meaning of the U.S. Securities Act, of the trust preferred securities. 36 44 As an additional condition to your eligibility to participate in the exchange offers, we may require that you furnish to us or to our agent in writing information as to the number of "beneficial owners" on behalf of whom you hold the old trust preferred securities to be exchanged in the exchange offers. If you are a participating broker-dealer, that is, a broker-dealer who receives trust preferred securities for your own account in the exchange offers, you must also acknowledge that you acquired the trust preferred securities for your own account as the result of market-making activities or other trading activities, and you must agree that you will deliver a prospectus meeting the requirements of the U.S. Securities Act in connection with any resale of your trust preferred securities. The letter of transmittal states that by making that acknowledgement and by delivering a prospectus, you will not be deemed to admit that you are an underwriter within the meaning of the U.S. Securities Act. Based on the position taken by the staff in the interpretive letters mentioned above, we believe that if you acquired old trust preferred securities for your own account as a result of market-making activities or other trading activities, you may fulfill your prospectus delivery requirements with respect to the trust preferred securities that you receive in the exchange offers by delivering this prospectus, as amended or supplemented from time to time, during the period ending on the earlier to occur of: - 90 days following the expiration date, subject to extension under certain limited circumstances described below, or, - the date on which you have disposed of all your trust preferred securities. Subject to certain provisions of the registration rights agreements, we have agreed that as a participating broker-dealer, you may use this prospectus, as amended or supplemented from time to time, in connection with resales of your trust preferred securities, during this period. See "Plan of Distribution." However, if you intend to use this prospectus in connection with the resale of trust preferred securities you receive in the exchange offers, you must notify us on or prior to the expiration date that you are a participating broker-dealer. You may give this notice in the space provided for that purpose in the letter of transmittal or you may deliver the notice to the exchange agent at the address indicated below under "-- Exchange Agents." For tenders of old Euro trust preferred securities, the electronic instructions sent to Euroclear or Clearstream must contain the character by which the participant acknowledges its receipt of and agrees to be bound by the letter of transmittal. If you are a participating broker-dealer who is also an affiliate of Fresenius Medical Care or a trust or your old trust preferred securities represent an unsold allotment from the original sale of the old trust preferred securities, you may not rely on these interpretive letters and you must comply with the registration and prospectus delivery requirements of the U.S. Securities Act in connection with any resale transaction. If you are a participating broker-dealer who surrenders old trust preferred securities pursuant to the exchange offers and notifies us that you intend to use this prospectus in connection with your resales of the trust preferred securities, by executing the letter of transmittal, you will also agree that you will suspend your sales of trust preferred securities pursuant to this prospectus if you receive a notice from us that: - an event has occurred, or we have discovered any fact which makes any statement contained or incorporated by reference in this prospectus untrue in any material respect or which causes this prospectus to omit to state a material fact necessary in order to make the statements contained or incorporated by reference in this prospectus, in light of the circumstances under which they were made, not misleading; or - certain other events specified in the registration rights agreements have occurred. If we deliver such a notice, you must suspend your sales of trust preferred securities until we have amended or supplemented this prospectus to correct the misstatement or omission and have furnished you with copies of the amended or supplemented prospectus, or we have notified you that you may resume your sales of the trust preferred securities, as the case may be. Any notice that we deliver will extend the 90-day period referred to above during which you and other participating broker-dealers may use this prospectus in connection with your resales of trust preferred securities. The extension will last for the number of days during the 90-day period from and including the date we give the notice to and including 37 45 the date you receive copies of the amended or supplemented prospectus necessary to permit resales of the trust preferred securities, or to and including the date on which we give notice that you may resume your sales of trust preferred securities, as the case may be. WITHDRAWAL RIGHTS Except as otherwise provided herein, you may withdraw your tenders of old trust preferred securities at any time on or prior to the applicable expiration date. For your withdrawal to be effective, the exchange agent (in the case of the USD exchange offer) or Euroclear or Clearstream (in the case of the Euro exchange offer) must receive your written or faxed withdrawal notice on or prior to the applicable expiration date. Your withdrawal notice must specify the name of the person who tendered the old trust preferred securities to be withdrawn, the aggregate liquidation amount of old trust preferred securities to be withdrawn and, if you tendered certificates for old trust preferred securities, the name of the registered holder of the old trust preferred securities as it appears on the certificates, if that name is different from the name of the person who tendered the old trust preferred securities. If you tendered certificates for old trust preferred securities or if the tendered securities were otherwise identified to the exchange agent or to Euroclear or Clearstream as the case may be, then prior to the physical release of your old trust preferred securities, you must submit the serial number shown on the particular old trust preferred securities to be withdrawn and the signature on the notice of withdrawal must be guaranteed by an eligible guarantor institution. No signature guarantee is necessary in the case of old trust preferred securities tendered for the account of an eligible guarantor institution. If you tendered old trust preferred securities pursuant to the book-entry transfer procedures described in "-- Procedures for Tendering Old Trust Preferred Securities," your notice of withdrawal will be effective if you deliver it to the exchange agent or to Euroclear or Clearstream as the case may be, in writing or by fax, and your withdrawal notice must specify the name and number of the account at the clearing agent to be credited with the withdrawal of old trust preferred securities. You may not rescind a withdrawal of tenders of old trust preferred securities, and any properly withdrawn old trust preferred securities will not be deemed validly tendered for purposes of the exchange offers. However, you may retender trust securities that you withdraw at any subsequent time on or prior to the expiration date by following any of the procedures described above under "-- Procedures for Tendering Old Trust Preferred Securities." DISTRIBUTIONS ON TRUST PREFERRED SECURITIES If you tender your old trust preferred securities and we accept your tender for exchange, you will not receive distributions on your old trust preferred securities and you will be deemed to have waived the right to receive any distributions on your old trust preferred securities accumulated from and after -- , 2001. Accordingly, if you are a holder of trust preferred securities as of the record date for the payment of distributions on September 15, 2001, you will be entitled to receive distributions accumulated from and after -- , 2001. CONDITIONS TO THE EXCHANGE OFFERS Notwithstanding any other provision of the exchange offers, or any extension of the exchange offers, we will not be required to accept for exchange, or to exchange, any old trust preferred securities for any trust preferred securities and we may terminate the exchange offers, regardless of whether any old trust preferred securities are accepted for exchange before termination, if any of the following conditions have occurred or exist or have not been satisfied: - a change occurs in the current staff interpretations which permit you to offer for resale, resell or otherwise transfer the trust preferred securities to be issued pursuant to the exchange offer (except for transfers by broker-dealers and any affiliates of Fresenius Medical Care or a trust) without compliance with the registration and prospectus delivery provisions of the U.S. Securities Act as long as you acquired your trust preferred securities in the ordinary course of your business and you 38 46 have no arrangement or understanding with any person to participate in a distribution of your trust preferred securities; or - any law, statute, rule or regulation is adopted or enacted which, in our judgment, would reasonably be expected to impair our ability to proceed with the exchange offers; or - the U.S. Securities and Exchange Commission or any state securities authority issues a stop order suspending the effectiveness of the registration statement for the exchange offers or initiates or to our knowledge, threatens to initiate proceedings for that purpose, or we do not obtain any governmental approval which in our reasonable discretion, we consider deem necessary for the consummation of the exchange offers as contemplated by this prospectus. If we determine in our reasonable discretion that any of the foregoing events or conditions has occurred or exists or has not been satisfied, we may, subject to applicable law, terminate either or both exchange offers, regardless of whether we accepted any old trust preferred securities for exchange before termination, or we may waive the condition or otherwise amend the terms of the exchange offers in any respect. If we amend the exchange offers in a manner we determine constitutes a material change, or if we waive a material condition of an exchange offer, we will promptly disclose the amendment or waiver in a prospectus supplement that we will distribute to you as the holders of the old trust preferred securities. If any facts or events arise which constitute a fundamental change in the information in this prospectus or if we make any material changes or material additions to the Plan of Distribution described in this prospectus, we will file a post-effective amendment to the registration statement that contains the applicable information and we will distribute an amended prospectus to holders of the old trust preferred securities. If on the date that we first give that prospectus supplement or amended prospectus to holders of old trust preferred securities, there are less than ten business days until the expiration date, we will extend either or both exchange offers so that the expiration date will be not less than ten business days following the date we distribute the prospectus supplement or amended prospectus. EXCHANGE AGENTS THE USD EXCHANGE OFFER The exchange agent for the USD exchange offer is State Street Bank and Trust Company. With respect to the USD exchange offer, you must deliver the letters of transmittal and any other required documents, and direct any questions, requests for assistance and requests for additional copies of this prospectus or the letter of transmittal to State Street Bank and Trust Company, by registered or certified mail or by hand or overnight delivery:
By Mail By Overnight or Hand Delivery State Street Bank and Trust Company State Street Bank and Trust Company Corporate Trust Department Corporate Trust Department P.O. Box 778 2 Avenue de Lafayette Boston, MA 02102-0778 Corporate Trust Window, 5th Floor Attn: Ralph Jones Boston, MA 02111-1724 Attn: Ralph Jones
By Facsimile State Street Bank and Trust Company Attn: Ralph Jones 617-662-1452 To Confirm Receipt: 617-662-1548 Delivery to an address or facsimile number other than those above will not constitute a valid delivery. IN PARTICULAR, DELIVERY TO DTC OR TO THE EXCHANGE AGENT FOR THE EURO EXCHANGE OFFER WILL NOT CONSTITUTE A VALID DELIVERY FOR THE USD EXCHANGE OFFER. 39 47 THE EURO EXCHANGE OFFER The exchange agent for the Euro exchange offer is Deutsche Bank AG London. With respect to the Euro exchange offer, you may direct any questions, requests for assistance and requests for additional copies of this prospectus or the letter of transmittal to Deutsche Bank AG London, by registered mail or by hand or overnight delivery: By Mail, by Overnight or Hand Delivery or by Facsimile Deutsche Bank AG London Winchester House 1 Great Winchester Street London EC2N 2DB England Attn: Corporate Trust and Agency Services Fax No.: ++44(0) 207 547-0271 To Confirm Receipt: ++44(0) 207 545-8000 However, to tender your old Euro trust preferred securities in the Euro exchange offer, you must arrange for transfer of your securities through Euroclear or Clearstream as described above under "-- Procedures for Tendering of Old Trust Preferred Securities -- Valid Tender" and "-- Procedures for Tendering of Old Trust Preferred Securities -- Book-Entry Transfer -- The Euro Exchange Offer." IN PARTICULAR, DELIVERY TO DTC OR TO EITHER EXCHANGE AGENT WILL NOT CONSTITUTE A VALID DELIVERY FOR THE EURO EXCHANGE OFFER. FEES AND EXPENSES We have agreed to pay the exchange agents their reasonable and customary fees for their services and will reimburse them for their reasonable out-of-pocket expenses in connection with the exchange offers. We will also pay brokerage houses and other custodians, nominees and fiduciaries the reasonable out-of-pocket expenses they incur in forwarding copies of this prospectus and related documents to the beneficial owners of old trust preferred securities, and in handling or tendering for their customers. You will not be obligated to pay any transfer taxes in connection with your tender of old trust preferred securities for exchange. However, if: - you instruct us to deliver trust preferred securities to, or to issue trust preferred securities in the name of, any person other than the registered holder of the old trust preferred securities that you tender, or - a transfer tax is imposed for any reason other than the exchange of old trust preferred securities in connection with the exchange offer, you will be obligated to pay the amount of any such transfer taxes, whether imposed on the registered holder or any other persons. If you do not submit satisfactory evidence of payment of these taxes or an exemption from these taxes with your letter of transmittal, we or the exchange agent will bill you directly for the amount of the transfer taxes. We will not make any payment to brokers, dealers or other nominees soliciting acceptance of the exchange offer. 40 48 SELECTED HISTORICAL FINANCIAL DATA OF FRESENIUS MEDICAL CARE AG The following table summarizes the consolidated financial information for our business as of and for each of the years 1996 through 2000 and as of and for the three-month periods ended March 31, 2001 and March 31, 2000. For each of the years ended, we derived the selected financial information from our consolidated financial statements. You should read this information together with the consolidated financial statements of Fresenius Medical Care and the section entitled "Management's Discussion and Analysis of Financial Condition and Results of Operations -- Fresenius Medical Care AG." For each of the years ended, we prepared our financial statements in accordance with US GAAP and KPMG Deutsche Treuhand-Gesellschaft Aktiengesellschaft Wirtschaftsprufungsgesellschaft, independent accountants, audited these financial statements. We derived the selected consolidated financial data as of and for the three-month periods ended March 31, 2001 and 2000 from our unaudited interim consolidated financial statements. We prepared our unaudited consolidated financial statements on a basis substantially consistent with our audited consolidated financial statements. In 1999, we recorded a special charge of $601 million ($419 million net of tax) related to the Settlement. In 1998, we discontinued our homecare and non-renal business. Fiscal years 1996 and 1997 show the effects of the discontinuance of these businesses, as we acquired them in 1996 in connection with the combination of Fresenius Worldwide Dialysis and the dialysis business of W.R. Grace, through which we were formed.
THREE MONTHS ENDED MARCH 31, YEAR ENDED DECEMBER 31, ----------------------- -------------------------------------------------------------- 2001 2000 2000 1999(A) 1998(B) 1997 1996(C) ---------- ---------- ---------- ---------- ---------- ---------- ---------- (UNAUDITED) (AUDITED) (IN MILLIONS, EXCEPT SHARE AND PER SHARE DATA) STATEMENT OF OPERATIONS DATA: Net revenues......................... $ 1,159 $ 1,001 $ 4,201 $ 3,840 $ 3,506 $ 2,974 $ 1,419 Cost of revenues..................... 769 648 2,734 2,463 2,243 1,886 860 ---------- ---------- ---------- ---------- ---------- ---------- ---------- Gross profit......................... 390 353 1,467 1,377 1,263 1,088 559 Selling, general and administrative..................... 225 199 814 785 743 675 344 Research and development............. 8 9 32 32 31 22 14 Special charge for Settlement(A)..... -- -- -- 601 -- -- -- ---------- ---------- ---------- ---------- ---------- ---------- ---------- Operating income (loss).............. 157 145 621 (41) 489 391 201 Interest expense, net................ 52 55 216 218 220 184 57 ---------- ---------- ---------- ---------- ---------- ---------- ---------- Earnings (loss) before income taxes.............................. 105 90 405 (259) 269 207 145 Income (loss) from continuing operations before cumulative effect of accounting change............... 55 45 212 (249) 132 104 89 Net income (loss).................... $ 55 $ 45 $ 212 $ (249) $ 19 $ 90 $ 88 ========== ========== ========== ========== ========== ========== ========== Weighted average of: Preference shares outstanding...... 25,894,564 11,981,976 19,002,118 9,023,341 9,023,341 6,506,917 517,808 Ordinary shares outstanding........ 70,000,000 70,000,000 70,000,000 70,000,000 70,000,000 70,000,000 43,907,500 Basic income (loss) from continuing operations per Ordinary share...... $ 0.56 $ 0.55 $ 2.37 $ (3.15) $ 1.62 $ 1.34 $ 2.00 Fully diluted income (loss) continuing per Ordinary share...... 0.56 0.55 2.36 (3.15) 1.62 1.34 2.00 Basic income (loss) per Ordinary share.............................. 0.56 0.55 2.37 (3.15) 0.20 1.16 1.96 Fully diluted income (loss) per Ordinary share..................... 0.56 0.55 2.36 (3.15) 0.20 1.16 1.96 Basic income (loss) from continuing operations per Preference share.... 0.58 0.56 2.43 (3.15) 1.78 1.39 2.07 Fully diluted income (loss) from continuing operations per Preference share................... 0.58 0.56 2.42 (3.15) 1.78 1.39 2.07 Basic income (loss) per Preference share.............................. 0.58 0.56 2.43 (3.15) 0.36 1.21 2.03 Fully diluted income (loss) per Preference share................... 0.58 0.56 2.42 (3.15) 0.36 1.21 2.03 Dividends declared per Ordinary share (E)(a)............................. -- -- 0.78 0.69 0.59 0.51 -- Dividends declared per Preference share (E)(a)....................... -- -- 0.84 0.75 0.64 0.56 0.10
41 49
THREE MONTHS ENDED MARCH 31, YEAR ENDED DECEMBER 31, ----------------------- -------------------------------------------------------------- 2001 2000 2000 1999(A) 1998(B) 1997 1996(C) ---------- ---------- ---------- ---------- ---------- ---------- ---------- (UNAUDITED) (AUDITED) (IN MILLIONS, EXCEPT SHARE AND PER SHARE DATA) OTHER DATA: EBITDA(b)............................ $ 237 $ 216 $ 914 $ 844 $ 768 $ 641 $ 292 Net cash provided by operating activities......................... 77 101 391 351 268 194 107 Net cash used in investing activities......................... 179 91 482 254 280 653 (87) Net cash provided by (used in) financing activities............... 111 -- 156 (79) 13 424 (142) Depreciation and amortization........ 79 71 293 284 279 250 91 Capital expenditures................. 64 47 228 160 159 209 119 Rental expenses (operating leases only).............................. 53 45 193 161 122 99 40 Ratio of fixed charges to earnings(c)........................ 0.4x 0.4x 0.4x -- 0.5x 0.5x 0.3x BALANCE SHEET DATA: Cash and cash equivalents............ $ 73 $ 46 $ 65 $ 35 $ 32 $ 38 $ 57 Working capital...................... 278 97 191 (229) 448 548 408 Total assets......................... 6,391 5,740 5,979 5,752 5,679 5,541 5,093 Total debt(d)........................ 1,471 1,344 1,237 1,228 1,296 1,811 1,595 Total Trust Preferred Securities..... 945 957 952 964 988 360 360 Total Liabilities.................... 3,619 3,360 3,300 3,750 3,322 3,095 2,937 Shareholders' equity (net assets).... 2,772 2,380 2,679 2,002 2,357 2,446 2,156
- --------------- (A) On January 18, 2000, FMCH, NMC and certain other affiliated companies consummated the Settlement. Under the Settlement with the U.S. government, FMCH made initial cash payments of approximately $286 million and entered into a note payable for the remainder of the payment obligations. You can find a more detailed discussion of the final terms of the settlement in "Management's Discussion and Analysis of Financial Condition and Results of Operations -- Fresenius Medical Care AG" and in Note 2 of the notes to our consolidated financial statements. (B) Includes the effect of an accounting change. See Note 1 of the notes to our consolidated financial statements. (C) Includes the results of FMCH for the period subsequent to September 30, 1996. (a) Amounts shown for each year represent dividends paid with respect to such year. The actual declaration and payment of the dividend was made in the following year, after approval of the dividend at our general meeting. Our shareholders approved the dividend for 2000 at our general meeting on May 23, 2001. (b) As used above, EBITDA means earnings before interest, income taxes, depreciation and amortization and, for 1999, the special charge for the Settlement. We are not presenting EBITDA here as a measure of our operating results. Our management believes that presentation of EBITDA is helpful to investors as a measure of our ability to generate cash and to service debt. Management also believes that presentation of EBITDA is helpful to investors because EBITDA is used to determine compliance with some of the covenants in our senior credit agreement and the indentures relating to both our outstanding trust preferred securities and the trust preferred securities we are currently offering. However, you should not construe EBITDA as an alternative to net earnings determined in accordance with US GAAP or to cash flow from operations, investing activities or financing activities or as a measure of cash flows. (c) In calculating the ratio of fixed charges to earnings, earnings consist of income before taxes plus fixed charges. Fixed charges consist of interest expense and amortization of deferred financing fees, plus one-third of rental expense under operating leases, the portion which we consider to be representative of an interest factor. Earnings were deficient in covering fixed charges by $260 million for the year ended 1999 due to the one-time settlement charge. (d) Total debt includes short-term borrowings from third parties, short-term borrowings from related parties, note payable related to the Settlement and long-term debt and capital lease obligations, including current portion. 42 50 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS -- FRESENIUS MEDICAL CARE AG You should read the following discussion and analysis of the results of operations of Fresenius Medical Care in conjunction with our historical consolidated financial statements, our historical condensed consolidated financial statements and related notes contained elsewhere in this offering circular. Some of the statements contained below, including those concerning future revenue, costs and capital expenditures and possible changes in our industry and competitive and financial conditions include forward-looking statements. Because such statements involve risks and uncertainties, actual results may differ materially from the results which the forward looking statements express or imply. FINANCIAL CONDITION AND RESULTS OF OPERATIONS The tables below, "Fresenius Medical Care AG Segment Data," present segment information for our company. We prepared the information using a management approach, consistent with the basis and manner in which our management internally segments financial information to assist in making internal operating decisions and evaluating management performance. This section contains forward-looking statements. We made these forward-looking statements based on our management's expectations and beliefs concerning future events which may affect us, but we cannot assure you that these events will occur or that the results will be as anticipated. Such statements include the matters that we described in the discussion in this offering circular entitled "Forward-Looking Statements." Our businesses operate in highly competitive markets and are subject to changes in business, economic and competitive conditions. Our business is subject to: - intense competition; - varying degrees of acceptance of new product introductions; - changes in reimbursement rates; - technological developments in our industry; - uncertainties in litigation or investigative proceedings and regulatory developments in the health care sector; - foreign exchange rate fluctuations; and - the availability of financing. Our business is also subject to other risks and uncertainties that we describe in this offering circular under "Risk Factors." Developments in any of these areas could cause our results to differ materially from the results that we or others have projected or may project. OVERVIEW Effective January 1, 1998, we adopted SFAS 131 issued by the U.S. Financial Accounting Standards Board. Commencing with the period ended March 31, 1999, we identified three operating segments, North America, International, and Asia Pacific, that we determined based upon how we manage our businesses. For reporting purposes, we have aggregated the International and Asia Pacific segments as "International." We aggregated these segments due to their similar economic characteristics. These characteristics include same services provided and same products sold, same type patient population, similar methods of distribution of products and services and similar economic environments. Each segment engages primarily in providing kidney dialysis services and manufacturing and distributing products and equipment for the treatment of end-stage renal disease. Additionally, the North America segment engages in performing clinical laboratory testing and renal diagnostic services. Our management board member responsible for the profitability and cash flow of each segment's various 43 51 businesses supervises the management of each operating segment. The accounting policies of the operating segments are the same as those we apply in preparing our consolidated financial statements under US GAAP. Our management evaluates each segment using a measure that reflects all of the segment's controllable revenues and expenses. Our management believes the most appropriate measure in this regard is earnings before interest and taxes, or EBIT, which measures our source of earnings. Financing is a corporate function which segments do not control. Therefore, we do not include interest cost as a segment measurement. We also regard taxes to be outside the segment's control. In addition to EBIT, our management also believes that earnings before interest, taxes, depreciation and amortization, or EBITDA, is helpful for investors as a measurement of the segment's and our company's ability to generate cash and to service our financing obligations. EBITDA is also the basis for determining compliance with some of the covenants contained in our senior credit agreement, the indentures relating to our outstanding trust preferred securities and the indenture relating to the offered trust preferred securities. You should not consider EBITDA to be an alternative to net earnings determined in accordance with US GAAP or to cash flow from operations, investing activities or financing activities or as a measure of cash flows. We believe our EBIT calculation is the functional equivalent of operating income. Because all companies do not calculate EBITDA and EBIT consistently, the presentation in this discussion may not be comparable to other similarly titled measures of other companies. During 1998, we had discontinued operations because we divested our homecare and non-renal diagnostics businesses. Our results of operations for 1998 also reflect an accounting change relating to start-up costs because in that year we adopted Statement of Position No. 98-5, Reporting on the Costs of Start-up Activities as issued by the Accounting Standards Executive Committee of the American Institute of Certified Public Accountants. Where appropriate, we have restated our quarterly financial information for 1998 to show the results of discontinued operations and to reflect the cumulative effect of the accounting change. We obtained approximately 40% of our worldwide revenue for 2000 and for the three months ended March 31, 2001 from sources subject to regulations under U.S. government health care programs. In the past, U.S. budget deficit reduction and health care reform measures have changed the reimbursement rates under these programs, including the Medicare composite rate, the reimbursement rate for EPO, and the reimbursement rates for other dialysis and non-dialysis related services and products, as well as other material aspects of these programs, and they may change in the future. We also obtain a significant portion of our net revenues from reimbursement by non-government payors. Historically, these payors' reimbursement rates generally have been higher than government program rates in their respective countries. However, non-governmental payors are imposing cost containment measures that are creating significant downward pressure on reimbursement levels that we receive for our services and products. We believe that our existing credit facilities, cash generated from operations and other current sources of financing are sufficient to meet our foreseeable needs, including our 2001 budget for acquisitions and capital expenditures summarized below in "Business -- Capital Expenditures." However, we expect from time to time to incur additional senior debt to refinance our outstanding senior debt and for other purposes. On July 12, 2001, we issued E108.5 million aggregate principal amount of four-year senior notes in the European private placement market, of which E80 million bear interest at a fixed rate of 6.16% per annum and E28.5 million bear interest at a floating rate, initially 5.837% per annum. We used the proceeds of these notes to refinance existing senior debt. If cash flows from operations or availability under existing banking arrangements fall below expectations, we may have to consider other alternatives to maintain sufficient liquidity. We cannot assure that we will be able to do so on satisfactory terms, if at all. Our discussions relating to our consolidated financial condition and results of operations for 1999 reflect the effects of the Settlement and costs incurred in connection with resulting special charge for the 44 52 settlement cost, "the special charge." The discussion of the disaggregated results of operations of the North America segment excludes the effect of the special charge. OPERATING RESULTS The following tables summarize our financial performance and certain operating results by principal business segment for the periods indicated. Inter-segment sales primarily reflect sales of medical equipment and supplies from the International segment to the North America segment. We reorganized this information and reclassified prior period information to conform with our business segment reporting requirements and to distinguish between continuing and discontinued operations and the cumulative effect of the accounting change as previously noted. FRESENIUS MEDICAL CARE AG SEGMENT DATA
THREE MONTHS ENDED MARCH 31, YEAR ENDED DECEMBER 31, ------------------ -------------------------- 2001 2000 2000 1999 1998 ------- ------- ------ ------ ------ (UNAUDITED) (AUDITED) (U.S. DOLLARS IN MILLIONS) Total revenue North America............................... $ 867 $ 743 $3,085 $2,811 $2,565 International............................... 298 266 1,155 1,076 986 ------ ------ ------ ------ ------ Totals.............................. 1,165 1,009 4,240 3,887 3,551 ------ ------ ------ ------ ------ Inter-segment revenue North America............................... 1 1 2 4 2 International............................... 5 7 37 43 43 ------ ------ ------ ------ ------ Totals.............................. 6 8 39 47 45 ------ ------ ------ ------ ------ Total net revenue North America............................... 866 742 3,083 2,807 2,563 International............................... 293 259 1,118 1,033 943 ------ ------ ------ ------ ------ Totals.............................. 1,159 1,001 4,201 3,840 3,506 ------ ------ ------ ------ ------ EBITDA North America............................... 171 154 646 611 549 International............................... 69 65 270 243 228 Special charge for Settlement............... -- -- -- (601) -- Corporate................................... (3) (3) (2) (10) (9) ------ ------ ------ ------ ------ Totals.............................. 237 216 914 243 768 ------ ------ ------ ------ ------ Amortization and depreciation North America............................... 62 55 223 217 215 International............................... 17 16 69 65 62 Corporate................................... -- -- 1 2 2 ------ ------ ------ ------ ------ Totals.............................. $ 79 $ 71 $ 293 $ 284 $ 279 ------ ------ ------ ------ ------
45 53
THREE MONTHS ENDED MARCH 31, YEAR ENDED DECEMBER 31, ------------------ -------------------------- 2001 2000 2000 1999 1998 ------- ------- ------ ------ ------ (UNAUDITED) (AUDITED) (U.S. DOLLARS IN MILLIONS) EBIT North America............................... $ 109 $ 99 $ 423 $ 394 $ 334 International............................... 51 49 201 178 165 Special charge for Settlement............... -- -- -- (601) -- Corporate................................... (3) (3) (3) (12) (10) ------ ------ ------ ------ ------ Totals.............................. 157 145 621 (41) 489 ------ ------ ------ ------ ------ Interest income............................... 3 3 9 8 8 Interest expense.............................. (56) (52) (195) (226) (228) Interest expense on obligation related to Settlement.................................. --(a) (6) (30) -- -- Income tax (expense) benefit.................. (49) (44) (190) 12 (135) Minority interest............................. -- (1) (3) (2) (2) Loss from discontinued operations, net........ -- -- -- -- (106) Cumulative effect of accounting change, net... -- -- -- -- (7) ------ ------ ------ ------ ------ Net income (loss)............................. $ 55 $ 45 $ 212 $ (249) $ 19 ====== ====== ====== ====== ======
- --------------- (a) In 2001, we discontinued separate reporting of Settlement interest because we will make the final payment on the Settlement note in July 2001. THREE MONTHS ENDED MARCH 31, 2001 COMPARED TO THREE MONTHS ENDED MARCH 31, 2000 Net revenues for the three months ended March 31, 2001 increased by 16% (18% at constant exchange rates) to $1,159 million from $1,001 million for the comparable period in 2000. Net income for the first quarter of 2001 was $54 million as compared to $45 million in 2000. The gross profit margin decreased from 35% to 34% in the first quarter 2001 as compared to the first quarter 2000. This was mainly due to the integration of Everest, which when acquired, had lower margins than Fresenius Medical Care as a whole. Earnings per Ordinary share were $0.56 compared to $0.55 for the same period in the prior year. At March 31, 2001 we owned, operated or managed 1,350 clinics compared to 1,270 at December 31, 2000. During the quarter we acquired 62 clinics with 5,653 patients, opened 22 clinics and disposed of three clinics. The number of patients treated in clinics that we own, operate or manage increased to 98,600 at March 31, 2001 from 91,900 at December 31, 2000. Approximately 3,600,000 treatments were provided in the first quarter of this year; an increase of 21% from 2,970,000 for the comparable period in 2000. Average revenue per treatment increased from $234 in the first quarter of last year to $236 for the same period for this year. The following discussion pertains to our business segments and the measures we use to manage these segments: NORTH AMERICA SEGMENT Revenue. Net revenue for the North America segment for the three months ended March 31, 2001 grew by 17% from $742 million to $867 million. Dialysis care revenue increased by 20% to $754 million as a result of base business growth of 10% and the positive impact of acquisitions we made in 2000 and 2001 of 10%. Of the total dialysis care revenue increase, $66 million is attributable to the Everest acquisition. The increase in dialysis care revenue resulted primarily from an increase in the number of treatments, which contributed $115 million (18%) and an increase in revenue per treatment as a result of the impact 46 54 of increased Medicare reimbursement rates and increased laboratory testing revenues due to increased patient volume, which together contributed approximately $13 million (2%). Medicare reimbursement rates increased 1.2% as of January 1, 2001 due to legislation passed in January 2000. Additional legislation passed during the fourth quarter 2000 provided for an additional 1.2% rate increase. However, this second increase was delayed until April 1, 2001 when rates were increased 1.6% to make up for this delay. Laboratory testing revenues increased as a result of higher patient volume. Dialysis products revenues decreased 3% to $113 million. The 3% decrease in dialysis product revenue is a result of a 5% decrease in product prices offset by a 2% increase in sales volume. During the quarter ended March 31, 2001, we treated 74,200 patients in the 1,000 clinics we own, operate or manage in the North American segment, compared to 67,900 patients treated in 920 clinics at December 31, 2000. The average revenue per treatment excluding laboratory testing revenue increased from $261 for the three months ended March 31, 2000 to $270 for the same period in 2001. Including laboratory testing, the average revenue per treatment for the same period increased from $274 to $279. EBITDA. EBITDA for the North America segment grew by 11% due to increased treatment volume, improved treatment rates, increased ancillary services, and increased earnings from laboratory testing. There was a decrease in EBITDA margin of 1%. This was the result of the integration of Everest discussed previously, higher personnel costs, and an increase in the provision for doubtful accounts. Amortization and Depreciation. Amortization and depreciation decreased slightly as a percentage of revenue in 2001. This is mainly due to depreciation and amortization increasing at a slower rate than revenue. EBIT. EBIT for the North America segment increased by 10% due to the increase in EBITDA and the positive impact of the decreased percentage of amortization and depreciation to revenue as previously mentioned. EBIT margins decreased for the same reasons stated above in the EBITDA section. INTERNATIONAL SEGMENT Revenue. Net revenue for the International segment during the three months ended March 31, 2001 increased by 13% (21% at constant exchange rates) from $259 million in 2000 to $293 million in 2001. Base business growth during the period was 1% (9% at constant rates). Including the effects of acquisitions, Asia Pacific region revenue increased $7 million or 17% (29% at constant exchange rates), and Latin America region revenue increased $17 million or 42% (49% at constant exchange rates). Acquisitions closed after March 31, 2000, mainly the acquisition of the international operations of Total Renal Care Holdings, Inc. (now known as DaVita) contributed $31 million, approximately $9 million in the European region, $17 million in the Latin America region and $5 million in Asia Pacific. The European region, unfavorably impacted by the appreciation of the U.S. dollar versus the euro, increased by 5% from $179 million in 2000 to $189 million in 2001 (13% increase at constant exchange rates). Total dialysis care revenue increased by 40% (47% at constant exchange rates) to $96 million in 2001 from $69 million in the prior year. This increase is a result of base business growth of approximately $8 million (12%), reflecting an increase in the number of dialysis care treatments, combined with approximately $26 million (38%) of increased revenues attributable to increase from acquisitions, offset by an approximate $5 million (7%) loss from exchange rate fluctuations and $2 million (3%) loss from decreasing prices. In the first quarter of this year, 24,400 patients were treated in the 350 clinics we own, operate or manage in the International segment compared to 24,000 in 350 clinics at December 31, 2000. Total dialysis products revenue for 2001 increased by 4% (12% at constant exchange rates) to $197 million. Product volume increased by approximately $26 million (14%) which was offset by lower average pricing of approximately $9 million (5%) due to the competitive nature of the market. Product revenue increase was further offset by approximately $15 million (8%) in losses due to exchange rate fluctuations. Acquisitions contributed approximately $5 million (3%) to total product revenue. 47 55 EBITDA. EBITDA for the International segment for 2001 grew by $3 million or 6% (13% at constant exchange rates) from $65 million to $68 million primarily due to the increased revenue noted above. EBITDA margin decreased 2% due to increased selling, general and administrative expenses in Asia Pacific, lower margins on the increased Latin America business, and currency fluctuations. EBIT. EBIT for the International segment for 2001 increased by 4% (11% at constant exchange rates) from $49 million to $52 million due to the increased EBITDA mentioned above and stable depreciation and amortization. EBIT margin decreased 2% due to the same factors responsible for the decrease in EBITDA margin. The following discussions pertain to our total company costs. Interest. Interest expense for the quarter ending March 31, 2001 decreased slightly compared to the same period in 2000. We anticipate higher interest rate expense for the rest of 2001 due to the increase in debt in connection with the Everest acquisition. Income Taxes. The effective tax rate for the first quarter of 2001 was slightly below the 2000 rate as non-deductible amortization of goodwill relating to acquisitions was lower, as a percentage of taxable income, for 2001 compared to the same period in 2000. Additionally, German tax reform went into effect lowering the effective tax rate. YEAR ENDED DECEMBER 31, 2000 COMPARED TO YEAR ENDED DECEMBER 31, 1999 Net revenues for the year ended December 31, 2000 increased by 9% (12% at constant exchange rates) to $4,201 million from $3,840 million for the comparable period in 1999. Net income for the year was $212 million as compared to a net loss of $249 million in 1999. The net loss of $249 million in 1999 was a result of the special charge of $601 million ($419 million after tax) relating to the Settlement. Excluding the effects of the special charge during 1999, net income for the year 2000 increased by 24% (34% at constant exchange rates) or $42 million. Earnings per Ordinary share in 2000 were $2.37 compared to a loss per Ordinary share of $3.15 in the prior year. Excluding the effects of the special charge, earnings per Ordinary share increased by 10% from $2.15 in 1999. At December 31, 2000 we owned, operated or managed 1,270 clinics compared to 1,090 clinics at the end of 1999. During 2000, we acquired 133 clinics with a total of 7,594 patients, opened 67 clinics and disposed of 20 clinics. The number of patients treated in clinics that we own, operate or manage increased from approximately 80,000 in 1999 to 91,900 at the end of 2000. Approximately 12.9 million treatments were provided in the year 2000; an increase of 13% from 11.4 million treatments for the comparable period in 1999. Average revenue per treatment remained stable at $228. The following discussions pertain to our business segments and the measures we use to manage these segments. THE NORTH AMERICA SEGMENT DISCUSSION EXCLUDES THE EFFECTS OF THE SPECIAL CHARGE IN 1999. NORTH AMERICA SEGMENT Revenue. Net revenue for the North America segment for 2000 grew by 10% from $2,807 million to $3,083 million. Dialysis care revenue increased by 12% to $2,608 million, 9% attributable to base business revenue growth and 3% to acquisitions. The increase in dialysis care revenue resulted primarily from a $201 million (9%) increase in the number of treatments, reflecting both base business growth and the impact of 1999 and 2000 acquisitions. Revenue was also favorably impacted by an increase in revenue per treatment of approximately $72 million (3%) as a result of increased Medicare reimbursement rates, higher revenue from disease state management programs and higher revenues in other pharmaceutical sales compared to 1999. For the years 2000 and 1999 EPO represented approximately 28% of dialysis care revenue or approximately 22% of total revenue. 48 56 The 1.2% increase of the Medicare composite rate for dialysis services (59% of dialysis care revenue in 2000 resulted from Medicare's ESRD program) generated an additional $9 million in revenue in 2000. We expect that an additional 2.4% increase, approved in December 2000, will have a positive impact on our revenues for 2001. Laboratory testing revenues increased as a result of higher patient volume. At the end of 2000 approximately 67,900 patients were treated in the 920 clinics that we own, operate or manage in the North America segment, compared to approximately 62,000 patients treated in 849 clinics at the end of 1999. The average revenue per treatment excluding laboratory testing revenue increased from $253 in 1999 to $261 in 2000. Including laboratory testing the average revenue per treatment increased from $264 in 1999 to $272 in 2000. Dialysis products revenue increased 1% to $475 million. Dialysis product volume revenue increased approximately $8 million or 2% as a result of increased sales of hemodialysis products, partially offset by decreased sales of peritoneal products. Product revenue growth was slightly (1%) affected by decreasing prices. The consolidation process in the dialysis care business also affected our product business growth. As integrated product and service providers acquire stand alone dialysis clinics, the external market for products decreases. The lower revenue in peritoneal products is also a result of a decreasing external market. EBITDA. EBITDA for the North America segment grew by 6% due to increased treatment volume, improved treatment rates, higher earnings in other pharmaceutical sales, increased earnings from laboratory testing and net foreign currency transaction gains. These increases were partially offset by costs to develop new therapies, costs to develop disease state management methodologies, higher personnel costs due to the tight labor market for medical personnel in the United States and an industry-wide price increase for Epogen, the key drug in anemia management. Amortization and Depreciation. Amortization and depreciation decreased slightly as a percentage of revenue in 2000. This was mainly due to the impact of internal revenue growth while amortization and depreciation has remained fairly constant at $222 million. EBIT. EBIT for the North America segment increased by 7% due to the increase in EBITDA and the positive impact of the decreased percentage of amortization and depreciation to revenue as previously mentioned. INTERNATIONAL SEGMENT Revenue. In 2000 the appreciation of the U.S. dollar against the euro significantly impacted our International segment. Net revenue for the International segment increased by 8% (19% at constant exchange rates) from $1,033 million in 1999 to $1,118 million in 2000. Acquisitions, primarily Total Renal Care, contributed $88 million, approximately $30 million in the European region, $46 million in the Latin America region and $12 million in the Asia Pacific region. Base business growth during the period was 10% at constant exchange rates. Including the effects of acquisitions, Asia Pacific region revenue increased $39 million or 29% (26% at constant exchange rates), and Latin America region revenue increased $65 million or 44% (49% at constant exchange rates). European region revenue decreased by 3% from $748 million in 1999 to $728 million in 2000 (12% increase at constant exchange rates) due to the appreciation of the U.S. dollar against the euro mentioned above. Total dialysis care revenue increased by 27% (40% at constant exchange rates) from $265 million in 1999 to $336 million in 2000. Base business growth consisted of approximately $27 million (10%) increase in the number of dialysis care treatments, offset by approximately $35 million (13%) due to exchange rate fluctuations. Average revenue per treatment increased by approximately 3% or $9 million before the impact of currency fluctuations. Acquisitions, primarily Total Renal Care Holdings, Inc., contributed approximately $70 million (26%) to total dialysis care revenue. At the end of 2000, approximately 24,000 patients were treated at 350 clinics that we own, operate or manage in the International segment compared to 18,000 patients treated at 241 clinics at the end of 1999. 49 57 Total dialysis product revenue for 2000 increased by 2% (12% at constant exchange rates) to $782 million. Product volume increased by approximately $121 million (16%) which was offset by lower average pricing of approximately $48 million (6%) due to the competitive nature of the market. The increase in product revenues was further offset by approximately $78 million (10%) due to exchange rate fluctuations. Acquisitions contributed approximately $18 million (2%) to total product revenue. EBITDA. EBITDA for the International segment for 2000 grew by 11% (25% at constant exchange rates) from $243 million to $270 million primarily due to the increased revenue noted above. EBIT. EBIT for the International segment for 2000 increased by 13% (27% at constant exchange rates) from $179 million to $201 million due to the increased EBITDA mentioned above and stable depreciation and amortization as a percentage of revenue. CORPORATE We do not allocate "corporate costs" to our segments in calculating segment EBIT and EBITDA. These corporate costs primarily relate to certain headquarter overhead charges, including accounting and finance, professional services, legal fees, etc. Total corporate EBIT was $(3) million in 2000 compared to $(12) million in 1999. EBIT in 2000 was primarily affected by net foreign currency transaction gains of $12 million related to intercompany financing. Excluding these net gains, corporate costs would have increased by approximately $3 million, resulting primarily from increased compensation expense relating to our international stock option plan. THE FOLLOWING DISCUSSIONS PERTAIN TO OUR TOTAL COMPANY COSTS, EXCLUDING THE EFFECTS OF THE SPECIAL CHARGE IN 1999. Cost of revenue and operating expenses. Cost of revenue increased as a percentage of revenue mainly due to costs to develop new therapies, costs to develop disease state management methodologies, higher personnel cost in the United States and an industry-wide price increase for EPO. However, the resulting decrease of our gross profit margin was more than offset by decreased selling, general and administrative expenses as a percentage of revenue, mainly due to effective general cost controls and net foreign currency transaction gains. Interest. Interest expense for 2000 remained relatively constant compared to the same period in 1999. Interest expense related to the note payable associated with the Settlement amounted to approximately $30 million. This additional interest expense was offset by the reduced interest expense related to lower other borrowings, resulting from the use of the $557 million net proceeds received from the Preference share offerings completed during 2000. We anticipate higher interest expense in 2001 due to the debt increase in connection with the acquisition of Everest. See "-- Liquidity and Capital Resources." Income Taxes. The effective tax rate for the year decreased from 49.5% in 1999 to 46.9% in 2000 due to the capitalization of tax loss carry forwards and because non-deductible amortization of goodwill relating to acquisitions was lower, as a percentage of taxable income, for 2000 compared to the same period in 1999. YEAR ENDED DECEMBER 31, 1999 COMPARED TO YEAR ENDED DECEMBER 31, 1998 Net revenues from continuing operations for the year ended December 31, 1999 increased by 10% (11% at constant exchange rates) to $3,840 million from $3,506 million for the comparable period in 1998. Net loss for the year was $249 million, a decrease of $268 million from net income of $19 million for the comparable period in 1998. The loss was a result of the special charge and related costs of $601 million ($419 million after tax) relating to the Settlement. Excluding the effects of the special charge net earnings from continuing operations increased by 29% (32% at constant exchange rates) to $170 million from $132 million in 1998. 50 58 The loss per Ordinary share from continuing operations was $3.15. Earnings per Ordinary share from continuing operations would have been $2.15, excluding the effects of the special charge, as compared to $1.62 for the same period in the prior year. Income from continuing operations for 1998 was impacted by the after tax effects of an accounting change of $7 million and losses on the sale of discontinued businesses of $106 million. This resulted in net income of $19 million for 1998. At December 31, 1999 we owned, operated or managed 1,090 clinics compared to 1,000 clinics at the end of 1998. During 1999 we acquired 36 clinics with a total of 2,531 patients, opened 71 clinics and disposed of 17 clinics. The number of patients treated in clinics that we own, operate or manage increased from 74,200 in 1998 to 80,000 at the end of 1999. Approximately 11,400,000 treatments were given in 1999; an increase of 9% from 10,450,000 treatments for the comparable period in 1998. The respective average revenue per treatment increased from $226 in 1999 to $228 in 2000. The following discussions pertain to our business segments and the measures we use to manage these segments. These discussions are based on continuing operations unless otherwise indicated. THE NORTH AMERICA SEGMENT DISCUSSION EXCLUDES THE EFFECTS OF THE SPECIAL CHARGE IN 1999. NORTH AMERICA SEGMENT Revenue. Net revenue for the North America segment for 1999 grew by 10% from $2,563 million to $2,807 million. This resulted from a 10% increase in dialysis care revenue to $2,335 million and a 5% increase in dialysis products revenue to $472 million. The increase in dialysis care revenue resulted primarily from an 8% increase in treatments, the beneficial impact of the extension of the Medicare Secondary Payor provision and higher EPO utilization as compared to 1998. This growth was partially offset by decreased laboratory testing revenues derived from lower laboratory testing volume during 1999 as competitors consolidated laboratory activity. Acquisitions contributed 2% of dialysis care revenue growth. The increase in dialysis product revenue was due to increased sales of hemodialysis products, partially offset by decreased sales of peritoneal dialysis products. At the end of 1999 approximately 62,000 patients were treated in 849 clinics that we own, operate or manage in the North America segment compared to 58,600 patients treated in 782 clinics at the end of 1998. EBITDA. EBITDA for the North America segment prior to the effects of the special charge grew by 11% due to the increase in our base business, improved treatment rates, and increased ancillary services. Product revenue growth, product mix and improvements in manufacturing efficiencies from increased production volume also contributed to the increased EBITDA growth. However, decreased EBITDA in laboratory testing partially offset this growth. Amortization and Depreciation. Amortization and depreciation decreased slightly as a percentage of revenue, in 1999. This was mainly due to the impact of internal revenue growth while amortization and depreciation has remained fairly constant. EBIT. EBIT for the North America segment prior to the effects of the special charge increased by 18% due to the increase in EBITDA and the positive impact of the decreased rate of amortization and depreciation to revenue as previously mentioned. INTERNATIONAL SEGMENT Revenue. Net revenue for the International segment during 1999 grew by 10% (14% at constant exchange rates) from $943 million in 1998 to $1,033 million in 1999 as a result of a 4% (8% at constant exchange rates) increase in the European region, 38% (28% at constant exchange rates) growth in the Asia Pacific region and a 21% (40% at constant exchange rates) increase in the Latin America region. Total dialysis care net revenue increased during 1999 by 8% (14% at constant exchange rates) to $265 million. This increase is a result of base business growth, as evidenced by the 12% increase in dialysis care 51 59 treatments. Total dialysis product net revenue for 1999 increased by 10% (14% at constant exchange rates) to $769 million. Product volume increased by approximately $123 million which was offset by lower average pricing of approximately $28 million (4%). At December 31, 1999 approximately 18,000 patients were treated in 241 clinics that we owned, operated or managed in the International segment compared to 15,600 patients treated in 218 clinics at the end of 1998. EBITDA. EBITDA for the International segment for 1999 grew by 7% (11% at constant exchange rates) primarily as a result of the increased revenue noted above. During the beginning of 1999 we elected to reduce shipments of equipment, which would normally have higher EBITDA margins, to some Eastern European countries due to the economic situation in that region, which partially offset EBITDA growth in the International segment. We also reduced fiber shipments to the North America segment during 1999 due to increased fiber production capabilities in that segment, which also offset EBITDA growth. Amortization and Depreciation. Amortization and depreciation, as a percentage of revenue, decreased slightly for 1999. This is mainly due to the impact of internal revenue growth while straight-line amortization of goodwill associated with prior years' acquisitions has remained fairly constant. EBIT. EBIT for the International segment for 1999 increased by 8% (12% at constant exchange rates) as a result of the increased EBITDA mentioned above and the positive impact of the decreased rate of amortization and depreciation to revenue as previously mentioned. THE FOLLOWING DISCUSSIONS PERTAIN TO OUR TOTAL COMPANY COSTS Interest. Interest expense for 1999, remained relatively constant compared to the same period in 1998 as a result of similar levels of average debt outstanding during the two periods. Income Taxes. Excluding the effects of the Settlement, the effective tax rate was 49.5% for 1999 and 50.2% for 1998. The tax benefit of the Settlement was limited to $182 million, reflecting the non-deductibility of $101.2 million in criminal fines included in the net settlement payments. The 1998 effective income tax rate was reduced primarily by the use of net operating losses that became realizable after the transfer of ownership of NMC's international business to the International business segment at the beginning of 1998. As a result of a reduction of the German federal corporate income tax rate for undistributed earnings from 45% to 40% effective the first quarter of 1999, our net deferred taxes and deferred income tax expense during 1999 were reduced by approximately $1 million. LIQUIDITY AND CAPITAL RESOURCES THREE MONTHS ENDED MARCH 31, 2001 COMPARED TO THREE MONTHS ENDED MARCH 31, 2000 We generated cash from operating activities of $77 million in the three-month period ended March 31, 2001 and $101 million in the comparable period in 2000. Net cash provided by operating activities during the first three months of 2000 was favorably impacted by the development of other current assets, while the development of receivables for the three months ending March 31, 2001, increased in line with revenues. Cash on hand was $73 million at March 31, 2001 compared to $65 million, at December 31, 2000. On January 18, 2000, we executed definitive agreements with respect to the Settlement. The agreements require net settlement payments totaling approximately $427 million. Under the definitive agreements with the U.S. government, we entered into a note payable for the remainder of the Settlement obligation. Installment payments under the note accrue interest at 6.3% on approximately $51 million of the obligation and at 7.5% annually on the balance, until paid in full. The note payable is being paid in six quarterly installments which began in April 2000 and will end in July 2001. The first four quarterly installments were made in the amount of approximately $35 million each, including interest at 7.5%. Of the final two installments of approximately $28 million each, including interest at 6.3%, the first was paid in April 2001, and the second will be paid in July 2001. The U.S. 52 60 government remitted the balance of our outstanding Medicare receivables in four quarterly payments of approximately $5 million each, plus interest at 7.5%. The last of these payments was received in February 2001. At March 31, 2001, the remaining note payable was approximately $51 million. In connection with the Settlement we amended the letter of credit that was given to the U.S. government in 1996 from $150 million to $190 million and, under the agreement, the letter of credit will be reduced as we continue to make installment payments to the government. At March 31, 2001, the face amount of the letter of credit was $54 million. In January 2001, we completed the acquisition of Everest. Approximately one-third of the purchase price ($341 million) was funded by the issuance of 2.25 million Fresenius Medical Care non-voting Preference shares ($99 million) to Everest stockholders. The remaining purchase price was paid with $107 million cash and debt assumed ($135 million). We subsequently repaid this debt using our senior credit facility as described below. Through March 31, 2001, we had paid approximately $117 million ($112 million for the North American segment and $5 million for the International segment) cash for acquisitions consisting primarily of dialysis clinics, including the cash portion of the purchase price for Everest. Acquisitions for the comparable period in 2000 were $48 million, $36 million for the North American segment and $12 million for the International segment. In addition, capital expenditures for property, plant and equipment were $64 million for the three months ended March 31, 2001 and $47 million for the comparable period in 2000. In 2001, capital expenditures in the North America segment were $36 million and $28 million for the International segment. In 2000, capital expenditures in the North America segment were $20 million and $27 million in the International segment. The majority of our capital expenditures were used for improvements to existing clinics, equipment for new clinics and expansion of production facilities. We believe that an increasing percentage of our dialysis care growth will be derived from worldwide markets and we envision making acquisitions in selected international markets. In the United States, we intend to continue to enhance our presence in the market by focusing our expansion on the acquisition of individual or small groups of clinics, expansion of existing clinics, and opening of new clinics. Nevertheless, we will consider larger acquisitions in the United States if suitable opportunities, such as Everest, become available to us. Total long-term debt, excluding the note payable related to the Settlement, net of current portion at March 31, 2001, increased to $908 million from $658 million at year-end 2000. This increase was mainly due to higher borrowings under our senior credit facility. Short-term borrowings from related parties increased from $218 million at December 31, 2000 to $236 million at March 31, 2001 whereas short term borrowings from third parties remained stable at $106 million. Other liabilities increased by $58 million mainly due to the market value of derivatives now included in the balance sheet as required by SFAS 133 Accounting for Derivative Instruments and Hedging Activities and the related amendments of SFAS 138. Under the terms of our senior credit facility, we have available an aggregate of $2 billion through two credit facilities: a revolving credit facility with availability of up to $1 billion and a term loan facility of $1 billion. Both facilities will expire on September 30, 2003. Loans under this senior credit facility bear interest at a base rate determined in accordance with the facility or at LIBOR plus, in either case, an applicable margin. We will permanently reduce the term loan facility through quarterly principal payments. In addition to these scheduled principal payments, the senior credit agreement will be reduced by the application of portions of the net cash proceeds from certain sales of assets, sales of accounts receivable and issuances of subordinated debt and equity securities. The senior credit facility contains customary affirmative and negative covenants with respect to us and our subsidiaries and other payment restrictions, mainly related to dividends. In January 2000, dollar interest rate swap agreements with a notional amount of $850 million expired as scheduled. In November 2000, we entered into additional dollar interest rate swap agreements with a notional amount of $450 million. At the same time, a dollar interest rate collar agreement with a notional amount of $150 million was closed out. As of March 31, 2001, the notional volume of dollar interest rate hedging contracts totaled $1,050 million. Those swap agreements, which expire at various dates between 53 61 2003 and 2007, effectively fix our variable interest rate exposure on the majority of our dollar-denominated revolving loans and outstanding obligations under our accounts receivable securitization program at an interest rate of 6.52%. Under our senior credit agreement, we have agreed to maintain at least $500 million of interest rate protection. In March 2000, we entered into a yen interest rate swap agreement with a notional amount of Japanese Yen 400 million, in line with a yen-denominated floating-rate borrowing of our Japanese subsidiary. In September 2000, both the bank borrowing and the notional amount of the interest rate swap agreement were increased as scheduled to Yen 1,000 million. The bank borrowing and the notional amount of the swap agreement are required to coincide until March 2009 when the bank debt is completely repaid and the swap expires. YEAR ENDED DECEMBER 31, 2000 COMPARED TO YEAR ENDED DECEMBER 31, 1999 We generated cash from operating activities of $391 million in 2000 and $355 million from continuing operations in the comparable period in 1999. A net increase in our accounts receivable balance reduced net cash provided by operating activities. The primary reason was a significant increase in days sales outstanding resulting from slower payment patterns from third parties outside of Germany, specifically from managed care plans in the United States. Days sales outstanding were also negatively impacted by the slowdown of the certification process for newly opened clinics in the United States. Furthermore, acquisitions, mainly outside Germany and the United States, and base business growth in countries where we experience higher days sales outstanding contributed to this increase. Cash on hand was $65 million at December 31, 2000 compared to $35 million at December 31, 1999. On January 18, 2000, we executed definitive agreements with respect to the Settlement. The agreements require net settlement payments totaling approximately $427 million, of which $14 million had been paid prior to January 1, 2000. This net amount reflected payments to us of approximately $59 million for Medicare receivables from the U.S. government. During the year 2000 after court approval of the Settlement, we made payments of $387 million, including initial cash payments of $286 million, and we received $54 million from the U.S. government for our outstanding Medicare receivable claims for intradialytic parenteral nutrition therapy rendered on or before December 31, 1999. We wrote off $94 million of these receivables at December 31, 1999 in anticipation of the final settlement. Under the definitive agreements with the U.S. government, we entered into a note payable for the remainder of the Settlement. Installment payments under the note will accrue interest at 6.3% on approximately $51 million of the obligation and at 7.5% annually on the balance, until paid in full. The note is payable in six quarterly installments which began in April 2000 and end in July 2001. The first four quarterly installments have been paid in the amount of approximately $35 million each, including interest at 7.5%. The first three of these four payments were made in April, July and October 2000 and the fourth installment was made in January 2001. The final two installments of approximately $28 million each, including interest at 6.3%, will be paid in April and July 2001. At December 31, 2000, the note payable balance was approximately $86 million. The U.S. government has agreed to remit the balance of our outstanding Medicare receivables in four quarterly payments of approximately $5 million each, plus interest at 7.5%. We received the first three quarterly payments in May, August and October 2000 and the final payment in February 2001. We amended the letter of credit that National Medical Care delivered to the U.S. government in 1996 from $150 million to $190 million and, under the agreement, the letter of credit will be reduced as we continue to make installment payments to the government. At December 31, 2000, the letter of credit was reduced to $89 million. In December 1999, we and the lenders under our senior credit facility amended the financial ratios in the senior credit facility to accommodate our obligations under the settlement agreements and to enable us to continue in compliance with our senior credit facility as we fulfill the settlement obligations. On September 21, 2000 the National Medical Care Credit Agreement was amended in order to increase the facility for accounts receivable securitization and some other credit facilities. The lenders also agreed that 54 62 the proceeds of the Preference share offerings during 2000 did not trigger repayment obligations on the term loan portion of the facility but may be used for capital expenditures and acquisitions. On March 2, 2000, we issued 8,974,359 non-voting Preference shares to a limited number of institutional and other accredited investors in exchange for the investors' interests in Franconia Acquisition LLC, an entity formed to acquire dialysis clinics and other related businesses. Franconia's principal asset at the time of this transaction was $350 million in cash. For financial reporting purposes, the transaction, which generated net proceeds of $344 million, has been accounted for as a financing at fair value. The investors have agreed not to effect sales or transfers of the Preference shares for a period of 24 months after issuance, except as permitted by the contribution agreement. After this time, the investors will have the right to require, under specified conditions, that we register the Preference shares for sale under the Securities Act, and provide them with assistance in connection with public offerings of their Preference shares outside the United States. On May 31, 2000, we paid a cash dividend of $51 million for 1999 in the amount of E0.75 on each Preference share, excluding the Preference shares issued on March 2, 2000, and E0.69 on each Ordinary share. In 1999 we paid dividends per Preference share of E0.64 and E0.59 per Ordinary share for an aggregate amount of $48 million. Under the terms of our senior credit agreement, we are restricted as to the level of dividends we may pay in any calendar year, which was $78 million for 2000. Annual dividend distributions by our subsidiary, National Medical Care, in any year, may not exceed 50% of its consolidated net income of the preceding year as defined in our senior credit agreement. These payment restrictions do not apply to any of our other subsidiaries. On June 19, 2000, we purchased substantially all of the international and non-continental U.S. operations business of Total Renal Care Holdings, Inc. for $145 million. Additionally, we made a non-refundable deposit, not included in the purchase price noted above, towards the purchase of the Puerto Rico operations. The purchase of the Puerto Rico operations is pending, subject to regulatory approval and third party consents. We are currently managing the Puerto Rico operations of Total Renal Care Holdings, Inc. On July 26, 2000, we completed a public offering of 5,000,000 non-voting Preference shares for net proceeds of approximately $185 million. In addition, on July 28, 2000, the underwriters of the public offering exercised options to purchase an additional 750,000 Preference shares increasing the total net proceeds from the public offering to approximately $213 million. On October 26, 2000, we increased our accounts receivable facility from $360 million to $500 million, and extended its maturity to October 25, 2001. Under the terms of the amended facility, the interest rate is based upon the commercial paper rate, which was approximately 6.59% at December 31, 2000. At December 31, 2000, we had received $445 million, and at December 31, 1999, $335 million, pursuant to sales of our receivables under the facility, which are reflected as reductions to accounts receivable. Under the terms of the facility, we sell new interests in accounts receivable as collections reduce previously sold accounts receivable. We expense the cost related to these sales as we incur them and record the costs as interest expense and related financing costs. On January 5, 2001, we acquired Everest for $341 million, including Everest's outstanding debt. One-third of the purchase price was paid through the issuance of 2,250,000 non-voting Preference shares on January 8, 2001. The remaining part of the acquisition was financed out of the proceeds of the Preference share offerings completed during 2000. Acquisitions during the year 2000 totaled $275 million (excluding International segment non-cash acquisitions of $14 million), $116 million in the North America segment and $159 million in the International segment. Acquisitions for the comparable period in 1999 were $101 million (excluding International segment non-cash acquisitions of $10 million), $65 million for the North America segment and $36 million for the International segment. We believe that we will derive an increasing percentage of our dialysis care growth from worldwide markets and we envision making acquisitions in selected international markets. In the United States, we generally intend to continue to enhance our presence in the 55 63 market by focusing our expansion on the acquisition of individual or small groups of clinics, expansion of existing clinics, and opening of new clinics. Nevertheless, we will consider larger acquisitions in the United States if suitable opportunities, such as Everest, become available to us. In addition, capital expenditures for property, plant and equipment were $228 million for the year 2000 and $160 million in 1999. In 2000, capital expenditures in the North America segment were $113 million and $115 million for the International segment. In 1999, capital expenditures in the North America segment were $81 million and $79 million in the International segment. The majority of our capital expenditures were used for improvements to existing clinics, equipment for new clinics and expansion of production facilities. Total long-term debt, net of current portion at December 31, 2000, increased to $658 million from $654 million at year-end 1999. We reduced our short-term borrowings from related parties from $330 million to $218 million at December 31, 2000. Short-term borrowings from third parties increased from $96 million in 1999 to $107 million in 2000. As of December 31, 2000, the unused portion of our senior credit facility was approximately $698 million. In January 2000, dollar interest rate swap agreements with a notional amount of $850 million expired as scheduled. In November 2000, we entered into additional dollar interest rate swap agreements with a notional amount of $450 million. At the same time, a dollar interest rate collar agreement with a notional amount of $150 million was closed out. As of December 31, 2000, the notional volume of dollar interest rate hedging contracts totaled $1,050 million. Those swap agreements, which expire at various dates between 2003 and 2007, effectively fix our variable interest rate exposure on the majority of our dollar-denominated revolving loans and outstanding obligations under the accounts receivable securitization program at an interest rate of 6.52%. Under our senior credit agreement, we have agreed to maintain at least $500 million of interest rate protection. In March 2000, we entered into a yen interest rate swap agreement with a notional amount of Japanese Yen 400 million, in line with a yen-denominated floating-rate borrowing of our Japanese subsidiary. In September 2000, both the bank borrowing and the notional amount of the interest rate swap agreement were increased as scheduled to Yen 1,000 million. The bank borrowing and the notional amount of the swap agreement will always coincide until March 2009 when the bank debt is completely repaid and the swap expires. We believe that our existing credit facilities, cash generated from operations and other current sources of financing are sufficient to meet our foreseeable needs, including our 2001 budget for acquisitions and capital expenditures summarized below in "Business -- Capital Expenditures." If cash flows from operations or availability under existing banking arrangements fall below expectations, we may have to consider other alternatives to maintain sufficient liquidity. We cannot assure that we will be able to do so on satisfactory terms, if at all. YEAR ENDED DECEMBER 31, 1999 COMPARED TO YEAR ENDED DECEMBER 31, 1998 We generated cash from operating activities of continuing operations of $355 million in 1999 and $268 million in the comparable period in 1998. Cash on hand was $35 million at December 31, 1999 compared to $32 million, at December 31, 1998. In December 1999, we and the lenders under our senior credit facility, amended certain covenants in the senior credit facility to accommodate our obligations under the settlement agreements with the U.S. government and to enable us to continue in compliance with the covenants upon consummation of the Settlement. We declared and paid dividends of E0.64 and E0.56 per Preference share in 1999 and 1998, respectively, and E0.59 and E0.51 per Ordinary share in 1999 and 1998, respectively. We paid aggregate dividends of $48 million and $45 million, including $1 million in arrearages for 1996, during the second quarter of 1999 and 1998, respectively. We made acquisitions of $101 million in 1999 (excluding International segment non-cash acquisitions of $10 million) and $223 million (excluding the North America segment non-cash acquisitions of 56 64 $42 million) in 1998. In 1999, $65 million of acquisitions were made in North America and $36 million of acquisitions (excluding the non-cash acquisitions) were made in the International segment. In 1998, $128 million of acquisitions (excluding non-cash acquisitions) were made in the North America segment and $94 million of acquisitions were made in the International segment. In addition, capital expenditures for property, plant and equipment were $160 million in 1999 and $159 million in 1998. In 1999, $81 million of capital expenditures was made in the North America segment and $79 million of capital expenditures were made in the International segment. In 1998, $75 million of capital expenditures was made in the North America segment and $84 million of capital expenditures was made in the International segment. Capital expenditures were used for automation of production processes and increased production capacity, internal expansion, improvements, furnishings and equipment. We believe that an increasing percentage of our dialysis care growth will be derived from worldwide markets and we envision making acquisitions in selected international markets. In the United States, we generally intend to continue to enhance our presence in the market by focusing our expansion on the acquisition of individual or small groups of clinics, expansion of existing clinics, and opening of new clinics. Nevertheless, we will consider larger acquisitions in the United States if suitable opportunities become available to us. On September 27, 1999, we increased our accounts receivable facility from $331 million to $360 million, and extended its maturity to September 25, 2000. Under the terms of the amended facility, the interest rate is based upon the commercial paper rate, which was approximately 5.90% at December 31, 1999. At December 31, 1999, we had received $335 million and at December 31, 1998, $305.6 million, pursuant to sales of our receivables under the facility, which are reflected as reductions to accounts receivable. Under the terms of the facility, we sell new interests in accounts receivable as collections reduce previously sold accounts receivable. We expense the costs related to these sales as we incur them and record the costs as interest expense and related financing costs. Managed care plans typically remit reimbursement more slowly than traditional indemnity plans. As a result of an increase in the percentage of net revenues we derive from managed care plans from 10% in 1998 to 12% in 1999 (an increase in net revenues of approximately $45 million), there was an increase in the days sales outstanding for third party payors. In addition, 1999 was the first full year of the extension of Medicare Secondary Payor regulations that increased the coverage period for commercial payors from 18 to 30 months, thereby increasing the average balance of receivables as commercial payors generally pay at a higher rate than government payment programs. The increase in days outstanding and the increase in the average receivable amount resulted in a corresponding increase in our allowance for doubtful accounts as it is calculated based on a percentage of gross accounts receivable. Any negative impact to liquidity related to the increase in days sales outstanding is mitigated by the increase in revenues and the higher reimbursement generally received from third party payors. Total long-term debt, net of current portion at December 31, 1999, decreased to $654 million from $1,081 million at year-end 1998, primarily as a result of an increase in short-term borrowings from related parties. Short-term borrowings from related parties increased to $330 million at December 31, 1999 from $60 million at December 31, 1998, with interest rates from 7.06% to 7.44% and maturities in less than 90 days. Other short-term borrowings decreased by approximately $13 million from year-end 1998 to $96 million at year-end 1999. Funds generated from operations were used to fund capital expenditures and acquisitions as well as dividends. The remainder was used to reduce long-term debt. If cash flows from operations or availability under existing banking arrangements fall below expectations, or if we are unsuccessful in amending our existing banking agreements, we may be required to consider other alternatives to maintain sufficient liquidity. RECENTLY ISSUED ACCOUNTING STANDARDS The Financial Accounting Standards Board issued SFAS No. 133 which establishes accounting and reporting standards for financial derivative instruments, including certain derivative instruments embedded in other contracts and for hedging activities. SFAS No. 133 requires that an entity recognize all derivatives 57 65 as either assets or liabilities in the balance sheet and measure those instruments at fair value. The statement also provides the criteria for determining whether a derivative may be specifically designated as a hedge of a particular exposure with the intent of measuring the effectiveness of that hedge in the statement of operations. In June 2000, the Financial Accounting Standards Board issued SFAS No. 138, which amended certain provisions of SFAS 133, including amendments allowing foreign-currency denominated assets and liabilities to qualify for hedge accounting, permitting the offsetting of certain inter-entity foreign currency exposures that reduce the need for third party derivatives and redefining the nature of interest rate risk to avoid sources of ineffectiveness. We are adopting SFAS 133, and the corresponding amendments under SFAS 138 effective as of January 1, 2001. After adoption, we will recognize gains and losses in fair value of recognized assets and liabilities and firm commitments of operating transactions as well as gains and losses on derivative financial instruments designated as fair value hedges of these recognized assets and liabilities and firm commitments currently in earnings. After adoption, we will report changes in the value of foreign currency forward contracts designated and qualifying as cash flow hedges of forecasted transactions in accumulated other comprehensive income. We will subsequently reclassify these amounts into earnings, as a component of the forecasted transaction, in the same period as the forecasted transaction affects earnings. The adoption of SFAS 133, as amended by SFAS 138, results in the recording of assets related to forward currency contracts of approximately $13 million. The offset to this transition adjustment will be recorded to other comprehensive income at an amount of $1 million and to net income at an amount of $12 million. Because of corresponding entries concerning the hedged items, the net effect on earnings will be immaterial. Additionally, we will record a liability for interest rate swaps of approximately $25 million. The offset will be recorded to other comprehensive income. In December 1999, the SEC issued SAB 101. SAB 101 provides the SEC staff's views in applying generally accepted accounting principles to selected revenue recognition issues, as well as examples of how the SEC staff applies revenue recognition guidance to specific circumstances. In June 2000, SAB 101B was issued by the SEC further delaying the implementation date for SAB 101 until the fourth quarter of the fiscal year beginning after December 15, 1999. The impact of the adoption of SAB 101 is not significant. In May 2000, the Emerging Issues Task Force issued EITF 00-014, Accounting for Certain Sales Incentives, which establishes accounting for point of sales coupons, rebates, and free merchandise. This EITF requires that an entity report these sales incentives that reduce the price paid to be netted directly against revenues. EITF 00-014 is effective no later than the fourth quarter of the fiscal year beginning after December 15, 1999. The impact of the adoption of EITF-00-14 is not significant. In March 2000, the Financial Accounting Standards Board issued Financial Accounting Standards Board Interpretation No. 44, an interpretation of APB Opinion 25. The effects of applying this interpretation are required to be recognized on a prospective basis from July 1, 2000. The application of this interpretation did not have a material effect on our financial position or results of operations. In September 2000, the Financial Accounting Standards Board issued SFAS No. 140, Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities, which replaces SFAS No. 125. SFAS No. 140 provides the accounting and reporting standards for securitizations and other transfers of financial assets and collateral. These standards are based on consistent application of a financial-components approach that focuses on control. This Statement also provides consistent standards for distinguishing transfers of financial assets that are sales from transfers that are secured borrowings. SFAS No. 140 is effective for transfers after March 31, 2001 and is effective for disclosures about securitizations and collateral for fiscal years ending after December 15, 2000. There is no impact for the adoption of SFAS No. 140. In July 2001, the Financial Accounting Standards Board issued SFAS No. 141, Business Combinations, and SFAS No. 142, Goodwill and Other Intangible Assets. SFAS 141 requires that the 58 66 purchase method of accounting be used for all business combinations initiated after June 30, 2001 as well as all purchase method business combinations completed after June 30, 2001. SFAS 141 also specifies criteria intangible assets acquired in a purchase method business combination must meet to be recognized and reported apart from goodwill, noting that any purchase price allocable to an assembled workforce may not be accounted for separately. SFAS 142 will require that goodwill and intangible assets with indefinite useful lives no longer be amortized, but instead tested for impairment at least annually in accordance with the provisions of SFAS 142. SFAS 142 will also require that intangible assets with definite useful lives be amortized over their respective estimated useful lives to their estimated residual values, and reviewed for impairment in accordance with SFAS No. 121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of. We are required to adopt the provisions of SFAS 141 immediately, and SFAS 142 effective January 1, 2002. Furthermore, any goodwill and any intangible asset determined to have an indefinite useful life that are acquired in a purchase business combination completed after June 30, 2001 will not be amortized, but will continue to be evaluated for impairment in accordance with the appropriate pre-SFAS 142 accounting literature. Goodwill and intangible assets acquired in business combinations completed before July 1, 2001 will continue to be amortized prior to the adoption of SFAS 142. SFAS 141 will require upon adoption of SFAS 142, that we evaluate existing intangible assets and goodwill that were acquired in prior purchase business combinations, and to make any necessary reclassifications in order to conform with the new criteria in SFAS 141 for recognition apart from goodwill. Upon adoption of SFAS 142, we will be required to reassess the useful lives and residual values of all intangible assets acquired in purchase business combinations, and make any necessary amortization period adjustments by the end of the first interim period after adoption. In addition, to the extent an intangible asset is identified as having an indefinite useful life, we will be required to test the intangible asset for impairment in accordance with the provisions of SFAS 142 within the first interim period. Any impairment loss will be measured as of the date of adoption and recognized as the cumulative effect of a change in accounting principle in the first interim period. In connection with the transitional goodwill impairment evaluation, SFAS 142 will require that we perform an assessment of whether there is an indication that goodwill (and equity-method goodwill) is impaired as of the date of adoption. To accomplish this we must identify our reporting units and determine the carrying value of each reporting unit by assigning the assets and liabilities, including the existing goodwill and intangible assets, to those reporting units as of the date of adoption. We will then have up to six months from the date of adoption to determine the fair value of each reporting unit and compare it to the reporting unit's carrying amount. To the extent a reporting unit's carrying amount exceeds its fair value, an indication exists that the reporting unit's goodwill may be impaired and we must perform the second step of the transitional impairment test. In the second step, we must compare the implied fair value of the reporting unit's goodwill, determined by allocating the reporting unit's fair value to all of its assets (recognized and unrecognized) and liabilities in a manner similar to a purchase price allocation in accordance with SFAS 141, to its carrying amount, both of which would be measured as of the date of adoption. This second step is required to be completed as soon as possible, but no later than the end of the year of adoption. Any transitional impairment loss will be recognized as the cumulative effect of a change in accounting principle in our statement of operations. Because of the extensive effort needed to comply with adopting SFAS 141 and 142, it is currently not practicable to reasonably estimate the impact of adopting these statements on our financial statements at this time, including whether any transitional impairment losses will be required to be recognized as the cumulative effect of a change in accounting principle. EURO CONVERSION Germany, our country of domicile, is one of the eleven members of the European Union who have adopted the euro as their currency. We have changed our functional currency to euro effective January 1, 1999, but will continue using the U.S. dollar as our reporting currency. In addition, at our general meeting 59 67 on June 2, 1999, our shareholders approved the currency conversion of our share capital to euro from Deutsche Mark. All internal reporting entities situated in the eleven member states are submitting their reports in euro. The euro conversion may affect cross-border competition by creating cross-border price transparency. In our business, however, patients may not have the luxury to "shop" cross-border due to the nature of their illness, the type of reimbursement program they are enrolled in and the fact that they maintain a medical relationship with their supplier, doctor or clinic. CONTINGENCIES We are a plaintiff in litigation against the U.S. federal government with respect to the implementation of the Omnibus Budget Reconciliation Act of 1993. We are also a defendant in significant commercial insurance litigation relating to the same alleged practices that were the subject of the recently settled government investigations. An adverse outcome in any of these matters could have a material adverse effect on our business, financial condition and results of operations. Because of the significant complexities and uncertainties associated with these proceedings, we cannot provide either an estimate of the possible loss or range of loss we may incur in respect of such matters, and a reserve based on any such estimate cannot be reasonably made. INFLATION The effects of inflation during the periods covered by the consolidated financial statements have not been significant to our results of operations. However, most of our net revenues from dialysis care are subject to reimbursement rates regulated by governmental authorities, and a significant portion of other revenues, especially revenues from the United States, is received from customers whose revenues are subject to these regulated reimbursement rates. Non-governmental payors are also exerting downward pressure on reimbursement rates. Increased operation costs that are subject to inflation, such as labor and supply costs, may not be recoverable through price increases in the absence of a compensating increase in reimbursement rates payable to us and our customers, and could materially adversely affect our business, financial condition and results of operations. Amgen Inc. has announced a 3.9% increase in its wholesaler acquisition price for EPO effective May 9, 2001. Our purchase contract with Amgen contains pricing protection such that our purchase price for EPO will be unaffected by the price increase through December 31, 2001. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK MANAGEMENT OF CURRENCY AND INTEREST RATE RISKS We are primarily exposed to market risk from changes in foreign currency exchange rates and changes in interest rates. In order to manage the risks from these foreign currency exchange rate and interest rate fluctuations, we enter into various hedging transactions with investment grade financial institutions as authorized by the management board. We do not contract for financial instruments for trading or other speculative purposes. We conduct our financial instrument activity under the control of a single centralized department. We have established guidelines for risk assessment procedures and controls for the use of financial instruments. They include a clear segregation of duties with regard to execution on one side and administration, accounting and controlling on the other. INTEREST RATE RISKS At March 31, 2001 and December 31, 2000, we had in place interest rate swap agreements for a notional amount of $1,050 million which we believe to be adequate to cover our interest rate exposure into the immediate future. The table below provides information about our foreign exchange forward contracts at December 31, 2000. The information is provided in U.S. dollar equivalent amounts. The table presents the notional 60 68 amounts, the weighted average contractual foreign currency exchange rates, and the fair values of the contracts, which show the unrealized net gain (loss) on existing contracts as of December 31, 2000. All contracts expire within 36 months after the reporting date.
FOREIGN CURRENCY RISK AT DECEMBER 31, 2000 ($ IN THOUSANDS, EXCEPT AVERAGE CONTRACT RATES) ------------------------------------------------------ FAIR VALUE AT DECEMBER 31, 2001 2002 2003 TOTAL 2000 -------- ------- ------- ------- ------------- FOREIGN CURRENCY FORWARDS Purchases of currencies against U.S. dollar Euro Notional amount.................................... 51,509 321,273 116,856 489,638 22,172 Average contract rate.............................. 0.8820 0.9172 Singapore Dollar Notional amount.................................... 800 800 2 Average contract rate.............................. 1.7235 -------- ------- ------- ------- ------ Total.................................................. 52,309 321,273 116,856 490,438 22,174 -------- ------- ------- ------- ------ Sales of currencies against U.S. dollar Canadian Dollar Notional amount.................................... 4,000 4,000 77 Average contract rate.............................. 1.4699 Euro Notional amount.................................... 2,591 2,501 (2) Average contract rate.............................. 0.9300 Singapore Dollar Notional amount.................................... 335 335 (1) Average contract rate.............................. 1.7255 -------- ------- ------- ------- ------ Total.................................................. 6,836 0 0 6,836 74 -------- ------- ------- ------- ------ Other sales of currencies against Euro British Pound Notional amount.................................... 19,942 3,955 23,897 1,261 Average contract rate.............................. 0.5942 0.5960 Japanese Yen Notional amount.................................... 11,163 4,634 15,797 1,633 Average contract rate.............................. 92.9869 95.110 Swiss Franc Notional amount.................................... 8,230 675 8,905 44 Average contract rate.............................. 1.5057 1.4910 Australian Dollar Notional amount.................................... 7,763 7,763 160 Average contract rate.............................. 1.6459 New Zealand Dollar Notional amount.................................... 2,947 2,947 (12) Average contract rate.............................. 2.1246 Singapore Dollar Notional amount.................................... 1,696 1.696 63 Average contract rate.............................. 1.5516 -------- ------- ------- ------- ------ Total.................................................. 51,741 9,264 0 61,005 3,149 -------- ------- ------- ------- ------
61 69
FOREIGN CURRENCY RISK AT DECEMBER 31, 2000 ($ IN THOUSANDS, EXCEPT AVERAGE CONTRACT RATES) ------------------------------------------------------ FAIR VALUE AT DECEMBER 31, 2001 2002 2003 TOTAL 2000 -------- ------- ------- ------- ------------- Other purchases of currencies against Euro Swiss Franc Notional amount.................................... 6,756 6,756 (87) Average contract rate.............................. 1.5014 Japanese Yen Notional amount.................................... 4,607 4,607 (38) Average contract rate.............................. 106.0397 Australian Dollar Notional amount.................................... 612 612 (3) Average contract rate.............................. 1.6714 -------- ------- ------- ------- ------ Total.................................................. 11,975 0 0 11,975 (128) -------- ------- ------- ------- ------
A summary of the high and low exchange rates for the Deutsche Mark to U.S. dollars and the average exchange rates for the last five years is set forth below. As the Deutsche Mark was replaced by the euro in the foreign exchange markets since the beginning of 1999, the table includes the respective rates for the euro/dollar quotations which were applied to calculate the respective 1999 Deutsche Mark/ U.S. dollar values, using a fixed conversion rate of DM 1.95583 = E1.
YEAR'S YEAR'S YEAR'S YEAR'S YEAR ENDING DECEMBER 31, HIGH LOW AVERAGE CLOSE - ------------------------ ------ ------ ------- ------ 1996...................................... 0.6979 0.6395 0.6650 0.6432 ($ per DM) 1997...................................... 0.6468 0.5299 0.5764 0.5580 ($ per DM) 1998...................................... 0.6256 0.5395 0.5685 0.5977 ($ per DM) 1999...................................... 0.6028 0.5121 0.5449 0.5136 ($ per DM) 1999...................................... 1.1790 1.0015 1.0658 1.0046 ($ per E) 2000...................................... 0.5311 0.4219 0.4722 0.4758 ($ per DM) 2000...................................... 1.0388 0.8252 0.9236 0.9305 ($ per E)
For additional information, see, Note 1(g) to the Notes to our consolidated financial statements -- "Summary of Significant Accounting Policies -- Derivative Financial Instruments," and Note 19 to our consolidated financial statements "-- Financial Instruments." INTEREST RATE EXPOSURE We are exposed to changes in interest rates that affect our variable-rate based borrowings. We enter into debt obligations and into accounts receivable financings to support our general corporate purposes including capital expenditures and working capital needs. Our subsidiary, National Medical Care, has entered into U.S. dollar interest rate swap agreements with various commercial banks for notional amounts totaling $1,050 million as of March 31, 2001 and as of December 31, 2000. National Medical Care entered into all of these agreements for purposes other than trading. The U.S. dollar interest rate swaps effectively change National Medical Care's interest rate exposure on the majority of its variable-rate loans under our senior credit agreement ($733 million outstanding as of December 31, 2000), loans extended to us by Fresenius AG ($209 million outstanding as of December 31, 2000), and the drawdowns under our receivables financing facility (drawn as of December 31, 2000, $445 million) to an average fixed interest rate of 6.52%. Our accounts receivable financing facility has been reflected in our consolidated financial statements as a reduction to accounts receivable. 62 70 The U.S. dollar interest rate swap agreements expire at various dates between November 29, 2003 and November 29, 2007. At December 31, 2000, the fair value of these agreements is $(24.62) million. The table below presents principal amounts and related weighted average interest rates by year of maturity for the various U.S. dollar interest rate swap agreements and for our significant fixed-rate long-term debt obligations. U.S. DOLLAR INTEREST RATE EXPOSURE DECEMBER 31, 2000 (U.S. DOLLARS IN MILLIONS)
FAIR VALUE DEC. 31, 2001 2002 2003 2004 2005 THEREAFTER TOTALS 2000 ---- ---- ---- ---- ---- ---------- ------ -------- PRINCIPAL PAYMENTS ON SENIOR CREDIT AGREEMENT... 150 150 433 0 0 0 733 733 Variable interest rate = 7.63% INTEREST RATE SWAP AGREEMENTS Notional amount............................... 600 250 200 1,050 Average fixed pay rate = 6.52%................ 6.58% 6.32% 6.61% (25) Receive rate = 3-month $LIBOR COMPANY OBLIGATED MANDATORILY REDEEMABLE PREFERRED SECURITIES OF SUBSIDIARIES FRESENIUS MEDICAL CARE CAPITAL TRUSTS Fixed interest = 9.%.......................... 360 360 346 Fixed interest = 7.875%....................... 450 450 410 Fixed interest rate = 7.375% (denominated in DM)......................................... 143 143 143
Our subsidiary FMC Japan has entered into a Yen interest rate swap agreement with a commercial bank for a notional amount of JPY 1,000 million as of December 31, 2000. This swap changes FMC Japan's interest rate exposure on its variable-rate bank loan (JPY 1,000 million outstanding as of December 31, 2000) to a fixed interest rate of 3.10%. The Yen interest rate swap agreement expires on March 13, 2009. At December 31, 2000, the fair value of this agreement is $(0.53) million. The terms of the Yen interest rate swap agreement, especially the notional amounts outstanding at any specific point of time, match the terms of the bank loan which has been borrowed from the same bank that is counterparty in the swap agreement. The bank borrowing and the notional amount of the swap agreement will always coincide until March 2009 when the bank debt is completely repaid and the swap expires. 63 71 SELECTED HISTORICAL FINANCIAL DATA OF FMCH The following table summarizes the consolidated financial information for FMCH's business as of and for the nine months ended September 30, 1996, the three month period ended December 31, 1996, the years 1997 through 2000 and as of and for the three-month periods ending March 31, 2001 and March 31, 2000. For each of the years, FMCH derived the selected financial information from its audited consolidated financial statements. You should read this information together with the consolidated financial statements of FMCH and the section entitled "Management's Discussion and Analysis of Financial Condition and Results of Operations -- FMCH." For each of the years 1996 through 2000, FMCH prepared its financial statements in accordance with US GAAP and KPMG LLP, independent accountants, audited the financial statements for each of the years in the five year period ended December 31, 2000. FMCH derived the selected consolidated financial data as of and for the three months ended March 31, 2001 and 2000 from its unaudited interim consolidated financial statements. FMCH's unaudited condensed consolidated financial statements have been prepared on a basis substantially consistent with its audited consolidated financial statements. In 1999, FMCH recorded a special charge of $601 million ($419 million net of tax) related to the Settlement. In 1998, FMCH discontinued its homecare and non-renal business, and restated fiscal years 1996 and 1997 to show the effects of the discontinuance of these businesses.
SUCCESSOR PREDECESSOR THREE MONTHS THREE MONTHS NINE MONTHS ENDED SUCCESSOR ENDED ENDED MARCH 31, YEAR ENDED DECEMBER 31, DECEMBER 31, SEPTEMBER 30, ----------------- ---------------------------------- ------------ ------------- 2001 2000 2000 1999 1998 1997 1996 1996 ------- ------- ------ ------ ------ ------ ------------ ------------- (UNAUDITED) (AUDITED) (AUDITED) (U.S. DOLLARS IN MILLIONS, EXCEPT SHARE AND PER SHARE DATA) STATEMENT OF OPERATIONS DATA Continuing Operations Net sales............................... $ 805 $ 745 $3,089 $2,815 $2,571 $2,166 $ 505 $1,615 Cost of Sales........................... 561 507 2,109 1,880 1,707 1,456 340 969 ------- ------- ------ ------ ------ ------ ------- ------ Gross Profit............................ 244 238 980 935 864 710 165 646 Selling, general and administrative and research and development.............. 149 140 560 540 529 452 106 501 Special charge for settlement of investigation and related costs(a).... -- 601 -- -- -- -- ------- ------- ------ ------ ------ ------ ------- ------ Operating income (loss)................. 95 98 420 (206) 335 258 59 145 Interest expense (net)................ 51 53 187 202 209 178 43 16 Interest expense on settlement of investigation (net)................. -- -- 30 -- -- -- -- -- ------- ------- ------ ------ ------ ------ ------- ------ Income (loss) from continuing operations before income taxes and cumulative effect of changes in accounting for start up costs........................ 44 45 203 (408) 126 80 16 129 Income tax (benefit) expense............ 21 22 98 (81) 74 46 11 66 ------- ------- ------ ------ ------ ------ ------- ------ Income (loss) from continuing operations before cumulative effect of change in accounting for start up costs......... $ 23 $ 23 $ 105 $ (327) $ 52 $ 34 $ 5 $ 63 ------- ------- ------ ------ ------ ------ ------- ------ Discontinued Operations Loss from discontinued operations, net of income taxes....................... -- -- -- -- (9) (14) (2) -- Loss on disposal of discontinued operations, net of income tax benefit............................... -- -- -- -- (97) -- -- -- ------- ------- ------ ------ ------ ------ ------- ------ Loss from discontinued operations....... -- -- -- -- (106) (14) (2) -- ------- ------- ------ ------ ------ ------ ------- ------ Cumulative effect of change in accounting for start up costs, net of tax benefit................................. -- -- -- -- (5) -- -- -- ------- ------- ------ ------ ------ ------ ------- ------ Net income (loss)....................... $ 23 $ 23 $ 105 $ (327) $ (59) $ 20 $ 3 $ 63 ======= ======= ====== ====== ====== ====== ======= ====== Net Income (loss) Per Common and Common Equivalent Share: Continuing Operations................... $ 0.26 $ 0.26 $ 1.16 $(3.64) $ 0.57 $ 0.37 $ 0.06 $ 0.66 Discontinued Operations................. -- -- -- -- (1.18) (0.15) (0.02) -- Cumulative effect of accounting change................................ -- -- -- -- (0.05) -- -- -- Net Income.............................. 0.26 0.26 1.16 (3.64) (0.66) 0.22 0.04 0.66
64 72
SUCCESSOR PREDECESSOR THREE MONTHS THREE MONTHS NINE MONTHS ENDED SUCCESSOR ENDED ENDED MARCH 31, YEAR ENDED DECEMBER 31, DECEMBER 31, SEPTEMBER 30, ----------------- ---------------------------------- ------------ ------------- 2001 2000 2000 1999 1998 1997 1996 1996 ------- ------- ------ ------ ------ ------ ------------ ------------- (UNAUDITED) (AUDITED) (AUDITED) (U.S. DOLLARS IN MILLIONS, EXCEPT SHARE AND PER SHARE DATA) Weighted average number of shares of Common stock and common stock equivalents: Primary (000's)......................... 90,000 90,000 90,000 90,000 90,000 90,000 90,000 95,188 OTHER DATA: EBITDA(b)............................... $ 152 $ 153 $ 643 $ 613(a) $ 551 $ 457 $ 108 $ 238 Net cash provided by operating (used in) activities............................ 49 61 263 249 200 108 (25) 148 Net cash used in investing activities... (41) (56) (220) (147) (171) (630) (38) (182) Net cash provided by financial activities............................ (8) (2) (23) (96) (37) (533) (115) 217 Depreciation and amortization........... 56 55 223 218 216 200 49 93 Capital expenditures.................... 35 20 104 81 75 134 34 93 Rental expenses (operating leases only)................................. 46 37 157 132 104 82 20 67 Ratio of fixed charges to earnings(c)... 0.6x 0.6x 0.6x -- 0.7x 0.7x 0.8x 0.2x BALANCE SHEET DATA: Cash and cash equivalents............... $ 33 $ 16 $ 33 $ 13 $ 6 $ 13 $ 22 $ 220 Working capital......................... (56) (484) (154) (456) 294 394 282 506 Total assets............................ 4,604 4,169 4,553 4,645 4,613 4,771 4,370 4,051 Total long term debt and capital lease obligations........................... 632 593 589 616 1,014 1,622 1,438 2,290 Mandatorily redeemable preferred securities............................ 301 -- 305 -- -- -- -- -- Total Liabilities....................... 2,582 2,974 2,522 3,023 2,664 2,785 2,828 2,855 Stockholders' equity.................... 1,721 1,645 1,726 1,622 1,949 1,987 1,764 1,196
- --------------- (a) On January 18, 2000, FMCH, NMC and certain other affiliated companies executed definitive agreements with the U.S. government to effect the Settlement. Under the Settlement, FMCH made initial cash payments of approximately $286 million and entered into a note payable for the remainder of the payment obligations. You can find a more detailed discussion of the final terms of the Settlement in "Management's Discussion and Analysis of Financial Condition and Results of Operations -- Fresenius Medical Care AG" and in Note 2 of the notes to Fresenius Medical Care's consolidated financial statements. (b) As used above, EBITDA means earnings before interest, income taxes, depreciation and amortization, and, for 1999, the special charge for the Settlement. EBITDA for the nine months ended September 30, 1996 excludes allocations of expenses by W.R. Grace-Conn. to its healthcare business and the reduction of carrying amounts of assets to estimated fair values, and also excludes writedowns to foreign operations, additional provisions for doubtful accounts, and additional provisions for restructuring charges of approximately $43 million. We are not presenting EBITDA here as a measure of FMCH's operating results. Our management believes that presentation of EBITDA is helpful to investors as a measure of FMCH's ability to generate cash and to service debt. Management also believes that presentation of EBITDA is helpful to investors because EBITDA is used to determine compliance with some of the covenants in our senior credit agreement and the indentures relating to both our outstanding trust preferred securities and the trust preferred securities we are currently offering. However, you should not construe EBITDA as an alternative to net earnings determined in accordance with US GAAP or to cash flow from operations, investing activities or financing activities or as a measure of cash flows. (c) In calculating the ratio of fixed charges to earnings, earnings consist of income before taxes plus fixed charges. Fixed charges consist of interest expense and amortization of deferred financing fees, plus one-third of rental expense under operating leases, the portion which FMCH considers to be representative of an interest factor. Earnings were deficient in covering fixed charges by $408 million in 1999. 65 73 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS -- FMCH OVERVIEW FMCH is a subsidiary of Fresenius Medical Care AG and the holding company for its North American operations. FMCH is primarily engaged in (a) providing kidney dialysis services, clinical laboratory testing and renal diagnostic services and (b) manufacturing and distributing products and equipment for dialysis treatment. Throughout FMCH's history, a significant portion of its growth has resulted from the development of new dialysis centers and the acquisition of existing dialysis centers, as well as from the acquisition and development of complementary businesses in the health care field. FMCH derives a significant portion of its net revenues from Medicare, Medicaid and other government health care programs (approximately 55% in 2000). The reimbursement rates under these programs, including the Composite Rate, the reimbursement rate for EPO, and the reimbursement rate for other dialysis and non-dialysis related services and products, as well as other material aspects of these programs, have in the past and may in the future be changed as a result of deficit reduction and health care reform measures. FMCH also derives a significant portion of its net revenues from reimbursement by non-government payors. Historically, reimbursement rates paid by these payors generally have been higher than Medicare and other government program rates. However, non-government payors are imposing cost containment measures that are creating significant downward pressure on reimbursement levels that FMCH receives for its services and products. SPECIAL CHARGE FOR THE SETTLEMENT AND RELATED COSTS On January 18, 2000, FMCH, NMC and certain affiliated companies executed definitive agreements with the United States government to settle (1) matters concerning violations of federal laws and (2) NMC's claims with respect to outstanding Medicare receivables for nutrition therapy. Under the settlement with the U.S. government, FMCH entered into a note payable for the settlement payment obligations to the U.S. government. Interest on installment payments to the U.S. government will accrue at 6.3% on $51.2 million of the obligation and at 7.5% annually on the balance, until paid in full. In February 2000, FMCH made initial payments to the government totaling $286.4 million. The remaining obligation is payable in six quarterly installments which began in April 2000 and will end in July 2001. The first four quarterly installments were in the amount of $35.4 million including interest at 7.5%. The first three of these four payments were made in April, July, and October 2000 to the U.S. government totaling $106.2 million including interest. The fourth installment was made in January 2001. Of the two installments of $27.8 million including interest at 6.3% the first payment was made in April and the next, and last, will be made in July 2001. In addition, FMCH received approximately $59.2 million from the U.S. government related to FMCH's claims for outstanding Medicare receivables. FMCH received $54 million in 2000 and a final payment of $5.2 million in February 2001. 66 74 RESULTS OF OPERATIONS The following table summarizes certain operating results of FMCH by principal business unit for the periods indicated. Intercompany eliminations primarily reflect sales of medical supplies by Dialysis products to Dialysis services.
THREE MONTHS ENDED MARCH 31, YEAR ENDED DECEMBER 31, ---------------- -------------------------- 2001 2000 2000 1999 1998 ------ ------ ------ ------ ------ (U.S. DOLLARS IN MILLIONS) Net revenues Dialysis services............................. $ 692 $ 630 $2,625 $2,339 $2,116 Dialysis products............................. 179 175 717 707 662 Intercompany eliminations..................... (66) (60) (253) (231) (207) ----- ----- ------ ------ ------ Net revenues.................................. $ 805 $ 745 $3,089 $2,815 $2,571 ===== ===== ====== ====== ====== Operating earnings: Dialysis services............................. $ 99 $ 99 $ 403 $ 386 $ 344 Dialysis products............................. 30 26 118 126 103 ----- ----- ------ ------ ------ Total operating earnings........................ 129 125 521 512 447 ----- ----- ------ ------ ------ Other expenses: General corporate............................. $ 33 $ 26 $ 97 $ 113 $ 108 Research and development...................... 1 1 4 4 4 Interest expense, net......................... 51 47 187 202 209 Interest expense on the Settlement, net....... (a) 6 30 -- -- Special charge for the Settlement............. -- -- -- 601 -- ----- ----- ------ ------ ------ Total other expenses............................ 85 80 318 920 321 ----- ----- ------ ------ ------ Income (loss) before income taxes and cumulative effect on change in accounting for start up costs......................... 44 45 203 (408) 126 ----- ----- ------ ------ ------ Provisions for income taxes 21 22 98 (81) 74 ----- ----- ------ ------ ------ Income (loss) from continuing operations before cumulative effect of change in accounting for start up costs.............. $ 23 $ 23 $ 105 $ (327) $ 52 ----- ----- ------ ------ ------ Discounted operations: Net revenues.................................. $ -- $ -- $ -- $ -- $ 121 ===== ===== ====== ====== ====== Loss before income taxes...................... -- -- -- -- (14) Benefit for income taxes...................... -- -- -- -- (5) ----- ----- ------ ------ ------ Loss from operations.......................... -- -- -- -- (9) ----- ----- ------ ------ ------ Loss on disposal before income taxes.......... -- -- -- -- (140) ----- ----- ------ ------ ------ Income tax benefit............................ -- -- -- -- (43) ----- ----- ------ ------ ------ Loss on disposal.............................. -- -- -- -- (97) ----- ----- ------ ------ ------ Loss on discounted operations................... $ -- $ -- $ -- $ -- $ (106) ===== ===== ====== ====== ====== Cumulative effect of change in accounting for start up costs, net of tax benefits........ -- -- -- -- (5) ----- ----- ------ ------ ------ Net income/(loss)............................. $ 23 $ 23 $ 105 $ (327) $ (59) ===== ===== ====== ====== ======
- --------------- (a) In 2001, FMCH discontinued separate reporting of Settlement interest because we will make the final payment on the Settlement note in July 2001. 67 75 THREE MONTHS ENDED MARCH 31, 2001 COMPARED TO THREE MONTHS ENDED MARCH 31, 2000 Net revenues for the first three months of 2001 increased by 8% ($60 million) over the comparable period in 2000. Net earnings for the first three months of 2001 remained unchanged over the comparable period in 2000 as a result of increased operating earnings and decreased interest expense offset by increased general corporate expenses. DIALYSIS SERVICES Dialysis Services net revenues for the first three months of 2001 increased by 10% ($62 million) over the comparable period in 2000, primarily as a result of an 8% increase in the number of treatments provided, the impact of increased Medicare reimbursement rates, and increased laboratory testing revenues due to patient volume. The treatment increase was a result of base business growth and the impact of acquisitions in 2000. The laboratory testing revenues increased as a result of higher patient volume. Dialysis Services operating earnings for the first three months of 2001 remained unchanged over the comparable period of 2000 as the revenue increases were entirely offset by increased operating expenses primarily related to higher personnel costs, increases in the provision for doubtful accounts, and increases to other operating expenses. DIALYSIS PRODUCTS Dialysis Products net revenues for the first three months of 2001 increased by 2% ($4 million) over the comparable period of 2000. This is primarily due to increased sales of dialyzers and other hemo disposable products, partially offset by decreased sales of machines and peritoneal products. Dialysis Products operating earnings for the first three months of 2001 increased by 15% ($4 million) over the comparable period of 2000. This is a result of an improvement in gross margin and decreased freight and distribution expenses. OTHER EXPENSES FMCH's other expenses for the first three months of 2001 increased by 6% ($5 million) over the comparable period of 2000. General corporate expenses increased by $7 million due to a charge of approximately $9 million to fair value foreign exchange contracts, partially offset by reduced corporate spending. Interest expense was favorable by $2 million primarily due to the change in the mix of debt instruments during the first quarter 2001 versus the first quarter 2000. INCOME TAX RATE The effective tax rate from operations for the first three months of 2001 (47.9%) is lower than the rate for the comparable period of 2000 (48.7%), due to expected higher earnings in relation to the amount of non-deductible merger goodwill. IMPACT OF INFLATION A substantial portion of FMCH's net revenue is subject to reimbursement rates which are regulated by the U.S. federal government and do not automatically adjust for inflation. Non-governmental payors also are exerting downward pressure on reimbursement levels. Increased operating costs that are subject to inflation, such as labor and supply costs, without a compensating increase in reimbursement rates, may adversely affect the FMCH's business and results of operations. Amgen Inc. has announced a 3.9% increase in its wholesaler acquisition price for Epogen effective May 9, 2001. FMCH's purchase contract with Amgen contains pricing protection such that its purchase price for EPO will be unaffected by such increase through December 31, 2001. 68 76 QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK FMCH is exposed to market risks due to changes in interest rates and foreign currency rates. FMCH uses derivative financial instruments, including interest rate swaps and foreign exchange contracts, as part of its market risk management strategy. These instruments are used as a means of hedging exposure to interest rate and foreign currency fluctuations in connection with debt obligations and purchase commitments. Periodically, FMCH enters into derivative instruments with related parties to form a natural hedge from currency exposures on intercompany obligations. These instruments are reflected in FMCH's balance sheet at fair value with changes in fair value recognized in earnings. Hedge accounting is applied if the derivative reduces the risk of the underlying hedged item and is designated at inception as a hedge. Additionally, changes in the value of the derivative must result in payoffs that are highly correlated to the changes in value of the hedged item. Derivatives are measured for effectiveness both at inception and on an ongoing basis. FMCH enters into foreign exchange contracts that are designated as, and effective as, hedges for the Euro denominated mandatorily redeemable preferred stock and for forecasted purchases of raw materials. Also, since FMCH carries a substantial amount of floating rate debt, FMCH uses interest rate swaps to synthetically change certain variable-rate debt obligations to fixed-rate obligations, as well as options to mitigate the impact of interest rate fluctuations. FMCH defers gains and losses on foreign exchange contracts accounted for as cash flow hedges in comprehensive income. FMCH recognizes deferred gains and losses as adjustments to cost of sales when it recognizes the future sales. FMCH records interest rate swap payments and receipts as part of interest expense. FMCH reclasses gains and losses from interest rate swaps are deferred in other comprehensive income into interest expense over the period during which it recognizes the hedged variable interest rate payments. FMCH recognizes cash flows from derivatives in the consolidated statement of cash flows in the same category as the item being hedged. At March 31, 2001, the fair value of FMCH's interest rate agreements, which consisted entirely of interest rate swaps, is approximately ($47 million) and the fair value of FMCH's foreign exchange contracts, which consisted entirely of forward agreements, is valued at approximately $10.6 million. FMCH had outstanding contracts covering the purchase of 488 million euros at an average contract price of $0.9114 per euro, for delivery between April 2001 and November 2003. YEAR ENDED DECEMBER 31, 2000 COMPARED TO YEAR ENDED DECEMBER 31, 1999 Net revenues from continuing operations for 2000 increased by 10% ($274 million) over 1999. Income from continuing operations increased by $432 million over 1999 as a result of increased operating earnings ($9 million), reduced corporate expense ($4 million), and no comparable 2000 expense relating to the special charge for settlement of investigation and related costs ($419 million, after income taxes) recorded in 1999, partially offset by increased interest expense. Excluding the effect of the special charge for settlement of the U.S. government investigation and related costs, net income from operations increased by 14% over 1999. DIALYSIS SERVICES Dialysis Services net revenues for 2000 increased by 12% ($286 million) over 1999, primarily as a result of a 9% increase in the number of treatments provided, the impact of increased Medicare reimbursement rates, improved anemia management (higher EPO utilization), consolidation of joint ventures, higher revenues in other pharmaceuticals and increased laboratory testing revenues. The treatment increase was a result of base business growth and the impact of 1999 and 2000 acquisitions. The laboratory testing revenues increased as a result of higher patient volume. Dialysis Services operating earnings for 2000 increased by 4% ($17 million) over 1999 primarily due to increases in treatment volume, the impact of increased Medicare reimbursement rates, higher earnings in other pharmaceuticals, and increased earnings from laboratory testing. These increases were partially 69 77 offset by higher personnel costs, increased costs of EPO, higher provisions for doubtful accounts, and higher equipment lease expenses. DIALYSIS PRODUCTS Dialysis Products net revenues for 2000 increased by 1% ($10 million) over the comparable period of 1999. This is primarily due to increased sales of hemodialysis products including machines and disposables, partially offset by decreased sales of peritoneal products. Dialysis Products operating earnings for 2000 decreased by 6% ($8 million) over the comparable period of 1999. This is a result of higher sales and marketing costs and freight and distribution expenses as well as an increased provision for doubtful accounts, partially offset by improvements in gross margin. SPECIAL CHARGE FOR THE SETTLEMENT AND RELATED COSTS On January 18, 2000, FMCH, NMC and certain affiliated companies executed definitive agreements with the U.S. government to settle (1) matters concerning violations of federal laws and (2) NMC's claims with respect to outstanding Medicare receivables for nutrition therapy. As a result of the settlement, FMCH recorded, a special pre-tax charge of $601 million ($419 million net of income taxes) in 1999 which included (1) a charge of approximately $486 million for settlement payment obligations to the government; (2) a reserve of approximately $94 million for the resolution of the FMCH's IDPN accounts receivable; and (3) a reserve for other related costs of $21 million. The Settlement payment obligations to the U.S. government and the amounts due to FMCH for outstanding Medicare receivables have been classified in the balance sheet at their expected settlement date. OTHER EXPENSES FMCH's other expenses for 2000 decreased by 1% ($1 million) over the comparable period of 1999 excluding the special charge for the Settlement. General corporate expenses decreased by $16 million and operating interest expense decreased by $15 million primarily due to the change in the mix of debt instruments. The decreases in general corporate and operating interest expenses for 2000 were offset by $30 million of increased interest expense related to the Settlement in January 2000. INCOME TAXES FMCH has recorded an income tax provision of $98 million for 2000 as compared to an income tax benefit of $81 million for 1999. The income tax provision in 2000 is higher than the statutory tax rate primarily due to the non-deductible merger goodwill. The income tax benefit in 1999 is lower than the statutory tax rate primarily due to the tax effect of the special charge for the Settlement and related costs, partially offset by non-deductible merger goodwill. YEAR ENDED DECEMBER 31, 1999 COMPARED TO DECEMBER 31, 1998 Net revenues from continuing operations for 1999 increased by 10% ($244 million) over 1998. Income from continuing operations for 1999 decreased ($379 million) over 1998 as a result of increased expense relating to the special charge for the Settlement and related costs ($419 million, after income taxes), and increases to general corporate expenses, partially offset by increased operating earnings and reduced interest expense. Excluding the effect of the special charge for Settlement and related costs recorded in 1999, net income from operations increased by 78%. DIALYSIS SERVICES Dialysis Services net revenues for 1999 increased by 11% ($223 million) over 1998, primarily as a result of an 8% increase in the number of treatments provided, the beneficial impact of the extension of the Medicare Secondary Payor (MSP) provision, higher EPO utilization relative to the comparable 1998 period, partially offset by decreased laboratory testing revenues. The increase in the number of treatments 70 78 was a result of base business growth and the impact of 1998 and 1999 acquisitions. The laboratory testing revenue decrease was primarily due to lower testing volume as competitors continue to consolidate lab activity. Dialysis Services operating earnings for 1999 increased by 12% ($42 million) over the comparable period of 1998 primarily due to the increase in treatment volume, the beneficial impact of the extension of the MSP provision and higher EPO utilization, and the decrease in the provision for doubtful accounts, partially offset by decreased operating earnings in laboratory testing. The provision for doubtful accounts decreased due to revisions of estimates for bad debt cost report recoveries. These recoveries include the result of FMCH's successful challenge of the Medicare regulation which capped reimbursement for the bad debts incurred by dialysis facilities in those years. Accordingly, FMCH has revised its estimate of recoveries for the previously disallowed bad debt expense associated with this regulation during the year. DIALYSIS PRODUCTS Dialysis Products net revenues for 1999 increased by 7% ($45 million) over the comparable period of 1998. This is due to increased sales of hemo products, including machines and disposables, partially offset by decrease sales of peritoneal products. Dialysis Products operating earnings for 1999 increased by 22% ($23 million) over 1998. This is primarily due to revenue growth and improvements in gross margin resulting from manufacturing efficiencies from increased production volume, partially offset by increased freight and distribution costs. SPECIAL CHARGE FOR THE SETTLEMENT AND RELATED COSTS On January 18, 2000, FMCH, NMC and certain affiliated companies executed definitive agreements with the U.S. government to settle (1) the matters covered in the U.S. government investigation and (2) NMC's claims with respect outstanding Medicare receivables for nutrition therapy. As a result of the Settlement, FMCH recorded a special pre-tax charge of $601 million ($419 million after tax) in 1999 which included (1) a charge of $486 million for settlement payment obligations to the U.S. government, (2) a reserve of approximately $94 million for resolution of the FMCH's IDPN accounts receivable, and (3) a reserve for other related costs of $21 million. The settlement payment obligations to the U.S. government and the amounts due to FMCH for the outstanding Medicare receivables have been classified in the balance sheet at their expected settlement dates. See Note 16 to the notes to the Financial Statements of Fresenius Medical Care Holdings, Inc. -- "Commitments and Contingencies -- Legal Proceedings." OTHER EXPENSES Excluding the effect of the special charge for the Settlement, FMCH's other expenses for 1999 decreased by 1% ($2 million) over the comparable period of 1998. General corporate expenses increased by $5 million due to increases in casualty and insurance expenses. Interest expense decreased by $7 million primarily due to the reduction of FMCH's funded debt. INCOME TAXES FMCH has recorded an income tax benefit of $81 million for 1999 as compared to an income tax provision of $74 million in 1998. The income tax benefit in 1999 is lower than the statutory tax rate primarily due to the tax effect of the special charge for the Settlement and related costs. The provision for income taxes in 1998 is higher than the statutory tax rate primarily due to the non-deductible merger goodwill. 71 79 LIQUIDITY AND CAPITAL RESOURCES THREE MONTHS ENDED MARCH 31, 2001 COMPARED TO THREE MONTHS ENDED MARCH 31, 2000 FMCH's cash requirements in 2001, and 2000, including acquisitions and capital expenditures have historically been funded by cash generated from operations, additional net intercompany borrowings and net increases in the receivable financing facility. Cash from operations decreased by $12 million from $61 million for the three months ended March 31, 2000 to $49 million for the three months ended March 31, 2001. This decrease is primarily related to decreases in deferred income taxes partially offset by increases in non-cash expenses and net increases in operating assets and liabilities of $3 million. The movement in operating assets and liabilities includes the collection of $5 million related to IDPN receivables. Increases in accounts receivable of $50 million in the three-month period 2001 are primarily due to the impact of acquisitions in 2001 and 2000, as well as slower payment patterns from third parties, specifically non governmental payors. Increases in accounts payable are primarily due to the timing of disbursements. Cash on hand was $33 million at March 31, 2001 and December 31, 2000. Net cash flows used in investing activities of operations totaled $41 million in 2001 compared to $56 million in 2000. FMCH funded its acquisitions and capital expenditures primarily through cash flows from operations and intercompany borrowings. FMCH's acquisitions totaled $5 million and $36 million in 2001 and 2000, respectively, net of cash acquired. FMCH made capital expenditures of $35 million and $20 million for internal expansion, improvements, new furnishings and equipment in 2001 and 2000, respectively. Net cash flows used in financing activities of operations totaled $8 million in 2001 compared to $2 million in 2000. During the first three months of 2001, FMCH made payments to the U.S. government totaling $35 million for the Settlement. In addition, debt and capital lease obligations increased by $43 million, primarily due to an increase on the FMCH's credit facility of $43 million. FMCH believes that it will have sufficient cash flows from continued operations and borrowing capacity under its revolving credit facility to make the payments required by the Settlement. FMCH also believes that following such payments, it will have sufficient funds available for both its day to day operations and its anticipated growth. YEAR ENDED DECEMBER 31, 2000 COMPARED TO YEAR ENDED DECEMBER 31, 1999 FMCH's cash requirements in 2000 and 1999, including acquisitions and capital expenditures, have been funded by cash generated from operations, additional intercompany borrowings, and an increase in the receivable financing facility. Cash from operations has improved by $14 million from $249 million in 1999 to $263 million in 2000. This improvement was primarily related to an increase in earnings and the addback of non-cash expenses of $122 million offset by net decreases in operating assets and liabilities of $108 million. These changes have been adjusted to exclude the special charge for the Settlement in 1999. The movement in operating assets and liabilities included the collection of $54 million related to IDPN receivables; increases in accounts receivable primarily due to increases in days sales outstanding resulting from slower payment patterns from third parties, specifically from non-governmental payors as well as the impact of new acquisitions; decreases in accounts payable due primarily to timing of disbursements; decreases in accrued liabilities primarily due to timing for physician compensation payments, unreconciled payments and compliance and legal costs. Cash on hand was $33 million at December 31, 2000 compared to $13 million at December 31, 1999. Under the Settlement, FMCH is required to make net settlement payments totaling approximately $427 million, of which $14 million had previously been paid prior to 2000. This amount is net of approximately $59.2 million of reimbursement for Medicare receivables from the U.S. government. During 72 80 2000, FMCH made payments to the U.S. government totaling $387 million and received $54 million from the U.S. government. Under the definitive agreements with the U.S. government, FMCH entered into a note payable for the settlement payment obligations to the U.S. government. Interest on installment payments to the U.S. government accrues at 6.3% on $51.2 million of the obligation and at 7.5% annually on the balance, until paid in full. Under the terms of the note payable, the remaining obligation is payable in six quarterly installments which began April 2000 and will end July 2001. The first three of these quarterly installments of $35.4 million including interest of 7.5% were made in April, July, and October 2000. The fourth quarterly installment was made in the amount of $35.4 million including interest at 7.5% in January 2001. The remaining two installments of $27.8 million including interest at 6.3% will be made in April and July 2001, respectively. The U.S. government has remitted the balance of FMCH's outstanding Medicare receivables in four quarterly payments of $5.2 million plus interest at 7.5%. The first three quarterly payments from the U.S. government were received in May, August, and October 2000. The final payment was received in February 2001. Net cash flows used in investing activities of operations during 2000 totaled $220 million compared to $146 million in 1999. FMCH funded its acquisitions and capital expenditures primarily through cash flows from operations and intercompany borrowings. Acquisitions totaled $116 million and $65 million in 2000 and 1999, respectively, net of cash acquired. Capital expenditures of $104 million and $81 million were made for internal expansion, improvements, new furnishings and equipment in 2000 and 1999, respectively. Net cash flows used in financing activities of operations during 2000 totaled $23 million as compared to net cash flows used of $96 million in 1999. During 2000, FMCH made payments to the government of $387 million for the settlement of the U.S. government investigation. In addition, debt and capital lease obligations were paid down by $18 million and repayments of $33 million were made on intercompany borrowings. Proceeds from financing activities in 2000 included $306 million for the issuance of mandatorily redeemable preferred stock to an affiliated company and increased borrowings under a receivable financing facility by $110 million. At December 31, 2000 FMCH had additional borrowing capacity of approximately $698 million under its credit facility and $55 million under its receivable financing facility. YEAR ENDED DECEMBER 31, 1999 COMPARED TO YEAR ENDED DECEMBER 31, 1998 Net cash flows provided by operating activities of continued operations totaled $253 million in 1999 compared to $212 million in 1998. Cash on hand was $13 million at December 31, 1999 compared to $7 million at December 31, 1998. On January 18, 2000, FMCH reached a final settlement agreement with respect to the U.S. government investigation. The Settlement requires net settlement payments totaling approximately $427 million, of which $14 million had previously been paid. FMCH paid another $286 million after court approval of the Settlement and will pay an additional $186 million over the next 18 months. As part of the Settlement, FMCH will receive $59 million over the next 18 months from the U.S. government against receivable claims of $153 million for intradialytic parenteral nutrition therapy rendered on or before December 31, 1999. FMCH has amended the letter of credit that was given to the U.S. government in 1996 from $150 million to $190 million, the balance of which will be reduced over a period of time as we make installment payments to the U.S. government. The net cash obligations of FMCH, related to the special charge are anticipated to approximate $266 million. This amount reflects the special charge of $601 million reduced for the resolution of FMCH's intradialytic parenteral nutrition receivable claims of approximately $153 million, and the estimated cash savings for the tax effect of the special charge of $182 million. The cash savings of the tax benefit are expected to be realized over time in relation to the cash outflows of the Settlement and expenditures for other related costs. 73 81 In December 1999, FMCH and the lenders under the senior credit facility, amended certain covenants in the senior credit facility to accommodate its obligations under the Settlement agreements and to enable it to continue in compliance with the financial covenants upon consummation of the Settlement. Net cash flows used in investing activities of continued operations totaled $147 million in 1999 compared to $162 million in 1998. FMCH funded its acquisitions and capital expenditures primarily through cash flows from operations. Acquisitions totaled $65 million and $170 million in 1999 and 1998, respectively, net of cash acquired. Capital expenditures of $81 million and $75 million were made for internal expansion, improvements, new furnishings and equipment in 1999 and 1998, respectively. FMCH intends to continue to enhance its presence in the U.S. by focusing its expansion on the acquisition of individual or small groups of clinics, expansion of existing clinics, and opening of new clinics. Net cash flows used in financing activities of continued operations totaled $96 million in 1999 compared to $35 million in 1998. Due to the improvement in cash flow from operations, FMCH was able to reduce its total borrowings in 1999 by approximately $97 million. In 1998, FMCH funded its acquisitions and capital expenditures primarily through proceeds from external short and long-term debt, proceeds from a receivable financing facility, and proceeds from the sale of the Non-Renal Diagnostics and Homecare divisions. Additionally in 1998, acquisitions were also funded through the issuance of investment securities by Fresenius Medical Care Finance, S.a.r.l. Luxembourg, a Luxembourg subsidiary of ours. In exchange for such financing, an intercompany account was established between FMCH and the Luxembourg subsidiary with payables due to Fresenius Medical Care Finance, S.a.r.l. Luxembourg of $42 million at December 31, 1998. CONTINGENCIES FMCH is a plaintiff in litigation against the federal government with respect to the implementation of OBRA 93 and is a defendant in significant litigation as described in "Business -- Legal Proceedings." An adverse outcome in any of these matters, could have a material adverse effect on FMCH's business, financial condition and results of operations. Because of the significant complexities and uncertainties associated with these proceedings, neither an estimate of the possible loss or range of loss that FMCH may incur in respect of such matters nor a reserve based on any such estimate can be reasonably made. See -- Note 16 to the notes to the consolidated financial statements -- FMCH, "Commitments and Contingencies." FMCH believes that its existing credit facilities, cash generated from operations and other current sources of financing are sufficient to meet its foreseeable needs. If cash flows from operations or availability under existing banking arrangements fall below expectations, FMCH may be required to consider other alternatives to maintain sufficient liquidity. There can be no assurance that FMCH will be able to do so on satisfactory terms, if at all. See "Management's Discussion and Analysis of Financial Condition and Results of Operations -- FMCH -- Liquidity and Capital Resources." DIVESTITURES FMCH sold its Non Renal Diagnostic Services and Homecare divisions on June 26, 1998 and July 29, 1998, respectively. The combined proceeds of these sales were approximately $100 million in cash and notes. INFLATION A substantial portion of FMCH's net revenue is subject to reimbursement rates which are regulated by the U.S. government and do not automatically adjust for inflation. Non-governmental payers are also exerting downward pressure on reimbursement levels. Increased operating costs that are subject to inflation, such as labor and supply costs, without a compensating increase in reimbursement rates, may adversely affect FMCH's business and results of operations. 74 82 RECENTLY ISSUED ACCOUNTING STANDARDS In September 2000, the Financial Accounting Standards Board issued SFAS No. 140, which replaces SFAS No. 125. SFAS No. 140 provides the accounting and reporting standards for securitizations and other transfers of financial assets and collateral. These standards are based on consistent application of a financial-components approach that focuses on control. This Statement also provides consistent standards for distinguishing transfers of financial assets that are sales from transfers that are secured borrowings. SFAS No. 140 is effective for transfers after March 31, 2001 and is effective for disclosures about securitizations and collateral for fiscal years ending after December 15, 2000. There is no impact to FMCH for the adoption of SFAS No. 140. 75 83 BUSINESS We are the world's largest kidney dialysis company engaged in both providing dialysis care and manufacturing dialysis products, based on publicly reported revenues and patients treated. We provide dialysis treatment to over 98,600 patients at our approximately 1,350 clinics located in 18 countries. In the United States, we also provide inpatient dialysis services, therapeutic apheresis, hemoperfusion and other services under contract to hospitals. We also develop and manufacture a complete range of equipment, systems and disposable products, which we sell to customers in over 100 countries. We are able to use the information we gain when treating patients in developing new and improved products. We believe that our size, our activities in both dialysis care and dialysis products and our concentration in specific geographic areas allow us to operate more cost-effectively than many of our competitors. For the year ended December 31, 2000, we had revenues of $4.2 billion and EBITDA of $913.7 million. We derived 73% of our revenues in 2000 from our North America operations and 27% from our International operations. RENAL INDUSTRY OVERVIEW END-STAGE RENAL DISEASE End-stage renal disease, or ESRD, is the stage of advanced chronic kidney disease that is characterized by the irreversible loss of kidney function and requires routine dialysis treatment or kidney transplantation to sustain life. A normally functioning human kidney removes waste products and excess water from the blood that prevents toxin buildup, water overload and the eventual poisoning of the body. A number of conditions -- diabetes, hypertension, glomerulonephritis and inherited diseases -- can cause chronic kidney disease. Nearly 60% of all people with ESRD acquire the disease as a complication of one or more of these primary conditions. There are currently only two methods for treating ESRD: dialysis and kidney transplantation. Scarcity of compatible kidneys limits transplants. According to data published by the Centers for Medicare and Medicaid Services, or "CMS," (formerly known as the Health Care Financing Administration) of the U.S. Department of Health and Human Services, approximately 13,500 patients, or 4% of the ESRD patient population, received kidney transplants in the United States during 1999. Transplantation rates vary from country to country in Europe. According to the European Dialysis and Transplantation Association Registry Report for 1996, 2% of new ESRD patients age 15 or over received transplants as the first mode of treatment in Europe in 1995. Therefore, most patients suffering from ESRD must rely on dialysis, which is the removal of toxic waste products and excess fluids from the body by artificial means. There are two major dialysis methods commonly used today, hemodialysis and peritoneal dialysis. These are described below under "Treatment Options for ESRD." Generally, an ESRD patient's physician, in consultation with the patient, chooses the patient treatment method, which is based on the patient's medical conditions and needs. Based on the most recent data published by the CMS, the number of patients in the United States who received dialysis for chronic ESRD grew from approximately 66,000 in 1982 to approximately 259,500 at December 31, 1999, or a compound annual rate of 8.4%. We believe that, over the next five to ten years, the number of patients suffering from ESRD in the United States will continue to grow at approximately the same rate. The United States Renal Data System projections to 2010 suggest that the number of both dialysis and transplant patients will reach levels double those in 1997. According to data from the CMS, the European Dialysis and Transplantation Association and our own internal survey, the number of non-U.S. chronic dialysis patients is growing at estimated annual rates of 7% for patients receiving hemodialysis and 8% for patients receiving peritoneal dialysis. At the end of 1998, an estimated 920,000 patients were undergoing dialysis treatment. According to our own market surveys, Japan is the second largest dialysis market in the world with approximately 188,000 dialysis patients. In the rest of the world, we estimate that at the end of 1998 there were approximately 225,000 dialysis patients in Europe, 76 84 more than 100,000 patients in Asia (excluding Japan) and around 90,000 patients in Latin America. We believe that the continuing growth in the number of dialysis patients is principally attributable to: - increased general life expectancy and the overall aging of the general U.S. and European populations; - shortage of donor organs for kidney transplants; - improved dialysis technology that has expanded the patient population able to undergo life-prolonging dialysis; - generally stable or increased reimbursements for treatments in many countries; and - better treatment and survival of patients with hypertension, diabetes and other illnesses that lead to ESRD. TREATMENT OPTIONS FOR ESRD Hemodialysis. Hemodialysis removes toxins and excess fluids from the blood outside the patient's body. In hemodialysis, the blood flows outside the body by means of plastic tubes known as bloodlines into a specially designed filter, called a dialyzer. The dialyzer functions as an artificial kidney by separating waste products and excess water from the blood by diffusion and ultrafiltration. Dialysis solution flowing through the dialyzer carries away the waste products and excess water, and the cleansed blood is returned to the patient. A hemodialysis machine controls the movement of the blood and dialysis solution. The machine pumps blood, adds anti-coagulants, regulates the purification process and controls the mixing of dialysis solution and the rate of its flow through the system. This machine may also monitor and record the patient's vital signs. In addition to standard hemodialysis, hemofiltration is a treatment method which cleanses an ESRD patient's blood without using dialysis solution. Blood passes through a semipermeable membrane, which filters out solute particles. Hemodialfiltration combines the advantages of hemofiltration and hemodialysis, and provides high elimination rates for small and large molecular weight substances. Hemodialysis patients generally receive treatment three times per week, typically for two and one-half to four hours or longer per treatment. The majority of hemodialysis patients receive treatment at outpatient dialysis clinics, such as ours, where hemodialysis treatments are performed with the assistance of a nurse or dialysis technician under the general supervision of a physician. Hemodialysis is the only form of treatment, other than transplantation, currently available to patients who have very low residual or nonexistent renal function and whose blood is inadequately cleansed using peritoneal dialysis. According to data from the CMS, as of December 31, 1999, there were approximately 3,740 Medicare-certified ESRD treatment clinics in the United States. Ownership of these clinics is fragmented. We estimate that currently, the ten largest multi-facility dialysis providers, including ourselves, treat approximately 68% of patients. We estimate that there are approximately 4,200 dialysis clinics in Europe, of which 60% are government-owned, 30% are privately owned, and 10% are operated by health care organizations. In Latin America, privately owned clinics predominate, comprising over 60% of all clinics providing dialysis care. According to the CMS, as of December 31, 1999, hemodialysis patients represented 88% of all dialysis patients in the United States. Our studies suggest that hemodialysis patients comprise 95% of the ESRD patient population in Japan, 89% in Europe and 83% in the rest of the world. Peritoneal Dialysis. Peritoneal dialysis removes toxins from the blood using the peritoneum, the membrane lining covering the internal organs located in the abdominal area. Peritoneal dialysis patients administer their own treatments in their own homes and workplaces, either by a treatment known as continuous ambulatory peritoneal dialysis or CAPD, or by a treatment we introduced in 1980 known as continuous cycling peritoneal dialysis or CCPD. In both of these treatments, a surgically implanted catheter provides access to the peritoneal cavity. Using this catheter, the patient introduces a sterile 77 85 dialysis solution from a solution bag through a tube into the peritoneal cavity and the peritoneum operates as the filtering membrane. A typical CAPD peritoneal dialysis program involves the introduction and disposal of dialysis solution four times a day. With CCPD a machine "cycles" solution to and from the patient's peritoneal cavity while the patient sleeps. In both CAPD and CCPD the patient undergoes dialysis daily, and typically does not experience the buildup of toxins and fluids which hemodialysis patients experience on the days they are not treated. In addition, because the patient need not make frequent visits to a hemodialysis clinic, and can administer the solution exchanges at convenient, although more frequent, times, a patient on peritoneal dialysis may experience much less disruption to his or her life than a patient on hemodialysis. Some aspects of peritoneal dialysis, however, limit its use as a long-term therapy for some patients. First, some patients cannot make the required sterile connections of the peritoneal dialysis tubing to the catheter, leading to excessive episodes of peritonitis. Peritonitis is a bacterial infection of the peritoneum which can result in serious adverse health consequences, including death. Second, treatment by current forms of peritoneal dialysis may not be as effective as hemodialysis in removing wastes and fluids. OUR STRATEGY Our objective is to focus on generating revenue growth that exceeds market growth of the dialysis industry, measured by growth in the patient population, while maintaining our leading position in the market and increasing earnings at a faster pace than revenue growth. Our dialysis services and product sales businesses have grown faster than the market in terms of revenues over the past five years, and we believe that we are well positioned to meet our objectives by focusing on the following strategies: - Continue to Provide High Standards of Patient Care. We believe that our reputation for providing the highest standards of patient care is a competitive advantage. We believe that our proprietary Patient Statistical Profile database, which contains clinical and demographic data on approximately 73,400 U.S. dialysis patients, is the most comprehensive body of information about dialysis patients in the world. In 1998, we began developing our European clinical database to develop a comparable body of data from our European dialysis clinics. We believe that these databases provide a unique advantage in improving dialysis therapy and treatment outcomes, improving the quality and effectiveness of dialysis products and reducing mortality rates. By improving dialysis outcomes and overall ESRD patient care, we also may be able to contain hospitalization and other costs of ESRD treatment. - Expand Presence in Attractive Growth Markets Worldwide. We intend to continue to take advantage of the reputation and market recognition that our global product business has created by acquiring and establishing new dialysis clinics within attractive international markets. We believe that we will obtain an increasing percentage of our dialysis care growth from worldwide markets. We believe that increases in per capita income in developing countries will make general health care benefits, which may include payment for dialysis treatment, more widely available and present significant opportunities. During 2000, we acquired 99 clinics and opened 17 new clinics outside the United States. In the first quarter of 2001, we acquired 62 clinics, opened 22 new clinics and closed 3 clinics. By December 31, 2000, we treated approximately 24,000 patients outside the United States, an increase of approximately 34% over the figure at December 31, 1999. By March 31, 2001, our patients outside the U.S. increased to 24,400. To take advantage of the growing trend towards consolidation outside of the U.S., we envision making additional acquisitions in selected international markets. Consistent with this strategy, on June 19, 2000, we acquired substantially all of the international and non-continental U.S. operations of Total Renal Care Holdings, Inc. (now called DaVita), consisting of 87 dialysis clinics treating approximately 5,100 patients in Argentina, Italy, the United Kingdom, Puerto Rico and Hawaii. We are currently managing the Puerto Rico operations of Total Renal Care Holdings, Inc. Completion of our acquisition of the Puerto Rico operations is subject to governmental approvals and third-party consents. Furthermore, on January 5, 2001, we acquired Everest which owns, operates or manages approximately 70 clinic facilities providing therapy to approximately 6,800 patients in the eastern and central United States. 78 86 Everest also conducts extracorporeal blood services and acute dialysis businesses which provide acute dialysis, apheresis and hemoperfusion services to approximately 100 hospitals in the United States. We also expect to continue to enhance our presence in the United States by acquiring individual or small groups of dialysis clinics in selected markets, expanding existing clinics, and opening new clinics, although we will consider larger acquisitions in the United States if suitable opportunities, such as Everest, become available to us. - Increase Our Spectrum of Dialysis Services. One of our objectives is to continue to expand our role within the broad spectrum of services for dialysis patients. We have begun to implement this strategy by providing expanded and enhanced patient services, including laboratory and diagnostic services, to both our own clinics and those of third parties. We estimate that our Spectra Renal Management division provides laboratory services for 40% of the dialysis patients in the United States. We have developed disease state management methodologies, which involve total patient care for ESRD patients, that we believe are attractive to managed care payors. As part of our plans to develop disease state management, we have formed Optimal Renal Care, LLC, a joint venture with Southern California Permanente Medical Group, a subsidiary of Kaiser Permanente, Inc. which has the largest dialysis patient population of any managed care organization, and we have formed Renaissance Health Care as a joint venture with participating nephrologists. - Offer Complete Dialysis Product Lines with Recurring Disposable Products Revenue Streams. We offer broad and competitive hemodialysis and peritoneal dialysis product lines. These product lines enjoy broad market acceptance and enable us to serve as our customers' single source for all of their dialysis machines, systems and disposable products. During the year ended December 31, 2000, we obtained approximately 18% of our product revenue from machine sales and 82% from sales of disposable products. These disposable products provide us with a continuing source of revenue from our installed base of dialysis equipment. - Extend Our Position as an Innovator in Product and Process Technology. We are committed to technological leadership in both hemodialysis and peritoneal dialysis products. We have an approximately 220 member research and development team that focuses on developing dialysis systems that are safer, more effective and easier to use and that can be easily customized to meet the differing needs of customers around the world. We believe that our extensive expertise in patient treatment and clinical data will further enhance our ability to develop more effective products and treatment methodologies. Our ability to manufacture dialysis products on a cost-effective and competitive basis results in large part from our process technologies. Over the past several years, we have reduced manufacturing costs per unit through development of proprietary manufacturing technologies that have streamlined and automated our production processes. We intend to further improve our proprietary, highly automated manufacturing systems to continue to reduce product manufacturing costs, concurrently achieving a high level of quality control and reliability. DIALYSIS CARE DIALYSIS SERVICES We provide dialysis treatment and related laboratory and diagnostic services at our 1,350 outpatient dialysis clinics, 1,000 of which are in the United States and 350 of which are in 17 countries outside of the United States. Our operations outside North America generated 11% of our 2000 dialysis care revenue. We currently operate dialysis clinics in Argentina, Australia, Brazil, China, Colombia, Czech Republic, France, Germany, Hungary, Italy, Korea, Portugal, Spain, Taiwan, Turkey, United Kingdom and Venezuela. Our dialysis clinics are generally concentrated in areas of high population density. In 2000, we acquired 133 existing clinics, opened 67 new clinics and closed or sold 20 clinics. The number of patients we treat at our clinics increased by about 15%, from approximately 80,000 at December 31, 1999 to approximately 91,900 at December 31, 2000 and further increased to approximately 98,600 at March 31, 2001. 79 87 With our large patient population, we have developed proprietary patient statistical databases which enable us to improve dialysis treatment outcomes, and improve the quality and effectiveness of dialysis products, resulting in reduced mortality rates. In addition to our patient databases, we believe that local physicians, hospitals and managed care plans refer their ESRD patients to our clinics for treatment due to: - our reputation for quality patient care and treatment; - our extensive network of dialysis clinics, which enables physicians to refer their patients to conveniently located clinics; and - our reputation for technologically advanced products for dialysis treatment. We treat approximately 26% of the dialysis patients in the United States and, based on publicly available reports, we believe our next largest competitor treats approximately 15% of U.S. dialysis patients. For the three-months ended March 31, 2001, dialysis services accounted for 73% of our total revenue. At our clinics, we provide hemodialysis treatments at individual stations through the use of dialysis machines. A nurse or dialysis technician attaches the necessary tubing to the patient and monitors the dialysis equipment and the patient's vital signs. The capacity of a clinic is a function of the number of stations and such factors as the type of treatment, patient requirements, length of time per treatment, and local operating practices and ordinances regulating hours of operation. Most of our clinics operate two or three patient shifts per day. Each of our dialysis clinics is under the general supervision of a Medical Director and, in some cases, one or more associate Medical Directors, all of whom are physicians. See "-- Patient, Physician and Other Relationships." Each dialysis clinic also has an administrator who supervises the day-to-day operations of the facility and the staff. The staff typically consists of registered nurses, licensed practical nurses, patient care technicians, a social worker, a registered dietician, a unit clerk and biomedical technicians. As part of the dialysis therapy, we provide a variety of services to ESRD patients in the United States at our dialysis clinics. These services include administering EPO, a bioengineered protein that stimulates the production of red blood cells. EPO is used to treat anemia, a medical complication that ESRD patients frequently experience, and we administer EPO to most of our patients. Revenues from EPO accounted for approximately 28% of dialysis care revenue in our North America segment for the twelve months ended December 31, 2000. We receive a substantial majority of this revenue as reimbursements through the Medicare and Medicaid programs. Amgen Inc., is the sole manufacturer of EPO in North America, and any interruption of supply could materially adversely affect our business, financial condition and results of operations. Our current contract with Amgen covers the period from January 2001 to December 2001 with price guarantees and volume and outcome based discounts. Amgen has announced a 3.9% increase in its wholesaler acquisition price for EPO effective May 9, 2001. Because our purchase contract with Amgen contains pricing protection through December 31, 2001, our purchase price for EPO will be unaffected by the increase through that date. We provide other services to ESRD patients in the United States including: - administering vitamin D, iron, hepatitis vaccine and blood transfusions; - providing intradyalitic parenteral nutrition, in which nutrients are added to the patient's blood during hemodialysis; - clinical laboratory testing through Spectra Renal Management; - doppler flow testing of the effectiveness of the patient's vascular access for dialysis; and - performing electrocardiograms. The patient's attending physician must prescribe these tests and other services. Our clinics also offer services for home dialysis patients, the majority of whom receive peritoneal dialysis treatment. For those patients, we provide materials, training and patient support services, including 80 88 clinical monitoring, supply of EPO, follow-up assistance and arranging for delivery of the supplies to the patient's residence. See "-- Regulatory and Legal Matters -- Reimbursement -- United States" for a discussion of billing for these products and services. We also provide dialysis services under contract to hospitals in the United States on an "as needed" basis for hospitalized ESRD patients and for patients suffering from acute kidney failure. Acute kidney failure can result from trauma or similar causes, and requires dialysis until the patient's kidneys recover their normal function. We service these patients either at their bedside, using portable dialysis equipment, or at the hospital's dialysis site. Contracts with hospitals provide for payment at negotiated rates that are generally higher than the Medicare reimbursement rates for chronic in-clinic treatments. We employ a centralized approach with respect to some administrative functions common to our operations. For example, each dialysis clinic uses our proprietary manuals containing our standardized operating and billing procedures. We believe that centralizing and standardizing these functions enhances our ability to perform services on a cost-effective basis. The manner in which each clinic conducts its business depends, in large part, upon applicable laws, rules and regulations of the jurisdiction in which the clinic is located, as well as our clinical policies. However, a patient's attending physician, who may be the clinic's Medical Director or an unaffiliated physician with staff privileges at the clinic, has medical discretion to prescribe the particular treatment modality and medications for that patient. Similarly, the attending physician has discretion in prescribing particular medical products, although the clinic typically purchases equipment, regardless of brand, in consultation with the Medical Director through our central purchasing operations. LABORATORY SERVICES AND RENAL DIAGNOSTICS We provide laboratory testing and marketing services through Spectra Renal Management. Spectra Renal Management is the leading United States dialysis clinical laboratory providing blood, urine and other bodily fluid testing services to assist physicians in determining whether a dialysis patient's therapy regimen, diet and medicines remain optimal. Spectra Renal Management operates three laboratories, located in New Jersey, Northern California, and Illinois. During the year ended December 31, 2000, Spectra Renal Management performed approximately 37 million tests for more than 100,000 dialysis patients across the United States. We plan to expand Spectra Renal Management into related markets such as hospital dialysis units and physician office practices, working particularly with nephrologists. ACQUISITIONS A significant factor in the growth in our revenue and operating earnings in prior years has been our ability to acquire health care businesses, particularly dialysis clinics, on reasonable terms. Worldwide, physicians own many dialysis clinics that are potential acquisition or joint venture candidates for us. In the United States, doctors might determine to sell their clinics to obtain relief from day-to-day administrative responsibilities and changing governmental regulations, to focus on patient care and to realize a return on their investment. Outside of the United States, doctors might determine to sell and/or enter into joint ventures or other relationships with us to achieve the same goals and to gain a partner with extensive expertise in dialysis products and services. While price is typically the key factor in securing acquisitions, we believe that we will be an attractive acquiror or partner to many dialysis clinic owners due to: - our reputation for patient treatment; - our proprietary Patient Statistical Profile and European clinical databases; - our comprehensive clinical and administrative systems, manuals and policies, and our ability to provide ancillary services for dialysis clinics and patients; and - our reputation for technologically advanced products. We paid aggregate consideration of approximately $288 million for acquisitions of health care facilities and clinical laboratories in 2000 and approximately $111 million in 1999. 81 89 On June 19, 2000, we purchased substantially all of the international and non-continental U.S. operations of Total Renal Care Holdings, Inc. (now called DaVita) for $145 million. These operations consist of 87 dialysis clinics treating approximately 5,100 patients in Argentina, Italy, the United Kingdom, Puerto Rico, and Hawaii. Additionally, we made a $10 million non-refundable deposit, not included in the purchase price noted above, towards the purchase of the Puerto Rico operations. The purchase of the Puerto Rico operations is pending subject to regulatory approval and third-party consents. On January 5, 2001, we acquired Everest for $341 million, which includes assumed debt and the issuance of 2.25 million non-voting Preference shares. Everest owns, operates or manages approximately 70 clinic facilities providing therapy to approximately 6,800 patients in the eastern and central United States. Everest also conducts extracorporal blood services and acute dialysis businesses which provide acute dialysis, apheresis and hemoperfusion services to approximately 100 hospitals. We regularly evaluate and hold discussions with various other health care companies and other businesses regarding acquisitions and joint business ventures. In 2000, we completed new acquisitions and acquisitions of previously managed clinics totaling 133 dialysis facilities providing care to approximately 7,594 patients. These acquisitions expand our presence in selected key geographic areas. QUALITY ASSURANCE IN DIALYSIS CARE At each of our U.S. dialysis clinics, a quality assurance committee is responsible for reviewing quality of care reports that our Patient Statistical Profile system generates, setting goals for quality enhancement and monitoring the progress of quality assurance initiatives. We believe that we enjoy a reputation of providing high quality care to dialysis patients. In 2000, we developed and implemented a number of programs to assist in achieving our quality goals. Our Access Intervention Management Program (AIM) detects and corrects arteriovenous access failure in hemodialysis treatment, which is the major cause of hospitalization and morbidity. We also developed a regionalization program to enhance peritoneal dialysis services. Throughout the United States we initiated a pre-ESRD program to educate patients about prevention, slowing kidney failure and treatment options. In 2000, we also completed a patient satisfaction survey which again revealed a high level of satisfaction among patients visiting our facilities. In the International segment our quality management program focuses on consolidation and coordination of medical matters and activities in our international dialysis clinics to ensure and improve the quality of renal care offered in these clinics. These clinics receive quality control guidelines to monitor factors such as water quality, anemia treatment, and laboratory services, using indices that are accepted worldwide in the dialysis and scientific communities. Our system includes review and report procedures for assessing the progress and effectiveness of our quality control activities. We coordinate the program with internal corporate audits and audits by third parties such as regulatory authorities. Management uses the audit reports to further improve our system by defining additional quality control objectives. During 2000, our continuous improvement efforts within the international quality management group focused on the management of electronic data. We implemented computerized tools to streamline the handling of customer complaints. The documentation of our corporate management system was also put on an electronic platform. Our organizational units successfully completed all their regulatory audits in 2000. During 2000, additional clinics in Spain and Italy were organized in line with the ISO 9002 quality standard, with 44 certified clinics at the end of 2000 compared to 37 clinics in 1999. In 2001, we will continue to have our facilities in Italy, France, Turkey and Hungary accredited under ISO standards. PATIENT DATA COLLECTION AND ANALYSIS We engage in systematic efforts to measure, maintain and improve the quality of the services at our dialysis clinics. Each clinic collects and analyzes quality assurance and patient data, which our division and corporate management regularly reviews. Our clinical laboratory results have been a critical element in the development of our proprietary Patient Statistical Profile database, which contains clinical, laboratory and demographic data on 82 90 approximately 73,400 dialysis patients in the United States. We use this database to assist physicians in providing quality care to dialysis patients. In addition, our Patient Statistical Profile database is a key resource in ongoing research, both within our company and at outside research institutions, to decrease mortality rates among dialysis patients and improve their quality of life. In 1998, we began developing our European clinical database. The database includes a version in each relevant local language and takes into account the different health care systems of the various European countries. Compilation and use of the information in this database are designed to comply with applicable European standards and restrictions relating to patient privacy. Our database is user-password protected and patient data are not replicated to our servers and central database in Bad Homburg. All medical information made available outside the dialysis unit is done so on a strictly anonymous basis. Our database is certified by each local authority where it is used. SOURCES OF U.S. DIALYSIS CARE NET REVENUE The following table provides information for the years ended December 31, 2000, 1999 and 1998 regarding the percentage of our U.S. dialysis treatment services net revenues from (a) the Medicare ESRD program, (b) private/alternative payors, such as commercial insurance and private funds, (c) Medicaid and other government sources and (d) hospitals.
YEAR ENDED DECEMBER 31, ----------------------- 2000 1999 1998 ----- ----- ----- Medicare ESRD Program....................................... 59.1% 60.2% 57.0% Private/alternative payors.................................. 32.1% 30.3% 33.8% Medicaid and other government sources....................... 4.2% 4.2% 4.1% Hospitals................................................... 4.6% 5.3% 5.1% ----- ----- ----- Total....................................................... 100.0% 100.0% 100.0% ===== ===== =====
Under the Medicare ESRD program, Medicare reimburses dialysis providers for the treatment of certain individuals who are diagnosed as having ESRD, regardless of age or financial circumstances. When Medicare assumes responsibility as the primary payor, it pays for dialysis and specified related services at 80% of the payment methodology commonly referred to as the Medicare composite rate. In addition, subject to various restrictions and co-payment limitations, Medicare pays separately for some dialysis-related diagnostic and therapeutic services not included in the Medicare composite rate. A secondary payor is responsible for paying any co-payment, which is typically 20%, other approved services not paid by Medicare and the annual deductible. The secondary payor is usually a Medicare supplemental insurer, a state Medicaid program or, to a lesser extent, the patient or the patient's private insurer. Most of the states in which we currently operate dialysis clinics provide Medicaid benefits to qualified recipients to supplement their Medicare entitlement. Prior to the time at which Medicare becomes the primary payor for a patient, another third-party payor, such as the patient's private insurer, or the patient, pays for most dialysis treatments. ESRD patients under age 65 who have employer health plan coverage must wait 33 months, which comprises a three-month entitlement waiting period and an additional 30-month "coordination of benefits period," before Medicare becomes the primary payor. During this 33-month period, the employer health plan is responsible for payment as primary payor at its negotiated rate or, in the absence of a negotiated rate, at our usual and customary rates, which generally are higher than the rates paid by governmental payors, such as Medicare, and Medicare is the secondary payor. We obtain a significant portion of our revenues for dialysis services from reimbursement provided by non-governmental third-party payors. Some type of managed care plan, including health maintenance organizations, now furnishes a substantial portion of third-party health insurance in the United States. Non-governmental payors generally reimburse for dialysis treatments at higher rates than governmental payors such as Medicare. However, managed care plans have been more aggressive in contracting with a 83 91 smaller number of selected providers willing to furnish services for lower rates and subject to a variety of service restrictions. For example, managed care plans and traditional indemnity third-party payors increasingly are demanding alternative fee structures, such as capitation arrangements. With capitation, a provider receives a fixed payment per month for each enrolled patient and bears the risk of loss if the costs of treating a patient exceed the fixed capitation payment. These market forces have resulted in pressures to reduce the reimbursements we receive for our services and products. Our ability to secure rates with indemnity and managed care plans has largely been due to the relatively small number of ESRD patients enrolled by any single health maintenance organization. Regulation has prohibited ESRD patients from joining a health maintenance organization unless they are otherwise eligible for Medicare coverage, due to their age or disability, and are members of a managed care plan when they first experience kidney failure. The CMS has a pilot program underway for managed care companies to treat Medicare ESRD patients under capitated contracts. If successful, this program could result in the elimination of the regulation that precludes ESRD patients from enrolling in managed care organizations. If Medicare health maintenance organization enrollments increase and the number of ESRD patients in managed care plans also increases, managed care plans' ability to negotiate lower rates or reduce the services we provide to them may increase. In addition, the health maintenance organization may have contracted with another provider, or may have stricter controls on access to certain ancillary services that we typically provide to ESRD patients. Any of these developments could limit our future payments for such services. We have formed two joint ventures seeking to contract with managed care organizations for the care of ESRD patients. Renaissance Health Care, Inc. is a 50/50 joint venture between us and participating nephrologists throughout the United States. Our other venture, Optimal Renal Care is a 50/50 joint venture between us and Southern California Permanente Medical Group. We believe a significant increase in the number of patients enrolled in managed care plans might also cause these plans to look more closely at outsourcing ESRD care to ESRD companies such as our disease state management joint ventures. As managed care programs expand market share and gain greater bargaining power in relation to health care providers, there will be increasing pressure to reduce the payments for our services and products. These trends would accelerate if future changes to the Medicare ESRD program require private payors to assume a greater percentage of the cost of care given to dialysis patients. We are presently seeking to expand the portion of our revenues attributable to non-governmental private payors through such measures as our joint venture with Southern California Permanente Medical Group. However, we believe that the historically higher rates of reimbursement nongovernmental payors have paid may not continue at these high levels. If substantially more patients join managed care plans or managed care plans reduce reimbursements paid to us, our business and results of operations could be adversely affected, possibly materially. See "-- Regulatory and Legal Matters -- Reimbursement" and "-- Anti-Kickback Statutes, False Claims Act, Stark Law, and Fraud and Abuse Laws." PATIENT, PHYSICIAN AND OTHER RELATIONSHIPS We believe that our success in establishing and maintaining dialysis clinics, both in the U.S. and in other countries, depends significantly on our ability to obtain the acceptance of and referrals from local physicians, hospitals and managed care plans. A dialysis patient generally seeks treatment at a conveniently located clinic at which the patient's nephrologist has staff privileges. Virtually all of our clinics maintain open staff privileges for local nephrologists. Our ability to provide quality dialysis care and otherwise meet the needs of local patients and physicians is central to our ability to attract nephrologists to our clinics and to receive referrals from such physicians. We market the availability, quality and other advantages of our dialysis clinics to physicians through symposia and other professional meetings. We supplement our marketing efforts through distribution of literature and advertisements in professional journals. 84 92 Medicare ESRD program reimbursement regulations require that a Medical Director generally supervises treatment at a dialysis clinic. Generally, the Medical Director must be board certified or board eligible in internal medicine and have at least twelve months of training or experience in the care of patients at ESRD clinics. Our Medical Directors maintain their own private practices. We have written agreements with the physicians who serve as Medical Directors for our clinics. Our U.S. Medical Director agreements generally have terms of three years, although some have terms of as long as five to ten years. Our Medical Directors and other physicians under contract individually negotiate their compensation, which generally depends upon competitive factors in the local market, the physician's professional qualifications, experience and responsibilities, the clinic's size and the services it provides. We fix the aggregate compensation of Medical Directors and other physicians under contract in advance for a period of one year or more, based in part on various efficiency and quality incentives. We believe that compensation is paid at fair market value. In some countries other than the United States, Medical Director and physician compensation may include a component based on some measure of the clinic's financial performance. Virtually all of our agreements with our Medical Directors in the United States, as well as the typical contract under which we acquire existing dialysis clinics, include noncompetition covenants covering specified activities within specified geographic areas for specified periods of time. They do not prohibit the physicians from providing direct patient care services at other locations. As required by law, they also do not require a physician to refer patients to us or particular clinics or to buy or use specific medical products. In certain states, non-competition covenants may not be enforceable. COMPETITION Dialysis Services. The dialysis services industry is highly competitive. Our major competitors in dialysis services include Gambro AB, DaVita, Inc. (formerly Total Renal Care), Baxter International Inc., Renal Care Group and the Kuratorium fur Dialyse und Nierentransplantation e.V. Ownership of dialysis clinics in the United States is fragmented with a large number of operators each owning 10 or fewer clinics and a small number of larger multi-clinic providers, of which we are the largest. Industry consolidation has been ongoing over the last decade. Many of our dialysis clinics are in urban areas, where there frequently are many competing clinics in proximity to our clinics. We experience direct competition from time to time from former Medical Directors, former employees or referring physicians who establish their own clinics. Furthermore, other health care providers or product manufacturers, some of who have significant operations, may decide to enter the dialysis business in the future. Because in the United States government programs are the primary source of reimbursement for services to the majority of patients, competition for patients in the United States is based primarily on quality and accessibility of service and the ability to obtain admissions from physicians with privileges at the facilities. However, the extension of periods during which commercial insurers are primarily responsible for reimbursement and the growth of managed care have placed greater emphasis on service costs for patients insured with private insurance. We believe that we compete effectively in all of these areas. In particular, based upon our knowledge and understanding of other providers of kidney dialysis, as well as from information obtained from publicly available sources, we believe that we are among the most cost-efficient providers of kidney dialysis services. In addition, as a result of our large size relative to most other dialysis service providers, we believe we enjoy economies of scale in administrative functions such as purchasing, billing, collections and data processing. In most countries other than the United States, we compete primarily against individual free-standing clinics and hospital-based clinics. In many of these countries, especially the developed countries, governments directly or indirectly regulate prices and the opening of new clinics. Providers compete in all countries primarily on the basis of quality and availability of service and the development and maintenance of relationships with referring physicians. Laboratory Services and Renal Diagnostics. Spectra Renal Management competes in the United States with large nationwide laboratories, dedicated dialysis laboratories and numerous local and regional 85 93 laboratories, including hospital laboratories. In the laboratory services market, companies compete on the basis of performance, including quality of laboratory testing, timeliness of reporting test results and cost- effectiveness. We believe that our services are competitive in these areas. In addition to laboratory services, Spectra Renal Management competes in the imaging diagnostic market. While the main competitors are local hospitals, Spectra Renal Management is competitive based upon the quality and accessibility of its service. DIALYSIS PRODUCTS We are currently the world's largest manufacturer and distributor of equipment and related products for hemodialysis and the second largest manufacturer of peritoneal dialysis products, based on publicly reported revenues, with operations in Germany, the United States and 35 other countries. We sell our dialysis products directly and through distributors in approximately 100 countries. Most of our customers are dialysis clinics. For the three-months ended March 31, 2001, dialysis products accounted for 27% of our total revenue. We manufacture a comprehensive line of kidney dialysis equipment and related products for each of the hemodialysis and peritoneal dialysis markets. Our products include: - hemodialysis machines, peritoneal dialysis cyclers and related equipment; - dialyzers; - peritoneal dialysis solutions in flexible plastic bags; - hemodialysis concentrates and solutions and granulate mixes; - bloodlines and disposable tubing assemblies; and - equipment for water treatment in dialysis clinics. We also distribute other manufacturers' products, including dialyzers, special blood access needles, heparin, a drug used to prevent blood clotting, and commodity supplies such as bandages, clamps and syringes. OVERVIEW The following table shows the breakdown of our revenues for the last three years from sales of dialysis products between hemodialysis products and peritoneal dialysis products.
YEAR ENDED DECEMBER 31, -------------------------------------------------------------------------- 2000 1999 1998 ---------------------- ---------------------- ---------------------- TOTAL TOTAL TOTAL PRODUCT PRODUCT PRODUCT REVENUES % OF TOTAL REVENUES % OF TOTAL REVENUES % OF TOTAL -------- ---------- -------- ---------- -------- ---------- (U.S. DOLLARS IN MILLIONS) Hemodialysis Products...... $1,060.3 84 $1,033.3 83 $ 922.5 80 Peritoneal Dialysis Products................. 196.5 16 207.4 17 224.6 20 -------- --- -------- --- -------- --- Total...................... $1,256.8 100 $1,240.7 100 $1,147.1 100 ======== === ======== === ======== ===
HEMODIALYSIS PRODUCTS We offer a comprehensive hemodialysis product line, consisting of hemodialysis machines, modular accessories for dialysis machines, polysulfone dialyzers, bloodlines, dialysis solutions and concentrates, fistula needles, connectors, devices for water treatment, data management systems, dialysis chairs, machines and supplies for the reuse of dialyzers and other similar supplies. We believe that our broad range of technologically sophisticated hemodialysis products makes us a leader in the hemodialysis product field. We continually strive to expand and improve the capabilities of our hemodialysis systems to offer an advanced treatment mode at reasonable cost. 86 94 Dialysis Machines. We introduced our first dialysis machine in 1980, and our dialysis machines are currently in their fifth generation of development. We sell our dialysis machines as Series 2008H models in North America and Series 4008 models in the rest of the world. Our dialysis machines offer the following features and advantages: - Volumetric dialysate balancing and ultrafiltration control system. This system provides for safe and more efficient use of highly permeable dialyzers, permitting faster dialysis with controlled rates of fluid removal; - Proven hydraulic systems, providing reliable operation and servicing flexibility; - Compatibility with all manufacturers' dialyzers and a wide variety of blood-lines and dialysis solutions, permitting maximum flexibility in both treatment and disposable products usage; - Modular design, which permits us to offer dialysis clinics a broad range of options to meet specific patient or regional treatment requirements. Modular design also allows upgrading through module substitution without the need to replace the entire machine; - Additional modules that provide monitoring and response capability for selected bio-physical patient parameters, such as body temperature, relative blood volume and electrolyte balances. This concept, known as physiological dialysis, permits hemodialysis treatments with lower incidence of a variety of symptoms or side effects, which still occur frequently in standard hemodialysis. Our most recent module, the Blood Volume Monitor(TM) controls removal of excess fluid from the patient; - Sophisticated microprocessor controls, and display and readout panels that are adaptable to meet local language requirements; - Battery backup, which continues operation of the blood circuit and all protective systems for 15 to 20 minutes following a power failure; - Online clearance, measurement of dialyzer clearance for quality assurance with the On-Line Clearance Monitor, providing immediate effective clearance information, real time treatment outcome monitoring, and therapy adjustment during dialysis without requiring invasive procedures or blood samples; - On-line data collection capabilities and computer interfacing with our FINESSE module and FDS08(R) system. Our machines can: - monitor and assess prescribed therapy; - connect a large number of hemodialysis machines and peripheral devices, such as patient scales, blood chemistry analyzers and blood pressure monitors, to a personal computer network; - enter nursing records automatically at bedside to register and document patient treatment records, facilitate billing, and improve record-keeping and staff efficiency; - adapt to new data processing devices and trends; - perform home hemodialysis with remote monitoring by a staff caregiver; - record and analyze trends in medical outcome factors in hemodialysis patients; and - Cost-effectively produce infusion solution during treatment with our ONLINEplus(TM) system for hemofiltration and hemodiafiltration with a special dialysis solution filter, DIASAFEplus(R), which provides ultrapure dialysis fluid. Dialyzers. We manufacture dialyzers using hollow fiber polysulfone membranes, a synthetic material. We are the leading worldwide producer of polysulfone dialyzers. While competitors currently sell polysulfone membranes in the market, we developed and are the only manufacturer with more than 15 years' experience in applying the technology required to mass produce polysulfone membranes. We believe 87 95 that polysulfone offers the following superior performance characteristics compared to other materials used in dialyzers: - higher biological compatibility, resulting in reduced incidence of adverse reactions to the fibers; - greater capacity to clear uremic toxins from patient blood during dialysis, permitting more thorough and rapid dialysis, which results in shorter treatment time; and - a complete range of permeability, or membrane pore size, which permits dialysis at prescribed rates -- high flux, medium flux and low flux, as well as ultra flux for acute dialysis, and allows tailoring of dialysis therapy to individual patients. Our full line of polysulfone dialyzers includes the F70NR, F50NR and F7NR series of single-use polysulfone dialyzers. We also distribute dialyzers manufactured by others, primarily to our own dialysis clinics. In North America, we sell dialyzer reprocessing and rinse machines. These machines cleanse dialyzers after dialysis, permitting multiple usage for the same patient before disposal of the dialyzer. Over the next two years, we plan to replace dialyzer reuse at our dialysis centers with single-use dialyzers. We recently announced that we will increase production of single-use dialyzers at our Ogden, Utah facility to meet demand for these products. Other Hemodialysis Products. We manufacture and distribute arterial, venous, single needle and pediatric bloodlines. We produce both liquid and dry dialysate concentrates. Liquid dialysate concentrate is mixed with purified water by the hemodialysis machine to produce dialysis solution, which removes the toxins and excess water from the patient's blood during dialysis. Dry concentrate, developed more recently, is less labor-intensive to use, requires less storage space and may be less prone to bacterial growth than liquid solutions. We also produce dialysis solutions in bags, including solutions for priming and rinsing hemodialysis bloodlines, as well as connection systems for central concentrate supplies and devices for mixing dialysis solutions and supplying them to hemodialysis machines. Other products include solutions for disinfecting and decalcifying hemodialysis machines, fistula needles, hemodialysis catheters, and products for acute renal treatment. PERITONEAL DIALYSIS PRODUCTS We offer a full line of peritoneal dialysis products. We manufacture peritoneal dialysis solutions in bags, peritoneal dialysis cycling machines for CCPD and disposable products for both CAPD and CCPD, such as tubing, sterile solutions and sterile kits to prepare patients for dialysis. We also distribute other manufacturers' peritoneal dialysis products, primarily to our own dialysis clinics. CAPD Systems. We manufacture standard and specialized peritoneal dialysis solutions. We believe that our peritoneal dialysis products offer significant advantages for CAPD, including: - ease of use and greater protection against contamination by touch than other peritoneal dialysis systems presently available. Our products incorporate our Safe-Lock(R) connection system for introducing and draining dialysis solution into and from the abdominal cavity, using the same bag for introduction and drainage. Our A.N.D.Y.(R) and A.N.D.Y. Plus(R) systems, which include a special drainage bag and a snap-off Y-shaped piece connected to the Safe-Lock(R) connector at the catheter, provide protection from contamination in a dual-bag system; - suitability for all peritoneal dialysis patients through the Inpersol(R) product line, which we acquired from Abbott Laboratories in 1993. Safe-Lock(R) products may be used only by peritoneal dialysis patients whose catheters include the Safe-Lock connector, which attaches to a solution bag fitted with the other part; - manufacture with Biofine(R), a new environmentally friendly plastic material for foils, tubings and other parts of peritoneal dialysis systems. Biofine(R) was developed by Fresenius AG and launched in 1997 and has the following significant benefits: 88 96 - higher biocompatibility through avoidance of plasticisers, which can leach into dialysis solutions; - lower gas permeability and less interaction with peritoneal dialysis solutions, permitting administration of a wide range of solutions, including bicarbonates; - disposal with less harm to the environment. Biofine(R) is manufactured with less material and, when burned, releases only carbon dioxide and water, rather than dioxins and furans which are released during incineration of other foils. This should make our products more attractive, especially in Europe, where disposal of harmful plastics is highly regulated. - the benefits of Biofine(R) with protection against contamination through our new Stay-Safe(R) system, launched in 1997. The system comprises tubing, connectors and a peritoneal dialysis solution double bag, made entirely from Biofine(R). It uses a single switching mechanism that replaces three tubing clamps to control solution drainage, flushing of tubes that connect solution bags to catheters, and introduction of new solution. The single switch also provides tight closure of the line and, to further reduce the possibility of contamination, the switch seals catheter access and surrounds the catheter adapter with disinfectant; - higher solution bag volumes with our new Premier twin-bag system which provides solution container and pre-attached tubing set in one package. The higher solution volumes permit larger dosages without increasing the number of required daily solution exchanges performed by the patient; and - improved biocompatibility with CAPD stay-safe balance, a lactate-buffered peritoneal dialysis solution that has a pH balance in the human physiological range. CCPD Products. We introduced the first peritoneal dialysis cycler machine in 1980. We believe that CCPD therapy offers benefits over CAPD therapy for patients who need more therapy due to body size, ultrafiltration loss or other reasons. In a standard CAPD program, a patient manually introduces two liters of fresh peritoneal dialysis solution and drains the used solution four times over a 24-hour period. Treatment occurs seven days per week and the patient must perform the treatment while awake. With CCPD therapy, the cycler automatically delivers a prescribed volume of dialysis solution into the peritoneal cavity through an implanted catheter, allows the solution to dwell for a specified time, and completes the process by draining the solution. CCPD therapy offers the following benefits over CAPD: - Solution exchanges take place automatically, which may reduce the risk of peritonitis due to less frequent handling of the catheter and connections; - The patient can cycle at home, throughout the night while asleep. The patient has complete daytime freedom, wearing only the surgically implanted catheter and capping device; and - CCPD delivers more effective therapy than CAPD due to the supine position of the patient during the night, higher volume exchanges and preferable cycle management. Our cycling equipment incorporates microprocessor technology, and the patient, hospital or clinic staff can easily program it to perform specific prescribed therapy for a given patient. Since all components are monitored and programmable, these machines allow the physician to prescribe any of a number of current therapy procedures. Our CCPD products and therapies include: - the Sleep-Safe(TM) cycler, a new cycler with an extremely compact and light design, that we began marketing in late 1999. Its pumping mechanism and disposable cartridge allow exact delivery of the peritoneal dialysis solution; - PD-PLUS(R), a variant on CCPD therapy we introduced in 1994. PD-PLUS(R) therapy provides a more tailored therapy than regular CCPD using a simpler nighttime cycler and, where necessary, includes one manual dialysis solution exchange during the day. We believe that PD-PLUS(R) therapy is less costly and easier to administer than typical CCPD. We also believe that PD-PLUS(R) therapy improves toxin removal by more than 40% compared to CAPD. By increasing the effectiveness of 89 97 peritoneal dialysis treatments, PD-PLUS(R) may also effectively prolong the time period during which a patient will be able to remain on peritoneal dialysis before requiring hemodialysis. PD-PLUS(R) therapy can only be performed using the Fresenius Freedom(TM) Cycler and special tubing using Safe-Lock(R) connectors; and - IQcard(TM), for use with the Freedom(TM) Cycler PD-PLUS(R) to monitor CCPD therapy for a full treatment history and improved therapy compliance. Other Peritoneal Dialysis Products. We also manufacture and distribute pediatric treatment systems for administration of low volumes of dialysis solutions, assist devices to facilitate automated bag exchange for handicapped patients, catheters, catheter implantation instruments, silicon glue, Pack-PD(R), a computer program which analyzes patient and peritoneal characteristics to present a range of treatment options for individual therapies, disinfectants, bag heating plates adapters, and products to assist and enhance connector sterility. We also provide scientific and patient information products, including support materials, such as brochures, slides, videos, instructional posters and training manuals. MARKETING, DISTRIBUTION AND SERVICE We sell most of our products to hospitals, clinics and specialized treatment clinics. With our comprehensive product line and years of experience in dialysis, we believe that we have been able to establish and maintain very close relationships with our clinic customer base on a global basis. Close interaction between our sales force and research and development personnel enables us to integrate concepts and ideas that originate in the field into product development. We maintain a direct sales force of trained salespersons engaged in the sale of both hemodialysis and peritoneal dialysis products. This sales force engages in direct promotional efforts, including visits to physicians, clinical specialists, hospitals, clinics and dialysis clinics, and represents us at industry trade shows. We also sponsor medical conferences and scientific symposia as a means for disseminating product information. Our clinical nurses provide clinical support, training and assistance to customers and assist our sales force. We also use outside distributors to provide sales coverage in countries that our internal sales force does not service. In our basic distribution system, we ship products from factories to central warehouses which are frequently located near the factories. From this central warehouse, we distribute our dialysis products to regional warehouses. We then distribute peritoneal dialysis products to the patient at home, and ship hemodialysis products directly to dialysis clinics and other customers. Local sales forces, independent distributors, dealers and sales agents sell all our products. We offer customer service, training and education in the applicable local language, and technical support such as field service, repair shops, maintenance, and warranty regulation for each country in which we sell dialysis products. We provide training sessions on our equipment at our facilities in Schweinfurt, Germany and Walnut Creek, California and we also maintain regional service centers that are responsible for day-to-day international service support. Our Schweinfurt and Walnut Creek facilities also provide training and act as backups for the regional service centers. We also provide technical training to employees of hospitals and other health care providers in the use of our products. We believe our service organizations have a reputation for reliability and high quality service. MANUFACTURING OPERATIONS We operate state-of-the-art production facilities world wide to meet the demand for machines, cyclers, dialyzers, solutions, concentrates, mixes, bloodlines, and disposable tubing assemblies and equipment for water treatment in dialysis clinics. We have invested significantly in developing proprietary processes, technologies and manufacturing equipment which we believe provide a competitive advantage in manufacturing our products. We intend to use our facilities in St. Wendel, Germany and Ogden, Utah as centers of competence for development and manufacturing and to implement similar technologies at our other facilities. 90 98 We produce and assemble hemodialysis machines and CCPD cyclers in our Schweinfurt, Germany and our Walnut Creek, California facilities. We also maintain facilities at our service and local distribution centers in Argentina, Egypt, France, Italy, The Netherlands, China, Brazil and Russia for testing and calibrating dialysis machines manufactured or assembled elsewhere, to meet local end user market needs. In 1998, we restructured our Schweinfurt facility to create process units dedicated to each of the main geographic regions in which we do business. This market-focused structure enables us to more actively support our worldwide equipment business with a high level of responsiveness to the needs of different markets, while realizing economies of scale. The new multi-disciplinary teams created within this structure have increased productivity, lowered manufacturing costs by 6% in 1998, 7% in 1999 and 2% in 2000, and improved customer service. In addition, we were able to increase output of 4008 series hemodialysis machines by 30% from 9,000 machines in 1999 to 11,700 in 2000. Additionally, we increased our output of the peritoneal dialysis cycler sleep safe from 200 units in 1999 to 500 units in 2000. We have implemented just-in-time manufacturing techniques at this facility and are currently able to produce a hemodialysis machine in two weeks. We manufacture and assemble dialyzers and polysulfone membranes in our St. Wendel, Germany and Ogden, Utah facilities and at production facilities of our joint ventures in Belarus and Japan. In 1998, we significantly increased capacity at the St. Wendel facility by optimizing production processes and by implementing flexible working hours and in 1999, we further increased capacity by eliminating non-essential manufacturing at that facility. In 2000 we added another polysulfone hollow fiber spinning line to satisfy growing demand for the core component of our dialyzers. Due, in part, to these changes, dialyzer and bloodline production capacities increased by 6% in 1999 and 25% in 2000. We adapted various production processes to meet the more technically complex requirements of newly developed dialyzers. We are currently developing a fully-automated production line to assure efficient production in future. We also enhanced Polysulfone dialyzer production at our subsidiaries in France, Saudi Arabia and Belarus. Our French facility is now the second facility after St. Wendel that can produce our complete series of polysulfone dialyzers. The significant rise in demand for foils and tubings made of our environmentally-friendly Biofine material led to a 77% increase in production of our Biofine non-polyvinyl chloride foil and a 63% increase in tubing production. Production of peritoneal dialysis solution bags and dry concentrates were expanded by more than 50% and 35%, respectively. In 2000, we commenced production of bloodline systems at our Antalya, Turkey facility, which will be integrated into our European network in 2001. In our subsidiary in Japan we are currently constructing a production plant for peritoneal dialysis solutions which is currently scheduled to be operational in mid 2001. In the North America segment at our Ogden, Utah facility, we commenced construction of an additional hollow-fiber spinning line in August 1999. This was the first step in a five-year expansion plan for that facility. The Ogden facility now operates as a fully integrated manufacturing and research and development facility for polysulfone dialyzers. An additional dialyzer assembly and fiber spinning line is expected to be operational in 2001 and we recently announced that we plan to increase production of single-use dialyzers at our Ogden, Utah facility by 200% to meet demand for these products. Over the past four years we have doubled employment at this facility to 960 employees. In 2000 we also constructed a new manufacturing facility for liquid concentrates in Coppel, Texas. Each step in the manufacture of our products, from the initial processing of raw materials through the final packaging of the completed product, is carried out under controlled quality assurance procedures required by law and under Good Manufacturing Practices or the Conformite Europeenne (CE) certification process, as well as under comprehensive quality management systems, such as the internationally recognized ISO 9000-9004 standards, which are mandated by regulatory authorities in the countries in which we operate. In addition, the St. Wendel and Schweinfurt facilities periodically undergo U.S. Food and Drug Administration inspection. The St. Wendel facility was last inspected in September 1998. The Schweinfurt facility was inspected by the U.S. Food and Drug Administration and by the comparable German authority under the ISO 9000 standard in mid-1999. No material adverse findings 91 99 were noted at either facility. Our facilities in Ogden, Utah and Reynosa, Mexico received ISO 9001 certification and approval for CE marking in 1999. In 2000 our facility in Antalya, Turkey received approval for CE marking and our manufacturing facility in Walnut Creek, California received ISO 9001 certification. Incoming raw materials for solutions undergo tests, such as, infrared, ultraviolet and physical and chemical analyses to assure quality and consistency. During the production cycle, sampling and testing take place in accordance with established quality assurance procedures to ensure the finished product's sterility, safety and potency. Pressure, temperature and time for various processes are monitored to assure consistency of semi-finished goods. Environmental conditions are monitored to assure that particulate and bacteriological levels do not exceed specified maximums. We maintain continuing quality control and Good Manufacturing Policies education and training programs for our employees. See "-- Regulatory and Legal Matters." ENVIRONMENTAL MANAGEMENT We conduct our operations with a commitment to environmental quality. Several of our locations have been certified in accordance with ISO 14001, the international standard for environmental management systems, and the European Union Eco Audit, a more restrictive audit performed within the European Union. In 1999, we integrated the existing environmental management systems in our production plants in St. Wendel and Schweinfurt and our research and development facilities in Bad Homburg, into our newly created and implemented corporate environmental management system. An independent certification body has certified the new system. We will also start the process of securing ISO 14001 certification for our operations in North America and thus continue our global efforts to improve the environmental compatibility of our products, production sites and dialysis clinics. We have also implemented a reporting system for the collection of environmental data in our certified units enabling us to retrieve the relevant performance indicators and to identify further improvement potential. For example a survey of our European clinics showed significant saving possibilities and provided input for further projects in the field of water consumption. The results of this "Eco-controlling system" will enable us to establish future targets which should result in savings in environmentally related costs of approximately 40% during the next few years, combined with positive impacts for environmental protection. Our research and development efforts also focus on environmental compatibility. For example, our new generation of FX-class dialyzers reduce weight and volume by 54% and 33% respectively and use an environmentally improved material composition. Another important project in 2000 was the development and integration of an environmental management system, based on ISO 14001, into our overall clinic quality management system. A current pilot project is generating the first implementation experience, and in 2001 we plan to expand the integration process of this EMS to all our dialysis clinics. We initiated a total of 13 environmentally related projects in our production plant in St. Wendel. Environmentally related efforts in the United States focus on continual waste minimization programs involving solid, medical and hazardous waste. In dialysis services, this has been accomplished via quarterly monitoring all medical waste costs related to the generation of medical waste and proper segregation and disposal. Regulatory compliance in the environmental area is accomplished through our internal Environmental Health and Safety Compliance Audit Program conducted at our locations. Furthermore, we have taken the initiative of promoting environmentally friendly schemes in the community and intend to dedicate even stronger focus on waste minimization initiatives in our dialysis services and our production plant in Ogden, Utah. SOURCES OF SUPPLY We purchase raw materials essential to our dialysis products business worldwide from numerous suppliers and we have not encountered serious shortages or delays in obtaining raw materials. To assure continuous high quality in the International segment, we formed a purchasing consulting center in mid 92 100 1998. This group coordinates supplies and enters into global contracts using benchmarking and systematic analysis of market and price information. Its major strategy has been to reach global commercial agreements with harmonized net prices through economies of scale from standardization of parts or materials and concentration of suppliers. We have supply agreements extending for up to three years for critical raw materials like polymers, granulates and plastics. These agreements include dual sourcing, multi-plant agreements or approved second sources to avoid the risk of bottlenecks in our supply chain. For key production processes, we have the internal capability to benchmark suppliers and/or assume manufacturing of key parts for internal needs. Of 51 supply projects started in 1998 and 29 projects started in 1999 we have completed 42 fixed agreements. In 2000, we started 31 additional projects, including projects for other Fresenius affiliates, mainly in the fields of plastic granulates, packaging materials, injection moldings, clinical materials and consulting. An interactive information system connects all global projects to insure standardization and monitoring by the purchasing consulting center. Markets in 2000 were characterized by significant price-pressure, principally for oil and paper, due in part to the U.S. dollar/euro exchange rate fluctuation. We were able to partially offset this development through intensive negotiations and the optimization of our supply distribution. In 2001 the purchasing consulting center will focus on global contract pooling with external partners, and we will initiate a strategic re-evaluation of all supplier sourcing contracts. We have material purchase commitments of approximately $165 million of materials of which $90 million is committed at December 31, 2000 for fiscal year 2001. The terms of these agreements run 2-5 years. The Materials Management Department of our Dialysis Products division in the North America segment is responsible for planning and procuring of $220 million annually from 150 suppliers. It provides production plans to our manufacturing locations and manages inventory levels in the distribution network that delivers supplies to clinics and home patients. NEW PRODUCT INTRODUCTIONS Research and development focuses strongly on the development of new products, technologies and treatment concepts to optimize treatment quality for dialysis patients, and on process technology for manufacturing our products. Research and development expenditures were $32 million in 2000, $32 million in 1999, and $31 million in 1998. We introduced the following new or enhanced products in 2000: FX-class and Optiflux dialyzers. Both of these dialyzers use polysulfone-based Helixone membranes, which significantly increase clearance. FX-class dialyzers provide simplified handling and more secure treatment and improve waste management, logistics and handling through weight reduction and environmentally improved materials. Optiflux polysulfone dialyzers deliver small and middle molecular weightsolute clearance. Both dialyzers have outstanding biocompatibility, continuing our efforts to provide patient care in the most biocompatible way. The 4008 3mix(TM) hemodialysis machine, which is capable of handing three different dialysis concentrate components instead of the usual two. The 4008 3mix(TM) permits selection of desired sodium and bicarbonate concentrations directly at the treatment site and provides a high standard of patient safety through enhanced conductivity monitoring and specifically coded connectors. The On-line Clearance Monitor, an options module for the 4008 series of dialysis machines, which provides immediate and online information on urea clearance and dialysis dose, providing a clear and visible picture of treatment efficacy and enabling immediate treatment adjustments to be made. The 2008K hemodialysis machine, introduced in the North American market, which provides innovative elements such as improved operator interface, an improved blood pump, level detector and heparin pump modules, and fluid removal measurement combined with a feedback control mechanism to monitor and avoid sudden declines in blood pressure and resulting complications. 93 101 Our Infrared Data Acquisition, a receiver/transmitter that can download data on completion of treatment to a hand-held computer. Data can then be transferred to a PC or PC-network for further processing or immediate treatment analysis. New or improved products for peritoneal dialysis, including: - Stay-safe(R)balance, a more biocompatible peritoneal dialysis solution in a dual chamber bag. This product is pH-neutral, which may provide longer preservation of the peritoneum as a natural dialysis membrane, - the Premier(TM) Plus Double Bag and the Premier(TM) Transfer Set, and - upgrades to the Freedom(TM) Cycler PD+ and related software, and new therapy-planning software. RESEARCH AND DEVELOPMENT Our research and development activities aim to improve the quality of dialysis treatment by matching it more closely with the individual needs of the patient, while reducing the overall cost for treatment. With our vertical integration, our research and development department can apply our experience as the world's largest provider of dialysis treatments to product development. To maintain and further enhance a continuous stream of product innovations, we had 220 employees working in research and development worldwide at December 31, 2000. Approximately two-thirds of our research and development activities are based in Germany and one-third are based in North America. Research and development focuses strongly on the development of new products, technologies and treatment concepts to optimize treatment quality for dialysis patients, and on process technology for manufacturing our products. Research and development expenditures were $31 million in 1998, $32 million in 1999, and $32 million in 2000. For information regarding recent product introductions, see "-- New Product Introductions." We intend to continue to maintain our central research and development operations for disposable products at our St. Wendel, Germany facility and for durable products at our Schweinfurt and Bad Homburg, Germany facilities. We expect that as our dialysis products business continues to expand internationally, research and development activities will rely primarily on the research and development activities conducted at St. Wendel, Bad Homburg, and Schweinfurt, which will transfer the production technology they develop to our production centers. Local activities will continue to focus on cooperative efforts with those facilities to develop new products and product modifications for local markets. In North America, we have concentrated our business development activities on expanding our products business in three main areas: - pharmaceutical products utilized in treating our renal patient base, - innovative products to improve vascular access outcomes for our renal patients, and - products and technologies which leverage our core competencies to provide extracorporeal therapies to treat other diseases. Our scientific service and consulting activities during 2000 focused both on product-related scientific issues and providing consultation to the nephrology community on these issues. In order to promote the exchange of new ideas in nephrology and dialysis and to strengthen our role in the international scientific community, we have established the "International Exchange Program for Young Nephrologists." With our financial support and close scientific cooperation young scientists worldwide are given the opportunity to work at renowned European research institutions. We closely work together with international nephrology experts in writing treatment recommendations for the most important topics in chronic and end-stage renal failure. In the beginning of 2000 we published a treatment recommendation on renal anemia. This was followed by a publication on renal osteodystrophy and cardiovascular risk factors in the journal "Nephrology, Dialysis, and Transplantation" in autumn 2000. We 94 102 will translate these recommendations into different languages and distribute them to our customers. Recommendations on further topics, such as nutrition and vascular access, will be published in 2001. PATENTS, TRADEMARKS AND LICENSES As the owner of or licensee under patents and trademarks throughout the world, we hold rights under 997 patents and patent applications relating to dialysis technology in major markets. Patented technologies that relate to dialyzers include our polysulfone hollow fiber, an in-line sterilization method, and sterile closures for in-line sterilized medical devices. For dialysis machines, patents include: - the location for a filter device for sterile filtering dialysate in the dialysis machine circuit; - the safety concept for the ultrafiltration device in a dialysis machine used for high flux dialysis; - a process for the on-line preparation of substitution fluid in hemodiafiltration machines; - conductivity sensor arrangements in the dialysis machine circuit; - conductivity sensor devices, mathematical algorithms for using such devices; - patents relating to controlled bicarbonate dialysis; and - patents related to thermal balance during dialysis. The connector system for our biBag(TM) bicarbonate concentrate powder container has been patented in the United States, Norway and Europe while national applications in Japan and Finland are still pending. Further pending patents include the new generation of DIASAFEplus(R) filters. Competitors in Europe and Japan have filed oppositions to the patent family covering Fresenius Medical Care Polysulfone(R) high flux membranes. Our patents have been upheld in both Europe and Japan. We successfully defended an appeal in the European Union, but an appeal by the Japanese competitor is still pending. While we believe that these patents are valid in the relevant jurisdictions, a successful opposition could have a material adverse effect on our business. Among our more significant patents, the patent for our polysulfone hollow fiber expires in 2005 in Germany, 2007 in the United States, and at various dates in 2005 in other jurisdictions. The patent for our in-line sterilization method expires in 2010 in Germany, 2010 in the United States, and in 2010 in other jurisdictions, and the patent for our biBag connector expires in 2013 in Germany, 2013 in the United States, and in 2013 in other jurisdictions. We believe that after expiration of these patents, our proprietary know-how for the manufacture of these products will continue to constitute a significant competitive advantage. For peritoneal dialysis, we hold rights on the Safe-Lock(TM) system. For our non-polyvinyl chloride film, known as Biofine(R), indicated for general use in intravenous and peritoneal dialysis, we have a grant patent in Germany as well as pending patent applications in various countries. Further pending patents describe a special film for a peelable, non-polyvinyl chloride multi chamber bag for peritoneal dialysis solutions. Fresenius USA's intellectual property includes the Inpersol(TM) trademark and rights to certain manufacturing know-how Fresenius USA obtained from Abbott Laboratories, and a paid-up non-exclusive global sublicense from Baxter, Inc. to certain CAPD and connector technology. We believe that our success will depend, in large part, on our technology. As a standard practice, we obtain legal protections we believe are appropriate for our intellectual property, but intellectual property is subject to infringement or invalidation claims. In addition, technological developments in ESRD therapy could reduce the value of our existing intellectual property. Any such reduction could be rapid and unanticipated. Other than as disclosed in this report, we are not dependent to any material extent upon patents, licences or contracts. 95 103 COMPETITION The markets in which we sell our dialysis products are highly competitive. Our competitors in the sale of hemodialysis and peritoneal dialysis products include Gambro AB, Baxter International Inc., Asahi Medical Co., Ltd., Bellco S.p.A., a subsidiary of Sorin Biomedica S.p.A., Bieffe Medital S.p.A., which is an affiliate of Baxter, Inc., B. Braun Melsungen AG, Nissho Corporation, including Nissho Nipro Corporation Ltd., Nikkiso Co., Ltd., Terumo Medical Corporation and Toray Medical Co., Ltd. Some of our competitors possess greater financial, marketing and research and development resources than we do. We believe that in the dialysis product market, companies compete primarily on the basis of product performance, cost-effectiveness, reliability, assurance of supply and service and continued technological innovation. We believe our products are highly competitive in all of these areas. Dialysis centers acquired by other product manufacturers may elect to limit or terminate their purchases of our dialysis products in order to avoid purchasing products manufactured by a competitor. We believe, however, that customers will continue to consider our long-term customer relationships and reputation for product quality in making product purchasing decisions, and we intend to compete vigorously for these customers. DISCONTINUED OPERATIONS Effective June 1, 1998, we classified our homecare/non-renal diagnostics businesses as discontinued operations. Until 1998, through the homecare division of NMC, we provided intravenous infusion, respiratory therapies and home medical equipment in the United States. Through the diagnostic services division of NMC, we also provided non-renal diagnostic testing at our own imaging clinics and on-site in physician offices, hospitals and nursing homes. We sold our non-renal diagnostics business in June 1998 and our homecare business in July 1998. We retained the assets belonging to the homecare business and the operations associated with the delivery of intradialytic parenteral nutrition therapy. For the year ended December 31, 1998, we recorded net losses after tax of $9 million from operations of discontinued businesses and $97 million from the disposal of these businesses. EMPLOYEES At March 31, 2001, we had 37,791 employees, as compared to 32,314 at March 31, 2000 and 31,094 at December 31, 1999. They are employed in our principal segments as follows: North America 26,250 employees and International 11,541. A decline in total employees from the divestiture of the U.S. homecare and non-renal diagnostics businesses was offset in 1998 by an increase due to dialysis clinic acquisitions. We are a member of the Chemical Industry Employers Association in Germany and we are bound by union agreements negotiated with the respective union representatives. We are also party to additional shop agreements negotiated with works councils at individual facilities relating to those facilities. We believe our relations with our employees are good. During the last two fiscal years, we have not suffered any labor-related work disruptions. In addition, approximately 600 employees, or 2% of our U.S. employees are covered by union agreements. 96 104 CAPITAL EXPENDITURES We invested, by business segment and geographical areas, the following amounts during the three fiscal years ended December 31, 2000, 1999 and 1998 and have budgeted the following amounts for the year 2001:
ACTUAL -------------------- BUDGET 2000 1999 1998 2001 ---- ---- ---- ------ (U.S. DOLLARS IN MILLIONS) Acquisitions North America............................................ $116(a) $ 65 $170 International Germany............................................... 11 -- -- Rest of World......................................... 161 46 95 ---- ---- ---- ---- Total acquisitions............................... $288 $111 $265 $100(a) ==== ==== ==== ==== Capital expenditures for property, plant and equipment North America............................................ $113 $ 81 $ 75 International Germany............................................... 24 24 31 Rest of World......................................... 91 55 53 ---- ---- ---- ---- Total capital expenditures....................... $228 $160 $159 $270 ==== ==== ==== ====
- --------------- (a) Excludes the acquisition of Everest on January 5, 2001 for a purchase price of approximately $341 million. See "Summary -- Our Business -- Recent Developments." In North America major capital expenditures for the year 2001 are planned for our manufacturing facility in Ogden, Utah. We have made a $65 million capital commitment to construct two dialyzer assembly lines and two fiber spinning lines. Production starts are scheduled between the fourth quarter of 2001 and the second quarter of 2002. Major capital expenditures in Japan scheduled for 2001 include a $14 million investment in a second fiber spinning line in Inukai. At our St. Wendel plant in Germany we plan to build a dialyzer assembly line for production of the new generation of FX-class dialyzers at an estimated cost of $10 million and we plan to invest an additional $7 million in a fourth line to produce peritoneal dialysis solutions. We finance our capital expenditures through cash flow from operations or under the existing credit facilities. 97 105 PROPERTY The table below describes our principal facilities. We do not own the land and buildings comprising our principal facilities in Germany. Rather, we lease those facilities on a long-term basis from Fresenius AG or one of its affiliates. This lease is described under "Certain Relationships and Related Party Transactions -- Real Property Lease."
FLOOR AREA CURRENTLY OWNED OR (APPROXIMATE LEASED BY FRESENIUS LEASE LOCATION SQUARE METERS) MEDICAL CARE EXPIRATION USE - -------- -------------- ------------------- ------------- ----------------------------- Bad Homburg, Germany.... 5,374 Leased December 2006 Corporate headquarters and administration St. Wendel, Germany..... 49,732 Leased December 2006 Manufacture of polysulfone membranes and dialyzers, bloodines, and peritoneal dialysis solutions; research an development Schweinfurt, Germany.... 15,717 Leased December 2006 Manufacture of hemodialysis machines and peritoneal dialysis cyclers; research and development L'Arbresle, France...... 13,524 Owned Manufacture of polysulfone dialyzers and special filters dry hemodialysis concentrates Palazzo Pignano, Manufacture of bloodines and Italy................. 66,550 Owned tubing Nottinghamshire, United Kingdom............... 5,110 Owned Manufacture of hemodialysis concentrate solutions Barcelona, Spain........ 2,000 Owned Manufacture of peritoneal dialysis bags and concentrates Ankara, Turkey.......... 1,000 Leased February, Manufacture of liquid 2009 hemodialysis concentrate solutions Tunisia................. 491 Leased December 2000 Manufacture of liquid hemodialysis concentrate solutions Buenos Aires, Manufacture of hemodialysis Argentina............. 10,100 Owned concentrate solutions Rio de Janeiro, Month to Manufacture of hemodialysis Brazil................ 1,159 Leased Month concentrate solutions Reynosa, Mexico......... 13,936 Owned Manufacture of bloodines Oita, Japan(1).......... 24,083 Owned Manufacture of polysulfone membranes, dialyzers, dialysis solutions, dialysis machine components and assembly of dialysis machines Hong Kong............... 1,013 Leased February 28, Corporate headquarter and 2003 administration -- Asia-Pacific Milson Point, June 30, 2003 Administration Australia............. 557 Leased with no renewal option Smithfield, Australia... 5,350 Owned Manufacture of hemodialysis concentrate solutions Warehouse Auckland, New Zealand... 2,043 Leased March 31, Administration 2001
98 106
FLOOR AREA CURRENTLY OWNED OR (APPROXIMATE LEASED BY FRESENIUS LEASE LOCATION SQUARE METERS) MEDICAL CARE EXPIRATION USE - -------- -------------- ------------------- ------------- ----------------------------- Pusat, KL, Malaysia..... 4,060 Leased March 15, Administration 2002 with an additional extended 2-year renewal option to March 15, 2004 based on prevailing market rental rate Taipei, Taiwan.......... 5,940 Leased December 2003 Administration Tokyo, Japan............ 1,153 Leased January 1999 Administration with 5-year renewal option Inukai, Japan........... -- Land 24,084 Owned Manufacture of polysulfone dialyzers and filters -- Building 2,142 Owned Buzen, Japan............ 37,094 Owned Manufacture of peritoneal dialyzers Seoul, South Korea...... 1,554 Leased August 15, Administration 2001 Lexington, October 2007 Corporate headquarters and Massachusetts......... 18,581 Leased with 5-year administration -- North renewal America option Walnut Creek, June 2002 Manufacture of hemodialysis California............ 7,897 Leased with 5-year machines and peritoneal renewal dialysis cyclers; research option and development Warehouse Space -- Machine components 1,625 Leased Ogden, Utah............. 41,807 Owned Manufacture polysulfone membranes and dialyzers and peritoneal dialyzers solutions; research and development Delran, New Jersey...... 3,902 Leased October 2002 Manufacture of liquid with 5-year hemodialysis concentrate renewal solutions option Perrysburg, Ohio........ 3,252 Leased August 2008 Manufacture of dry hemodialysis concentrates Livingston, October 2001 Manufacture of liquid California............ 2.973 Leased with 5-year hemodialysis concentrates renewal option Chicago, Illinois....... 63 Leased March 2005 Clinical laboratory testing Freemont, California.... 6,688 Leased July 2003 Clinical laboratory testing with 5-year renewal option Rockleigh, New Jersey... 7,897 Leased June 2005 Clinical laboratory testing with two 5-year renewal options
99 107
FLOOR AREA CURRENTLY OWNED OR (APPROXIMATE LEASED BY FRESENIUS LEASE LOCATION SQUARE METERS) MEDICAL CARE EXPIRATION USE - -------- -------------- ------------------- ------------- ----------------------------- Miami, Florida.......... 400 Leased Month to Administration Month Irving, Texas........... 6,503 Leased Manufacture of liquid hemodialysis solution
- --------------- (1) We own 70% of the joint venture that owns the facility. We lease most of our dialysis clinics, manufacturing, laboratory, warehousing and distribution and administrative and sales facilities in the United States and foreign countries on terms which we believe are customary in the industry. We own those dialysis clinics and manufacturing facilities that we do not lease. REGULATORY AND LEGAL MATTERS REGULATORY OVERVIEW Our operations are subject to extensive governmental regulation by virtually every country in which we operate including, most notably, in the United States, at the federal, state and local levels. Although these regulations differ from country to country, in general, non-U.S. regulations are designed to accomplish the same objectives as U.S. regulations regarding the operation of dialysis clinics, laboratories and manufacturing facilities, the provision of quality health care for patients, the maintenance of occupational, health, safety and environmental standards and the provision of accurate reporting and billing for governmental payments and/or reimbursement. In the United States, some states prohibit ownership of health care providers by for-profit corporations or establish other regulatory barriers to direct ownership by for-profit corporations. Outside the United States, each country has its own payment and reimbursement rules and procedures, and some countries prohibit ownership of health care providers or establish other regulatory barriers to direct ownership by foreign companies. In all jurisdictions, we work within the framework of applicable laws to establish alternative contractual arrangements to provide services to those facilities. Any of the following matters could have a material adverse effect on our business, financial condition and results of operations: - failure to receive required licenses, certifications or other approvals for new facilities or significant delays in such receipt; - loss of various federal certifications or termination of licenses under the laws of any state or other governmental authority; and - changes resulting from health care reform or other government actions that reduce reimbursement or reduce or eliminate coverage for particular services we provide. We must comply with all U.S., German and other legal and regulatory requirements under which we operate, including the U.S. federal Medicare and Medicaid Fraud and Abuse Amendments of 1977, as amended, generally referred to as the "anti-kickback statute", the federal restrictions on certain physician referrals, commonly known as the "Stark Law", and other fraud and abuse laws and similar state statutes, as well as similar laws in other countries. It is possible that applicable laws or regulations will be amended, or that enforcement agencies or the courts will make interpretations inconsistent with ours or the manner in which we conduct our business. Any one of these events could have a material adverse effect on our business, reputation, financial condition and results of operations. Sanctions for violations of these statutes may include criminal or civil penalties, such as imprisonment, fines or forfeitures, denial of payments, and suspension or exclusion from the Medicare and Medicaid programs. In the United States, these laws have been broadly interpreted by a number of courts, and significant government funds and personnel have been devoted to enforcing them because enforcement has become a high priority for the federal government and some states. We, and the health care industry in general, will continue to be subject to extensive federal, state and foreign regulation, and we cannot predict the full scope of these regulations. 100 108 In connection with the Settlement, FMCH has entered into a corporate integrity agreement with the U.S. government, which requires that FMCH staff and maintain a comprehensive compliance program, including a written code of conduct, training programs and compliance policies and procedures. The corporate integrity agreement requires annual audits by an independent review organization and periodic reporting to the government. The corporate integrity agreement permits the U.S. government to exclude FMCH and its subsidiaries from participation in U.S. federal health care programs if there is a material breach of the agreement that is not cured by FMCH within 30 days after FMCH receives written notice of the breach. PRODUCT REGULATION UNITED STATES In the United States, the Food and Drug Administration and comparable state regulatory agencies impose requirements on our subsidiaries that manufacture and sell medical products and supplies under their jurisdiction. These rules require: - compliance with Good Manufacturing Practices in manufacturing medical products; and - compliance with Food and Drug Administration rules regulating, - product design; - safety; - advertising and labeling; and - record-keeping and reporting of adverse events. In addition, in order to clinically test, produce and market certain medical products and other disposables (including hemodialysis and peritoneal dialysis equipment and solutions, dialyzers, bloodlines and cell separators) for human use, we must satisfy mandatory procedures and safety and efficacy requirements established by the Food and Drug Administration or comparable state and foreign governmental agencies. These rules generally require that the Food and Drug Administration approve products as safe and effective for their intended use prior to being marketed. The Food and Drug Administration has designated peritoneal dialysis solutions as drugs and, as such, they are subject to additional Food and Drug Administration regulation under the Food, Drug and Cosmetic Act of 1938. The approval process is expensive, time consuming and subject to unanticipated delays. The Food and Drug Administration may also prohibit the sale or importation of products, order product recalls or require post-marketing testing and surveillance programs to monitor a product's effects. We believe that we have filed for or obtained all necessary approvals for the manufacture and sale of our products in jurisdictions in which those products are currently produced or sold. We cannot assure that we will obtain necessary regulatory approvals or clearances within reasonable time frames, if at all. Any delay or failure to obtain regulatory approval or clearances could have a materially adverse effect on our business, financial condition and results of operations. GERMANY AND OTHER NON-U.S. Most countries maintain different regulatory regimes for pharmaceutical products and for medical devices. In each regime, there are regulations governing manufacturers and distributors, as well as regulations governing the final products manufactured and distributed. Treaties or other international law and standards and guidelines under treaties or laws may supplement or supersede individual country regulations. Some of our products, such as peritoneal dialysis solutions, are considered pharmaceuticals. The European Union has issued a directive on pharmaceuticals, No. 65/65/EWG (January 26, 1965), as amended. Each member of the European Union is responsible for conforming its law to comply with this 101 109 directive. In Germany, the German Drug Law (Arzneimittelgesetz) which implements European Union requirements, is the primary regulation applicable to pharmaceutical products. The provisions of the German Drug Law are typical of the legal standards in other European countries. The German Drug Law states the requirements for the authorization of a company to manufacture pharmaceuticals. A manufacturer must, among other requirements, appoint pharmacists or physicians to be responsible for the quality, safety and efficacy of the pharmaceuticals. At least five responsible persons must be appointed: a marketing manager, a quality control manager, a manufacturing manager, a safety officer, and a drug information officer. Each of these persons may be held personally liable under German criminal laws for violations of the German Drug Law. International guidelines also govern the manufacture of pharmaceuticals and, in many cases, overlap with national requirements. In particular, the Pharmaceutical Inspection Convention, an international treaty, contains rules which are binding on most countries in which pharmaceuticals are manufactured. Among other things, the Pharmaceutical Inspection Convention establishes requirements for Good Manufacturing Practices which are then adopted at the national level. Another international guideline, which is non-binding, is the ISO 9000-9004 system for assuring quality control. This system is more detailed than Good Manufacturing Practices. Compliance entitles the manufacturer to utilize the CE certification of quality control. In July 1993, we obtained our first certificates for successfully running full quality management systems under the ISO 9001 standard. In addition to regulating the manufacture of pharmaceuticals, countries directly regulate marketing of the pharmaceuticals produced. A drug needs to be registered and authorized in every country in which it is distributed. European Union rules govern the conditions for a registration, such as pre-clinical and clinical testing. Historically, medical devices have not been regulated as strictly as pharmaceuticals, but more stringent regulatory schemes have been adopted during the last decade. The European Union began to harmonize national regulations comprehensively for the control of medical devices in Europe in 1993, when it adopted its Medical Devices Directive. In 1995, Germany implemented this directive when it adopted the Medical Devices Act (Medizinproduktegesetz), which is similar in many ways to the German Drug Law. The European Union directive applies to both the manufacturer's quality control system and the products' technical design. Depending on the class of medical devices, a manufacturer may choose alternative regulatory modules to demonstrate compliance with European Union provisions. To assure and demonstrate the high quality standards and performance of our operations, we have subjected our entire European business to the most comprehensive procedural module, which is also the fastest way to launch a new product in the European Union. This module requires the certification of a full quality management system by a notified body charged with supervising the quality management system. A notified body is a group accredited and monitored by governmental agencies that inspects manufacturing facilities and quality control systems at regular intervals and is authorized to carry out unannounced inspections. When a company receives a European Union certificate for the quality management system of a particular facility, it may assess whether products developed and manufactured in the facility satisfy European Union requirements. European Union requirements for products are laid down in harmonized European Union standards and include conformity to safety requirements, physical and biological properties, construction and environmental properties, and information supplied by the manufacturer. A manufacturer must demonstrate conformity to these requirements by pre-clinical tests, biocompatibility tests, qualification of products and packaging, risk analysis and well-conducted clinical investigations approved by ethics committees. A manufacturer having a European Union-certified full quality management system has to declare and document conformity of its products to the harmonized European standards. If able to do so, the manufacturer must put a "CE" mark on the products. The CE mark, which stands for Conformite Europeenne, demonstrates compliance with the relevant European Union requirements. Products subject to these provisions that do not bear the "CE" mark cannot be imported, sold or distributed within the European Union. 102 110 The Medical Devices Directive became mandatory on June 15, 1998. Our Series 4008, 4008B, 4008E dialysis machines and their therapy modifications, and our PD-NIGHT(R) cycler, and our other medical devices distributed in the European market, as well as our dialysis filters and dialysis tubing systems and accessories, all bear the "CE" mark. We expect to continue to obtain additional certificates as they are required. FACILITIES AND OPERATIONAL REGULATION UNITED STATES The Clinical Laboratory Improvement Amendments of 1988 subject virtually all clinical laboratory testing facilities, including our facilities, to the jurisdiction of Department of Health and Human Services. That act establishes national standards for assuring the quality of laboratories based upon the complexity of testing performed by a laboratory. Some of our operations also subject us to federal laws governing the repackaging and dispensing of drugs and the maintenance and tracking of certain life sustaining and life-supporting equipment. Our operations are subject to various U.S. Department of Transportation, Nuclear Regulatory Commission and Environmental Protection Agency requirements and other federal, state and local hazardous and medical waste disposal laws. As currently in effect, laws governing the disposal of hazardous waste do not classify most of the waste produced in connection with the provision of dialysis or laboratory services as hazardous, although disposal of nonhazardous medical waste is subject to specific state regulation. However, our laboratory operations do generate hazardous waste which is subject to specific disposal requirements. Our operations are also subject to various air emission and wastewater discharge regulations. Federal, state and local regulations require that we meet various standards relating to, among other things, facilities, management, personnel qualifications and licensing, maintenance of proper records, equipment, quality assurance programs, the operation of pharmacies, and dispensing of controlled substances. All of our operations are subject to periodic inspection by federal and state agencies and other governmental authorities to determine if the operations, premises, equipment, personnel and patient care meet applicable standards. To receive Medicare reimbursement, our dialysis clinics, renal diagnostic support business and laboratories must have CMS certification. All of our dialysis clinics and laboratories that furnish Medicare services have the required certification. Some of our facilities and employees are also subject to state licensing statutes and regulations. These statutes and regulations are in addition to federal and state rules and standards that we must meet to qualify for payments under Medicare, Medicaid and other government reimbursement programs. Licenses and approvals to operate these clinics and conduct certain professional activities are customarily subject to periodic renewal and to revocation upon failure to comply with the conditions under which they were granted. Occupational Safety and Health Administration regulations require employers to provide employees who work with blood or other potentially infectious materials with prescribed protections against blood-borne and air-borne infection carriers. The regulatory requirements apply to all health care facilities, including dialysis clinics, laboratories and renal diagnostic support businesses, and require that employers determine which employees may be exposed to blood or other potentially infectious materials and have in effect a written exposure control plan. In addition, employers are required to provide hepatitis B vaccinations, personal protective equipment, blood-borne infection training, post-exposure evaluation and follow-up, waste disposal techniques and procedures, engineering and work practice controls and other programs required by the Occupational Safety and Health Administration for blood-borne and air-borne infection carriers. Some states in which we operate have certificate of need laws that require any person or entity seeking to establish a new health care service or to expand an existing service to apply for and receive an administrative determination that the service is needed. We currently operate in 13 states and the District 103 111 of Columbia and Puerto Rico that have certificate of need laws applicable to dialysis clinics. These requirements may provide a barrier to entry to new companies seeking to provide services in these states, but also may constrain our own ability to expand our operations in these states. GERMANY AND OTHER NON-U.S. Countries outside of the United States possess a wide variety of operational regulation at disparate levels. Accordingly, our operations are subject to very different regulations in different countries. Most countries regulate dialysis clinic operating conditions and product manufacturing. We are subject to a broad spectrum of regulation. Our operations must comply with various environmental and transportation regulations in the various countries in which we operate. Our manufacturing facilities and dialysis clinics are also subject to various standards relating to, among other things, facilities, management, personnel qualifications and licensing, maintenance of proper records, equipment, quality assurance programs, the operation of pharmacies, the protection of workers from blood-borne diseases and the dispensing of controlled substances. All of our operations are subject to periodic inspection by various governmental authorities to determine if the operations, premises, equipment, personnel and patient care meet applicable standards. Our dialysis clinic operations and our related activities generally require licenses, which are subject to periodic renewal and may be revoked for violation of applicable regulatory requirements. In addition, many countries impose various investment restrictions on foreign companies. For instance, government approval may be required to enter into a joint venture with a local partner. Some countries do not permit foreign investors to own a majority interest in local companies or require that companies organized under their laws have at least one local shareholder. Investment restrictions therefore affect the corporate structure, operating procedures and other characteristics of our subsidiaries and joint ventures in these and other countries. We believe our facilities are currently in compliance in all material respects with the applicable national and local requirements in the jurisdictions in which they operate. REIMBURSEMENT UNITED STATES Dialysis Services. Our dialysis clinics provide outpatient hemodialysis treatment and related services for ESRD patients. In addition, some of our clinics offer services for the provision of peritoneal dialysis and hemodialysis treatment at home. The Medicare program is the primary source of revenue for the North America segment's dialysis care business. For example, in 2000, approximately 59% of our dialysis care revenue in the United States or approximately 37% of our revenue worldwide resulted from Medicare's ESRD program. As described below, the Medicare program reimburses the North America segment for dialysis treatment and related laboratory services in accordance with the Medicare composite rate for some products and services rendered at our dialysis clinics. As described in the next paragraph, other payment methodologies apply to Medicare reimbursement for other products and services that we provide at our dialysis clinics and for products that we sell and support services we furnish to ESRD patients receiving dialysis treatment at home. Medicare reimbursement rates are fixed in advance and are subject to adjustment from time to time by the U.S. Congress. Although this form of reimbursement limits the allowable charge per treatment, it provides us with predictable and recurring revenue per treatment. When Medicare assumes responsibility as primary payor, as described below under "Coordination of Benefits," Medicare is responsible for payment of 80% of the Medicare composite rate set by the CMS for dialysis treatments. The Medicare composite rate governs the Medicare reimbursement available for a designated group of dialysis services, including the dialysis treatment, supplies used for treatment, specified laboratory tests and specified medications. The Medicare composite rate consists of labor and non-labor components with adjustments made for regional wage costs, subject to a national payment rate schedule. 104 112 The Medicare composite rate for 2001 was increased by an average of 2.4% (as a result of set increases over the year), with a new payment ceiling of $144 per treatment. Some exceptions are paid at a higher rate based on specific criteria. Medicare reimburses us for home dialysis using two methods based on which supplier is selected to provide dialysis supplies and equipment. In Method I reimbursement, the dialysis clinic is designated as the supplier. Under Method I, the clinic provides all dialysis treatment related services, including equipment and supplies, and is reimbursed using a methodology based on the Medicare composite rate. In Method II reimbursement, our dialysis products division is designated as the direct supplier. Under Method II, our dialysis products division provides the patient directly with all necessary equipment and supplies and is reimbursed by Medicare subject to a capitated ceiling. Clinics provide home support services to Method II patients and these services are reimbursed at a monthly fee for service basis subject to a capitated ceiling. The reimbursement rates under Method I and Method II differ, although both are prospectively determined and are subject to adjustment from time to time by the U.S. Congress. Some items and services that we furnish at our dialysis clinics are not included in the Medicare composite rate and are eligible for separate Medicare reimbursement, typically on the basis of established fee schedule amounts. These items and services include specified drugs such as EPO, blood transfusions and some diagnostic tests. Medicare payments are subject to change by legislation and pursuant to deficit reduction measures. The Medicare composite rate was unchanged from commencement of the Medicare ESRD program in 1972 until 1983. From 1983 through December 1990, numerous congressional actions resulted in a net reduction of the average reimbursement rate from $138 per treatment in 1983 to approximately $125 per treatment in 1990. The U.S. Congress increased the ESRD reimbursement rate, effective January 1, 1991, to an average rate of $126 per treatment. Effective January 1, 2000, the reimbursement rate was increased by 1.2%. In December 2000 an additional increase of 2.4% was approved for the year 2001. We cannot predict what, if any, future changes may occur in the rate of Medicare reimbursement. Any significant decreases in the Medicare reimbursement rates could have a material adverse effect on our dialysis services business. In addition, because the demand for products is affected by Medicare reimbursement, a decline in reimbursement rates could also adversely affect our products business. Increases in operating costs that are affected by inflation, such as labor and supply costs, without a compensating increase in reimbursement rates, also may adversely affect our business and results of operations. Patients or their third-party insurance carriers, including employer-sponsored health insurance plans, commercial insurance carriers and the Medicaid program, are responsible for paying any co-payment amounts for approved services not paid by Medicare. Payment of these amounts -- typically the annual deductible and 20% co-insurance -- is subject to the specific coverage policies of the payors. The extent to which we are actually paid the full co-payment amounts depends on the particular responsible party. Each third-party payor, including Medicaid, makes payment under contractual or regulatory reimbursement provisions which may or may not cover the full 20% co-payment or annual deductible. Where the patient has no third-party insurance or the third party insurance does not cover co-payment or deductibles and the patient is not eligible for Medicaid, the patient is responsible for paying the co-payments or the deductible. We frequently do not collect these amounts in full despite reasonable collection efforts. Under an advisory opinion from the Office of the Inspector General, subject to specified conditions, we and other similarly situated providers may make contributions to a non-profit organization that has volunteered to make premium payments for supplemental medical insurance and/or medigap insurance on behalf of indigent ESRD patients, including our patients. Laboratory Tests. Spectra Renal Management obtains a substantial portion of its net revenue from Medicare, which pays for clinical laboratory services provided to dialysis patients in two ways. First, the Medicare composite rate paid to our dialysis clinics includes payment for some routine tests. For those services, the dialysis clinics obtain the services from a laboratory and pay the laboratory for the 105 113 services. In accordance with industry practice, Spectra Renal Management usually provides composite rate testing services under capitation agreements with its customers pursuant to which it bills a fixed amount per patient per month to cover the laboratory tests included in the Medicare composite rate at the designated frequencies. In October 1994, the Office of the Inspector General issued a special fraud alert in which it stated its view that the industry practice of providing tests covered by the Medicare composite rate at below fair market value raised issues under the anti-kickback statutes, as such an arrangement with an ESRD facility appeared to be an offer of something of value (Medicare composite rate tests at below market value) in return for the ordering of additional tests billed directly to Medicare. See "-- Anti-Kickback Statutes, False Claims Act, Stark Law and Fraud and Abuse Laws" for a description of this statute. Second, Spectra Renal Management performs laboratory tests for Medicare beneficiaries that are not included in the Medicare composite rate and are separately billable directly to Medicare. Medicare pays for these tests at 100% of the Medicare fee schedule amounts, which are limited by national ceilings on payment rates, called National Limitation Amounts. The U.S. Congress has periodically reduced the fee schedule rates and the National Limitation Amounts with the most recent reductions in the National Limitation Amounts occurring in January 1998. (As part of the Balanced Budget Act of 1997, the U.S. Congress lowered the National Limitation Amounts from 76% to 74% effective January 1, 1998.) The U.S. Congress has also approved a five-year freeze on inflation adjustments based on the Consumer Price Index for 1998-2002. Medicare insurers have aggressively implemented its Local Medical Review Policies, which limit coverage for certain clinical laboratory services to an established list of diagnosis codes supporting medical necessity. These policies establish criteria under which laboratory tests will be considered medically necessary only if the patient's condition is reflected in specified diagnosis codes. They also establish rules limiting the frequency of certain laboratory tests. Provisions in the Balanced Budget Act of 1997 require the Secretary of Health and Human Services to adopt uniform coverage and payment policies for laboratory testing by July 1, 1999. The adoption of additional coverage policies would reduce the number of covered services and could materially affect our revenues. Laboratory tests are ordered only by physicians based on their patients' needs. Intradialytic parenteral nutrition. Among its other services, Spectra Renal Management administers intradialytic parenteral nutrition, a form of nutritional therapy, to chronic dialysis patients who suffer from gastrointestinal malfunctions. The Medicare program covers these services under the Medicare parenteral and enteral nutrition benefit, which requires extensive documentation and individual physician certification of medical necessity for each patient. Intradialytic parenteral nutrition therapy has been shown to increase the body content of vital, high biologic value proteins like albumin. Deficiency of such proteins, on both a long-term and short-term basis, has been shown to be associated with substantially higher risk of death among dialysis patients. Spectra Renal Management has continued to provide intradialytic parenteral nutrition therapy to malnourished dialysis patients who meet current Medicare coverage criteria. Analyses of data from our patient statistical profile database, both internal and as published in peer-reviewed medical journals, indicate that intradialytic parenteral nutrition is effective in increasing serum albumin levels -- a recognized measure of malnutrition -- and moderating mortality risk for malnourished patients with certain low serum albumin levels. Under our corporate integrity agreement, we agreed to submit claims for payment of intradialytic parenteral and other nutrition therapy in accordance with the coverage criteria of the CMS as in effect from time to time. Erythropoetin. In 1999, the Office of the Inspector General and the Clinton Administration announced their intention to seek a 10% reduction in Medicare reimbursement for EPO. Although this 106 114 proposal was not enacted, any of the following could adversely affect our business, and results of operations, possibly materially: - future changes in the EPO reimbursement rate; - inclusion of EPO in the Medicare composite rate; - changes in the typical dosage per administration; or - increases in the cost of EPO. Amgen Inc., our sole supplier of EPO, has announced a 3.9% increase in its wholesaler acquisition price for EPO effective May 9, 2001. Because our purchase contract with Amgen contains pricing protection, our purchase price for EPO will be unaffected by this increase through December 31, 2001. Coordination of Benefits. Medicare entitlement begins for most patients in the fourth month after chronic dialysis treatment at a dialysis clinic commences. During the first three months, considered to be a waiting period, the patient or the patient's insurance company, Medicaid or a state renal program are responsible for payment. Patients who have Medicare coverage and are also covered by an employer group health plan are subject to a 30-month coordination period during which the employer group health plan is the primary payor and Medicare is the secondary payor. During this coordination period the employer group health plan pays a negotiated rate or, in the absence of such a rate, our standard rate or a rate defined by the health plan documents. These payments are generally higher than the Medicare composite rate. Insurance will therefore generally cover a total of 33 months, the three-month waiting period plus the 30-month coordination period. Patients who already are eligible for Medicare coverage based on age when they become ESRD patients are dual eligible patients. If these patients have an employer group health plan that is their primary payor for covered services then these patients will have a 30-month coordination period. If Medicare is already the primary payor when ESRD entitlement begins, Medicare remains the primary payor, the employer group health plan is the secondary payor and no coordination period will apply. All ESRD patients or patients over 65 who do not have a health insurance retirement benefit plan can purchase Medigap plans. Possible Changes in Medicare. Because the Medicare program represents a substantial portion of the federal budget the U.S. Congress takes action frequently to modify the Medicare program by refining the amounts payable to health care providers. Future legislation or regulations could substantially modify or reduce the amounts paid for our services and products. It is also possible that future statutes or regulations may impose additional eligibility requirements for participation in the federal and state health care programs. Any such new legislation or regulations may adversely affect our businesses and results of operations. GERMANY AND OTHER NON-U.S. As a global company delivering dialysis care and dialysis products in more than 100 countries world wide, we face the challenge of addressing the needs of dialysis patients in widely varying economic and health care environments. Health care systems and reimbursement structures for ESRD treatment vary by country. In general, the government pays for health care and finances its payments through taxes and other sources of government income, from social contributions, or a combination of those sources. However, not all health care systems provide for dialysis treatment. In many developing countries, only limited subsidies from government or charitable institutions are available, and dialysis patients must finance all or substantially all of the cost of their treatment. In some countries patients in need of dialysis do not receive treatment on a regular basis but rather when the financial resources allow it. 107 115 In the major European and British Commonwealth countries, health care systems are generally based on one of two models. The German model is based on mandatory employer and employee contributions dedicated to health care financing. The British model provides a national health care system funded by taxes, with the result that funds allocated to health care may vary from year to year. Within these systems provision for the treatment of dialysis has been made either through allocation of a national budget or a billing system reimbursing on a fee-for-service basis. The health care systems of Japan, France, Switzerland and the Netherlands are based on the German model. Canada, Scandinavia, Italy and Spain established their national health services using the British model. Ownership of health care providers and, more specifically dialysis care providers, varies within the different systems and from country-to-country. In Europe more than 60% of the clinics providing dialysis care and services are publicly owned, nearly 30% are privately owned and approximately 10% belong to a health care organization. It should be noted that health care organizations treating a significant patient population operate only in Germany, France and Spain. Publicly run clinics care for almost 100% of the dialysis populations in Canada and Australia. Within Europe, nearly 100% of the dialysis population is treated in public clinics in the United Kingdom, the Netherlands and the Scandinavian countries, while more than 50% of dialysis clinics are privately owned in Spain and Portugal. In Latin America and Asia, privately owned clinics predominate, constituting more than 60% of all clinics providing dialysis care. As in the United States, only approximately 15% of dialysis clinics in Japan are publicly operated. Unlike the United States, however, Japan has a premium-based, mandatory social insurance system, and the structure of its health care system is more closely comparable to the German system. Financing policies for ESRD treatment also differ from country-to-country. In countries with a health care system that includes provisions for ESRD patient care, treatment is generally financed through a government budget allocation or on a fee-for-service basis. A few European countries have introduced payment systems based on fixed fees charged according to the disease related group, an arrangement similar to capitation. This basis for payment was adopted from the United States, where it was implemented as a method to curtail costs. Treatment components included in the cost of dialysis may vary from country-to-country, depending on the structure and cost allocation principles. Where treatment is reimbursed on a fee-for-service basis, reimbursement rates are allocated in accordance with the type of treatment performed. We believe that it is not possible to calculate a global reimbursement amount, because the services and costs for which reimbursement is provided in any such global amount would be likely to bear little relation to the actual reimbursement system in any one country. Generally, in countries with established dialysis programs, reimbursements range from $100 to more than $300 per treatment. However, a comparison from country to country would not be meaningful if made in the absence of a detailed analysis of the cost components reimbursed, services rendered and the structure of the dialysis clinic in each country being compared. Health care expenditures are consuming an ever increasing portion of the gross domestic product worldwide. In the developed economies of Europe, Asia and Latin America, health care spending is in the range of 5%-14% of gross domestic product. As in the United States, dialysis costs consume a disproportionately high amount of health care spending and these costs may be considered a target for implementation of cost containment measures. Today, there is increasing awareness of the correlation between the quality of care delivered in the dialysis unit and the total health care expenses incurred by the dialysis patient. Accordingly, developments in reimbursement policies include higher reimbursement rates for practices which are believed to improve the overall state of health of the ESRD patient and reduce the need for additional medical treatment. ANTI-KICKBACK STATUTES, FALSE CLAIMS ACT, HEALTH CARE FRAUD, STARK LAW AND FRAUD AND ABUSE LAWS Some of our operations are subject to U.S. federal and state statutes and regulations governing financial relationships between health care providers and potential referral sources and reimbursement for services and items provided to Medicare and Medicaid patients. These laws include the anti-kickback 108 116 statutes, health care fraud statutes, the False Claims Act, the Stark Law, other U.S. federal fraud and abuse laws and similar state laws. These laws apply because our Medical Directors and other physicians with whom we have financial relationships refer patients to our dialysis clinics and other operations and order diagnostic and therapeutic services from them. As is generally true in the dialysis industry, at many dialysis facilities a small number of physicians account for all or a significant portion of the patient referral base. An ESRD patient generally seeks treatment at a clinic that is convenient to the patient and at which the patient's nephrologist has staff privileges. Virtually all of our clinics maintain open staff privileges for local nephrologists. Our ability to provide quality dialysis care and to otherwise meet the needs of patients and local physicians is central to our ability to expand our dialysis facilities. The U.S. federal government, many states and private third-party insurance payors have made combating health care waste, fraud and abuse one of their highest enforcement priorities, resulting in increasing resources devoted to this problem. Consequently, the Office of the Inspector General and other enforcement authorities are increasing scrutiny of arrangements between physicians and health care providers for possible violations of the anti-kickback statutes or other federal laws. ANTI-KICKBACK STATUTES The U.S. federal anti-kickback statutes establish criminal prohibitions against and civil penalties for the knowing and willful solicitation, receipt, offer or payment of any remuneration, whether direct or indirect, in return for or to induce the referral of patients or the ordering or purchasing of items or services payable in whole or in part under Medicare, Medicaid or other U.S. federal health care programs. Sanctions for violations of the anti-kickback statutes include criminal and civil penalties, such as imprisonment or criminal fines of up to $25,000 per violation, and civil penalties of up to $50,000 per violation, and exclusion from the Medicare or Medicaid programs and other federal programs. In addition, certain provisions of federal criminal law that may be applicable provide that if a corporation is found guilty of a criminal offense it may be fined no more than twice any pecuniary gain to the corporation, or, in the alternative, no more than $500,000 per offense. Some states also have enacted statutes similar to the anti-kickback statutes, which may include criminal penalties, applicable to referrals of patients regardless of payor source, and may contain exceptions different from state to state and from those contained in the federal anti-kickback statutes. FALSE CLAIMS ACT AND RELATED CRIMINAL PROVISIONS The False Claims Act imposes civil penalties for making false claims with respect to governmental programs, such as Medicare and Medicaid, for services not rendered, or for misrepresenting actual services rendered, in order to obtain reimbursement. Moreover, private individuals may bring qui tam or "whistle blower" suits against providers under the False Claims Act. In a "whistle blower" action, the private plaintiff asserts the government's alleged claims under the False Claims Act, which also authorizes the payment of a portion of any recovery to the individual bringing suit. Private plaintiffs must initially file a qui tam action under seal until the Department of Justice reviews the action. A few federal district courts have recently interpreted the False Claims Act as applying to claims for reimbursement that violate the anti-kickback statutes under certain circumstances. The False Claims Act generally provides for civil penalties of $5,000 to $10,000 per claim and for treble damages, resulting in the possibility of substantial financial penalties for small billing errors that are replicated in a large number of claims, as each individual item within a claim could be deemed to be a separate violation of the False Claims Act. Criminal provisions that are similar to the False Claims Act provide that if a corporation is convicted of presenting a claim or making a statement that it knows to be false, fictitious or fraudulent to any federal agency it may be fined not more than twice any pecuniary gain to the corporation, or, in the alternative, no more than $500,000 per offense. Some states also have enacted statutes similar to the False Claims Act which may include criminal penalties, substantial fines, and treble damages. 109 117 THE HEALTH INSURANCE PORTABILITY AND ACCOUNTABILITY ACT OF 1996 The Health Insurance Portability and Accountability Act of 1996 was enacted in August 1996 and substantively changed U.S. federal fraud and abuse laws. The act: - expanded the reach of fraud and abuse laws to all federal health care programs; - established new bases for exclusions from government health programs and mandated minimum exclusion terms; - created an additional exception to the anti-kickback penalties for risk-sharing arrangements; - required the Secretary of Health and Human Services to issue advisory opinions; - increased civil monetary penalties to $10,000 (formerly $2,000) per item or service and assessments to three times (formerly twice) the amount claimed; - created a specific health care offense of health care fraud applicable to all payors and related health fraud crimes; and - expanded investigative authority and sanctions applicable to health care fraud. The act also prohibits provider payments which could be deemed an inducement to patient selection of a provider. The law expands criminal sanctions for health care fraud involving any governmental or private health benefit program, including freezing of assets and forfeiture of property traceable to commission of a health care offense. BALANCED BUDGET ACT OF 1997 The Balanced Budget Act of 1997 contained sweeping adjustments to both the Medicare and Medicaid programs, and further expanded the fraud and abuse laws. Specifically, the Act created a civil monetary penalty for violations of the federal anti-kickback statute whereby violations will result in damages equal to three times the amount involved as well as a penalty of $50,000 per violation. In addition, these provisions expanded the exclusion requirements so that any person or entity convicted of three health care offenses is automatically excluded from federally funded health care programs for life. Individuals or entities convicted of two offenses are subject to mandatory exclusion of 10 years, while the Secretary of Health and Human Services may deny entry into the Medicare program to any provider or supplier convicted of any felony if entry is deemed to be detrimental to the best interests of the Medicare program or its beneficiaries. The Balanced Budget Act of 1997 also provides that any person or entity that arranges or contracts with an individual or entity that has been excluded from a federally funded health care program will be subject to civil monetary penalties if the individual or entity "knows or should have known" of the sanction. Finally, the Balanced Budget Act of 1997 created a Medicare+Choice Program that is designed to provide a variety of options to Medicare beneficiaries, almost all of whom may enroll in a Medicare+Choice Plan. The options include provider sponsored organizations, coordinated care plans, health maintenance organizations with and without point of service options involving out-of-network providers, and medical savings accounts offered as a demonstration project. STARK LAW The original Stark Law, known as "Stark I" was enacted as part of the U.S. Omnibus Budget Reconciliation Act of 1989, and prohibits a physician from referring Medicare patients for clinical laboratory services to entities with which the physician (or an immediate family member) has a financial relationship, unless specified exceptions apply. Sanctions for violations of the Stark Law may include denial of payment, refund obligations, civil monetary penalties and exclusion of the provider from the 110 118 Medicare and Medicaid programs. The Stark Law also prohibits the entity receiving the referral from filing a claim or billing for services arising out of the prohibited referral. Provisions of the U.S. Omnibus Budget Reconciliation Act of 1993, known as "Stark II" amended Stark I to revise and expand upon various statutory exceptions, to expand the services regulated by the statute to a list of "Designated Health Services," and to prohibit similar Medicaid Designated Health Services referrals where a financial relationship exists. The provisions of Stark II generally became effective on January 1, 1995. The additional Designated Health Services include: - physical therapy services; - occupational therapy services; - radiology services, including magnetic resonance imaging, computer axial tomography scans and ultrasound services; - durable medical equipment and supplies; - parenteral and enteral nutrients, equipment and supplies; - home health services; - outpatient prescription drugs; and - inpatient and outpatient hospital services. Proposed regulations implementing Stark I and Stark II, published on January 9, 1998, would specifically exempt EPO as a Designated Health Service if it is provided to ESRD patients as part of a renal dialysis treatment plan. Further, the proposed regulations discussing durable medical equipment would exclude ESRD equipment and supplies from coverage as a Designated Health Service. Outpatient prescription drugs and in-hospital treatments would also be excluded because the ESRD benefit is distinguished under Medicare from the durable medical equipment benefit. Several states in which we operate have enacted self-referral statutes similar to the Stark Law. These state self-referral laws may apply to referrals of patients regardless of payor source and may contain exceptions different from each other and from those contained in the Stark Law. OTHER FRAUD AND ABUSE LAWS Our operations are also subject to a variety of other federal and state health care laws, principally designed to ensure that claims for payment to be made with public funds are complete, accurate and fully comply with all applicable program rules. Violations of numerous rules under the applicable statute, including the filing of a false or fraudulent claim and billing in excess of the amount permitted to be charged for a particular item or service, trigger various civil monetary penalty provisions. Violations may also result in suspension of payments, exclusion from the Medicare and Medicaid programs, as well as other federal health care benefit programs, or forfeiture of assets. In addition to the statutes described above, other criminal statutes may be applicable to conduct that is found to violate any of the statutes described above. HEALTH CARE REFORM Health care reform is considered by many countries to be a national priority. In the United States, members of Congress from both parties and the executive branch are continuing to consider many health care proposals, some of which are comprehensive and far-reaching in nature. Several states of the United States and many of the countries in which we do business are also currently considering health care proposals. We cannot predict what additional action, if any, the federal government or any state may ultimately take with respect to health care reform or when any such action will be taken. Health care 111 119 reform may bring radical changes in health care industry financing and regulation, which could have a material adverse effect on our business, financial condition and results of operations. LEGAL PROCEEDINGS The following section describes material legal actions and proceedings relating to us and our business. While we believe that it is unlikely that any pending legal proceedings known to us will have a material adverse effect on our business, financial condition and results of operations, we can offer no assurance regarding the ultimate outcome of any pending legal proceedings. COMMERCIAL LITIGATION In 1997, FMCH, NMC and certain named NMC subsidiaries were served with a civil complaint filed by Aetna Life Insurance Company in the U.S. District Court for the Southern District of New York. The lawsuit alleges inappropriate billing practices for nutritional therapy, diagnostic and clinical laboratory tests and misrepresentations. In April 1999, Aetna amended its complaint to include its affiliate, Aetna U.S. Healthcare, Inc., as an additional plaintiff and to make certain other limited changes in its pleading. The amended complaint seeks unspecified damages and costs. Other insurance companies have filed similar claims seeking unspecified damages and costs. We, FMCH, NMC and its subsidiaries believe that there are substantial defenses to the claims asserted and intend to vigorously defend all lawsuits. Other private payors have contacted FMCH and may assert that NMC received excess payments and, similarly, may join the lawsuits or file their own lawsuit seeking reimbursement and other damages. Although we cannot predict the ultimate outcome on us of these proceedings at this time, an adverse result could have a material adverse effect on our business, financial condition and results of operations. FMCH has filed counterclaims against the plaintiffs in these matters based on inappropriate claim denials and delays in claim payments. On September 28, 2000, Mesquita, et al. v. W.R. Grace & Company, et al. (Sup. Court of Calif., S.F. County, #315465) was filed as a class action by plaintiffs claiming to be creditors of Grace Chemicals against Grace Chemicals, FMCH and other defendants, principally alleging that the merger which resulted in the original formation of Fresenius Medical Care was a fraudulent transfer, violated the uniform fraudulent transfer act, and constituted a conspiracy. An amended complaint (Abner et al. v. W.R. Grace & Company, et al.) and an additional class action were filed subsequently with substantially similar allegations; the additional class action was transferred to Delaware Bankruptcy Court on June 13, 2001. These cases have been stayed in connection with W.R. Grace's Chapter 11 bankruptcy proceedings. We have requested indemnification from Grace Chemicals pursuant to the Merger Agreements. If the Merger is determined to have been a fraudulent transfer, if material damages are proved by the plaintiffs, and if we are not able to collect, in whole or in part on the indemnity, from W.R. Grace & Co. or its affiliates or former affiliates or their insurers, and if we are not able to collect against any party that may have received proceeds from W.R. Grace & Co., a judgment could have a material adverse effect on our business, financial condition and results of operations. We are confident that no fraudulent transfer or conspiracy occurred and we intend to defend the cases vigorously. OBRA 93 The Omnibus Budget Reconciliation Act of 1993 affected the payment of benefits under Medicare and employer health plans for dual-eligible ESRD patients. In July 1994, the CMS issued an instruction to Medicare claims processors to the effect that Medicare benefits for the patients affected by that act would be subject to a new 18-month "coordination of benefits" period. This instruction had a positive impact on NMC's dialysis revenues because, during the 18-month coordination of benefits period, patients' employer health plans were responsible for payment, which was generally at rates higher than those provided under Medicare. In April 1995, the CMS issued a new instruction, reversing its original instruction in a manner that would substantially diminish the positive effect of the original instruction on NMC's dialysis business. The 112 120 CMS further proposed that its new instruction be effective retroactive to August 1993, the effective date of the Omnibus Budget Reconciliation Act of 1993. NMC ceased to recognize the incremental revenue realized under the original instruction as of July 1, 1995, but it continued to bill employer health plans as primary payors for patients affected by the Omnibus Budget Reconciliation Act of 1993 through December 31, 1995. As of January 1, 1996, NMC commenced billing Medicare as primary payor for dual eligible ESRD patients affected by the act, and then began to re-bill in compliance with the revised policy for services rendered between April 24 and December 31, 1995. On May 5, 1995, NMC filed a complaint in the U.S. District Court for the District of Columbia (National Medical Care, Inc. and Bio-Medical Applications of Colorado, Inc. d/b/a Northern Colorado Kidney Center v. Shalala, C.A. No. 95-0860 (WBB)) seeking to preclude the CMS from retroactively enforcing its April 24, 1995 implementation of the Omnibus Budget Reconciliation Act of 1993 provision relating to the coordination of benefits for dual eligible ESRD patients. On May 9, 1995, NMC moved for a preliminary injunction to preclude the CMS from enforcing its new policy retroactively, that is, to billing for services provided between August 10, 1993 and April 23, 1995. On June 6, 1995, the court granted NMC's request for a preliminary injunction and in December of 1996, NMC moved for partial summary judgment seeking a declaration from the Court that the CMS's retroactive application of the April 1995 rule was legally invalid. The CMS cross-moved for summary judgment on the grounds that the April 1995 rule was validly applied prospectively. In January 1998, the court granted NMC's motion for partial summary judgment and entered a declaratory judgment in favor of NMC, holding the CMS's retroactive application of the April 1995 rule legally invalid. Based on its finding, the Court also permanently enjoined the CMS from enforcing and applying the April 1995 rule retroactively against NMC. The Court took no action on the CMS's motion for summary judgment pending completion of the outstanding discovery. On October 5, 1998, NMC filed its own motion for summary judgment requesting that the Court declare the CMS's prospective application of the April 1995 rule invalid and permanently enjoin the CMS from prospectively enforcing and applying the April 1995 rule. The Court has not yet ruled on the parties' motions. The CMS elected not to appeal the Court's June 1995 and January 1998 orders. The CMS may, however, appeal all rulings at the conclusion of the litigation. If the CMS should successfully appeal so that the revised interpretation would be applied retroactively, NMC may be required to refund the payment received from employer health plans for services provided after August 10, 1993 under the CMS's original implementation, and to re-bill Medicare for the same services, which would result in a loss to NMC of approximately $120 million attributable to all periods prior to December 31, 1995. Also, in this event, our business, financial condition and results of operations would be materially adversely affected. In July, 2000, NMC filed a complaint in the U.S. District Court for the Eastern District of Virginia (National Medical Care, Inc. and Bio-Medical Applications of Virginia, Inc. v. Aetna Life Insurance, Co., Inc. Aetna U.S. Healthcare, Inc. and John Does 1-10) seeking recovery against Aetna U.S. Healthcare and health plans administered by Aetna U.S. Healthcare for claims related to primary payor liability for dual eligible ESRD patients under the Omnibus Budget Reconciliation Act of 1993. On January 16, 2001, the Court stayed the action pending resolution of the District of Columbia Court action. OTHER LITIGATION AND POTENTIAL EXPOSURES From time to time, we are a party to or we may be threatened with other litigation arising in the ordinary course of our business. Our management regularly analyzes current information including, as applicable, our defenses and insurance coverage and, as necessary, provides accruals for probable liabilities for the eventual disposition of these matters. We do not expect that the ultimate outcome of these matters will materially affect our financial position, results of operations or cash flows. Like other health care providers, we conduct our operations under intense government regulation and scrutiny. We must comply with regulations which relate to or govern the safety and efficacy of medical products and supplies, the operation of manufacturing facilities, laboratories and dialysis clinics, and environmental and occupational health and safety. We must also comply with the U.S. anti-kickback 113 121 statute, the False Claims Act, the Stark Law and other federal and state fraud and abuse laws. Applicable laws or regulations may be amended, or enforcement agencies or courts may make interpretations that differ from the ours or the manner in which we conduct our business. In the United States, enforcement has become a high priority for the federal government and some states. In addition, the provisions of the False Claims Act authorizing payment of a portion of any recovery to the party bringing the suit encourage private plaintiffs to commence "whistle blower" actions. By virtue of this regulatory environment, as well as our corporate integrity agreement with the government, we expect that our business activities and practices will continue to be subject to extensive review by regulatory authorities and private parties, and to continuing inquiries, claims and litigation relating to our compliance with applicable laws and regulations. We may not always be aware that an inquiry or action has begun, particularly in the case of "whistle blower" actions, which are initially filed under court seal. We operate a large number facilities throughout the United States. In such a decentralized system, it is often difficult to maintain the desired level of oversight and control over the thousands of individuals employed by many affiliate companies. We rely upon our management structure, regulatory and legal resources, and the effective operation of our compliance program to direct, manage and monitor the activities of these employees. On occasion, we may identify instances where employees, deliberately or inadvertently, have submitted inadequate or false billings. Such persons' actions may subject us and our subsidiaries to liability under the False Claims Act, among other laws, and we cannot predict whether law enforcement authorities may use this information to initiate further investigations of the business practices disclosed or any of our other business activities. Physicians, hospitals and other participants in the health care industry are also subject to a large number of lawsuits alleging professional negligence, malpractice, product liability, worker's compensation or related claims, many of which involve large claims and significant defense costs. We have been subject to these suits due to the nature of our business and we expect that those types of lawsuits may continue. Although we maintain insurance at a level we believe is prudent, we cannot assure that our coverage limits will be adequate or that insurance will cover all claims asserted against us. A successful claim against us or any of our subsidiaries in excess of insurance coverage could have a material adverse effect upon us and our results of operations. Any claims, regardless of their merit or eventual outcome, also may have a material adverse effect on our reputation and business. We have also had claims asserted against us and lawsuits filed against us relating to businesses that we have acquired or divested. These claims and suits relate both to operation of the businesses and to the acquisition and divestiture transactions. We have asserted our own claims, and claims for indemnification. Although we cannot predict the ultimate outcome on us at this time, an adverse result could have a material adverse effect upon our business, financial condition and results of operations. 114 122 MANAGEMENT OF FRESENIUS MEDICAL CARE OUR DIRECTORS AND SENIOR MANAGEMENT GENERAL In accordance with the German Stock Corporation Act, we have a supervisory board and a management board. The two boards are separate and no individual may simultaneously be a member of both boards. OUR SUPERVISORY BOARD Our supervisory board consists of six members who are elected by the holders of Ordinary shares at our annual general meeting. Pursuant to the Ordinary shares pooling agreement, dated as of September 27, 1996 among Fresenius Medical Care AG, our independent directors as agents of the minority holders of Ordinary shares and us and the Preference shares pooling agreement, dated as of November 27, 1996 among Fresenius Medical Care AG, our independent directors as agents of the holders of Preference shares and us, at least one-third, but no fewer than two, of the members of the supervisory board elected by the shareholders are required to be independent directors, who are persons with no substantial business or professional relationship with us, Fresenius AG or any affiliate of either. If and when either: - Fresenius Medical Care AG itself has more than 500 employees; or - we enter into a domination agreement with a German subsidiary having more than 500 employees, or if that subsidiary is integrated into Fresenius Medical Care AG; the German employees of Fresenius Medical Care AG and our German subsidiaries will elect one-third of the members of the supervisory board. If and when the aggregate number of employees of Fresenius Medical Care AG and our German subsidiaries exceeds 2,000, the supervisory board will increase to 12 persons and the holders of Ordinary shares and the German employees of Fresenius Medical Care AG and its German subsidiaries will elect six members each. In that case, the Chairman of the supervisory board will be selected from the members elected by the shareholders and will have the tie-breaking vote. The term of a member of the supervisory board will expire at the end of the general meeting of shareholders after the fourth fiscal year following the year in which the member was elected, but not counting the fiscal year in which such member's term begins. Members of the supervisory board elected by our shareholders may be removed by a resolution of our general meeting. This resolution requires a three-fourths majority of the votes cast at that meeting. The supervisory board ordinarily acts by simple majority vote and the Chairman has a tie-breaking vote in case of any deadlock. The principal function of the supervisory board is to appoint and to supervise the management board and to approve mid-term planning, dividend payments and matters which are not in the ordinary course of business and are of fundamental importance to us. 115 123 The table below provides the names and ages of the members of our supervisory board:
AGE AS OF DECEMBER 31, NAME 2000 - ---- ------------ Dr. Gerd Krick, Chairman................................ 62 Dr. Dieter Schenk, Deputy Chairman...................... 48 Prof. Dr. Bernd Fahrholz................................ 52 Dr. Theo Spettmann...................................... 56 Walter L. Weisman(1).................................... 65 Stephen M. Peck(1)...................................... 65
- --------------- (1) Independent Director The term for each member of the supervisory board set forth above will expire in 2006. Members of the supervisory board are eligible for reelection. DR. GERD KRICK has been Chairman of our supervisory board since January 1, 1998. Since 1992, he has been Chairman of the Fresenius AG management board. Prior to 1992, he was a Director of the Medical Systems Division of Fresenius AG and Deputy Chairman of the Fresenius AG management board. From September 1996 until December 1997, Dr. Krick was Chairman of the management board of Fresenius Medical Care. Dr. Krick is a member of the Board of Directors of Adelphi Capital Europe Fund, of the Administrative Board of Dresdner Bank Luxembourg S.A., of the supervisory board of Vereinte Krankenversicherung AG, of the Advisory Board of HDI Haftpflichtverband der deutschen Industrie and of the Board of Trustees of the Donau Universitat Krems. He is also the Chairman of the supervisory boards of Vamed AG and of Fresenius Kabi AG. DR. DIETER SCHENK has been Deputy Chairman of our supervisory board since 1996. He is an attorney and tax advisor and has been a partner in the law firm of Norr Stiefenhofer Lutz since 1986. Dr. Schenk is also a member of the supervisory board of Fresenius AG and a member and vice-chairman of the supervisory board of Greiffenberger AG and a member of the supervisory boards of Schmidt Bank KGaA and Feintechnik Eisfeld GmbH. PROF. DR. BERND FAHRHOLZ has been a member of our supervisory board since 1998. He is an attorney and has been a member of the management board of Dresdner Bank AG since 1998 and its Chairman since April 2000. Dr. Fahrholz is also a member of the supervisory boards of ASTA Medica AG, BMW AG, BNP-Dresdner European Bank AG, DEGI Deutsche Gesellschaft fur Immobilienfonds mbH, Deutsche Hypothekenbank Frankfurt-Hamburg AG, Deutsche Schiffsbank AG (Chairman), Diskont und Kredit AG, Dresdnerbank Investment Management Kapitalanlagegesellschaft mbH, Dresdner Bank Lateinamerika Aktiengesellschaft (Vice Chairman), Dresdner Capital International Kapitalanlagegesellschaft mbH, Dresdner Kleinwort Wasserstein Inc., Dynamit Nobel AG, Kommanditgesellschaft Allgemeine Leasing GmbH & Co. (Chairman), Oldenburgische Landesbank AG; and Reuschel & Co. DR. THEO SPETTMAN has been a member of our supervisory board since April 1, 2000. He has been a member of the management board of Sudzucker AG since 1988 and Spokesman of the management board of Sudzucker AG since 1995. Dr. Spettman also sits on the supervisory boards of VK Muhlen AG, Karlsruher Versicherungen AG, Gerling Industrie Service AG, Scholler Holding GmbH & Co.KG and is spokesman of the supervisory board of Berentzen-Group AG. WALTER L. WEISMAN has been a member of our supervisory board since 1996. He is a private investor and a former Chairman and Chief Executive Officer of American Medical International, Inc., which he joined in 1972, was elected President in 1979 and served as Chief Executive Officer from 1985 to 1988. Mr. Weisman is a Vice-Chairman of the Board of the California Institute of Technology, 116 124 Chairman of the Board of the Los Angeles County Museum of Art, Chairman of the Board of the Sundance Institute, and a trustee of the Samuel A. Kress Foundation and the Los Angeles Opera. STEPHEN M. PECK was elected to our supervisory board in 1999. He is a private investor and a former managing and special partner of Weiss, Peck & Greer, which was founded in 1970. He served as Chief Investment Officer and Director of Reliance Insurance Company, Inc. from January 1986 to July 1988. Mr. Peck is a member of the Board of Directors of Harnischfeger Greyhound Lines, Inc., OFFIT Investment Funds and Banyan Strategic Realty Trust Grand Union Co., where he serves as Non-Executive Chairman of the Board. He also serves as a member of the Advisory Boards of the Torrey Funds and Brown Simpson Asset Management. Mr. Peck is presently Chairman of the Board of Trustees and the Executive Committee of Mount Sinai -- NYU Medical Center and Health System. He is a member of the Board of Trustees of Mount Sinai School of Medicine, New York University and The Jewish Theological Seminary. OUR MANAGEMENT BOARD Each member of our management board is appointed by the supervisory board for a maximum term of five years and is eligible for reappointment after such term. Their terms expire at our annual general meeting in the years listed below. The table below provides names, ages, positions and terms of office of the members of our management board:
AGE AS OF YEAR DECEMBER 31, TERM NAME 2000 POSITION EXPIRES - ---- ------------ ------------------------------------------------- ------- Dr. Ben Lipps............ 60 Chairman of the management board, Chief Executive 2005 Officer of our Company and Chief Executive Officer for North America Roberto Fuste............ 48 Chief Executive Officer for Asia Pacific 2005 Dr. Emanuele Gatti....... 45 Chief Executive Officer for Europe, Middle East, 2005 Africa and Latin America
DR. BEN J. LIPPS has been Chairman of the management board since May 1, 1999 and was Vice Chairman of the management board from September 1998 until May 1, 1999. He has been President and a director of Fresenius Medical Care Holdings since September 1996 and President, Chief Executive Officer, Chief Operating Officer and a director of Fresenius USA since October 1989, and he had served in various capacities with Fresenius USA's predecessor since 1985. Dr. Lipps joined Dow Chemical Company in 1966 and led the research team that developed the first hollow fiber dialyzer between 1967 and 1969. Prior to joining Fresenius USA's predecessor, Dr. Lipps was a Vice President of Research and Development for Cordis Dow Corporation. MR. ROBERTO FUSTE was appointed to our management board effective January 1, 1999. Mr. Fuste is responsible for the Asia-Pacific region within the International segment, for which he assumed responsibility in 1998. Mr. Fuste joined Fresenius AG in 1991 when Fresenius AG acquired Nephrocontrol S.A., a Spanish company which he founded in 1985 and of which he was Managing Director and joint owner. After the company was acquired by Fresenius AG, he continued as Managing Director. In 1995, he joined the Head Office of Fresenius AG where he has held various executive positions. DR. EMANUELE GATTI has been a member of our management board since May 1997 and is President and Chief Executive Officer of Europe, Middle East, Africa and Latin America within the International segment. Previously he was Executive Vice President with responsibility for our dialysis business in Southern Europe. Dr. Gatti joined the Fresenius Group in 1989 when Fresenius AG acquired Sis-ter, an Italian company of which he was General Manager. He has been working in the field of dialysis 117 125 since 1981 after leaving the Polytechnic School of Milan where he was involved in teaching and biomedical research. The business address of all members of our management board and supervisory board is Else-Kroner-Strasse 1, 61352 Bad Homburg, Germany. COMPENSATION OF OUR MANAGEMENT BOARD AND OUR SUPERVISORY BOARD For the year ended December 31, 2000, we paid aggregate compensation to all members of the management board of E2,949,237. The aggregate fees paid to all members of the supervisory board was E315,000, including compensation to Dr. Krick for his duties as Chairman of the supervisory board. We pay an annual retainer fee of $60,000 to each member of the supervisory board, with the Chairman paid twice that amount and the Deputy Chairman paid 150% of that amount. We reimburse supervisory board members for their reasonable travel and accommodation expenses incurred with respect to their duties as supervisory board members. The aggregate compensation reported above does not include amounts paid as fees for services rendered by certain business or professional entities with which some of the supervisory board members are associated. Those fees are described under "Certain Relationships and Related Party Transactions." During 2000 we awarded 83,000 options at an exercise price of E47.64 to members of the management board. At December 31, 2000, management board members held options to acquire 282,600 Preference shares of which options to purchase 49,933 Preference shares were exercisable at a weighted average exercise price of E36.81. At December 31, 2000, a loan granted to a member of our management board in the principal amount of $2,000,000, bearing interest at 6% per annum, was outstanding. SHARE OWNERSHIP BY OUR DIRECTORS AND OFFICERS As of December 31, 2000, members of the supervisory board and the management board as a group owned 4,367 Ordinary shares (0.01% of total Ordinary shares outstanding) and 10,700 Preference shares (0.05% of total Preference shares outstanding). At December 31, 2000 management board members held options to acquire 282,600 Preference shares of which options to purchase 49,933 Preference shares were exercisable at a weighted average exercise price of E36.81. Those options expire at various dates between 2008 and 2010. None of the members of our management board and our supervisory board beneficially owns more than 1% of our outstanding Ordinary shares or our outstanding Preference shares. OPTIONS TO PURCHASE OUR SECURITIES STOCK OPTION PLANS We have adopted a 1996 Stock Incentive Plan and a 1998 Stock Incentive Plan for our key management and executive employees and those of our subsidiaries. Under our stock incentive plans, eligible employees generally have the right to acquire Preference shares or ADSs. Each ADS represents one-third of a Preference share. A total of 1,333,333 Preference shares are available for issuance pursuant to grants under our stock incentive plans. The 1998 Stock Incentive Plan was amended in 1999 and 2000 to increase the number of Preference shares available for issuance pursuant to grants under that plan by 450,000 and 660,000, respectively, resulting in a total number of shares available for issuance of 2,443,333 Preference shares, less the number of Preference shares issued under the 1996 Stock Incentive Plan. Some eligible employees have received initial grants intended to cover a three-year period; other grants will be made annually. During 2000, there were no grants or awards under our 1996 Stock Incentive Plan. At December 31, 2000, there were awards for 205,166 ADSs outstanding under our 1996 Stock Incentive Plan with a weighted average exercise price of $76.03 per underlying Preference share. We do not expect to issue any additional awards under our 1996 Stock Incentive Plan. During 2000, grants for 653,325 Preference shares were issued under our 1998 Stock Incentive Plan at a weighted average exercise price of E46.74. 118 126 Grants under our stock incentive plans are in the form of non-assignable and non-transferable convertible bonds and a corresponding nonrecourse employee loan, secured solely by the convertible bonds with respect to which it was made. The grant of convertible bonds and corresponding employee loans to an eligible employee is designed to be the functional equivalent of non-qualified employee stock options. To accomplish this result, as more fully described below, amounts due and payable on an employee loan are completely offset by amounts due and payable on the convertible bonds with respect to which the employee loan was made. We requested rulings from the U.S. Internal Revenue Service to this effect, and we received a favorable response received with respect to our 1996 Stock Incentive Plan and to our 1998 Stock Incentive Plan. The convertible bonds have a face amount equal to the calculated nominal value of a Preference share multiplied by the number of Preference shares into which the convertible bonds may be converted, either directly or as represented by ADSs. The interest rate on the convertible bonds is a rate determined by our management board, who administer our stock incentive plans. Conversion rights over the convertible bonds generally vest over a three-year period from the date of grant. Upon vesting, convertible bonds are convertible, subject to satisfaction of all state regulatory and other legal requirements, as well as the provisions of the applicable stock incentive plan, for a period of ten years from the date of grant, unless the recipient's employment terminates prior to that date. Generally, upon termination, the recipient or his or her representative will have 90 days to exercise the conversion right. That period is extended to one year in the case of death or disability. In the case of termination for cause, conversion rights cease at the time of termination of employment. Convertible bonds that are not converted within the prescribed time are mandatorily redeemed for face value. Convertible bonds may be converted in whole or in part; appropriate adjustment is made to the corresponding employee loans for partial conversions. Employee loans have a principal amount equal to the face amount of the convertible bonds with respect to which the employee loan was made, and bear interest at the same rate as the convertible bonds. An employee loan is payable on conversion of the convertible bonds with respect to which it was made, or upon redemption of the convertible bonds. If the convertible bonds are redeemed, the proceeds of the convertible bonds and the interest payable on the bond must be applied against the repayment of the corresponding employee loan and interest on the loan. Accordingly, for each grant, the terms of the convertible bonds and the corresponding employee loan are designed to match in all respects, so that the recipient of the grant receives nothing and pays nothing with respect to the convertible bonds or the employee loan. We have the right to offset our obligation on a convertible bond against the obligation on the related employee loan; therefore, the convertible bond obligations and employee loan receivables are not reflected in our consolidated financial statements. The conversion price of convertible bonds issued under our 1996 Stock Incentive Plan and held by U.S. citizens or residents is the fair market value of the ADS or Preference shares on the day of the grant. The conversion price of convertible bonds issued under our 1998 Stock Incentive Plan and held by U.S. citizens or residents is the fair market value of the Preference shares on the day following the date of the grant. A portion of the amount paid on conversion will be used to repay the corresponding employee loan, and interest payable with respect to the employee loan will be offset by interest payable on the convertible bonds. At the time of conversion, an employee who is a U.S. citizen or resident will be subject to U.S. federal income taxes equal to the value of the ADSs or Preference shares received and the amount paid for conversion of the convertible bonds and may be required, as a condition to receiving the ADSs or Preference shares, to remit to his or her employer company any required withholding and payroll taxes. Employees may also be required to file with us or our designed agent, as a protective measure, a form sufficient under German law to elect the treaty benefit of no withholding on interest under the U.S.-German income tax treaty. Under current German law, there would be no withholding tax imposed on these interest payments. As of December 31, 2000, options for a total of 10,060 Preference shares have been exercised under our 1998 Stock Incentive Plan. 119 127 We have also adopted the Fresenius Medical Care Stock Option Plan of June 10, 1998. This plan, known as our International Plan, was adopted for: - members of management board and managerial staff of Fresenius Medical Care; - members of management and managerial staff of our German affiliates, other than Fresenius AG and subsidiaries of Fresenius AG that are not also our subsidiaries; and - managerial staff members of our non-German affiliates, other than subsidiaries of Fresenius AG that are not also our subsidiaries. We have reserved a total of 2,500,000 Preference shares for issuance upon exercise of options under our International Plan, of which 500,000 Preference shares have been reserved for issuance to members of our management board and 2,000,000 shares for other managerial staff. The exercise price of the options under the International Plan is equal to the average of the official daily quotation prices of the Preference shares on the Frankfurt Stock Exchange on the thirty (30) days of trading immediately prior to the date of grant of the award. One third of an option granted under the International Plan vests on each of the second, third and fourth anniversary of the award date, provided that we achieve certain performance criteria for the full fiscal year following the grant date in comparison to our performance for the full fiscal year preceding the grant date. The term of the International Plan is five years, and not more than 20% of the total options available under the International Plan may be issued in any one year. Options issued under the International Plan expire 10 years from the date of grant. At our 2000 annual general meeting, our shareholders approved a resolution allowing us to exclude from the calculation of the performance criteria under the International Stock Option Plan the effects of the special charges we took in 1999 in connection with the settlement of the U.S. government investigation. Under the International Stock Plan, 1999 performance criteria are used as both the comparative year to 1997 for options granted in 1998 and as the base year (which will be compared to 2001) for options granted in 2000. The purpose of excluding the special charges taken in 1999 is to avoid the distortions created by the special charges for both purposes. The International Plan is administered by our management board, except that the selection of award recipients and other determinations under the International Plan relating to members of our management board are made by our supervisory board. Subject to the vesting requirements of the International Plan, options are exercisable only within 15 working days after publication of our financial statements for the preceding quarter. Options under the International Plan are not transferable. During 2000, we awarded options under the International Plan to purchase 321,204 Preference shares at a weighted average price of E47.64 per share, including options to purchase 83,000 shares awarded to members of the management board. During 2000 a total of 7,333 options were exercised. At December 31, 2000, a total of 78,277 options were exercisable under the International Plan. We have adopted a new stock incentive plan for our key management and executive employees and those of our subsidiaries and our shareholders approved the new plan at our 2001 annual general meeting. A total of 4,000,000 non-voting Preference shares are available for issuance under our new stock incentive plan, of which up to 500,000 shares may be issued to members of our Management Board. Participation in the new plan is limited to management staff members, executive staff members and other employees of Fresenius Medical Care and its affiliates, other than subsidiaries of Fresenius AG that are not also our subsidiaries. Our management board will determine eligibility for participation in the new plan and awards under the new plan, except that our supervisory board will make those determinations with respect members of the management board. Grants under our new stock incentive plan will be in the form of non-assignable and non-transferable convertible bonds and the offer of a corresponding non-recourse loan, effectively secured solely by the convertible bonds with respect to which the loan was made. The convertible bonds have a face amount equal to E2.56 -- the calculated nominal value of a Preference share -- multiplied by the number of Preference shares into which the bonds may be converted. The interest rate on the bonds is 5.5% per 120 128 annum. Conversion rights over the convertible bonds generally vest over a four-year period from the date of grant. Upon vesting, convertible bonds are convertible, subject to satisfaction of all state regulatory and other legal requirements, as well as the provisions of the stock incentive plan, for a period of ten years from the date of grant, unless the recipient's employment terminates prior to that date. The plan authorizes the management board, with the consent of the supervisory board or the supervisory board in the case of grants to members of the management board) to adopt regulations governing exercise in case of death, occupational disability or incapacity for employment, retirement or dismissal on operational grounds and in similar exceptional cases. Convertible bonds that are not converted within the prescribed time are mandatorily redeemed for face value. Convertible bonds may be converted in whole or in part; appropriate adjustment is made to any corresponding employee loans for partial conversions. Any employee loans made in connection with grants will have a principal amount equal to the face amount of the convertible bonds with respect to which the employee loan is made, and will bear interest at the same rate as the convertible bonds. An employee loan will be payable on conversion of the convertible bonds with respect to which it was made, or upon redemption of the convertible bonds. If the convertible bonds are redeemed, the proceeds of the convertible bonds and the interest payable on the bond must be applied against the repayment of the corresponding employee loan and interest on the loan. Accordingly, for each grant that includes an employee loan, the terms of the convertible bonds and the corresponding employee loan are designed to match in all respects, so that the recipient of the grant receives nothing and pays nothing with respect to the convertible bonds or the employee loan. In the case of grants to North American employees, we expect that the grant of a convertible bond accompanied by an employee loan will be treated as the functional equivalent of a non-qualified stock option for U.S. federal income tax purposes. We obtained rulings to that effect in connection with our 1996 and 1998 Stock Incentive Plans. A grant of convertible bonds may, at the election of the plan participant, be subject to a success target specified in the plan. If a participant does not elect to receive bonds subject to the success target, the award will be reduced by 15%. To achieve the success target, the stock exchange price of our Preference shares must exceed the initial value of the shares by at least 25% or more for at least one day prior to conversion of the bond. The initial value of Preference shares issuable upon conversion of the convertible bonds will be the average stock exchange price during the 30 trading days prior to the grant of the bond. For this purpose, the stock exchange price is the closing price of the Preference shares in electronic "Xetra" trading on the Deutsche Borse AG. The conversion price for convertible bonds granted without a success target shall be the average stock exchange price of our Preference shares during the 30 trading days prior to the grant, less the face amount of the converted convertible bond. The conversion price for convertible bonds which are subject to a success target shall be the stock exchange price of our Preference shares at the time the success target price is achieved for the first time, less the face amount of the converted convertible bond. In the case of convertible bonds issued together with an employee loan, a portion of the amount paid on conversion will be used to repay the corresponding employee loan, and interest payable with respect to the employee loan will be offset by interest payable on the convertible bonds. In connection with approval of the new plan, we terminated our International Plan. Our new plan is effective immediately for participants outside of North America. Our 1996 Stock Incentive Plan and our 1998 Stock Incentive Plan remain in effect, but our authority to issue Preference shares upon conversion of convertible bonds issued under those plans expires in September 2001. At that time, our new plan will also be available for North American personnel. The termination of our International Plan and the termination of authority to issue Preference shares under out 1996 and 1998 Stock Incentive Plans do not affect awards currently outstanding under those plans. ROLLOVER OPTIONS In connection with our formation, employees of NMC exchanged options to purchase W.R. Grace common stock and Fresenius USA employees exchanged options to purchase Fresenius USA common stock for equivalent options with respect to our Ordinary shares. When we were formed, German corporate 121 129 law did not allow us to reserve Ordinary shares and issue them upon the exercise of these rollover options, as is done by U.S. corporations. Instead, we issued the Ordinary shares issuable upon exercise of the options to Fresenius AG, which will hold the shares until exercise of the options. Fresenius AG has agreed that it will not exercise voting power, and will return any dividends paid, with respect to the Ordinary shares underlying options formerly related to W.R. Grace common stock. Upon exercise of any of these options, the holder will pay the option exercise price to us and Fresenius AG will deliver the Ordinary shares to the depositary for the Ordinary shares against issuance of ADSs representing Ordinary shares in the name of the option holder. Upon cancellation or expiration without exercise of options formerly relating to W.R. Grace common stock, Fresenius AG will transfer the underlying Ordinary shares to us at no cost. Upon cancellation or expiration without exercise of options formerly relating to Fresenius USA common stock, the underlying Ordinary shares will revert to Fresenius AG. All rollover options expire on the same date on which the previous options to purchase either the W.R. Grace common stock or Fresenius USA common stock to which such rollover options relate would have expired. As of December 31, 2000, a total of 182,006 Ordinary ADSs, each representing one-third of an Ordinary share, were subject to rollover options as described above at exercise prices ranging from $9.78 to $46.53 per Ordinary share, all currently exercisable. Members of our supervisory board and our management board, as a group, held no rollover options. 122 130 SECURITY OWNERSHIP OF PRINCIPAL SHAREHOLDERS SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS OF FRESENIUS MEDICAL CARE Our outstanding share capital consists of Ordinary shares and non-voting Preference shares that are issued only in bearer form. Accordingly, unless we receive information regarding acquisitions of our shares through a filing with the SEC or through the German statutory requirements referred to below, we have no way of determining who our shareholders are or how many shares any particular shareholder owns except as described below with respect to our shares held in ADR form. Because we are a foreign private issuer under the rules of the SEC, our directors and officers are not required to report their ownership of our equity securities or their transactions in our equity securities pursuant to Section 16 of the Exchange Act. Under the German Securities Exchange Law (Wertpapierhandelsgesetz), holders of voting securities of a German company listed on the official market (amtlicher Handel) of a German stock exchange or a corresponding trading segment of a stock exchange within the European Union are obligated to notify the company of the level of their holding whenever such holding reaches, exceeds or falls below certain thresholds, which have been set at 5%, 10%, 25%, 50% and 75% of a company's outstanding voting rights. To our knowledge, Fresenius AG is the only entity that beneficially owns more than 5% of our outstanding Ordinary shares. We have been informed that as of December 31, 2000, Fresenius AG owned the majority, 50.8%, of our Ordinary shares. At December 31, 2000 Fresenius AG's Ordinary shares represented approximately 40% of our total share capital. Morgan Guaranty Trust Company of New York, our ADR depositary, informed us that as of December 31, 2000 17,521,746 Ordinary ADSs, each representing one-third of an Ordinary share, were held of record by 8,393 U.S. holders and 3,610,391 Preference ADSs, each representing one-third of a Preference share, were held of record by six U.S. holders. Ordinary shares and Preference shares of U.S. holders accounted for approximately 8% of our Ordinary shares outstanding and 5% of our Preference shares outstanding as of December 31, 2000. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS OF FRESENIUS AG Fresenius AG's share capital consists of Ordinary shares and non-voting Preference shares. Both classes of shares are issued only in bearer form. Accordingly, Fresenius AG has no way of determining who its shareholders are or how many shares any particular shareholder owns. However, under the German Securities Exchange Law, holders of voting securities of a German company listed on the official market (amtlicher Handel) of a German stock exchange or a corresponding trading segment of a stock exchange within the European Union are obligated to notify the company of certain levels of holdings, as described above. Fresenius AG has been informed that the Else Kroner-Fresenius-Stiftung owns 68% of the Fresenius AG Ordinary shares. The Else Kroner-Fresenius-Stiftung serves to promote medical science, primarily in the fields of research and treatment of illnesses, including the development of apparatuses and preparations. It may promote only those research projects which make their results generally accessible to the public. It further serves to promote the education of physicians or of others concerned with the treatment and care of sick persons, primarily those working in the field of dialysis, as well as to promote the education of particularly gifted pupils and students. Fresenius AG has also been informed that AW Beteiligungsgesellschaft mbH, which is controlled by Agrar Industrie Holding GmbH, owns 9% of the Fresenius AG Ordinary shares. Pursuant to a pooling agreement relating to its shares, voting power over the shares indirectly held by Agrar-Industrie Holding GmbH is held by the Else Kroner-Fresenius-Stiftung. In addition, Neunte Herakles Beteiligungs-Gesellschaft mbH & Co. KG informed Fresenius AG that it owns 9.97% of the Fresenius AG Ordinary shares. 123 131 CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS In connection with the formation of Fresenius Medical Care, and the combination of the dialysis businesses of Fresenius AG and W.R. Grace, Fresenius AG and its affiliates and Fresenius Medical Care and its affiliates entered into several agreements for the purpose of giving effect to the merger and defining our ongoing relationship. Fresenius AG and W.R. Grace negotiated these agreements. The information below summarizes the material aspects of certain agreements, arrangements and transactions between Fresenius Medical Care and Fresenius AG and their affiliates. Some of these agreements have been previously filed with the SEC. The following descriptions are not complete and are qualified in their entirety by reference to the agreements, copies of which have been filed with the SEC and the New York Stock Exchange. We believe that the leases, the supply agreements and the services agreements are no less favorable to us and no more favorable to Fresenius AG than would have been obtained in arm's-length bargaining between independent parties. The trademark and other intellectual property agreements summarized below were negotiated by Fresenius AG and W.R. Grace, and, taken independently, are not necessarily indicative of market terms. In the discussion below regarding our contractual and other relationships with Fresenius AG: - the term "we (or us) and our affiliates" refers only to Fresenius Medical Care and its subsidiaries; and - the term "Fresenius AG and its affiliates" refers only to Fresenius AG and affiliates of Fresenius AG other than Fresenius Medical Care and its subsidiaries. REAL PROPERTY LEASE We did not acquire the land and buildings in Germany that Fresenius Worldwide Dialysis used when we were formed. Fresenius AG or its affiliates have leased part of the real property to us, directly, and transferred the remainder of that real property to two limited partnerships. Fresenius AG is the sole limited partner of each partnership, and the sole shareholder of the general partner of each partnership. These limited partnerships, as landlords, have leased the properties to us and to Fresenius AG, as applicable, for use in our respective businesses. The aggregate annual rent payable by us under these leases is 16.8 million Deutsche mark (approximately E8.6 million), which was approximately $9.5 million as of December 31, 2000, exclusive of maintenance and other costs, and is subject to escalation, based upon the German cost of living index for a four-person employee household. The leases for manufacturing facilities have a ten-year term, followed by two successive optional renewal terms of ten years each at our election. The leases for the other facilities have a term of ten years. Based upon an appraisal, we believe that the rents under the leases represent fair market value for such properties. For information with respect to our principal properties in Germany, see "Business -- Property." COVENANTS NOT TO COMPETE Each of Fresenius AG and W.R. Grace has agreed that, for a period of ten years after our formation, it will not compete with us in any aspect of the business of supplying renal care-related goods and services, including laboratories. However, Fresenius AG may continue its home care business. TRADEMARKS Fresenius AG continues to own the name and mark "Fresenius" and its "F" logo. Fresenius AG and FMC Deutschland, our principal German subsidiary, have entered into agreements containing the following provisions. Fresenius AG has granted to FMC Deutschland, for our benefit and that of our affiliates, an exclusive, worldwide, royalty-free, perpetual license to use "Fresenius Medical Care" in our corporate names, and to use the Fresenius marks, including some combination marks containing the Fresenius name that were used by Fresenius AG's dialysis business, and the Fresenius Medical Care name 124 132 as a trade name, in all aspects of the renal business. FMC Deutschland, for our benefit and that of our affiliates, has also been granted a worldwide, royalty-free, perpetual license: - to use the "Fresenius Medical Care" mark in the then current NMC non-renal business if it is used as part of "Fresenius Medical Care" together with one or more descriptive words, such as "Fresenius Medical Care Home Care" or "Fresenius Medical Care Diagnostics"; - to use the "F" logo mark in the National Medical Care non-renal business, with the consent of Fresenius AG. That consent will not be unreasonably withheld if the mark using the logo includes one or more additional descriptive words or symbols; and - to use "Fresenius Medical Care" as a trade name in both the renal business and the National Medical Care non-renal business. We and our affiliates have the right to use "Fresenius Medical Care" as a trade name in other medical businesses only with the consent of Fresenius AG. Fresenius AG may not unreasonably withhold its consent. In the United States and Canada, Fresenius AG will not use "Fresenius" or the "F" logo as a trademark or service mark, except that it is permitted to use "Fresenius" in combination with one or more additional words such as "Pharma Home Care" as a service mark in connection with its home care business and may use the "F" logo as a service mark with the consent of FMC Deutschland, who will not unreasonably withhold its consent if the service mark includes one or more additional descriptive words or symbols. Similarly, in the United States and Canada, Fresenius AG has the right to use "Fresenius" as a trade name, but not as a mark, only in connection with its home care and other medical businesses other than the renal business and only in combination with one or more other descriptive words, provided that the name used by Fresenius AG is not confusingly similar to our marks and trade names. After the expiration of Fresenius AG's ten-year covenant not to compete with us, Fresenius AG may use "Fresenius" in its corporate names if it is used in combination with one or more additional descriptive word or words, provided that the name used by Fresenius AG is not confusingly similar to the Fresenius Medical Care marks or corporate or trade names. OTHER INTELLECTUAL PROPERTY Some of the patents, patent applications, inventions, know-how and trade secrets that Fresenius Worldwide Dialysis used prior to our formation were also used by other divisions of Fresenius AG. For Biofine(R), the polyvinyl chloride-free packaging material, Fresenius AG has granted to FMC Deutschland, for our benefit and for the benefit of our affiliates, an exclusive license for the renal business and a non-exclusive license for all other fields except other non-renal medical businesses. FMC Deutschland and Fresenius AG will share equally any royalties from licenses of the Biofine(R) intellectual property by either FMC Deutschland or by Fresenius AG to third parties outside the renal business and the other non-renal medical businesses. In addition, Fresenius AG has transferred to FMC Deutschland the other patents, patent applications, inventions, know-how and trade secrets that were used predominantly in Fresenius AG's dialysis business. In certain cases Fresenius Worldwide Dialysis and the other Fresenius AG divisions as a whole each paid a significant part of the development costs for patents, patent applications, inventions, know-how and trade secrets that were used by both prior to the merger. Where FMC Deutschland acquired those jointly funded patents, patent applications, inventions, know-how and trade secrets, our subsidiary licensed them back to Fresenius AG exclusively in the other non-renal medical businesses and non-exclusively in all other fields. Where Fresenius AG retained the jointly funded patents, patent applications, inventions, know-how and trade secrets, Fresenius AG licensed them to FMC Deutschland exclusively in the renal business and non-exclusively in all other fields. SUPPLY AGREEMENTS We produce most of our products in our own facilities. However, Fresenius AG manufactures some of our products for us, principally concentrates, at facilities that, Fresenius AG retained. These facilities are located in Brazil and France. Conversely, a facility in Italy that Fresenius AG transferred to us produces products for Fresenius Kabi AG, a subsidiary of Fresenius AG. 125 133 Our local subsidiaries and those of Fresenius AG have entered into supply agreements for the purchase and sale of products from the above facilities. Prices under the supply agreements include a unit cost component for each product and an annual fixed cost charge for each facility. The unit cost component, which is subject to annual review by the parties, is intended to compensate the supplier for variable costs such as costs of materials, variable labor and utilities. The fixed cost component generally will be based on an allocation of the 1995 fixed costs of each facility, such as rent, depreciation, production scheduling and quality control. The fixed cost component will be subject to adjustment by good-faith negotiation every twenty-four months. If the parties cannot agree upon an appropriate adjustment, the adjustment will be made based on an appropriate consumer price index in the country in which the facility is located. Each supply agreement has a term that is approximately equal to the estimated average life of the relevant production assets as of September 30, 1996, resulting in terms of four and one-half to five years. Each supply agreement may be terminated by the purchasing party after specified notice period, subject to a compensation payment reflecting a portion of the relevant fixed costs. The parties may modify existing or enter into additional supply agreements, arrangements and transactions. Any future modifications, agreements, arrangements and transactions will be negotiated between the parties and will be subject to the approval provisions of the pooling agreements and the regulatory provisions of German law regarding dominating enterprises. SERVICES AGREEMENT We obtain administrative and other services from Fresenius AG headquarters and from other divisions and subsidiaries of Fresenius AG. These services relate to, among other things, data processing, financial and management accounting and audit, human resources, risk management, quality control, production management, research and development, marketing and logistics. For 2000, Fresenius AG charged us approximately $20 million for these services. Conversely, we have provided certain services to other divisions and subsidiaries of Fresenius AG relating to research and development, plant administration, patent administration and warehousing. For 2000, we charged approximately $10 million to Fresenius AG's other divisions and subsidiaries for services we rendered to them. We and Fresenius AG may modify existing or enter into additional services agreements, arrangements and transactions. Any such future modifications, agreements, arrangements and transactions will be negotiated between the parties and will be subject to the approval provisions of the pooling agreements and the regulations of German law regarding dominating enterprises. FINANCING During the year ended December 31, 2000, aggregate loans outstanding from Fresenius AG amounted to $216 million, of which $209 million bore interest at rates varying between 7.35% and 7.38%. The remaining loans bore interest at a rate of approximately 4%. The borrowed funds were used for general corporate purposes. Interest paid during 2000 was $18.6 million. OTHER INTERESTS Dr. Gerd Krick, who is Chairman of our supervisory board, is also the Chairman of the management board of Fresenius AG. During 1999, we granted a member of our management board a five-year unsecured loan in the amount of $2 million, with interest at 6.0% per annum. Only interest is due during the first four years of the term, with both principal and interest due during the fifth year. At any time during the term of the loan, we may call the loan, and the loan can be repaid without penalty. Affiliates of Dresdner Bank AG were initial purchasers of the old trust preferred securities and Dresdner Kleinwort Wasserstein-Grantchester, Inc. was the co-lead manager of the offering of old USD trust preferred securities. Prof. Dr. Bernd Fahrholz, a member of our supervisory board, is the chairman of 126 134 the managing board of Dresdner Bank AG, an affiliate of Dresdner Bank AG London Branch, and Dr. Manfred Schaudwet, the Executive Manager of Dresdner Bank AG, is a member of the supervisory board of Fresenius AG. Dresdner Bank AG was one of the joint global coordinators of our offering of Preference shares in 2000 and received underwriting commissions and fees of E11.1 million ($10.4 million). Kleinwort Benson Holdings Inc., an affiliate of Dresdner Bank AG, acquired 1,410,256 Preference shares in the Franconia transaction described under "Management's Discussion of Financial Condition and Results of Operations -- Fresenius Medical Care AG -- Liquidity and Capital Resources" and received a financing fee of approximately $589,900 in connection with the transaction. Kleinwort Benson Holdings, Inc. subsequently sold 1,111,000 of these shares at cost to an unaffiliated investor. An affiliate of Dresdner Kleinwort Benson North America LLC is the New York Stock Exchange specialist for the ADSs evidencing our Ordinary shares. Kleinwort Benson Holdings Inc. and Dresdner Kleinwort Benson North America LLC are wholly owned subsidiaries of Dresdner Bank AG. See "-- Security Ownership of Certain Beneficial Owners of Fresenius AG." Dresdner Bank AG also acts as custodian under the deposit agreement for the ADSs evidencing the Ordinary shares and under the deposit agreement for the ADSs evidencing the Preference shares. WestLB Panmure Limited, an affiliate of Westdeutsche Landesbank Girozentrale is one of the initial purchasers of the trust preferred securities in this offering. Mr. Gerhard Roggemann, a member of the managing board of Westdeutsche Landesbank Girozentrale is a member of the supervisory board of Fresenius AG. Dr. Dieter Schenk, Deputy Chairman of our supervisory board and a member of the supervisory board of Fresenius AG, is a partner in the law firm of Norr Stiefenhofer Lutz, German counsel to Fresenius AG and Fresenius Medical Care in connection with this offering of trust preferred securities, prior securities offerings by us, and other matters. See "-- Security Ownership of Certain Beneficial Owners of Fresenius AG." Dr. Alfred Stiefenhofer, also a partner of Norr Stiefenhofer Lutz, is one of the executors of the estate of Mrs. Else Kroner. The Else Kroner-Fresenius Stiftung, a charitable foundation established under the will of Mrs. Kroner, owns the majority of the voting shares of Fresenius AG. PRODUCTS During 2000, we recognized $28.1 million of sales to Fresenius AG and its affiliates. We made purchases from Fresenius AG in the amount of $25.5 million during 2000. 127 135 DESCRIPTION OF THE TRUST PREFERRED SECURITIES Fresenius Medical Care Capital Trust IV and Fresenius Medical Care Capital Trust V will issue the trust preferred securities under their respective declarations of trust. State Street Bank and Trust Company, a Massachusetts chartered trust company, is the preferred trustee under each trust declaration. The trust declarations have been qualified under the Trust Indenture Act of 1939, as amended, incorporate certain provisions of the Trust Indenture Act and, upon consummation of the exchange offers, the trust declarations will be subject to and governed by the Trust Indenture Act. The following description is only a summary of the material provisions of the trust declarations. We urge you to read the trust declaration governing your trust preferred securities because it, not this description, defines your rights as holders of the trust preferred securities. You may request copies of the trust declarations from us. We have filed the trust declarations as exhibits to the registration statement that includes this prospectus, and you can obtain copies of the trust declarations from the sources described under "Where You Can Find More Information." GENERAL The trusts will issue the trust preferred securities in fully registered form, not in bearer form, without interest coupons. The USD trust preferred securities represent undivided beneficial ownership interests in the assets of Trust IV and the Euro trust preferred securities represent undivided beneficial ownership interests in the assets of Trust V, and entitle you to a preference, in certain circumstances with respect to distributions and amounts payable on redemption or liquidation, over the common securities of the applicable trust. Neither trust declaration permits a trust to: - issue any securities other than the old trust preferred securities, the common securities and the trust preferred securities to be issued by the trusts in the exchange offers, or - incur any indebtedness. We own all of the common securities of each trust. The common securities rank equally, and payments will be made on the common securities pro rata, with the trust preferred securities except as described below under "-- Subordination of Common Securities." The preferred trustee will own the notes and hold them for your benefit and for our benefit as holder of the common securities of each trust. Each trust guarantee is a full and unconditional guarantee with respect to the USD or Euro trust preferred securities, but does not guarantee payment of distributions or amounts payable on redemption or liquidation of such trust preferred securities when the relevant trust does not have funds available to make those payments. See "Description of the Trust Guarantee." DISTRIBUTIONS Distributions on the trust preferred securities will be fixed at the rates per annum of 7 7/8 of the stated liquidation amount of $1,000 per USD trust preferred security and 7 3/8% of the stated liquidation amount of E1,000 per Euro trust preferred security. Distributions in arrears for more than one quarter, and interest on such distributions, will accrue interest, compounded quarterly, at the same rates. The term "distributions" as used in this prospectus includes any such distributions payable unless otherwise stated. The amount of distributions payable for any period will be computed on the basis of a 360-day year of twelve 30-day months. Distributions on the trust preferred securities will be cumulative, will accrue from the date of initial issuance and will be payable quarterly in arrears on each March 15, June 15, September 15, and December 15, commencing September 15, 2001, when, as and if available for payment. Distributions on the trust preferred securities must be paid quarterly on the dates payable to the extent that the applicable trust has funds available for the payment of these distributions. The funds 128 136 available for distribution to the holders of the USD or the Euro trust preferred securities will be limited to payments received from the note issuer on the notes held by the applicable trust. See "Description of the Notes." Fresenius Medical Care will guarantee each trust's payment of distributions, to the extent of available funds of each trust, as set forth under "Description of the Trust Guarantee." Distributions on the trust preferred securities will be payable to the holders of the securities as they appear on the books and records of each trust on the relevant record dates, which will be 15 days prior to the relevant payment dates. Subject to any applicable laws and regulations and the provisions of each trust declaration, each payment will be made as described under "-- Same Day Settlement and Payment" below. If any date on which distributions are payable on the trust preferred securities is not a "business day," payment of the distribution payable on that date will be made on the next succeeding day which is a business day (without any distribution or other payment in respect of any such delay) except that, if that business day is in the next succeeding calendar year, the payment shall be made on the immediately preceding business day, in each case with the same force and effect as if made on that date. A business day means - for the USD trust preferred securities, any day other than a day on which banking institutions in New York City, Frankfurt am Main or Luxembourg are authorized or required by law to close, and, - for the Euro trust preferred securities any day other than a day on which banking institutions in New York City, London, Frankfurt am Main or Luxembourg are, or on which the Trans-European Automated Real-Time Gross-settlement Express Transfer System is, authorized or required by law to close. TAX EVENT OR INVESTMENT COMPANY EVENT REDEMPTION OR DISTRIBUTION If a "tax event", which is defined in the paragraph below, with respect to a trust occurs and is continuing, we will cause the trustees to dissolve and, after satisfaction of liabilities to creditors, liquidate that trust. The dissolving trust will then distribute the USD or Euro notes, as applicable, to the holders of its trust preferred securities and to us as holder of the common securities, within 90 days following the occurrence of the tax event. However, the liquidation and distribution will be conditioned on: (a) the trustees' receipt of an opinion of nationally recognized independent tax counsel experienced in such matters to the effect that you will not recognize any income, gain or loss for U.S. federal income tax purposes as a result of the liquidation and distribution of the notes, and (b) the note issuer being unable to avoid the tax event within the 90-day period by taking some ministerial action or pursuing some other reasonable measure that will have no adverse effect on the trust, the note issuer or you, and will involve no material cost. In the event that: - we receive an opinion of nationally recognized independent U.S. or German tax counsel or advisors or nationally recognized independent counsel or advisors of the note issuer's jurisdiction of formation (currently Luxembourg), that as a result of a tax event, there is more than an insubstantial risk that the note issuer or we would be precluded from deducting the interest on notes, for U.S. federal or German income tax purposes, or for purposes of any income tax imposed by the note issuer's jurisdiction of formation (currently Luxembourg), even after the notes were distributed to you upon liquidation of the trust as described above, or - tax counsel informs the trustees that it cannot deliver to the trustees an opinion referred to under (a) above; the note issuer will have the right, upon not less than 30 nor more than 60 days' notice and within 90 days following the occurrence of the tax event, to redeem all of its notes, for cash, at 100% of their principal amount plus accrued and unpaid interest. The trust will then redeem all the common securities and 129 137 preferred trust securities of the dissolving trust at the liquidation amount of $1,000 or E1,000 per common security and trust preferred security, as applicable, plus accrued and unpaid distributions. However, if the note issuer or the affected trust has the opportunity to eliminate, within this 90-day period, the tax event by taking some ministerial action or pursuing some other reasonable measure that will have no adverse effect on the trust, the note issuer or you, and will involve no material cost, the trust or the note issuer will pursue that measure instead of redemption. See "Mandatory Redemption." Instead of the foregoing options, we will also have the option of causing the USD or Euro trust preferred securities to remain outstanding and causing the note issuer to pay additional interest. See "Description of the Notes -- Additional Amounts." For the purposes of the trust preferred securities and the notes, a "tax event" occurs when Fresenius Medical Care obtains an opinion of nationally recognized tax counsel with respect to a trust to the effect that, as a result of: - any amendment to, or change (including any announced prospective change) in, the laws or the underlying regulations pertaining to such laws of the United States, Germany or the note issuer's jurisdiction of formation (currently Luxembourg), or any political subdivision or taxing authority in such jurisdictions (other than any amendment or change implementing, complying with, or introduced in order to conform to, or otherwise arising as a result of or in connection with, any European Union Directive on the taxation of savings implementing the conclusions of the ECOFIN Council meeting of 26-27 November 2000), or - any amendment to or change in an interpretation or application of such laws or regulations by any legislative body, court, governmental agency or regulatory authority, including the enactment of any legislation and the publication of any judicial decision or regulatory determination on or after the date of issuance of the trust preferred securities, but not including any amendment or change implementing, complying with, or introduced in order to conform to, or otherwise arising as a result of or in connection with, any European Union Directive on the taxation of savings implementing the conclusions of the ECOFIN Council meeting of 26-27 November 2000, which is effective or is announced on or after the date of issuance of the trust preferred securities, and there is more than an insubstantial risk that: - the trust is, or will be within 90 days after the date of opinion of counsel, subject to U.S. federal or German income tax, or income tax in the note issuer's jurisdiction of formation (currently Luxembourg), in each case, with respect to interest received or accrued on the notes, - interest payable by the note issuer on the notes is not, or within 90 days after the date of the opinion of counsel, will not be, deductible by the note issuer or by us, in whole or in part for U.S. federal or German income tax purposes, or for purposes of any income tax imposed by the note issuer's jurisdiction of formation (currently Luxembourg), or - the trust is, or will be within 90 days after the date of such opinion of counsel, subject to more than a de minimis amount of other taxes, duties, assessments or other governmental charges of whatever nature imposed by the United States, Germany or the note issuer's jurisdiction of formation (currently Luxembourg), or any other taxing authority. If an "investment company event" with respect to a trust occurs and is continuing, Fresenius Medical Care shall cause the trustees to dissolve and, after satisfaction of liabilities to creditors, liquidate that trust and have the USD or Euro notes distributed to holders of the USD or Euro trust preferred securities as applicable, and to us as holder of the common securities within 90 days following the occurrence of the investment company event. For purposes of the trust preferred securities and the notes, "investment company event" means receipt by Fresenius Medical Care of an opinion of counsel, having a nationally recognized tax and securities practice, with respect to a trust to the effect that, as a result of the occurrence of a change in 130 138 law or regulation or a change in interpretation or application of law or regulation by any legislative body, court, governmental agency or regulatory authority, which change in law becomes effective on or after the date of issuance of the trust preferred securities, that trust is or will be considered an "investment company" which is required to be registered under the U.S. Investment Company Act of 1940. After the date fixed for any distribution of USD notes or Euro notes: - the distributing trust's trust preferred securities will no longer be deemed to be outstanding, - DTC, or its nominee, as the record holder of the USD global certificates, or Deutsche Bank AG London, as common depositary for Euroclear and Clearstream, Luxembourg, or its nominee, as the record holder of the Euro global certificates, will receive registered global certificates representing the USD or Euro notes to be delivered upon such distribution, and - any certificates representing USD trust preferred securities not held by DTC or its nominee, or Euro trust preferred securities not held by Deutsche Bank AG London as common depositary for Euroclear and Clearstream, Luxembourg or its nominee, will be deemed to represent the USD or Euro notes, as applicable, having a principal amount equal to the aggregate of the stated liquidation amount of such trust preferred securities, with accrued and unpaid interest equal to the amount of accrued and unpaid distributions on such trust preferred securities, until such certificates are presented to the note issuer or its agent for transfer or reissuance. The distribution by a trust of the USD or Euro notes will effectively result in the cancellation of the distributing trust's preferred securities. MANDATORY REDEMPTION The notes will mature on June 15, 2011 and we may redeem them at any time in certain circumstances upon the occurrence of a tax event. Upon the repayment of the USD or Euro notes, whether at maturity, upon redemption, by declaration or otherwise, after satisfaction of the liabilities of the applicable trust, we will apply the proceeds from such repayment or redemption simultaneously to redeem the common securities and preferred trust securities of that trust having an aggregate liquidation amount equal to the principal amount of notes repaid or redeemed. However, the trust conducting the redemption will give us, as holder of the common securities, not less than 30 nor more than 60 days' notice of such redemption. See "-- Tax Event or Investment Company Event Redemption or Distribution" and "Description of the Notes -- General." CHANGE OF CONTROL REDEMPTION A holder of common securities or preferred trust securities has the right to require the applicable trust to redeem all or any part of that holder's common securities or preferred trust securities upon the occurrence of a Change of Control Triggering Event, as defined under "Description of Notes -- Certain Definitions," at a redemption price equal to 101% of the liquidation amount plus any accrued and unpaid distributions. Upon the occurrence of such an event, the trust will exercise its right to require the note issuer to redeem USD or Euro notes in an amount equal to the USD or Euro trust preferred securities and common securities, as applicable, to be redeemed. See "Description of the Notes -- Change of Control." REDEMPTION PROCEDURES A trust will not redeem its trust preferred securities unless all accrued and unpaid distributions have been paid on such trust preferred securities for all quarterly distribution periods terminating on or prior to the date of redemption. Notice of redemption by a trust in respect of its trust preferred securities is irrevocable. If a trust gives a notice of redemption in respect of its trust preferred securities, then by 12:00 noon, New York City time, for the USD trust preferred securities, or 12:00 noon Central European time for the Euro trust 131 139 preferred securities, on the redemption date, the trust conducting the redemption will irrevocably deposit with the paying agent for payment to DTC for the USD trust preferred securities, or to the common depositary for Euroclear and Clearstream, Luxembourg, for the Euro trust preferred securities, funds sufficient to pay the amount payable on redemption. The trust will instruct the paying agent to give DTC or the common depositary for Euroclear and Clearstream, Luxembourg, as applicable, irrevocable instructions and authority to pay such amount in respect of the trust preferred securities which are represented by global certificates to be redeemed. The trust will irrevocably deposit with the paying agent for its trust preferred securities funds sufficient to pay that amount in respect of any certificated trust preferred securities and will give the paying agent irrevocable instructions and authority to pay that amount to any holders of certificated trust preferred securities upon surrender of their certificates. Notwithstanding the foregoing, each trust will pay, on the relevant record dates, any distributions payable on or prior to the redemption date for its trust preferred securities called for redemption. If a trust gives notice of redemption and deposits funds as required, then upon the date of the deposit, all rights of the holders of the trust preferred securities called for redemption will cease, except the right to receive the redemption price and any distributions payable on or prior to the date of redemption, but without interest on the redemption price. In the event that any date fixed for redemption of trust preferred securities is not a business day, then payment of the amount payable on that date will be made on the next succeeding day which is a business day (without any interest or other payment in respect of any such delay), except that, if such business day falls in the next calendar year, such payment will be made on the immediately preceding business day. In the event that the conducting the redemption trust improperly withholds or refuses to pay the redemption price in respect of its trust preferred securities to be redeemed, distributions on those trust preferred securities will continue to accrue at the then applicable rate, from the original redemption date to the date of payment. In that case the actual payment date will be considered the date fixed for redemption for purpose of calculating the amount payable upon redemption (other than for purposes of calculating any premium). The trust conducting the redemption will mail notice of any redemption to holders of its trust preferred securities and us as holder of its common securities. In the case of the trust preferred securities, the trust will mail the notice at least 30 days but not more than 60 days before the date of the redemption. Unless the note issuer defaults in payment of the redemption price on the USD or Euro notes, as applicable, on and after the date of the redemption, interest shall cease to accrue on the USD or Euro notes, as applicable, or portions thereof (and distributions will cease to accrue on the related trust preferred securities or portions thereof) called for redemption. We may at any time and from time to time purchase outstanding trust preferred securities by tender, in the open market or by private agreement, subject to our obligations described in this section and under the indentures for the notes and applicable law including U.S. federal securities laws. SUBORDINATION OF COMMON SECURITIES Each trust will make distribution payments and any other payments due upon redemption or liquidation of its common securities and trust preferred securities, on a pro rata basis. However, if on any distribution date or redemption date an event of default under its trust declaration, the indenture for the USD or Euro notes or the applicable trust guarantee has occurred and is continuing, a trust will not make any payment of any distribution on, or amount payable upon redemption of, any common security, and will not make any other payment on account of the redemption, liquidation or other acquisition of the common securities, unless it has made payment in full in cash of accumulated and unpaid distributions on all its outstanding trust preferred securities for all distribution periods terminating on or prior to the date of payment, or in the case of payment of the amount payable upon redemption of such trust preferred securities, it has made or provided for the full amount of such payment in respect of all its outstanding trust preferred securities, and all funds available to the preferred trustee shall first be applied to the payment in full in cash of all distributions on, or the amount payable upon redemption of, its trust preferred securities then due and payable. 132 140 In the case of any event of default referred to in the previous paragraph we, as holder of the common securities of a trust, will be deemed to have waived the event of default until all such events of default with respect to the USD or Euro trust preferred securities of that trust have been cured, waived or otherwise eliminated. Until any events of default with respect to such trust preferred securities have been so cured, waived or otherwise eliminated, the trustees shall act solely on behalf of the holders of those trust preferred securities and not on our behalf as holder of the common securities and only the holders of those trust preferred securities will have the right to direct the trustees to act on their behalf. LIQUIDATION DISTRIBUTION UPON DISSOLUTION In the event of any voluntary or involuntary dissolution, winding up or termination of a trust, the holders of that trust's trust preferred securities and we, as holder of its common securities, will be entitled to receive out of the assets of that trust available for distribution, after satisfaction of liabilities to creditors of the trust, an amount equal to the aggregate of the stated liquidation amount of $1,000 per USD trust security or E1,000 per Euro trust security, plus accrued and unpaid distributions on such trust securities to the date of payment. You will not be entitled to receive such a distribution if, in connection with such dissolution, winding up or termination, USD or Euro notes as applicable, in an aggregate principal amount equal to such distribution have been given on a pro rata basis to you. If such distribution can be paid only in part because a trust has insufficient assets available to pay in full the aggregate distribution, then the amounts payable directly by the dissolving or terminating trust on its trust preferred securities shall be paid on a pro rata basis. We, as holder of the common securities of each trust will be entitled to receive distributions upon each trust's liquidation pro rata with you, except that if an event of default has occurred and is continuing, the trust preferred securities shall have a priority over the common securities. Under each trust declaration, a trust will be dissolved and its affairs will be wound up upon the earliest to occur of the following: - December 31, 2030, the expiration of the term of each trust, - our bankruptcy, liquidation or dissolution, - the revocation of our charter and the expiration of 90 days after the date of revocation without a reinstatement of our charter, - the entry of a decree of judicial dissolution of the trust by a court of competent jurisdiction, - the distribution of all of the trust property (as defined in the trust declaration), - the written direction from us, as sponsor, to the preferred trustee at any time to terminate the trust and cause the note issuer to distribute the USD or Euro notes in exchange for the USD or Euro trust preferred securities, as applicable, - the redemption of all of the USD or Euro trust preferred securities in connection with the redemption of all of the USD or Euro notes, as applicable, - subject to conditions specified under "-- Tax Event or Investment Company Event Redemption or Distribution," the occurrence of a "tax event," and - the occurrence of an "investment company event." MERGER, CONSOLIDATION OR AMALGAMATION OF THE TRUSTS Neither trust may consolidate, amalgamate, merge with or into, or be replaced by, or convey, transfer or lease its properties and assets substantially as an entirety to any corporation or other person, except as described below. A trust may, without your consent, consolidate, amalgamate, merge with or into, or be 133 141 replaced by, or convey, transfer or lease its properties and assets substantially as an entirety to, a trust organized as such under the laws of any state of the United States of America so long as: (a) if the trust is not the survivor, the successor entity either (1) expressly assumes all of the obligations of the trust under its common securities and trust preferred securities, or (2) substitutes for the trust's common securities and trust preferred securities other securities ("successor securities") having substantially the same terms as the common and trust preferred securities, as long as the successor securities rank the same as the common securities and trust preferred securities with respect to distributions and payments upon liquidation, redemption and otherwise, (b) the note issuer expressly appoints a trustee of the successor entity that possesses substantially the same powers and duties possessed by the preferred trustee as the holder of the USD or Euro notes, as applicable, (c) the USD or Euro trust preferred securities, as applicable, or any successor securities are listed, or any successor securities will be listed upon notification of issuance, on any national securities exchange or other organization on which the USD or Euro trust preferred securities, as applicable, are then listed, (d) the merger, consolidation, amalgamation, replacement, conveyance, transfer or lease does not cause the USD or Euro trust preferred securities, as applicable, including any successor securities, to be downgraded by any nationally recognized statistical rating organization, (e) the merger, consolidation, amalgamation, replacement, conveyance, transfer or lease does not adversely affect the rights, preferences and privileges of the holders of the USD or Euro trust preferred securities, as applicable or those of the holders of the common securities, including any successor securities, in any material respect, (f) the successor entity has a purpose substantially identical to that of the trust, (g) we have provided a guarantee to the holders of the successor securities with respect to the successor entity having substantially the same terms as the applicable trust guarantee, and (h) prior to the merger, consolidation, amalgamation, replacement, conveyance, transfer or lease, the note issuer has received an opinion of nationally recognized independent counsel to the trust experienced in such matters to the effect that (1) the successor entity will be treated as a grantor trust for U.S. federal income tax purposes or otherwise as an entity that is not subject to U.S. federal income tax at the entity level and the assets and income of which are treated for U.S. federal income tax purposes as held and derived directly by holders of interests in the entity, (2) following the merger, consolidation, amalgamation, replacement, conveyance, transfer or lease, neither the trust nor the successor entity will be required to register as an investment company under the Investment Company Act and (3) the merger, consolidation, amalgamation, replacement, conveyance, transfer or lease will not adversely affect the rights, preferences, privileges and limited liability of the USD or Euro trust preferred securities as applicable in any material respect. Notwithstanding these conditions, a trust will not, except with the consent of the holders of 100% in liquidation amount of the common securities and USD or Euro preferred trust securities, as applicable, consolidate, amalgamate, merge with or into, be replaced by, convey, transfer or lease its properties and assets substantially as an entirety to, any other entity or permit any other entity to consolidate, amalgamate, merge with or into or replace it, if such consolidation, amalgamation, merger, replacement, conveyance, transfer or lease would cause the trust or the successor entity to be classified as other than a 134 142 grantor trust for U.S. federal income tax purposes or another entity which is not subject to U.S. federal income tax at the entity level and the assets and income of which are treated for U.S. federal income tax purposes as held and derived directly by holders of interests in the entity. DECLARATION EVENTS OF DEFAULT An event of default under an indenture, or a default by Fresenius Medical Care under a trust guarantee constitutes an event of default under the related trust declaration with respect to the common securities and USD or Euro trust preferred securities, as applicable. However, under the trust declaration of each trust, we, as holder of the common securities of a trust, will be deemed to have waived any event of default under the trust declaration with respect to such common securities until all events of default under the trust declaration with respect to the trust preferred securities of the trust have been cured, waived or otherwise eliminated. Until that time, the preferred trustee will be deemed to be acting solely on behalf of the holders of the trust preferred securities of the trust and only the holders of the trust preferred securities will have the right to direct the preferred trustee with respect to certain matters under the applicable trust declaration and, therefore, the related indenture. If an event of default has occurred and is continuing under a trust declaration and is attributable to the failure of the note issuer to pay interest on or principal of the USD or Euro notes on the date such interest or principal is otherwise payable (including, for the avoidance of doubt, any failure of the note issuer to pay additional amounts in respect of the notes), or in the case of redemption, the redemption date, then holders of not less than 25% in liquidation amount of outstanding USD or Euro trust preferred securities, as applicable, have the right to appoint a special trustee to act on their behalf. The special trustee appointed in accordance with the preceding sentence will represent all of the holders of the USD or Euro trust preferred securities, as applicable, unless the holders of at least a majority in liquidation amount of such outstanding trust preferred securities appoint an alternative special trustee in which case the special trustee appointed in accordance with the preceding sentence will be required to resign as special trustee. At no time can there be more than one special trustee acting on behalf of the holders of the USD or Euro trust preferred securities, as applicable. The special trustee will have the right to directly institute a proceeding against the note issuer for enforcement of payment of the principal of or interest on the USD or Euro notes, having a principal amount equal to the aggregate liquidation amount of USD or Euro trust preferred securities, as applicable. In connection with any such action, the note issuer will be subrogated to the rights of the holders of the trust preferred securities under the applicable trust declaration to the extent of any payment made by the note issuer to those holders in the action. If the preferred trustee or the special trustee do not enforce such payment obligations, the holders of the USD or Euro trust preferred securities will have the right, to the fullest extent permitted by law, to bring an action on behalf of the applicable trust to enforce the trust's rights under the USD or Euro notes, as applicable, and the related indenture. The holders of trust preferred securities will not be able to exercise directly any other remedy available to the holders of the notes. Upon the occurrence of an event of default under a trust declaration, the preferred trustee, as the sole holder of the USD or Euro notes, as applicable, will have the right under the applicable indenture to declare the principal of and interest on the USD or Euro notes to be immediately due and payable. The note issuer and the trusts are each required to file annually with the preferred trustee an officers' certificate as to its compliance with all conditions and covenants under the trust declaration. VOTING RIGHTS Except as described in this section and under "Description of the Trust Guarantee -- Amendments and Assignment" and as provided in the Delaware Business Trust Act and the Trust Indenture Act and as otherwise required by law and the applicable trust declaration, you will have no voting rights. Subject to the requirement that the preferred trustee obtain a tax opinion in certain circumstances set forth in the last sentence of the following paragraph, the holders of a majority in aggregate liquidation amount of the USD or Euro trust preferred securities, as applicable, have the right to direct the time, method and place of conducting any proceeding for any remedy available to the preferred trustee, or direct 135 143 the exercise of any trust or power conferred upon the preferred trustee under the applicable trust declaration including the right to direct the preferred trustee, as holder of the USD or Euro notes, to: - exercise the remedies available under the applicable indenture with respect to the USD or Euro notes, - waive any past event of default that is waivable under the applicable indenture, - exercise any right to rescind or annul a declaration that the principal of all USD or Euro notes will be due and payable, or - consent to any amendment, modification, or termination of an indenture or the related notes where such consent will be required. However, if a consent or action under an indenture would require the consent or act of the holders of more than a majority of the aggregate principal amount of the USD or Euro notes affected thereby, only the holders of the percentage of the aggregate stated liquidation amount of the USD or Euro trust preferred securities, as applicable, which is at least equal to the percentage required under the applicable indenture may direct the preferred trustee to give consent or take action. Also, we cannot amend either indenture in any way which would cause the applicable trust to fail or cease to be classified for purposes of U.S. federal income taxation as other than a grantor trust or other entity which is not subject to U.S. federal income tax at the entity level and the assets and income of which are treated for U.S. federal income tax purposes as held and derived directly by holders of interests in the entity. The trustees may not revoke any action that the holders of the USD or Euro trust preferred securities previously authorized or approved by their vote except by subsequent vote by them. If the preferred trustee or the special trustee fails to enforce its rights under the USD or Euro notes to receive interest or principal on those notes on the date the interest or principal is otherwise payable (or in the case of redemption, the redemption date), the holders of USD or Euro trust preferred securities, as applicable may institute a legal proceeding on behalf of the applicable trust against the note issuer to enforce the trust's rights under the notes without first instituting any legal proceeding against the preferred trustee or any other person or entity. The holders of trust preferred securities would not be able to exercise directly any other remedies available to the holders of the notes unless the preferred trustee or the indenture trustee, acting for the benefit of the preferred trustee, fails to do so. In that case, the holders of at least 25% in aggregate liquidation amount of outstanding USD or Euro trust preferred securities, as applicable, to the fullest extent permitted by law, have a right to institute such proceedings. The preferred trustee will notify the holders of USD or Euro trust preferred securities, of any notice of default received from the indenture trustee with respect to the related notes. The notice will state that the event of default also constitutes an event of default under the applicable declaration. Except with respect to directing the time, method and place of conducting a proceeding for a remedy, the preferred trustee will not take any of the actions described above unless the preferred trustee has obtained an opinion of tax counsel to the effect that, as a result of such action, the applicable trust will not fail to be classified as a grantor trust for U.S. federal income tax purposes or another entity which is not subject to U.S. federal income tax at the entity level and the assets and income of which are treated for U.S. federal income tax purposes as held and derived directly by holders of interests in the entity. In the event the consent of the preferred trustee, as the holder of the USD or Euro notes, is required under the applicable indenture with respect to any amendment, modification or termination of that indenture, the preferred trustee shall request the direction of the holders of USD or Euro trust preferred securities, with respect to that amendment, modification or termination and will vote with respect to the amendment, modification or termination as directed by a majority in liquidation amount of the USD or Euro trust preferred securities. However, if a consent under an indenture would require the consent of the holders of more than a majority of the aggregate principal amount of the USD or Euro notes, the preferred trustee may only give that consent at the direction of the holders of at least the same proportion in aggregate stated liquidation amount of USD or Euro trust preferred securities. Also, we may not amend either indenture in any way which would cause the trust under the related declaration to fail or cease to be 136 144 classified for purposes of U.S. federal income taxation as other than a grantor trust or other entity which is not subject to U.S. federal income tax at the entity level and the assets and income of which are treated for U.S. federal income tax purposes as held and derived directly by holders of interests in the entity. The preferred trustee will not take any such action in accordance with the directions of the holders of trust preferred securities unless the preferred trustee has obtained an opinion of tax counsel to the effect that for the purposes of U.S. federal income tax the applicable trust will not be classified as other than a grantor trust or another entity which is not subject to U.S. federal income tax at the entity level and the assets and income of which are treated for U.S. federal income tax purposes as held and derived directly by holders of interests in the entity. A waiver of an event of default under an indenture will constitute a waiver of the corresponding event of default under the related trust declaration. The holders of USD or Euro trust preferred securities may give any required approval or direction at a separate meeting of holders of those trust preferred securities convened for such purpose, at a meeting of all of the holders of common and USD or Euro trust preferred securities or pursuant to written consent. The trustees will cause a notice of any meeting at which the holders of trust preferred securities are entitled to vote, or of any matter upon which action by written consent of those holders is to be taken, to be mailed to each holder of record of the applicable trust preferred securities. Each notice will include a statement setting forth the following information: - the date of such meeting or the date by which the action is to be taken, - a description of any resolution proposed for adoption at the meeting on which the holders are entitled to vote or of the matter upon which written consent is sought, and - instructions for the delivery of proxies or consents. No vote or consent of the holders of trust preferred securities will be required for a trust to redeem and cancel its trust preferred securities or distribute the USD or Euro notes in accordance with the applicable trust declaration. In any case in which the holders of trust preferred securities are entitled to vote or consent under any of the circumstances described above, any of the trust preferred securities: - that we own, - that any entity that we directly or indirectly control owns, or - that any entity under direct or indirect common control with us owns, will not be entitled to vote or consent and will, for purposes of this vote or consent, be treated as if the trust preferred securities which these persons own were not outstanding. The procedures for you to exercise your voting rights are described below. See "-- Book-Entry, Delivery and Form" below. You will have no rights to appoint or remove, or increase or decrease the number of, the trustees, who may be appointed, removed or replaced, increased or decreased solely by us as the holder of all of the common securities. MODIFICATION OF THE TRUST DECLARATIONS The trustees, the note issuer and we may modify a trust declaration. However, if any proposed amendment provides for, or the trustees, the note issuer or we otherwise propose to: (a) take any action that would adversely affect the powers, preferences or special rights of the common securities and trust preferred securities issued under a declaration of trust, whether by way of amendment to the trust declaration or otherwise, or (b) dissolve, wind up or terminate a trust other than under the terms of its trust declaration, 137 145 then we, as holder of the common securities, and the holders of the trust preferred securities of that trust, voting together as a single class will be entitled to vote on the amendment or proposal and the amendment or proposal will not be effective except with the approval of at least a majority in liquidation amount of the common securities and trust preferred securities affected by such amendment or proposal. However, if any amendment or proposal referred to in clause (a) above would adversely affect only the preferred securities or the common securities, as the case may be, of that trust, then only the affected class will be entitled to vote on the amendment or proposal and the amendment or proposal will not be effective except with the approval of at least a majority in liquidation amount of the applicable class of securities. Notwithstanding the foregoing, no amendment or modification may be made to a trust declaration if the amendment or modification would: - cause the applicable trust to be classified for purposes of U.S. federal income taxation as other than a grantor trust or another entity which is not subject to U.S. federal income tax at the entity level and the assets and income of which are treated for U.S. federal income tax purposes as held and derived directly by holders of interests in the entity, - reduce or otherwise adversely affect the powers of the trustees, or - cause the applicable trust, to be deemed an "investment company" which is required to be registered under the Investment Company Act. BOOK-ENTRY, DELIVERY AND FORM The trust preferred securities will be represented by two or more certificates in registered, global form without interest coupons (the "USD global certificate" and the "Euro global certificate," respectively, and collectively, the "global certificates"). The USD global certificate will be deposited upon issuance with the preferred trustee as custodian for DTC and registered in the name of DTC or its nominee, for credit to an account of a direct or indirect participant in DTC as described below. The Euro global certificate will be deposited upon issuance with Deutsche Bank AG London as common depositary for Morgan Guaranty Trust Company of New York, Brussels Office, operator of Euroclear S.A./N.V. and Clearstream Banking societe anonyme, and registered in the name of BT Globenet Nominees Limited as nominee for the common depositary, for credit to an account of a direct or indirect participant in Euroclear or Clearstream, Luxembourg as described below. The Euro trust preferred securities will not be registered with DTC or any nominee thereof. Except as described below, the USD global certificate may be transferred, in whole and not in part, only to another nominee of DTC or to a successor of DTC or its nominee, and the Euro global certificate may be transferred, in whole and not in part, only by Euroclear and Clearstream, Luxembourg, to the common depositary, as the case may be, or by the common depositary to Euroclear and Clearstream, Luxembourg, respectively, or to another nominee or successor thereof or a nominee of such successor. Beneficial interests in the global certificates may not be exchanged for trust preferred securities in certificated form except in the limited circumstances described below. See "-- Certificated Securities." Except in the limited circumstances described below, owners of beneficial interests in the global certificates will not be entitled to receive physical delivery of trust preferred securities in certificated form. Transfers of beneficial interests in the USD global certificate will be subject to the applicable rules of DTC and its direct or indirect participants (including, if applicable, those of Euroclear and Clearstream, Luxembourg). Transfers of beneficial interests in the Euro global certificate will be subject to the applicable rules and procedures of Euroclear and Clearstream, Luxembourg and their direct or indirect participants (including, if applicable, those of DTC). In each case, these procedures may change from time to time. Cross-market transfers of beneficial interests in the USD global certificate between the participants in DTC, on the one hand, and Euroclear or Clearstream, Luxembourg participants, on the other hand, will be effected through DTC in accordance with DTC's rules on behalf of Euroclear or Clearstream, Luxembourg by its respective depositary; however, such cross-market transactions will require delivery of instructions to 138 146 Euroclear or Clearstream, Luxembourg by the counterparty in such system in accordance with the rules and procedures and within the established deadlines (Brussels time) of such system. Euroclear or Clearstream, Luxembourg will, if the transaction meets its settlement requirements, deliver instructions to its respective depositary to take action to effect final settlement on its behalf by delivering or receiving interests in the relevant global certificate in DTC, and making or receiving payment in accordance with normal procedures for same-day funds settlement applicable to DTC. Euroclear participants and Clearstream, Luxembourg participants may not deliver instructions directly to the depositories for Euroclear or Clearstream, Luxembourg. Cross-market transfers of beneficial interests in the Euro global certificate between the participants in Euroclear and Clearstream, Luxembourg, on the one hand, and DTC participants, on the other hand, will be effected through Euroclear and Clearstream, Luxembourg in accordance with Euroclear and Clearstream, Luxembourg's rules on behalf of DTC; however, such cross-market transactions will require delivery of instructions to DTC by the counterparty in such system in accordance with the rules and procedures and within the established deadlines (New York City time) of such system. DTC will, if the transaction meets its settlement requirements, take action to effect final settlement by delivering or receiving interests in the relevant global certificate in Euroclear and Clearstream, Luxembourg, and making or receiving payment in accordance with normal procedures for same-day funds settlement applicable to Euroclear and Clearstream, Luxembourg. DEPOSITARY PROCEDURES The following description of the operations and procedures of DTC, Euroclear and Clearstream, Luxembourg are provided solely as a matter of convenience. We have obtained the information in these descriptions from sources we and the trusts believe to be reliable, but neither we nor the trusts takes responsibility for the accuracy of this information. The operations and procedures of these clearing systems are solely within the control of the respective settlement systems. Although DTC, Euroclear and Clearstream, Luxembourg have agreed to the foregoing procedures to facilitate transfers of interests in the USD and Euro global certificates between their own participants and among participants in DTC, Euroclear and Clearstream, Luxembourg, they are under no obligation to perform or to continue to perform such procedures, and may discontinue such procedures at any time. Neither we nor the preferred trustee nor any of our respective agents will have any responsibility for the performance by DTC, Euroclear or Clearstream or their respective participants or indirect participants of their respective obligations under the rules and procedures governing their operations. We urge you to contact the system or their participants directly to discuss these matters. DTC PROCEDURES DTC has advised us that DTC is a limited-purpose trust company created to hold securities for its participating organizations and to facilitate the clearance and settlement of transactions in those securities between participants through electronic book-entry changes in accounts of its participants. DTC participants include securities brokers and dealers (including the initial purchasers of the old trust preferred securities), banks, trust companies, clearing corporations and certain other organizations. Access to DTC's system is also available to other entities such as banks, brokers, dealers and trust companies that clear through or maintain a custodial relationship with a participant, either directly or indirectly; these entities are referred to in this prospectus as DTC's indirect participants. Persons who are not participants may beneficially own securities held by or on behalf of DTC only through the participants or the indirect participants. The ownership interests in, and transfers of ownership interests in, each security held by or on behalf of DTC are recorded on the records of its participants and indirect participants. DTC has also advised us that, pursuant to procedures established by it: (1) upon deposit of the global USD certificate, DTC will credit the accounts of its participants with portions of the liquidation amount of the USD global certificate; and 139 147 (2) ownership of these interests in the global certificate will be shown on, and the transfer of ownership of these interests will be effected only through, records maintained by DTC (with respect to the participants) or by the participants and the indirect participants (with respect to other owners of beneficial interest in the USD global certificate). Investors in the USD global certificate who are participants in DTC's system may hold their interests in the certificates directly through DTC. Investors in the USD global certificate who are not participants may hold their interests in the certificate indirectly through organizations (including Euroclear and Clearstream, Luxembourg) which are DTC participants. Euroclear and Clearstream, Luxembourg will hold interests in the USD global certificate on behalf of their participants through customers' securities accounts in their respective names on the books of their respective depositories, which are Morgan Guaranty Trust Company of New York, Brussels office, as operator of Euroclear, and Citibank, N.A., as operator of Clearstream, Luxembourg. All interests in the USD global certificate, including those held through Euroclear or Clearstream, Luxembourg, may be subject to the procedures and requirements of DTC. Those interests held through Euroclear or Clearstream, Luxembourg may also be subject to the procedures and requirements of those systems. 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 beneficial interests in a global certificate to such persons will be limited to that extent. Because DTC can act only on behalf of participants, which in turn act on behalf of indirect participants, your ability to pledge your beneficial interest in a global certificate to persons that do not participate in the DTC system, or otherwise take actions in respect of those interests, may be affected by the lack of a physical certificate evidencing the beneficial interests. Except as described below you, as an owner of interest in the USD global certificates will not have USD trust preferred securities registered in your name, will not receive physical delivery of USD trust preferred securities in certificated form and will not be considered the registered owner of the USD trust preferred security under the Trust IV trust declaration for any purpose. The preferred trustee will act as U.S. paying agent for the USD trust preferred securities. We have appointed Banque Generale du Luxembourg as Luxembourg paying agent with respect to any USD trust preferred securities that are represented by a global certificate subject to transfer restrictions pursuant to Regulation S under the U.S. Securities Act. The aggregate amount of payments to DTC, as the registered holder of the USD trust preferred securities, will correspond to the aggregate liquidation amount of USD trust preferred securities represented by the USD global certificates as established by the preferred trustee at the close of business on the relevant record date, which will be 15 days prior to the relevant payment dates. Payments in respect of liquidation amounts and distributions on a USD global certificate registered in the name of DTC or its nominee will be payable to DTC in its capacity as the registered holder under the Trust IV trust declaration. Under the terms of that trust declaration, the preferred trustee will treat holders of the USD trust preferred securities as the owners of the USD trust preferred securities for the purpose of receiving payments and for all other purposes. Trust IV, the preferred trustee or any paying agent will not, however, have any responsibility or liability for: (1) any aspect of DTC's records or any participant's or indirect participant's records relating to or payments made on account of beneficial ownership interest in the USD global certificate or for maintaining, supervising or reviewing any of DTC's records or any participant's or indirect participant's records relating to the beneficial ownership interests in the USD global certificate; or (2) any other matter relating to the actions and practices of DTC or any of its participants or indirect participants. DTC has advised us that its current practice, upon receipt of any payment in respect of securities such as the USD trust preferred securities, is to credit the accounts of the relevant participants with the payment on the payment date unless DTC has reason to believe it will not receive payment on such payment date. Each relevant participant is credited with an amount proportionate to its beneficial 140 148 ownership of an interest in the principal amount or the liquidation amount of the relevant security as shown on the records of DTC. Payments by DTC's participants and indirect participants to the beneficial owners of USD trust preferred securities will be governed by standing instructions and customary practices and will be the responsibility of those participants and indirect participants and will not be the responsibility of DTC. Neither we nor the preferred trustee will be liable for any delay by DTC or any of its participants in identifying the beneficial owners of the USD trust preferred securities, and we and the preferred trustee may conclusively rely on and will be protected in relying on instructions from DTC or its nominee for all purposes. Transfers of beneficial interests in the USD global certificate between participants in DTC will be effected in accordance with DTC's procedures, and will be settled in same-day funds, and transfers between participants in Euroclear and Clearstream, Luxembourg will be effected in accordance with their respective rules and operating procedures. DTC has advised us that it will take any action permitted to be taken by you as holders of USD trust preferred securities only at the direction of one or more participants to whose account DTC has credited the interests in the USD global certificate and only in respect of the portion of the aggregate liquidation amount of the USD trust preferred securities as to which the participant or participants has or have given such direction. EUROCLEAR AND CLEARSTREAM, LUXEMBOURG PROCEDURES We have been furnished with the following information by Euroclear and Clearstream, Luxembourg: - Euroclear and Clearstream, Luxembourg each hold securities for their account holders and facilitate the clearance and settlement of securities transactions by electronic book-entry transfer between their respective account holders. This eliminates the need for physical movements of certificates and any risks from lack of simultaneous transfers of securities. - Euroclear and Clearstream, Luxembourg each provide various services including safekeeping, administration, clearance and settlement of internationally traded securities and securities lending and borrowing. - Each of Euroclear and Clearstream, Luxembourg can settle securities transactions in any of more than 30 currencies, including the euro. - Euroclear and Clearstream, Luxembourg each also deal with domestic securities markets in several countries through established depositary and custodial relationships. - Their respective systems enable their respective account holders to settle trades with each other. - Account holders in Euroclear and Clearstream, Luxembourg are world-wide financial institutions including underwriters, securities brokers and dealers, which may include the initial purchasers, banks, trust companies and clearing corporations. - Indirect access to both Euroclear and Clearstream, Luxembourg is available to other institutions that clear through or maintain a custodial relationship with an account holder of either system. - An account holder's overall contractual relations with either Euroclear or Clearstream, Luxembourg are subject to their respective rules or operating procedures and any applicable laws. - Both Euroclear and Clearstream, Luxembourg act under those rules and operating procedures only on behalf of their respective account holders and have no record of or relationships with persons holding through their respective holders. Upon the issuance of the Euro global certificate, either of Euroclear or Clearstream, Luxembourg will credit the accounts of persons holding through it with the respective liquidation amounts represented by the Euro global certificate. Such accounts shall be limited to persons who have accounts with Euroclear or Clearstream, Luxembourg, or persons who may hold interests through such account holders. Ownership of beneficial interests in a Euro global certificate will be shown on, and the transfer of that ownership interest will be effected only through, records maintained by Euroclear or Clearstream, 141 149 Luxembourg (with respect to account holders' interests) and such account holders (with respect to the owners of beneficial interests in such Euro global certificates other than account holders). The Euro global certificates will not be eligible for clearance through DTC, except indirectly through DTC's participation in Euroclear and Clearstream, Luxembourg. We expect that investors who hold accounts with Euroclear or Clearstream, Luxembourg may acquire, hold and transfer security entitlements with respect to the Euro global certificates against Euroclear or Clearstream, Luxembourg and their respective property by book-entry to accounts with Euroclear or Clearstream, Luxembourg, each of which has an account with the common depositary and subject at all times to the procedures and requirements of Euroclear or Clearstream, Luxembourg. In this prospectus, "security entitlement" means the rights and property interests of an account holder against its securities intermediary under applicable law in or with respect to a security, including any ownership, co-ownership, contractual or other rights. Investors who do not have accounts with Euroclear or Clearstream, Luxembourg may acquire, hold and transfer security entitlements with respect to the Euro global certificate against the securities intermediary and its property with which such investors hold accounts by book-entry to accounts with such securities intermediary, which in turn may hold a security entitlement with respect to the Euro global certificate through Euroclear or Clearstream, Luxembourg. Investors electing to acquire security entitlements with respect to the Euro global certificate through an account with Euroclear or Clearstream, Luxembourg or some other securities intermediary must follow settlement procedures of their securities intermediary with respect to the settlement of new issues of securities. Security entitlements with respect to the Euro global certificate to be acquired through an account with Euroclear or Clearstream, Luxembourg will be credited to such account as of the settlement date against payment in euro for value as of the settlement date. Investors electing to acquire, hold or transfer security entitlements with respect to a Euro global certificate through an account with Euroclear or Clearstream, Luxembourg or some other securities intermediary other than in connection with the initial distribution of the Euro trust preferred securities must follow the settlement procedures of their securities intermediary with respect to the settlement of secondary market transactions in securities. The laws of some jurisdictions may require that certain purchasers of securities take physical delivery of such securities in definitive form. These limits and laws may impair the ability to transfer or pledge beneficial interests in the Euro global certificate. We will make distributions on the Euro trust preferred securities represented by a Euro global certificate in immediately available funds to the paying agent for payment to the common depositary for Euroclear and Clearstream, Luxembourg or its nominee, as the sole registered owner and the sole holder of the Euro global certificate represented thereby for all purposes under the Trust V declaration of trust. We expect that Euroclear and Clearstream, Luxembourg, upon receipt of any distribution on any Euro global certificate, will immediately credit, on their respective book-entry registration and transfer systems, the accounts of account holders with payments in amounts proportionate to their respective beneficial interests in the liquidation amount of such Euro global certificate as shown on the records of Euroclear and Clearstream, Luxembourg. We also expect that payments by account holders to owners of beneficial interests in a Euro global certificate held through such account holders will be governed by standing instructions and customary practice as is now the case with securities held for customer accounts registered in "street names" and will be the sole responsibility of such account holders. We will not have any responsibility or liability for any aspect of the records relating to, or payments made on account of, beneficial ownership interests in the Euro global certificate for any Euro trust preferred security or for maintaining, supervising or reviewing any records relating to such beneficial ownership interests or for any other aspect of the relationship between Euroclear and Clearstream, Luxembourg and their respective account holders, or the relationship between such account holders and the owners of beneficial interests in the Euro global certificate owning through such account holders. Owners of beneficial interests in the Euro global certificate who wish to receive payment in any currency other than euro must make foreign exchange conversion arrangements at their own expense. 142 150 Investors may be subject to foreign exchange risks that may have important economic and tax consequences for them. So long as a common depositary for Euroclear and Clearstream, Luxembourg or its nominee is the registered owner of a Euro global certificate, the common depositary or any successor depositary or such party will be considered the sole owner or holder of the Euro trust preferred securities represented by that Euro global certificate for all purposes under the Trust V declaration of trust and the Euro trust preferred securities. Except as set forth below, owners of beneficial interests in a Euro global certificate will not be entitled to have the Euro trust preferred securities represented by such Euro global certificate registered in their names, will not receive or be entitled to receive physical delivery of certificated Euro trust preferred securities and will not be considered to be the owners or holders of any Euro trust preferred securities for purposes of the Trust V declaration of trust and the Euro trust preferred securities. Accordingly, each person owning a beneficial interest in a Euro global certificate must rely on the procedures of Euroclear or Clearstream, Luxembourg, 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 Trust V declaration of trust or with respect to the Euro trust preferred securities. We understand that under existing industry practices, in the event that we request any action of holders or that an owner of a beneficial interest in a Euro global certificate desires to give or take any action which a holder is entitled to give or take under the Trust V declaration of trust, Euroclear and Clearstream, Luxembourg would authorize the account holders holding the relevant beneficial interest to give or take such action and such account holders would authorize beneficial owners owning through such account holders to give or take such action or would otherwise act upon the instructions of beneficial owners owning through them. CERTIFICATED SECURITIES Subject to certain conditions, the trust preferred securities represented by the global certificates are exchangeable for certificated trust preferred securities of the same series in definitive registered form of like tenor in denominations of $1,000 or E1,000 as applicable, and integral multiples of $1,000 or E1,000 if: - DTC (in the case of the USD global certificate) notifies us or Euroclear and Clearstream, Luxembourg (in the case of the Euro global certificates) notify us that they are unwilling or unable to continue as a clearing agency for the applicable global certificate and we are unable to locate at least one qualified successor clearing agency within 90 days, - We in our discretion at any time determine not to have all the USD or Euro trust preferred securities, as applicable, represented by a global certificate, or - A default entitling the holders of the USD or Euro trust preferred securities to require the trustee to accelerate the maturity of the USD or Euro notes, as applicable, has occurred and is continuing. Each declaration of trust requires us to make distributions in respect of certificated trust preferred securities by mailing a check to each such holder's registered address. Distribution upon liquidation on a certificated trust preferred security will be made against surrender of the relevant trust preferred security at the office of any paying agent. Any trust preferred security that is exchangeable as described above is exchangeable for certificated trust preferred securities issuable in authorized denominations and registered in such names as DTC (in the case of USD trust preferred securities) or Euroclear and Clearstream, Luxembourg (in the case of the Euro trust preferred securities) shall direct. Subject to the foregoing, neither global certificate is exchangeable, except for a global certificate of the same aggregate liquidation amount to be registered in the name of DTC or its nominee or Euroclear and Clearstream, Luxembourg or their nominee, as the case may be. Upon the issuance of certificated trust preferred securities, holders will be able to transfer certificated trust preferred securities at the specified office of the registrar and transfer agent or any paying agent or transfer agent in Luxembourg upon the surrender of such certificated trust preferred securities, together with the form of transfer endorsed thereon duly completed and executed, and otherwise in accordance with 143 151 the provisions of the applicable declaration of trust. In the case of a transfer of part only of a certificated trust preferred security, a new certificated trust preferred security will be issued to the transferee in respect of the part transferred, and a further new certificated trust preferred security in respect of the balance of the holding not transferred will be issued to the transferor. Each new certificated trust preferred security to be so issued shall be available for delivery within three business days of receipt by the registrar and transfer agent or any paying agent or transfer agent at its specified office on the relevant certificated trust preferred security and the form of transfer. REGISTRAR AND TRANSFER AGENT State Street Bank and Trust Company, a Massachusetts chartered trust company will act as registrar and transfer agent for the USD trust preferred securities. Deutsche Bank AG London will act as registrar and transfer agent for the Euro trust preferred securities. Registration of transfers of trust preferred securities will be made without charge by or on behalf of the applicable trust, but upon payment (with the giving of such indemnity as such trust or the note issuer may require) in respect of any tax or other government charges which may be imposed in relation to it. A trust will not be required to register or cause to be registered the transfer of trust preferred securities that have been called for redemption. CLEARING AND SETTLEMENT CLEARSTREAM, LUXEMBOURG Clearstream, Luxembourg is incorporated under the laws of Luxembourg as a professional depositary. Clearstream, Luxembourg holds securities for its participating organizations and facilitates the clearance and settlement of securities transactions between Clearstream, Luxembourg participants through electronic book-entry changes in accounts of Clearstream, Luxembourg participants, thereby eliminating the need for physical movement of certificates. Transactions may be settled in various currencies, including euro. Clearstream, Luxembourg provides to its participants, among other things, services for safekeeping, administration, clearance and settlement of internationally traded securities and securities lending and borrowing. As a professional depositary, Clearstream, Luxembourg is subject to regulation by the Luxembourg Commission of Supervision of the Financial Sector (CSSF). Clearstream, Luxembourg participants are recognized financial institutions around the world, including underwriters, securities brokers and dealers, banks, trust companies, clearing corporations and certain other organizations and may include the initial purchasers. Indirect access to Clearstream, Luxembourg is also available to others, such as banks, brokers, dealers and trust companies that clear through or maintain a custodial relationship with a Clearstream, Luxembourg participant either directly or indirectly. Distributions with respect to global certificates held beneficially through Clearstream, Luxembourg will be credited to cash accounts of Clearstream, Luxembourg participants in accordance with its rules and procedures. EUROCLEAR Euroclear was created in 1968 to hold securities for participants of Euroclear and to clear and settle transactions between Euroclear participants through simultaneous book-entry delivery against payment, thereby eliminating the need for physical movement of certificates and any risk from lack of simultaneous transfers of securities and cash. Transactions may now be settled in various currencies, including euro. Euroclear includes various other services, including securities lending and borrowing and interfaces with domestic markets in several countries. Euroclear is operated by Euroclear Bank S.A./N.V. (the "Euroclear operator"), under contract with Euroclear Clearance System S.C., a Belgian cooperative corporation (the "cooperative"). All operations are conducted by the Euroclear operator, and all Euroclear securities clearance accounts and Euroclear cash accounts are accounts with the Euroclear operator, not the cooperative. The cooperative establishes policy for Euroclear on behalf of Euroclear participants. Euroclear participants include banks (including central banks), securities brokers and dealers and other professional financial intermediaries and may include the initial purchasers. Indirect access to Euroclear is also available to other firms that clear through or maintain a custodial relationship with a Euroclear participant, either directly or indirectly. 144 152 The Euroclear operator is the Brussels Branch of a New York banking corporation which is a member bank of the Federal Reserve System. As such, it is regulated and examined by the Board of Governors of the U.S. Federal Reserve System and the New York State Banking Department, as well as the Belgian Banking Commission. Securities clearance accounts and cash accounts with the Euroclear operator are governed by the Terms and Conditions Governing Use of Euroclear and the related Operating Procedures of the Euroclear System, and applicable Belgian law. The Euroclear terms and conditions govern transfers of securities and cash within Euroclear, withdrawals of securities and cash from Euroclear, and receipts of payments with respect to securities in Euroclear. All securities in Euroclear are held on a fungible basis without attribution of specific certificates to specific securities clearance accounts. The Euroclear operator acts under the Euroclear terms and conditions only on behalf of Euroclear participants, and has no record of or relationship with persons holding through Euroclear participants. Distributions with respect to trust preferred securities held beneficially through Euroclear will be credited to the cash accounts of Euroclear participants in accordance with the Euroclear terms and conditions, to the extent received by the Euroclear operator. SAME DAY SETTLEMENT AND PAYMENT We will make payments in respect of the USD trust preferred securities represented by the USD global certificate by wire transfer of immediately available funds to the accounts specified by the holders of the USD trust preferred securities. We will make payments in respect of the Euro trust preferred securities represented by the Euro global certificate by wire transfer of immediately available funds to the common depositary for payment to Euroclear and Clearstream, Luxembourg. We will make all payments of liquidation amounts and distributions, with respect to certificated trust preferred securities by wire transfer of immediately available funds to the accounts specified by the holders of the certificated trust preferred securities or, if no such account is specified, by mailing a check to each such holder's registered address. Because DTC, Euroclear and Clearstream, Luxembourg operate same day funds settlement systems, any permitted secondary market trading activity in trust preferred securities will be required by DTC, Euroclear and Clearstream, Luxembourg to be settled in immediately available funds. We expect that secondary trading in any certificated trust preferred securities will also be settled in immediately available funds. Because of time zone differences, the securities account of a DTC participant purchasing an interest in a Euro global certificate from a participant in Euroclear and Clearstream, Luxembourg, or a Euroclear and Clearstream, Luxembourg participant purchasing an interest in a USD global certificate from a participant in DTC, will be credited, and any such crediting will be reported to the relevant purchaser, during the securities settlement processing day (which must be a business day for settlement system in which the purchaser is a participant) immediately following the settlement date of the settlement system in which the seller is a participant. DTC has advised us that cash received in Euroclear or Clearstream, Luxembourg as a result of sales of interests in a global certificate by or through a Euroclear or Clearstream, Luxembourg participant to a participant in DTC will be received with value on the settlement date of DTC but will be available in the relevant Euroclear or Clearstream, Luxembourg cash account only as of the business day for Euroclear or Clearstream, Luxembourg following DTC's settlement date. Euroclear and Clearstream, Luxembourg have advised us that cash received in DTC as a result of sales of interests in a global certificate by or through a DTC participant to a participant in Euroclear and Clearstream, Luxembourg will be received with value on the settlement date of Euroclear and Clearstream, Luxembourg but will be available in the relevant DTC cash account only as of the business day for DTC following Euroclear and Clearstream, Luxembourg's settlement date. GOVERNING LAW The trust declarations and the trust preferred securities are governed by and will be construed in accordance with the laws of the State of Delaware. 145 153 LISTING; NOTICES We intend to list the trust preferred securities on the Luxembourg Stock Exchange. All notices regarding the trust preferred securities will be published in the Luxemburger Wort or in any other publication as required by the rules of the Luxembourg Stock Exchange. Any notice will become effective for all purposes on the date of its publication. At any time that the rules of the Luxembourg Stock Exchange permit, we may substitute for this publication in this newspaper the delivery of the relevant notice to the applicable clearing system for communication by it to holders of the trust preferred securities. Any notice will be deemed to have been given to you on the seventh day after the day on which it was given to all applicable clearing systems. PAYING AGENTS If any European Union Directive on the taxation of savings implementing the conclusions of the ECOFIN Council meeting of 26-27 November 2000 or any law implementing or complying with, or introduced in order to conform to this Directive is introduced, we will ensure that we maintain a paying agent in respect of the trust preferred securities in a European Union member state that will not be obliged to withhold or deduct for or on account of tax pursuant to any such Directive or law. As long as any trust preferred securities are listed on the Luxembourg Stock Exchange, we will maintain a paying agent in Luxembourg. MISCELLANEOUS The trustees are authorized and directed to conduct the affairs of and to operate the trusts in such a way that neither trust will be deemed to be an "investment company" required to be registered under the Investment Company Act or characterized as other than a grantor trust for U.S. federal income tax purposes or otherwise as an entity that is not subject to U.S. federal or German income tax, or income tax in the jurisdiction of formation of the note issuer, at the entity level and the assets and income of which are treated for U.S. federal or German income tax purposes, or for purposes of any income tax imposed by the jurisdiction of formation of the note issuer, as held and derived directly by holders of interests in the entity, and so that the notes will be treated as indebtedness of the note issuer for U.S. federal or German income tax purposes or for purposes of any income tax imposed by the jurisdiction of formation of the note issuer. In this connection, the trustees are authorized to take any action, not inconsistent with applicable law, the certificates of trust or the trust declarations that the trustees determine in their discretion to be necessary or desirable for such purposes as long as this action does not adversely affect your interests. You have no preemptive rights with respect to any securities of the trusts. INFORMATION CONCERNING THE PREFERRED TRUSTEE The preferred trustee, prior to default, undertakes to perform only the duties specifically set forth in the trust declarations and, after default, will exercise the same degree of care as a prudent individual would exercise in the conduct of his or her own affairs. Subject to this provision, the preferred trustee is under no obligation to exercise any of the powers vested in it by the trust declarations at the request of any holder of USD trust preferred securities or Euro trust preferred securities, unless offered reasonable indemnity by you against the costs, expenses and liabilities which the preferred trustee might incur by exercising such powers. The preferred trustee is not required to expend or risk its own funds or otherwise incur personal financial liability in the performance of its duties if the preferred trustee reasonably believes that it does not have reasonable assurance of repayment or adequate indemnity. INFORMATION CONCERNING THE DELAWARE TRUSTEE The Delaware trustee is First Union Trust Company, National Association, a national banking association. The Delaware trustee will be one of the trustees of the trusts for the sole and limited purpose of fulfilling the requirements of the Delaware Business Trust Act for a trustee that is either a natural person who is a resident of Delaware or a legal entity with its principal place of business in that state. 146 154 DESCRIPTION OF THE TRUST GUARANTEES Fresenius Medical Care AG will issue the trust guarantees for your benefit. State Street Bank and Trust Company will act as indenture trustee under the trust guarantees and will hold the trust guarantees for the benefit of the holders of the USD or Euro trust preferred securities, as applicable. The following description is only a summary of the material provisions of the trust guarantees and does not purport to be complete. We urge you to read the trust guarantees. You may request a copy of the trust guarantee from the indenture trustee. In addition, we have filed the trust guarantees as exhibits to the registration statement that includes this prospectus, and you can obtain copies of the trust guarantees from the sources described under "Where You Can Find More Information." The trust guarantees have been qualified under the Trust Indenture Act. GENERAL Under the trust guarantees, Fresenius Medical Care will irrevocably and unconditionally agree to pay in full, on a senior subordinated basis, the following payments or distributions with respect to the USD or the Euro trust preferred securities as applicable, to the extent not paid by or on behalf of a trust and to the extent that the trust has legally available funds (as discussed below): (a) any accumulated and unpaid distributions required to be paid on the trust preferred securities, (b) the redemption price with respect to trust preferred securities called for redemption, and (c) upon a voluntary or involuntary dissolution, winding up or liquidation of a trust (unless the USD or Euro notes, as applicable, are distributed to holders of the related USD or Euro trust preferred securities), the lesser of (1) the aggregate of the liquidation amount and all accrued and unpaid distributions on the trust preferred securities to the date of payment and (2) the amount of assets of the trust remaining legally available for distribution to the holders of the USD or Euro trust preferred securities, as applicable, upon the liquidation of the trust. The foregoing payments will be made to the holders of the USD or Euro trust preferred securities, as applicable, as and when due, regardless of any defense, right of set-off or counterclaim that the trust may have or assert, other than the defense of payment. Fresenius Medical Care's obligation to make a guarantee payment may be satisfied by our direct payment of the required amounts to the holders of the USD or Euro trust preferred securities, as applicable, or by causing the applicable trust to pay such amounts to them. Each trust guarantee will be an irrevocable and unconditional guarantee on a senior subordinated basis of a trust's obligations under its trust preferred securities, but will apply only to the extent that the trust has funds sufficient to make such payments and is not a guarantee of collection. The trust guarantees will rank subordinate and junior in right of payment to all of the senior indebtedness of Fresenius Medical Care. See "-- Status of the Trust Guarantee." If the note issuer does not make interest payments on the USD or Euro notes held by a trust and neither Fresenius Medical Care nor the other note guarantors makes such payments under the note guaranties, the trust will not be able to pay distributions on its trust preferred securities and will not have funds legally available for payment. Fresenius Medical Care is a non-operating holding company and almost all of its operating assets and those of our consolidated subsidiaries are owned by such subsidiaries. Fresenius Medical Care relies primarily on dividends and other payments from our subsidiaries to meet our obligations for payment of principal and interest on our outstanding debt obligations and corporate expenses. Accordingly, the 147 155 obligations of Fresenius Medical Care under the trust guarantees will be effectively subordinated to all existing and future liabilities of its subsidiaries. Fresenius Medical Care has, through the trust guarantees, the trust declarations, the notes, the note guaranties, the indentures and the expense agreements described under "-- The Expense Agreements," taken together, fully, irrevocably and unconditionally guaranteed each trust's obligations under the trust preferred securities. No single document standing alone or operating in conjunction with fewer than all of the other documents constitutes such guarantee. It is only the combined operation of these documents that has the effect of providing a full, irrevocable and unconditional guarantee of each trust's obligations under the USD or Euro trust preferred securities. See "Relationship Among the Trust Preferred Securities, the Notes and the Trust Guarantees." Fresenius Medical Care has also agreed separately to irrevocably and unconditionally guarantee the obligations of each trust with respect to the common securities to the same extent as the applicable trust guarantee, except that upon the occurrence and during the continuation of an event of default under a trust declaration, you will have priority over holders of common securities with respect to distributions and payments on liquidation, redemption, or otherwise. STATUS OF THE TRUST GUARANTEE The trust guarantees will constitute an unsecured senior subordinated obligation of Fresenius Medical Care and will rank subordinate and junior in right of payment to all of its Senior Indebtedness as defined under "Description of the Notes -- Certain Definitions." The trust guarantees will constitute guarantees of payment and not of collection (i.e., the guaranteed party may institute a legal proceeding directly against Fresenius Medical Care to enforce its rights under the applicable trust guarantee without first instituting a legal proceeding against any other person or entity). The trust guarantees will be held for the benefit of the holders of the USD or Euro trust preferred securities, as applicable. The trust guarantees will not be discharged except by payment of the guarantee payments thereunder in full to the extent not paid by the applicable trust out of funds legally available for payment or upon distribution of the USD or Euro notes to the holders of the USD or Euro trust preferred securities, as applicable. The trust guarantees place no limitations on the amount of additional Senior Indebtedness that Fresenius Medical Care may incur. However, Fresenius Medical Care's ability and the ability of its subsidiaries to incur indebtedness is restricted under the indentures. Fresenius Medical Care expects from time to time to incur additional indebtedness constituting Senior Indebtedness to refinance our Senior Indebtedness and for other purposes. On July 12, 2001, we issued E108.5 million aggregate principal amount of senior notes in the European private placement market, guaranteed by Fresenius Medical Care. We used the proceeds to refinance existing senior debt. See "Description of the Notes -- Certain Covenants." Fresenius Medical Care may not make a guarantee payment to holders of trust preferred securities if: - any of its Specified Senior Indebtedness as defined under "Description of the Notes -- Certain Definitions." (or any of its other Senior Indebtedness having an outstanding principal amount at the time of determination in excess of $25 million) is not paid when due, or - any other default on its Specified Senior Indebtedness occurs and the maturity of such Specified Senior Indebtedness is accelerated in accordance with its terms, unless, in either case, the default has been cured or waived and any such acceleration has been rescinded or such Specified Senior Indebtedness has been paid in full. However, Fresenius Medical Care may make a guarantee payment without regard to these restrictions if it and the guarantee trustee receive written notice approving the payment from a representative of the Specified Senior Indebtedness with respect to which either of the events set forth in the above paragraphs has occurred and is continuing. During the continuance of any default (other than a default described in the bullet-point paragraphs above) with respect to any of the Specified Senior Indebtedness of Fresenius Medical Care pursuant to which the maturity of such indebtedness may be accelerated immediately without further notice (except such notice as may be required to effect such acceleration) or the 148 156 expiration of any applicable grace periods, Fresenius Medical Care may not make a guarantee payment to the holders of trust preferred securities for a period, a "Payment Blockage Period," commencing upon the guarantee trustee's receipt (with a copy to Fresenius Medical Care) of written notice, a "Blockage Notice," of such default from the representative of the holders of such Specified Senior Indebtedness specifying an election to effect a Payment Blockage Period and ending 179 days thereafter. However, Fresenius Medical Care may make the guarantee payment earlier if such Payment Blockage Period is terminated: - by written notice to the guarantee trustee and Fresenius Medical Care from the representative of the holders of such specified Senior Indebtedness, - because the default giving rise to such Blockage Notice is no longer continuing, or - because such Specified Senior Indebtedness has been repaid in full. Notwithstanding the provisions described in the immediately preceding sentence, unless the holders of such Specified Senior Indebtedness or the representative of such holders have accelerated the maturity of such Specified Senior Indebtedness, Fresenius Medical Care may resume guarantee payments after the end of the Payment Blockage Period. A trust guarantee will not be subject to more than one Payment Blockage Period in any consecutive 360-day period, regardless of the number of defaults with respect to Specified Senior Indebtedness during such period. Upon any payment or distribution of Fresenius Medical Care's assets upon a total or partial liquidation or dissolution or reorganization of or similar proceeding relating to it or its property, the holders of Fresenius Medical Care's Senior Indebtedness will be entitled to receive payment in full of that Senior Indebtedness before you are entitled to receive any guarantee payment, and until that Senior Indebtedness is paid in full, any payment or distribution to which you would be entitled but for the subordination provisions of the trust guarantees will be made to holders of our Senior Indebtedness as their interests may appear. If a distribution is made to you that, due to the subordination provisions, should not have been made to you, you are required to hold it in trust for the holders of the Senior Indebtedness of Fresenius Medical Care and pay it over to them as their interests may appear. If we make a guarantee payment to you, we or the guarantee trustee will promptly notify the holders of the Senior Indebtedness of Fresenius Medical Care or the representative of those holders of the guarantee payment. If any of the Senior Indebtedness of Fresenius Medical Care is outstanding, we may not pay such guarantee payment until five business days after the representatives of all the issues of its Senior Indebtedness receive notice of the guarantee payment and, thereafter, we may pay the guarantee payment only if the applicable trust guarantee otherwise permits payment at that time. AMENDMENTS AND ASSIGNMENT Except with respect to any changes that do not materially adversely affect your rights (in which case no vote will be required), Fresenius Medical Care may not amend a trust guarantee without the prior approval of the holders of not less than a majority in aggregate liquidation amount of the outstanding USD or Euro trust preferred securities, as applicable. A description of the manner of obtaining any such approval appears under "Description of the Trust Preferred Securities -- Voting Rights." All guarantees and agreements contained in the trust guarantees will bind the successors, assigns, receivers, trustees and representatives of Fresenius Medical Care and will inure to the benefit of the holders of the USD or Euro trust preferred securities, as applicable. EVENTS OF DEFAULT An event of default under a trust guarantee will occur upon a failure of Fresenius Medical Care to perform any of its payment or other obligations under the trust guarantee. The holders of not less than a majority in aggregate liquidation amount of the USD or Euro trust preferred securities, as applicable, have the right to direct the time, method and place of conducting any proceeding for any remedy available to 149 157 the guarantee trustee in respect of the related trust guarantee or to direct the exercise of any trust or power conferred upon the guarantee trustee under that trust guarantee. Upon the occurrence of a payment default under a trust guarantee, the holders of the related trust preferred securities may institute a legal proceeding directly against Fresenius Medical Care to enforce their rights under that trust guarantee without first instituting a legal proceeding against the applicable trust, the guarantee trustee or any other persons or entity. Fresenius Medical Care, as guarantor, is required to file annually with the guarantee trustee certificates as to whether or not it is in compliance with all the conditions and covenants applicable to it under the applicable trust guarantee. TERMINATION OF THE TRUST GUARANTEES The trust guarantees will terminate and be of no further force and effect upon full payment of the redemption price of the USD or Euro trust preferred securities, as applicable, upon full payment of the amounts payable in accordance with the applicable trust declaration, upon liquidation of the applicable trust or upon distribution of the USD or Euro notes to the holders in exchange for all of the related trust preferred securities. The trust guarantees will continue to be effective or will be reinstated if at any time holders of USD or Euro trust preferred securities, as applicable, must restore payment of any sums paid under those trust preferred securities or the applicable trust guarantee. GOVERNING LAW The trust guarantees will be governed by and construed in accordance with the laws of the State of New York. THE EXPENSE AGREEMENTS Under the expense agreements, Fresenius Medical Care has irrevocably and unconditionally guaranteed to each person or entity to whom the trusts becomes indebted or liable, the full payment of any costs, expenses, or liabilities of the trusts, other than obligations of the trusts to pay the amounts due pursuant to the terms of their common securities and trust preferred securities, and other than U.S. withholding taxes. INFORMATION CONCERNING THE GUARANTEE TRUSTEE The guarantee trustee, other than during the occurrence and continuance of a default by Fresenius Medical Care in performance of either trust guarantee, undertakes to perform only the duties that are specifically set forth in the applicable trust guarantee and, after default with respect to a trust guarantee, must exercise the same degree of care and skill as a prudent person would exercise or use in the conduct of his or her own affairs. Subject to this provision, the guarantee trustee is under no obligation to exercise any of the powers vested in it by a trust guarantee at the request of any holder of USD or Euro trust preferred securities unless it is offered reasonable indemnity against the costs, expenses and liabilities that it might incur in doing so. 150 158 DESCRIPTION OF THE NOTES Each trust invested the proceeds of the issuance and sale of the old trust preferred securities in the old notes. The note issuer will issue the USD notes under an indenture dated as of June 6, 2001 and the Euro notes under an indenture dated as of June 15, 2001, each among the note issuer, State Street Bank and Trust Company, a Massachusetts chartered trust company, as indenture trustee, Fresenius Medical Care, FMCH and FMC Deutschland, as note guarantors (the "indentures"). The trusts will exchange their old USD notes or old Euro notes for USD notes or Euro notes, as applicable, in connection with consummation of the exchange offers. Some of the terms used in this description are defined under the subheading "-- Certain Definitions." The definitions apply to the terms used in this description even if they are not capitalized in the description. In this description, - the term "note issuer" refers only to FMC Finance, Luxembourg, as the issuer of the notes, and not to Fresenius Medical Care or any other subsidiary owned or controlled by Fresenius Medical Care AG, - the term "trust IV" refers to Fresenius Medical Care Capital Trust IV, - the term "trust V" refers to Fresenius Medical Care Capital Trust V, and - the term "trusts" refers to trust IV and trust V collectively. The following description is only a summary of the material provisions of the indentures. We urge you to read the indentures because this description does not purport to be complete. You may request copies of the indentures from the indenture trustee. In addition, we have filed the indentures as exhibits to the registration statement that includes this prospectus, and you can obtain copies of the indentures from the sources described under "Where You Can Find More Information." The indentures have been qualified under the Trust Indenture Act. The terms of the USD or Euro notes will include those stated in the applicable indenture and those made part of each indenture by reference to the Trust Indenture Act. Under the circumstances specified in each trust declaration and each indenture involving the dissolution of a trust following the occurrence of a tax event or investment company event with respect to the trust, the USD or Euro notes may be distributed to the holders of the related trust preferred securities in liquidation of that trust. PRINCIPAL, MATURITY AND INTEREST The note issuer will issue the USD notes under the applicable indenture with a maximum aggregate principal amount of $225,225,000. This is equal to the sum of the aggregate stated liquidation amount of the USD common securities and the USD trust preferred securities. The note issuer will issue the USD notes in denominations of $1,000 and any integral multiple of $1,000. The note issuer will issue the Euro notes under the applicable indenture with a maximum aggregate principal amount of E300,300,000. This is equal to the sum of the aggregate stated liquidation amount of the Euro common securities and the Euro trust preferred securities. The note issuer will issue the Euro notes in denominations of E1,000 and any integral multiple of E1,000. The notes will mature on June 15, 2011, at par. The notes are not entitled to the benefit of any sinking fund. Interest will accrue on the USD notes at the rate of 7 7/8% per annum and on the Euro notes at the rate of 7 3/8% per annum and, in each case, will be payable quarterly in arrears on March 14, June 14, September 14 and December 14, commencing September 14, 2001. The note issuer will make each interest payment on the relevant interest payment date to the holders of record of the Notes on the record date for each interest payment. The record dates are the March 1, June 1, September 1 and December 1 immediately preceding the interest payment date. Interest in arrears for more than one-quarter (and interest on such overdue interest) will accrue interest (compounded quarterly) at the same rate. 151 159 Interest on these notes will accrue from the most recent date on which interest has been paid or, if no interest has yet been paid, from June 6, 2001, in the case of the USD notes, and from June 15, 2001, in the case of the Euro notes. Interest will be computed on the basis of a 360-day year comprised of twelve 30-day months. FORM AND TRANSFER The note issuer will initially issue the notes in fully registered certificated form. The preferred trustee will initially hold the notes. If a trust distributes USD or Euro notes to the holders of the related trust preferred securities upon the dissolution of that trust, the distributed notes will then be issued as global securities to the extent of any global certificates at the time representing the related trust preferred securities and otherwise in fully registered, certificated form. If the notes are issued in certificated form, they will be issued only in denominations of $1,000 or E1,000, as applicable, and integral multiples of $1,000 or E1,000, and may be transferred or exchanged at the offices described below. Payments on notes issued as global securities will be made in immediately available funds to DTC as depositary for the USD trust preferred securities or to the common depositary for the Euro trust preferred securities for payment to Euroclear and Clearstream, Luxembourg. If the notes are issued in certificated form, principal and interest will be payable, transfers of the notes will be registrable and the notes will be exchangeable for notes of other denominations in the same aggregate principal amount at the corporate trust office of the indenture trustee in The City of New York. However, unless the notes are held by the trusts or any successor permissible as described above, the note issuer may elect to pay interest on the notes by check mailed to the address of the persons entitled to receive such payments. REDEMPTION FOR CHANGES IN WITHHOLDING TAXES The note issuer is entitled to redeem the USD or Euro notes, at its option, at any time as a whole but not in part, upon not less than 30 nor more than 60 days' notice, at 100% of the principal amount of the notes, plus accrued and unpaid interest (if any) to the date of redemption (subject to the right of holders of record on the relevant record date to receive interest due on the relevant interest payment date), in the event the note issuer has become or would become obligated to pay, on the next date on which any amount would be payable with respect to the notes, any additional amounts as a result of: (a) a change in or an amendment to the laws (including any regulations promulgated under such laws) of the United States, Germany, the United Kingdom or the jurisdiction of formation of the note issuer (initially Luxembourg) (or any political subdivision or taxing authority of or in any such jurisdiction), or (b) any change in or amendment to any official position regarding the application or interpretation of such laws or regulations, which change or amendment is announced or becomes effective on or after the date of issuance of the notes, other than, in either case, any amendment or change implementing, complying with, or introduced in order to conform to, or otherwise arising as a result of or in connection with, any European Union Directive on the taxation of savings implementing the conclusions of the ECOFIN Council meeting of 26-27 November 2000. NOTE GUARANTIES Fresenius Medical Care will unconditionally guarantee, jointly and severally with FMCH and FMC Deutschland, on a senior subordinated basis, the obligations of the note issuer under the notes, including the repurchase obligation of the note issuer resulting from a change of control. In this description, we refer to our guaranties and that of the other note guarantors as the note guaranties. The note guaranties of Fresenius Medical Care will not be limited in amount. Each note guaranty of any other note guarantor will be limited in amount to an amount not to exceed the maximum amount that can be guaranteed by the note guarantor without rendering that note guaranty, as it relates to the note guarantor, voidable under 152 160 applicable law relating to the maintenance of the guarantors share capital, fraudulent conveyance or fraudulent transfer or similar laws affecting the rights of creditors generally or under applicable law of Germany. If a note guaranty were to be rendered voidable, a court could subordinate that note guaranty to all other indebtedness (including guarantees and other contingent liabilities) of the applicable note guarantor and, depending on the amount of such indebtedness, a note guarantor's liability on its note guaranty could be reduced to zero. Under the indentures, a note guarantor may consolidate with, merge with or into, or transfer all or substantially all of its assets to any other person only to the extent described below under "-- Certain Covenants -- Limitation on Mergers, Acquisitions and Sales of Assets." However, if the other person is not the note issuer or Fresenius Medical Care, the note guarantor's obligations under its note guaranties must be expressly assumed by the other person. Upon the sale or other disposition, including by way of consolidation or merger, of a note guarantor, or the sale or disposition of all or substantially all the assets of a note guarantor, in each case other than to the note issuer or Fresenius Medical Care or any affiliate of either of them, as permitted by the covenant described under "-- Certain Covenants -- Limitation on Sales of Assets and Subsidiary Stock," the selling note guarantor will be released and relieved from all its obligations under its note guaranties. RANKING AND SUBORDINATION The indebtedness evidenced by the notes and the note guaranties will be senior subordinated obligations of the note issuer, Fresenius Medical Care and the other note guarantors. The payment of the principal of (including any payments on redemption or repurchase), premium, if any, and interest on the notes and the payment of any note guaranty will be subordinate in right of payment to all senior indebtedness of Fresenius Medical Care, the note issuer, and the relevant note guarantor, whether outstanding on the date the notes are originally issued or thereafter incurred. As of March 31, 2001, on a pro forma basis after giving effect to the consummation of the offerings of the USD and Euro trust preferred securities and the application of the net proceeds from these offerings, our total consolidated liabilities would have been $3.6 billion, including our obligations with respect to all trust preferred securities of approximately $1.4 billion, our total consolidated assets would have been $6.4 billion and our shareholders' equity would have been $2.8 billion. Fresenius Medical Care and some of its material subsidiaries, including FMCH and FMC Deutschland, have guaranteed the obligations of National Medical Care and the other borrowers under our senior credit facility. National Medical Care has pledged the stock of 100% of its material U.S. subsidiaries and 66% of the stock of its material non-U.S. subsidiaries to secure obligations under the facility. Fresenius Medical Care has pledged the stock of its material subsidiaries, including FMCH and FMC Deutschland, to secure its guarantee of the senior credit facility, and FMCH has pledged the stock of National Medical Care to secure its guarantee of the senior credit facility. Although the indentures contain limitations on the amount of additional Indebtedness that the note guarantors may incur, under certain circumstances the amount of such Indebtedness could be substantial and, in any case, that Indebtedness may be Senior Indebtedness. See "-- Certain Covenants." Fresenius Medical Care's conducts its operations through its subsidiaries. Claims of our subsidiaries' creditors, including trade creditors, secured creditors and creditors holding indebtedness and guarantees issued by our subsidiaries, and claims of preferred stockholders, if any, of these subsidiaries generally will have priority with respect to the assets and earnings of the subsidiaries over the claims of creditors of Fresenius Medical Care, including, with respect to Fresenius Medical Care's note guaranty, holders of notes. This will be so even if the subsidiary's obligations do not constitute Senior Indebtedness. As a result, Fresenius Medical Care's note guaranty will be effectively subordinated to creditors (including trade creditors) and preferred stockholders (if any) of its subsidiaries and each other note guarantor's note guaranty will be effectively subordinated to creditors (including trade creditors) of subsidiaries of that note guarantor and to preferred stockholders (if any) of subsidiaries of that note guarantor that are not themselves note guarantors. None of FMCH's or FMC Deutschland's subsidiaries is a note guarantor. 153 161 Although the indentures limit the incurrence of Indebtedness and Capital Stock of some of our subsidiaries, this limitation is subject to a number of significant exceptions and qualifications. Moreover, the indentures do not impose any limitation on the ability of these subsidiaries to incur liabilities that are not considered Indebtedness under the indentures. See "-- Certain Covenants." Only Indebtedness of the note issuer, Fresenius Medical Care or another note guarantor that is Senior Indebtedness will rank senior to the notes and the relevant note guaranty in accordance with the provisions of the indentures. The notes and each note guaranty will in all respects rank equally with all other Senior Subordinated Indebtedness of the note issuer and the relevant note guarantor, respectively. Each note guaranty will rank equally with the Indebtedness represented by the 9% Notes, the 2008 7 7/8% Notes and the 2008 7 3/8% Notes; the USD and Euro notes will rank equally; and on a consolidated basis the notes will effectively rank equally with the 9% Notes, the 2008 7 7/8% Notes and the 2008 7 3/8% Notes. However, the 9% Notes, the 2008 7 7/8% Notes and the 2008 7 3/8% Notes are not direct liabilities of the note issuer. Our senior subordinated guaranty of the 9% Notes is secured by a pledge of 100% of all of the outstanding common stock of FMCH, which is a guarantor of the notes, the 9% Notes, the 2008 7 7/8% Notes and the 2008 7 3/8% Notes. The security interest is subordinate to a security interest in the shares that we granted to secure our obligations under our senior credit facility. The notes will not have the benefit of a pledge of those shares or any other security interest. The note issuer and each note guarantor, including us, have agreed in the indentures that they will not incur, directly or indirectly, any Indebtedness that is subordinate or junior in ranking in right of payment to Senior Indebtedness unless such Indebtedness is Senior Subordinated Indebtedness or is expressly subordinated in right of payment to Senior Subordinated Indebtedness. The note issuer may not pay principal of, or premium (if any) or interest on, the notes and may not repurchase, redeem or otherwise retire notes, collectively, "pay the notes," if: - any Specified Senior Indebtedness of ours or the note issuer (or any other Senior Indebtedness of ours or the note issuer having an outstanding principal amount at the time of determination in excess of $25 million) is not paid when due, or - any other default on Specified Senior Indebtedness of ours or the note issuer occurs and the maturity of that Specified Senior Indebtedness is accelerated in accordance with its terms, unless, in either case, the default has been cured or waived and any such acceleration has been rescinded or the Specified Senior Indebtedness has been paid in full. However, the note issuer may pay the notes without regard to these conditions if we, the note issuer and the indenture trustee receive written notice approving the payment from a representative of the Specified Senior Indebtedness with respect to which either of the events set forth in the above two paragraphs has occurred and is continuing. During the continuance of any default (other than a default described in the second preceding sentence) with respect to any Specified Senior Indebtedness of ours or the note issuer under which the maturity of that Specified Senior Indebtedness may be accelerated immediately without further notice (except such notice as may be required to effect such acceleration) or the expiration of any applicable grace periods, the note issuer may not pay the notes for a period -- a "Payment Blockage Period" -- commencing upon the indenture trustee's receipt (with a copy to the note issuer and us) of written notice, a "Blockage Notice," of the default from the representative of the holders of that specified Senior Indebtedness specifying an election to effect a Payment Blockage Period and ending 179 days thereafter. The Payment Blockage Period will end earlier if the Payment Blockage Period is terminated: - by written notice to us, the indenture trustee, and the note issuer from the representative of the holders of the Specified Senior Indebtedness, - because the default giving rise to such Blockage Notice is no longer continuing, or - because the Specified Senior Indebtedness has been repaid in full. 154 162 Notwithstanding the provisions described in the immediately preceding sentence, unless the holders of such Specified Senior Indebtedness or the representative of such holders have accelerated the maturity of such Specified Senior Indebtedness (and such Specified Senior Indebtedness remains outstanding), the note issuer may resume payments on the notes issued under the indentures after the end of the Payment Blockage Period. The notes issued under the indentures will not be subject to more than one Payment Blockage Period in any consecutive 360-day period, irrespective of the number of defaults with respect to specified Senior Indebtedness during such period. Upon any payment or distribution of the assets of the note issuer upon a total or partial liquidation or dissolution or reorganization of or similar proceeding relating to the note issuer or its property: - the holders of our Senior Indebtedness and the Senior Indebtedness of the note issuer will be entitled to receive payment in full of the Senior Indebtedness before the holders of notes are entitled to receive any payment, and - until our Senior Indebtedness and the Senior Indebtedness of the note issuer are paid in full, any payment or distribution to which holders of notes would be entitled but for the subordination provisions of the indentures will be made to holders of the Senior Indebtedness as their interests may appear. If a distribution is made to holders of notes that, due to the subordination provisions, should not have been made to them, the holders are required to hold it in trust for the holders of our Senior Indebtedness and the Senior Indebtedness of the note issuer and pay it over to them as their interests may appear. If payment of any notes is accelerated because of an Event of Default with respect to the notes, we, the note issuer or the indenture trustee shall promptly notify the holders of our Senior Indebtedness and the Senior Indebtedness of the note issuer or the representative of such holders of the acceleration. If any Senior Indebtedness is outstanding, neither the note issuer nor we or any other note guarantor may pay the notes those until five Business Days after the representatives of all the issues of Senior Indebtedness receive notice of such acceleration and, thereafter, may pay those notes only if the applicable indenture otherwise permits payment at that time. The obligations of a note guarantor (including Fresenius Medical Care) under its note guaranty are senior subordinated obligations. As such, the rights of holders of notes to receive payment by a note guarantor pursuant to its note guaranty of the notes will be subordinated in right of payment to the rights of holders of Senior Indebtedness of the note guarantor. The terms of the subordination provisions described above with respect to the note issuer's obligations in respect of the notes apply in substantially the same manner to us and the other note guarantors and the obligations of us and such other note guarantors under their respective note guaranties. By reason of the subordination provisions contained in the indentures, in the event of insolvency, creditors of the note issuer or a note guarantor (including us) who are holders of Senior Indebtedness of the note issuer or the note guarantor, may recover more, ratably, than the holders of notes, and creditors of the note issuer or a note guarantor who are not holders of Senior Indebtedness may recover less, ratably, than holders of Senior Indebtedness and may recover more, ratably, than the holders of notes. SUSPENSION OF COVENANTS DURING ACHIEVEMENT OF INVESTMENT GRADE STATUS If during any period the notes have achieved and continue to maintain Investment Grade Status and no Event of Default has occurred and is continuing (such period is referred to herein as an "Investment Grade Status Period"), then upon notice by Fresenius Medical Care to the trustee by the delivery of an officers' certificate that it has achieved Investment Grade Status and that no Event of Default has occurred and is continuing, some of the covenants described under "-- Certain Covenants" will be suspended and will not during that period be applicable to Fresenius Medical Care and its subsidiaries. As a result, during any Investment Grade Status Period, the notes will lose the full covenant protection initially provided under the indentures. No action taken during an Investment Grade Status Period or prior to an Investment Grade Status Period in compliance with the covenants then applicable will require 155 163 reversal or constitute a default under the notes in the event that suspended covenants are subsequently reinstated or suspended, as the case may be. An Investment Grade Status Period will not commence until Fresenius Medical Care has delivered the officers' certificate referred to above and will terminate immediately upon the failure of the notes to maintain Investment Grade Status. Fresenius Medical Care will promptly notify the trustee in writing of any failure of the notes to maintain Investment Grade Status. ADDITIONAL AMOUNTS All payments made under or with respect to the notes under the indentures must be made free and clear of and without withholding or deduction for or on account of any present or future tax, duty, levy, impost, assessment or other governmental charge (including penalties, interest and other liabilities related thereto) imposed or levied by or on behalf of the United States, Germany, the United Kingdom or the jurisdiction of formation of the note issuer, or any note guarantor or of any territory thereof or by any authority or agency therein or thereof having power to tax, collectively, "Taxes," unless the note issuer or any note guarantor is required to withhold or deduct Taxes by law or by the interpretation or administration thereof by the relevant government authority or agency. If the note issuer or any note guarantor is so required to withhold or deduct any amount for or on account of Taxes from any payment made under or with respect to the notes, the note issuer or the note guarantors, as the case may be, will be required to pay such amount -- "Additional Amounts" -- as may be necessary so that the net amount (including Additional Amounts) received by each Holder after such withholding or deduction will not be less than the amount such Holder would have received if such Taxes had not been withheld or deducted. The note issuer will also make such withholding or deduction and remit the full amount deducted or withheld to the relevant authority as and when required in accordance with applicable law. The note issuer will furnish to the holders, within 30 days after the date the payment of any Taxes is due under applicable law, certified copies of tax receipts evidencing such payment by the note issuer. If a trust would be required to pay any taxes, duties, assessments or governmental charges of whatever nature (other than withholding taxes) imposed by the United States, or any other taxing authority, then, in any such case, the note issuer will pay as additional interest -- "Additional Interest" -- such amounts as will be necessary so that the net amounts received and retained by such trust after paying any such taxes, duties, assessments or governmental charges will be not less than the amounts such trust would have received had no such taxes, duties, assessments or governmental charges been imposed. All references in this offering circular to "Additional Amounts" will include "Additional Interest." These obligations will survive any termination, defeasance or discharge of the applicable Indenture. CERTAIN COVENANTS The indentures provide that certain of the following restrictive covenants and other obligations will be suspended during any Investment Grade Status Period. The covenants and obligations that will be suspended during any Investment Grade Status Period include "-- Limitation on Restricted Payments," "-- Limitation on Incurrence of Indebtedness," "-- Limitation on Restrictions on Distributions from Subsidiaries," "-- Limitation on Sales of Assets and Subsidiary Stock," clause (1) of "-- Senior Subordinated Indebtedness; Liens" and clause (4)(B) of the second paragraph of "-- Limitation on Mergers, Acquisitions and Sales of Assets." In the discussion below, "the Company" refers to Fresenius Medical Care. LIMITATION ON RESTRICTED PAYMENTS (a) The Company will not, and will not permit any Subsidiary to, directly or indirectly, make any Restricted Payment if at the time the Company or such Subsidiary makes such Restricted Payment: (1) a Default has occurred and is continuing (or would result therefrom); (2) the Company is not able to Incur an additional $1.00 of Indebtedness pursuant to paragraph (a) of the covenant described under "-- Limitation on Incurrence of Indebtedness"; or 156 164 (3) the aggregate amount of such Restricted Payment and all other Restricted Payments since the Issue Date would exceed the sum of: (A) 50% of the Consolidated Net Income accrued during the period (treated as one accounting period) from January 1, 2000 to the end of the Company's most recently ended fiscal quarter for which internal financial statements are available at the time of such Restricted Payment (or, in case such Consolidated Net Income is a deficit, minus 100% of such deficit); (B) the aggregate Net Cash Proceeds received by the Company from the issuance or sale of its Capital Stock (other than Disqualified Stock) subsequent to January 1, 2000 (other than an issuance or sale to a Subsidiary and other than an issuance or sale to an employee stock ownership plan or to a trust established by the Company or any of its Subsidiaries for the benefit of their employees); and (C) the amount by which Indebtedness of the Company is reduced on the Company's balance sheet upon the conversion or exchange (other than by a Subsidiary), subsequent to January 1, 2000 of any Indebtedness of the Company convertible or exchangeable for Capital Stock (other than Disqualified Stock) of the Company (less the amount of any cash, or the fair value of any other property, distributed by the Company upon such conversion or exchange). (b) The provisions of the foregoing paragraph (a) will not prohibit: (1) any purchase or redemption of Capital Stock or Subordinated Obligations of the Company made by exchange for, or out of the proceeds of the substantially concurrent sale of, Capital Stock of the Company (other than Disqualified Stock and other than Capital Stock issued or sold to a Subsidiary or an employee stock ownership plan or to a trust established by the Company or any of its Subsidiaries for the benefit of their employees); provided, however, that (A) such purchase or redemption shall be excluded in the calculation of the amount of Restricted Payments and (B) the Net Cash Proceeds from such sale shall be excluded from the calculation of amounts under clause (3)(B) of paragraph (a) above; (2) any purchase, repurchase, redemption, defeasance or other acquisition or retirement for value of Subordinated Obligations made by exchange for, or out of the proceeds of the substantially concurrent sale of, Indebtedness of the Company which is permitted to be Incurred pursuant to the covenant described under "Limitation on Indebtedness"; provided, however, that such purchase, repurchase, redemption, defeasance or other acquisition or retirement for value shall be excluded in the calculation of the amount of Restricted Payments; or (3) dividends paid within 60 days after the date of declaration of that dividend if at such date of declaration such dividend would have complied with this covenant and at the time of payment of such dividend, no other Default shall have occurred and be continuing or result from the dividend payment. That dividend shall be included in the calculation of the amount of Restricted Payments. LIMITATION ON INCURRENCE OF INDEBTEDNESS (a) The Company shall not, and shall not permit any Subsidiary to, Incur, directly or indirectly, any Indebtedness unless, on the date of such Incurrence (and after giving effect thereto), the Consolidated Coverage Ratio exceeds 2.5 to 1. (b) The foregoing limitations contained in paragraph (a) do not apply to the Incurrence of any of the following Indebtedness: (1) Indebtedness under the Credit Agreements; (2) Indebtedness owed to and held by a Wholly Owned Subsidiary; provided, however, that any subsequent issuance or transfer of any Capital Stock that results in any such Wholly Owned Subsidiary ceasing to be a Wholly Owned Subsidiary or any subsequent transfer of such Indebtedness 157 165 (other than to another Wholly Owned Subsidiary) shall be deemed, in each case, to constitute the Incurrence of such Indebtedness by the Company; (3) Indebtedness in respect of the notes, and the related guaranties by the Company and the note guarantors of the notes, the 9% Notes, the 2008 7 7/8% Notes and the 2008 7 3/8% Notes; (4) Capital Lease Obligations and Indebtedness incurred, in each case, to provide all or a portion of the purchase price or cost of construction of an asset or, in the case of a sale/leaseback transaction, to finance the value of such asset owned by the Company or a Subsidiary, in an aggregate principal amount which, together with all other such Capital Lease Obligations and Indebtedness outstanding on the date of such Incurrence (other than Indebtedness permitted by paragraph (a) or clause (2) or (9) of this paragraph (b)), does not exceed $200 million; (5) Indebtedness in respect of Receivables Financings in an aggregate principal amount which, together with all other Indebtedness in respect of Receivables Financings outstanding on the date of such Incurrence (other than Indebtedness permitted by paragraph (a) or clause (2) or (9) of this paragraph (b)), does not exceed 85% of the sum of (1) the total amount of accounts receivables shown on the Company's most recent consolidated quarterly balance sheet, plus (2) without duplication, the total amount of accounts receivable already subject to a Receivables Financing; (6) Refinancing Indebtedness in respect of Indebtedness Incurred pursuant to paragraph (a) or pursuant to clause (3), (4) or (5) of this paragraph (b); (7) Hedging Obligations permitted under the NMC Credit Agreement as in effect on the Issue Date; (8) customer deposits and advance payments received from customers for goods purchased in the ordinary course of business; and (9) Indebtedness in an aggregate principal amount which, together with all other Indebtedness of the Company and its Subsidiaries outstanding on the date of such Incurrence (other than Indebtedness permitted by paragraph (a) or clauses (1) through (8) of this paragraph (b)), does not exceed $400 million. (c) Notwithstanding the foregoing, the Company shall not, and shall not permit any Subsidiary to, incur, directly or indirectly, any Indebtedness: (1) that is subordinate or junior in ranking in right of payment to its Senior Indebtedness unless such Indebtedness is Senior Subordinated Indebtedness or is expressly subordinated in right of payment to Senior Subordinated Indebtedness, or (2) pursuant to paragraph (b) above if the proceeds thereof are used, directly or indirectly, to Refinance any Subordinated Obligations unless such Indebtedness shall be subordinated to the notes to at least the same extent as such Subordinated Obligations. (d) For purposes of determining compliance with the foregoing covenant: (1) in the event that an item of Indebtedness meets the criteria of more than one of the types of Indebtedness described above, the Company, in its sole discretion, will classify such item of Indebtedness and only be required to include the amount and type of such Indebtedness in one of the above clauses, and (2) an item of Indebtedness may be divided and classified in more than one of the types of Indebtedness described above. 158 166 LIMITATION ON RESTRICTIONS ON DISTRIBUTIONS FROM SUBSIDIARIES The Company will not, and will not permit any Subsidiary to, create or otherwise cause or permit to exist or become effective any consensual encumbrance or restriction on the ability of any Subsidiary: (a) to pay dividends or make any other distributions on its Capital Stock to the Company or any other Subsidiary or pay any Indebtedness owed to the Company or any other Subsidiary, (b) to make any loans or advances to the Company or any other Subsidiary or (c) to transfer any of its property or assets to the Company or any other Subsidiary, except: (1) any encumbrance or restriction pursuant to an agreement in effect at or entered into on the Issue Date; (2) any encumbrance or restriction with respect to a Subsidiary pursuant to an agreement relating to any Indebtedness Incurred by such Subsidiary on or prior to the date on which such Subsidiary was acquired by the Company (other than Indebtedness Incurred as consideration in, or to provide all or any portion of the funds or credit support utilized to consummate the transaction or series of related transactions pursuant to which such Subsidiary became a Subsidiary or was acquired by the Company) and outstanding on such date; (3) any encumbrance or restriction pursuant to an agreement effecting a Refinancing of Indebtedness Incurred pursuant to an agreement referred to in clause (1) or (2) above or this clause (3) or contained in any amendment to an agreement referred to in clause (1) or (2) above or this clause (3); provided, however, that the encumbrances and restrictions with respect to such Subsidiary contained in any such refinancing agreement or amendment are no less favorable to the holders of Notes than encumbrances and restrictions with respect to such Subsidiary contained in such agreements; (4) any such encumbrance or restriction consisting of customary non-assignment provisions in leases governing leasehold interests or in licensing agreements to the extent such provisions restrict the transfer of the lease or the property leased thereunder or the licensing agreement or the rights licensed thereunder; (5) in the case of clause (c) above, restrictions contained in security agreements or mortgages securing Indebtedness of a Subsidiary to the extent such restrictions restrict the transfer of the property subject to such security agreements or mortgages; and (6) any restriction with respect to a Subsidiary imposed pursuant to an agreement entered into for the sale or disposition of all or substantially all the Capital Stock or assets of such Subsidiary pending the closing of such sale or disposition. LIMITATION ON SALES OF ASSETS AND SUBSIDIARY STOCK (a) The Company will not, and will not permit any Subsidiary to, directly or indirectly, consummate any Asset Disposition unless: (1) the Company or such Subsidiary receives consideration at the time of such Asset Disposition at least equal to the fair market value (including as to the value of all non-cash consideration), as determined in good faith by the Board of Directors of the Company or such Subsidiary, as the case may be, of the shares and assets subject to such Asset Disposition and at least 70% of the consideration thereof received by the Company or such Subsidiary is in the form of cash or cash equivalents; and (2) an amount equal to 100% of the Net Available Cash from such Asset Disposition is applied by the Company (or such Subsidiary, as the case may be); (A) first, to the extent the Company elects (or is required by the terms of any Senior Indebtedness), to prepay, repay, redeem or purchase Senior Indebtedness or Indebtedness (other 159 167 than any Disqualified Stock) of a Wholly Owned Subsidiary (in each case other than Indebtedness owed to the Company or an Affiliate of the Company) within one year from the later of the date of such Asset Disposition or the receipt of such Net Available Cash; (B) second, to the extent of the balance of such Net Available Cash after application in accordance with clause (A), to the extent the Company elects, to acquire Additional Assets within one year from the later of the date of such Asset Disposition or the receipt of such Net Available Cash; (C) third, to the extent of the balance of such Net Available Cash after application in accordance with clauses (A) and (B), to cause FMC Trust Finance S.a.r.l. Luxembourg to make an offer to the holders of the 9% Notes to purchase the 9% Notes pursuant to and subject to the conditions contained in the 9% Indenture; (D) fourth, to the extent of the balance of such Net Available Cash after application in accordance with clauses (A), (B) and (C), to cause FMC Trust Finance S.a.r.l. Luxembourg to make an offer to the holders of the 2008 7 7/8% Notes or the 2008 7 3/8% Notes, as the case may be, to purchase the 2008 7 7/8% Notes or the 2008 7 3/8% Notes pursuant to and subject to the conditions contained in the 2008 7 7/8% Indenture or the 2008 7 3/8% Indenture, as the case may be; (E) fifth, to the extent of the balance of such Net Available Cash after application in accordance with clauses (A), (B),(C) and (D), to cause the note issuer to make an offer to the holders of the USD notes on a pro rata basis to purchase the USD notes pursuant to and subject to the conditions contained in the indenture for the USD notes; and (F) sixth, to the extent of the balance of such Net Available Cash after application in accordance with clauses (A), (B), (C), (D) and (E), to cause the note issuer to make an offer to the holders of the Euro notes on a pro rata basis to purchase the Euro notes pursuant to and subject to the conditions contained in the indenture for the Euro notes; provided, however, that in connection with any prepayment, repayment or purchase of Indebtedness pursuant to clause (A), (C), (D), (E) or (F) above, the Company or such Subsidiary shall retire such Indebtedness and shall cause the related loan commitment (if any) to be permanently reduced in an amount equal to the principal amount so prepaid, repaid or purchased. Notwithstanding the foregoing provisions of this covenant, the Company and the Subsidiaries will not be required to apply any Net Available Cash in accordance with this covenant except to the extent that the aggregate Net Available Cash from all Asset Dispositions which are not applied in accordance with this covenant exceeds $20 million. Pending application of Net Available Cash pursuant to this covenant, such Net Available Cash will be invested in Permitted Investments. For the purposes of this covenant, the following are deemed to be cash or cash equivalents: (1) the assumption of Indebtedness of the Company or any Subsidiary and the release of the Company or such Subsidiary from all liability on such Indebtedness in connection with such Asset Disposition; and (2) securities received by the Company or any Subsidiary from the transferee that are promptly converted by the Company or such Subsidiary into cash. (b) In the event of an Asset Disposition that requires the purchase of the notes pursuant to clause (a)(2)(E) or clause (a)(2)(F) above, the note issuer will be required to purchase the USD or Euro notes, as applicable, tendered pursuant to an offer by the note issuer for such notes at a purchase price of 100% of the principal amount thereof (without premium), plus accrued but unpaid interest, in accordance with the procedures (including prorating in the event of oversubscription) set forth in the applicable indenture. The note issuer shall not be required to make such an offer to purchase notes pursuant to this covenant if the Net Available Cash available therefor is less than $20 million (which 160 168 lesser amount shall be carried forward for purposes of determining whether such an offer is required with respect to any subsequent Asset Disposition). (c) The note issuer will comply, to the extent applicable, with the requirements of Section 14(e) of the Exchange Act and any other securities laws or regulations in connection with the repurchase of notes under this covenant. To the extent that the provisions of any securities laws or regulations conflict with provisions of this covenant, the note issuer will comply with the applicable securities laws and regulations and will not be deemed to have breached its obligations under this clause by virtue thereof. LIMITATION ON AFFILIATE TRANSACTIONS (a) The Company will not, and will not permit any Subsidiary to, enter into any transaction (including the purchase, sale, lease or exchange of any property, employee compensation arrangements or the rendering of any service) with any Affiliate of the Company (an "Affiliate Transaction") unless the terms thereof: (1) are no less favorable to the Company or such Subsidiary than those that could be obtained at the time of such transaction in arm's length dealings with a Person who is not such an Affiliate, (2) if such Affiliate Transaction involves an amount in excess of $5 million, (i) are set forth in writing and (ii) have been approved by a majority of the members of the Board of Directors of the Company or such Subsidiary having no personal stake in such Affiliate Transaction; and (3) if such Affiliate Transaction involves an amount in excess of $15 million, have been determined by a nationally recognized investment banking firm or, in appropriate circumstances, an internationally recognized engineering firm, to be fair from a financial standpoint to the Company and its Subsidiaries. (b) The provisions of paragraph (a) above shall not prohibit (1) any Restricted Payment permitted to be paid pursuant to the covenant described under "Limitation on Restricted Payments," (2) transactions or payments pursuant to any employee arrangements or employee or director benefit plans entered into by the Company or any of its Subsidiaries in the ordinary course of business of the Company or such Subsidiary, and (3) any Affiliate Transaction between the Company and a Wholly Owned Subsidiary or between Wholly Owned Subsidiaries. SENIOR SUBORDINATED INDEBTEDNESS; LIENS The Company will not, and will not permit any Subsidiary to, Incur: (1) any Indebtedness if such Indebtedness is subordinate or junior in ranking in any respect to any Senior Indebtedness unless such Indebtedness is Senior Subordinated Indebtedness or is expressly subordinated in right of payment to Senior Subordinated Indebtedness or (2) any Secured Indebtedness that is not Senior Indebtedness, unless (A) contemporaneously therewith effective provision is made to secure the notes equally and ratably with such Secured Indebtedness for so long as such Secured Indebtedness is secured by a Lien, (B) such Secured Indebtedness is permitted by clause (1), (4), (5) or (7) of paragraph (b) of the covenant described under "Limitation on Incurrence of Indebtedness," (C) such Secured Indebtedness is Incurred by a Subsidiary pursuant to a revolving credit agreement as in effect on the Issue Date, or 161 169 (D) such Secured Indebtedness is Refinancing Indebtedness in respect of Secured Indebtedness Incurred by a Subsidiary pursuant to a revolving credit agreement as in effect on the Issue Date. LIMITATION ON MERGERS, ACQUISITIONS AND SALES OF ASSETS The Indentures provide that the note issuer may not consolidate or merge with or into (whether or not the note issuer is the Surviving Person), or sell, assign, transfer, lease, convey or otherwise dispose of all or substantially all of its properties and assets in one or more related transactions, to another Person unless: (1) the Surviving Person is a corporation organized and existing under the laws of (i) in the case of the indenture for the USD notes, Germany, the United Kingdom or Luxembourg, (ii) in the case of the indenture for the Euro notes, any member state of the European Union (other than Greece or Portugal) or Switzerland, or, (iii) in all cases the United States of America, or any state thereof or the District of Columbia, or the jurisdiction of formation of the note issuer; (2) the Surviving Person (if other than the note issuer) assumes all the obligations of the note issuer under the indentures and the notes issued thereunder pursuant to a supplemental indentures in a form reasonably satisfactory to the Indenture trustee; (3) at the time of and immediately after such transaction, no Default or Event of Default shall have occurred and be continuing; (4) such consolidation, merger, conveyance, transfer or lease is permitted under the applicable trust declaration and does not give rise to any breach or violation of that trust declaration; and (5) the note issuer delivers to the indenture trustee an Officers' Certificate and an Opinion of Counsel, each stating that such consolidation, merger or transfer and such supplemental indenture, if any, comply with the applicable Indenture. The Company will not and will not permit any other note guarantor to consolidate with or merge with or into, or convey, transfer, lease, sell, assign, or otherwise dispose of, in one transaction or a series of transactions, all or substantially all of its properties and assets to any Person unless: (1) the Surviving Person shall be a Person organized and existing under the laws of Germany, the United Kingdom, the United States of America, or any state thereof, or the District of Columbia, except in a transaction or series of transactions involving the Company, the jurisdiction of formation of the note issuer or, if the Surviving Person is a corporation organized and existing under the laws of any other jurisdiction, the note issuer delivers to the indenture trustee a written opinion of legal counsel reasonably acceptable to the Indenture trustee to the effect that the rights of the holders of the USD or Euro notes, as applicable, would not be affected adversely as a result of the law of the jurisdiction of organization of the Surviving Person, insofar as such law affects the ability of the Surviving Person to pay and perform its obligations and undertakings in connection with its note guaranty or the ability of the Surviving Person to obligate itself to pay and perform such obligations and undertakings or the ability of the holders to enforce such obligations and undertakings; (2) the Surviving Person (if other than the Company or such other note guarantor) shall expressly assume, (A) in a transaction or series of transactions involving the Company, by a supplemental indenture in a form satisfactory to the indenture trustee, all of the obligations of the Company under the applicable indenture and the Company's note guaranty, or (B) in a transaction or series of transactions not involving the Company, by a Guaranty Agreement, in a form satisfactory to the Indenture trustee, all the obligations of such note guarantor, if any, under its note guaranty; (3) at the time of, and immediately after giving effect to, such transaction or transactions on a pro forma basis (and treating any Indebtedness which becomes an obligation of the resulting, surviving or transferee Person as a result of such transaction as having been issued by such Person at the time of such transaction), no Default shall have occurred and be continuing; 162 170 (4) in the case of a transaction or series of transactions involving the Company, (A) the Surviving Person will have Consolidated Net Worth (immediately after the transaction) equal to or greater than the Consolidated Net Worth of the Company immediately preceding the transaction and (B) at the time of such transaction and after giving pro forma effect to such transaction, the Surviving Person would be permitted to incur at least $1.00 of additional Indebtedness pursuant to paragraph (a) of the covenant described under "-- Limitation on Incurrence of Indebtedness;" and (5) the note issuer and the Company or such other note guarantor delivers to the indenture trustee an Officers' Certificate and an Opinion of Counsel, each stating that such consolidation, merger conveyance, transfer, assignment, sale, lease or other disposition and such supplemental indenture and Guaranty Agreement, if any, comply with the applicable indenture. SUCCESSOR TO NOTE ISSUER The Company or a Wholly Owned Subsidiary, a "Successor," may assume the obligations of the note issuer under the USD or Euro notes, as applicable, by executing and delivering to the indenture trustee: (a) a supplemental indenture which subjects such person to all of the provisions of the applicable indenture as an issuer under that indenture; and (b) an Opinion of Counsel to the effect that such supplemental indenture has been duly authorized and executed by such Person, and constitutes the legal, valid, binding and enforceable obligation of such Person, subject to customary exceptions; provided, (1) the Successor is formed under the laws of (i) the United States of America, or any state thereof, or the District of Columbia, (ii) in the case of a Successor under the USD notes, Germany, the United Kingdom or any other member state of the European Union or (iii) in the case of a Successor under the Euro notes, any member state of the European Union (other than Greece or Portugal), Switzerland, or the jurisdiction of the formation of the note issuer; (2) no Additional Amounts would be or become payable with respect to the applicable notes at the time of such assumption, or as a result of any change in the laws of the jurisdiction of formation of such Successor that was reasonably foreseeable at such time; (3) the assumption of such obligations by the Successor will not cause the applicable trust to fail or cease to be classified for U.S. federal income tax purposes as a grantor trust or another entity which is not subject to U.S. federal income tax at the entity level and the assets and income of which are treated for U.S. federal income tax purposes as held and derived directly by holders of interests in such trust; and (4) if a Wholly Owned Subsidiary is the Successor, the Company will continue to unconditionally guarantee, on a senior subordinated basis, the obligations assumed by such Successor. The Successor will succeed to, and be substituted for, and may exercise every right and power of, the note issuer under the applicable indenture with the same effect as if it were the note issuer thereunder, and the former note issuer will be discharged from all obligations and covenants under that indenture and the related notes. REPORTS Whether or not required by the rules and regulations of the SEC, so long as any notes are outstanding, the Company will provide the indenture trustee and the holders with: (1) all annual financial information that would be required to be contained in a filing with the SEC on Form 20-F as if the Company were required to file reports on such Form; and (2) quarterly financial statements as of and for the period from the beginning of each year to the close of each quarterly period (other than the fourth quarter), together with comparable information for the corresponding period of the preceding year, including, in each case, a "Management's 163 171 Discussion and Analysis of Financial Condition and Results of Operations" and, with respect to the annual information only, a report thereon from the Company's certified independent public accountants. In addition, whether or not required by the rules and regulations of the SEC, the Company will file a copy of all such information and reports with the SEC for public availability and make such information and reports available to securities analysts and prospective investors upon request. OWNERSHIP OF THE TRUSTS AND THE NOTE ISSUER The Company will continue: (1) to directly or indirectly maintain 100% ownership of the common securities of each trust; provided, however, that any permitted successor of the Company under an Indenture may succeed to the Company's ownership of the related common securities; and (2) to use its reasonable efforts to cause each trust: (A) to remain a statutory business trust, except in connection with the distribution of notes to the holders of common securities and trust preferred securities in liquidation of the applicable trust, the redemption of all of the common securities and trust preferred securities, or certain mergers, consolidations or amalgamations, each as permitted by the applicable trust declaration; and (B) to otherwise continue to be classified for U.S. federal income tax purposes as a grantor trust or another entity which is not subject to U.S. federal income tax at the entity level and the assets and income of which are treated for U.S. federal income tax purposes as held and derived directly by holders of interests in the entity. The Company will continue to directly or indirectly maintain 100% ownership of the Capital Stock of the note issuer, provided, that any permitted successor of the Company under the indentures may succeed to the Company's ownership of such Capital Stock. The Company will cause the note issuer to engage only in those activities that are necessary, convenient or incidental to: (1) issuing and selling the old notes and any additional Senior Subordinated Indebtedness permitted by the indentures, and advancing or distributing the proceeds thereof to the Company and its subsidiaries and performing its obligations relating to the notes and any such additional Senior Subordinated Indebtedness, pursuant to the terms thereof and of the indentures and any other applicable indenture; (2) conducting or participating in the exchange offers and issuing the USD notes and the Euro notes; and (3) guaranteeing the Company's senior credit facility. CHANGE OF CONTROL Each holder of the notes, upon the occurrence of a Change of Control Triggering Event, will have the right to require that the note issuer repurchase such holder's USD or Euro notes, as applicable, at a purchase price in cash equal to 101% of the principal amount thereof plus accrued and unpaid interest, if any, to the date of purchase (subject to the right of holders of record on the relevant record date to receive interest due on the relevant interest payment date). Within 30 days following a Change of Control Triggering Event, the note issuer will mail a notice to each holder with a copy to the indenture trustee stating: (1) that a Change of Control Triggering Event has occurred and that such holder has the right to require the note issuer to purchase such holder's USD or Euro notes, as applicable, at a purchase 164 172 price in cash equal to 101% of the principal amount thereof plus accrued and unpaid interest, if any, to the date of purchase (subject to the right of holders of record on the relevant record date to receive interest on the relevant interest payment date); (2) the circumstances and relevant facts regarding such Change of Control Triggering Event (including information with respect to pro forma historical income, cash flow and capitalization after giving effect to such Change of Control); (3) the repurchase date (which shall be no earlier than 30 days nor later than 60 days from the date such notice is mailed); (4) that each USD or Euro note will be subject to repurchase only in the amount of $1,000 or E1,000, as applicable, or integral amounts thereof; and (5) the instructions determined by the note issuer, consistent with the covenant described hereunder, that a holder must follow in order to have its notes purchased. The note issuer will comply, to the extent applicable, with the requirements of Section 14(e) of the Exchange Act and any other securities laws or regulations in connection with the repurchase of Notes pursuant to this covenant. To the extent that the provisions of any securities laws or regulations conflict with the provisions of this covenant, the note issuer will comply with the applicable securities laws and regulations and will not be deemed to have breached its obligations under this covenant by virtue thereof. The Change of Control purchase feature is a result of negotiations between the Company and the initial purchasers in connection with our issuing the old trust preferred securities. We have no present intention to engage in a transaction involving a Change of Control, although it is possible that we would decide to do so in the future. Subject to the limitations discussed below, we could, in the future, enter into certain transactions, including acquisitions, refinancings or other recapitalizations, that would not constitute a Change of Control under the indentures, but that could increase the amount of Indebtedness outstanding at such time or otherwise affect our capital structure or credit ratings. Restrictions on our ability to incur additional Indebtedness are contained in the covenants described under "-- Certain Covenants -- Limitation on Incurrence of Indebtedness." These restrictions can only be waived with the consent of the holders of a majority in principal amount of the USD and Euro notes then outstanding under the indentures. Except for the limitations contained in such covenants, however, the indentures will not contain any covenants or provisions that may afford holders of the notes protection in the event of a highly leveraged transaction. The note issuer's ability to repurchase notes upon a Change of Control may be limited by a number of factors. The occurrence of some of the events that constitute a Change of Control could constitute a default under our senior credit facility. In addition, the 9% Indenture, the 2008 7 7/8% Indenture and the 2008 7 3/8% Indenture contain covenants similar to this "Change of Control" covenant which, in the event of a Change of Control, could make it difficult for the note issuer to repurchase the notes. Our future indebtedness may contain prohibitions on the occurrence of certain events that would constitute a Change of Control or require such indebtedness to be repurchased upon a Change of Control. Moreover, the exercise by the holders of their right to require the note issuer to repurchase the notes could cause a default under such indebtedness, even if the Change of Control itself does not, due to the financial effect of such repurchase on us. Finally, the note issuer's ability to pay cash to the holders of notes following the occurrence of a Change of Control may be limited by our then existing financial resources. We cannot assure you that sufficient funds will be available when necessary to make any required repurchases. The provisions under the indentures relating to the note issuer's obligation to make an offer to repurchase notes as a result of a Change of Control may be waived or modified with the written consent of the holders of a majority in principal amount of the notes issued under the applicable indenture. 165 173 EVENTS OF DEFAULT The indentures provide that any one or more of the following described events, which has occurred and is continuing, constitutes an "Event of Default" with respect to the USD or Euro notes issued under the applicable indenture: (1) failure for 30 days to pay interest on the applicable notes, including any Additional Amounts in respect thereof, when due; or (2) failure to pay principal of or premium, if any, on the applicable notes when due, whether at maturity, upon redemption, by declaration or otherwise; or (3) failure to observe or perform any other covenant contained in the applicable indenture for 90 days after notice as provided in that indenture; or (4) default under any mortgage, indenture or instrument under which there may be issued or by which there may be secured or evidenced any indebtedness for money borrowed by us or any of our Subsidiaries (or the payment of which is guaranteed by us), whether such Indebtedness or Guarantee now exists or is incurred after the issue date, if (A) such default results in the acceleration of such Indebtedness prior to its express maturity or will constitute a default in the payment of such Indebtedness and (B) the principal amount of any such Indebtedness that has been accelerated or not paid at maturity, when added to the aggregate principal amount of all other such Indebtedness, at such time, that has been accelerated or not paid at maturity, exceeds $25 million; or (5) the dissolution, winding up or termination of the applicable trust, except in connection with the distribution of USD or Euro notes to the holders of the related trust preferred securities in liquidation of the trust and in connection with certain mergers, consolidations or amalgamations permitted by the applicable trust declaration; or (6) certain events in bankruptcy, insolvency or reorganization of the note issuer or Fresenius Medical Care. The indenture trustee or the holders of not less than 25% in aggregate outstanding principal amount of the USD or Euro notes, as applicable, may declare the principal of and interest (including any Additional Amounts) on the applicable notes due and payable immediately on the occurrence of an Event of Default; provided, however, that, after such acceleration, but before a judgment or decree based on acceleration, the holders of a majority in aggregate principal amount of the outstanding USD or Euro notes, as applicable, may, under certain circumstances, rescind and annul the acceleration if all Events of Default, other than the nonpayment of accelerated principal, have been cured or waived as provided in the related indenture. For information as to waiver of defaults, see "-- Modification of the Indenture." The preferred trustee is the initial holder of the notes. However, while the trust preferred securities are outstanding, the preferred trustee has agreed under the trust declarations not to waive an Event of Default with respect to the USD or Euro notes, as applicable, without the consent of holders of a majority in aggregate liquidation amount of the related trust preferred securities then outstanding. A default under any of our or any Subsidiary's other indebtedness or that of any of our respective joint ventures or the trust would not constitute an Event of Default under the notes. Subject to the provisions of the indentures relating to the duties of the indenture trustee, in case an event of default shall occur and be continuing, the indenture trustee will be under no obligation to exercise any of its rights or powers under an indenture at the request or direction of any holders of USD or Euro notes issued under that indenture unless such holders shall have offered to the indenture trustee reasonable indemnity. Subject to the provisions for the indemnification of the indenture trustee, the holders of a majority in aggregate principal amount of the USD or Euro notes then outstanding will have the right to direct the time, method and place of conducting any proceeding for any remedy available to such indenture trustee, or exercising any trust or power conferred on the indenture trustee. 166 174 No holder of any USD or Euro note will have any right to institute any proceeding with respect to the related indenture or for any remedy thereunder, unless the holder will have previously given to the indenture trustee written notice of a continuing Event of Default and, if the preferred trustee is not the holder of the USD or Euro notes, as applicable, unless the holders of at least 25% in aggregate principal amount of those notes then outstanding will also have made written request, and offered reasonable indemnity, to the indenture trustee to institute such proceeding as indenture trustee, and the indenture trustee will not have received from the holders of a majority in aggregate principal amount of the outstanding USD or Euro notes, as applicable, a direction inconsistent with such request and shall have failed to institute such proceeding within 60 days. However, these limitations do not apply to a suit instituted by a holder of a note for enforcement of payment of the principal of and premium, if any, or interest on such note on or after the respective due dates expressed in such note. The holders of a majority in aggregate outstanding principal amount of the USD or Euro notes, as applicable, affected thereby may, on behalf of the holders of all those notes waive any past default, except a default in the payment of principal, premium, if any, or interest or a default in respect of a covenant or provision that cannot be modified or amended without consent of the holder of each affected USD or Euro note. The note issuer is required to file annually with the Indenture trustee and the trustees a certificate as to whether or not we and the note issuer are in compliance with all the conditions and covenants under the indentures. MODIFICATION OF THE INDENTURES Each indenture contains provisions permitting the note issuer and the indenture trustee, with the consent of the holders of not less than a majority in principal amount of the USD or Euro notes issued under that indenture, to modify that indenture or any supplemental indenture, provided that, without the consent of the holder of each outstanding USD or Euro note affected thereby such modification may not: (1) extend the Stated Maturity of any such note, or reduce the principal amount thereof, or reduce the rate or extend the time of payment of interest thereon, or reduce any premium payable upon the redemption thereof, (2) change the place or currency of payment of principal of, or any premium or interest on, any such note, (3) impair the right to institute suit for the enforcement of any payment on or with respect to any such note, (4) modify the subordination provisions in a manner adverse to the holders of such notes, or (5) reduce the percentage in principal amount of notes whose holders are required to consent to any modification or amendment of the applicable indenture. In addition, the note issuer and the indenture trustee may execute, without the consent of any holder of notes, any supplemental indenture to cure any ambiguities, comply with the Trust Indenture Act and for certain other customary purposes. GOVERNING LAW The indentures and the notes are governed by, and will be construed in accordance with, the laws of the State of New York. INFORMATION CONCERNING THE INDENTURE TRUSTEE The indenture trustee, prior to default, undertakes to perform only such duties as are specifically set forth in the indentures and, after default, shall exercise the same degree of care as a prudent individual would exercise in the conduct of his or her own affairs. Subject to such provision, the indenture trustee is under no obligation to exercise any of the powers vested in it by the indentures at the request of any holder of USD or Euro notes, unless offered reasonable indemnity by such holder against the costs, 167 175 expenses and liabilities which might be incurred thereby. The indenture trustee is not required to expend or risk its own funds or otherwise incur personal financial liability in the performance of its duties if the indenture trustee reasonably believes that repayment or adequate indemnity is not reasonably assured to it. CERTAIN DEFINITIONS In the discussion below, the "Company" refers to Fresenius Medical Care. As used in the indenture: "Additional Assets" means: (1) any property or assets (other than Indebtedness and Capital Stock) in a Related Business, (2) the Capital Stock of a Person that becomes a Subsidiary as a result of the acquisition of such Capital Stock by the Company or another Subsidiary, or (3) Capital Stock constituting a minority interest in any Person that at such time is a Subsidiary; provided, however, that any such Subsidiary described in this clause or clause (2) above is primarily engaged in a Related Business. "Affiliate" of any specified Person means: (1) any other Person, directly or indirectly, controlling or controlled by, or (2) under direct or indirect common control with such specified Person, provided, however, that an Affiliate of the Company shall not be deemed to include the trusts, Fresenius Medical Care Capital Trust, Fresenius Medical Care Capital Trust II or Fresenius Medical Capital Trust III, or any business trust organized and operated on such similar terms. For the purposes of this definition, "control" when used with respect to any Person means the power to direct the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise; and the terms "controlling" and controlled" have meanings correlative to the foregoing. For purposes of the provisions described under "-- Certain Covenants -- Limitation on Restricted Payments," "-- Certain Covenants -- Limitation on Affiliate Transactions" and "-- Certain Covenants -- Limitations on Sales of Assets and Subsidiary Stock" only, "Affiliate" shall also mean any beneficial owner of Capital Stock representing 5% or more of the total voting power of the Voting Stock (on a fully diluted basis) of the Company or of rights or warrants to purchase such Capital Stock (whether or not currently exercisable) and any Person who would be an Affiliate of any such beneficial owner pursuant to the first sentence hereof. "Asset Disposition" means any sale, lease, transfer or other disposition (or series of related sales, leases, transfers or dispositions) by the Company or any Subsidiary, including any disposition by means of a merger, consolidation or similar transaction (each referred to for the purposes of this definition as a "disposition"), of: (1) any shares of Capital Stock of any Subsidiary (other than directors qualifying shares or shares required by applicable law to be held by a Person other than the Company or a Subsidiary), (2) all or substantially all the assets of any division or line of business of the Company or any Subsidiary, or (3) any other assets of the Company or any Subsidiary outside of the ordinary course of business of the Company or such Subsidiary, other than, in the case of (1), (2) and (3) above, (A) a disposition by a Subsidiary to the Company or by the Company or a Subsidiary to a Wholly Owned Subsidiary, and 168 176 (B) for purposes of the covenant described under "-- Certain Covenants -- Limitation on Sales of Assets and Subsidiary Stock" only, a disposition that constitutes a Restricted Payment permitted by the covenant described under "-- Certain Covenants -- Limitation on Restricted Payments"). "Average Life" means, as of the date of determination, with respect to any Indebtedness or Preferred Stock, the quotient obtained by dividing: (1) the sum of the products of numbers of years from the date of determination to the dates of each successive scheduled principal payment of such Indebtedness or redemption or similar payment with respect to such Preferred Stock multiplied by the amount of such payment by (2) the sum of all such payments. "Board of Directors" means, with respect to the note issuer, the Company or a Subsidiary, as the case may be, the Board of Directors (or other body performing functions similar to any of those performed by a Board of Directors including those performed, in the case of a German corporation, by the Managing Board or the Supervisory Board) of such person or any committee thereof duly authorized to act on behalf of such Board (or other body). "Business Day" means any day other than: (1) a Saturday or Sunday, (2) a day on which banking institutions in New York City, London, Frankfurt am Main, or Luxembourg are authorized or required by law or executive order to remain closed, (3) with respect to the Euro trust preferred securities only, a day on which the Trans-European Automated Real-Time Gross-settlement Express Transfer System is authorized or required by law to close, or (4) a day on which the corporate trust office of the indenture trustee, or, with respect to the trust preferred securities, the principal office of the preferred trustee under the trust declarations, is closed for business. "Capital Lease Obligations" means an obligation that is required to be classified and accounted for as a capital lease for financial reporting purposes in accordance with GAAP, and the amount of Indebtedness represented by such obligation shall be the capitalized amount of such obligation determined in accordance with GAAP; and the Stated Maturity thereof shall be the date of the last payment of rent or any other amount due under such lease prior to the first date upon which such lease may be terminated by the lessee without payment of a penalty. "Capital Stock" of any Person means any and all shares, interests, rights to purchase, warrants, options, participations or other equivalents of or interests in (however designated) equity of such Person, including any Preferred Stock, but excluding any debt securities convertible into such equity. "Change of Control" means any transaction or series of transactions in which any Person or group (within the meaning of Rule 13d-5 under the Exchange Act and Section 13(d) and 14(d) of the Exchange Act) other than Fresenius AG and its subsidiaries: (1) acquires all or substantially all of the Company's assets, or (2) becomes the direct or indirect "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), by way of merger, consolidation, other business combination or otherwise, of greater than 50% of the total voting power (on a fully diluted basis as if all convertible securities had been converted and all options and warrants had been exercised) entitled to vote in the election of directors of the Company or the Surviving Person (if other than the Company). "Change of Control Triggering Event" means the occurrence of both a Change of Control and a Rating Decline. 169 177 "Consolidated Coverage Ratio" as of any date of determination means the ratio of (x) the aggregate amount of EBITDA for the Company's most recently ended four full fiscal quarters for which internal financial statements are available immediately preceding the date of such determination to (y) Consolidated Interest Expense for such four fiscal quarters; provided, however, that: (1) if the Company or any Subsidiary has Incurred any Indebtedness since the beginning of such period that remains outstanding or if the transaction giving rise to the need to calculate the Consolidated Coverage Ratio is an Incurrence of Indebtedness, or both, EBITDA and Consolidated Interest Expense for such period shall be calculated after giving effect on a pro forma basis to such Indebtedness as if such Indebtedness had been Incurred on the first day of such period and the discharge of any other Indebtedness repaid, repurchased, defeased or otherwise discharged with the proceeds of such new Indebtedness as if such discharge had occurred on the first day of such period, (2) if since the beginning of such period the Company or any Subsidiary shall have made any Asset Disposition, the EBITDA for such period shall be reduced by an amount equal to the EBITDA (if positive) directly attributable to the assets which are the subject of such Asset Disposition for such period, or increased by an amount equal to the EBITDA (if negative), directly attributable thereto for such period and Consolidated Interest Expense for such period shall be reduced by an amount equal to the Consolidated Interest Expense directly attributable to any Indebtedness of the Company or any Subsidiary repaid, repurchased, defeased or otherwise discharged with respect to the Company and its continuing Subsidiaries in connection with such Asset Disposition for such period (or, if the Capital Stock of any Subsidiary is sold, the Consolidated Interest Expense for such period directly attributable to the Indebtedness of such Subsidiary to the extent the Company and its continuing Subsidiaries are no longer liable for such Indebtedness after such sale), (3) if since the beginning of such period the Company or any Subsidiary (by merger or otherwise) shall have made an Investment in any Subsidiary (or any Person which becomes a Subsidiary) or an acquisition of assets, including any acquisition of assets occurring in connection with a transaction requiring a calculation to be made hereunder, which constitutes all or substantially all of an operating unit of a business, EBITDA and Consolidated Interest Expense for such period shall be calculated after giving pro forma effect thereto (including the Incurrence of any Indebtedness) as if such Investment or acquisition occurred on the first day of such period, and (4) if since the beginning of such period any Person (that subsequently became a Subsidiary or was merged with or into the Company or any Subsidiary since the beginning of such period) shall have made any Asset Disposition, any Investment or acquisition of assets that would have required an adjustment pursuant to clause (2) or (3) above if made by the Company or a Subsidiary during such period, EBITDA and Consolidated Interest Expense for such period shall be calculated after giving pro forma effect thereto as if such Asset Disposition, Investment or acquisition occurred on the first day of such period. For purposes of this definition, whenever pro forma effect is to be given to an acquisition of assets, the amount of income or earnings relating thereto and the amount of Consolidated Interest Expense associated with any Indebtedness Incurred in connection therewith, the pro forma calculations shall be determined in good faith by a responsible financial or accounting officer of the Company. If any Indebtedness bears a floating rate of interest and is being given pro forma effect, the interest of such Indebtedness shall be calculated as if the rate in effect on the date of determination had been the applicable rate for the entire period (taking into account any Interest Rate Agreement applicable to such Indebtedness if such Interest Rate Agreement has a remaining term in excess of 12 months). "Consolidated Interest Expense" means, for any period, the total interest expense of the Company and its consolidated Subsidiaries, plus, to the extent not included in such total interest expense, and to the extent incurred by the Company or its Subsidiaries, (1) interest expense attributable to capital leases, (2) amortization of debt discount and debt issuance cost, 170 178 (3) capitalized interest, (4) non-cash interest expenses, (5) commissions, discounts and other fees and charges owed with respect to letters of credit and bankers' acceptance financing, (6) net costs associated with Hedging Obligations (including amortization of fees), (7) Preferred Stock dividends in respect of all Preferred Stock held by Persons other than the Company or a Wholly Owned Subsidiary, (8) interest incurred in connection with Investments in discontinued operations, (9) interest accruing on any Indebtedness of any other Person to the extent such Indebtedness is Guaranteed by the Company or any Subsidiary, and (10) the cash contributions to any employee stock ownership plan or similar trust to the extent such contributions are used by such plan or trust to pay interest or fees to any Person (other than the Company) in connection with Indebtedness Incurred by such plan or trust. "Consolidated Net Income" means, for any period, the net income of the Company and its consolidated Subsidiaries; provided, however, that there shall not be included in such Consolidated Net Income: (1) any net income of any Person if such Person is not a Subsidiary, except that (A) subject to the exclusion contained in clause (4) below, the Company's equity in the net income of any such Person for such period shall be included in such Consolidated Net Income up to the aggregate amount of cash actually distributed by such Person during such period to the Company or a Subsidiary as a dividend or other distribution (subject, in the case of a dividend or other distribution paid to a Subsidiary, to the limitations contained in clause (3) below) and (B) the Company's equity in a net loss of any such Person for such period shall be included in determining such Consolidated Net Income, (2) any net income (or loss) of any Person acquired by the Company or a Subsidiary in a pooling of interests transaction for any period prior to the date of such acquisition, (3) any net income of any Subsidiary that is not a Wholly Owned Subsidiary if such Subsidiary is subject to contractual, governmental or regulatory restrictions, directly or indirectly, on the payment of dividends or the making of distributions by such Subsidiary, directly or indirectly, to the Company, except that (A) subject to the exclusion contained in clause (4) below, the Company's equity in the ]net income of any such Subsidiary for such period shall be included in such Consolidated Net Income up to the aggregate amount of cash actually distributed by such Subsidiary during such period to the Company or another Subsidiary as a dividend or other distribution (subject, in the case of a dividend or other distribution paid to another Subsidiary that is not a Wholly Owned Subsidiary, to the limitation contained in this clause) and (B) the Company's equity in a net loss of any such Subsidiary for such period shall be included in determining such Consolidated Net Income, (4) any gain (but not loss) realized upon the sale or other disposition of any assets of the Company or its consolidated Subsidiaries (including pursuant to any sale and leaseback arrangement) that is not sold or otherwise disposed of in the ordinary course of business and any gain (but not loss) realized upon the sale or other disposition of any Capital Stock of any Person, (5) extraordinary gains or losses, and (6) the cumulative effect of a change in accounting principles. "Consolidated Net Worth" means the total of the amounts shown on the balance sheet of the Company and its consolidated Subsidiaries, determined on a consolidated basis in accordance with GAAP, as of the end of the Company's most recently ended fiscal quarter for which internal financial statements 171 179 are available prior to the taking of any action for the purpose of which the determination is being made, as: (1) the par or stated value of all outstanding Capital Stock of the Company plus (2) paid-in capital or capital surplus relating to such Capital Stock plus (3) any retained earnings or earned surplus less (A) any accumulated deficit and (B) any amounts attributable to Disqualified Stock. "Credit Agreements" means the NMC Credit Agreement and the Other Bank Agreements; provided, that the aggregate principal amount of Indebtedness that may be outstanding, at any one time, under such agreements does not exceed $2.5 billion. "Currency Agreement" means any foreign currency exchange contract, currency swap agreement or other similar agreement or arrangement designed and entered into to protect the Company or any Subsidiary against fluctuations in currency exchange rates. "Default" means any event that is, or after notice or passage of time or both would be, an Event of Default (as defined herein). "Disqualified Stock" means, with respect to any Person, any Capital Stock that by its terms (or by the terms of any security into which it is convertible or for which it is exchangeable) or upon the happening of any event: (1) matures or is mandatorily redeemable pursuant to a sinking fund obligation or otherwise, (2) is convertible or exchangeable for Indebtedness or Disqualified Stock, or (3) is redeemable at the option of the holder thereof, in whole or in part. In each case on or prior to the first anniversary of the Stated Maturity of the notes; provided, however, that any Capital Stock that would not constitute Disqualified Stock but for provisions thereof giving holders thereof the right to require such Person to repurchase or redeem such Capital Stock upon the occurrence of an "asset sale" or "change of control" occurring prior to the first anniversary of the Stated Maturity of the notes shall not constitute Disqualified Stock if the "asset sale" or "change of control" provisions applicable to such Capital Stock are not more favorable to the holders of such Capital Stock than the provisions described under "-- Certain Covenants -- Limitation on Sales of Assets and Subsidiary Stock" and "-- Change of Control." "EBITDA" for any period means the sum of Consolidated Net Income, plus Consolidated Interest Expense plus the following to the extent deducted in calculating such Consolidated Net Income: (1) all income tax expense of the Company and its Subsidiaries, (2) depreciation expense, and (3) amortization expense, in each case for such period. Notwithstanding the foregoing, the provision for taxes based on the income or profits of, and the depreciation and amortization of, a Subsidiary that is not a Wholly Owned Subsidiary shall be added to Consolidated Net Income to compute EBITDA only to the extent (and in the same proportion) that the net income of such Subsidiary was included in calculating Consolidated Net Income and only if a corresponding amount would be permitted at the date of determination to be dividended to the Company by such Subsidiary without prior approval (that has not been obtained), pursuant to the terms of its charter and all agreements, instruments, judgments, decrees, orders, statutes, rules and governmental regulations applicable to such Subsidiary or its stockholders. "E" or "euro" means the euro, the common currency of the European Monetary Union. "Exchange Act" means the U.S. Securities Exchange Act of 1934, as amended. 172 180 "GAAP" means generally accepted accounting principles in the United States of America as in effect as of the Issue Date, including those set forth: (1) in the opinions and pronouncements of the Accounting Principles Board of the American Institute of Certified Public Accountants, (2) statements and pronouncements of the Financial Accounting Standards Board, (3) in such other statements by such other entity as approved by a significant segment of the accounting profession, and (4) the rules and regulations of the SEC governing the inclusion of financial statements (including pro forma financial statements) in periodic reports required to be filed pursuant to Section 13 of the Exchange Act, including opinions and pronouncements in staff accounting bulletins and similar written statements from the accounting staff of the SEC. "Guarantee" means any obligation, contingent or otherwise, of any Person directly or indirectly guaranteeing any Indebtedness or other obligation of any Person and any obligation, direct or indirect, contingent or otherwise, of such Person: (1) to purchase or pay (or advance or supply funds for the purchase or payment of) such Indebtedness or other obligation of such Person (whether arising by virtue of partnership arrangements, or by agreements to keep-well, to purchase assets, goods, securities or services, to take- or-pay or to maintain financial statement conditions or otherwise), or (2) entered into for the purpose of assuring in any other manner the obligee of such Indebtedness or other obligation of the payment thereof or to protect such obligee against loss in respect thereof (in whole or in part); provided, however, that the term "Guarantee" shall not include endorsements for collection or deposit in the ordinary course of business. The term "Guarantee" used as a verb has a corresponding meaning. The term "Guarantor" shall mean any Person Guaranteeing any obligation. "Guaranty Agreement" means, in the context of a consolidation, merger or sale of all or substantially all of the assets of a note guarantor, an agreement by which the Surviving Person from such a transaction expressly assumes all of the obligations of such note guarantor under its note guaranty. "Hedging Obligations" of any Person means the obligations of such Person pursuant to any Interest Rate Agreement or Currency Agreement. "Incur" means issue, assume, Guarantee, incur or otherwise become liable for; provided, however, that any Indebtedness or Capital Stock of a Person existing at the time such Person becomes a Subsidiary (whether by merger, consolidation, acquisition or otherwise) shall be deemed to be Incurred by such Subsidiary at the time it becomes a Subsidiary. The term "Incurrence" when used as a noun shall have a correlative meaning. The accretion of principal of a non-interest bearing or other discount security shall be deemed the Incurrence of Indebtedness. "Indebtedness" means, with respect to any Person on any date of determination (without duplication): (1) the principal of and premium (if any) in respect of (A) indebtedness of such Person for money borrowed and (B) indebtedness evidenced by notes, debentures, bonds or other similar instruments for the payment of which such Person is responsible or liable, (2) all Capital Lease Obligations of such Person, (3) all obligations of such Person issued or assumed as the deferred purchase price of property or services, all conditional sale obligations of such Person and all obligations of such Person under any title retention agreement (other than (x) customary reservations or retentions of title under agreements with suppliers entered into in the ordinary course of business, (y) trade debt incurred in the ordinary course of business and due within six months of the incurrence thereof and 173 181 (z) obligations incurred under a pension, retirement or deferred compensation program or arrangement regulated under the Employee Retirement Income Security Act of 1974, as amended, or the laws of a foreign government), (4) all obligations of such Person for the reimbursement of any obligor on any letter of credit, bank guaranty, banker's acceptance or similar credit transaction (other than obligations with respect to letters of credit and bank Guarantees (A) not made under the NMC Credit Agreement and (B) securing obligations (other than obligations described in (1) through (3) above) entered into in the ordinary course of business of such Person to the extent such letters of credit are not drawn upon or, if and to the extent drawn upon, such drawing is reimbursed no later than the tenth Business Day following receipt by such Person of a demand for reimbursement following payment on the letter of credit), (5) the amount of all obligations of such Person with respect to the redemption, repayment or other repurchase of any Disqualified Stock or, with respect to any subsidiary of such Person, any Preferred Stock (but excluding, in each case, any accrued dividends), (6) all obligations of the type referred to in clauses (1) through (5) of other Persons and all dividends of other Persons for the payment of which, in either case, such Person is responsible or liable, directly or indirectly, as obligor, guarantor or otherwise, including by means of any Guarantee, (7) all obligations of the type referred to in clauses (1) through (6) of other Persons secured by any Lien on any property or asset of such Person (whether or not such obligation is assumed by such Person), the amount of such obligation being deemed to be the lesser of the value of such property or assets or the amount of the obligation so secured, and (8) to the extent not otherwise included in this definition, Hedging Obligations of such Person. The amount of Indebtedness of any Person at any date shall be the outstanding balance at such date of all unconditional obligations as described above and the maximum liability, upon the occurrence of the contingency giving rise to the obligation, of any contingent obligations at such date. "Interest Rate Agreement" means any interest rate swap agreement, interest rate cap agreement or other financial agreement or arrangement designed and entered into to protect the Company or any Subsidiary against fluctuations in interest rates. "Investment" in any Person means any direct or indirect advance, loan (other than advances to customers in the ordinary course of business that are recorded as accounts receivable on the balance sheet of such Person) or other extensions of credit (including by way of Guarantee or similar arrangement) or capital contribution to (by means of any transfer of cash or other property to others or any payment for property or services for the account or use of others), or any purchase or acquisition of Capital Stock, Indebtedness or other similar instruments issued by such Person. "Investment Grade" means a rating of BBB- or higher by S&P and Baa3 or higher by Moody's or the equivalent of such ratings by S&P or Moody's and the equivalent in respect of Rating Categories of any Rating Agencies substituted for S&P or Moody's. "Investment Grade Status" exists as of any time if at such time (i) the rating assigned to the notes by Moody's is at least Baa3 (or the equivalent) or higher and (ii) the rating assigned to the notes by S&P is at least BBB- (or the equivalent) or higher. "Issue Date" means the date on which the notes are originally issued. "Lien" means any mortgage, pledge, security interest, encumbrance, lien or charge of any kind (including any conditional sale or other title retention agreement or lease in the nature thereof). "Moody's" means Moody's Investors Service, Inc. and its successors. "Net Available Cash" from an Asset Disposition means cash payments received therefrom (including any cash payments received by way of deferred payment of principal pursuant to a note or installment 174 182 receivable or otherwise, but only as and when received, but excluding any other consideration received in the form of assumption by the acquiring Person of Indebtedness or other obligations relating to such properties or assets or received in any other non-cash form) in each case net of: (1) all legal, title and recording tax expenses, commissions and other fees and expenses incurred, and all federal, state, provincial, foreign and local taxes required to be accrued as a liability under GAAP, as a consequence of such Asset Disposition, (2) all payments made on any Indebtedness which is secured by any assets subject to such Asset Disposition, in accordance with the terms of any Lien upon or other security agreement of any kind with respect to such assets, or which must by its terms, or in order to obtain a necessary consent to such Asset Disposition, or by applicable law be, repaid out of the proceeds from such Asset Disposition, (3) all distributions and other payments required to be made to minority interest holders in Subsidiaries or joint ventures as a result of such Asset Disposition, and (4) the deduction of appropriate amounts provided by the seller as a reserve, in accordance with GAAP, against any liabilities associated with the property or other assets disposed in such Asset Disposition and retained by the Company or any Subsidiary after such Asset Disposition. "Net Cash Proceeds" with respect to any issuance or sale of Capital Stock, means the cash proceeds of such issuance or sale net of attorneys' fees, accountants' fees, underwriters' or placement agents' fees, discounts or commissions and brokerage, consultant and other fees actually incurred in connection with such issuance or sale and net of taxes paid or payable as a result thereof. "9% Indenture" means the Senior Subordinated Indenture dated as of November 27, 1996, as amended by the Supplemental Indenture dated as of February 19, 1998 and the Second Supplemental Indenture dated as of November 30, 1998, by and between FMC Trust Finance S.a.r.l. Luxembourg, Fleet National Bank (as predecessor to State Street Bank and Trust Company), as trustee, the Company and the other note guarantors with respect to the issuance of the 9% Senior Subordinated Notes of FMC Trust Finance S.a.r.l. Luxembourg due December 1, 2006 in the aggregate principal amount of $360,360,000, as it may be further amended, modified or otherwise supplemented from time to time. "9% Notes" means the 9% Senior Subordinated Notes due December 1, 2006 issued pursuant to the 9% Indenture. "NMC Credit Agreement" means the Credit Agreement, dated as of September 27, 1996, among National Medical Care, Inc., certain subsidiaries and affiliates thereof, the lenders referred to in such Credit Agreement, NationsBank, N.A., as paying agent, and The Bank of Nova Scotia, The Chase Manhattan Bank, Dresdner Bank AG and NationsBank, N.A., as managing agents, including any related notes, guarantees, collateral documents, instruments and agreements executed in connection with such Credit Agreement, in each case as amended, modified, renewed, refunded, replaced, restated or refinanced from time to time; provided that such amendment, modification, renewal, refunding, replacement, restatement or refinancing: (1) does not cause the aggregate principal amount of Indebtedness that may be outstanding under such Credit Agreement to exceed $2.5 billion except to the extent that such additional principal amount of Indebtedness could be incurred under clause (9) of "Certain Covenants -- Limitation on Incurrence of Indebtedness," and (2) does not contain, with respect to any Subsidiary, any encumbrances or restrictions of the type described in clauses (a), (b) and (c) of the covenant described under "Certain Covenants -- Limitation on Restrictions on Distributions from Subsidiaries" that are less favorable to the holders of notes than the encumbrances and restrictions with respect to such Subsidiary contained in such Credit Agreement prior thereto. "Note Guarantor" means each of the Company, FMCH and FMC Deutschland GmbH. 175 183 "Note Guaranty" means the Guarantee by a Note Guarantor of the Note Issuer's obligations with respect to the Notes. "Other Bank Agreements" means any credit agreement or other agreement for loans, letters of credit, bank Guarantees or other financial accommodations (and any related notes, guarantees, collateral documents, instruments and agreements executed in connection therewith) entered into by the Company or any Subsidiary with any bank; provided, that the aggregate principal amount of Indebtedness that may be outstanding thereunder does not exceed $500 million, except to the extent that such additional principal amount of Indebtedness could be incurred under clause (9) of "Certain Covenants -- Limitation on Incurrence of Indebtedness." "Permitted Investment" means: an Investment by the Company or any Subsidiary in: (1) a Person that will, upon the making of such Investment, be or become a Subsidiary; provided, however, that the primary business of such Subsidiary is a Related Business, (2) a Person if as a result of such Investment such other Person is merged or consolidated with or into, or transfers or conveys all or substantially all its assets to, the Company or a Subsidiary; provided, however, that such Person's primary business is a Related Business, (3) Temporary Cash Investments, (4) any demand deposit account with an Approved Lender, (5) receivables owing to the Company or any Subsidiary if created or acquired in the ordinary course of business and payable or dischargeable in accordance with customary trade terms; provided, however, that such trade terms may include such concessionary trade terms as the Company or any such Subsidiary deems reasonable under the circumstances, (6) payroll, travel and similar advances to cover matters that are expected at the time of such advances ultimately to be treated as expenses for accounting purposes and that are made in the ordinary course of business, (7) loans or advances to employees made in the ordinary course of business consistent with past practices of the Company or such Subsidiary, (8) stock, obligations or securities received in settlement of debts created in the ordinary course of business and owing to the Company or any Subsidiary or in satisfaction of judgments, (9) any Person to the extent such Investment represents the non-cash portion of the consideration received for an Asset Disposition as permitted pursuant to the covenant described under "Certain Covenants -- Limitation on Sales of Assets and Subsidiary Stock", and (10) any Affiliate (the primary business of which is a Related Business) that is not a Subsidiary (other than Fresenius AG), provided, that the aggregate of all such Investments outstanding at any one time under this clause (x) shall not exceed $125 million. "Person" means any individual, corporation, partnership, joint venture, association, joint-stock company, trust, unincorporated organization, government or any agency, instrumentality or political subdivision thereof, or any other entity. "Preferred Stock", as applied to the Capital Stock of any corporation, means Capital Stock of any class or classes (however designated) which is preferred as to the payment of dividends, or as to the distribution of assets upon any voluntary or involuntary liquidation or dissolution of such corporation, over shares of Capital Stock of any other class of such corporation. "principal" of a Note means the principal of such Note plus the premium, if any, payable on such Note which is due or overdue or is to become due at the relevant time. 176 184 "Rating Agencies" means: (1) S&P and (2) Moody's, or (3) if S&P or Moody's or both shall not make rating of the notes publicly available, a nationally recognized securities rating agency or agencies, as the case may be, selected by the Company, which shall be substituted for S&P or Moody's or both, as the case may be. "Rating Category" means: (1) with respect to S&P, any of the following categories: BB, B, CCC, CC, C and D (or equivalent successor categories), (2) with respect to Moody's, any of the following categories: Ba, B, Caa, Ca, C and D (or equivalent successor categories), and (3) the equivalent of any such category of S&P or Moody's used by another Rating Agency. In determining whether the rating of the notes has decreased by one or more gradations, gradations within Rating Categories (+ and - for S&P, 1, 2 and 3 for Moody's; or the equivalent gradations for another Rating Agency) shall be taken into account (e.g., with respect to S&P, a decline in a rating from BB+ to BB, as well as from BB- to B+, will constitute a decrease of one gradation). "Rating Date" means the date which is 90 days prior to the earlier of (1) a Change of Control and (2) public notice of the occurrence of a Change of Control or of the intention by the Company or any Person to effect a Change of Control. "Rating Decline" means the occurrence on or within 90 days after the date of the first public notice of the occurrence of a Change of Control or of the intention by the Company to effect a Change of Control (which period shall be extended so long as the rating of the Notes is under publicly announced consideration for possible downgrade by any of the Rating Agencies) of: (1) in the event the Notes are rated by either Moody's or S&P on the Rating Date as Investment Grade, a decrease in the rating of the notes by both Rating Agencies to a rating that is below Investment Grade, or (2) in the event the Notes are rated below Investment Grade by both Rating Agencies on the Rating Date, a decrease in the rating of the Notes by either Rating Agency by one or more gradations (including gradations within Rating Categories as well as between Rating Categories). "Receivables Financings" means: (1) the accounts receivable financing facility of National Medical Care, Inc. contemplated by the Receivables Purchase Agreement dated as of August 28, 1997 by and between National Medical Care, Inc., as Seller, and NMC Funding Corporation, as Purchaser and the Amended and Restated Transfer and Administration Agreement dated October 26, 2000 among Compass US Acquisition LLC, NMC Funding Corporation, National Medical Care, Inc., Enterprise Funding Corporation, the Bank Investors listed therein, Westdeutsche Landesbank Girozentrale, New York Branch as an administrative agent and Bank of America N.A., as an administrative agent, as each such agreement may be amended or supplemented from time to time, and (2) any financing transaction or series of financing transactions that have been or may be entered into by the Company or a Subsidiary pursuant to which the Company or a Subsidiary may sell, convey or otherwise transfer to a Subsidiary or Affiliate, or any other Person, or may grant a security interest in, any receivables or interests therein secured by the merchandise or services financed thereby (whether such receivables are then existing or arising in the future) of the Company or such Subsidiary, as the case may be, and any assets related thereto, including without limitation, all security interests in merchandise or services financed thereby, the proceeds of such receivables, and other assets which are customarily sold or in respect of which security interests are customarily granted in connection with securitization transactions involving such assets. 177 185 "Refinance" means, in respect of any Indebtedness, to refinance, extend, renew, refund, repay, prepay, redeem, defease or retire, or to issue other Indebtedness in exchange or replacement for, such Indebtedness. "Refinanced" and "Refinancing" shall have correlative meanings. "Refinancing Indebtedness" means Indebtedness that Refinances any Indebtedness of the Company or any Subsidiary existing on the Issue Date or Incurred in compliance with the Indenture including Indebtedness that Refinances Refinancing Indebtedness; provided, however, that: (1) such Refinancing Indebtedness has a Stated Maturity no earlier than the Stated Maturity of the Indebtedness being Refinanced, (2) such Refinancing Indebtedness has an Average Life at the time such Refinancing Indebtedness is Incurred that is equal to or greater than the Average Life of the Indebtedness being Refinanced, and (3) such Refinancing Indebtedness has an aggregate principal amount (or if Incurred with original issue discount, an aggregate issue price) that is equal to or less than the aggregate principal amount (or if Incurred with original issue discount, the aggregate accredit value) then outstanding or committed (plus fees and expenses, including any premium and defeasance costs) under the Indebtedness being Refinanced; provided further, however, that Refinancing Indebtedness shall not include (x) Indebtedness of a Subsidiary that Refinances Indebtedness of the Company or (y) Indebtedness of the Company or a Subsidiary (other than National Medical Care or a Subsidiary of National Medical Care) that Refinances Indebtedness of another Subsidiary. "Related Business" means any business related, ancillary or complementary to the businesses of the Company and its Subsidiaries on the Issue Date. "Restricted Payment" with respect to any Person means: (1) the declaration or payment of any dividends or any other distributions of any sort in respect of its Capital Stock (including any payment in connection with any merger or consolidation involving such Person) or similar payment to the direct or indirect holders of its Capital Stock (other than dividends or distributions payable solely in its Capital Stock (other than Disqualified Stock)) and dividends or distributions payable solely to the Company or a Subsidiary, and other than pro rata dividends or other distributions made by a Subsidiary that is not a Wholly Owned Subsidiary to minority stockholders (or owners of an equivalent interest in the case of a Subsidiary that is an entity other than a corporation)), (2) the purchase, redemption or other acquisition or retirement for value of any Capital Stock of the Company held by any Person or of any Capital Stock of a Subsidiary held by any Affiliate of the Company (other than a Subsidiary), including the exercise of any option to exchange any Capital Stock (other than into Capital Stock of the Company that is not Disqualified Stock), (3) the purchase, repurchase, redemption, defeasance or other acquisition or retirement for value, prior to scheduled maturity, scheduled repayment or scheduled sinking fund payment of any Subordinated Obligations (other than the purchase, repurchase or other acquisition of Subordinated Obligations purchased in anticipation of satisfying a sinking fund obligation, principal installment or final maturity, in each case due within one year of the date of acquisition), or (4) the making of any Investment in any Person (other than a Permitted Investment). "SEC" means the U.S. Securities and Exchange Commission. "Secured Indebtedness" means any Indebtedness of the note issuer or the Company secured by a Lien. "Senior Indebtedness" means, with respect to the note issuer or a note guarantor, as the case may be: (1) Indebtedness of such Person, whether outstanding on the Issue Date or thereafter incurred and 178 186 (2) accrued and unpaid interest (including interest accruing on or after the filing of any petition in bankruptcy or for reorganization relating to such Person, whether or not the claim for such interest is allowed as a claim after such filing) in respect of (A) any Indebtedness of such Person under the NMC Credit Agreement, (B) Indebtedness of such Person for money borrowed and (C) Indebtedness evidenced by notes, debentures, bonds or other similar instruments for the payment of which such Person is responsible or liable unless, in the instrument creating or evidencing the same or pursuant to which the same is outstanding, it is provided that such obligations are subordinate in right of payment to the notes. However, Senior Indebtedness shall not include: (1) any obligation of such Person to any subsidiary or parent of such Person, (2) any liability for federal, state, local or other taxes owed or owing by such Person, (3) any accounts payable or other liability to trade creditors arising in the ordinary course of business (including guarantees thereof or instruments evidencing such liabilities), (4) any Indebtedness of such Person (and any accrued and unpaid interest in respect thereof) which is expressly subordinate or junior in any respect to any other Indebtedness or other obligation of such Person, including Senior Subordinated Indebtedness, or (5) that portion of any Indebtedness which at the time of incurrence is incurred in violation of the indenture. "Senior Subordinated Indebtedness" means the 9% Notes, the 2008 7 7/8% Notes, the 2008 7 3/8% Notes, the Notes and any Indebtedness of the Company or the note issuer that specifically provides that such Indebtedness is to rank pari passu with the Company's and the note issuer's respective obligations with respect to the notes in right of payment and is not subordinated by its terms in right of payment to any Indebtedness or other obligation of the Company or the note issuer that is not Senior Indebtedness. "S&P" means Standard & Poor's Corporation and its successors. "Specified Senior Indebtedness" means, with respect to the note issuer or a Note Guarantor, as the case may be: (1) any Indebtedness of such Person under the NMC Credit Agreement, (2) any Refinancing Indebtedness of such Person in respect of Indebtedness specified in clause (1) above, and (3) after all Indebtedness specified in clauses (1) and (2) above is no longer outstanding, any other Senior Indebtedness of such Person permitted under the indenture the outstanding principal amount of which is more than $25 million at the time of determination and that has been designated by such Person as "Specified Senior Indebtedness." "Stated Maturity" means, with respect to any security, the date specified in such security as the fixed date on which the final payment of principal of such security is due and payable, including pursuant to any mandatory redemption provision (but excluding any provision providing for the repurchase of such security at the option of the holder thereof upon the happening of any contingency unless such contingency has occurred). "Subordinated Obligation" means any Indebtedness of the note issuer or the Company (whether outstanding on the Issue Date or thereafter Incurred) that is subordinate or junior in right of payment to the notes pursuant to a written agreement to that effect. 179 187 "Subsidiary" means, with respect to any Person, any corporation, limited liability company, association, partnership or other business entity of which more than 50% of the total voting power of shares of Voting Stock is at the time owned or controlled, directly or indirectly, by: (1) such Person; (2) such Person and one or more Subsidiaries of such Person; or (3) one or more Subsidiaries of such Person. "Surviving Person" means, with respect to any Person involved in any merger, consolidation or other business combination or the sale, assignment, transfer, lease, conveyance or other disposition of all or substantially all of such Person's assets, the Person formed by or surviving such transaction or the Person to which such disposition is made. "Temporary Cash Investments" means any of the following: (1) securities issued or directly and fully guaranteed or insured by (i) 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) and (ii) the governments of Germany and the United Kingdom, having in each case maturities of not more than twelve months from the date of acquisition, (2) time deposits and certificates of deposit, Eurodollar time deposits and Eurodollar certificates of deposit of (i) any lender under the NMC Credit Agreement, or (ii) any United States, German, United Kingdom or Swiss commercial bank of recognized standing (y) having capital and surplus in excess of $500 million and (z) 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 (any such bank being an "Approved Lender"), in each case with maturities of not more than 270 days from the date of acquisition, (3) commercial paper and variable or fixed rate notes issued by an Approved Lender (or by the parent company thereof) and maturing within six months of the date of acquisition, (4) repurchase agreements entered into by a Person with a bank or trust company (including any of the lenders under the NMC Credit Agreement) or recognized securities dealer having capital and surplus in excess of $500 million for (i) direct obligations issued or fully guaranteed by the United States of America, (ii) time deposits or certificates of deposit described under subsection (2) above, or (iii) commercial paper or other notes described under subsection (3) above, in which, in each such case, such bank, trust company or dealer shall have a perfected first priority security interest (subject to no other Liens) and having, on the date of purchase thereof, a fair market value of at least 100% of the amount of the repurchase obligations, (5) obligations of any state of the United States or any political subdivision thereof, the interest with respect to which is exempt from federal income taxation under Section 103 of the U.S. Internal Revenue Code, having a long term rating of at least AA- or Aa-3 by S&P or Moody's, respectively, and maturing within three years from the date of acquisition thereof, (6) Investments in municipal auction preferred stock (i) rated AAA (or the equivalent thereof) or better by S&P or Aaa (or the equivalent thereof) or better by Moody's and (ii) with dividends that reset at least once every 365 days, and (7) Investments, classified in accordance with GAAP as current assets, in money market investment programs (i) registered under the Investment Company Act of 1940, as amended, or (ii) operated by an investment company in Germany or the United Kingdom and subject to regulations under the laws of such jurisdiction, in each case which are administered by reputable financial institutions having capital of at least $100 million and the portfolios of which are limited to Investments of the character described in clauses (1), (2), (3), (4), (5) and (6) above. 180 188 "2008 7 3/8% Indenture" means the Senior Subordinated Indenture dated as of February 19, 1998 by and among FMC Trust Finance S.a.r.l. Luxembourg, State Street Bank and Trust Company as trustee, the Company and the other Note Guarantors with respect to the issuance of 7 3/8% Senior Subordinated Notes of FMC Trust Finance S.a.r.l. Luxembourg due February 1, 2008 in the aggregate principal amount of DM 300,300,000, as it may amended, supplemented or otherwise modified from time to time. "2008 7 3/8% Notes" means the 7 3/8% Senior Subordinated Notes due February 1, 2008 issued pursuant to the 2008 7 3/8% Indenture. "2008 7 7/8% Indenture" means the Senior Subordinated Indenture dated as of February 19, 1998 by and among FMC Trust Finance S.a.r.l. Luxembourg, State Street Bank and Trust Company as trustee, the Company and the other note guarantors with respect to the issuance of 7 7/8% Senior Subordinated Notes of FMC Trust Finance S.a.r.l. Luxembourg due February 1, 2008 in the aggregate principal amount of $450,450,000, as it may be amended, supplemented or otherwise modified from time to time. "2008 7 7/8% Notes" means the 7 7/8% Senior Subordinated Notes due February 1, 2008 issued pursuant to the 2008 7 7/8% Indenture. "Voting Stock" of a Person means all classes of Capital Stock or other interests (including partnership interests) of such Person then outstanding and normally entitled (without regard to the occurrence of any contingency) to vote in the election of directors, managers or trustees thereof. "Wholly Owned Subsidiary" means a Subsidiary all the Capital Stock of which (other than (1) directors' qualifying shares and shares held by other Persons to the extent such shares are required by applicable law to be held by a Person other than the Company or a Subsidiary and (2) shares of Preferred Stock of FMCH) is owned by the Company or by one or more Wholly Owned Subsidiaries, or by the Company and one or more Wholly Owned Subsidiaries. 181 189 RELATIONSHIP AMONG THE TRUST PREFERRED SECURITIES, THE NOTES AND THE TRUST GUARANTEES FULL AND UNCONDITIONAL TRUST GUARANTEES We have irrevocably guaranteed payments of distributions and other amounts due on each trust's preferred securities, to the extent the trust has funds legally available for payment of these amounts, as described under "Description of the Trust Guarantees." Taken together, our obligations under the indentures, our note guaranties, the trust declarations, the expense agreements and the trust guarantees provide a full, irrevocable and unconditional guarantee of payments of distributions and other amounts due on the trust preferred securities of each trust. No single document standing alone or operating in conjunction with fewer than all of the other documents constitutes such a guarantee. If and to the extent that the note issuer does not make payments on the USD or Euro notes, as applicable, the related trust will not pay distributions or other amounts due on its trust preferred securities. The trust guarantees do not cover payment of distributions when a trust does not have sufficient funds legally available to pay such distributions. In that event, your remedy would be to institute a legal proceeding directly against the note issuer on behalf of the applicable trust for enforcement of the note issuer's obligations on the USD or Euro notes, as applicable. Our obligations under the trust guarantees are subordinate and junior in right of payment to all of our senior indebtedness. SUFFICIENCY OF PAYMENTS As long as payments of interest and other payments are made when due on the notes, such payments will be sufficient to cover distributions and other payments due on the trust preferred securities, primarily because: - the aggregate principal amount of the notes will be equal to the sum of the aggregate stated liquidation amount of the related trust preferred securities and common securities; - the interest rate and interest and other payment dates on the notes will match the distribution rate and distribution and other payment dates for the related trust preferred securities; - each trust declaration provides that we will pay all and any costs, expenses and liabilities of the trust except the trust's obligations to you; and - each trust declaration further provides that the applicable trust will not engage in any activity that is not consistent with the limited purposes of the trust. Regardless of anything to the contrary in the indentures, we have the right to set-off any payment we are otherwise required to make under an indenture with and to the extent we have previously made, or are concurrently on the date of such payment making, a payment under the related trust guarantee. ENFORCEMENT RIGHTS OF HOLDERS OF TRUST PREFERRED SECURITIES If an event of default under a trust declaration has occurred and is continuing and is attributable to the failure of the note issuer to make payments on the USD or Euro notes, then holders of not less than 25% in liquidation amount of outstanding USD or Euro trust preferred securities, as applicable, have the right to appoint a special trustee to act on behalf of all such holders. The special trustee appointed in accordance with the preceding sentence will represent the holders of all such trust preferred securities, unless the holders of at least a majority in liquidation amount of those outstanding trust preferred securities appoint an alternative special trustee in which case the special trustee appointed in accordance with the preceding sentence will be required to resign as special trustee. At no time can there be more than one special trustee acting on behalf of the holders of the trust preferred securities. The special trustee will have the right to directly institute a proceeding for enforcement of payment of the principal of or interest on the USD or Euro notes, as applicable, having a principal amount equal to the aggregate liquidation amount of such USD or Euro trust preferred securities outstanding on or after the respective due date specified in the unpaid notes. You would not be able to exercise directly any other remedies 182 190 available to the holders of the notes unless the preferred trustee or the special trustee, acting for the benefit of the preferred trustee, fails to do so. In such event, the holders of at least 25% in aggregate liquidation amount of outstanding USD or Euro trust preferred securities, as applicable, would, to the fullest extent permitted by law, have a right to institute such proceedings. In addition, if the note issuer fails to make interest or other payments on the notes when due, and the preferred trustee fails to enforce its rights under the notes, the indentures provide that a holder of USD or Euro trust preferred securities, as applicable, may institute legal proceedings directly against the note issuer to enforce the preferred trustee's rights under the related notes without first instituting a legal proceeding against the preferred trustee, the applicable trust or any other person or entity. If we fail to make a payment under a trust guarantee, a holder of USD or Euro trust preferred securities, as applicable, may institute a legal proceeding directly against us to enforce the holders' rights under the related trust guarantee without first instituting a legal proceeding against the guarantee trustee, the applicable trust or any other person or entity. If we fail to make payments in respect of a trust's costs and expenses as required by the applicable trust declaration, a creditor of that trust may institute a legal proceeding directly against us to enforce such payments. A default or event of default under any senior indebtedness of ours would not constitute a default or event of default. However, in the event of payment defaults under, or acceleration of, senior indebtedness of ours, the subordination provisions of the indentures provide that no payments may be made in respect of the notes, until such senior indebtedness has been paid in full or any payment default thereunder has been cured or waived. Failure to make required payments on the notes would constitute an event of default. LIMITED PURPOSE OF THE TRUSTS The trust preferred securities evidence beneficial interests in the trusts, and the trusts exist for the sole purpose of issuing the USD or Euro trust preferred securities and their common securities and investing the proceeds of these securities in the related notes. A principal difference between your rights and the rights of a holder of a note is that a holder of a note is entitled to receive from the note issuer the principal amount of and interest accrued on such notes held, while you are entitled to receive distributions from the applicable trust (or from us under a trust guarantee) if and to the extent such trust has funds available for the payment of such distributions. RIGHTS UPON TERMINATION Upon any voluntary or involuntary dissolution, winding-up or liquidation of a trust involving the liquidation of the notes held by that trust, holders of the USD or Euro trust preferred securities, as applicable, will be entitled to receive, out of assets held by trust, a liquidation distribution in cash. Upon our voluntary or involuntary liquidation or bankruptcy, the preferred trustee, as holder of our note guaranties, would be a senior subordinated creditor of ours, subordinated in right of payment to all our senior indebtedness, but entitled to receive payment in full of principal and interest on the notes under our trust guarantees before any of our shareholders or our creditors subordinated to our note guaranties, if any, receive payments or distributions. Since we are the guarantor under the trust guarantees and have agreed to pay for all costs, expenses and liabilities of the trusts (other than the trust's obligations to you), your position and that of a holder of the related notes relative to our other creditors and to our stockholders in the event of our liquidation or bankruptcy are expected to be substantially the same. 183 191 DESCRIPTION OF THE OLD SECURITIES The terms of the old USD and the old Euro trust preferred securities are identical in all material respects to the USD and Euro trust preferred securities, except that: - the old trust preferred securities were not registered under the Securities Act and are entitled to certain rights under the registration rights agreements. However, these rights will terminate when we consummate the exchange offers, except under limited circumstances; - the trust preferred securities will not contain the minimum liquidation amount transfer restriction and certain other restrictions on transfer applicable to the old trust preferred securities; - the trust preferred securities will not provide for any increase in the rate of distributions thereon those securities; - the notes will not contain the minimum principal amount transfer restriction; and - the notes will not provide for any increase in their interest rate. Accordingly, you should review the information described under "Risk Factors -- The exchange offers could adversely affect any market for old trust preferred securities that are not exchanged," as well as under "Description of Trust Preferred Securities," "Description of the Trust Guarantees," Description of the Notes," and "Relationship Among the Trust Preferred Securities, the Notes and the Trust Guarantees." PLAN OF DISTRIBUTION If you are a broker-dealer that receives trust preferred securities for your own account in connection with the exchange offers you must acknowledge that you will deliver a prospectus when you resell those trust preferred securities. Subject to certain provisions of the registration rights agreements, we have agreed that participating broker-dealers who acquired trust preferred securities for their own accounts as a result of market-making or other trading activities may use this prospectus, as amended or supplemented from time to time, in connection with resales of the trust preferred securities during the period ending on the earlier to occur of: - 90 days following the expiration date, or - the date on which they have disposed of all their trust preferred securities. This period may be extended under the circumstances described under "The Exchange Offers -- Resales of Trust Preferred Securities." However, if you are a participating broker-dealer who intends to use this prospectus in connection with your resale of trust preferred securities that you receive in the exchange offers, you must notify us, on or prior to the expiration date, that you are a participating broker-dealer. You may give that notice in the space provided for that purpose in the letter of transmittal or you may be send to the appropriate exchange agent at its address or facsimile number appearing under "The Exchange Offers -- Exchange Agents." See "The Exchange Offers -- Resales of Trust Preferred Securities." Neither we nor either trust will receive any cash proceeds from the issuance of the trust preferred securities in the exchange offers. Broker-dealers who receive trust preferred securities for their own accounts in connection with the exchange offers from time to time in one or more transactions in the over-the-counter market, in negotiated transactions, through writing options on the trust preferred securities or a combination of these methods of resale. The sales may take place at market prices prevailing at the time of resale, at prices related to the prevailing market prices or at negotiated prices. They may resell the trust preferred securities directly to purchasers or to or through brokers or dealers who may receive compensation in the form of commissions or concessions from any such broker-dealer, from the purchasers of the trust preferred securities, or both. Any broker-dealer that resells trust preferred securities that it received for its own account in the exchange offers and any broker or dealer that participates in a distribution of those trust preferred 184 192 securities may be deemed to be an "underwriter" within the meaning of the U.S. Securities Act, and any profit on any those resales, as well as any commissions or concessions received by any of those persons may be deemed to be underwriting compensation under the U.S. Securities Act. However, the letter of transmittal states that by acknowledging that it has an obligation to deliver and will deliver a prospectus, a broker-dealer will not be deemed to admit that it is an underwriter within the meaning of the U.S. Securities Act. In reselling trust preferred securities, you must comply with all applicable laws and regulations in force in any jurisdiction in which you offer or sell the trust preferred securities or distribute this prospectus or any part of it. You must also obtain any consent, approval or permission required for your offers or sales under the laws and regulations in force in any jurisdiction that you are subject to or in which you make offers or sales. Except as described above with respect to the use of this prospectus, we do not have any responsibility for your compliance with any of those laws and regulations. 185 193 TAX CONSIDERATIONS FEDERAL REPUBLIC OF GERMANY GENERAL Under current German laws regarding taxation - Distributions on the trust preferred securities (except as described below) will be payable without deduction or withholding for or on account of any taxes or duties imposed or levied by the Federal Republic of Germany or any district municipality or other political subdivision or taxing authority therein or thereof; - No stamp, issue, registration or similar tax or duty is or will be payable in Germany in connection with the creation, issue, offering or redemption of the trust preferred securities, or, in respect of the execution, delivery or enforcement (except for court fees) of the declaration of trust or the indenture; - A holder of the trust preferred securities who is neither resident nor deemed to be resident in Germany nor deemed to hold the trust preferred securities through a German permanent establishment or agent will not be subject to German taxes or duties on payment of distributions in respect of the trust preferred securities; - No gift, estate or inheritance tax arises in Germany in respect of the trust preferred securities on a gift of the trust preferred securities by, or on the death of, a holder who is neither resident nor deemed to be resident in Germany unless the trust preferred securities are or are deemed to be attributable to a permanent establishment in Germany; and - No taxation of capital gains will arise in Germany on the disposition of trust preferred securities by a holder who is not resident nor deemed to be resident in Germany unless such trust preferred securities are attributable to a permanent establishment in Germany. Distributions on the trust preferred securities effected in Germany will be subject to a withholding tax at a rate of 30% of the gross amount of interest. Fresenius Medical Care or a German financial institution, including a German branch of a foreign financial institution (but excluding a foreign branch of a German financial institution), upon paying the interest is obligated to deduct this withholding tax unless the holder gives proof that (1) the holder is not resident in Germany and (2) the interest income is not effectively connected with a German permanent establishment or agent of such holder. If we pay interest to a non-German financial institution, including a foreign branch of a German financial institution, which pays the distribution to the holders, no German withholding tax will become due. PROPOSED EU INFORMATION REPORTING/WITHHOLDING TAX DIRECTIVE The European Union is currently considering proposals for a new directive regarding the taxation of savings income. A new draft directive was promulgated on July 18, 2001. Subject to a number of important conditions being met, it is proposed that member states will be required to provide to the tax authorities of another member state details of payments of interest or other similar income paid by a person within its jurisdiction to an individual resident, as well as to other forms of organizations such as partnerships and trusts, in that other member state, subject to the right of certain member states to opt instead for a withholding system for a transitional period in relation to such payments. Luxembourg has opted to adopt a withholding system for a period of seven years for payments made to individual beneficial owners of securities (which may include, for example, individuals who hold interests through forms of organizations such as partnerships and trusts, among others) who are resident in a member state of the European Union that is different from the member state of the issuer of the securities or the member state of any paying agent (which could, for these purposes, include a person making payment in respect of the securities on behalf of the issuer or on behalf of the holder). Thus, if the directive is adopted, payments made at the latest on or after January 1, 2004 by a Luxembourg issuer of securities or through a 186 194 Luxembourg paying agent in respect of instruments issued after March 1, 2001 could be subject to withholding tax under the directive. There can be no assurance that the directive will be adopted as proposed or as to the final terms of such directive. See "Description of the Trust Preferred Securities -- Paying Agents." UNITED STATES GENERAL The following is a summary of certain of the material U.S. federal income tax consequences of the purchase, ownership and disposition of the trust preferred securities. This summary is based on the Internal Revenue Code of 1986, as amended (the "Code"), Treasury regulations thereunder and administrative and judicial interpretations of the Code, as of the date of this offering circular. The Code, interpretations thereof, and judicial authorities are subject to change and any such change in law or interpretation may be applied retroactively. For a discussion of certain German and European Union tax matters see "Federal Republic of Germany." For a discussion of certain Luxembourg tax matters see "Luxembourg Taxation." TREATMENT BY THE NOTE ISSUER The note issuer intends to treat the notes as debt for U.S. federal income tax purposes and each holder of trust preferred securities as the owner of an undivided interest in the notes. The note issuer and the trusts will therefore report any payments on the notes to the Internal Revenue Service in a manner consistent with such characterization. The notes will be issued without original issue discount. The discussion that follows assumes that the notes will be treated as debt for U.S. federal income tax purposes. CLASSIFICATION OF THE TRUSTS In connection with the issuance of the trust preferred securities, O'Melveny & Myers LLP, counsel to Fresenius Medical Care AG, will render its opinion generally to the effect that, under then current law and assuming full compliance with the terms of the respective declarations of trust (and certain other documents), and based on certain facts and assumptions contained in such opinion, the trusts will continue to be classified for U.S. federal income tax purposes as a grantor trust and not as an association taxable as a corporation. UNITED STATES HOLDERS Unless otherwise stated, this summary deals only with the trust preferred securities held as capital assets by United States Holders ("U.S. Holders") who purchase the trust preferred securities upon original issuance. It also does not deal with special classes of U.S. Holders such as banks, thrifts, real estate investment trusts, regulated investment companies, insurance companies, dealers in securities or currencies, traders in securities that elect to mark to market, persons engaging in straddles, conversion and hedging transactions, tax-exempt investors, or persons that will hold the trust preferred securities as other than a capital asset. This summary also does not address the tax consequences to persons that have a functional currency other than the U.S. dollar or the tax consequences to shareholders, partners or beneficiaries of a U.S. Holder of trust preferred securities. Further, it does not include any description of any alternative minimum tax consequences or the tax laws of any state or local government or of any foreign government that may be applicable to the trust preferred securities. As used herein, a U.S. Holder is generally a citizen or resident of the United States, a corporation, partnership or other entity created or organized in or under the law of the United States or any political subdivision thereof, an estate the income of which is subject to U.S. federal income taxation regardless of its source, a trust if a U.S. court can exercise primary supervision over the administration of the trust and one or more United States persons have authority to control all substantial decisions of the trust, or any other person whose world-wide income is otherwise subject to U.S. federal income taxation on a net basis. 187 195 Exchange Offers Neither the exchange of old trust preferred securities for trust preferred securities nor the exchange of old notes for notes pursuant to the exchange offers should be a taxable event to U.S. Holders of the old trust preferred securities. Consequently, exchanging U.S. Holders should not recognize any taxable gain or loss as a result of consummation of the exchange offers. A U.S. Holder's tax basis and holding period for the old trust preferred securities will carry over to the trust preferred securities the U.S. holder receives in the exchange offers. Payment of Interest For U.S. federal income tax purposes, each U.S. Holder of trust preferred securities generally will be considered the owner of an undivided interest in the notes held by the applicable trust. Accordingly, each U.S. Holder will be required to include in its gross income any interest paid or accrued with respect to its allocable share of the notes, in accordance with its method of accounting. U.S. Holders of Euro trust preferred securities should also see the discussion below under the caption "-- Currency Exchange Gain or Loss for Euro Denominated Trust Preferred Securities." Receipt of Notes or Cash Upon Liquidation of the Note Issuer Under certain circumstances, as described under the caption "Description of the Trust Preferred Securities -- Tax Event or Investment Company Event Redemption or Distribution," notes held by a trust may be distributed to holders in exchange for the trust preferred securities and in liquidation of the distributing trust. For U.S. federal income tax purposes, such a distribution to U.S. Holders would be treated as a nontaxable event, and each U.S. Holder would receive an aggregate tax basis in the notes equal to such U.S. Holder's aggregate tax basis in its trust preferred securities. A U.S. Holder's holding period in the notes so received would include the period during which such holder held the trust preferred securities. Under certain circumstances described herein, the notes may be redeemed for cash and the proceeds of such redemption distributed to holders in redemption of their related trust preferred securities. For U.S. federal income tax purposes, such a redemption would constitute a taxable disposition of the redeemed trust preferred securities and a U.S. Holder would recognize gain or loss as if it had sold such redeemed trust preferred securities for cash. See "-- Sale of Trust Preferred Securities," below. Sale of Trust Preferred Securities A U.S. Holder that sells trust preferred securities will recognize gain or loss equal to the difference between the amount realized on the sale of the trust preferred securities and the U.S. Holder's adjusted tax basis in such trust preferred securities. A U.S. Holder's adjusted tax basis in the trust preferred securities generally will be its initial purchase price. Such gain or loss will be a capital gain or loss and will be a long-term capital gain or loss if the trust preferred securities have been held for more than one year at the time of sale. Under current law, any net long-term capital gains for individuals are subject to a maximum U.S. federal income taxation at preferential rates if specified minimum holding periods are met. The deductibility of capital losses is subject to significant limitations. A sale of the Euro trust preferred securities will also result in foreign currency exchange gain or loss under the rules discussed below under the heading "-- Currency Exchange Gain or Loss for Euro Denominated Trust Preferred Securities." Deductibility of Capital Losses Subject to Significant Limitations The trust preferred securities may trade at a price that does not fully reflect the value of accrued but unpaid interest with respect to the underlying notes. A U.S. Holder that disposes of its trust preferred securities between record dates for payments of distributions will nevertheless be required to include in income accrued but unpaid interest on the notes through the date of disposition, and to add that amount to its adjusted tax basis in its proportional share of the underlying notes deemed disposed. Accordingly, such a U.S. Holder will recognize a capital loss to the extent the selling price (which may not fully reflect 188 196 the value of accrued but unpaid interest) is less than that U.S. Holder's adjusted tax basis (which will include accrued but unpaid interest). Subject to certain limited exceptions, capital losses cannot be applied to offset ordinary income for U.S. federal income tax purposes. Therefore, it is possible that a U.S. Holder will not be able to offset such accrued but unpaid interest against any such capital loss (although such capital loss could be used to offset capital gains of such U.S. Holder). Market Discount and Bond Premium U.S. Holders of trust preferred securities other than U.S. Holders who purchased the trust preferred securities upon original issuance may be considered to have acquired their undivided interest in the notes with "market discount" or "acquisition premium" as such phrases are defined for U.S. federal income tax purposes. Such holders are advised to consult their tax advisors as to the income tax consequences of the acquisition, ownership and disposition of the trust preferred securities. Currency Exchange Gain or Loss For Euro Denominated Trust Preferred Securities - Purchase of Trust Preferred Securities: A U.S. Holder of Euro trust preferred securities will have a tax basis in the trust preferred securities, based on the spot rate of euros in effect on the date of purchase. A U.S. Holder who converts U.S. dollars into euros and immediately uses the euros to purchase the Euro trust preferred securities will ordinarily not recognize any currency exchange gain or loss in connection with the conversion and purchase. If the U.S. Holder uses euros that were already owned, the U.S. Holder would recognize currency exchange gain or loss equal to the difference between such U.S. Holder's tax basis in the euros and the U.S. dollar fair market value of the Euro trust preferred securities, based on the spot rate in effect on the date of purchase. Any currency exchange gain or loss is treated as ordinary income or loss. - Interest Payments -- Cash Basis: A U.S. Holder of Euro trust preferred securities will have to convert euro denominated interest into U.S. dollars, based on its method of accounting. A cash basis U.S. Holder will include in income as interest the U.S. dollar value of the interest payment, based on the spot rate in effect on the date of receipt of the interest payment, regardless whether the payment in fact is converted into U.S. dollars on that date. However, such a U.S. Holder will not have any currency exchange gain or loss as a result of the interest payment. Upon a subsequent disposition of the euros received, the U.S. Holder will have currency exchange gain or loss measured by the change in the exchange rate between the date of receipt and the date of disposition. - Interest Payments -- Accrual Basis: Unlike a cash method U.S. Holder, an accrual method U.S. Holder must report currency exchange gain or loss attributable to accrued interest. Generally, an accrual basis U.S. Holder will include in income as interest the U.S. dollar value of the accrued amounts, based on the average spot rate in effect for each business day during the interest accrual period (unless an election is made pursuant to Treasury regulations to use a different exchange rate). Such U.S. dollar value for each accrual period will be the U.S. Holder's tax basis in the euros. Upon receipt of an interest payment, the accrual basis U.S. Holder will recognize gain or loss, measured by the difference between the U.S. dollar value of an interest payment, based on the spot rate in effect on the date of receipt, and the U.S. Holder's tax basis in the euros for the accrual period or periods to which such interest payment relates. - Principal Payments: A U.S. Holder who disposes of, or has redeemed, Euro trust preferred securities will have currency exchange gain or loss. The amount of currency exchange gain or loss will be the difference between (1) the U.S. dollar amount determined by converting the euros received into U.S. dollars, based on the spot rate on the date of payment or the date of disposition, and (2) the U.S. dollar amount 189 197 determined by converting the liquidation amount of the Euro trust preferred securities on the date of acquisition. UNITED STATES ALIEN HOLDERS As used herein, a "United States Alien Holder" is any corporation, individual, partnership, estate or trust that is, as to the United States, a foreign corporation, a non-resident alien individual, a foreign partnership, or a nonresident fiduciary of a foreign estate or trust. A United States Alien Holder will not be subject to any United States (a) federal income tax on the interest paid or accrued on the notes, unless the interest is effectively connected with the conduct by the United States Alien Holder of a trade or business in the United States, and (b) withholding tax on such interest income. A United States Alien Holder will not be subject to U.S. federal income tax on any gain realized on the sale or disposition of the trust preferred securities unless (1) the gain is effectively connected with the conduct by the United States Alien Holder of a trade or business in the United States, or (2) the United States Alien Holder is an individual who has been in the United States for 183 days or more in the taxable year of the sale or disposition. Effectively connected income of a United States Alien Holder that is a corporation may in certain circumstances be subject to additional "branch profits tax" at a 30% rate or, if applicable a lower treaty rate. INFORMATION REPORTING AND BACKUP WITHHOLDING United States Holders Subject to the qualifications discussed below, income on the trust preferred securities will be reported to U.S. Holders on Forms 1099, which forms should be mailed to U.S. Holders of trust preferred securities by January 31 following each calendar year. With respect to the USD trust preferred securities, Trust IV will be obligated to report annually to DTC, as holder of record of the USD trust preferred securities, the interest related to the USD trust preferred securities that accrued during the year. Trust IV currently intends to report such information on Form 1099 prior to January 31 following each calendar year even though Trust IV is not legally required to report to record holders until April 15 following each calendar year. The initial purchasers of the old USD trust preferred securities have indicated to Trust IV that, to the extent that they hold USD trust preferred securities as nominees for United States beneficial holders, they currently expect to report to such beneficial holders on Forms 1099 by January 31 following each calendar year. Under current law, holders of USD trust preferred securities who hold as nominees for beneficial holders will not have any obligation to report information regarding the beneficial holders to Trust IV. Trust IV, moreover, will not have any obligation to report to beneficial holders who are not also record holders. Thus, United States beneficial holders of USD trust preferred securities who hold their USD trust preferred securities through the initial purchasers will receive Forms 1099 reflecting the income on their USD trust preferred securities from such nominee holders rather than Trust IV. The initial purchasers of the old Euro trust preferred securities have indicated to Trust V that, to the extent that they hold Euro trust preferred securities as nominees for United States beneficial holders, they currently expect to report the interest related to the Euro trust preferred securities that accrued during the year to such beneficial holders on Forms 1099 by January 31 following each calendar year. Under current law, holders of Euro trust preferred securities who hold as nominees for beneficial holders will not have any obligation to report information regarding the beneficial holders to Trust V. Trust V, moreover, will not have any obligation to report to beneficial holders who are not also record holders. Thus, United States beneficial holders of Euro trust preferred securities who hold their Euro trust preferred securities through the initial purchasers will receive Forms 1099 reflecting the income on their Euro trust preferred securities from such nominee holders rather than Trust V. 190 198 Payments made on, and proceeds from the sale of, the trust preferred securities may be subject to a "backup" withholding tax of 30.5% for 2001 (gradually reducing to 28% by the year 2006) unless the U.S. Holder complies with certain requirements relating to the identification of the holder, including the provision of an accurate taxpayer identification number (or provides a certificate of non-U.S. status). Any withheld amounts will be allowed as a credit against the holder's U.S. federal income tax, provided the required information is provided to the Internal Revenue Service. Certain exempt recipients (such as corporations) are not subject to these information reporting requirements. U.S. Holders who are required to establish their exempt status generally must file IRS Form W-9 ("Request for Taxpayer Identification Number and Certification"). United States Alien Holders Under current law, United States Alien Holders are generally not subject to U.S. information reporting or backup withholding. However, such United States Alien Holders may be required to provide certification of non-U.S. status in connection with payments they receive in the United States or through certain U.S.-related financial institutions. United States Alien Holders receiving payments from non-U.S. paying agents and United States Alien beneficial holders receiving payments from non-U.S. nominee holders will not be subject to the information reporting rules applicable to United States Holders. However, such United States Alien Holders may be required to provide certification of non-U.S. status in connection with payments received in the United States or through certain U.S.-related financial institutions. THE UNITED STATES FEDERAL INCOME TAX DISCUSSION SET FORTH ABOVE IS INCLUDED FOR GENERAL INFORMATION ONLY AND MAY NOT BE APPLICABLE DEPENDING UPON A HOLDER'S PARTICULAR SITUATION. HOLDERS SHOULD CONSULT THEIR TAX ADVISORS WITH RESPECT TO THE TAX CONSEQUENCES TO THEM OF THE PURCHASE, OWNERSHIP AND DISPOSITION OF THE TRUST PREFERRED SECURITIES, INCLUDING THE TAX CONSEQUENCES UNDER STATE, LOCAL, FOREIGN AND OTHER TAX LAWS AND THE POSSIBLE EFFECTS OF CHANGES IN UNITED STATES FEDERAL OR OTHER TAX LAWS. LUXEMBOURG The note issuer intends to treat the notes as debt for all Luxembourg tax purposes and will report payments made on the notes in a manner consistent with such characterization. The following summary assumes such treatment will be confirmed by Luxembourg tax authorities. The note issuer will apply to the Luxembourg tax authorities for a confirmation. Under existing Luxembourg law, all payments of interest under the notes to a holder of the notes who is not currently, and has never been, a Luxembourg citizen or resident, will be free of withholding tax or any similar taxes of whatsoever nature. No income tax and capital tax will be due on interest received or profits realized upon disposition of any notes by a holder, provided such holder is not currently, and has never been, a Luxembourg citizen or resident, and such holder has no permanent establishment in Luxembourg and the notes are not effectively connected with such permanent establishment. No net wealth tax will be due in respect of the notes and no estate or inheritance taxes will arise in Luxembourg on the transfer of any notes by way of gift, or on death of a holder, provided such holder is not currently, and has never been, a Luxembourg citizen or resident, and such holder has no permanent establishment in Luxembourg. THE LUXEMBOURG TAX DISCUSSION SET FORTH ABOVE IS INCLUDED FOR GENERAL INFORMATION ONLY AND MAY NOT BE APPLICABLE DEPENDING UPON A HOLDER'S PARTICULAR SITUATION. HOLDERS SHOULD CONSULT THEIR TAX ADVISORS WITH RESPECT TO THE TAX CONSEQUENCES TO THEM OF THE PURCHASE, 191 199 OWNERSHIP AND DISPOSITION OF THE TRUST PREFERRED SECURITIES, INCLUDING THE TAX CONSEQUENCES UNDER STATE, LOCAL, FOREIGN AND OTHER TAX LAWS AND THE POSSIBLE EFFECTS OF CHANGES IN LUXEMBOURG OR OTHER TAX LAWS. SERVICE OF PROCESS AND ENFORCEABILITY OF CIVIL LIABILITIES We are a German corporation. Some of our directors and executive officers and certain of the experts named in this offering circular are residents of Germany. A substantial portion of our assets and those of such individuals is located outside the United States. As a result, it may be difficult or impossible for investors to effect service of process upon such persons within the United States with respect to matters arising under the U.S. federal securities laws or to enforce against them in U.S. courts judgments of such courts predicated upon the civil liability provisions of such federal securities laws. We have been advised by our German counsel, Norr Stiefenhofer Lutz, that there may be doubt as to the enforceability in Germany, in original actions, of liabilities predicated on the U.S. federal securities laws and that in Germany both recognition and enforcement of court judgments with respect to civil liability provisions of U.S. federal securities laws are solely governed by the provisions of the German Civil Procedure Code ("Zivilprozessordnung"). In some cases, especially when according to the German statutory provisions the international jurisdiction of the U.S. court will not be recognized or the judgment conflicts with basic principles (e.g., the restriction to compensatory damages and limited pre-trial discovery) of German law, the U.S. judgment might not be recognized by a German court. The service of process in U.S. proceedings on persons in Germany is regulated by a multilateral treaty guaranteeing service of writs and other legal documents in civil cases if the current address of the defendant is known. EXPERTS The consolidated financial statements for Fresenius Medical Care Aktiengesellschaft as of December 31, 2000 and 1999, and for each of the years in the three-year period ended December 31, 2000, have been included herein and in the registration statement in reliance upon the report of KPMG Deutsche Treuhand-Gesellschaft Aktiengesellschaft Wirtschaftsprufungsgesellschaft, independent accountants, appearing elsewhere herein, and upon the authority of said firm as experts in accounting and auditing. The consolidated financial statements of Fresenius Medical Care Holdings, Inc. as of December 31, 2000 and 1999 and for each of the years in the three-year period ended December 31, 2000, have been included herein and in the registration statement in reliance upon the report of KPMG LLP, independent certified public accountants, appearing elsewhere herein, and upon the authority of said firm as experts in accounting and auditing. LEGAL MATTERS The validity of the notes, the trust guarantees and the note guaranties will be passed upon for Fresenius Medical Care by O'Melveny & Myers LLP and certain matters under German law with respect to Fresenius Medical Care and FMC Deutschland will be passed upon by Norr Stiefenhofer Lutz. Certain matters under Luxembourg law with respect to the note issuer will be passed upon by Wildgen & Partners. Certain matters of Delaware law relating to the trusts and the validity of the trust preferred securities will be passed upon for the trusts by Richards, Layton & Finger, special Delaware counsel to the trusts. Dr. Dieter Schenk, a member of the firm of Norr Stiefenhofer Lutz, is the Deputy Chairman of the Supervisory Board of Fresenius Medical Care. Dr. Alfred Stiefenhofer, a member of the firm of Norr Stiefenhofer Lutz, is one of the executors of the estate of Mrs. Else Kroner. 192 200 WHERE YOU CAN FIND MORE INFORMATION We file periodic reports and information with the SEC and the New York Stock Exchange. You may inspect a copy of these reports without charge at the Public Reference Room of the SEC at Room 1024, 450 Fifth Avenue, N.W., Washington, D.C. 20549 or at the SEC's regional offices at Seven World Trade Center, 13th Floor, New York, New York 10048 and 500 West Madison Street, Suite 1400, Chicago, Illinois 60661. The public may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC also maintains an Internet site that contains reports, proxy and information statements and other information regarding registrants that file electronically with the SEC. The SEC's World Wide Web address is http://www.sec.gov. As a foreign private issuer, we are not obligated to file registration statements and reports with the SEC in electronic form; however, commencing with our report on Form 6-K filed November 20, 2000 we have voluntarily chosen to do so. Accordingly, our report for the nine months ended September 30, 2000, our Annual Report on Form 20-F for the year ended December 31, 2000 and our reports for subsequent periods may be obtained from any source authorized to store and make available electronically filed reports. The New York Stock Exchange currently lists American Depositary Shares representing our Preference shares and American Depositary Shares representing our Ordinary shares. As a result, we are subject to the periodic reporting requirements of the Exchange Act, and we file reports and other information with the SEC. These reports and other information and the registration statement and exhibits and schedules thereto may be inspected without charge at, and copies thereof may be obtained at prescribed rates from, the public reference facilities of the SEC and the electronic sources listed in the preceding paragraph. In addition, these materials are available for inspection and copying at the offices of the New York Stock Exchange, 20 Broad Street, New York, New York 10005, USA. We prepare annual and quarterly reports, which are then distributed to our shareholders. Our annual reports contain financial statements examined and reported upon, with opinions expressed by our independent auditors. We prepare the consolidated financial statements of Fresenius Medical Care included in these annual reports in conformity with US GAAP. Our annual and quarterly reports to our shareholders are posted on our website at http://www.fmc-ag.com. In furnishing our web site address in this prospectus, however, we are not incorporating by reference any information on our web site into this prospectus, and you should not consider any information on our web site to be part of this prospectus. You may inspect the documents referred to in this prospectus which relate to us as well as our annual and interim reports, at our offices, Else-Kroner-Strasse 1, 61346 Bad Homburg, Germany. You should rely only on the information appearing in this prospectus, including the documents we incorporate by reference into this prospectus. We have not authorized anyone to provide you with information different from the information contained in this prospectus or the incorporated documents. The information that appears in this prospectus is accurate only as of the date of this prospectus, regardless of the time of delivery of this prospectus or any sale of trust preferred securities. INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE The following reports filed with the Securities and Exchange Commission pursuant to the Securities Exchange Act of 1934, as amended, are hereby incorporated by reference into this prospectus: - Fresenius Medical Care's Annual Report on Form 20-F for the fiscal year ended December 31 2000 - Fresenius Medical Care's report on Form 6-K dated May 21, 2001 - FMCH's Annual Report on Form 10-K for the fiscal year ended December 31, 2000 - FMCH's Quarterly Report on Form 10-Q for the three months ended March 31, 2001 filed May 15, 2001 193 201 - FMCH's definitive Information Statement for its 2001 Annual Meeting of Shareholders filed April 30, 2001. All annual reports we file with the Commission pursuant to the Securities Exchange Act of 1934, as amended, on Form 20-F and all annual and other reports that FMCH files with the Commission pursuant to Sections 13(a), 13(c), 14 or 15(d) of that Act, in each case after the date of this prospectus and prior to the termination of this offering shall be deemed to be incorporated by reference into this prospectus and to be part of this prospectus from the date of filing of the report. We may incorporate by reference any Form 6-K that we subsequently submit to the Commission by identifying in that Form that we are incorporating it by reference into this prospectus. Any statement in this prospectus or in a document incorporated by reference or deemed to be incorporated by reference into this prospectus shall be deemed to be modified or superseded for purposes of this prospectus to the extent that any statement contained in this prospectus, or in any other document we subsequently file that also is or is deemed to be incorporated by reference into this prospectus, modifies or replaces the original statement. Any statement that we modify or supersede in this manner shall not be deemed, except as so modified or replaced, to constitute a part of this prospectus. We shall undertake to provide without charge to each person who receives a copy of this prospectus, upon written or oral request to us, a copy of any or all of the documents referred to above that have been or may be incorporated into this prospectus by reference, including exhibits to such documents, unless the exhibits are specifically incorporated by reference to the documents You should direct your requests for copies of the documents to Fresenius Medical Care AG, Else-Kroner Str. 1, 61346 Bad Homburg, Germany, Attention: Controlling Department, telephone 011-49-6172-609-0. GENERAL INFORMATION We intend to list the trust preferred securities on the Luxembourg Stock Exchange. We have appointed Banque Generale Du Luxembourg as the initial Listing Agent for the Luxembourg Stock Exchange. Prior to the listing of the trust preferred securities, the constitutional documents of Fresenius Medical Care and the trusts, and the legal notices relating to the trust preferred securities will be registered with the Registrar of the District Court in Luxembourg (Greffier en Chef du Tribunal d'Arrondissement de et a Luxembourg), where copies of these documents may be obtained upon request. The Listing Agent will act as intermediary between Fresenius Medical Care and the trusts, as issuers, and the holders of the trust preferred securities. Copies of this prospectus, our constitutional documents, our latest annual report, our quarterly interim unaudited financial information, the annual profit and loss accounts and balance sheet of the note issuer, the other note guarantors' constitutional documents, the note issuer's constitutional documents, the indentures, the trust guarantees and the declarations of trust, will be obtainable during usual business hours at the principal offices of Fresenius Medical Care, State Street Bank and Trust Company and the Listing Agent so long as any of the trust preferred securities remain outstanding. According to Chapter VI, Article 3, point A/11/2 of the Rules and Regulations of the Luxembourg Stock Exchange, the preferred securities shall be freely transferable and therefore no transactions made on the Luxembourg Stock Exchange shall be cancelled. The USD trust preferred securities represented by the global certificate have been accepted for clearing through DTC under CUSIP number 35802Q AB 4 and have been assigned ISIN number US35802QAB41. The Euro trust preferred securities represented by the global certificate have been accepted for clearance through Euroclear and Clearstream, Luxembourg under Common Code numbers -- and have been assigned ISIN numbers --. 194 202 INDEX OF FINANCIAL STATEMENTS
PAGE ---- FRESENIUS MEDICAL CARE AG UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS Condensed Consolidated Statements of Earnings for the three months ended March 31, 2001 and 2000 (unaudited)........................................... F-2 Condensed Consolidated Balance Sheets at March 31, 2001 (unaudited) and December 31, 2000 (audited)........... F-3 Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2001 and 2000 (unaudited)........................................... F-4 Condensed Consolidated Statements of Shareholders' Equity for the three months ended March 31, 2001 (unaudited)........................................... F-5 Notes to Condensed Consolidated Financial Statements... F-6 AUDITED CONSOLIDATED FINANCIAL STATEMENTS Independent Auditors' Report........................... F-24 Consolidated Statements of Operations for the years ended December 31, 2000, 1999 and 1998................ F-25 Consolidated Balance Sheets at December 31, 2000 and 1999.................................................. F-26 Consolidated Statements of Cash Flows for the years ended December 31, 2000, 1999 and 1998................ F-27 Consolidated Statements of Shareholders' Equity for the years ended December 31, 2000, 1999 and 1998.......... F-29 Notes to Consolidated Financial Statements............. F-30 FRESENIUS MEDICAL CARE HOLDINGS, INC. UNAUDITED, CONSOLIDATED FINANCIAL STATEMENTS Unaudited, Consolidated Statements of Earnings for the three months ended March 31, 2001 and 2000............ F-76 Unaudited, Consolidated Statements of Comprehensive Income for the three months ended March 31, 2001...... F-77 Consolidated Balance Sheets at March 31, 2001 (unaudited) and December 31, 2000 (audited)........... F-78 Unaudited, Consolidated Statements of Cash Flows for the three months ended March 31, 2001 and 2000........ F-79 Notes to Unaudited, Consolidated Financial Statements............................................ F-81 CONSOLIDATED FINANCIAL STATEMENTS Report of Independent Auditors......................... F-90 Consolidated Statements of Operations for the Years Ended December 31, 2000, 1999 and 1998................ F-91 Consolidated Statements of Comprehensive Income for the Years Ended December 31, 2000, 1999 and 1998.......... F-92 Consolidated Balance Sheets as of December 31, 2000 and 1999.................................................. F-93 Consolidated Statements of Cash Flow for the Years Ended December 31, 2000, 1999 and 1998................ F-94 Consolidated Statements of Changes in Equity for the Years Ended December 31, 2000, 1999 and 1998.......... F-96 Notes to Consolidated Financial Statements............. F-97
F-1 203 FRESENIUS MEDICAL CARE AG PART I FINANCIAL INFORMATION CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS FOR THE THREE MONTHS ENDED MARCH 31, 2001 AND 2000 (UNAUDITED) (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
2001 2000 ---------- ---------- Net revenue: Dialysis Care............................................. $ 849,984 $ 694,566 Dialysis Products......................................... 309,506 306,369 ---------- ---------- 1,159,490 1,000,935 Cost of revenue: Dialysis Care............................................. 599,250 476,186 Dialysis Products......................................... 170,460 171,986 ---------- ---------- 769,710 648,172 Gross profit................................................ 389,780 352,763 Operating expenses: Selling, general and administrative....................... 224,499 198,735 Research and development.................................. 7,966 8,554 ---------- ---------- Operating income............................................ 157,315 145,474 Other (income) expense: Interest income........................................... (2,829) (2,950) Interest expense.......................................... 55,618 58,429 ---------- ---------- Income before income taxes and minority interest............ 104,526 89,995 Income tax expense.......................................... 49,692 43,897 ---------- ---------- Income before minority interest............................. 54,834 46,098 Minority interest........................................... 327 753 ---------- ---------- Net income.................................................. $ 54,507 $ 45,345 ========== ========== Basic income per Ordinary share............................. $ 0.56 $ 0.55 ========== ========== Fully diluted income per Ordinary share..................... $ 0.56 $ 0.55 ========== ========== Basic income per Preference share........................... $ 0.58 $ 0.56 ========== ========== Fully diluted income per Preference share................... $ 0.58 $ 0.56 ========== ==========
See accompanying notes to unaudited condensed consolidated financial statements F-2 204 FRESENIUS MEDICAL CARE AG CONDENSED CONSOLIDATED BALANCE SHEETS AT MARCH 31, 2001 AND DECEMBER 31, 2000 (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
MARCH 31, DECEMBER 31, 2001 2000 ----------- ------------ (UNAUDITED) ASSETS Current assets: Cash and cash equivalents................................. $ 72,695 $ 64,577 Trade accounts receivable, less allowance for doubtful accounts of $121,437 in 2001 and $111,185 in 2000....... 850,418 753,674 Accounts receivable from related parties.................. 39,932 46,117 Inventories............................................... 332,644 320,234 Prepaid expenses and other current assets................. 239,541 214,526 IDPN accounts receivable.................................. -- 5,189 Deferred taxes............................................ 170,340 177,094 ---------- ---------- Total current assets...................................... 1,705,570 1,581,411 Property, plant and equipment, net.......................... 786,997 738,993 Intangible assets, including goodwill, net.................. 3,721,742 3,475,056 Deferred taxes.............................................. 40,272 27,205 Other assets................................................ 136,525 156,288 ---------- ---------- Total assets....................................... $6,391,106 $5,978,953 ========== ========== LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable.......................................... $ 222,575 $ 203,374 Accounts payable to related parties....................... 80,168 77,823 Accrued expenses and other current liabilities............ 391,589 391,640 Note payable related to Settlement........................ 51,186 85,920 Short-term borrowings..................................... 106,235 106,592 Short-term borrowings from related parties................ 236,157 218,333 Current portion of long-term debt and capital lease obligations............................................. 168,518 168,231 Income tax payable........................................ 149,827 117,572 Deferred taxes............................................ 20,845 20,967 ---------- ---------- Total current liabilities................................. 1,427,100 1,390,452 Long-term debt and capital lease obligations, less current portion................................................... 908,471 657,832 Other liabilities........................................... 89,619 31,464 Pension liabilities......................................... 71,572 69,970 Deferred taxes.............................................. 156,045 176,487 Company-obligated mandatorily redeemable preferred securities of subsidiary Fresenius Medical Care Capital Trusts holding solely Company-guaranteed debentures of subsidiary................................................ 945,471 952,727 Minority interest........................................... 21,139 21,271 ---------- ---------- Total liabilities.................................. 3,619,417 3,300,203 Shareholders' equity: Preference shares, no par, E2.56 nominal value, 45,497,700 shares authorized, 26,029,024 issued and outstanding at March 31, 2001; 23,765,093 issued and outstanding at December 31, 2000......................................... 69,175 63,644 Ordinary shares, no par, E2.56 nominal value, 70,000,000 shares authorized, issued and outstanding at March 31, 2001 and December 31, 2000................................ 229,494 229,494 Additional paid-in capital.................................. 2,729,759 2,634,606 Retained deficit............................................ (1,517) (56,024) Accumulated other comprehensive loss........................ (255,222) (192,970) ---------- ---------- Total shareholders' equity.................................. 2,771,689 2,678,750 ---------- ---------- Total liabilities and shareholders' equity.................. $6,391,106 $5,978,953 ========== ==========
See accompanying notes to unaudited condensed consolidated financial statements F-3 205 FRESENIUS MEDICAL CARE AG CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE THREE MONTHS MARCH 31, 2001 AND 2000 (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA) (UNAUDITED)
2001 2000 --------- --------- Operating Activities: Net income................................................ $ 54,507 $ 45,345 Adjustments to reconcile net income to cash and cash equivalents provided by (used in) operating activities: Depreciation and amortization.......................... 79,365 70,581 Change in deferred taxes, net.......................... (8,552) 11,076 Gain on sale of fixed assets........................... (648) (271) Compensation expense related to stock options.......... 661 -- Changes in assets and liabilities, net of amounts from businesses acquired or disposed of: Trade accounts receivable, net......................... (47,315) (43,762) Inventories............................................ (14,513) (875) Prepaid expenses, other current and non-current assets................................................ (6,594) 26,013 Accounts receivable from/payable to related parties.... 3,802 242 Accounts payable, accrued expenses and other current and non-current liabilities........................... (21,215) (31,474) Income taxes payable................................... 37,616 23,672 --------- --------- Net cash provided by operating activities............ 77,114 100,547 --------- --------- Investing Activities: Purchases of property, plant and equipment................ (64,128) (47,349) Proceeds from sale of property, plant and equipment....... 2,533 3,464 Acquisitions, net of cash acquired........................ (117,348) (47,509) --------- --------- Net cash used in investing activities................ (178,943) (91,394) --------- --------- Financing Activities: Proceeds from short-term borrowings....................... 15,481 27,175 Repayments of short-term borrowings....................... (13,106) (24,564) Proceeds of short-term borrowings from related parties.... 20,588 -- Repayments of short-term borrowings from related parties................................................ (1,459) (59,300) Payments on obligation related to Settlement.............. (34,734) (286,402) Proceeds from long-term debt.............................. 304,545 14,241 Principal payments of long-term debt and capital lease obligations............................................ (175,260) (23,161) Proceeds from issuance of preference shares............... -- 344,215 (Decrease) increase of accounts receivable securitization program................................................ (5,340) 7,148 Proceeds from exercise of options......................... 544 39 Change in minority interest............................... 197 623 --------- --------- Net cash provided by financing activities............ 111,456 14 --------- --------- Effect of exchange rate changes on cash and cash equivalents............................................... (1,509) 1,806 --------- --------- Cash and Cash Equivalents: Net increase in cash and cash equivalents................. 8,118 10,973 Cash and cash equivalents at beginning of period.......... 64,577 34,760 --------- --------- Cash and cash equivalents at end of period................ $ 72,695 $ 45,733 ========= =========
See accompanying notes to unaudited condensed consolidated financial statements F-4 206 FRESENIUS MEDICAL CARE AG CONDENSED CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY FOR THE THREE MONTHS ENDED MARCH 31, 2001 (UNAUDITED) (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
PREFERENCE SHARES ORDINARY SHARES ACCUMULATED -------------------- --------------------- ADDITIONAL OTHER NUMBER OF NO PAR NUMBER OF NO PAR PAID IN RETAINED COMPREHENSIVE SHARES VALUE SHARES VALUE CAPITAL DEFICIT LOSS TOTAL ---------- ------- ---------- -------- ---------- -------- ------------- ---------- Balance at December 31, 2000 (audited)................... 23,765,093 $63,644 70,000,000 $229,494 $2,634,606 $(56,024) $(192,970) $2,678,750 Issuance of preference shares...................... 2,250,000 5,498 -- -- 93,981 -- -- 99,479 Proceeds from exercise of options..................... 13,931 33 -- -- 511 -- -- 544 Compensation expense related to stock options............ -- -- -- -- 661 -- -- 661 Comprehensive income (loss): Net income.................. -- -- -- -- -- 54,507 -- 54,507 Other comprehensive income (loss) related to cash flow hedges............... -- -- -- -- -- -- (27,427) (27,427) Foreign currency translation adjustment................ -- -- -- -- -- -- (34,825) (34,825) ---------- Comprehensive income (loss)... -- -- -- -- -- -- -- (7,745) ---------- ------- ---------- -------- ---------- -------- --------- ---------- Balance at March 31, 2001..... 26,029,024 $69,175 70,000,000 $229,494 $2,729,759 $ (1,517) $(255,222) $2,771,689 ========== ======= ========== ======== ========== ======== ========= ==========
The changes in the other comprehensive income (loss) related to SFAS 133 are as follows:
MARCH 31, 2001 ---------------------------------- PRETAX TAX EFFECT NET -------- ---------- -------- Net gains (losses) on derivatives hedging variability of cash flows: Unrealized derivative gains (losses)..................... $(45,518) $18,344 $(27,174) Reclassification adjustments for gains (losses) included in net income.......................................... (341) 88 (253) -------- ------- -------- Net derivative gains (losses)............................ $(45,859) $18,432 $(27,427) ======== ======= ========
See accompanying notes to unaudited condensed consolidated financial statements F-5 207 FRESENIUS MEDICAL CARE AG NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA) 1. THE COMPANY AND BASIS OF PRESENTATION THE COMPANY Fresenius Medical Care AG ("FMC" or the "Company") is a German stock corporation (Aktiengesellschaft). The Company is primarily engaged in (i) providing kidney dialysis services, clinical laboratory testing and renal diagnostic services and (ii) manufacturing and distributing products and equipment for dialysis treatment. BASIS OF PRESENTATION A) BASIS OF CONSOLIDATION The condensed consolidated financial statements at March 31, 2001 and for the three month periods ended March 31, 2001 and 2000 in this report are unaudited and should be read in conjunction with the consolidated financial statements in the Company's 2000 Annual Report on Form 20-F. Such financial statements reflect all adjustments that, in the opinion of management, are necessary for a fair presentation of the results of the periods presented. All such adjustments are of a normal recurring nature. The results of operations for the three month period ended March 31, 2001 are not necessarily indicative of the results of operations for the fiscal year ending December 31, 2001. B) CLASSIFICATIONS Certain items in prior years' unaudited condensed consolidated financial statements have been reclassified to conform with the current year's presentation. 2. SETTLEMENT OF INVESTIGATIONS AND RELATED COSTS On January 18, 2000, Fresenius Medical Care Holdings, Inc. ("FMCH"), National Medical Care, Inc. ("NMC") and certain other affiliated companies executed definitive agreements with the United States Government to settle (i) matters concerning violations of federal laws then under investigation and (ii) National Medical Care, Inc.'s claims with respect to outstanding Medicare receivables for intradialytic parenteral nutrition therapy (collectively, the "Settlement"). Under the Settlement, FMCH made initial cash payments of approximately $286 million and entered into a note payable for the remainder of the payment obligations. Interest on installment payments to the U.S. government accrue at 6.3% on approximately $51 million of the obligation and at 7.5% annually on the balance, until paid in full. The note payable to the U.S. government and the amounts due to the Company for the outstanding Medicare receivables have been classified in the balance sheet based on their expected settlement dates. Under the terms of the note payable, the remaining obligation is being paid in six quarterly installments that began in April 2000 and end in July 2001. The first four quarterly installments were paid in the amount of approximately $35 million each, including interest at 7.5%. Of the final two installments of approximately $28 million each, including interest at 6.3%, the first was paid in April 2001, and the second will be paid in July 2001. At March 31, 2001, the remaining note payable was approximately $51 million. In March 2000, the Company received an initial payment of approximately $38 million on its outstanding Medicare receivables. The U.S. government remitted the remaining balance in four quarterly payments of approximately $5 million each, plus interest at 7.5%. The final payment was received in February 2001. F-6 208 FRESENIUS MEDICAL CARE AG NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) (UNAUDITED) (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA) The Company amended the letter of credit that was given to the U.S. government in 1996 from $150 million to $190 million and, under the Settlement, the letter of credit will be reduced as installment payments are made to the Government. At March 31, 2001, the face amount of the letter of credit was $54 million. 3. ACQUISITIONS In January 2001, the Company acquired Everest Healthcare Services Corporation ("Everest") for $341 million including debt assumed amounting to $135 million. Approximately one third of the purchase price ($99 million) was funded by the issuance of 2.25 million Fresenius Medical Care AG Preference shares to the Everest shareholders. The remaining purchase price was paid with $107 million cash. Through March 31, 2001, the Company had paid approximately $117 million cash, including the cash portion of the Everest acquisition, for acquisitions consisting primarily of dialysis clinics. 4. INVENTORIES As of March 31, 2001 and December 31, 2000, inventories consisted of the following:
MARCH 31, DECEMBER 31, 2001 2000 --------- ------------ Raw materials and purchased components............... $ 69,685 $ 73,244 Work in process...................................... 20,398 22,231 Finished goods....................................... 174,278 160,358 Health care supplies................................. 68,283 64,401 -------- -------- Inventories........................................ $332,644 $320,234 ======== ========
5. SHAREHOLDERS' EQUITY On January 8, 2001, the Company issued 2,250,000 Preference shares as a portion of the purchase price for the Everest acquisition. (see Note 3). During the three months ended March 31, 2001, 7,224 FMC Rollover Plan options were exercised by employees. In connection therewith, Fresenius AG transferred 2,408 Ordinary shares to employees and remitted approximately $91 to the Company. During the same period, no Rollover Plan options were canceled. These funds have been accounted for as a capital contribution within additional paid-in capital. During the three months ended March 31, 2001, 13,931 Preference shares were issued upon exercise of stock options under FMC 98 Plan 1. The $453 proceeds were accounted for as an increase in capital. No stock options were exercised under FMC 98 Plan 2. During the same period, 13,922 and 3,107 stock options were cancelled under FMC 98 Plan 1 and FMC 98 Plan 2, respectively. F-7 209 FRESENIUS MEDICAL CARE AG NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) (UNAUDITED) (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA) The following table is a reconciliation of the numerators and denominators of the basic and diluted earnings per share computations for each of the three month periods ending March 31, 2001 and 2000, respectively.
FOR THE THREE MONTHS ENDED MARCH 31, -------------------------------- 2001 2000 -------------- -------------- (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA) Numerators: Income............................................ $ 54,507 $ 45,345 less: Preference on Preference shares................... 354 177 ----------- ----------- Income available to Preference shares only........ 354 177 Income available to all classes of shares......... $ 54,153 $ 45,168 =========== =========== Denominators: Weighted average number of: Ordinary shares outstanding....................... 70,000,000 70,000,000 Preference shares outstanding..................... 25,894,569 11,981,976 ----------- ----------- Total weighted average shares outstanding......... 95,894,569 81,981,976 Potentially dilutive Preference shares............ 335,643 8,291 ----------- ----------- Total weighted average shares outstanding assuming dilution........................................ 96,230,212 81,990,267 Total weighted average Preference shares outstanding assuming dilution................... 26,230,212 11,990,267 Basic income per Ordinary share................... $ 0.56 $ 0.55 Plus preference per Preference shares............. 0.02 0.01 ----------- ----------- Basic income per Preference share................. $ 0.58 $ 0.56 =========== =========== Basic income per Ordinary share................... $ 0.56 $ 0.55 Plus preference per Preference share assuming dilution........................................ 0.02 0.01 ----------- ----------- Fully diluted income per Preference share......... $ 0.58 $ 0.56 =========== ===========
6. COMMITMENTS AND CONTINGENCIES LEGAL PROCEEDINGS COMMERCIAL LITIGATION In 1997, FMCH, NMC, and certain named NMC subsidiaries, were served with a civil complaint filed by Aetna Life Insurance Company in the U.S. District Court for the Southern District of New York. The lawsuit alleges inappropriate billing practices for nutritional therapy, diagnostic and clinical laboratory tests and misrepresentations. In April 1999, Aetna amended its complaint to include its affiliate, Aetna U.S. Healthcare, Inc., as an additional plaintiff, and to make certain other limited changes in its pleading. The amended complaint seeks unspecified damages and costs. Other insurance companies have filed similar claims seeking unspecified damages and costs. The Company, FMCH, NMC and its subsidiaries believe that there are substantial defenses to the claims asserted, and intend to vigorously defend all lawsuits. Other private payors have contacted the Company and may assert that NMC received excess F-8 210 FRESENIUS MEDICAL CARE AG NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) (UNAUDITED) (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA) payment and, similarly, may join the lawsuits or file their own lawsuit seeking reimbursement and other damages. Although the ultimate outcome on the Company of these proceedings cannot be predicted at this time, an adverse result could have a material adverse effect on the Company's business, financial condition and result of operations. FMCH has filed counterclaims against the plaintiffs in these matters based on inappropriate claim denials and delays in claim payments. On September 28, 2000, Mesquita, et al. v. W.R. Grace & Company, et al. (Sup. Court of Calif., S.F. County, #315465) was filed as a class action by plaintiffs claiming to be creditors of W.R. Grace & Co.-Conn ("Grace Chemicals") against Grace Chemicals, FMCH and other defendants, principally alleging that the Merger which resulted in the original formation of the Company (described in greater detail in "Indemnification by W.R. Grace & Co." below) was a fraudulent transfer, violated the uniform fraudulent transfer act, and constituted a conspiracy. An amended complaint (Abner et al. v. W.R. Grace & Company, et al.) and an additional class action were filed subsequently with substantially similar allegations. These cases have been stayed in connection with Grace's Chapter 11 bankruptcy proceedings. The Company has requested indemnification from Grace Chemicals pursuant to the Merger agreements. If the Merger is determined to have been a fraudulent transfer, if material damages are proved by the plaintiffs, and if the Company is not able to collect, in whole or in part on the indemnity, from W.R. Grace & Co. or its affiliates or former affiliates or their insurers, and if the Company is not able to collect against any party that may have received proceeds from W.R. Grace & Co., a judgment could have a material adverse effect on the Company's business, financial condition and results of operations. The Company is confident that no fraudulent transfer or conspiracy occurred and intends to defend the cases vigorously. OBRA 93 The Omnibus Budget Reconciliation Act of 1993 affected the payment of benefits under Medicare and employer health plans for dual-eligible ESRD patients. In July 1994, the Health Care Financing Administration issued an instruction to Medicare claims processors to the effect that Medicare benefits for the patients affected by that act would be subject to a new 18-month "coordination of benefits" period. This instruction had a positive impact on NMC's dialysis revenues because, during the 18-month coordination of benefits period, patients' employer health plans were responsible for payment, which was generally at rates higher than those provided under Medicare. In April 1995, the Health Care Financing Administration issued a new instruction, reversing its original instruction in a manner that would substantially diminish the positive effect of the original instruction on NMC's dialysis business. The Health Care Financing Administration further proposed that its new instruction be effective retroactive to August 1993, the effective date of the Omnibus Budget Reconciliation Act of 1993. NMC ceased to recognize the incremental revenue realized under the original instruction as of July 1, 1995, but it continued to bill employer health plans as primary payors for patients affected by the Omnibus Budget Reconciliation Act of 1993 through December 31, 1995. As of January 1, 1996, NMC commenced billing Medicare as primary payor for dual eligible ESRD patients affected by the act, and then began to re-bill in compliance with the revised policy for services rendered between April 24 and December 31, 1995. On May 5, 1995, NMC filed a complaint in the U.S. District Court for the District of Columbia (National Medical Care, Inc. and Bio-Medical Applications of Colorado, Inc. d/b/a Northern Colorado F-9 211 FRESENIUS MEDICAL CARE AG NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) (UNAUDITED) (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA) Kidney Center v. Shalala, C.A. No.95-0860 (WBB)) seeking to preclude the Health Care Financing Administration from retroactively enforcing its April 24, 1995 implementation of the Omnibus Budget Reconciliation Act of 1993 provision relating to the coordination of benefits for dual eligible ESRD patients. On May 9, 1995, NMC moved for a preliminary injunction to preclude the Health Care Financing Administration from enforcing its new policy retroactively, that is, to billing for services provided between August 10, 1993 and April 23, 1995. On June 6, 1995, the court granted NMC's request for a preliminary injunction and in December of 1996, NMC moved for partial summary judgment seeking a declaration from the Court that the Health Care Financing Administration's retroactive application of the April 1995 rule was legally invalid. The Health Care Financing Administration cross-moved for summary judgment on the grounds that the April 1995 rule was validly applied prospectively. In January 1998, the court granted NMC's motion for partial summary judgment and entered a declaratory judgment in favor of NMC, holding the Health Care Financing Administration's retroactive application of the April 1995 rule legally invalid. Based on its finding, the Court also permanently enjoined the Health Care Financing Administration from enforcing and applying the April 1995 rule retroactively against NMC. The Court took no action on the Health Care Financing Administration's motion for summary judgment pending completion of the outstanding discovery. On October 5, 1998, NMC filed its own motion for summary judgment requesting that the Court declare the Health Care Financing Administration's prospective application of the April 1995 rule invalid and permanently enjoin Health Care Financing Administration from prospectively enforcing and applying the April 1995 rule. The Court has not yet ruled on the parties' motions. The Health Care Financing Administration elected not to appeal the Court's June 1995 and January 1998 orders. The Health Care Financing Administration may, however, appeal all rulings at the conclusion of the litigation. If the Health Care Financing Administration should successfully appeal so that the revised interpretation would be applied retroactively, NMC may be required to refund the payment received from employer health plans for services provided after August 10, 1993 under the Health Care Financing Administration's original implementation, and to re-bill Medicare for the same services, which would result in a loss to NMC of approximately $120 million attributable to all periods prior to December 31, 1995. Also, in this event, the Company's business, financial condition and results of operations would be materially adversely affected. In July, 2000, NMC filed a complaint in the U.S. District Court for the Eastern District of Virginia (National Medical Care, Inc. and Bio-Medical Applications of Virginia, Inc. v. Aetna Life Insurance, Co., Inc. Aetna U.S. Healthcare, Inc. and John Does 1-10) seeking recovery against Aetna U.S. Healthcare and health plans administered by Aetna U.S. Healthcare for claims related to primary payor liability for dual eligible ESRD patients under the Omnibus Budget Reconciliation Act of 1993. On January 16, 2001, the Court stayed the action pending resolution of the District of Columbia Court action. OTHER LITIGATION AND POTENTIAL EXPOSURES From time to time, the Company is a party to or may be threatened with other litigation arising in the ordinary course of its business. Management regularly analyzes current information including, as applicable, the Company's defenses and insurance coverage and, as necessary, provides accruals for probable liabilities for the eventual disposition of these matters. The ultimate outcome of these matters is not expected to materially affect the Company's financial position, results of operations or cash flows. The Company, like other health care providers, conducts its operations under intense government regulation and scrutiny. The Company must comply with regulations which relate to or govern the safety and efficacy of medical products and supplies, the operation of manufacturing facilities, laboratories and dialysis clinics, and environmental and occupational health and safety. The Company must also comply with the U.S. anti-kickback statute, the False Claims Act, the Stark Law, and other federal and state F-10 212 FRESENIUS MEDICAL CARE AG NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) (UNAUDITED) (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA) fraud and abuse laws. Applicable laws or regulations may be amended, or enforcement agencies or courts may make interpretations that differ from the Company's or the manner in which the Company conduct its business. In the U.S., enforcement has become a high priority for the federal government and some states. In addition, the provisions of the False Claims Act authorizing payment of a portion of any recovery to the party bringing the suit encourage private plaintiffs to commence "whistle blower" actions. By virtue of this regulatory environment, as well as our corporate integrity agreement with the government, the Company expects that its business activities and practices will continue to be subject to extensive review by regulatory authorities and private parties, and continuing inquiries, claims and litigation relating to its compliance with applicable laws and regulations. The Company may not always be aware that an inquiry or action has begun, particularly in the case of "whistle blower" actions, which are initially filed under court seal. The Company operates a large number facilities throughout the U.S. In such a decentralized system, it is often difficult to maintain the desired level of oversight and control over the thousands of individuals employed by many affiliate companies. The Company relies upon its management structure, regulatory and legal resources, and the effective operation of its compliance program to direct, manage and monitor the activities of these employees. On occasion, the Company may identify instances where employees, deliberately or inadvertently, have submitted inadequate or false billings. The actions of such persons may subject the Company and its subsidiaries to liability under the False Claims Act, among other laws, and the Company cannot predict whether law enforcement authorities may use such information to initiate further investigations of the business practices disclosed or any of its other business activities. Physicians, hospitals and other participants in the health care industry are also subject to a large number of lawsuits alleging professional negligence, malpractice, product liability, worker's compensation or related claims, many of which involve large claims and significant defense costs. The Company has been subject to these suits due to the nature of its business and the Company expects that those types of lawsuits may continue. Although the Company maintains insurance at a level which it believes to be prudent, the Company cannot assure that the coverage limits will be adequate or that insurance will cover all asserted claims. A successful claim against the Company or any of its subsidiaries in excess of insurance coverage could have a material adverse effect upon the Company and the results of its operations. Any claims, regardless of their merit or eventual outcome, also may have a material adverse effect on the Company's reputation and business. The Company has also had claims asserted against it and has had lawsuits filed against it relating to businesses that it has acquired or divested. These claims and suits relate both to operation of the businesses and to the acquisition and divestiture transactions. The Company has asserted its own claims, and claims for indemnification. Although the ultimate outcome on the Company cannot be predicted at this time, an adverse result could have a material adverse effect upon the Company's business, financial condition, and results of operations. INDEMNIFICATION BY W. R. GRACE & CO. The Company was formed as a result of a series of transactions pursuant to the Agreement and Plan of Reorganization (the "Merger") dated as of February 4, 1996 by and between W.R. Grace & Co. and Fresenius AG. At the time of the Merger, a W.R. Grace & Co. subsidiary known as W.R. Grace & Co.-Conn. had, and continues to have, significant liabilities arising out of product-liability related litigation, pre-Merger tax claims and other claims unrelated to NMC, which was Grace's dialysis business prior to the Merger. In connection with the Merger, W.R. Grace & Co.-Conn. agreed to indemnify the Company and NMC against all liabilities of W.R. Grace & Co., whether relating to events occurring before or after F-11 213 FRESENIUS MEDICAL CARE AG NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) (UNAUDITED) (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA) the Merger, other than liabilities arising from or relating to NMC's operations. Proceedings have been brought against W.R. Grace & Co. and the FMCH by plaintiffs claiming to be creditors of W.R. Grace & Co.-Conn., principally alleging that the Merger was a fraudulent conveyance, violated the uniform fraudulent transfer act, and constituted a conspiracy. See "Commercial Litigation" above. In addition, the Merger was consummated as a tax free reorganization. Pre-merger tax claims or tax claims that would arise if events were to violate the tax-free nature of the Merger could be the obligation of FMCH. Subject to certain representations made by W.R. Grace & Co.-Conn., FMCH and Fresenius AG, W.R. Grace & Co.-Conn. also agreed to indemnify the Company against any such tax liability. W.R. Grace & Co.-Conn. and certain of its subsidiaries have filed for reorganization under Chapter 11 of the U.S. Bankruptcy Code. If the Merger is determined to be a fraudulent transfer and if material damages are proved by the plaintiffs, or if W.R. Grace & Co. is unable to satisfy its Merger related or pre-Merger tax obligations, and if the Company is not able to collect on the indemnities from W.R. Grace & Co. as a result of the bankruptcy proceedings or otherwise, and if the Company is not able to collect on the indemnities from any affiliates or former affiliates of W.R. Grace & Co. or their insurers, and if the Company is not able to collect against any party that may have received proceeds from W.R. Grace & Co., a judgment could have a material adverse effect on the Company's business, financial condition and results of operations. 7. FINANCIAL INSTRUMENTS ADOPTION OF SFAS 133 -- TRANSITION The Company adopted SFAS 133 Accounting for Derivative Instruments and Hedging Activities and the related amendments of SFAS 138, on January 1, 2001. Upon adoption of this Statement, the Company recorded a net transition adjustment loss of $14,085 (net of income tax benefit of $9,596) in accumulated other comprehensive income. In addition the company recorded a net transition adjustment gain of $6,964 (net of income tax expense of $4,643) in net income. Because of corresponding entries concerning the hedged items, the net effect on earnings was immaterial. During the three-month period ended March 31, 2001, the Company reclassified $341 of net losses (net of income tax $253) from accumulated other comprehensive income into net income relating to the transition adjustment included in accumulated other comprehensive income on January 1, 2001. MARKET RISK The Company is exposed to market risk from changes in interest rates and foreign exchange rates. In order to manage the risk of interest rate and currency exchange rate fluctuations, the Company enters into various hedging transactions with investment grade financial institutions as authorized by the Company's Management Board. The Company does not use financial instruments for trading purposes. The company conducts its financial instrument activity under the control of a single centralized department. The company established guidelines for risk assessment procedures and controls for the use of financial instruments. They include a clear segregation of duties with regard to execution on one side and administration, accounting and controlling on the other. In January 2000, dollar interest rate swap agreements with a notional amount of $850 million expired as scheduled. In November 2000, the Company entered into additional dollar interest rate swap agreements with a notional amount of $450 million. At the same time, a dollar interest rate collar agreement with a notional amount of $150 million was closed. As of March 31, 2001, the notional volume of dollar interest rate hedging contracts totalled $1,050 million. Those swap agreements, which expire at various dates between 2003 and 2007, effectively fix the Company's variable interest rate exposure on the F-12 214 FRESENIUS MEDICAL CARE AG NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) (UNAUDITED) (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA) majority of the dollar-denominated revolving loans and outstanding obligations under the accounts receivable securitization program at an interest rate of 6.52%. Under the senior credit agreement, the Company has agreed to maintain at least $500 million of interest rate protection. In March 2000, the Company entered into a yen-denominated interest rate swap agreement with a notional amount of Japanese Yen 400 million, in line with a yen-denominated floating-rate borrowing of a Japanese subsidiary. In September 2000, both the bank borrowing and the notional amount of the interest rate swap agreement were increased as scheduled to Yen 1,000 million. The bank borrowing and the notional amount of the swap agreement will always coincide until March 2009 when the bank debt is completely repaid and the swap expires. FOREIGN CURRENCY RISK MANAGEMENT The Company conducts its business on a global basis in several major international currencies, although its operations are located principally in Germany and the United States. For financial reporting purposes, the Company has chosen the U.S. dollar as its reporting currency. Therefore, changes in the rate of exchange between the U.S. dollar, the euro and the local currencies in which the financial statements of the Company's international operations are maintained, affect its results of operations and financial position as reported in its consolidated financial statements. The Company has consolidated the balance sheets of its non-U.S. dollar denominated operations into U.S. dollars at the exchange rates prevailing at the balance sheet date. Revenues and expenses are translated at the average exchange rates for the period. The Company's exposure to market risk for changes in foreign exchange rates relates to transactions such as sales and purchases, lendings and borrowings, including intercompany borrowings. The Company sells significant amounts of products from its manufacturing facilities in Germany to its other international operations. In general, the German sales are denominated in euro. This exposes the subsidiaries to fluctuations in the rate of exchange between the euro and the currency in which their local operations are conducted. The Company employs, to a limited extent, forward contracts and options to hedge its currency exposure. The Company's policy, which has been consistently followed, is that forward currency contracts and options be used only for purposes of hedging foreign currency exposures. The Company has not used such instruments for purposes other than hedging. INTEREST RATE MANAGEMENT The Company enters into derivatives, particularly interest rate swaps, to protect interest rate exposures arising from long-term and short-term borrowings and accounts receivable securization programs at floating rates by effectively swapping them into fixed rates. Under interest rate swaps, the Company agrees with other parties to exchange, at specified intervals, the difference between fixed-rate and floating-rate interest amounts calculated by reference to an agreed notional amount. FAIR VALUE HEDGES Gains and losses in fair value of recognized assets and liabilities and firm commitments of operating transactions as well as gains and losses on derivative financial instruments designated as fair value hedges of these recognized assets and liabilities and firm commitments are recognized currently in earnings. CASH FLOW HEDGES Changes in the value of foreign currency forward contracts designated and qualifying as cash flow hedges of forecasted transactions will be reported in accumulated other comprehensive income. These F-13 215 FRESENIUS MEDICAL CARE AG NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) (UNAUDITED) (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA) amounts will subsequently be reclassified into earnings, as a component of the forecasted transaction, in the same period as the forecasted transaction affects earnings. The Company reclassified $341 of net losses (net of income tax $253) from Accumulated other comprehensive income into the statement of income relating to the transition adjustment included in Accumulated other comprehensive income on Jan. 1, 2001 because the underlying transactions to which the reclassified amounts relate were recognized. It is anticipated that $1,792 of net gains (net of income taxes $1,158) included in accumulated other comprehensive income at March 31, 2001 of which $1,125 of net gains (net of income taxes $745) were also included in accumulated other comprehensive income at January 1, 2001, will be reclassified into income during the next year. As of March 31, 2001, we had purchased derivative financial instruments with a maximum maturity of 15 months to hedge its exposure to the variability in future cash flows associated with foreign currency forecasted transactions. 8. BUSINESS SEGMENT INFORMATION Effective January 1, 1998, Fresenius Medical Care AG (1) reorganized its reporting structure to conform to the manner in which the Company is managed and (2) adopted SFAS No. 131, Disclosures about Segments of an Enterprise and Related Information. SFAS No. 131 establishes the standards for reporting information about operating segments in annual financial statements and requires selected information about operating segments in interim financial reports issued to stockholders. It also establishes standards for related disclosures about products and services, and geographic areas. Operating segments are defined as components of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision maker, or decision making group, in deciding how to allocate resources and in assessing performance. FMC's chief operating decision maker is the Chief Executive Officer. The accounting policies of the operating segments are the same as those the Company uses in preparing its consolidated financial statements. Commencing with the period ended March 31, 1999, the Company has identified three segments, North America, International, and Asia Pacific, which were determined based upon how the Company manages its businesses. All segments are primarily engaged in providing kidney dialysis and manufacturing and distributing products and equipment for the treatment of end-stage renal disease. Additionally, the North America segment engages in performing clinical laboratory testing and renal diagnostic services. The Company has aggregated the International and Asia Pacific operating segments as "International". The segments are aggregated due to their similar economic characteristics. These characteristics include the same products sold, the same type patient population, similar methods of distribution of products and services and similar economic environments. The United States operations of Fresenius Medical Care Deutschland GmbH, which had previously been included in the International segment, are now included in the North America segment. All reports have been restated to reflect this change. Management evaluates each segment using a measure that reflects all of the segment's controllable revenues and expenses. Management believes that the most appropriate measure in this regard is earnings before interest and taxes (EBIT). In addition to EBIT, management believes that earnings before interest, taxes, depreciation and amortization (EBITDA) is helpful for investors as a measurement of the segment's and the Company's ability to generate cash and to service its financing obligations. EBITDA is also the basis for determining compliance with certain covenants contained in the Company's senior bank credit agreement and indentures relating to the Company's trust preferred securities. F-14 216 FRESENIUS MEDICAL CARE AG NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) (UNAUDITED) (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA) EBITDA should not be construed as an alternative to net earnings determined in accordance with generally accepted accounting principles or to cash flow from operations, investing activities or financing activities or as a measure of cash flows. The Company believes its EBIT calculation is the functional equivalent of operating income. Because EBITDA and EBIT are not calculated consistently by all companies, the presentation herein may not be comparable to other similarly titled measures of other companies. Approximately 40% of the Company's worldwide revenue is derived from sources subject to regulations under U.S. governmental programs. Information pertaining to the Company's business segments for the three-month periods ended March 31, 2001 and 2000 is set forth below:
NORTH AMERICA INTERNATIONAL CORPORATE TOTAL ---------- ------------- --------- ---------- Three months ended March 31, 2001 Net revenue external customers............ $ 866,691 $ 292,799 $ 0 $1,159,490 Inter-segment revenue..................... 458 4,846 (5,304) 0 ---------- ---------- ------- ---------- Total net revenue......................... 867,149 297,645 (5,304) 1,159,490 ---------- ---------- ------- ---------- EBITDA.................................... 170,867 68,816 (3,003) 236,680 Depreciation and amortization............. (61,668) (17,292) (405) (79,365) ---------- ---------- ------- ---------- EBIT...................................... 109,199 51,524 (3,408) 157,315 ---------- ---------- ------- ---------- Segment assets............................ 5,012,976 1,343,163 38,770 6,394,909 Capital expenditures and acquisitions(1)........................ 147,823 33,629 24 181,476 Three months ended March 31, 2000 Net revenue external customers............ $ 742,085 $ 258,850 $ 0 $1,000,935 Inter-segment revenue..................... 1,034 6,925 (7,959) 0 ---------- ---------- ------- ---------- Total net revenue......................... 743,119 265,775 (7,959) 1,000,935 ---------- ---------- ------- ---------- EBITDA.................................... 153,777 64,867 (2,589) 216,055 Depreciation and amortization............. (54,717) (15,430) (434) (70,581) ---------- ---------- ------- ---------- EBIT...................................... 99,060 49,437 (3,023) 145,474 ---------- ---------- ------- ---------- Segment assets(2)......................... 4,578,386 1,368,209 32,358 5,978,953 Capital expenditures and acquisitions(3)........................ 55,705 29,690 9,463 94,858
- --------------- (1) North America acquisitions exclude $233,895 of non-cash acquisitions for 2001 and International acquisitions exclude $3,309 of non-cash acquisitions in 2001 (2) Segment assets are as of December 31, 2000 (3) Corporate acquisitions exclude $96 of non-cash acquisition in 2000 F-15 217 FRESENIUS MEDICAL CARE AG NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) (UNAUDITED) (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
THREE MONTHS ENDED MARCH 31, -------------------- 2001 2000 -------- -------- Reconciliation of measures to consolidated totals. Total EBITDA of reporting segments................... $239,683 $218,644 Total depreciation and amortization.................. (79,365) (70,581) Corporate income (expenses).......................... (3,003) (2,589) Interest expense..................................... (55,618) (58,429) Interest income...................................... 2,829 2,950 -------- -------- Total income before income taxes and minority interest.......................................... $104,526 $ 89,995 ======== ======== Total EBIT of reporting segments..................... 160,723 148,497 Corporate income (expenses).......................... (3,408) (3,023) Interest expense..................................... (55,618) (58,429) Interest income...................................... 2,829 2,950 -------- -------- Total income before income taxes and minority interest.......................................... $104,526 $ 89,995 ======== ======== Depreciation and amortization Total depreciation and amortization of reporting segments.......................................... 78,960 70,147 Corporate depreciation and amortization.............. 405 434 -------- -------- Total depreciation and amortization.................... $ 79,365 $ 70,581 ======== ========
9. SUPPLEMENTARY CASH FLOW INFORMATION The following additional information is provided with respect to the condensed consolidated statements of cash flows:
2001 2000 -------- ------- (IN THOUSANDS) Supplementary cash flow information: Cash paid for interest................................ $ 51,201 $50,935 -------- ------- Cash paid for income taxes, net....................... $ 5,701 $ 9,084 -------- ------- Supplemental disclosures of cash flow information: Details for acquisitions: Assets acquired....................................... $403,165 $47,828 Liabilities assumed................................... 48,613 215 Notes assumed in connection with acquisition.......... 137,725 96 Preference shares issued in connection with acquisition........................................ 99,479 -- -------- ------- Cash paid............................................. 117,348 47,517 Less cash acquired.................................... -- 8 -------- ------- Net cash paid for acquisitions........................ $117,348 $47,509 ======== =======
F-16 218 FRESENIUS MEDICAL CARE AG NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) (UNAUDITED) (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA) 10. SUPPLEMENTAL CONDENSED COMBINING INFORMATION FMC Trust Finance S.a.r.l. Luxembourg, a wholly-owned subsidiary of FMC, is the obligor on senior subordinated debt securities which are fully and unconditionally guaranteed, jointly and severally, on a senior subordinated basis, by FMC and by Fresenius Medical Care Deutschland GmbH ("D-GmbH"), a wholly-owned subsidiary of FMC, and by FMCH, a substantially wholly-owned subsidiary of FMC (D-GmbH and FMCH being "Guarantor Subsidiaries"). The following combining financial information for the Company is as of March 31, 2001 and December 31, 2000 and for the three months ended March 31, 2001 and 2000, segregated between FMC, D-GmbH, FMCH and each of the Company's other businesses (the "Non-Guarantor Subsidiaries"). For purposes of the condensed combining information, FMC and the Guarantor Subsidiaries carry their investments under the equity method. Other (income) expense includes income (loss) related to investments in consolidated subsidiaries recorded under the equity method for purposes of the condensed combining information. In addition, other (income) expense includes income and losses from profit and loss transfer agreements as well as dividends received. Separate financial statements and other disclosures concerning D-GmbH are not presented herein because management believes that they are not material to investors. FMCH is currently subject to the periodic reporting requirements of the United States Securities Exchange Act of 1934, as amended, and in accordance therewith files consolidated financial statements with the United States Securities and Exchange Commission. Additionally dividends from FMCH, a wholly-owned subsidiary, are limited as a result of a restriction on dividends from its subsidiary, National Medical Care, Inc., and its subsidiaries. As a result of this restriction, parent company only financial information is presented under the column FMC. F-17 219 FRESENIUS MEDICAL CARE AG NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) (UNAUDITED) (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
FOR THE THREE MONTH PERIOD ENDED MARCH 31, 2001 ---------------------------------------------------------------------------- GUARANTOR SUBSIDIARIES ----------------------- NON-GUARANTOR COMBINING COMBINED FMC AG D-GMBH FMCH SUBSIDIARIES ADJUSTMENT TOTAL -------- ---------- ---------- ------------- ---------- ---------- Net revenue................................. $ -- $137,389 $ -- $1,164,049 $(141,948) $1,159,490 Cost of revenue............................. -- 83,505 -- 828,420 (142,215) 769,710 -------- -------- -------- ---------- --------- ---------- Gross profit.............................. -- 53,884 -- 335,629 267 389,780 -------- -------- -------- ---------- --------- ---------- Operating expenses: Selling, general and administrative....... 2,819 21,050 -- 201,298 (668) 224,499 Research and development.................. -- 6,455 -- 1,511 -- 7,966 -------- -------- -------- ---------- --------- ---------- Operating (loss) income..................... (2,819) 26,379 -- 132,820 935 157,315 -------- -------- -------- ---------- --------- ---------- Other (income) expense: Interest, net............................. 187 744 14,709 41,964 (4,815) 52,789 Other, net................................ (68,677) 15,333 (31,975) -- 85,319 -- -------- -------- -------- ---------- --------- ---------- Income (loss) before income taxes and minority interest......................... 65,671 10,302 17,266 90,856 (79,569) 104,526 Income tax expense (benefit).............. 11,164 10,051 (5,884) 35,376 (1,015) 49,692 -------- -------- -------- ---------- --------- ---------- Income (loss) before minority interest...... 54,507 251 23,150 55,480 (78,554) 54,834 Minority interest........................... -- -- -- -- 327 327 -------- -------- -------- ---------- --------- ---------- Net income.................................. $ 54,507 $ 251 $ 23,150 $ 55,480 $ (78,881) $ 54,507 ======== ======== ======== ========== ========= ==========
F-18 220 FRESENIUS MEDICAL CARE AG NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) (UNAUDITED) (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
FOR THE THREE MONTH PERIOD ENDED MARCH 31, 2000 ---------------------------------------------------------------------------- GUARANTOR SUBSIDIARIES ----------------------- NON-GUARANTOR COMBINING COMBINED FMC AG D-GMBH FMCH SUBSIDIARIES ADJUSTMENT TOTAL -------- ---------- ---------- ------------- ---------- ---------- Net revenue................................. $ -- $138,124 $ -- $984,540 $(121,729) $1,000,935 Cost of revenue............................. -- 79,974 -- 686,544 (118,346) 648,172 -------- -------- -------- -------- --------- ---------- Gross profit.............................. -- 58,150 -- 297,996 (3,383) 352,763 -------- -------- -------- -------- --------- ---------- Operating expenses: Selling, general and administrative....... 2,661 20,628 -- 176,153 (707) 198,735 Research and development.................. -- 6,665 -- 1,889 -- 8,554 -------- -------- -------- -------- --------- ---------- Operating (loss) income..................... (2,661) 30,857 -- 119,954 (2,676) 145,474 -------- -------- -------- -------- --------- ---------- Other (income) expense: Interest, net............................. (172) 1,755 14,648 39,248 -- 55,479 Other, net................................ (63,279) 16,935 (31,883) -- 78,227 -- -------- -------- -------- -------- --------- ---------- Income (loss) before income taxes and minority interest......................... 60,790 12,167 17,235 80,706 (80,903) 89,995 Income tax expense (benefit).............. 12,361 12,936 (5,859) 37,063 (12,604) 43,897 -------- -------- -------- -------- --------- ---------- Income (loss) before minority interest...... 48,429 (769) 23,094 43,643 (68,299) 46,098 Minority interest........................... -- -- -- -- 753 753 -------- -------- -------- -------- --------- ---------- Net income (loss)........................... $ 48,429 $ (769) $ 23,094 $ 43,643 $ (69,052) $ 45,345 ======== ======== ======== ======== ========= ==========
F-19 221 FRESENIUS MEDICAL CARE AG NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) (UNAUDITED) (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
AT MARCH 31, 2001 ------------------------------------------------------------------------------- GUARANTOR SUBSIDIARIES ----------------------- NON-GUARANTOR COMBINING COMBINED FMC AG D-GMBH FMCH SUBSIDIARIES ADJUSTMENT TOTAL ---------- --------- ----------- ------------- ----------- ---------- Current assets: Cash and cash equivalents................. $ 313 $ 1,274 $ -- $ 71,108 $ -- $ 72,695 Trade accounts receivable, less allowance for doubtful accounts................... -- 66,773 -- 783,645 -- 850,418 Accounts receivable from related parties................................. 323,428 181,828 56,147 538,233 (1,059,704) 39,932 Inventories............................... -- 74,901 -- 288,372 (30,629) 332,644 Prepaid expenses and other current assets.................................. 7,091 22,542 -- 208,484 1,424 239,541 Deferred taxes............................ 133 -- -- 157,359 12,848 170,340 ---------- -------- ---------- ---------- ----------- ---------- Total current assets............... 330,965 347,318 56,147 2,047,201 (1,076,061) 1,705,570 Property, plant and equipment, net.......... 175 48,055 -- 755,156 (16,389) 786,997 Intangible assets, including goodwill, net....................................... 684 5,325 -- 3,715,733 -- 3,721,742 Investments in unconsolidated subsidiaries.............................. 2,786,447 904 2,588,567 9,718 (5,367,206) 18,430 Loans to related parties.................... 78,562 -- 185,529 827,099 (1,091,190) -- Deferred taxes.............................. -- -- -- 29,738 10,534 40,272 Other assets................................ 8,438 10,918 10,315 88,424 -- 118,095 ---------- -------- ---------- ---------- ----------- ---------- Total assets....................... $3,205,271 $412,520 $2,840,558 $7,473,069 $(7,540,312) $6,391,106 ========== ======== ========== ========== =========== ========== Current liabilities: Accounts payable.......................... $ 3 $ 10,795 $ -- $ 211,777 $ -- $ 222,575 Accounts payable to related parties....... 102,090 184,817 275,411 560,050 (1,042,200) 80,168 Accrued expenses and other current liabilities............................. 12,421 53,453 -- 325,180 535 391,589 Note payable related to Settlement........ -- -- -- 51,186 -- 51,186 Short-term borrowings..................... 205,230 442 -- 105,793 -- 311,465 Short-term borrowings from related parties................................. 19,695 -- 17,504 216,462 (17,504) 236,157 Current portion of long-term debt and capital lease obligations............... -- 324 -- 168,194 -- 168,518 Income tax payable........................ 89,060 28 -- 60,739 -- 149,827 Deferred taxes............................ -- 3,920 -- 14,707 2,218 20,845 ---------- -------- ---------- ---------- ----------- ---------- Total current liabilities.......... 428,499 253,779 292,915 1,714,088 (1,056,951) 1,632,330 Long term debt and capital lease obligations, less current portion......... 3,992 1,629 827,099 961,711 (1,091,190) 703,241 Other liabilities........................... -- 2,692 -- 82,146 4,781 89,619 Pension liabilities......................... 327 24,207 -- 47,038 -- 71,572 Deferred taxes.............................. 764 2,367 -- 152,914 -- 156,045 Company obligated mandatorily redeemable preferred securities of subsidiary Fresenius Medical Care Capital Trusts holding solely Company guaranteed debentures of subsidiary.................. -- -- -- 945,471 -- 945,471 Minority interest........................... -- -- 16,318 -- 4,821 21,139 ---------- -------- ---------- ---------- ----------- ---------- Total liabilities.................. 433,582 284,674 1,136,332 3,903,368 (2,138,539) 3,619,417 Shareholders' equity:....................... 2,771,689 127,846 1,704,226 3,569,701 (5,401,773) 2,771,689 ---------- -------- ---------- ---------- ----------- ---------- Total liabilities and shareholders' equity.......................... $3,205,271 $412,520 $2,840,558 $7,473,069 $(7,540,312) $6,391,106 ========== ======== ========== ========== =========== ==========
F-20 222 FRESENIUS MEDICAL CARE AG NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) (UNAUDITED) (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
AT DECEMBER 31, 2000 ------------------------------------------------------------------------------- GUARANTOR SUBSIDIARIES ----------------------- NON-GUARANTOR COMBINING COMBINED FMC AG D-GMBH FMCH SUBSIDIARIES ADJUSTMENT TOTAL ---------- --------- ----------- ------------- ----------- ---------- Current assets: Cash and cash equivalents................ $ 137 $ 100 $ -- $ 64,340 $ -- $ 64,577 Trade accounts receivable, less allowance for doubtful accounts.................. -- 72,775 -- 680,899 -- 753,674 Accounts receivable from related parties................................ 132,463 193,640 51,487 531,874 (863,347) 46,117 Inventories.............................. -- 67,988 -- 286,199 (33,953) 320,234 Prepaid expenses and other current assets................................. 2,539 20,237 -- 190,326 1,424 214,526 IDPN accounts receivable................. -- -- -- 5,189 -- 5,189 Deferred taxes........................... 388 1,945 -- 156,732 18,029 177,094 ---------- -------- ---------- ---------- ----------- ---------- Total current assets.............. 135,527 356,685 51,487 1,915,559 (877,847) 1,581,411 Property, plant and equipment, net......... 205 49,460 -- 705,353 (16,025) 738,993 Intangible assets, including goodwill, net...................................... 789 6,006 -- 3,468,261 -- 3,475,056 Loans to related parties................... 78,206 -- 185,529 827,099 (1,090,834) -- Deferred taxes............................. -- 3,011 -- 13,949 10,245 27,205 Other assets............................... 2,681,199 12,119 2,589,842 117,641 (5,244,513) 156,288 ---------- -------- ---------- ---------- ----------- ---------- Total assets...................... $2,895,926 $427,281 $2,826,858 $7,047,862 $(7,218,974) $5,978,953 ========== ======== ========== ========== =========== ========== Current liabilities: Accounts payable......................... $ 506 $ 16,356 $ -- $ 186,512 $ -- $ 203,374 Accounts payable to related parties...... 113,406 180,997 257,566 372,978 (847,124) 77,823 Accrued expenses and other current liabilities............................ 9,740 52,916 -- 328,395 589 391,640 Note payable related to settlement....... -- -- -- 85,920 -- 85,920 Short-term borrowings.................... 627 465 -- 105,500 -- 106,592 Short-term borrowings from related parties................................ -- -- -- 218,333 -- 218,333 Current portion of long-term debt and capital lease obligations.............. -- 516 -- 167,715 -- 168,231 Income tax payable....................... 87,277 -- -- 30,295 -- 117,572 Deferred taxes........................... 223 6,102 -- 11,902 2,740 20,967 ---------- -------- ---------- ---------- ----------- ---------- Total current liabilities......... 211,779 257,352 257,566 1,507,550 (843,795) 1,390,452 Long term debt and capital lease obligations, less current portion........ 4,206 1,882 843,322 915,479 (1,107,057) 657,832 Other liabilities.......................... -- 3,688 -- 23,312 4,464 31,464 Pension liabilities........................ 327 24,682 -- 44,961 -- 69,970 Deferred taxes............................. 864 5,238 -- 170,385 -- 176,487 Company obligated mandatorily redeemable preferred securities of subsidiary Fresenius Medical Care Capital Trusts holding solely Company guaranteed debentures of subsidiary................. -- -- -- 952,727 -- 952,727 Minority interest.......................... -- -- 16,318 -- 4,953 21,271 ---------- -------- ---------- ---------- ----------- ---------- Total liabilities................. 217,176 292,842 1,117,206 3,614,414 (1,941,435) 3,300,203 Shareholders' equity:...................... 2,678,750 134,439 1,709,652 3,433,448 (5,277,539) 2,678,750 ---------- -------- ---------- ---------- ----------- ---------- Total liabilities and shareholders' equity........... $2,895,926 $427,281 $2,826,858 $7,047,862 $(7,218,974) $5,978,953 ========== ======== ========== ========== =========== ==========
F-21 223 FRESENIUS MEDICAL CARE AG NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) (UNAUDITED) (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
FOR THE THREE MONTH PERIOD ENDED MARCH 31, 2001 ---------------------------------------------------------------------------- GUARANTOR SUBSIDIARIES ----------------------- NON-GUARANTOR COMBINING COMBINED FMC AG D-GMBH FMCH SUBSIDIARIES ADJUSTMENT TOTAL --------- ---------- ---------- ------------- ---------- --------- Operating Activities: Net income.................................. $ 54,507 $ 251 $ 23,150 $ 55,480 $(78,881) $ 54,507 Adjustments to reconcile net (loss) income to net cash and cash equivalents provided by (used in) operating activities: Equity affiliate income..................... (43,608) -- (31,975) -- 75,583 -- Depreciation and amortization............. 405 4,563 -- 75,551 (1,154) 79,365 Change in deferred taxes, net............. (34) 238 -- (17,493) 8,737 (8,552) Gain on sale of fixed assets.............. -- (238) -- (410) -- (648) Compensation expense related to stock options................................ 661 -- -- -- -- 661 Changes in assets and liabilities, net of amounts from businesses acquired or disposed of: Trade accounts receivable, net............ -- 2,407 -- (49,722) -- (47,315) Inventories............................... -- (10,839) -- (1,727) (1,947) (14,513) Prepaid expenses and other current and non-current assets..................... (1,385) (2,802) 373 (3,069) 289 (6,594) Accounts receivable from/payable to related parties........................ (218,589) 15,669 14,466 197,456 (5,200) 3,802 Accounts payable, accrued expenses and other current and non-current liabilities............................ (695) (2,615) -- (18,929) 1,024 (21,215) Income taxes payable...................... 6,502 29 (5,884) 36,969 -- 37,616 --------- -------- -------- --------- -------- --------- Net cash provided by operating activities........................... (202,236) 6,663 130 274,106 (1,549) 77,114 --------- -------- -------- --------- -------- --------- Investing Activities: Purchases of property, plant and equipment................................. (24) (5,554) -- (60,077) 1,527 (64,128) Proceeds from sale of property, plant and equipment................................. 24 461 -- 2,048 -- 2,533 Acquisitions and investments, net of cash acquired.................................. (32,914) -- -- (114,504) 30,070 (117,348) --------- -------- -------- --------- -------- --------- Net cash used in investing activities........................... (32,914) (5,093) -- (172,533) 31,597 (178,943) --------- -------- -------- --------- -------- --------- Financing activities: Short-term borrowings, net.................. 19,965 -- -- 1,539 -- 21,504 Payments on obligation related to settlement................................ -- -- -- (34,734) -- (34,734) Long-term debt and capital lease obligations, net.......................... 214,529 (339) -- (84,905) -- 129,285 Decrease of accounts receivable securitization program.................... -- -- -- (5,340) -- (5,340) Proceeds from exercise of options........... 544 -- -- -- -- 544 Capital Increase of Non-Guarantor-Subsidiaries................ -- -- -- 30,072 (30,072) -- Change in minority interest................. -- -- (130) -- 327 197 --------- -------- -------- --------- -------- --------- Net cash provided by financing activities........................... 235,038 (339) (130) (93,368) (29,745) 111,456 --------- -------- -------- --------- -------- --------- Effect of exchange rate changes on cash and cash equivalents............................ 288 (57) -- (1,437) (303) (1,509) Cash and Cash Equivalents: Net increase in cash and cash equivalents..... 176 1,174 (0) 6,768 -- 8,118 Cash and cash equivalents at beginning of period...................................... 137 100 -- 64,340 -- 64,577 --------- -------- -------- --------- -------- --------- Cash and cash equivalents at end of period.... $ 313 $ 1,274 $ (0) $ 71,108 $ -- $ 72,695 ========= ======== ======== ========= ======== =========
F-22 224 FRESENIUS MEDICAL CARE AG NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) (UNAUDITED) (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
FOR THE THREE MONTH PERIOD ENDED MARCH 31, 2000 --------------------------------------------------------------------------- GUARANTOR SUBSIDIARIES ---------------------- NON-GUARANTOR COMBINING COMBINED FMC AG D-GMBH FMCH SUBSIDIARIES ADJUSTMENT TOTAL --------- --------- ---------- ------------- ---------- --------- Operating Activities: Net income (loss)............................ $ 48,429 $ (769) $ 23,094 $ 43,643 $(69,052) $ 45,345 Adjustments to reconcile net income (loss) to net cash and cash equivalents provided by (used in) operating activities: Equity affiliate income...................... (33,374) -- (31,883) -- 65,257 -- Depreciation and amortization.............. 433 4,983 -- 65,872 (707) 70,581 Change in deferred taxes, net.............. (1,321) (523) -- 14,258 (1,338) 11,076 Gain on sale of fixed assets............... -- -- -- (271) -- (271) Changes in assets and liabilities, net of amounts from businesses acquired or disposed of: Trade accounts receivable, net............. -- 4,471 -- (48,233) -- (43,762) Inventories................................ -- (6,366) -- 3,728 1,763 (875) Prepaid expenses and other current and non- current assets.......................... (1,571) (4,869) 373 30,408 1,672 26,013 Accounts receivable from/payable to related parties................................. (16,199) 7,523 13,505 (4,587) -- 242 Accounts payable, accrued expenses and other current and non-current liabilities............................. 1,334 3,231 -- (36,824) 785 (31,474) Income taxes payable....................... 13,636 698 (5,859) 15,197 -- 23,672 --------- ------- -------- --------- -------- --------- Net cash provided by (used in) operating activities............................ 11,367 8,379 (770) 83,191 (1,620) 100,547 --------- ------- -------- --------- -------- --------- Investing Activities: Purchases of property, plant and equipment... (19) (6,302) -- (41,863) 835 (47,349) Proceeds from sale of property, plant and equipment.................................. -- -- -- 3,464 -- 3,464 Acquisitions and investments, net of cash acquired................................... (10,403) (1,110) -- (36,765) 769 (47,509) --------- ------- -------- --------- -------- --------- Net cash used in investing activities... (10,422) (7,412) -- (75,164) 1,604 (91,394) --------- ------- -------- --------- -------- --------- Financing activities: Short-term borrowings, net................... (942) (26) -- (55,721) -- (56,689) Short-term borrowings to/from related parties, net............................... (344,215) -- -- 344,215 -- -- Payments on obligation related to settlement................................. -- -- -- (286,402) -- (286,402) Long-term debt and capital lease obligations, net........................................ -- (803) 900 (9,017) -- (8,920) Proceeds from issuance of preference shares..................................... 344,215 -- -- -- -- 344,215 Proceeds from increase of accounts receivable securitization program..................... -- -- -- 7,148 -- 7,148 Proceeds from exercise of options............ 39 -- -- -- -- 39 Capital Increase of Non-Guarantor-Subsidiaries................. -- -- -- 737 (737) -- Changes in minority interest................. -- -- (130) -- 753 623 --------- ------- -------- --------- -------- --------- Net cash (used in) provided by financing activities............................ (903) (829) 770 960 16 14 --------- ------- -------- --------- -------- --------- Effect of exchange rate changes on cash and cash equivalents............................. (52) (6) -- 1,864 -- 1,806 Cash and Cash Equivalents: Net (decrease) increase in cash and cash equivalents.................................. (10) 132 -- 10,851 -- 10,973 Cash and cash equivalents at beginning of period....................................... 155 37 -- 34,568 -- 34,760 --------- ------- -------- --------- -------- --------- Cash and cash equivalents at end of period..... $ 145 $ 169 $ -- $ 45,419 $ -- $ 45,733 ========= ======= ======== ========= ======== =========
F-23 225 INDEPENDENT AUDITORS' REPORT To the Shareholders Fresenius Medical Care Aktiengesellschaft Hof an der Saale, Germany: We have audited the accompanying consolidated balance sheets of Fresenius Medical Care Aktiengesellschaft and subsidiaries (the "Company") as of December 31, 2000 and 1999 and the related consolidated statements of operations, cash flows and shareholders' equity for each of the years in the three-year period ended December 31, 2000. In connection with our audits of the consolidated financial statements, we have also audited the financial statement schedule as listed in the accompanying index. These consolidated financial statements and the financial statement schedule are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements and the financial statement schedule based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2000 and 1999, and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 2000, in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the related financial statement schedule, when considered in relation to the consolidated financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein. Frankfurt am Main, Germany March 23, 2001, except as to paragraphs 16 and 17 of Note 18, as to which the date is April 5, 2001 /s/ KPMG Deutsche Treuhand-Gesellschaft Aktiengesellschaft Wirtschaftsprufungsgesellschaft F-24 226 FRESENIUS MEDICAL CARE AG CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998 (IN THOUSANDS, EXCEPT SHARE DATA)
2000 1999 1998 ---------- ---------- ---------- Net revenue: Dialysis Care......................................... $2,944,625 $2,599,688 $2,358,577 Dialysis Products..................................... 1,256,713 1,240,741 1,147,099 ---------- ---------- ---------- 4,201,338 3,840,429 3,505,676 Cost of revenue: Dialysis Care......................................... 2,040,627 1,776,604 1,614,266 Dialysis Products..................................... 693,966 686,551 628,672 ---------- ---------- ---------- 2,734,593 2,463,155 2,242,938 Gross profit............................................ 1,466,745 1,377,274 1,262,738 Operating expenses: Selling, general and administrative................... 813,997 784,572 742,610 Research and development.............................. 31,935 32,488 31,150 Special charge for Settlement......................... -- 601,000 -- ---------- ---------- ---------- Operating income (loss)................................. 620,813 (40,786) 488,978 Other (income) expense: Interest income....................................... (9,411) (8,094) (8,641) Interest expense...................................... 195,569 226,218 228,182 Interest expense on obligation related to Settlement......................................... 29,947 -- -- ---------- ---------- ---------- Income (loss) from continuing operations before income taxes, minority interest and cumulative effect of accounting change..................................... 404,708 (258,910) 269,437 Income tax expense (benefit)............................ 189,772 (12,744) 135,366 Minority interest....................................... 2,861 2,378 2,454 ---------- ---------- ---------- Income (loss) from continuing operations before cumulative effect of accounting change................ 212,075 (248,544) 131,617 Loss from discontinued operations, net.................. -- -- (105,897) Cumulative effect of accounting change, net............. -- -- (6,589) ---------- ---------- ---------- Net income (loss)....................................... $ 212,075 $ (248,544) $ 19,131 ========== ========== ========== Basic income (loss) from continuing operations before cumulative effect of accounting change per Ordinary share................................................. $ 2.37 $ (3.15) $ 1.62 ========== ========== ========== Fully diluted income (loss) from continuing operations before cumulative effect of accounting change per Ordinary share........................................ $ 2.36 $ (3.15) $ 1.62 ========== ========== ========== Basic income (loss) per Ordinary share.................. $ 2.37 $ (3.15) $ 0.20 ========== ========== ========== Fully diluted income (loss) per Ordinary share.......... $ 2.36 $ (3.15) $ 0.20 ========== ========== ========== Basic income (loss) from continuing operations before cumulative effect of accounting change per Preference share................................................. $ 2.43 $ (3.15) $ 1.78 ========== ========== ========== Fully diluted income (loss) from continuing operations before cumulative effect of accounting change per Preference share...................................... $ 2.42 $ (3.15) $ 1.78 ========== ========== ========== Basic income (loss) per Preference share................ $ 2.43 $ (3.15) $ 0.36 ========== ========== ========== Fully diluted income (loss) per Preference share........ $ 2.42 $ (3.15) $ 0.36 ========== ========== ==========
See accompanying notes to consolidated financial statements F-25 227 FRESENIUS MEDICAL CARE AG CONSOLIDATED BALANCE SHEETS AT DECEMBER 31, 2000 AND 1999 (IN THOUSANDS, EXCEPT SHARE DATA)
2000 1999 ---------- ---------- ASSETS Current assets: Cash and cash equivalents................................. $ 64,577 $ 34,760 Trade accounts receivable, less allowance for doubtful accounts of $111,185 in 2000 and $101,262 in 1999....... 753,674 667,739 Accounts receivable from related parties.................. 46,117 49,129 Inventories............................................... 320,234 301,302 Prepaid expenses and other current assets................. 214,526 179,392 IDPN accounts receivable.................................. 5,189 53,962 Deferred taxes............................................ 177,094 254,925 ---------- ---------- Total current assets...................................... 1,581,411 1,541,209 Property, plant and equipment, net.......................... 738,993 642,121 Intangible assets, including goodwill, net.................. 3,475,056 3,438,756 Deferred taxes.............................................. 27,205 25,121 Non-current IDPN accounts receivable........................ -- 5,189 Other assets................................................ 156,288 99,987 ---------- ---------- Total assets....................................... $5,978,953 $5,752,383 ========== ========== LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable.......................................... $ 203,374 $ 193,120 Accounts payable to related parties....................... 77,823 89,453 Accrued expenses and other current liabilities............ 391,640 415,061 Accrued Settlement........................................ -- 386,815 Note payable related to Settlement........................ 85,920 -- Short-term borrowings..................................... 106,592 96,383 Short-term borrowings from related parties................ 218,333 330,000 Current portion of long-term debt and capital lease obligations............................................. 168,231 147,484 Income tax payable........................................ 117,572 78,438 Deferred taxes............................................ 20,967 33,438 ---------- ---------- Total current liabilities................................. 1,390,452 1,770,192 Long-term debt and capital lease obligations, less current portion................................................... 657,832 653,776 Accrued Settlement.......................................... -- 85,920 Other liabilities........................................... 31,464 24,686 Pension liabilities......................................... 69,970 61,578 Deferred taxes.............................................. 176,487 168,037 Company-obligated mandatorily redeemable preferred securities of subsidiary Fresenius Medical Care Capital Trusts Holding solely Company-guaranteed debentures of subsidiary................................................ 952,727 964,103 Minority interest........................................... 21,271 21,774 ---------- ---------- Total liabilities.................................. 3,300,203 3,750,066 SHAREHOLDERS' EQUITY: Preference shares, no par, E2.56 nominal value, 45,497,700 shares authorized, 23,765,093 issued and outstanding...... 63,644 27,623 Ordinary shares, no par, E2.56 nominal value, 70,000,000 shares authorized, issued and outstanding................. 229,494 229,494 Additional paid-in capital.................................. 2,634,606 2,097,480 Retained deficit............................................ (56,024) (216,870) Accumulated other comprehensive loss........................ (192,970) (135,410) ---------- ---------- Total shareholders' equity......................... 2,678,750 2,002,317 ---------- ---------- Total liabilities and shareholders' equity......... $5,978,953 $5,752,383 ========== ==========
See accompanying notes to consolidated financial statements F-26 228 FRESENIUS MEDICAL CARE AG CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998 (IN THOUSANDS)
2000 1999 1998 --------- --------- --------- Operating Activities: Net income (loss)..................................... $ 212,075 $(248,544) $ 19,131 Adjustments to reconcile net income (loss) to cash flows provided by (used in) operating activities: Cumulative effect of accounting change............. -- -- 6,589 Depreciation and amortization...................... 292,854 284,208 278,984 Loss from discontinued operations.................. -- -- 105,897 Write-off of IDPN accounts receivable.............. -- 94,349 -- Change in deferred taxes, net...................... 76,934 (89,925) 23,586 (Gain) loss on sale of fixed assets................ (289) 991 213 Compensation expense related to stock options...... 3,980 -- -- Changes in assets and liabilities, net of amounts from businesses acquired or disposed of: Trade accounts receivable, net..................... (174,333) (136,262) (160,051) Inventories........................................ (23,007) (15,754) (39,304) Prepaid expenses, other current and non-current assets........................................... (8,285) (36,718) (37,295) Accounts receivable from/ payable to related parties.......................................... (18,801) (14,946) 3,174 Accounts payable, accrued expenses and other current and non-current liabilities.............. (20,689) 488,696 (6,336) Income taxes payable............................... 50,827 28,662 73,669 --------- --------- --------- Net cash provided by operating activities of continuing operations......................... 391,266 354,757 268,257 --------- --------- --------- Net cash used in operating activities of discontinued operations....................... -- (3,782) (257) --------- --------- --------- Net cash provided by operating activities........ 391,266 350,975 268,000 --------- --------- --------- Investing Activities: Purchases of property, plant and equipment............ (228,037) (160,276) (158,695) Proceeds from sale of property, plant and equipment... 20,724 7,130 26,179 Acquisitions and investments, net of cash acquired.... (274,530) (101,326) (222,935) Proceeds from disposition of businesses............... -- -- 82,500 --------- --------- --------- Net cash used in investing activities of continuing operations......................... (481,843) (254,472) (272,951) --------- --------- --------- Net cash used in investing activities of discontinued operations....................... -- -- (7,315) --------- --------- --------- Net cash used in investing activities............ (481,843) (254,472) (280,266) --------- --------- ---------
F-27 229
2000 1999 1998 --------- --------- --------- Financing Activities: Proceeds from short-term borrowings................... 38,416 79,580 54,954 Repayments of short-term borrowings................... (32,609) (80,946) (44,795) Proceeds from short-term borrowings from related parties............................................ 26,000 270,000 60,000 Repayments of short-term borrowings from related parties............................................ (141,000) -- (66,428) Proceeds from long-term debt.......................... 255,224 26,895 60,150 Principal payments of long-term debt and capital lease obligations........................................ (221,739) (310,476) (640,497) Payments on obligation related to Settlement.......... (386,815) -- -- Retirement of convertible investment securities....... -- (47,664) (61,725) Proceeds from issuance of mandatorily redeemable preferred securities............................... -- -- 597,810 Proceeds from issuance of Preference shares........... 556,958 -- -- Proceeds from increase of accounts receivable securitization program............................. 111,402 29,400 105,600 Proceeds from exercise of stock options............... 885 1,719 1,047 Dividends paid........................................ (51,229) (48,404) (49,214) Distributions on convertible investment securities.... -- -- (2,752) Change in minority interest........................... 139 578 717 --------- --------- --------- Net cash provided by (used in) financing activities of continuing operations........... 155,632 (79,318) 14,867 --------- --------- --------- Net cash used in financing activities of discontinued operations....................... -- -- (2,107) --------- --------- --------- Net cash provided by (used in) financing activities.................................... 155,632 (79,318) 12,760 --------- --------- --------- Effect of exchange rate changes on cash and cash equivalents........................................... (35,238) (14,292) (6,445) --------- --------- --------- Cash and Cash Equivalents: Net increase (decrease) in cash and cash equivalents........................................ 29,817 2,893 (5,951) Cash and cash equivalents at beginning of period...... 34,760 31,867 37,818 --------- --------- --------- Cash and cash equivalents at end of period............ $ 64,577 $ 34,760 $ 31,867 ========= ========= =========
See accompanying notes to consolidated financial statements F-28 230 FRESENIUS MEDICAL CARE AG CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY FOR THE YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998 (IN THOUSANDS, EXCEPT SHARE DATA)
PREFERENCE SHARES ORDINARY SHARES ACCUMULATED -------------------- ---------------------- CONVERTIBLE ADDITIONAL RETAINED OTHER NUMBER OF NO PAR NUMBER OF NO PAR INVESTMENT PAID IN EARNINGS COMPREHENSIVE SHARES VALUE SHARES VALUE SECURITIES CAPITAL (DEFICIT) LOSS ---------- ------- ----------- -------- ----------- ---------- --------- ------------- Balance at December 31, 1997..................... 9,023,341 $27,623 70,000,000 $229,494 $ 67,584 $2,098,776 $ 108,875 $ (86,387) Proceeds from exercise of options.................. -- -- -- -- -- 1,047 -- -- Retirement of convertible investment securities.... -- -- -- -- (67,584) -- -- -- Distributions on convertible investment securities............... -- -- -- -- -- -- (2,752) -- Distributions to Fresenius AG....................... -- -- -- -- -- (4,062) -- -- Dividends paid............. -- -- -- -- -- -- (45,176) -- Comprehensive income: Net income............... -- -- -- -- -- -- 19,131 -- Foreign currency translation adjustment............. -- -- -- -- -- -- -- 10,397 Comprehensive income....... -- -- -- -- -- -- -- -- ---------- ------- ----------- -------- -------- ---------- --------- --------- Balance at December 31, 1998..................... 9,023,341 27,623 70,000,000 229,494 $ -- $2,095,761 $ 80,078 $ (75,990) Proceeds from exercise of options.................. -- -- -- -- -- 1,719 -- -- Dividends paid............. -- -- -- -- -- -- (48,404) -- Comprehensive loss: Net loss................. -- -- -- -- -- -- (248,544) -- Foreign currency translation adjustment............. -- -- -- -- -- -- -- (59,420) Comprehensive loss......... -- -- -- -- -- -- -- -- ---------- ------- ----------- -------- -------- ---------- --------- --------- Balance at December 31, 1999..................... 9,023,341 $27,623 70,000,000 $229,494 $ -- $2,097,480 $(216,870) $(135,410) Issuance of Preference shares................... 14,724,359 35,980 -- -- -- 532,302 -- -- Proceeds from exercise of options.................. 17,393 41 -- -- -- 844 -- -- Compensation expense related stock options.... -- -- -- -- -- 3,980 -- -- Dividends paid............. -- -- -- -- -- -- (51,229) -- Comprehensive income: Net income............... -- -- -- -- -- -- 212,075 -- Foreign currency translation adjustment............. -- -- -- -- -- -- -- (57,560) Comprehensive income:...... -- -- -- -- -- -- -- -- ---------- ------- ----------- -------- -------- ---------- --------- --------- Balance at December 31, 2000..................... 23,765,093 $63,644 70,000,000 $229,494 $ -- $2,634,606 $ (56,024) $(192,970) ========== ======= =========== ======== ======== ========== ========= ========= TOTAL ---------- Balance at December 31, 1997..................... $2,445,965 Proceeds from exercise of options.................. 1,047 Retirement of convertible investment securities.... (67,584) Distributions on convertible investment securities............... (2,752) Distributions to Fresenius AG....................... (4,062) Dividends paid............. (45,176) Comprehensive income: Net income............... 19,131 Foreign currency translation adjustment............. 10,397 ---------- Comprehensive income....... 29,528 ---------- Balance at December 31, 1998..................... $2,356,966 Proceeds from exercise of options.................. 1,719 Dividends paid............. (48,404) Comprehensive loss: Net loss................. (248,544) Foreign currency translation adjustment............. (59,420) ---------- Comprehensive loss......... (307,964) ---------- Balance at December 31, 1999..................... $2,002,317 Issuance of Preference shares................... 568,282 Proceeds from exercise of options.................. 885 Compensation expense related stock options.... 3,980 Dividends paid............. (51,229) Comprehensive income: Net income............... 212,075 Foreign currency translation adjustment............. (57,560) ---------- Comprehensive income:...... 154,515 ---------- Balance at December 31, 2000..................... $2,678,750 ==========
F-29 231 FRESENIUS MEDICAL CARE AG NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA) 1. THE COMPANY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Fresenius Medical Care AG and subsidiaries ("FMC" or the "Company"), is an integrated provider of kidney dialysis products and dialysis care. Fresenius Medical Care AG ("FMC AG") was created by conversion of Sterilpharma GmbH, a limited liability company incorporated in 1975, into a stock corporation (Aktiengesellschaft). The resolutions for this conversion were adopted by a shareholder meeting on April 17, 1996. On September 30, 1996, Fresenius Medical Care AG initiated a series of transactions to consummate an Agreement and Plan of Reorganization entered into on February 4, 1996 by Fresenius AG and W.R. Grace & Co. ("W.R. Grace"). Pursuant to that Agreement, Fresenius AG contributed Fresenius Worldwide Dialysis or FWD, its global dialysis business, including its controlling interest in Fresenius USA, Inc. ("FUSA"), in exchange for Fresenius Medical Care AG Ordinary shares. Thereafter, FMC acquired: (i) all of the outstanding Common stock of W.R. Grace, whose sole business at the time of the transaction consisted of National Medical Care, Inc., its global dialysis business, in exchange for Ordinary shares; and (ii) the publicly-held minority interest of Fresenius USA, Inc., in exchange for Ordinary shares. BASIS OF PRESENTATION The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America ("U.S. GAAP"). SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES A) PRINCIPLES OF CONSOLIDATION The consolidated financial statements include all material companies in which the Company has legal or effective control. All significant intercompany transactions and balances have been eliminated. The equity method of accounting is used for investments in associated companies (20% to 50% owned). All other investments are accounted for at cost. For business combinations accounted for under the purchase method, all assets acquired and liabilities assumed are recorded at fair value. An excess of the purchase price over the fair value of net assets acquired is capitalized as goodwill and amortized over the estimated period of benefit on a straight-line basis. B) CLASSIFICATIONS Certain items in prior years' consolidated financial statements have been reclassified to conform with the current year's presentation. C) CASH AND CASH EQUIVALENTS Cash and cash equivalents represent cash and certificates of deposit with original maturity dates of three months or less at origination. D) INVENTORIES Inventories are stated at the lower of cost (determined by using the average or first-in, first-out method) or market value. F-30 232 FRESENIUS MEDICAL CARE AG NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA) E) PROPERTY, PLANT AND EQUIPMENT Property, plant, and equipment are stated at cost. Significant improvements are capitalized; repairs and maintenance costs that do not extend the useful lives of the assets are charged to expense as incurred. Property and equipment under capital leases are stated at the present value of future minimum lease payments at the inception of the lease. The cost and accumulated depreciation of assets sold or otherwise disposed are removed from the accounts, and any resulting gain or loss is included in income when the assets are disposed. Depreciation on property, plant and equipment is calculated using the straight-line method over the estimated useful lives of the assets ranging from 5 to 50 years for buildings and improvements with a weighted average life of 11 years and 3 to 15 years for machinery and equipment with a weighted average life of 7 years. Equipment held under capital leases and leasehold improvements are amortized using the straight-line method over the shorter of the lease term or the estimated useful life of the asset. The Company capitalizes interest on borrowed funds during construction periods. Interest capitalized during 2000, 1999, and 1998 was, $1,205, $224, and $221, respectively. F) INTANGIBLE ASSETS The Company has adopted the following useful lives and amortizes intangible assets using the straight-line method: goodwill -- 20 to 40 years with weighted average life of 37 years; tradename and patents -- 6 to 40 years with weighted average life of 33 years; patient relationships, distribution rights and other intangible assets -- over the estimated period to be benefited, generally from 5 to 40 years with a weighted average life of 8 years. G) DERIVATIVE FINANCIAL INSTRUMENTS The Company utilizes derivative financial instruments including forward currency contracts and interest rate swaps. Forward currency contracts -- Gains and losses on forward currency contracts that are designated and effective as hedges of existing assets or liabilities are included in the carrying amount of those hedged items. Foreign currency forward contracts hedging firm commitments are deferred and recognized along with the effects of the hedged transaction. Gains and losses on other forward currency contracts not qualifying for hedge accounting are recognized as selling, general and administrative expenses or cost of revenues in the period in which the gain or loss occurs. Interest rate swaps -- Interest rate agreements that are designated as a hedge of a debt or other long-term obligations are accounted for on an accrual basis. That is, the interest payable and interest receivable under the terms of the swaps are accrued and recorded as an adjustment to the interest or related expense of the designated liability or obligation. Amounts due from and payable to the counterparties of interest rate swaps are recorded on an accrual basis at each reporting date on amounts computed by reference to the respective interest rate swap contract. Realized gains and losses that occur from the early termination or expiration of contracts are deferred and recorded in income over the remaining period of the original swap agreement. Gains and losses arising from interest differential on contracts that hedge specific borrowings are recorded as a component of interest expense over the life of the contract. In the event the hedged asset or liability is terminated, sold, or otherwise disposed of, the timing of the gain or loss on the interest rate swap would be matched with the offsetting gain or loss of the related item. For information regarding the adoption of F-31 233 FRESENIUS MEDICAL CARE AG NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA) SFAS 133 Accounting for Derivative Instruments and Hedging Activities, as amended by SFAS 138, see "S) RECENT PRONOUNCEMENTS AND ACCOUNTING CHANGES." H) FOREIGN CURRENCY TRANSLATION For purposes of these consolidated financial statements, the U.S. dollar is the reporting currency. The Company follows the provisions of Statement of Financial Accounting Standards ("SFAS") No. 52, Foreign Currency Translation. Substantially all assets and liabilities of the Company and all non-U.S. subsidiaries are translated at year end exchange rates, while revenues and expenses are translated at exchange rates prevailing during the year. Adjustments for foreign currency translation fluctuations are excluded from earnings and are included in other comprehensive income. Gains and losses resulting from the translation of intercompany borrowings, which are not considered equity investments, are included in selling, general and administrative expense. Transaction gains (losses) amounted to $18,370, $2,299 and $366 for 2000, 1999 and 1998, respectively. I) REVENUE RECOGNITION POLICY Health care revenues are recognized on the date services and related products are provided and the payor is obligated to pay at amounts estimated to be received under reimbursement arrangements with these third party payors. Medicare and Medicaid programs are billed at pre-determined net realizable rates per treatment that are established by statute or regulation. Most non-governmental payors, including contracted managed care payors, are billed at our standard rates for services net of contractual allowances to reflect the estimated amounts to be received under reimbursement arrangements with these payors. Product revenues are recognized when title to the product passes to the customers either at the time of shipment, upon receipt by the customer or upon any other terms that clearly define passage of title. As product returns are not typical, no return allowances are established. In the event a return is required, the appropriate reductions to sales, accounts receivables and cost of sales are made. J) RESEARCH AND DEVELOPMENT EXPENSES Research and development expenses are expensed as incurred. K) INCOME TAXES In accordance with SFAS No. 109, Accounting for Income Taxes, deferred tax assets and liabilities are recognized for the future consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. Prior to the German tax law change in 2000, deferred taxes in Germany were calculated using the "undistributed earnings" tax rate. (see Note 12) L) IMPAIRMENT In accordance with Statement of Financial Accounting Standards No. 121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of, the Company reviews the carrying value of its long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of assets may not be recoverable. The Company considers various valuation factors including discounted cash flows, fair values and replacement costs to assess any impairment of goodwill and other long lived assets. Recoverability of assets to be held and used is measured by a F-32 234 FRESENIUS MEDICAL CARE AG NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA) comparison of the carrying amount of an asset to future net cash flows expected to be generated by the asset. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets. Assets to be disposed of are reported at the lower of the carrying amount or fair value less costs to sell. M) DEBT ISSUANCE COSTS Costs related to the issuance of debt are amortized over the term of the related obligation. N) SELF INSURANCE PROGRAMS A major subsidiary of the Company is self-insured for professional, product and general liability, auto and worker's compensation claims up to predetermined amounts above which third party insurance applies. Estimates are made for both reported and incurred but not reported claims. O) USE OF ESTIMATES The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America 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 consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. P) CONCENTRATION OF CREDIT RISK The Company is engaged in the manufacture and sale of products for all forms of kidney dialysis, principally to health care providers throughout the world, and in providing kidney dialysis treatment, clinical laboratory testing and other medical ancillary services. The Company performs ongoing evaluations of its customers' financial condition and, generally, requires no collateral. A significant percentage of the Company's health care services revenues are paid by and subject to regulations under governmental programs, primarily Medicare and Medicaid, health care programs administered by the United States government. Q) EARNINGS PER PREFERENCE SHARE AND ORDINARY SHARE Basic net income (loss) per Preference share and basic net income (loss) per Ordinary share for all years presented have been calculated using the two-class method required under U.S. GAAP based upon the weighted average number of Ordinary and Preference shares outstanding. Basic earnings per share are computed by dividing net income less preference amounts and distributions earned by convertible investment securities by the weighted average number of Ordinary shares and Preference shares outstanding during the year. Diluted earnings per share include the effect of all potentially dilutive Ordinary shares and Preference shares that would have been outstanding during the year. The convertible investment securities (see Note 16) and awards granted under the FMC stock incentive plans (see Note 17), are potentially dilutive equity instruments. R) STOCK OPTION PLANS The Company accounts for its stock option plans in accordance with the provisions of Accounting Principles Board ("APB") Opinion No. 25, Accounting for Stock Issued to Employees, and related interpretations. As such, compensation expense is recorded only if the current market price of the F-33 235 FRESENIUS MEDICAL CARE AG NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA) underlying stock exceeds the exercise price on the measurement date. For stock incentive plans which are performance based, the Company recognizes compensation expense over the vesting periods, based on the then current market values of the underlying stock. In addition, the Company has adopted the disclosure only provisions required by SFAS No. 123, Accounting for Stock-Based Compensation. S) RECENT PRONOUNCEMENTS AND ACCOUNTING CHANGES The Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 133, Accounting for Derivative Instruments and Hedging Activities, which establishes accounting and reporting standards for financial derivative instruments, including certain derivative instruments embedded in other contracts and for hedging activities. SFAS No. 133 requires that an entity recognize all derivatives as either assets or liabilities in the balance sheet and measure those instruments at fair value. The statement also provides the criteria for determining whether a derivative may be specifically designated as a hedge of a particular exposure with the intent of measuring the effectiveness of that hedge in the statement of operations. In June 2000, the Financial Accounting Standards Board issued SFAS No. 138, which amended certain provisions of SFAS 133, including allowing foreign-currency denominated assets and liabilities to qualify for hedge accounting, permitting the offsetting of certain inter-entity foreign currency exposures that reduce the need for third party derivatives and redefining the nature of interest rate risk to avoid sources of ineffectiveness. The Company is adopting SFAS 133, and the corresponding amendments under SFAS 138 effective as of January 1, 2001. After adoption, gains and losses in fair value of recognized assets and liabilities and firm commitments of operating transactions as well as gains and losses on derivative financial instruments designated as fair value hedges of these recognized assets and liabilities and firm commitments will be recognized currently in earnings. After adoption, changes in the value of foreign currency forward contracts designated and qualifying as cash flow hedges of forecasted transactions will be reported in accumulated other comprehensive income. These amounts will subsequently be reclassified into earnings, as a component of the forecasted transaction, in the same period as the forecasted transaction affects earnings. The adoption of SFAS 133, as amended by SFAS 138, results in the recording of assets related to forward currency contracts of approximately $13,072. The offset to this transition adjustment will be recorded to other comprehensive income at an amount of $1,465 and to net income at an amount of $11,607. Because of corresponding entries concerning the hedged items, the net effect on earnings will be immaterial. Additionally a liability for interest rate swaps of approximately $25,146 will be recorded. The offset will be recorded to other comprehensive income. In December 1999, the United States Securities and Exchange Commission ("SEC") issued Staff Accounting Bulletin 101, Revenue Recognition in Financial Statements ("SAB 101"). SAB 101 provides the SEC staff's views in applying generally accepted accounting principles to selected revenue recognition issues, as well as examples of how the SEC staff applies revenue recognition guidance to specific circumstances. In June 2000, SAB 101B was issued by the SEC further delaying the implementation date for SAB 101 until the fourth quarter of the fiscal year beginning after December 15, 1999. The impact of the adoption of SAB 101 is not significant. In May 2000, the Emerging Issues Task Force ("EITF") issued EITF 00-014, Accounting for Certain Sales Incentives, which establishes accounting for point of sales coupons, rebates, and free merchandise. This EITF requires that an entity report these sales incentives that reduce the price paid to be netted directly against revenues. EITF 00-014 is effective no later than the fourth quarter of the fiscal year beginning after December 15, 1999. The impact of the adoption of EITF-00-14 is not significant. F-34 236 FRESENIUS MEDICAL CARE AG NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA) In March 2000, the Financial Accounting Standards Board issued Financial Accounting Standards Board Interpretation No. 44, Accounting for Certain Transactions Involving Stock Compensation, an interpretation of APB Opinion 25. The effects of applying this interpretation are required to be recognized on a prospective basis from July 1, 2000. The application of this interpretation did not have a material effect on our financial position or results of operations. In September 2000, the Financial Accounting Standards Board issued SFAS No. 140, Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities, which replaces SFAS No. 125. SFAS No. 140 provides the accounting and reporting standards for securitizations and other transfers of financial assets and collateral. These standards are based on consistent application of a financial-components approach that focuses on control. This Statement also provides consistent standards for distinguishing transfers of financial assets that are sales from transfers that are secured borrowings. SFAS No. 140 is effective for transfers after March 31, 2001 and is effective for disclosures about securitizations and collateral for fiscal years ending after December 15, 2000. There is no impact for the adoption of SFAS No. 140. In April 1998, Statement of Position No. 98-5, Reporting on the Costs of Start-up Activities ("SOP 98-5"), was issued by the Accounting Standards Executive Committee (AcSEC) of the AICPA and was adopted by the Company, effective January 1, 1998. SOP 98-5 requires that the costs of start-up activities, including organization costs, which have been previously capitalized, should be expensed as incurred. As a result of the adoption of SOP 98-5, deferred start-up activities in the amount of $11,279 as of January 1, 1998, have been recognized as a cumulative effect of a change in accounting, net of related tax benefit of $4,690, in the consolidated statements of earnings for the year ended December 31, 1998. Costs for start-up activities are expensed as incurred beginning in 1998. 2. SPECIAL CHARGE FOR THE SETTLEMENT On January 18, 2000, Fresenius Medical Care Holdings, Inc. ("FMCH"), National Medical Care, Inc. and certain other affiliated companies executed definitive agreements with the United States Government to settle (i) matters concerning violations of federal laws then under investigation and (ii) National Medical Care, Inc.'s claims with respect to outstanding Medicare receivables for intradialytic parenteral nutrition therapy (collectively, the "Settlement"). Under the Settlement with the U.S. government, FMCH made initial cash payments of approximately $286 million and entered into a note payable for the remainder of the payment obligations. Interest on installment payments to the U.S. government will accrue at 6.3% on approximately $51 million of the obligation and at 7.5% annually on the balance, until paid in full. The note payable to the U.S. government and the amounts due to the Company for the outstanding Medicare receivables have been classified in the balance sheet based on their expected settlement dates. Under the terms of the note payable, the remaining obligation is payable in six quarterly installments that began in April 2000 and end in July 2001. The first four quarterly installments were paid in the amount of approximately $35 million each, including interest at 7.5%. The first three of these four payments were made in April, July and October 2000 and the fourth installment was made in January 2001. The final two installments of approximately $28 million each, including interest at 6.3%, will be paid in April and July 2001, respectively. In addition, the Company received approximately $59 million from the U.S. government related to the Company's claims for outstanding Medicare receivables. The Company received $54 million in 2000 and a final payment of $5 million in February 2001. In connection with the Settlement, the Company amended the letter of credit that National Medical Care delivered to the U.S. government in 1996 from $150 million to $190 million and, under the F-35 237 FRESENIUS MEDICAL CARE AG NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA) Settlement, the letter of credit will be reduced as installment payments are made to the Government. At December 31, 2000, the letter of credit was reduced to $89 million. 3. RELATED PARTY TRANSACTIONS A) SHARED SERVICES Fresenius AG, the majority shareholder, historically provided services to and incurred costs on behalf of the Company. The Company entered into service agreements with Fresenius AG and certain affiliates of Fresenius AG to continue to receive services, including, but not limited to: administrative services, management information services, employee benefit administration, legal and environmental consultation and administration insurance, central purchasing, tax services, treasury services, and accounting and reporting. In the opinion of management, such expenses are indicative of the actual expenses that would have been incurred if the Company had been operating as an independent entity. For the years 2000, 1999 and 1998, amounts charged from Fresenius AG to FMC under the terms of the agreement are $19,947, $16,387 and $21,298, respectively. FMC also provides certain services to FAG and certain affiliates of FAG, including research and development, plant administration, patent administration and warehousing. FMC charged amounts of $9,984, $6,821 and $5,233 for services rendered to Fresenius AG in 2000, 1999 and 1998, respectively. Related party transactions pertaining to services performed between affiliated entities are recorded as accounts receivable or payable to related parties. At December 31, 2000 and 1999 FMC had accounts receivable from related parties of $46,117 and $49,129, respectively. The FMC accounts payable to related parties at December 31, 2000 and 1999 were $77,823 and $89,453, respectively. Under operating lease agreements entered into in conjunction with the formation of Fresenius Medical Care, FMC will pay Fresenius AG approximately DM16,800 (E8,590) per year. The lease amounts escalate annually, based upon published indices in Germany. Converted to USD, this amounts to approximately, $9,472, $10,642 and $10,101 during 2000, 1999 and 1998, respectively. The leases expire in 2005 with options for renewal. B) FINANCING PROVIDED BY FRESENIUS AG At December 31, 2000, the Company had short-term loans outstanding of $215,934, of which $209,000 bore interest at rates varying between 7.35% and 7.38%. The remaining loans bore interest at a rate of approximately 4%. At December 31, 1999, the Company had short-term loans outstanding of $330,000 at varying interest rates between 7.06% and 7.44%. The funds were used primarily to reduce long-term debt. At December 31, 2000, the loans were due at various dates throughout the first quarter of 2001 and have subsequently been extended to various dates through June 6, 2001. Interest expense on these borrowings was, $18,571, $13,037 and $1,096 for the years 2000, 1999 and 1998, respectively. C) PRODUCTS During the years ended December 31, 2000, 1999, and 1998, the Company recognized sales of $28,076, $28,563 and $13,237, respectively, to non-FMC businesses of Fresenius AG. During 2000, 1999 and 1998, the Company made purchases from Fresenius AG and affiliates in the amount of $25,547, $30,056 and $29,822, respectively. F-36 238 FRESENIUS MEDICAL CARE AG NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA) D) OTHER During 1999, the Company granted to a member of the Management Board a five year unsecured loan of $2,000 with interest at 6.0% per annum. Only interest is due during the first four years of the term, with both principal and interest due in the fifth year. The Company may call the loan at any time and can be repaid without penalty, at any time during the period of the loan. A member of the Company's Supervisory board is a partner in a law firm which provided services to the Company. The Company paid the law firm approximately $580, $107, and $254 in 2000, 1999 and 1998, respectively. A member of the Company's Supervisory Board is the chairman of the management board of a bank that served as one of two joint global coordinators of a public offering of Preference shares conducted by the Company in 2000. The Company paid the bank a total of $10,438 in underwriting discounts and commissions. The Chairman of the Company's Supervisory Board and former Chief Executive Officer of FMC are members of the Management Board of Fresenius AG, the majority holder of FMC's Ordinary shares. 4. ACQUISITIONS The Company acquired certain health care facilities and clinical laboratories for a total consideration of $288,144, $110,788, and $264,740 in 2000, 1999 and 1998, respectively. In 2000, consideration consisted of cash of $274,530 and notes for $13,614. Acquisitions in 2000 include the purchase of substantially all of the international and non-continental U.S. operations of Total Renal Care Holdings, Inc. ("TRC"). The purchase price for these operations was $145,000. Additionally the Company agreed to acquire TRC's Puerto Rico operations. That acquisition is subject to regulatory approval and third party consents. In connection with the Puerto Rico acquisition the Company paid a $10 million non-refundable deposit. In 1999, consideration consisted of cash of $101,326 and notes for $9,462. In 1998, the consideration consisted of cash of $222,935 and convertible investment securities of $41,805. These acquisitions have been accounted for as purchase transactions and, accordingly, are included in the results of operations from the dates of acquisition. The excess of the total acquisition costs over the fair value of the tangible net assets acquired was $196,000, $94,000 and $243,000 for 2000, 1999 and 1998, respectively. 5. DISCONTINUED OPERATIONS Effective June 1, 1998, the Company classified its Homecare/Non-renal Diagnostics businesses as discontinued operations. The sale of the Non-renal Diagnostics business was completed on June 26, 1998 while the sale of the Homecare business was completed on July 29, 1998. In connection with the sale of Homecare, the Company retained the assets and the operations associated with the delivery of IDPN and recorded, for accounting purposes, its activity as part of discontinued operations for the periods through June 30, 1998. Subsequent to June 30, 1998, the Company has recorded no IDPN revenues and any incidental expenses have been included in continuing operations. Since it has exited this business, the Company provides those services only to existing physicians' patients for whom this therapy is prescribed. The Company has recorded net after tax losses of $9,000 from operations of discontinued businesses and $97,000 from the disposal of these businesses for the year ended December 31, 1998. The net loss on the disposal of these businesses and their results of operations have been accounted for as discontinued operations. IDPN receivables of $153,500 which had been included in the retained assets of discontinued operations were resolved as part of the settlement agreements with the U.S. Government relating to the OIG investigations (see Note 2). As a result, a $94,300 write off was taken against these receivables. The F-37 239 FRESENIUS MEDICAL CARE AG NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA) remaining receivables have been classified separately on the balance sheet and were collected from the U.S. Government. DISCONTINUED OPERATIONS -- RESULTS OF OPERATIONS The revenue and results of operations of the discontinued operations in 1998 were as follows:
1998 --------- Net revenue................................................. $ 120,940 Cost of revenue............................................. 73,950 --------- Gross profit.............................................. 46,990 Selling, general and administrative......................... 61,202 --------- Loss from operations of discontinued businesses before income tax benefit........................................ (14,212) Income tax benefit.......................................... (5,543) --------- Loss from operations of discontinued businesses............. (8,669) --------- Loss on disposal before income tax benefit.................. (140,000) Income tax benefit.......................................... (42,772) --------- Loss on disposal............................................ (97,228) --------- Loss from discontinued operations........................... $(105,897) =========
6. SALE OF ACCOUNTS RECEIVABLE National Medical Care, Inc. ("NMC"), a subsidiary of the Company, has an asset securitization facility (the "accounts receivable facility") whereby receivables of NMC and certain affiliates are sold to NMC Funding Corporation (the "Transferor"), a wholly-owned subsidiary of NMC, and subsequently the Transferor transfers and assigns percentage ownership interests in the receivables to certain bank investors. NMC Funding Corporation is not consolidated as it does not meet the control criteria of SFAS 125. The amount of the accounts receivable facility was last amended on October 26, 2000, when the Company increased the accounts receivable facility to $500,000, and extended its maturity to October 25, 2001. At December 31, 2000 and 1999, $445,000 and $335,000, respectively, had been received pursuant to such sales and are reflected as reductions to accounts receivable. The Transferor pays interest to the bank investors, calculated based on the commercial paper rates for the particular tranches selected. The effective interest rate was approximately 6.59% at year-end 2000. Under the terms of the agreement, new interests in accounts receivable are sold as collections reduce previously sold accounts receivable. The costs related to such sales are expensed as incurred and recorded as interest expense and related financing costs. There were no gains or losses on these transactions. F-38 240 FRESENIUS MEDICAL CARE AG NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA) 7. INVENTORIES As of December 31, inventories consisted of the following:
2000 1999 -------- -------- Raw materials and purchased components................. $ 73,244 $ 61,624 Work in process........................................ 22,231 21,834 Finished goods......................................... 160,358 168,193 Health care supplies................................... 64,401 49,651 -------- -------- Inventories.......................................... $320,234 $301,302 ======== ========
Under the terms of certain (unconditional) purchase agreements, the Company is obligated to purchase approximately $165,000 of materials, of which $90,000 is committed at December 31, 2000 for fiscal year 2001. The terms of these agreements run 2 to 5 years. Inventories as of December 31, 2000 include approximately $25,800 of EPO which is supplied by a single source supplier in the United States. Delays, stoppages, or interruptions in the supply of EPO could adversely affect the operating results of the Company. In 2000, revenues from EPO accounted for approximately 22% of total revenue in the North America segment and approximately 23% of dialysis care revenue world-wide. 8. PROPERTY, PLANT AND EQUIPMENT As of December 31, property, plant and equipment consisted of the following:
2000 1999 ---------- ---------- Land and improvements............................... $ 21,477 $ 9,717 Buildings and improvements.......................... 386,568 336,782 Machinery and equipment............................. 691,607 620,024 Machinery, equipment and rental equipment under capitalized leases................................ 17,507 24,001 Construction in progress............................ 90,184 48,832 ---------- ---------- 1,207,343 1,039,356 Accumulated depreciation and amortization........... (468,350) (397,235) ---------- ---------- Property, plant and equipment, net................ $ 738,993 $ 642,121 ========== ==========
Depreciation and amortization expense for property, plant and equipment amounted to $130,278, $131,623, and $130,628 for the years ended December 31, 2000, 1999, and 1998, respectively. Included in property, plant and equipment as of December 31, 2000, 1999 and 1998 were $36,853, $36,015 and $36,996, respectively, of peritoneal dialysis cycler machines which the Company leases to customers with end-stage renal disease on a month-to-month basis and hemodialysis machines which the Company leases to physicians under operating leases. Identification of the rental income from the Company's leasing activities is not practicable as the Company's return on the machines is received through contractual arrangements whereby a premium is charged for other support equipment sold during the life of the lease. Accumulated depreciation related to machinery, equipment and rental equipment under capital leases was $7,358, $14,330 and $10,785 at December 31, 2000, 1999 and 1998, respectively. F-39 241 FRESENIUS MEDICAL CARE AG NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA) 9. INTANGIBLE ASSETS As of December 31, intangible assets consisted of the following:
2000 1999 ---------- ---------- Goodwill............................................ $3,252,335 $3,114,063 Patient relationships............................... 198,147 180,067 Patents............................................. 252,336 252,923 Distribution rights................................. 7,619 4,349 Other............................................... 387,589 354,400 ---------- ---------- 4,098,026 3,905,802 Accumulated amortization............................ (622,970) (467,046) ---------- ---------- Intangible assets, net.............................. $3,475,056 $3,438,756 ========== ==========
Amortization expense for intangible assets amounted to $160,604, $151,735, and $147,616 for the years ended December 31, 2000, 1999, and 1998, respectively. 10. ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES As at December 31, accrued expenses and other current liabilities consisted of the following:
2000 1999 -------- -------- Accrued operating expenses............................. $ 49,012 $ 68,599 Accrued legal and compliance costs..................... 3,314 12,991 Accrued insurance...................................... 47,074 54,518 Accrued salaries and wages............................. 87,016 75,163 Accounts receivable credit balances.................... 38,215 48,932 Accrued interest....................................... 26,926 25,429 Accrued restructuring.................................. 3,450 2,472 Accrued physician compensation......................... 17,649 17,721 Bonus and incentive plan compensation.................. 2,489 2,746 Withholding tax and VAT................................ 24,138 17,294 Commissions............................................ 12,231 10,406 Deferred income........................................ 6,764 5,770 Bonuses and rebates.................................... 7,331 9,303 Accrued other costs related to Settlement.............. 4,986 20,577 Other.................................................. 61,045 43,140 -------- -------- Total accrued expenses and other current liabilities... $391,640 $415,061 ======== ========
11. DEBT AND CAPITAL LEASE OBLIGATIONS Short-term borrowings from third parties of $106,592, and $96,383 at December 31, 2000, and 1999, respectively, represent amounts borrowed by certain of the Company's subsidiaries under lines of credit with commercial banks. The average interest rates on these borrowings at December 31, 2000, and 1999 was 6.0% and 4.6%, respectively. For information regarding short-term borrowings from affiliates, see Note 3b. F-40 242 FRESENIUS MEDICAL CARE AG NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA) Excluding amounts available under the senior credit agreement (as described below), at December 31, 2000, FMC had $24,291 available under such commercial bank agreements. These lines of credit are generally secured by the Company's accounts receivable and contain various covenants including, but not limited to, requirements for maintaining defined levels of working capital, net worth, capital expenditures and various financial ratios. As of December 31, long-term debt and capital lease obligations consisted of the following:
2000 1999 --------- --------- Senior credit agreement.............................. $ 732,500 $ 738,150 Capital leases....................................... 6,808 8,067 Other................................................ 86,755 55,043 --------- --------- 826,063 801,260 Less current maturities.............................. (168,231) (147,484) --------- --------- $ 657,832 $ 653,776 ========= =========
SENIOR CREDIT AGREEMENT The Company is party to a bank agreement dated September 27, 1996 (hereafter "senior credit agreement") with the Bank of America, N.A., The Bank of Nova Scotia, The Chase Manhattan Bank, Dresdner Bank Aktiengesellschaft and certain other lenders (collectively, the "Lenders"), as amended, pursuant to which the Lenders have made available to the Company and certain subsidiaries and affiliates an aggregate of $2,000,000 through two credit facilities: - a revolving credit facility of up to $1,000,000 (of which up to $250,000 is available for letters of credit, up to $450,000 is available for borrowings in certain non-U.S. currencies, up to $50,000 is available as swing lines in U.S. dollars and up to $20,000 is available as swing lines in certain non-U.S. currencies) for up to seven years expiring on September 30, 2003 - a term loan facility of $1,000,000 for up to seven years, also expiring September 30, 2003. The terms of the senior credit agreement relating to the term loan facility require payments that permanently reduce the term loan facility. The repayment began in the fourth quarter of 1999 and will continue quarterly until the final maturity of the agreement in 2003. Loans under this senior credit agreement bear interest at a base rate determined in accordance with the agreement, or at LIBOR, plus in either case an applicable margin. A fee is payable to the Lenders equal to a percentage per annum (initially 0.375%) of the portion of the senior credit agreement not used. In addition to scheduled principal payments, the senior credit agreement will be reduced by certain portions of the net cash proceeds from certain sales of assets, sales of accounts receivable and the issuance of subordinated debt and equity securities. Prepayments are permitted at any time without penalty, except in certain defined periods. The senior credit agreement contains customary affirmative and negative covenants with respect to the Company and its subsidiaries and other payment restrictions, mainly related to dividends. Under the terms of the agreement the Company is restricted as to the level of dividends that can be paid in any calendar year, which was $78,000 in 2000. The Company's dividend distribution in 2000 was $51,229. Dividends from Fresenius Medical Care Holdings, Inc., a wholly owned subsidiary, are limited as a result of a restriction on dividends from its subsidiary, National Medical Care, Inc, and its subsidiaries. The restriction limits National Medical Care dividends to 50% of its consolidated net income of the preceding year. National Medical Care had losses in 1999 as a result of a special charge (see Note 2) and losses in 1998 from discontinued operations (see Note 5). F-41 243 FRESENIUS MEDICAL CARE AG NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA) In December 1999, the Company amended certain covenants including, among other things, financial ratios contained in its senior credit facility that would have been affected by the impact of the Settlement (see Note 2). At December 31, 2000 the Company was in compliance with all such covenants. On September 21, 2000 the senior credit agreement was amended in order to increase the facility for accounts receivable securitization and some other facilities. The Lenders also agreed that the proceeds of the Preference share offerings during 2000 (see Note 16) did not trigger repayment obligations on the term loan, but maybe used for capital expenditures and acquisitions. At December 31, 2000, the Company had approximately $698,000 of additional borrowing capacity available under the revolving credit facility of the senior credit agreement, including approximately $103,000 for additional letters of credit. No further borrowings are available under the term loan facility. On January 18, 2000, the Company increased the amount of the letter of credit that National Medical Care delivered to the U.S. Government in 1996 from $150,000 to $190,000. Under the Settlement agreement, the letter of credit will be reduced as installment payments are made to the government. At December 31, 2000, the letter of credit was $89,000. Aggregate annual payments applicable to the senior credit agreement, term loan, capital leases and other borrowings for the five years subsequent to December 31, 2000 (excluding borrowings underlying the Company's trust preferred securities (see Note 14) are: 2001........................................................ $168,231 2002........................................................ 159,474 2003........................................................ 439,950 2004........................................................ 8,100 2005........................................................ 7,632 Thereafter.................................................. 42,676 -------- $826,063 ========
12. INCOME TAXES Income (loss) from continuing operations before income taxes, minority interest, and cumulative effect of accounting change is attributable to the following geographic locations:
2000 1999 1998 -------- --------- -------- Germany........................................... $106,475 $ 93,653 $ 70,877 United States..................................... 220,176 (408,060) 118,574 Other............................................. 78,058 55,497 79,986 -------- --------- -------- $404,708 $(258,910) $269,437 ======== ========= ========
F-42 244 FRESENIUS MEDICAL CARE AG NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA) Income tax expense (benefit) for the years ended December 31, consisted of the following:
2000 1999 1998 -------- -------- -------- Current: German corporation and trade income taxes........ $ 66,754 $ 43,876 $ 23,990 United States income taxes....................... 23,132 12,088 54,600 Other income taxes............................... 29,971 28,797 22,246 -------- -------- -------- 119,857 84,761 100,836 ======== ======== ======== Deferred: Germany.......................................... (14,902) 791 15,281 United States.................................... 81,553 (92,907) 16,800 Other income taxes............................... 3,264 (5,389) 2,449 -------- -------- -------- 69,915 (97,505) 34,530 -------- -------- -------- $189,772 $(12,744) $135,366 ======== ======== ========
In 2000, the German government enacted new tax legislation which, among other changes, will reduce the Company's statutory corporate tax rate for German companies from 40% on retained earnings and 30% on distributed earnings to a uniform 25%, effective for the Company's year beginning January 1, 2001. In 1999, various changes to the German corporation tax law were made effective, including the reduction of the tax rate applied to undistributed earnings from 45% to 40%. The effects of the reductions in the tax rate and other tax law changes on the deferred tax assets and liabilities of the Company's German companies were recognized in the year of enactment and resulted in deferred tax benefit for 2000 and 1999 of $2,227 and $850, respectively. Prior to the 2000 tax law changes becoming effective, German corporation tax law applied a split rate imputation system to the income taxation of a corporation and its shareholders. Upon distribution of retained earnings in the form of a dividend, shareholders subject to German tax received a credit for corporation taxes paid by the corporation on such distributed earnings. In addition, the corporation received a tax refund to the extent such earnings had been initially subjected to a corporation income tax in excess of 30%. The tax refund was also distributable to the shareholder. In general, prior to 2001 retained (undistributed) German corporate income was initially subject to a federal corporation income tax currently at a rate of 40% for 2000 (40% for 1999 and 45% for 1998) plus a surcharge of 5.5% for each year on federal corporate taxes payable. Giving effect to the surcharge, the federal corporate tax rate was 42.2% for 2000 (42.2% in 1999 and 47.475% in 1998). Upon distribution of certain retained earnings generated in Germany to stockholders, the corporate income tax rate on the earnings was adjusted to 30%, plus a solidarity surcharge of 5.5%, for a total of 31.65% for each year, by means of a refund for taxes previously paid. Under the new German corporate tax system, during a 15 year transition period beginning on January 1, 2001, the Company will continue to receive a refund or pay additional taxes on the distribution of retained earnings which existed as of December 31, 2000. The income tax expense reflects the actual amount of distribution of that year's earnings of the German operations. As such, the refund of tax described above is reflected in the income tax expense reconciliation presented below. For the years ended December 31, 2000, 1999, and 1998 income tax expense differed from the amounts computed by applying the German federal corporation income tax rate of 42.2% for both 2000 F-43 245 FRESENIUS MEDICAL CARE AG NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA) and 1999 and 47.475% for 1998 to income before income taxes, minority interest and cumulative effect of accounting change as a result of the following:
2000 1999 1998 -------- --------- -------- Computed "expected" income tax (benefit) expense at the undistributed earnings rate.............. $170,786 $(109,260) $127,929 Dividend distributions credit..................... (9,077) -- -- Trade income taxes, net of German federal corporation income tax benefit.................. 12,688 8,758 8,351 Amortization of non-tax deductible goodwill....... 28,380 28,057 30,999 Foreign tax rate differential..................... (20,811) (2,687) (27,799) Non-deductible portion of special charge for Settlement...................................... -- 71,622 -- Other............................................. 7,805 (9,234) (4,114) -------- --------- -------- Provision for income taxes........................ $189,772 $ (12,744) $135,366 ======== ========= ======== Effective tax rate................................ 46.9% (4.9)% 50.2% ======== ========= ========
The tax effects of the temporary differences that give rise to deferred tax assets and liabilities at December 31 are presented below:
2000 1999 -------- -------- Deferred tax assets: Accounts receivable, primarily due to allowance for doubtful accounts.................................... $ 28,083 $ 27,844 Inventory, primarily due to additional costs capitalized for tax purposes, and inventory reserve accounts............................................. 23,479 21,427 Accrued expenses and other liabilities for financial accounting purposes, not currently tax deductible.... 119,439 141,123 Capital leases, principally due to capitalization of costs for tax purposes............................... 955 1,839 Settlement............................................. 5,302 92,469 Net operating loss carryforwards....................... 30,546 21,807 Other.................................................. 5,821 1,895 -------- -------- Total deferred tax assets.............................. $213,625 $308,404 Less: valuation allowance.............................. (9,292) (6,360) -------- -------- Net deferred tax assets................................ $204,333 $302,044 -------- --------
F-44 246 FRESENIUS MEDICAL CARE AG NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
2000 1999 -------- -------- Deferred tax liabilities: Accounts receivable, primarily due to allowance for doubtful accounts.................................... $ 3,526 $ 4,553 Inventory, primarily due to inventory reserve accounts for tax purposes..................................... 5,329 6,262 Accrued expenses and other liabilities deductible for tax prior to financial accounting recognition........ 31,037 40,365 Plant and equipment, principally due to differences in depreciation......................................... 154,605 169,813 Other.................................................. 2,991 2,480 -------- -------- Total deferred tax liabilities......................... 197,488 223,473 -------- -------- Net deferred tax asset................................. $ 6,845 $ 78,571 ======== ========
During 2000 and 1999, the valuation allowance increased by $2,932 and $1,020, respectively, primarily attributable to losses, principally arising in Japan, and partially offset by utilization of operating losses. At December 31, 2000 the Company had approximately $83,607 of net operating losses, of which $3,568 will expire in 2001, $4,395 in 2002, $5,002 in 2003, $4,387 in 2004, $13,746 in 2005, $14,336 in 2018, $3,812 in 2019 and $3,352 in 2020. Substantially all of the remaining $31,009 of net operating losses are not subject to an expiration period. In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities and projected future taxable income in making this assessment. Based upon the level of historical taxable income and projections for future taxable income over the periods which the deferred tax assets are deductible, management believes it is more likely than not the Company will realize the benefits of these deductible differences, net of the existing valuation allowances at December 31, 2000. Provision has not been made for additional taxes on approximately $102,000 undistributed earnings of foreign subsidiaries. The majority of these earnings have been, and will continue to be, reinvested. The earnings could become subject to additional tax if remitted or deemed remitted as dividends. The Company estimates that the distribution of these earnings would result in $6,396 of additional withholding and corporation income taxes. INTRAPERIOD TAX ALLOCATION Income tax expense was allocated among the following items as follows:
2000 1999 1998 -------- -------- -------- Continuing operations.............................. $189,772 $(12,744) $135,366 Operations of discontinued operations.............. -- -- (5,543) Disposal of discontinued businesses................ -- -- (42,772) -------- -------- -------- Total income tax expense........................... $189,772 $(12,744) $ 87,051 ======== ======== ========
F-45 247 FRESENIUS MEDICAL CARE AG NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA) 13. EMPLOYEE BENEFIT PLANS DEFINED BENEFIT PENSION PLANS Plan benefits are generally based on employee years of service and final salary. Consistent with normal business custom in the Federal Republic of Germany, FMC's pension obligations in Germany are unfunded. In the United States, substantially all U.S. employees are covered by National Medical Care's non-contributory, defined benefit pension plan. Each year, National Medical Care contributes to this plan at least the minimum amount required by law. Plan assets consist principally of publicly traded common stock, fixed income securities and cash equivalents. In addition, National Medical Care also sponsors a supplemental executive retirement plan to provide certain key executives with benefits in excess of normal pension benefits. The following provides a reconciliation of benefit obligations, plan assets, and funded status of the plans. Benefits paid as shown in the reconciliation of plan assets include only benefit payments from the Company's funded benefit plans.
2000 1999 1998 -------- -------- -------- Change in benefit obligation: Benefit obligation at beginning of year............ $111,753 $111,832 $ 88,713 Translation loss (gain)............................ (1,748) (3,611) 1,432 Service cost....................................... 11,465 10,040 8,905 Interest cost...................................... 8,148 7,300 6,418 Amendments......................................... -- (5) -- Transfer of plan participants...................... (6) 3,706 28 Actuarial loss (gain).............................. 5,940 (15,826) 9,400 Divestitures....................................... -- -- (1,717) Benefits paid...................................... (3,103) (1,683) (1,347) -------- -------- -------- Benefit obligation at end of year.................. $132,451 $111,753 $111,832 ======== ======== ======== Change on plan assets: Fair value of plan assets at beginning of year..... $ 86,794 $ 77,019 $ 65,088 Actual return on plan assets....................... (2,098) 11,179 13,218 Benefits paid...................................... (2,748) (1,404) (1,287) -------- -------- -------- Fair value of plan assets at end of year........... $ 81,948 $ 86,794 $ 77,019 ======== ======== ======== Funded Status...................................... $(50,503) $(24,961) $(34,813) Unrecognized net gain.............................. (12,593) (31,441) (11,821) Unrecognized prior service cost.................... (4) (4) -- Unrecognized transition obligation................. 226 326 475 -------- -------- -------- Accrued benefit costs.............................. $(62,875) $(56,079) $(46,159) ======== ======== ======== Weighted -- average assumptions as of December 31, Discount rate...................................... 7.30% 7.28% 6.59% Expected return of plan assets..................... 9.70% 9.70% 9.70% Rate of compensation increase...................... 4.90% 4.60% 4.60%
F-46 248 FRESENIUS MEDICAL CARE AG NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
2000 1999 1998 -------- -------- -------- Components of net period benefit cost: Service cost....................................... $ 11,465 $ 10,040 $ 8,905 Interest cost...................................... 8,148 7,300 6,418 Expected return on plan assets..................... (8,345) (7,401) (6,430) Amortization of transition obligation.............. 75 87 56 Amortization unrealized losses..................... -- 61 -- Amortization of prior service cost................. (1) (1) -- Recognized net (gain)/loss......................... (2,429) (520) (857) Curtailment net gain............................... -- -- (1,717) -------- -------- -------- Net periodic benefit costs......................... $ 8,913 $ 9,566 $ 6,375 ======== ======== ========
In addition to the principal pension plans, certain of the Company's other subsidiaries offer separate retirement plans. The total accrued pension cost for these plans was $7,095, $5,499, and $3,600 at December 31, 2000, 1999 and 1998, respectively. The Company does not provide any postretirement benefits to its employees other than those provided under its pension plans and supplemental executive retirement plan. DEFINED CONTRIBUTION PLANS National Medical Care and FUSA sponsor defined contribution plans. Total contributions for the years ended December 31, 2000, 1999 and 1998 were $8,786, $7,298 and $7,195, respectively. 14. MANDATORILY REDEEMABLE TRUST PREFERRED SECURITIES In November 1996, the Company, through Fresenius Medical Care Capital Trust (the "1996 Trust"), a statutory business trust organized under the laws of the State of Delaware, issued $360,000 of 9% Trust Preferred Securities (the "Trust Securities"). FMC owns all of the common securities of the 1996 Trust. The sole asset of the Trust is $360,360 aggregate principal amount of 9% Senior Subordinated Debentures due 2006 of FMC Trust Finance S.a.r.l. Luxembourg, a wholly owned subsidiary of the Company ("Luxco"), and related guarantees by the Company, Fresenius Medical Care Deutschland GmbH ("D-GmbH") and Fresenius Medical Care Holdings, Inc. ("FMCH"); D-GmbH and FMCH being the "Subsidiary Guarantors". (See Note 23 "Supplemental Condensed Combining Information.") The Trust Securities are guaranteed by FMC through a series of undertakings by the Company and the Subsidiary Guarantors. The Trust Securities entitle the holders to distributions payable at an annual rate of 9% of the stated amount and are mandatorily redeemable on December 1, 2006. The holders of the Trust Securities are entitled upon liquidation of the 1996 Trust to a distribution equal to the stated amount of the Trust Securities. Except in limited circumstances, the holders of the Trust Securities have no voting rights. Luxco has the right to redeem the 9% Senior Subordinated Debenture, in whole or in part, at any time or from time to time after December 1, 2001, at specified redemption prices plus accrued and unpaid interest. In connection with any such redemption, the 1996 Trust must redeem a like amount of Trust Securities. In February 1998, the Company, through Fresenius Medical Care Capital Trust II ("Trust II") and Fresenius Medical Care Capital Trust III ("Trust III", and collectively with Trust II, "the 1998 Trusts"), statutory business trusts created under the laws of the State of Delaware, issued $450,000 of 7 7/8% USD Trust Preferred Securities (the "Trust II Securities") and DM300,000 of 7 3/8% DM Trust Preferred F-47 249 FRESENIUS MEDICAL CARE AG NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA) Securities (the "Trust III Securities" and, together with the Trust II Securities, the "Trust Preferred Securities"). FMC owns all of the common securities of the 1998 Trusts. The sole asset of Trust II is $450,450 aggregate principal amount of Luxco 7 7/8% USD Senior Subordinated Debentures due 2008 and related guarantees by the Subsidiary Guarantors. The sole asset of Trust III is DM300,300 aggregate principal amount of Luxco 7 3/8% DM Senior Subordinated Debentures due 2008 and related guarantees by the Subsidiary Guarantors. (See Note 23 "Supplemental Condensed Combining Information.") The Trust Preferred Securities are guaranteed by FMC through a series of undertakings by the Company and the Subsidiary Guarantors. The Trust II and Trust III Securities entitle the holders to distributions payable at the annual rate of 7 7/8% and 7 3/8%, respectively, of the stated amount, and are mandatorily redeemable on February 1, 2008. The holders of the Trust Preferred Securities are entitled, upon liquidation of the 1998 Trusts, to a distribution equal to the stated amount of the Trust Preferred Securities. The Senior Subordinated Debentures issued by Luxco to the 1998 Trusts are not redeemable prior to February 1, 2008, except under specified circumstances. Except in limited circumstances, the holders of the Trust Preferred Securities have no voting rights. 15. MINORITY INTERESTS At December 31, minority interests were as follows:
2000 1999 ------- ------- FMCH Preferred Stock: Preferred Stock, $100 par value -- 6% Cumulative; 40,000 shares authorized; 36,460 outstanding......................................... $ 3,646 $ 3,646 -- 8% Cumulative Class A; 50,000 shares authorized; 16,176 outstanding.................................. 1,618 1,618 -- 8% Noncumulative Class B; 40,000 shares authorized; 21,483 outstanding.................................. 2,148 2,148 Preferred Stock, $0.10 par value -- Noncumulative Class D; 100,000,000 shares authorized; 89,062,316 outstanding.................. 8,906 8,906 ------- ------- Sub-total FMCH minority interest......................... 16,318 16,318 Other minority interest.................................. 4,953 5,456 ------- ------- Total minority interest.................................. $21,271 $21,774 ======= =======
In conjunction with the formation of FMC, each holder of W.R. Grace common stock received one share of a Class D Preferred stock of Fresenius Medical Care Holdings for each share of stock previously held. The Class D Preferred stock entitles the holder to receive a one-time special dividend if (but only if) the cumulative adjusted cash flow to ordinary shareholders (defined as net income plus depreciation and amortization) from January 1, 1997 through December 31, 2001 exceeds $3.7 billion. If cumulative adjusted cash flow meets that threshold, 44.8% of any amount exceeding $3.7 billion will be distributed as a special dividend on the Fresenius Medical Care Holdings Class D Preferred Shares. Fresenius Medical Care Holdings must make a public announcement of the amount, if any, of the special dividend by May 1, 2002. Payment of a special dividend on the Class D Preferred Shares would commence in October 2002. For the period from January 1, 1997 through the end of 2000, cumulative adjusted cash flow for the purpose of the Class D Preferred Shares special dividend calculation was approximately $1.2 billion. Based upon the Company's cumulative adjusted cash flow at December 31, 2000 and its historical trend, the F-48 250 FRESENIUS MEDICAL CARE AG NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA) Company believes that it is unlikely that any special dividend will be paid. The Company has no obligation to contribute any amount to Fresenius Medical Care Holdings to enable it to pay any special dividend. 16. SHAREHOLDERS' EQUITY By resolution of the general meeting on June 10, 1998, our share capital was conditionally increased by up to DM 12,500, divided into 2,500,000 new non-voting Preference shares. This conditional capital increase may be effected only upon exercise of subscription rights granted under the FMC 98 Plan 2. The Company requested and received approval from its shareholders at the annual shareholder meeting on June 2, 1999, to change the currency of the Company's share capital from Deutsche Mark (DM) to euro to prepare for the transition by the European Community to euro which began January 1, 1999 and is scheduled for completion by mid 2002. The exchange rate for DM to euro was set at DM 1.95583 to E1. As a result, the per share nominal value of the Company's Preference shares and Ordinary shares changed from DM 5 per share to E2.55646 per share. For convenience, shareholders approved an increase to the nominal value to E2.56 resulting in a Capital Stock increase of E280 ($290). The increase in value of capital stock was offset by a decrease in additional paid-in-capital. No new shares were issued for this revaluation. The effect of the conversion has been recognized retroactively in the shareholders' equity accounts on the balance sheets as of December 31, 1997 and in the consolidated financial statements. Shareholders' equity accounts have been restated to reflect the reclassification of an amount equal to the nominal value of the increase in Ordinary shares from additional paid in capital. In addition, the Company's shareholders approved a change in the dividend premium for the Preference shares from a percentage of the nominal value per share to an absolute amount. If dividends are declared, the Preference shareholder will receive E0.06 per share more than the dividend for an Ordinary share, but no less than E0.12 per share. In another matter approved by the shareholders, the Company's shares have been changed to no par value. On March 2, 2000, the Company issued 8,974,359 non-voting Preference shares to a limited number of institutional and other accredited investors in exchange for the investors' interests in Franconia Acquisition LLC, an entity formed to acquire dialysis clinics and other related businesses. For financial reporting purposes, the transaction, which generated net proceeds of approximately $344,000, has been accounted for as a financing at fair value. The investors have agreed not to effect sales or transfers of the Preference shares for a period of 24 months after issuance except as permitted by the contribution agreement. After this period, the investors will have rights to require, under specific conditions, that the Company register these Preference shares for sale under the Securities Act of 1933, as amended, and that the Company provide assistance to them in connection with public offerings of their Preference shares outside the United States. After giving effect to the issuance of 8,974,359 non-voting Preference shares in the Franconia transaction the remaining Approved Capital II amounted to E29,533. By resolution of the annual general meeting on May 30, 2000, the authorization of the remaining Approved Capital I and Approved Capital II described above was revoked, however, the management board, with the approval of the supervisory board, was authorized to increase share capital by a maximum amount of: - E30,720,000, corresponding to 12,000,000 Preference shares, by issuing new non-voting Preference shares for cash, new Approved Capital I. - E20,480,000, corresponding to 8,000,000 Preference shares, by issuing new non-voting Preference shares for cash or against contributions in kind, new Approved Capital II. F-49 251 FRESENIUS MEDICAL CARE AG NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA) The authorizations of Approved Capital I and Approved Capital II are effective until May 29, 2005. Statutory preemptive rights will generally be available in connection with the issuance of Preference shares utilizing Approved Capital I, except for fractional amounts required to provide for a round issue amount and a subscription ratio without fractional amounts. The Company may exclude statutory preemptive rights in connection with the issuance of Preference shares using Approved Capital II if the shares are issued against a contribution in kind to acquire a company or an interest in a company or if the shares are issued for cash and the issue price is not materially lower than the price of the shares on the stock exchange. Under the German Stock Corporation Act, the shareholders of a stock corporation may empower the Management Board to issue shares in a specified aggregate nominal value not exceeding 50% of the issued share capital at the time of the passing of the resolution, in the form of Conditional Capital (bedingtes Kapital) or Approved Capital (genehmigtes Kapital). The authorization for the issuance of Approved Capital is limited for a period not exceeding five years from the date the shareholders' resolution becomes effective. On July 26, 2000, the Company completed a public offering of 5,000,000 Preference shares for net proceeds of approximately $185 million. In addition, on July 28, 2000, the underwriters of the public offering exercised options to purchase an additional 750,000 Preference shares, resulting in total net proceeds from the public offering of approximately $213 million. At December 31, 2000, after giving effect to the issuance of 5,750,000 Preference shares in the offering described above the remaining Approved Capital II amounted to E5,760. After giving effect to the issuance of 2,250,000 Preference shares in the Everest acquisition (see Note 22), no additional Preference shares are available for issuance under Approved Capital II. Cash dividends of $51,229 for 1999 in the amount of E0.75 on each Preference share, excluding the Preference shares issued on March 2, 2000, and E0.69 on each Ordinary share, were paid on May 31, 2000. Under the German Stock Corporation Act, the amount of dividends available for distribution to shareholders is based upon the unconsolidated retained earnings of Fresenius Medical Care AG as reported in its balance sheet determined in accordance with the German Commercial Code (Handelsgesetzbuch). If no dividend is declared for two consecutive years after the year for which the Preference shares are entitled to dividends, then the holders of such Preference shares will be entitled to the same voting rights as holders of Ordinary shares until all arrearages are paid. In addition, the payment of dividends by FMC is subject to limitations under the senior credit agreement (see Note 11). In accordance with a contribution agreement between the Company and Fresenius AG, which was entered into in connection with the Agreement and Plan of Reorganization (See Note 1), the Company distributed $4,062 during the year ending December 31, 1998, to Fresenius AG. These funds represented earnings of the former Fresenius Worldwide Division (FWD), prior to the contribution of FWD by Fresenius AG to the Company, as part of the formation of the FMC. These earnings were not distributed at the time of the formation of FMC due to the application of local generally accepted accounting principles in determining the amount of pre-formation earnings and the legal requirement of a shareholder declaration to remit those earnings. In anticipation of a determination of the amount and a positive shareholder declaration, an estimate of the amount that would be due was made. The estimated amount was loaned by the Company to Fresenius AG with any distribution of earnings to be utilized to reduce the receivable from Fresenius AG. During 1998, the $4,062 distribution of earnings was subsequently applied against the receivable by the Company. F-50 252 FRESENIUS MEDICAL CARE AG NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA) In connection with certain acquisitions made during 1997, a subsidiary of the Company issued convertible investment securities (Wandel-GenuSSrechte) with a nominal value of $67,584. The convertible investment securities, which were non-voting, carried a cumulative dividend rate between 6.12% and 6.25% payable only out of legally available earnings of FMC AG and were redeemable ten years from the date of issuance. The Company and the convertible investment security holders also entered into agreements which permitted the Company to exchange, and under certain circumstances permitted the convertible investment security holders to request that the Company exchange, the convertible investment securities solely at the Company's option, for cash or for Preference shares or other specified securities of equal value. As the Company had the unilateral ability to exchange the convertible investment securities for Preference shares and the Preference shares represent permanent equity, the Company had classified the convertible investment securities within shareholders' equity. During the year ended December 31, 1998, a decision was made to redeem a portion of these securities for cash rather than exchange such securities for Preference shares. A total of approximately $61,725 nominal amount of these securities was redeemed during the year ended December 31, 1998. Approximately $5,859 nominal amount of these securities remained outstanding at year-end 1998. At December 31, 1998, it was the intent of the Company to redeem the remaining securities for cash during 1999 and therefore the Company reclassified such amounts as liabilities. These securities were subsequently redeemed for cash during the fourth quarter of 1999. The following table is a reconciliation of the numerators and denominators of the basic and diluted earnings per share computations. Stock options granted under the FMC 1998 Plan 2 are subject to performance criteria. At December 31, 1999, the performance criteria for the 1998 and 1999 stock options granted had not been met. Therefore, the stock options granted have been excluded from the diluted earnings per share computations. On May 30, 2000, the Company's shareholders approved a change to the FMC 98 Plan 2 whereby the impact of the special charge for the Settlement (see Note 2) was excluded from the Company's performance criteria relative to the EBIT growth requirements in the plan. Therefore, at December 31, 2000, the performance criteria had been met and the stock options granted are included in the diluted earnings per share computation for 2000.
2000 1999 1998 ----------- ----------- ----------- Numerators: Income (loss) from continuing operations before cumulative effect of accounting change................ $ 212,075 $ (248,544) $ 131,617 less: Distributions on convertible investment securities.... -- -- (2,752) Dividend arrearages on Preference shares for 1996, declared and paid in 1998.......................... -- -- (974) Preference on Preference shares....................... (1,056) -- (513) ----------- ----------- ----------- Income (loss) available to Preference shares only....... (1,056) -- (1,487) Income (loss) from continuing operations before cumulative effect of accounting change available to all class of shares................................... $ 211,019 $ (248,544) $ 127,378 =========== =========== =========== Loss from discontinued operations, net.................. -- -- (105,897) Cumulative effect of accounting change.................. -- -- (6,589)
F-51 253 FRESENIUS MEDICAL CARE AG NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
2000 1999 1998 ----------- ----------- ----------- Denominators: Weighted average number of: Ordinary shares outstanding........................... 70,000,000 70,000,000 70,000,000 Preference shares outstanding......................... 19,002,118 9,023,341 9,023,341 ----------- ----------- ----------- Total weighted average shares outstanding............. 89,002,118 79,023,341 79,023,341 Potentially dilutive Preference shares................ 302,824 -- 2,522 ----------- ----------- ----------- Total weighted average shares outstanding assuming dilution........................................... 89,304,942 79,023,341 79,025,863 Total weighted average Preference shares outstanding assuming dilution.................................. 19,304,942 9,023,341 9,025,863 Basic income (loss) from continuing operations before cumulative effect of accounting change per Ordinary share................................................. $ 2.37 $ (3.15) $ 1.62 Plus Preference and declared dividend arrearages per Preference share...................................... 0.06 0.00 0.16 ----------- ----------- ----------- Basic income (loss) from continuing operations before cumulative effect of accounting change per Preference share................................................. $ 2.43 $ (3.15) $ 1.78 =========== =========== =========== Fully diluted income (loss) from continuing operations before cumulative effect of accounting change per Ordinary share........................................ 2.36 (3.15) 1.62 Plus Preference and declared dividend arrearages per Preference share assuming dilution.................... 0.06 0.00 0.16 ----------- ----------- ----------- Fully diluted income (loss) from continuing operations before cumulative effect of accounting change per Preference share...................................... $ 2.42 $ (3.15) $ 1.78 =========== =========== =========== Basic and fully diluted loss from discontinued operations per Ordinary and Preference share.......... 0.00 0.00 (1.34) Basic and fully diluted accumulative effect of accounting change per Ordinary and Preference share... 0.00 0.00 (0.08)
17. STOCK OPTIONS In connection with the formation of Fresenius Medical Care in 1996, certain options outstanding under stock option plans of W.R. Grace and FUSA were exchanged, for equivalent options with respect to FMC Ordinary shares (the "FMC Rollover Plan"). The resulting total number of shares issuable upon exercise of options under the FMC Rollover Plan at the formation of FMC, September 30, 1996, was approximately 333,000. No additional Ordinary shares are available for granting of options under the FMC Rollover Plan. The Ordinary shares issuable upon exercise of FMC Rollover options were issued to Fresenius AG which is holding the shares pending exercise of the options. Fresenius AG has agreed, with respect to the Ordinary shares underlying options related to W.R. Grace common stock, to not exercise voting power over such Ordinary shares and to return any dividends paid. Upon exercise of any of the FMC Rollover options, the exercise price will be paid to the Company and Fresenius AG will deliver the Ordinary shares to the option holder. Upon cancellation or expiration without exercise of options formerly relating to W.R. Grace common stock, the underlying Ordinary shares held by Fresenius AG will be transferred to FMC at no cost to it. Upon cancellation or expiration without exercise of options formerly relating to FUSA common stock, the underlying Ordinary shares will revert to Fresenius AG. During the year ended December 31, 2000, 34,337 FMC Rollover Plan options were exercised by employees. In connection therewith, Fresenius AG transferred 11,446 Ordinary shares to employees and F-52 254 FRESENIUS MEDICAL CARE AG NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA) remitted $247 to the Company. During the same period, 7,643 options were canceled. At December 31, 2000, the $247 has been accounted for as a capital contribution within additional paid in capital. Rollover plan options for 182,006 Ordinary ADSs were exercisable as of December 31, 2000 at an weighted average exercise price of $7.88. FMC PLAN Immediately prior to the formation of Fresenius Medical Care, FMC adopted a stock incentive plan (the "FMC Plan") for FMC's key management and executive employees. Under the FMC Plan, eligible employees will have the right to acquire Preference shares of the Company. Awards under the FMC Plan are evidenced by a non-transferable convertible bond and corresponding non-recourse loan to the employee, secured solely by the bond with which it was made. The Company has the right to offset its obligation on a convertible bond against the employee obligation on the related loan; therefore, the convertible bond obligations and employee loan receivables are not reflected the Company's consolidated financial statements. The bonds mature in ten years and are generally fully convertible after three or five years. Each convertible bond, which is DM denominated, entitles the holder thereof, upon payment of a conversion price equal to the fair market value of the Preference shares on the award date, to convert the bond into a number of ADSs representing Preference shares equal to the face amount of the bond divided by the Preference shares' nominal value (DM5 per Preference share). The following table shows the number of Preference shares available and the average price range (in $) for the FMC Plan.
AVERAGE SHARES PRICE RANGE -------------- -------------- (IN THOUSANDS) FMC Plan Balance at December 31, 1997................... 827 $55.59 - 78.33 Forfeited................................. 723 55.59 - 78.33 --- -------------- Balance at December 31, 1998................... 104 55.59 - 78.33 Forfeited................................. 10 55.59 - 78.33 --- -------------- Balance at December 31, 1999................... 94 55.59 - 78.33 --- -------------- Forfeited................................. 26 55.59 - 78.33 --- -------------- Balance at December 31, 2000................... 68 $55.59 - 78.33 === ============== Exercisable at December 31, 2000............... 68 $55.59 - 78.33 === ==============
FMC 98 PLAN 1 AND PLAN 2 During 1998, the Company adopted two new stock incentive plans ("FMC 98 Plan 1" and "FMC 98 Plan 2") for FMC's key management and executive employees. Under FMC 98 Plan 1, eligible employees have the right to acquire Preference shares of the Company. Grants for these rights (the "Grants") under FMC 98 Plan 1 will be evidenced by a non-transferable convertible bond and corresponding non-recourse loan to the employee, secured solely by the bond with which it was made. The Company has the right to offset its obligation on a convertible bond against the employee obligation on the related loan; therefore, the convertible bond obligations and employee loan receivables are not reflected in the Company's consolidated financial statements. The bonds mature in ten years and are generally fully convertible after three years. Each convertible bond, which is DM denominated, entitles the holder thereof, upon payment of a conversion price equal to the fair market value of the Preference shares one day after the grant date, F-53 255 FRESENIUS MEDICAL CARE AG NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA) to convert the bond into a number of Preference shares equal to the face amount of the bond divided by the Preference shares' nominal value (DM5 per Preference share). FMC 98 Plan 1 was subsequently amended 1999 and 2000 to increase the number of Preference shares available for issuance pursuant to grants under FMC 98 Plan 1 by 450,000 and 660,000 shares, respectively. The maximum number of Preference shares that may be issued under this plan is 2,443,333 less any shares issued, or subject to issue, under the FMC Plan. Any shares available due to forfeiture of Grants under the FMC Plan would be considered available under FMC 98 Plan 1 as long as the total Preference shares issued under both plans does not exceed the 2,443,333 shares noted above. Under FMC 98 Plan 2, eligible employees have the right to acquire Preference shares (the "Options") of the Company. The share price of the Preference share shall be equal to the average of the official daily quotation prices of the Preference shares on the Frankfurt Stock Exchange on the thirty days (30) of trading immediately prior to the date of grant of the award. One third of an option vests on each of the second, third and fourth anniversary of the award date, provided that the Company achieves certain performance criteria for the full fiscal year following the grant date in comparison to its performance for the full fiscal year preceding the grant date. On May 30, 2000, the Company's shareholders approved a change to the FMC 98 Plan 2 whereby the impact of the special charge for Settlement (see Note 2) was excluded from the Company's performance criteria relative to the EBIT growth requirements in the plan. The term of FMC 98 Plan 2 is five years and not more than 20% of the total options available under the plan may be issued in any year. Options granted under FMC 98 Plan 2 have a 10-year term. The maximum number of Preference shares that may be issued under this plan is 2,500,000 shares, of which 500,000 are designated for Management Board members and 2,000,000 are for other managerial staff. Each option is exercisable into one Preference share. The following table shows the number of Preference shares available and the average price range (in $ and E) for FMC 98 Plan 1 and FMC 98 Plan 2.
AVERAGE AVERAGE SHARES PRICE RANGE PRICE RANGE -------------- -------------- -------------- (IN THOUSANDS) FMC 98 Plan 1 Balance at December 31, 1997........... -- Granted.............................. 1,024 E42.44 - 56.24 $39.49 - 52.33 ----- -------------- -------------- Balance at December 31, 1998........... 1,024 42.44 - 56.24 39.49 - 52.33 ----- -------------- -------------- Granted.............................. 572 32.90 30.61 Forfeited............................ 140 32.90 - 56.24 30.61 - 52.33 ----- -------------- -------------- Balance at December 31, 1999........... 1,456 32.90 - 56.24 30.61 - 52.33 ----- -------------- -------------- Granted.............................. 653 40.70 - 49.00 37.87 - 45.59 Exercised............................ 10 32.90 - 42.44 30.61 - 39.49 Forfeited............................ 303 32.90 - 56.24 30.61 - 52.33 ----- -------------- -------------- Balance at December 31, 2000........... 1,796 E32.90 - 56.24 $30.61 - 52.33 ===== ============== ============== Exercisable at December 31, 2000....... 660 E32.90 - 56.24 $30.61 - 52.33 ===== ============== ==============
F-54 256 FRESENIUS MEDICAL CARE AG NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
AVERAGE AVERAGE SHARES PRICE RANGE PRICE RANGE -------------- -------------- -------------- (IN THOUSANDS) FMC 98 Plan 2 Balance at December 31, 1997........... -- Granted.............................. 258 E 44.66 $ 41.56 ----- -------------- -------------- Balance at December 31, 1998........... 258 44.66 41.56 ----- -------------- -------------- Granted.............................. 297 32.41 30.16 Forfeited............................ 5 32.41 - 44.66 30.16 - 41.56 Balance at December 31, 1999........... 550 32.41 - 44.66 30.16 - 41.56 ----- -------------- -------------- Granted.............................. 321 47.64 44.33 Exercised............................ 7 44.66 41.56 Forfeited............................ 40 32.41 - 47.64 30.16 - 44.33 ----- -------------- -------------- Balance at December 31, 2000........... 824 E32.41 - 47.64 $30.16 - 44.33 ===== ============== ============== Exercisable at December 31, 2000....... 78 E 44.66 $ 41.56 ===== ============== ==============
Proceeds totaling $638 from exercise of 17,393 shares under FMC 98 Plan 1 and FMC 98 Plan 2 in 2000 were recorded as a capital contribution. FAIR VALUE STOCK OPTIONS The per share weighted-average fair value of stock options granted during 2000, 1999 and 1998 was $16.76, $13.06 and $14.20, respectively, on the date of the grant using the Black-Scholes option-pricing model with the weighted-average assumptions presented below.
2000 1999 1998 --------- --------- --------- Weighted-average assumptions: Expected dividend yield.......................... 1.50% 1.00% 1.75% Risk-free interest rate.......................... 5.50% 5.56% 4.26% Expected volatility.............................. 40.00% 35.00% 35.00% Expected life of option.......................... 5.3 years 5.3 years 5.3 years
F-55 257 FRESENIUS MEDICAL CARE AG NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA) The Company applies APB Opinion No. 25 in accounting for stock compensation and, accordingly, recognized compensation expense of approximately $3,980 for stock options granted in 2000,1999 and 1998. No compensation cost has been recognized in 1998 and 1997 for stock options in the consolidated financial statements. Prior to 1998, no stock options had been granted which would have resulted in significant compensation costs under SFAS No. 123. Had the Company determined compensation cost based on the fair value at the grant date for its stock options under SFAS No. 123, the Company's net income would have been reduced to the pro forma amounts indicated below:
2000 1999 1998 -------- --------- ------- Net income (loss) As reported...................................... $212,075 $(248,544) $19,131 Effect of FMC Plan benefit (expense)............. (295) (247) 1,726 Effect of FMC 98 Plans (expense)................. (3,581) (2,253) (2,967) Effect of 1999 option grants..................... 25 (615) Effect of 2000 option grants..................... (4,242) -------- --------- ------- Pro forma........................................ $203,982 $(251,659) $17,890 Basic net income (loss) per: Ordinary share As reported................................... $ 2.37 $ (3.15) $ 0.20 Pro forma..................................... $ 2.28 $ (3.19) $ 0.18 Preference share As reported................................... $ 2.43 $ (3.15) $ 0.36 Pro forma..................................... $ 2.34 $ (3.19) $ 0.34 Fully diluted net income (loss) per: Ordinary share As reported................................... $ 2.36 $ (3.15) $ 0.20 Pro forma..................................... $ 2.27 $ (3.19) $ 0.18 Preference share As reported................................... $ 2.42 $ (3.15) $ 0.36 Pro forma..................................... $ 2.33 $ (3.19) $ 0.34
The Company revised its estimates of compensation costs for the FMC Plan due to the large amount of forfeitures and cancellations that occurred in 1998. This resulted in a significant reduction in the pro forma compensation cost for 1998 relating to the FMC Plan. The pro forma compensation cost relating to options still outstanding at December 31, 1998 was $348. This amount has been included in determining the total compensation benefit for the FMC Plan for 1998. 18. COMMITMENTS AND CONTINGENCIES OPERATING LEASES The Company leases buildings and machinery and equipment under various lease agreements expiring on dates through 2010. Rental expense recorded for operating leases for the years ended December 31, 2000, 1999, and 1998 was $192,910, $160,624, and $122,459, respectively. In September 2000, FMCH entered into an amended operating lease agreement with a bank that covers approximately $65,165 of equipment in its dialyzer manufacturing facility in Ogden, Utah. The agreement has a basic term expiration date of January 1, 2010, renewal options and a purchase option at the greater of 20% of the original cost or the fair market value. F-56 258 FRESENIUS MEDICAL CARE AG NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA) Future minimum rental payments under noncancelable operating leases for the five years succeeding December 31, 2000 are: 2001...................................................... $129,883 2002...................................................... 109,491 2003...................................................... 96,331 2004...................................................... 122,673 2005...................................................... 57,534 Thereafter................................................ 110,935 -------- $626,847 ========
LEGAL PROCEEDINGS COMMERCIAL INSURER LITIGATION In 1997, FMCH, NMC, and certain named NMC subsidiaries were served with a civil complaint filed by Aetna Life Insurance Company in the U.S. District Court for the Southern District of New York. The lawsuit alleges inappropriate billing practices for nutritional therapy, diagnostic and clinical laboratory tests and misrepresentations. In April 1999, Aetna amended its complaint to include its affiliate, Aetna U.S. Healthcare, Inc., as an additional plaintiff, and to make certain other limited changes in its pleading. The amended complaint seeks unspecified damages and costs. In February 2000, FMCH was served with a similar complaint filed by Connecticut General Life Insurance Company, Equitable Life Assurance Society for the United States, Cigna Employee Benefits Services, Inc. and Guardian Life Insurance Company of America, Inc. (Connecticut General Life Insurance Company et al v. National Medical Care et al, 00-Civ-0932) seeking unspecified damages and costs. The Company, FMCH, NMC and its subsidiaries believe that there are substantial defenses to the claims asserted, and intend to vigorously defend both lawsuits. Other private payors have contacted FMCH and may assert that NMC received excess payment and, similarly, may join either lawsuit or file their own lawsuit seeking reimbursement and other damages. FMCH has filed counterclaims against the plaintiffs in these matters based on inappropriate claim denials and delays in claim payments. Although the ultimate outcome on the Company of these proceedings cannot be predicted at this time, an adverse result could have a material adverse effect on the Company's business, financial condition and result of operations. OBRA 93 The Omnibus Budget Reconciliation Act of 1993 affected the payment of benefits under Medicare and employer health plans for dual-eligible ESRD patients. In July 1994, the Health Care Financing Administration issued an instruction to Medicare claims processors to the effect that Medicare benefits for the patients affected by that act would be subject to a new 18-month "coordination of benefits" period. This instruction had a positive impact on National Medical Care's dialysis revenues because, during the 18-month coordination of benefits period, patients' employer health plans were responsible for payment, which was generally at rates higher than those provided under Medicare. In April 1995, the Health Care Financing Administration issued a new instruction, reversing its original instruction in a manner that would substantially diminish the positive effect of the original instruction on National Medical Care's dialysis business. The Health Care Financing Administration further proposed that its new instruction be effective retroactive to August 1993, the effective date of the Omnibus Budget Reconciliation Act of 1993. F-57 259 FRESENIUS MEDICAL CARE AG NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA) National Medical Care ceased to recognize the incremental revenue realized under the original instruction as of July 1, 1995, but it continued to bill employer health plans as primary payors for patients affected by the Omnibus Budget Reconciliation Act of 1993 through December 31, 1995. As of January 1, 1996, National Medical Care commenced billing Medicare as the primary payor for dual eligible ESRD patients affected by the act, and then began to re-bill in compliance with the revised policy for services rendered between April 24 and December 31, 1995. On May 5, 1995, National Medical Care filed a complaint in the U.S. District Court for the District of Columbia (National Medical Care, Inc. and Bio-Medical Applications of Colorado, Inc. d/b/a Northern Colorado Kidney Center v. Shalala, C.A. No.95-0860 (WBB)) seeking to preclude the Health Care Financing Administration from retroactively enforcing its April 24, 1995 implementation of the Omnibus Budget Reconciliation Act of 1993 provision relating to the coordination of benefits for dual eligible ESRD patients. On May 9, 1995, National Medical Care moved for a preliminary injunction to preclude the Health Care Financing Administration from enforcing its new policy retroactively, that is, to billing for services provided between August 10, 1993 and April 23, 1995. On June 6, 1995, the court granted National Medical Care's request for a preliminary injunction and in December of 1996, National Medical Care moved for partial summary judgment seeking a declaration from the Court that the Health Care Financing Administration's retroactive application of the April 1995 rule was legally invalid. The Health Care Financing Administration cross-moved for summary judgement on the grounds that the April 1995 rule was validly applied prospectively. In January 1998, the court granted National Medical Care's motion for partial summary judgment and entered a declaratory judgment in favor of National Medical Care, holding the Health Care Financing Administration's retroactive application of the April 1995 rule legally invalid. Based on its finding, the Court also permanently enjoined the Health Care Financing Administration from enforcing and applying the April 1995 rule retroactively against National Medical Care. The Court took no action on the Health Care Financing Administration's motion for summary judgement pending completion of the outstanding discovery. On October 5, 1998, National Medical Care filed its own motion for summary judgement requesting that the Court declare the Health Care Financing Administration's prospective application of the April 1995 rule invalid and permanently enjoin the Health Care Financing Administration from prospectively enforcing and applying the April 1995 rule. The Court has not yet ruled on the parties' motions. The Health Care Financing Administration elected not to appeal the Court's June 1995 and January 1998 orders. The Health Care Financing Administration may, however, appeal all rulings at the conclusion of the litigation. If the Health Care Financing Administration should successfully appeal so that the revised interpretation would be applied retroactively, National Medical Care may be required to refund the payments received from employer health plans for services provided after August 10, 1993 under the Health Care Financing Administration's original implementation, and to re-bill Medicare for the same services, which could result in a loss to National Medical Care of approximately $120 million attributable to all periods prior to December 31, 1995. Also, in this event, the business, financial condition and results of operations would be materially adversely affected. OTHER LITIGATION AND POTENTIAL EXPOSURES From time to time, the Company is a party to or may be threatened with other litigation arising in the ordinary course of its business. Management regularly analyzes current information including, as applicable, the Company's defenses and insurance coverage and, as necessary, provides accruals for probable liabilities for the eventual disposition of these matters. The ultimate outcome of these matters is not expected to materially affect the Company's financial position, results of operations or cash flows. The Company, like other health care providers, conducts its operations under intense government regulation and scrutiny. The Company must comply with regulations which relate to or govern the safety and efficacy of medical products and supplies, the operation of manufacturing facilities, laboratories and F-58 260 FRESENIUS MEDICAL CARE AG NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA) dialysis clinics, and environmental and occupational health and safety. The Company must also comply with the U.S. anti-kickback statute, the False Claims Act, the Stark Law, and other federal and state fraud and abuse laws. Applicable laws or regulations may be amended, or enforcement agencies or courts may make interpretations that differ from the Company's or the manner in which the Company conduct its business. In the U.S., enforcement has become a high priority for the federal government and some states. In addition, the provisions of the False Claims Act authorizing payment of a portion of any recovery to the party bringing the suit encourage private plaintiffs to commence "whistle blower" actions. By virtue of this regulatory environment, as well as our corporate integrity agreement with the government, the Company expects that its business activities and practices will continue to be subject to extensive review by regulatory authorities and private parties and continuing inquiries, claims and litigation relating to its compliance with applicable laws and regulations. The Company may not always be aware that an inquiry or action has begun, particularly in the case of "whistle blower" actions, which are initially filed under court seal. The Company operates a large number of facilities throughout the U.S. In such a decentralized system, it is often difficult to maintain the desired level of oversight and control over the thousands of individuals employed by many affiliate companies. The Company relies upon its management structure, regulatory and legal resources, and the effective operation of its compliance program to direct, manage and monitor the activities of these employees. On occasion, the Company may identify instances where employees, deliberately or inadvertently, have submitted inadequate or false billings. The actions of such persons may subject the Company and its subsidiaries to liability under the False Claims Act, among other laws, and the Company cannot predict whether law enforcement authorities may use such information to initiate further investigations of the business practices disclosed or any of its other business activities. Physicians, hospitals and other participants in the health care industry are also subject to a large number of lawsuits alleging professional negligence, malpractice, product liability, worker's compensation or related claims, many of which involve large claims and significant defense costs. The Company has been subject to these suits due to the nature of its business and the Company expects that those types of lawsuits may continue. Although the Company maintains insurance at a level which it believes to be prudent, the Company cannot assure that the coverage limits will be adequate or that insurance will cover all asserted claims. A successful claim against the Company or any of its subsidiaries in excess of insurance coverage could have a material adverse effect upon the Company and the results of its operations. Any claims, regardless of their merit or eventual outcome, also may have a material adverse effect on the Company's reputation and business. The Company has also had claims asserted against it and has had lawsuits filed against it relating to businesses that it has acquired or divested. These claims and suits relate both to operation of the businesses and to the acquisition and divestiture transactions. The Company has asserted its own claims, and claims for indemnification. Although the ultimate outcome on the Company cannot be predicted at this time, an adverse result could have a material adverse effect upon the Company's business, financial condition, and results of operations. CONTINGENT NON-NMC LIABILITIES OF W. R. GRACE & CO. (NOW KNOWN AS FRESENIUS MEDICAL CARE HOLDINGS, INC.) The Company was formed as a result of a series of transactions pursuant to the Agreement and Plan of Reorganization (the "Merger") dated as of February 4, 1996 by and between W.R. Grace & Co. ("Grace") and Fresenius AG. In connection with the Merger, W.R. Grace & Co.-Conn. ("Grace Chemicals") agreed to indemnify the Company and NMC against all liabilities of the Company and its successors, whether relating to events occurring before or after the Merger, other than liabilities arising F-59 261 FRESENIUS MEDICAL CARE AG NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA) from or relating to NMC operations. The Company may be contingently liable for certain liabilities with respect to pre-Merger matters that are not related to NMC operations. Grace Chemicals has filed for reorganization under Chapter 11 of the U.S. Bankruptcy Code. If Grace Chemicals' indemnity obligation is terminated or limited as a result of this bankruptcy proceeding, and the Company is held liable for pre-Merger obligations of Grace Chemicals, the Company's business, financial condition, and results of operations may be adversely affected. On September 28, 2000, Mesquita, et al. v. W. R. Grace & Company, et al. (Sup. Court of Calif., S.F. County, #315465) was filed by plaintiffs claiming to be creditors of Grace Chemicals as a class action against Grace Chemicals, certain U.S. affiliates of the Company, and other defendants, principally alleging that the Merger was a fraudulent transfer, violated the uniform fraudulent transfer act, and constituted a conspiracy. An amended complaint (Abner et al. v. W. R. Grace & Company, et al.) and an additional class action (Woodward v. Sealed Air Corporation, et al, USDC Boston, No. 01 10547 PBS), were filed subsequently with substantially similar allegations. The Company has requested indemnification from Grace Chemicals pursuant to the Merger agreement. If the Merger is determined to have been a fraudulent transfer, if material damages are proved by the plaintiff, and if the Company is not able to collect, in whole or in part on the indemnity, a judgment could have a material adverse effect on the Company's business, financial condition and results of operations. The Company believes that no fraudulent transfer or conspiracy occurred and intends to defend the case vigorously. Were events to violate the tax-free nature of the Merger, the resulting tax liability would be the obligation of the Company. Subject to representations by Grace Chemicals, the Company and Fresenius AG, Grace Chemicals has agreed to indemnify the Company for such a tax liability. If the Company was not able to collect on the indemnity, the tax liability would have a material adverse effect on the Company's business, the financial condition of the Company and the results of operations. 19. FINANCIAL INSTRUMENTS MARKET RISK The Company is exposed to market risk from changes in interest rates and foreign exchange rates. In order to manage the risk of interest rate and currency exchange rate fluctuations, the Company enters into various hedging transactions with investment grade financial institutions as authorized by the Company's Management Board. The Company does not use financial instruments for trading purposes. FOREIGN EXCHANGE RISK MANAGEMENT The Company conducts business on a global basis in several international currencies. As such, it is exposed to movements in foreign currency exchange rates. The Company enters into foreign exchange forward and option contracts to reduce certain currency exposures. The Company hedges only those currency exposures associated with certain nonfunctional currency assets and liabilities. Gains and losses on the contracts are included in selling, general and administrative expenses and offset foreign exchange gains or losses from the revaluation of intercompany balances or other assets and liabilities denominated in currencies other than the functional currency of the reporting entity. The Company's forward currency contracts generally range from 1 to 36 months in original maturity. Foreign F-60 262 FRESENIUS MEDICAL CARE AG NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA) exchange contracts outstanding, their unrealized gains and losses and the related credit exposure of all contracts with unrealized gains as of December 31, 2000 are summarized as follows:
CONTRACT UNREALIZED CREDIT AMOUNT GAIN/(LOSS) EXPOSURE -------- ----------- -------- Purchases of currencies against U.S. dollar........ $490,438 $22,174 $22,174 Sales of currencies against U.S. dollar............ 6,836 74 77 Sales of other currencies against euro............. 61,005 3,149 3,180 Purchases of other currencies against euro......... 11,975 (128) 1 -------- ------- ------- Total.............................................. $570,254 $25,269 $25,432 ======== ======= =======
The Company's foreign exchange contracts contain credit risk in that its bank counterparties may be unable to meet the terms of the agreements. The potential risk of loss with any one party resulting from this type of credit risk is monitored. Management does not expect any material losses as a result of default by other parties. INTEREST RATE RISK MANAGEMENT The Company enters into derivatives, particularly interest rate swaps, to protect interest rate exposures arising from long-term and short-term borrowings and accounts receivable securitization programs at floating rates by effectively swapping them into fixed rates. Under interest rate swaps, the Company agrees with other parties to exchange, at specified intervals, the difference between fixed-rate and floating-rate interest amounts calculated by reference to an agreed notional amount. Interest rate hedging contracts outstanding as of December 31, 2000 and 1999 are summarized in the following table.
2000 1999 ---------------------- ---------------------- NOTIONAL CREDIT NOTIONAL CREDIT AMOUNT EXPOSURE AMOUNT EXPOSURE ---------- -------- ---------- -------- U.S. dollar interest rate swaps................ $1,050,000 $0 $1,350,000 $3,766 Forward starting dollar interest rate derivatives.................................. $ 0 $0 $ 250,000 $7,612 Yen interest rate swap......................... $ 8,703 $0 $ 0 $ 0
The notional amounts of derivatives do not represent amounts exchanged by the parties and, thus, are not a measure of credit exposure. The amounts exchanged are determined by reference to the notional amounts and the other terms of the derivatives. FMC is exposed to credit-related losses in the event of nonperformance by counterparties to financial instruments but does not expect any counterparties to fail to meet their obligations. The current credit exposure of derivatives is represented by the fair value of contracts with a positive fair value at the reporting date. The Company had receive-variable/pay-fixed swaps with nominal amounts of $1,050,000 and Japanese Yen 1,000,000 with average pay rates of 6.52% and 3.10%, respectively, as of December 31, 2000. FAIR VALUE OF FINANCIAL INSTRUMENTS The following table presents the carrying amounts and fair values of the Company's financial instruments at December 31, 2000 and 1999. FASB Statement No. 107, Disclosures about Fair Value of Financial Instruments, defines the fair value of a financial instrument as the amount at which the F-61 263 FRESENIUS MEDICAL CARE AG NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA) instrument could be exchanged in a current transaction between willing parties, other than in a forced or liquidation sale.
2000 1999 -------------------- -------------------- CARRYING FAIR CARRYING FAIR AMOUNT VALUE AMOUNT VALUE -------- -------- -------- -------- Nonderivatives Assets Cash and cash equivalents..................... $ 64,577 $ 64,577 $ 34,760 $ 34,760 Receivables................................... 753,674 753,674 667,739 667,739 IDPN receivables.............................. 5,189 5,189 59,151 59,151 Liabilities Accounts payable................................ 281,197 281,197 282,573 282,573 Income taxes payable.......................... 117,572 117,572 78,438 78,438 Debt.......................................... 826,063 826,063 801,260 801,260 Trust Preferred Securities.................... 952,727 897,827 964,103 944,044 Derivatives: Foreign exchange contracts.................... 12,197 25,269 (4,384) (14,783) U.S. dollar interest rate hedges.............. 0 (24,619) 0 9,242 Yen interest rate hedges...................... 0 (527) 0 0
The carrying amounts in the table are included in the statement of financial position under the indicated captions, except for derivative asset amounts, which are included in other assets. ESTIMATION OF FAIR VALUES The significant methods and assumptions used in estimating the fair values of financial instruments are as follows: Short-term financial instruments are valued at their carrying amounts included in the statement of financial position, which are reasonable estimates of fair value due to the relatively short period to maturity of the instruments. This approach applies to cash and cash equivalents, receivables, accounts payable and income taxes payable. Because the Company's long-term bank debt represents borrowings from a syndicated bank credit facility, the long-term bank debt is valued at its carrying amount because the actual drawings under the facility carry interest on a variable basis which reflects actual money market conditions, plus specific margins which represent Company-related performance ratios as well as the entire set of terms and conditions including covenants as determined in the credit agreement. The fair value of the Trust Preferred Securities is based upon market quotes. The fair value of derivatives generally reflects the estimated amounts that the Company would receive or pay to terminate the contracts at the reporting date, thereby taking into account the current unrealized gains or losses of open contracts. Dealer quotes are available for all of the Company's derivatives. 20. BUSINESS SEGMENT INFORMATION Effective January 1, 1998, Fresenius Medical Care AG (1) reorganized its reporting structure to conform to the manner in which the Company is managed and (2) adopted SFAS No. 131, Disclosures about Segments of an Enterprise and Related Information. SFAS No. 131 establishes the standards for F-62 264 FRESENIUS MEDICAL CARE AG NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA) reporting information about operating segments in annual financial statements and requires selected information about operating segments in interim financial reports issued to stockholders. It also establishes standards for related disclosures about products and services, and geographic areas. Operating segments are defined as components of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision maker, or decision making group, in deciding how to allocate resources and in assessing performance. FMC's chief operating decision maker is the Chief Executive Officer. The accounting policies of the operating segments are the same as those the Company uses in preparing its consolidated financial statements. Commencing with the period ended March 31, 1999, the Company has identified three segments, North America, International, and Asia Pacific, which were determined based upon how the Company manages its businesses. All segments are primarily engaged in providing kidney dialysis and manufacturing and distributing products and equipment for the treatment of end-stage renal disease. Additionally, the North America segment engages in performing clinical laboratory testing and renal diagnostic services. The Company has aggregated the International and Asia Pacific operating segments as "International." The segments are aggregated due to their similar economic characteristics. These characteristics include the same products sold, the same type patient population, similar methods of distribution of products and services and similar economic environments. Management evaluates each segment using a measure that reflects all of the segment's controllable revenues and expenses. Management believes that the most appropriate measure in this regard is earnings before interest and taxes (EBIT). In addition to EBIT, management believes that earnings before interest, taxes, depreciation and amortization (EBITDA) is helpful for investors as a measurement of the segment's and the Company's ability to generate cash and to service its financing obligations. EBITDA is also the basis for determining compliance with certain covenants contained in the Company's principal senior bank credit agreement and indentures relating to the Trust Preferred Securities. Management has excluded the effects of the special charge in the calculation of EBIT and EBITDA in 1999. EBITDA should not be construed as an alternative to net earnings determined in accordance with generally accepted accounting principles or to cash flow from operations, investing activities or financing activities or as a measure of cash flows. The Company believes its EBIT calculation is the functional equivalent of operating income. Because EBITDA and EBIT are not calculated consistently by all companies, the presentation herein may not be comparable to other similarly titled measures of other companies. Approximately 40% of the Company's worldwide revenue is derived from sources subject to regulations under U.S. governmental programs. Information pertaining to the Company's two business segments is set forth below:
NORTH AMERICA INTERNATIONAL CORPORATE TOTAL ---------- ------------- --------- ---------- 2000 Net revenue external customers..................... $3,083,095 $1,118,243 $ -- $4,201,338 Inter-segment revenue.............................. 2,226 36,677 (38,903) ---------- ---------- -------- ---------- Total net revenue.................................. 3,085,321 1,154,920 (38,903) 4,201,338 ---------- ---------- -------- ----------
F-63 265 FRESENIUS MEDICAL CARE AG NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
NORTH AMERICA INTERNATIONAL CORPORATE TOTAL ---------- ------------- --------- ---------- EBITDA............................................. $ 645,549 $ 269,943 $ (1,825) $ 913,667 Depreciation and amortization...................... (222,495) (68,733) (1,626) (292,854) ---------- ---------- -------- ---------- EBIT............................................... 423,054 201,210 (3,451) 620,813 ---------- ---------- -------- ---------- Segment assets..................................... 4,571,069 1,375,526 32,358 5,978,953 Capital expenditures and acquisitions(1)........... 228,177 274,290 100 502,567 1999 Net revenue external customers..................... $2,807,186 $1,033,243 $ -- $3,840,429 Inter-segment revenue.............................. 4,195 42,853 (47,048) -- ---------- ---------- -------- ---------- Total net revenue.................................. 2,811,381 1,076,096 (47,048) 3,840,429 ---------- ---------- -------- ---------- EBITDA............................................. 611,478 243,373 (10,429) 844,422 Depreciation and amortization...................... (217,584) (64,674) (1,950) (284,208) ---------- ---------- -------- ---------- EBIT............................................... 393,894 178,699 (12,379) 560,214 ---------- ---------- -------- ---------- Segment assets..................................... 4,653,058 1,064,108 35,217 5,752,383 Capital expenditures and acquisitions(2)........... 146,498 114,774 330 261,602 1998 Net revenue external customers..................... $2,562,603 $ 943,073 $ -- $3,505,676 Inter-segment revenue.............................. 2,159 43,476 (45,635) -- ---------- ---------- -------- ---------- Total net revenue.................................. 2,564,762 986,549 (45,635) 3,505,676 ---------- ---------- -------- ---------- EBITDA............................................. 548,986 227,789 (8,813) 767,962 Depreciation and amortization...................... (214,940) (62,362) (1,682) (278,984) ---------- ---------- -------- ---------- EBIT............................................... 334,046 165,427 (10,495) 488,978 ---------- ---------- -------- ---------- Segment assets..................................... 4,630,168 961,972 87,279 5,679,419 Capital expenditures and acquisitions(3)........... 202,983 177,886 761 381,630
- --------------- (1) International acquisitions exclude $13,614 of non-cash acquisitions for 2000 (2) International acquisitions exclude $9,462 of non-cash acquisitions for 1999 (3) North America acquisitions exclude $41,805 of non-cash acquisitions for 1998 F-64 266 FRESENIUS MEDICAL CARE AG NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
2000 1999 1998 --------- --------- --------- Reconciliation of measures to consolidated totals Total EBITDA of reporting segments............ $ 915,492 $ 854,851 $ 776,775 Total depreciation and amortization........... (292,854) (284,208) (278,984) Special charge for Settlement................. -- (601,000) -- Corporate expenses............................ (1,825) (10,429) (8,813) Interest expense.............................. (195,569) (226,218) (228,182) Interest expense on obligation related to Settlement................................. (29,947) -- -- Interest income............................... 9,411 8,094 8,641 --------- --------- --------- Total income (loss) from continuing operations before income taxes, minority interest and cumulative effect of accounting change..... $ 404,708 $(258,910) $ 269,437 ========= ========= ========= Total EBIT of reporting segments.............. 624,264 572,593 499,473 Special charge for Settlement................. -- (601,000) -- Corporate expenses............................ (3,451) (12,379) (10,495) Interest expense.............................. (195,569) (226,218) (228,182) Interest expense on obligation related to Settlement................................. (29,947) -- -- Interest income............................... 9,411 8,094 8,641 --------- --------- --------- Total income (loss) from continuing operations before income taxes, minority interest and cumulative effect of accounting change..... $ 404,708 $(258,910) $ 269,437 ========= ========= ========= Depreciation and amortization Total depreciation and amortization of reporting segments......................... 291,228 282,258 277,302 Corporate depreciation and amortization....... 1,626 1,950 1,682 --------- --------- --------- Total depreciation and amortization........... $ 292,854 $ 284,208 $ 278,984 ========= ========= =========
For the geographic presentation, revenues are attributed to specific countries based on the end user's location for products and the country in which the service is provided. Information with respect to the Company's geographic operations is set forth in the table below:
UNITED STATES AND REST OF GERMANY CANADA THE WORLD TOTAL -------- ---------- --------- ---------- 2000 Net revenue external customers............... $193,857 $3,083,095 $924,386 $4,201,338 Long-lived assets............................ 79,670 520,614 294,997 895,281 1999 Net revenue external customers............... $213,209 $2,807,186 $820,034 $3,840,429 Long-lived assets............................ 83,384 483,872 180,041 747,297 1998 Net revenue external customers............... $203,886 $2,562,603 $739,187 $3,505,676
F-65 267 FRESENIUS MEDICAL CARE AG NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA) 21. SUPPLEMENTARY CASH FLOW INFORMATION The following additional information is provided with respect to the Consolidated Financial Statement of Cash Flows:
2000 1999 1998 -------- -------- -------- Supplementary cash flow information Cash paid for interest........................... $222,826 $215,836 $207,944 -------- -------- -------- Cash paid for income taxes, net.................. $ 44,715 $ 27,954 $ (1,250) -------- -------- -------- Supplementary schedule of non-cash investing and financing activities Issuance of debt................................. $ 13,613 $ 9,462 $ -- -------- -------- -------- Issuance of convertible investment securities for acquisitions.................................. $ -- $ -- $ 41,805 -------- -------- -------- Supplemental disclosures of cash flow information Details for acquisitions: Assets acquired.................................. $346,378 $124,598 $286,413 Liabilities assumed.............................. 52,843 13,186 14,331 Notes issued in connection with acquisition...... 13,613 9,462 41,805 -------- -------- -------- Cash paid........................................ 279,922 101,950 230,277 Less cash acquired............................... 5,392 624 7,342 -------- -------- -------- Net cash paid for acquisitions................... $274,530 $101,326 $222,935 ======== ======== ========
22. SUBSEQUENT EVENTS On January 5, 2001, the Company acquired Everest Healthcare Services Corporation ("Everest"), Oak Park, Illinois through a merger of Everest into a subsidiary of the Company for $343 million including Everest's outstanding debt. One third of the purchase price was paid by the issuance of 2,250,000 Preference shares on January 5, 2001. The remainder of the purchase price was paid using the proceeds from the Preference share offerings completed during 2000. 23. SUPPLEMENTAL CONDENSED COMBINING INFORMATION FMC Trust Finance S.a.r.l. Luxembourg, a wholly-owned subsidiary of FMC AG, has assumed or issued senior subordinated debt securities which were fully and unconditionally guaranteed, jointly and severally, on a senior subordinated basis, by FMC AG and by D-GmbH, a wholly-owned subsidiary of FMC AG, and by FMCH, a substantially wholly-owned subsidiary of FMC AG (D-GmbH and FMCH being the "Guarantor Subsidiaries"). The following is combining financial information for the Company as of December 31, 2000 and 1999 and for the years ended December 31, 2000, 1999 and 1998, segregated between FMC AG, D-GmbH, FMCH and each of the Company's other businesses (the "Non-Guarantor Subsidiaries"). For purposes of the condensed combining information, FMC AG and the Guarantor Subsidiaries carry their investments under the equity method. Other (income) expense includes income (loss) related to investments in consolidated subsidiaries recorded under the equity method for purposes of the condensed combining information. In addition, other (income) expense includes income and losses from profit and loss transfer agreements as well as dividends received. Separate financial statements and other disclosures concerning D-GmbH are not presented herein because management believes that they are not material to investors. FMCH is currently subject to the periodic reporting requirements of the F-66 268 FRESENIUS MEDICAL CARE AG NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA) United States Securities Exchange Act of 1934, as amended, and in accordance therewith files consolidated financial statements with the United States Securities and Exchange Commission. Additionally, as discussed in Note 11, dividends from Fresenius Medical Care Holdings, Inc., a wholly owned subsidiary, are limited as a result of a restriction on dividends from its subsidiary, National Medical Care, Inc., and its subsidiaries. As a result of this restriction, parent company only financial information is presented under the column FMC AG. F-67 269 FRESENIUS MEDICAL CARE AG NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
FOR THE YEAR ENDED DECEMBER 31, 2000 ---------------------------------------------------------------------------- GUARANTOR SUBSIDIARIES ---------------------- NON-GUARANTOR COMBINING COMBINED FMC AG D-GMBH FMCH SUBSIDIARIES ADJUSTMENT TOTAL --------- --------- ---------- ------------- ---------- ---------- Net revenue............................... $ -- $552,747 $ -- $4,141,565 $(492,974) $4,201,338 Cost of revenue........................... -- 320,287 -- 2,891,592 (477,286) 2,734,593 --------- -------- --------- ---------- --------- ---------- Gross profit............................ -- 232,460 -- 1,249,973 (15,688) 1,466,745 --------- -------- --------- ---------- --------- ---------- Operating expenses: Selling, general and administrative..... 15,519 88,923 -- 714,751 (5,196) 813,997 Research and development................ -- 25,902 -- 6,033 -- 31,935 --------- -------- --------- ---------- --------- ---------- Operating (loss) income................. (15,519) 117,635 -- 529,189 (10,492) 620,813 --------- -------- --------- ---------- --------- ---------- Other (income) expense: Interest, net........................... (2,501) 5,917 58,681 155,118 (1,110) 216,105 Other, net.............................. (286,260) 60,173 (140,459) 38,118 328,428 -- --------- -------- --------- ---------- --------- ---------- Income before income taxes and minority interests............................... 273,242 51,545 81,778 335,953 (337,810) 404,708 Income tax expense (benefit)............ 61,167 46,019 (23,472) 155,909 (49,851) 189,772 --------- -------- --------- ---------- --------- ---------- Income before minority interests.......... 212,075 5,526 105,250 180,044 (287,959) 214,936 Minority interests........................ -- -- -- -- 2,861 2,861 --------- -------- --------- ---------- --------- ---------- Net income................................ $ 212,075 $ 5,526 $ 105,250 $ 180,044 $(290,820) $ 212,075 ========= ======== ========= ========== ========= ==========
FOR THE YEAR ENDED DECEMBER 31, 1999 ---------------------------------------------------------------------------- GUARANTOR SUBSIDIARIES ---------------------- NON-GUARANTOR COMBINING COMBINED FMC AG D-GMBH FMCH SUBSIDIARIES ADJUSTMENT TOTAL --------- --------- ---------- ------------- ---------- ---------- Net revenue............................... $ -- $556,354 $ -- $3,733,213 $(449,138) $3,840,429 Cost of revenue........................... -- 348,923 -- 2,548,748 (434,516) 2,463,155 --------- -------- --------- ---------- --------- ---------- Gross profit............................ -- 207,431 -- 1,184,465 (14,622) 1,377,274 --------- -------- --------- ---------- --------- ---------- Operating expenses: Selling, general and administrative..... 13,701 74,149 -- 701,719 (4,998) 784,572 Research and development................ -- 24,527 -- 7,961 -- 32,488 Special charge for settlement of investigations and related costs..... -- -- -- 601,000 -- 601,000 --------- -------- --------- ---------- --------- ---------- Operating (loss) income................. (13,701) 108,754 -- (126,215) (9,624) (40,786) --------- -------- --------- ---------- --------- ---------- Other (income) expense: Interest, net........................... 171 5,604 58,382 153,967 -- 218,124 Other, net.............................. 188,727 56,364 291,998 -- (537,089) -- --------- -------- --------- ---------- --------- ---------- Income (loss) before income taxes and minority interests...................... (202,599) 46,786 (350,380) (280,182) 527,465 (258,910) Income tax expense (benefit)............ 36,562 43,654 (23,353) (24,309) (45,298) (12,744) --------- -------- --------- ---------- --------- ---------- Income (loss) before minority interests... (239,161) 3,132 (327,027) (255,873) 572,763 (246,166) Minority interests........................ -- -- -- -- 2,378 2,378 --------- -------- --------- ---------- --------- ---------- Net (loss) income......................... $(239,161) $ 3,132 $(327,027) $ (255,873) $ 570,385 $ (248,544) ========= ======== ========= ========== ========= ==========
See accompanying notes to consolidated financial statements F-68 270 FRESENIUS MEDICAL CARE AG NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
FOR THE YEAR ENDED DECEMBER 31, 1998 ---------------------------------------------------------------------------- GUARANTOR SUBSIDIARIES ---------------------- NON-GUARANTOR COMBINING COMBINED FMC AG D-GMBH FMCH SUBSIDIARIES ADJUSTMENT TOTAL --------- --------- ---------- ------------- ---------- ---------- Net revenue............................... $ -- $500,794 $ -- $3,366,884 $(362,002) $3,505,676 Cost of revenue........................... -- 295,748 -- 2,305,855 (358,664) 2,242,938 --------- -------- --------- ---------- --------- ---------- Gross profit............................ -- 205,046 -- 1,061,029 (3,338) 1,262,738 --------- -------- --------- ---------- --------- ---------- Operating expenses: Selling, general and administrative..... 8,043 87,945 -- 648,527 (1,905) 742,610 Research and development................ -- 24,902 -- 6,248 -- 31,150 --------- -------- --------- ---------- --------- ---------- Operating (loss) income................. (8,043) 92,199 -- 406,255 (1,433) 488,978 --------- -------- --------- ---------- --------- ---------- Other (income) expense: Interest, net........................... (2,683) 5,461 54,693 162,070 -- 219,541 Other, net.............................. (172,085) 49,804 (84,653) -- 206,934 -- --------- -------- --------- ---------- --------- ---------- Income from continuing operations before income taxes, minority interests and cumulative effect of accounting change............................... 166,725 36,934 29,960 244,185 (208,367) 269,437 Income tax expense........................ 28,431 37,570 (21,877) 115,468 (24,226) 135,366 --------- -------- --------- ---------- --------- ---------- Income (loss) from continuing operations before minority interests and cumulative effect of accounting change............................... 138,294 (636) 51,837 128,717 (184,141) 134,071 Minority interests........................ -- -- -- -- 2,454 2,454 --------- -------- --------- ---------- --------- ---------- Income (loss) from continuing operations before cumulative effect of accounting change.................... 138,294 (636) 51,837 128,717 (186,595) 131,617 --------- -------- --------- ---------- --------- ---------- Discontinued operations Loss from operations of discontinued businesses, net...................... (8,669) -- (8,669) (8,669) 17,338 (8,669) Loss on disposal of discontinued businesses, net...................... (97,228) -- (97,228) (97,228) 194,456 (97,228) --------- -------- --------- ---------- --------- ---------- Loss from discontinued operations, net.................................. (105,897) -- (105,897) (105,897) 211,794 (105,897) --------- -------- --------- ---------- --------- ---------- Cumulative effect of accounting change, net..................................... (6,589) (706) (4,890) (5,883) 11,479 (6,589) Net income (loss)......................... $ 25,808 $ (1,342) $ (58,950) $ 16,937 $ 36,678 $ 19,131 ========= ======== ========= ========== ========= ==========
See accompanying notes to consolidated financial statements F-69 271 FRESENIUS MEDICAL CARE AG NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
AT DECEMBER 31, 2000 ------------------------------------------------------------------------------- GUARANTOR SUBSIDIARIES ----------------------- NON-GUARANTOR COMBINING COMBINED FMC AG D-GMBH FMCH SUBSIDIARIES ADJUSTMENT TOTAL ---------- --------- ----------- ------------- ----------- ---------- Current assets: Cash and cash equivalents............ $ 137 $ 100 $ -- $ 64,340 $ -- $ 64,577 Trade accounts receivable, less allowance for doubtful accounts... -- 72,775 -- 680,899 -- 753,674 Accounts receivable from related parties........................... 132,463 193,640 51,487 531,874 (863,347) 46,117 Inventories.......................... -- 67,988 -- 286,199 (33,953) 320,234 Prepaid expenses and other current assets............................ 2,539 20,237 -- 190,326 1,424 214,526 IDPN accounts receivable............. -- -- -- 5,189 -- 5,189 Deferred taxes....................... 388 1,945 -- 156,732 18,029 177,094 ---------- -------- ---------- ---------- ----------- ---------- Total current assets......... 135,527 356,685 51,487 1,915,559 (877,847) 1,581,411 Property, plant and equipment, net..... 205 49,460 -- 705,353 (16,025) 738,993 Intangible assets, including goodwill, net.................................. 789 6,006 -- 3,468,261 -- 3,475,056 Loans to related parties............... 78,206 -- 185,529 827,099 (1,090,834) -- Deferred taxes......................... -- 3,011 -- 13,949 10,245 27,205 Other assets........................... 2,681,199 12,119 2,589,842 117,641 (5,244,513) 156,288 ---------- -------- ---------- ---------- ----------- ---------- Total assets................. $2,895,926 $427,281 $2,826,858 $7,047,862 $(7,218,974) $5,978,953 ========== ======== ========== ========== =========== ========== Current liabilities: Accounts payable..................... $ 506 $ 16,356 $ -- $ 186,512 $ -- $ 203,374 Accounts payable to related parties........................... 113,406 180,997 257,566 372,978 (847,124) 77,823 Accrued expenses and other current liabilities....................... 9,740 52,916 -- 328,395 589 391,640 Note payable related to settlement... -- -- -- 85,920 -- 85,920 Short-term borrowings................ 627 465 -- 105,500 -- 106,592 Short-term borrowings from related parties........................... -- -- -- 218,333 -- 218,333 Current portion of long-term debt and capital lease obligations......... -- 516 -- 167,715 -- 168,231 Income taxes payable................. 87,277 -- -- 30,295 -- 117,572 Deferred taxes....................... 223 6,102 -- 11,902 2,740 20,967 ---------- -------- ---------- ---------- ----------- ---------- Total current liabilities.... 211,779 257,352 257,566 1,507,550 (843,795) 1,390,452 Long term debt and capital lease obligations, less current portion.... 4,206 1,882 843,322 915,479 (1,107,057) 657,832 Other liabilities...................... -- 3,688 -- 23,312 4,464 31,464 Pension liabilities.................... 327 24,682 -- 44,961 -- 69,970 Deferred taxes......................... 864 5,238 -- 170,385 -- 176,487 Company obligated mandatorily redeemable preferred securities of subsidiary Fresenius Medical Care Capital Trusts holding solely Company guaranteed debentures of subsidiary........................... -- -- -- 952,727 -- 952,727 Minority interest...................... -- -- 16,318 -- 4,953 21,271 ---------- -------- ---------- ---------- ----------- ---------- Total liabilities............ 217,176 292,842 1,117,206 3,614,414 (1,941,435) 3,300,203 Shareholders' equity:.................. 2,678,750 134,439 1,709,652 3,433,448 (5,277,539) 2,678,750 ---------- -------- ---------- ---------- ----------- ---------- Total liabilities and shareholders' equity....... $2,895,926 $427,281 $2,826,858 $7,047,862 $(7,218,974) $5,978,953 ========== ======== ========== ========== =========== ==========
See accompanying notes to consolidated financial statements F-70 272 FRESENIUS MEDICAL CARE AG NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
AT DECEMBER 31, 1999 ------------------------------------------------------------------------------- GUARANTOR SUBSIDIARIES ----------------------- NON-GUARANTOR COMBINING COMBINED FMC AG D-GMBH FMCH SUBSIDIARIES ADJUSTMENT TOTAL ---------- --------- ----------- ------------- ----------- ---------- Current assets: Cash and cash equivalents............... $ 155 $ 37 $ -- $ 34,568 $ -- $ 34,760 Trade accounts receivable, less allowance for doubtful accounts...... -- 81,686 -- 586,053 -- 667,739 Accounts receivable from related parties.............................. 135,878 226,351 32,586 351,445 (697,131) 49,129 Inventories............................. -- 61,951 -- 270,379 (31,028) 301,302 Prepaid expenses and other current assets............................... 8,691 11,094 -- 159,607 -- 179,392 IDPN accounts receivable................ -- -- -- 53,962 -- 53,962 Deferred taxes.......................... 703 4,079 -- 233,832 16,311 254,925 ---------- -------- ---------- ---------- ----------- ---------- Total current assets............ 145,427 385,198 32,586 1,689,846 (711,848) 1,541,209 Property, plant and equipment, net........ 236 51,473 -- 600,084 (9,672) 642,121 Intangible assets, including goodwill, net..................................... 1,124 2,894 -- 3,434,738 -- 3,438,756 Loans to related parties.................. 127,155 -- 185,529 987,963 (1,300,647) -- Deferred taxes............................ 11 3,667 -- 14,471 6,972 25,121 Non-current IDPN accounts receivable...... -- -- -- 5,189 -- 5,189 Other assets.............................. 1,947,133 10,460 2,428,224 66,320 (4,352,150) 99,987 ---------- -------- ---------- ---------- ----------- ---------- Total assets.................... $2,221,086 $453,692 $2,646,339 $6,798,611 $(6,367,345) $5,752,383 ========== ======== ========== ========== =========== ========== Current liabilities: Accounts payable........................ $ 30 $ 16,923 $ -- $ 176,167 $ -- $ 193,120 Accounts payable to related parties..... 151,914 205,213 181,857 393,142 (842,673) 89,453 Accrued expenses and other current liabilities.......................... 4,879 45,343 -- 363,265 1,574 415,061 Short-term accrued settlement........... -- -- -- 386,815 -- 386,815 Short-term borrowings................... 960 26 -- 95,397 -- 96,383 Short-term borrowings from related parties.............................. -- -- -- 330,000 -- 330,000 Current portion of long-term debt and capital lease obligations............ -- 2,754 -- 144,730 -- 147,484 Income taxes payable.................... 49,064 -- -- 29,374 -- 78,438 Deferred taxes.......................... 13,898 9,188 -- 9,165 1,187 33,438 ---------- -------- ---------- ---------- ----------- ---------- Total current liabilities....... 220,745 279,447 181,857 1,928,055 (839,912) 1,770,192 Long term debt and capital lease obligations, less current portion....... 4,541 635 842,421 961,284 (1,155,105) 653,776 Long-term accrued settlement.............. -- -- -- 85,920 -- 85,920 Other liabilities......................... 290 3,794 -- 16,331 4,271 24,686 Pension liabilities....................... -- 23,819 -- 37,759 -- 61,578 Deferred taxes............................ 1,182 6,862 -- 159,993 -- 168,037 Company obligated mandatorily redeemable preferred securities of subsidiary Fresenius Medical Care Capital Trusts holding solely Company guaranteed debentures of subsidiary................ -- -- -- 964,103 -- 964,103 Minority interest......................... -- -- 16,318 -- 5,456 21,774 ---------- -------- ---------- ---------- ----------- ---------- Total liabilities............... 226,758 314,557 1,040,596 4,153,445 (1,985,290) 3,750,066 Shareholders' equity:..................... 1,994,328 139,135 1,605,743 2,645,166 (4,382,055) 2,002,317 ---------- -------- ---------- ---------- ----------- ---------- Total liabilities and shareholders' equity.......... $2,221,086 $453,692 $2,646,339 $6,798,611 $(6,367,345) $5,752,383 ========== ======== ========== ========== =========== ==========
See accompanying notes to consolidated financial statements F-71 273 FRESENIUS MEDICAL CARE AG NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
FOR THE YEAR ENDED DECEMBER 31, 2000 --------------------------------------------------------------------------- GUARANTOR SUBSIDIARIES ---------------------- NON-GUARANTOR COMBINING COMBINED FMC AG D-GMBH FMCH SUBSIDIARIES ADJUSTMENT TOTAL --------- --------- ---------- ------------- ---------- --------- Operating activities: Net income (loss).............................. $ 212,075 $ 5,526 $ 105,250 $ 180,044 $(290,820) $ 212,075 Adjustments to reconcile net income (loss) to net cash and cash equivalents provided by (used in) operating activities: Equity affiliate income........................ (87,521) -- (140,459) 38,118 189,862 -- Depreciation and amortization................ 1,625 19,512 -- 274,841 (3,124) 292,854 Change in deferred tax....................... (12,514) (1,298) -- 93,049 (2,303) 76,934 (Gain) loss on sale of fixed assets.......... (40) (1,239) -- 990 -- (289) Gain on sale of investments.................. (66,189) -- -- -- 66,189 -- Compensation expense related to stock options................................... 3,980 -- -- -- -- 3,980 Changes in assets and liabilities, net of amounts from businesses acquired or disposed of: Trade accounts receivable, net............... -- 2,865 -- (177,198) -- (174,333) Inventories.................................. -- (10,527) -- (17,945) 5,465 (23,007) Prepaid expenses and other current and non-current assets........................ 5,241 (11,377) 1,491 (4,272) 632 (8,285) Accounts receivable from/ payable to related parties................................... (56,306) 6,884 56,809 (44,492) 18,304 (18,801) Accounts payable, accrued expenses and other current and non-current liabilities....... 5,716 14,285 -- (39,895) (795) (20,689) Income taxes payable......................... 52,846 -- (23,472) 21,453 -- 50,827 --------- -------- --------- --------- --------- --------- Net cash provided by (used in) operating activities.............................. 58,913 24,631 (381) 324,693 (16,590) 391,266 --------- -------- --------- --------- --------- --------- Investing activities: Purchases of property, plant and equipment..... (100) (23,992) -- (213,466) 9,521 (228,037) Proceeds from sale of property, plant and equipment.................................... 49 2,352 -- 18,323 -- 20,724 Acquisitions and investments, net of cash acquired..................................... (314,421) (2,619) -- (268,028) 310,538 (274,530) Disbursement of loans to related parties, net.......................................... (240,139) -- -- -- 240,139 -- --------- -------- --------- --------- --------- --------- Net cash used in investing activities..... (554,611) (24,259) -- (463,171) 560,198 (481,843) --------- -------- --------- --------- --------- --------- Financing activities: Short-term borrowings, net..................... (6,577) 441 -- (103,057) -- (109,193) Long-term debt and capital lease obligations, net.......................................... -- (740) 901 257,858 (224,534) 33,485 Payments on obligation related to settlement... -- -- -- (386,815) -- (386,815) Proceeds from issuance of preference shares.... 556,958 -- -- -- -- 556,958 Proceeds from increase of accounts receivable securitization program....................... -- -- -- 111,402 -- 111,402 Proceeds from exercise of options.............. 885 -- -- -- -- 885 Capital increase of Non-Guarantor-Subsidiaries................... -- -- -- 312,352 (312,352) -- Dividends paid................................. (51,229) -- -- (6,385) 6,385 (51,229) Changes in minority interest................... -- -- (520) -- 659 139 --------- -------- --------- --------- --------- --------- Net cash provided by (used in) financing activities.............................. 500,037 (299) 381 185,355 (529,842) 155,632 --------- -------- --------- --------- --------- --------- Effect of exchange rate changes on cash and cash equivalents.................................... (4,357) (10) -- (17,105) (13,766) (35,238) Cash and cash equivalents: Net (decrease) increase in cash and cash equivalents.................................... (18) 63 -- 29,772 -- 29,817 Cash and cash equivalents at beginning of period......................................... 155 37 -- 34,568 -- 34,760 --------- -------- --------- --------- --------- --------- Cash and cash equivalents at end of period....... $ 137 $ 100 $ -- $ 64,340 $ -- $ 64,577 ========= ======== ========= ========= ========= =========
See accompanying notes to consolidated financial statements F-72 274 FRESENIUS MEDICAL CARE AG NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
FOR THE YEAR ENDED DECEMBER 31, 1999 --------------------------------------------------------------------------- GUARANTOR SUBSIDIARIES ---------------------- NON-GUARANTOR COMBINING COMBINED FMC AG D-GMBH FMCH SUBSIDIARIES ADJUSTMENT TOTAL --------- --------- ---------- ------------- ---------- --------- Operating Activities: Net income (loss).............................. $(239,161) $ 3,132 $(327,027) $(255,873) $ 570,385 $(248,544) Adjustments to reconcile net (loss) income to net cash and cash equivalents provided by (used in) operating activities: Equity affiliate loss.......................... 305,430 -- 291,998 -- (597,428) -- Depreciation and amortization................ 2,981 22,330 -- 264,005 (5,108) 284,208 Write-off of IDPN accounts receivable........ -- -- -- 94,349 -- 94,349 Change in deferred tax....................... (3,276) 119 -- (81,956) (4,812) (89,925) Loss on sale of fixed assets................. 163 -- -- 828 -- 991 Changes in assets and liabilities, net of amounts from businesses acquired or disposed of: Trade accounts receivable, net............... -- (18,485) -- (117,777) -- (136,262) Inventories.................................. -- (562) -- (22,145) 6,953 (15,754) Prepaid expenses and other current and non-current assets........................ (5,578) (4,062) 1,491 (35,243) 6,674 (36,718) Accounts receivable from/payable to related parties................................... (30,345) (6,391) 56,560 (35,540) 770 (14,946) Accounts payable, accrued expenses and other current and non-current liabilities....... 1,340 28,778 -- 455,438 3,140 488,696 Income taxes payable......................... 23,936 -- (23,353) 28,079 -- 28,662 --------- -------- --------- --------- --------- --------- Net cash provided by (used in) operating activities of continuing operations..... 55,490 24,859 (331) 294,165 (19,426) 354,757 --------- -------- --------- --------- --------- --------- Net cash used in operating activities of discontinued operations................. -- -- -- (3,782) -- (3,782) --------- -------- --------- --------- --------- --------- Net cash provided by (used in) operating activities.............................. 55,490 24,859 (331) 290,383 (19,426) 350,975 --------- -------- --------- --------- --------- --------- Investing Activities: Purchases of property, plant and equipment..... (326) (23,611) -- (140,208) 3,869 (160,276) Proceeds from sale of property, plant and equipment.................................... 92 1,065 -- 5,973 -- 7,130 Acquisitions and investments, net of cash acquired..................................... (9,002) -- -- (100,288) 7,964 (101,326) --------- -------- --------- --------- --------- --------- Net cash used in investing activities..... (9,236) (22,546) -- (234,523) 11,833 (254,472) --------- -------- --------- --------- --------- --------- Financing activities: Short-term borrowings, net..................... (3,595) (456) -- 272,685 -- 268,634 Long-term debt and capital lease obligations, net.......................................... 4,817 (1,836) 851 (286,948) (465) (283,581) Retirement of convertible investment securities................................... -- -- -- (47,664) -- (47,664) Proceeds from increase of accounts receivable securitization program....................... -- -- -- 29,400 -- 29,400 Proceeds from exercise of FMC Rollover options...................................... 1,719 -- -- -- -- 1,719 Capital Increase of Non-Guarantor-Subsidiaries................... -- -- -- 8,556 (8,556) -- Dividends paid................................. (48,404) -- -- (15,516) 15,516 (48,404) Changes in minority interest................... -- -- (520) -- 1,098 578 --------- -------- --------- --------- --------- --------- Net cash (used in) provided by financing activities.............................. (45,463) (2,292) 331 (39,487) 7,593 (79,318) --------- -------- --------- --------- --------- --------- Effect of exchange rate changes on cash and cash equivalents.................................... (1,665) (6) -- (12,621) -- (14,292) Cash and Cash Equivalents: Net (decrease) increase in cash and cash equivalents.................................... (874) 15 -- 3,752 -- 2,893 Cash and cash equivalents at beginning of period......................................... 1,029 22 -- 30,816 -- 31,867 --------- -------- --------- --------- --------- --------- Cash and cash equivalents at end of period....... $ 155 $ 37 $ -- $ 34,568 $ -- $ 34,760 ========= ======== ========= ========= ========= =========
See accompanying notes to consolidated financial statements F-73 275 FRESENIUS MEDICAL CARE AG NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
FOR THE YEAR ENDED DECEMBER 31, 1998 --------------------------------------------------------------------------- GUARANTOR SUBSIDIARIES ---------------------- NON-GUARANTOR COMBINING COMBINED FMC AG D-GMBH FMCH SUBSIDIARIES ADJUSTMENT TOTAL --------- --------- ---------- ------------- ---------- --------- Operating Activities: Net income (loss)............................... $ 25,808 $ (1,342) $ (58,950) $ 16,937 $ 36,678 $ 19,131 Adjustments to reconcile net income to net cash and cash equivalents provided by (used in) operating activities: Equity affiliate income......................... (93,715) -- (84,653) -- 178,368 -- Cumulative effect of accounting change........ 6,589 706 4,890 5,883 (11,479) 6,589 Depreciation and amortization................. 2,908 22,099 -- 253,977 -- 278,984 Loss from operations of discontinued businesses................................. 8,669 -- 8,669 8,669 (17,338) 8,669 Loss on disposition of businesses............. 97,228 -- 97,228 97,228 (194,456) 97,228 Change in deferred tax........................ 19,383 (834) -- 5,755 (718) 23,586 Loss on sale of fixed assets.................. -- -- -- 213 -- 213 Changes in assets and liabilities, net of amounts from businesses acquired or disposed of: Trade accounts receivable, net................ (2,650) (11,891) -- (145,510) -- (160,051) Inventories................................... -- 160 -- (39,615) 151 (39,304) Prepaid expenses and other current and non-current assets......................... (10,717) (5,696) (13,671) (7,673) 462 (37,295) Accounts receivable from/ payable to related parties.................................... (90,095) 23,543 68,622 1,104 -- 3,174 Accounts payable, accrued expenses and other current and non-current liabilities........ (2,330) 5,654 -- (9,660) -- (6,336) Income taxes payable.......................... 12,131 (4,027) (21,877) 87,442 -- 73,669 --------- -------- --------- ----------- --------- --------- Net cash (used in) provided by operating activities of continuing operations...... (26,791) 28,372 258 274,750 (8,332) 268,257 --------- -------- --------- ----------- --------- --------- Net cash used in operating activities of discontinued operations.................. -- -- -- (257) -- (257) --------- -------- --------- ----------- --------- --------- Net cash (used in) provided by operating activities............................... (26,791) 28,372 258 274,493 (8,332) 268,000 --------- -------- --------- ----------- --------- --------- Investing Activities: Purchases of property, plant and equipment...... (126) (30,372) -- (129,424) 1,227 (158,695) Proceeds from sale of property, plant and equipment..................................... 617 2,776 -- 22,786 -- 26,179 Acquisitions and investments, net of cash acquired...................................... (100,805) (16) (250,000) (153,208) 281,094 (222,935) Proceeds from disposition of businesses......... -- -- -- 82,500 -- 82,500 --------- -------- --------- ----------- --------- --------- Net cash used in investing activities of continuing operations.................... (100,314) (27,612) (250,000) (177,346) 282,321 (272,951) --------- -------- --------- ----------- --------- --------- Net cash used in investing activities of discontinued operations.................. -- -- -- (7,315) -- (7,315) --------- -------- --------- ----------- --------- --------- Net cash used in investing activities...... (100,314) (27,612) (250,000) (184,661) 282,321 (280,266) --------- -------- --------- ----------- --------- --------- Financing activities: Short-term borrowings, net...................... 4,481 505 -- (1,255) -- 3,731 Long-term debt and capital lease obligations, net........................................... 172,483 (2,754) 250,000 (1,000,076) -- (580,347) Retirement of convertible investment securities.................................... -- -- -- (61,725) -- (61,725) Proceeds from issuance of mandatorily redeemable preferred securities.......................... -- -- -- 597,810 -- 597,810 Proceeds from increase of accounts receivable securization program.......................... -- -- -- 105,600 -- 105,600 Proceeds from exercise of FMC Rollover options....................................... 1,047 -- -- -- -- 1,047 Capital Increase of Non-Guarantor Subsidiaries.................................. -- -- -- 275,226 (275,226) -- Dividends paid.................................. (45,176) -- -- (4,038) -- (49,214) Distributions on convertible investment securities.................................... -- -- -- (2,752) -- (2,752) --------- -------- --------- ----------- --------- ---------
F-74 276 FRESENIUS MEDICAL CARE AG NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
FOR THE YEAR ENDED DECEMBER 31, 1998 --------------------------------------------------------------------------- GUARANTOR SUBSIDIARIES ---------------------- NON-GUARANTOR COMBINING COMBINED FMC AG D-GMBH FMCH SUBSIDIARIES ADJUSTMENT TOTAL --------- --------- ---------- ------------- ---------- --------- Changes in minority interest.................... -- -- (520) -- 1,237 717 Net cash provided by (used in) financing activities of continuing operations...... 132,835 (2,249) 249,480 (91,210) (273,989) 14,867 --------- -------- --------- ----------- --------- --------- Net cash used in financing activities of discontinued operations.................. -- -- -- (2,107) -- (2,107) --------- -------- --------- ----------- --------- --------- Net cash provided by (used in) financing activities............................... 132,835 (2,249) 249,480 (93,317) (273,989) 12,760 --------- -------- --------- ----------- --------- --------- Effect of exchange rate changes on cash and cash equivalents..................................... (4,794) 29 262 (1,942) -- (6,445) Cash and cash equivalents: Net (decrease) increase in cash and cash equivalents..................................... 936 (1,460) -- (5,427) -- (5,951) Cash and cash equivalents at beginning of period.......................................... 93 1,482 -- 36,243 -- 37,818 --------- -------- --------- ----------- --------- --------- Cash and cash equivalents at end of period........ $ 1,029 $ 22 $ -- $ 30,816 $ -- $ 31,867 ========= ======== ========= =========== ========= =========
See accompanying notes to consolidated financial statements F-75 277 FRESENIUS MEDICAL CARE HOLDINGS, INC. AND CONSOLIDATED SUBSIDIARIES UNAUDITED, CONSOLIDATED STATEMENTS OF EARNINGS (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
THREE MONTHS ENDED MARCH 31, -------------------- 2001 2000 -------- -------- NET REVENUES Health care services...................................... $688,401 $626,077 Medical supplies.......................................... 116,740 119,038 -------- -------- 805,141 745,115 -------- -------- EXPENSES Cost of health care services.............................. 476,397 420,403 Cost of medical supplies.................................. 84,221 86,455 General and administrative expenses....................... 75,088 71,587 Provision for doubtful accounts........................... 16,335 12,379 Depreciation and amortization............................. 56,510 54,736 Research and development.................................. 1,084 1,197 Interest expense, net, and related financing costs including $26,764 and $25,164, of interest with affiliates............................................. 51,050 53,303 -------- -------- 760,685 700,060 -------- -------- INCOME BEFORE INCOME TAXES.................................. 44,456 45,055 PROVISION FOR INCOME TAXES.................................. 21,306 21,961 -------- -------- NET INCOME.................................................. $ 23,150 $ 23,094 ======== ======== Basic and fully dilutive earnings per share Net Income................................................ $ 0.26 $ 0.26
See accompanying Notes to Unaudited, Consolidated Financial Statements F-76 278 FRESENIUS MEDICAL CARE HOLDINGS, INC. AND CONSOLIDATED SUBSIDIARIES UNAUDITED, CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (DOLLARS IN THOUSANDS)
THREE MONTHS ENDED MARCH 31, ------------------- 2001 2000 -------- ------- NET INCOME.................................................. $ 23,150 $23,094 Other comprehensive income.................................. Foreign currency translation adjustments.................. (408) 120 Derivative instruments.................................... (28,039) -- -------- ------- Total other comprehensive income/(loss)................... (28,447) 120 -------- ------- COMPREHENSIVE INCOME/(LOSS)................................. $ (5,297) $23,214 ======== =======
See accompanying Notes to Unaudited, Consolidated Financial Statements F-77 279 FRESENIUS MEDICAL CARE HOLDINGS, INC. AND CONSOLIDATED SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (DOLLARS IN THOUSANDS)
MARCH 31, DECEMBER 31, 2001 2000 ----------- ------------ (UNAUDITED) ASSETS Current Assets: Cash and cash equivalents................................. $ 33,159 $ 33,327 Accounts receivable, less allowances of $81,283 and $80,466................................................ 357,568 318,391 Inventories............................................... 197,029 191,699 Deferred income taxes..................................... 134,698 123,190 Other current assets...................................... 156,852 139,082 Net accounts receivable from affiliates................... 13,490 -- IDPN accounts receivable.................................. -- 5,189 ---------- ---------- Total Current Assets.............................. 892,796 810,878 ---------- ---------- Properties and equipment, net............................... 471,373 456,936 ---------- ---------- Other Assets: Excess of cost over the fair value of net assets acquired and other intangible assets, net of accumulated amortization of $600,397 and $564,880.................. 3,190,307 3,222,044 Other assets and deferred charges......................... 49,588 63,500 ---------- ---------- Total Other Assets................................ 3,239,895 3,285,544 ---------- ---------- Total Assets...................................... $4,604,064 $4,553,358 ========== ========== LIABILITIES AND EQUITY Current Liabilities: Note payable for settlement of investigation.............. $ 51,186 $ 85,920 Current portion of long-term debt and capitalized lease obligations............................................ 151,251 151,268 Current portion of borrowing from affiliates.............. 331,218 341,643 Accounts payable.......................................... 151,640 139,754 Accrued liabilities....................................... 211,549 228,025 Net accounts payable (receivable) to affiliates........... 10,499 6,317 Accrued income taxes...................................... 41,334 11,525 ---------- ---------- Total Current Liabilities......................... 948,677 964,452 Long-term debt.............................................. 631,413 588,526 Non-current borrowings from affiliates...................... 786,865 786,865 Capitalized lease obligations............................... 859 911 Deferred income taxes....................................... 106,949 122,946 Other liabilities........................................... 107,246 58,188 ---------- ---------- Total Liabilities................................. 2,582,009 2,521,888 ---------- ---------- Mandatorily Redeemable Preferred Securities................. 301,511 305,500 ---------- ---------- Equity: Preferred stock, $100 par value........................... 7,412 7,412 Preferred stock, $.10 par value........................... 8,906 8,906 Common stock, $1 par value; 300,000,000 shares authorized; outstanding 90,000,000................................. 90,000 90,000 Paid in capital........................................... 1,942,387 1,942,387 Retained deficit.......................................... (299,952) (322,973) Accumulated comprehensive income (loss)................... (28,209) 238 ---------- ---------- Total Equity...................................... 1,720,544 1,725,970 ---------- ---------- Total Liabilities and Equity...................... $4,604,064 $4,553,358 ========== ==========
See accompanying Notes to Unaudited, Consolidated Financial Statements. F-78 280 FRESENIUS MEDICAL CARE HOLDINGS, INC. AND CONSOLIDATED SUBSIDIARIES UNAUDITED, CONSOLIDATED STATEMENTS OF CASH FLOWS (DOLLARS IN THOUSANDS)
THREE MONTHS ENDED MARCH 31, -------------------- 2001 2000 ------- --------- Cash Flows from Operating Activities: Net income................................................ $23,150 $ 23,094 Adjustments to reconcile net income to net cash from Operating activities: Depreciation and amortization.......................... 56,510 54,736 Provision for doubtful accounts........................ 16,335 12,379 Deferred income taxes.................................. (8,813) 12,515 Loss (gain) on disposal of properties and equipment.... 210 (137) Changes in operating assets and liabilities, net of effects of purchase acquisitions and foreign exchange: Increase in accounts receivable........................ (49,912) (61,101) (Increase) decrease in inventories..................... (5,330) 6,432 (Increase) decrease in other current assets............ (17,770) 8,958 Decrease in IDPN accounts receivable................... 5,189 38,395 Decrease in other assets and deferred charges.......... 12,030 76 Increase (decrease) in accounts payable................ 11,888 (2,238) Increase in accrued income taxes....................... 29,809 7,637 Decrease in accrued liabilities........................ (16,476) (37,238) Increase in other long-term liabilities................ 2,025 2,010 Net changes due to/from affiliates..................... (9,308) (5,419) Other, net............................................. (650) 1,078 ------- --------- Net cash provided by operating activities............ 48,887 61,177 ------- --------- Cash Flows from Investing Activities: Capital expenditures...................................... (35,482) (20,261) Payments for acquisitions, net of cash acquired........... (5,086) (35,545) ------- --------- Net cash used in investing activities................ (40,568) (55,806) ------- --------- Cash Flows from Financing Activities: Payments on settlement of investigation................... (34,734) (286,402) Net (decrease) increase in borrowings from affiliates..... (10,425) 297,323 Cash dividends paid....................................... (130) (130) (Payments) proceeds from receivable financing facility.... (5,600) 7,800 Net increase/(decrease) on debt and capitalized leases.... 42,818 (20,665) ------- --------- Net cash used in financing activities................ (8,071) (2,074) ------- --------- Effects of changes in foreign exchange rates................ (416) 81 ------- --------- Change in cash and cash equivalents......................... (168) 3,378 Cash and cash equivalents at beginning of period............ 33,327 12,563 ------- --------- Cash and cash equivalents at end of period.................. $33,159 $ 15,941 ======= =========
See accompanying Notes to Unaudited, Consolidated Financial Statements F-79 281 FRESENIUS MEDICAL CARE HOLDINGS, INC. AND SUBSIDIARIES UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS (DOLLARS IN THOUSANDS)
THREE MONTHS ENDED MARCH 31, ------------------ 2001 2000 ------- ------- Supplemental disclosures of cash flow information: Cash paid during the period for: Interest, net.......................................... $41,710 $53,947 Income taxes paid, net................................. 1,269 2,241 Details for Acquisitions: Assets acquired........................................... 5,086 35,545 ------- ------- Net cash paid for acquisitions............................ $ 5,086 $35,545 ======= =======
See accompanying Notes to Unaudited, Consolidated Financial Statements F-80 282 FRESENIUS MEDICAL CARE HOLDINGS, INC. AND CONSOLIDATED SUBSIDIARIES NOTES TO UNAUDITED, CONSOLIDATED INTERIM FINANCIAL STATEMENTS (DOLLARS IN THOUSANDS) NOTE 1. THE COMPANY Fresenius Medical Care Holdings, Inc., a New York corporation ("the Company") is a subsidiary of Fresenius Medical Care AG, a German corporation ("FMC" or "Fresenius Medical Care"). The Company conducts its operations through five principal subsidiaries, National Medical Care, Inc., ("NMC"); Fresenius USA Marketing, Inc., Fresenius USA Manufacturing, Inc., and SRC Holding Company, Inc., ("SRC"), all Delaware corporations and Fresenius USA, Inc., a Massachusetts corporation. The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries, NMC, FUSA, and SRC and those financial statements where the Company controls professional corporations in accordance with Emerging Issues Task Force Issue 97-2. The Company is primarily engaged in (i) providing kidney dialysis services, clinical laboratory testing and renal diagnostic services, and (ii) manufacturing and distributing products and equipment for dialysis treatment. BASIS OF PRESENTATION BASIS OF CONSOLIDATION The consolidated financial statements in this report at March 31, 2001 and 2000 and for the three month interim periods then ended are unaudited and should be read in conjunction with the audited, consolidated financial statements in the Company's 2000 report on Form 10-K. Such interim financial statements reflect all adjustments that, in the opinion of management, are necessary for a fair presentation of the results of the interim periods presented. Certain amounts in the prior periods' consolidated financial statements have been reclassified to conform to the current periods' basis of presentation. The results of operations for the three month period ended March 31, 2001 are not necessarily indicative of the results of operations for the fiscal year ending December 31, 2001. All intercompany transactions and balances have been eliminated in consolidation. EARNINGS PER SHARE Basic earnings per share are computed by dividing net income available to common shareholders by the weighted-average number of common shares outstanding during the year. Diluted earnings per share includes the effect of all dilutive potential common shares that were outstanding during the year. The number of shares used to compute basic and diluted earnings per share was 90,000 in all periods as there were no potential common shares and no adjustments to income to be considered for purposes of the diluted earnings per shares calculation.
THREE MONTHS ENDED MARCH 31, ------------------ 2001 2000 ------- ------- The weighted average number of shares of Common Stock were as follows............................................... 90,000 90,000 ====== ======
F-81 283 FRESENIUS MEDICAL CARE HOLDINGS, INC. AND CONSOLIDATED SUBSIDIARIES NOTES TO UNAUDITED, CONSOLIDATED INTERIM FINANCIAL STATEMENTS -- (CONTINUED) (DOLLARS IN THOUSANDS) Net income used in the computation of earnings per share is as follows:
THREE MONTHS ENDED MARCH 31, ------------------ 2001 2000 ------- ------- CONSOLIDATED Net income............................................... $23,150 $23,094 Dividends paid on preferred stocks....................... (130) (130) ------- ------- Income used in per share computation of earnings......... $23,020 $22,964 ======= ======= Basic and fully dilutive earnings per share.............. $ 0.26 $ 0.26 ======= =======
DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES Effective January 1, 2001, the Company adopted the provisions of SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities and the related amendments of SFAS No. 138. The cumulative effect of adopting SFAS 133 as of January 1, 2001 was not material to the Company's consolidated financial statements. The Company is exposed to market risk due to changes in interest rates and foreign currencies. The Company uses derivative financial instruments, including interest rate swaps and foreign exchange contracts, as part of its risk management strategy. These instruments are used as a means of hedging exposure to interest rate and foreign currency fluctuations in connection with debt obligations, forecasted raw material purchases and Euro denominated mandatorily redeemable preferred stock. The interest rate swaps are designated as cash flow hedges effectively converting certain variable interest rate payments into fixed interest rate payments. After tax losses of $28 million ($47 million pretax), were deferred in other comprehensive income during the quarter. Interest payable and interest receivable under the swap terms are accrued and recorded as an adjustment to interest expense at each reporting date. Ineffective amounts had no material impact on earnings for the three months ended March 31, 2001. The Company enters into forward rate agreements that are designated and effective as hedges of forecasted raw material purchases. After tax losses of $0.2 million ($0.3 million pretax), were deferred in other comprehensive income during the quarter and will be reclassified into cost of sales in the period during which the hedged transaction affects earnings. All deferred amounts will be reclassified into earnings within the next twelve months. Ineffective amounts had no impact on earnings for the three months ended March 31, 2001. The Company enters into forward rate agreements that are designated and effective as hedges of changes in the fair value of the Euro denominated mandatorily redeemable preferred stock. Changes in fair value are recorded in earnings and offset against gains and losses resulting from the underlying exposures. Ineffective amounts had no material impact on earnings for the three months ended March 31, 2001. Periodically, the Company enters into derivative instruments with related parties to form a natural hedge for currency exposures on intercompany obligations. These instruments are reflected in the balance sheet at fair value with changes in fair value recognized in earnings. FMC-AG ACQUISITION On January 8, 2001, FMC acquired Everest Healthcare Services Corporation (now known as Everest Healthcare Holdings, Inc., "Everest") through a merger of Everest into a subsidiary of FMC at a purchase F-82 284 FRESENIUS MEDICAL CARE HOLDINGS, INC. AND CONSOLIDATED SUBSIDIARIES NOTES TO UNAUDITED, CONSOLIDATED INTERIM FINANCIAL STATEMENTS -- (CONTINUED) (DOLLARS IN THOUSANDS) price of $343 million, which included assumed debt and the issuance of 2.25 million FMC preference shares. Everest owns, operates or manages approximately 70 clinic facilities providing therapy to approximately 6,800 patients in the United States. Everest also operates extracorporal blood services and acute dialysis businesses that provide acute dialysis, apheresis and hemoperfusion services to approximately 100 hospitals. The Company has entered into agreements with Everest where it provides certain management services on behalf of FMC. The Company sells dialysis products and provides laboratory services to Everest. Net revenues for sales to Everest were approximately $5.5 million for the three months ended March 31, 2001. In addition, the Company provides financing to Everest. At March 31, 2001, the Company has trade accounts receivable of $1.7 million and a net loan receivable of $226.7 million. The net loan receivable is recorded in the current portion of borrowings from affiliates. NEW PRONOUNCEMENTS In September 2000, the Financial Accounting Standards Board issued SFAS No. 140, Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities, which replaces SFAS No. 125 and rescinds SFAS No. 127. SFAS No. 140 provides the accounting and reporting standards for securitizations and other transfers of financial assets and collateral. These standards are based on consistent application of a financial-components approach that focuses on control. This Statement also provides consistent standards for distinguishing transfers of financial assets that are sales from transfers that are secured borrowings. SFAS No. 140 is effective for transfers after March 31, 2001 and is effective for disclosures about securitizations and collateral for fiscal years ending after December 15, 2000. There is no impact for the adoption of SFAS No. 140. NOTE 2. INVENTORIES
MARCH 31, DECEMBER 31, 2001 2000 --------- ------------ Inventories: Raw materials...................................... $ 42,853 $ 44,787 Manufactured goods in process...................... 9,808 10,516 Manufactured and purchased inventory available for sale............................................ 88,541 80,520 -------- -------- 141,202 135,823 Health care supplies............................... 55,827 55,876 -------- -------- Total...................................... $197,029 $191,699 ======== ========
F-83 285 FRESENIUS MEDICAL CARE HOLDINGS, INC. AND CONSOLIDATED SUBSIDIARIES NOTES TO UNAUDITED, CONSOLIDATED INTERIM FINANCIAL STATEMENTS -- (CONTINUED) (DOLLARS IN THOUSANDS) NOTE 3. DEBT
MARCH 31, DECEMBER 31, 2001 2000 --------- ------------ Long-term debt to outside parties consists of: NMC Credit Facility.................................. $775,400 $732,500 Note payable for settlement.......................... 51,186 85,920 Other................................................ 7,066 7,120 -------- -------- 833,652 825,540 Less amounts classified as current................... 202,239 237,014 -------- -------- $631,413 $588,526 ======== ========
Borrowings/(receivables) from affiliates consists of:
MARCH 31, DECEMBER 31, 2001 2000 ---------- ------------ Fresenius Medical Care AG borrowings primarily at interest rates approximating 7.75%................ $ 235,132 $ 18,850 Fresenius AG borrowing at interest rates approximating 7.34 - 7.38%........................ 209,000 209,000 Fresenius Medical Care Trust Finance S.a.r.l. borrowings at interest rates of 8.43% and 9.25%... 786,524 786,524 Franconia Acquisition, LLC at interest rates approximating 6.87%............................... 113,121 113,121 Everest Healthcare Holdings, Inc.................... (226,707) -- Other............................................... 1,013 1,013 ---------- ---------- 1,118,083 1,128,508 Less amounts classified as current.................. 331,218 341,643 ---------- ---------- Total............................................... $ 786,865 $ 786,865 ========== ==========
NOTE 4. MANDATORILY REDEEMABLE PREFERRED SECURITIES During the fourth quarter of 2000, a wholly-owned subsidiary of the Company issued to NMC 1,000 shares of Series A Preferred Stock and 1,700 shares of Series C Preferred Stock that were then transferred to FMC for proceeds of $113,500 and $192,000, respectively ("Redeemable Preferred Securities"). The Redeemable Preferred Securities are identical in substance except that the Series A shares rank prior to the Series C shares both as to dividends and liquidation, dissolution or winding-up of the subsidiary. The Redeemable Preferred Securities have a par value of $.01 per share. The holders of the securities are entitled to receive dividends in amount of dollars per share equal to approximately 8% of the share issuance price. The dividends will be declared and paid in cash at least annually. Upon liquidation or dissolution or winding up of the subsidiary, the holders of the Redeemable Preferred Securities are entitled to an amount equal to the liquidation preference for each share of stock plus an amount equal to all accrued and unpaid dividends thereon through the date of distribution. The liquidation preference is the sum of the issuance price plus, for each year or portion thereof an amount equal to one-half of one percent of the issue price, not to exceed 5%. F-84 286 FRESENIUS MEDICAL CARE HOLDINGS, INC. AND CONSOLIDATED SUBSIDIARIES NOTES TO UNAUDITED, CONSOLIDATED INTERIM FINANCIAL STATEMENTS -- (CONTINUED) (DOLLARS IN THOUSANDS) The Redeemable Preferred Securities will be sold to the Company in two years for an amount equal to Euros 341,385 plus any accrued and unpaid dividends. Accordingly, the mandatorily redeemable preferred securities are deemed to be a Euro liability and the risk of foreign currency fluctuations are hedged through forward currency contracts. The holders of the Redeemable Preferred Securities have the same participation rights of the holders of all other classes of capital stock of the subsidiary. NOTE 5. SETTLEMENT OF INVESTIGATION WITH THE U.S. GOVERNMENT During the quarter, the Company made payments to the U.S. Government of $35.4 million, pursuant to the January 2000 settlement agreement with the U.S. Government. The final two installments of $27.8 million including interest will be paid in April and July 2001. In addition, the Company received a final payment of $5.2 million in February 2001 from the U.S. Government, related to the Company's claims for outstanding Medicare receivables. NOTE 6. COMMITMENTS AND CONTINGENCIES LEGAL PROCEEDINGS COMMERCIAL LITIGATION In 1997, the Company, NMC, and certain named NMC subsidiaries, were served with a civil complaint filed by Aetna Life Insurance Company in the U.S. District Court for the Southern District of New York. The lawsuit alleges inappropriate billing practices for nutritional therapy, diagnostic and clinical laboratory tests and misrepresentations. In April 1999, Aetna amended its complaint to include its affiliate, Aetna U.S. Healthcare, Inc., as an additional plaintiff, and to make certain other limited changes in its pleading. The amended complaint seeks unspecified damages and costs. Other insurance companies have filed similar claims seeking unspecified damages and costs. The Company, NMC and its subsidiaries believe that there are substantial defenses to the claims asserted, and intend to vigorously defend all lawsuits. Other private payors have contacted the Company and may assert that NMC received excess payment and, similarly, may join the lawsuits or file their own lawsuit seeking reimbursement and other damages. Although the ultimate outcome on the Company of these proceedings cannot be predicted at this time, an adverse result could have a material adverse effect on the Company's business, financial condition and result of operations. The Company has filed counterclaims against the plaintiffs in these matters based on inappropriate claim denials and delays in claim payments. On September 28, 2000, Mesquita, et al. v. W.R. Grace & Company, et al. (Sup. Court of Calif., S.F. County, #315465) was filed as a class action by plaintiffs claiming to be creditors of W.R. Grace & Co.-Conn ("Grace Chemicals") against Grace Chemicals, the Company and other defendants, principally alleging that the Merger which resulted in the original formation of the Company (described in greater detail in "Indemnification by W.R. Grace & Co." below) was a fraudulent transfer, violated the uniform fraudulent transfer act, and constituted a conspiracy. An amended complaint (Abner et al. v. W.R. Grace & Company, et al.) and an additional class action were filed subsequently with substantially similar allegations. These cases have been stayed in connection with Grace's Chapter 11 bankruptcy proceedings. The Company has requested indemnification from Grace Chemicals pursuant to the Merger agreements. If the Merger is determined to have been a fraudulent transfer, if material damages are proved by the plaintiffs, and if the Company is not able to collect, in whole or in part on the indemnity, from W.R. Grace & Co. or its affiliates or former affiliates or their insurers, and if the Company is not able to collect against any party that may have received proceeds from W.R. Grace & Co., a judgment F-85 287 FRESENIUS MEDICAL CARE HOLDINGS, INC. AND CONSOLIDATED SUBSIDIARIES NOTES TO UNAUDITED, CONSOLIDATED INTERIM FINANCIAL STATEMENTS -- (CONTINUED) (DOLLARS IN THOUSANDS) could have a material adverse effect on the Company's business, financial condition and results of operations. The Company is confident that no fraudulent transfer or conspiracy occurred and intends to defend the cases vigorously. OBRA 93 The Omnibus Budget Reconciliation Act of 1993 affected the payment of benefits under Medicare and employer health plans for dual-eligible ESRD patients. In July 1994, the Health Care Financing Administration issued an instruction to Medicare claims processors to the effect that Medicare benefits for the patients affected by that act would be subject to a new 18-month "coordination of benefits" period. This instruction had a positive impact on NMC's dialysis revenues because, during the 18-month coordination of benefits period, patients' employer health plans were responsible for payment, which was generally at rates higher than those provided under Medicare. In April 1995, the Health Care Financing Administration issued a new instruction, reversing its original instruction in a manner that would substantially diminish the positive effect of the original instruction on NMC's dialysis business. The Health Care Financing Administration further proposed that its new instruction be effective retroactive to August 1993, the effective date of the Omnibus Budget Reconciliation Act of 1993. NMC ceased to recognize the incremental revenue realized under the original instruction as of July 1, 1995, but it continued to bill employer health plans as primary payors for patients affected by the Omnibus Budget Reconciliation Act of 1993 through December 31, 1995. As of January 1, 1996, NMC commenced billing Medicare as primary payor for dual eligible ESRD patients affected by the act, and then began to re-bill in compliance with the revised policy for services rendered between April 24 and December 31, 1995. On May 5, 1995, NMC filed a complaint in the U.S. District Court for the District of Columbia (National Medical Care, Inc. and Bio-Medical Applications of Colorado, Inc. d/b/a Northern Colorado Kidney Center v. Shalala, C.A. No. 95-0860 (WBB)) seeking to preclude the Health Care Financing Administration from retroactively enforcing its April 24, 1995 implementation of the Omnibus Budget Reconciliation Act of 1993 provision relating to the coordination of benefits for dual eligible ESRD patients. On May 9, 1995, NMC moved for a preliminary injunction to preclude the Health Care Financing Administration from enforcing its new policy retroactively, that is, to billing for services provided between August 10, 1993 and April 23, 1995. On June 6, 1995, the court granted NMC's request for a preliminary injunction and in December of 1996, NMC moved for partial summary judgment seeking a declaration from the Court that the Health Care Financing Administration's retroactive application of the April 1995 rule was legally invalid. The Health Care Financing Administration cross-moved for summary judgment on the grounds that the April 1995 rule was validly applied prospectively. In January 1998, the court granted NMC's motion for partial summary judgment and entered a declaratory judgment in favor of NMC, holding the Health Care Financing Administration's retroactive application of the April 1995 rule legally invalid. Based on its finding, the Court also permanently enjoined the Health Care Financing Administration from enforcing and applying the April 1995 rule retroactively against NMC. The Court took no action on the Health Care Financing Administration's motion for summary judgment pending completion of the outstanding discovery. On October 5, 1998, NMC filed its own motion for summary judgment requesting that the Court declare the Health Care Financing Administration's prospective application of the April 1995 rule invalid and permanently enjoin Health Care Financing Administration from prospectively enforcing and applying the April 1995 rule. The Court has not yet ruled on the parties' motions. The Health Care Financing Administration elected not to appeal the Court's June 1995 and January 1998 orders. The Health Care Financing Administration may, however, appeal all rulings at the F-86 288 FRESENIUS MEDICAL CARE HOLDINGS, INC. AND CONSOLIDATED SUBSIDIARIES NOTES TO UNAUDITED, CONSOLIDATED INTERIM FINANCIAL STATEMENTS -- (CONTINUED) (DOLLARS IN THOUSANDS) conclusion of the litigation. If the Health Care Financing Administration should successfully appeal so that the revised interpretation would be applied retroactively, NMC may be required to refund the payment received from employer health plans for services provided after August 10, 1993 under the Health Care Financing Administration's original implementation, and to re-bill Medicare for the same services, which would result in a loss to NMC of approximately $120 million attributable to all periods prior to December 31, 1995. Also, in this event, the Company's business, financial condition and results of operations would be materially adversely affected. In July, 2000, NMC filed a complaint in the U.S. District Court for the Eastern District of Virginia (National Medical Care, Inc. and Bio-Medical Applications of Virginia, Inc. v. Aetna Life Insurance, Co., Inc. Aetna U.S. Healthcare, Inc. and John Does 1-10) seeking recovery against Aetna U.S. Healthcare and health plans administered by Aetna U.S. Healthcare for claims related to primary payor liability for dual eligible ESRD patients under the Omnibus Budget Reconciliation Act of 1993. On January 16, 2001, the Court stayed the action pending resolution of the District of Columbia Court action. OTHER LITIGATION AND POTENTIAL EXPOSURES From time to time, the Company is a party to or may be threatened with other litigation arising in the ordinary course of its business. Management regularly analyzes current information including, as applicable, the Company's defenses and insurance coverage and, as necessary, provides accruals for probable liabilities for the eventual disposition of these matters. The ultimate outcome of these matters is not expected to materially affect the Company's financial position, results of operations or cash flows. The Company, like other health care providers, conducts its operations under intense government regulation and scrutiny. The Company must comply with regulations which relate to or govern the safety and efficacy of medical products and supplies, the operation of manufacturing facilities, laboratories and dialysis clinics, and environmental and occupational health and safety. The Company must also comply with the U.S. anti-kickback statute, the False Claims Act, the Stark Law, and other federal and state fraud and abuse laws. Applicable laws or regulations may be amended, or enforcement agencies or courts may make interpretations that differ from the Company's or the manner in which the Company conduct its business. In the U.S., enforcement has become a high priority for the federal government and some states. In addition, the provisions of the False Claims Act authorizing payment of a portion of any recovery to the party bringing the suit encourage private plaintiffs to commence "whistle blower" actions. By virtue of this regulatory environment, as well as our corporate integrity agreement with the government, the Company expects that its business activities and practices will continue to be subject to extensive review by regulatory authorities and private parties, and continuing inquiries, claims and litigation relating to its compliance with applicable laws and regulations. The Company may not always be aware that an inquiry or action has begun, particularly in the case of "whistle blower" actions, which are initially filed under court seal. The Company operates a large number facilities throughout the U.S. In such a decentralized system, it is often difficult to maintain the desired level of oversight and control over the thousands of individuals employed by many affiliate companies. The Company relies upon its management structure, regulatory and legal resources, and the effective operation of its compliance program to direct, manage and monitor the activities of these employees. On occasion, the Company may identify instances where employees, deliberately or inadvertently, have submitted inadequate or false billings. The actions of such persons may subject the Company and its subsidiaries to liability under the False Claims Act, among other laws, and the Company cannot predict whether law enforcement authorities may use such information to initiate further investigations of the business practices disclosed or any of its other business activities. F-87 289 FRESENIUS MEDICAL CARE HOLDINGS, INC. AND CONSOLIDATED SUBSIDIARIES NOTES TO UNAUDITED, CONSOLIDATED INTERIM FINANCIAL STATEMENTS -- (CONTINUED) (DOLLARS IN THOUSANDS) Physicians, hospitals and other participants in the health care industry are also subject to a large number of lawsuits alleging professional negligence, malpractice, product liability, worker's compensation or related claims, many of which involve large claims and significant defense costs. The Company has been subject to these suits due to the nature of its business and the Company expects that those types of lawsuits may continue. Although the Company maintains insurance at a level which it believes to be prudent, the Company cannot assure that the coverage limits will be adequate or that insurance will cover all asserted claims. A successful claim against the Company or any of its subsidiaries in excess of insurance coverage could have a material adverse effect upon the Company and the results of its operations. Any claims, regardless of their merit or eventual outcome, also may have a material adverse effect on the Company's reputation and business. The Company has also had claims asserted against it and has had lawsuits filed against it relating to businesses that it has acquired or divested. These claims and suits relate both to operation of the businesses and to the acquisition and divestiture transactions. The Company has asserted its own claims, and claims for indemnification. Although the ultimate outcome on the Company cannot be predicted at this time, an adverse result could have a material adverse effect upon the Company's business, financial condition, and results of operations. INDEMNIFICATION BY W.R. GRACE & CO. The Company was formed as a result of a series of transactions pursuant to the Agreement and Plan of Reorganization (the "Merger") dated as of February 4, 1996 by and between W.R. Grace & Co. and Fresenius AG. At the time of the Merger, a W.R. Grace & Co. subsidiary known as W.R. Grace & Co.-Conn. had, and continues to have, significant liabilities arising out of product-liability related litigation, pre-merger tax claims and other claims unrelated to NMC, which was Grace's dialysis business prior to the Merger. In connection with the Merger, W.R. Grace & Co.-Conn. agreed to indemnify the Company and NMC against all liabilities of W.R. Grace & Co., whether relating to events occurring before or after the Merger, other than liabilities arising from or relating to NMC's operations. Proceedings have been brought against W.R. Grace & Co. and the Company by plaintiffs claiming to be creditors of W.R. Grace & Co.-Conn., principally alleging that the Merger was a fraudulent conveyance, violated the uniform fraudulent transfer act, and constituted a conspiracy. See "Legal Proceedings" above. In addition, the Merger was consummated as a tax free reorganization. Pre-merger tax claims or tax claims that would arise if events were to violate the tax-free nature of the Merger could be the obligation of the Company. Subject to certain representations made by W.R. Grace & Co.-Conn., the Company and Fresenius AG, W.R. Grace & Co.-Conn. also agreed to indemnify the Company against any such tax liability. W.R. Grace & Co.-Conn. and certain of its subsidiaries have filed for reorganization under Chapter 11 of the U.S. Bankruptcy Code. If the Merger is determined to be a fraudulent transfer and if material damages are proved by the plaintiffs, or if W.R. Grace & Co. is unable to satisfy its merger related or pre-merger tax obligations, and if the Company is not able to collect on the indemnities from W.R. Grace & Co. as a result of the bankruptcy proceedings or otherwise, and if the Company is not able to collect on the indemnities from any affiliates or former affiliates of W.R. Grace & Co. or their insurers, and if the Company is not able to collect against any party that may have received proceeds from W.R. Grace & Co., a judgment could have a material adverse effect on the Company's business, financial condition and results of operations. NOTE 7. INDUSTRY SEGMENTS INFORMATION The Company's reportable segments are Dialysis Services and Dialysis Products. For purposes of segment reporting, the Dialysis Services Division and Spectra Renal Management are combined and reported as Dialysis Services. These divisions are aggregated because of their similar economic F-88 290 FRESENIUS MEDICAL CARE HOLDINGS, INC. AND CONSOLIDATED SUBSIDIARIES NOTES TO UNAUDITED, CONSOLIDATED INTERIM FINANCIAL STATEMENTS -- (CONTINUED) (DOLLARS IN THOUSANDS) classifications. These include the fact that they are both health care service providers whose services are provided to a common patient population, and both receive a significant portion of their net revenue from Medicare and other government and non-government third party payors. The Dialysis Products segment reflects the activity of the Dialysis Products Division only. The table below provides information for the three months ended March 31, 2001 and 2000 pertaining to the Company's two industry segments.
LESS DIALYSIS DIALYSIS INTERSEGMENT SERVICES PRODUCTS SALES TOTAL ---------- -------- ------------ ---------- NET REVENUES FOR THREE MONTHS ENDED 3/31/01.................................... $ 692,471 $178,679 $66,009 $ 805,141 3/31/00.................................... $ 630,002 $174,942 $59,829 $ 745,115 OPERATING EARNINGS FOR THREE MONTHS ENDED 3/31/01.................................... 98,975 30,487 -- 129,462 3/31/00.................................... 99,101 26,252 -- 125,353 ASSETS AT 3/31/2001.................................. 2,233,373 653,571 -- 2,886,944 12/31/2000................................. 2,176,055 644,853 -- 2,820,908
Total assets of $4,604,064 is comprised of total assets for reportable segments, $2,886,944; intangible assets not allocated to segments, $1,916,562; accounts receivable financing agreement ($439,700); and other corporate assets, $240,258. The table below provides the reconciliations of reportable segment operating earnings to the Company's consolidated totals.
THREE MONTHS ENDED MARCH 31, -------------------- SEGMENT RECONCILIATION 2001 2000 - ---------------------- -------- -------- INCOME BEFORE INCOME TAXES: Total operating earnings for reportable segments.......... $129,462 $125,353 Corporate G&A............................................. (32,872) (25,798) Research and development expense.......................... (1,084) (1,197) Net interest expense...................................... (51,050) (53,303) -------- -------- Income Before Income Taxes.................................. $ 44,456 $ 45,055 ======== ========
F-89 291 REPORT OF INDEPENDENT AUDITORS To the Board of Directors and Stockholders of Fresenius Medical Care Holdings, Inc. We have audited the accompanying consolidated balance sheets of Fresenius Medical Care Holdings, Inc. and its subsidiaries (the "Company") as of December 31, 2000 and 1999 and the related consolidated statements of operations, comprehensive income, changes in equity and cash flows for each of the years in the three year period ended December 31, 2000. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2000 and 1999, and the consolidated results of their operations and their cash flows for the three years then ended in conformity with accounting principles generally accepted in the United States of America. /s/ KPMG LLP February 9, 2001, except as to paragraph 14 of Note 16, as to which the date is April 2, 2001 Boston, MA F-90 292 FRESENIUS MEDICAL CARE HOLDINGS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
TWELVE MONTHS ENDED DECEMBER 31, -------------------------------------- 2000 1999 1998 ---------- ---------- ---------- NET REVENUES Health care services................................. $2,609,108 $2,324,322 $2,100,422 Medical supplies..................................... 480,067 490,911 470,984 ---------- ---------- ---------- 3,089,175 2,815,233 2,571,406 ---------- ---------- ---------- EXPENSES Cost of health care services......................... 1,768,914 1,542,965 1,390,321 Cost of medical supplies............................. 339,908 336,749 317,122 General and administrative expenses.................. 269,574 276,408 253,920 Provision for doubtful accounts...................... 62,949 42,243 54,709 Depreciation and amortization........................ 222,870 217,952 216,214 Research and development............................. 4,127 4,065 4,060 Interest expense, net, and related financing costs including $110,746, $88,679 and $77,705 interest with affiliates................................... 187,315 201,915 208,776 Interest expense on settlement of investigation, net............................................... 29,947 -- -- Special charge for settlement of investigation and related costs..................................... -- 601,000 -- ---------- ---------- ---------- 2,885,604 3,223,297 2,445,122 ---------- ---------- ---------- INCOME (LOSS) FROM CONTINUING OPERATIONS BEFORE INCOME TAXES AND CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING FOR START UP COSTS................................... 203,571 (408,064) 126,284 PROVISION (BENEFIT) FOR INCOME TAXES................... 98,321 (81,037) 74,447 ---------- ---------- ---------- INCOME (LOSS) FROM CONTINUING OPERATIONS BEFORE CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING FOR START UP COSTS............................................. $ 105,250 $ (327,027) $ 51,837 ---------- ---------- ---------- DISCONTINUED OPERATIONS Loss from discontinued operations, net of income taxes............................................. -- -- (8,669) Loss on disposal of discontinued operations, net of income tax benefit................................ -- -- (97,228) ---------- ---------- ---------- Loss from discontinued operations.................... $ -- $ -- $ (105,897) ---------- ---------- ---------- CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING FOR START UP COSTS, NET OF TAX BENEFIT............................ -- -- (4,890) ---------- ---------- ---------- NET INCOME (LOSS)...................................... $ 105,250 $ (327,027) $ (58,950) ========== ========== ========== Basic and fully dilutive (loss) earnings per share Continuing operations................................ $ 1.16 $ (3.64) $ 0.57 Loss from discontinued operations.................... $ -- $ -- $ (0.10) Loss on disposal of discontinued operations.......... $ -- $ -- $ (1.08) Cumulative effect of accounting change............... $ -- $ -- $ (0.05) Net Income (loss).................................... $ 1.16 $ (3.64) $ (0.66)
See accompanying Notes to Consolidated Financial Statements F-91 293 FRESENIUS MEDICAL CARE HOLDINGS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (DOLLARS IN THOUSANDS)
TWELVE MONTHS ENDED DECEMBER 31, --------------------------------- 2000 1999 1998 -------- --------- -------- NET INCOME (LOSS)......................................... $105,250 $(327,027) $(58,950) Other comprehensive income Foreign currency translation adjustments................ (174) (625) 1,872 -------- --------- -------- Total other comprehensive income........................ (174) (625) 1,872 -------- --------- -------- COMPREHENSIVE INCOME (LOSS)............................... $105,076 $(327,652) $(57,078) ======== ========= ========
See accompanying Notes to Consolidated Financial Statements F-92 294 FRESENIUS MEDICAL CARE HOLDINGS, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (DOLLARS IN THOUSANDS)
DECEMBER 31, ------------------------ 2000 1999 ---------- ---------- ASSETS Current Assets: Cash and cash equivalents................................. $ 33,327 $ 12,563 Accounts receivable, less allowances of $80,466 and $63,012................................................ 318,391 295,235 Inventories............................................... 191,699 183,112 Deferred income taxes..................................... 123,190 219,454 Other current assets...................................... 139,082 130,771 IDPN accounts receivable.................................. 5,189 53,962 ---------- ---------- Total Current Assets.............................. 810,878 895,097 ---------- ---------- Properties and equipment, net............................... 456,936 428,793 ---------- ---------- Other Assets: Excess of cost over the fair value of net assets acquired and other intangible assets, net of accumulated amortization of $564,880 and $424,704.................. 3,222,044 3,265,491 Other assets and deferred charges......................... 63,500 49,998 Non-current IDPN accounts receivable...................... -- 5,189 ---------- ---------- Total Other Assets................................ 3,285,544 3,320,678 ---------- ---------- Total Assets...................................... $4,553,358 $4,644,568 ========== ========== LIABILITIES AND EQUITY Current Liabilities: Note payable for settlement of investigation.............. $ 85,920 $ -- Current portion of long-term debt and capitalized lease obligations............................................ 151,268 142,110 Current portion of borrowing from affiliates.............. 341,643 372,949 Accounts payable.......................................... 139,754 133,337 Accrued settlement........................................ -- 386,815 Accrued liabilities....................................... 228,025 291,358 Net accounts payable to affiliates........................ 6,317 12,361 Accrued income taxes...................................... 11,525 12,433 ---------- ---------- Total Current Liabilities......................... 964,452 1,351,363 Long-term debt.............................................. 588,526 615,065 Non-current borrowings from affiliates...................... 786,865 788,506 Capitalized lease obligations............................... 911 1,190 Deferred income taxes....................................... 122,946 134,310 Accrued settlement.......................................... -- 85,920 Other liabilities........................................... 58,188 46,153 ---------- ---------- Total Liabilities................................. 2,521,888 3,022,507 ---------- ---------- Mandatorily Redeemable Preferred Securities................. 305,500 -- ---------- ---------- Equity: Preferred stock, $100 par value........................... 7,412 7,412 Preferred stock, $.10 par value........................... 8,906 8,906 Common stock, $1 par value; 300,000,000 shares authorized; outstanding 90,000,000................................. 90,000 90,000 Paid in capital........................................... 1,942,387 1,943,034 Retained deficit.......................................... (322,973) (427,703) Accumulated comprehensive income.......................... 238 412 ---------- ---------- Total Equity...................................... 1,725,970 1,622,061 ---------- ---------- Total Liabilities and Equity...................... $4,553,358 $4,644,568 ========== ==========
See accompanying Notes to Consolidated Financial Statements. F-93 295 FRESENIUS MEDICAL CARE HOLDINGS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (DOLLARS IN THOUSANDS)
TWELVE MONTHS ENDED DECEMBER 31, --------------------------------- 2000 1999 1998 --------- --------- --------- Cash Flows from Operating Activities: Net income (loss)......................................... $ 105,250 $(327,027) $ (58,950) Adjustments to reconcile net income to net cash from operating activities: Depreciation and amortization.......................... 222,870 217,952 216,214 Write-off of receivables relating to settlement of investigation........................................ -- 94,349 -- Loss on disposition of businesses...................... -- -- 97,228 Loss from discontinued operations...................... -- -- 8,669 Cumulative effect of change in accounting.............. -- -- 4,890 Provision for doubtful accounts........................ 62,949 42,243 54,709 Deferred income taxes.................................. 84,900 (93,124) 16,734 Loss on disposal of properties and equipment........... 970 713 402 Changes in operating assets and liabilities, net of effects of purchase acquisitions and foreign exchange: Increase in accounts receivable........................ (194,772) (112,095) (159,228) Increase in inventories................................ (7,472) (12,606) (30,979) (Increase) decrease in other current assets............ (6,025) (21,300) 3,890 Decrease in IDPN receivables........................... 53,962 -- -- (Increase) decrease in other assets and deferred charges.............................................. (3,025) 1,646 (19,554) Increase (decrease) in accounts payable................ 5,976 25,855 (11,705) (Decrease) increase in accrued income taxes............ (908) 22 74,395 (Decrease) increase in accrued liabilities............. (65,227) 356,539 (31,040) Increase in other long-term liabilities................ 12,035 102,795 3,560 Net changes due to/from affiliates..................... (6,044) (5,605) 22,777 Other, net............................................. (2,126) (17,088) 19,614 --------- --------- --------- Net cash provided by operating activities of continued operations............................................. 263,313 253,269 211,626 --------- --------- --------- Net cash used in operating activities of discontinued operations............................................. -- (3,782) (11,947) --------- --------- --------- Net cash provided by operating activities................. 263,313 249,487 199,679 --------- --------- --------- Cash Flows from Investing Activities: Capital expenditures................................... (104,199) (81,330) (74,653) Payments for acquisitions, net of cash acquired........ (115,601) (65,235) (170,137) Proceeds from disposition of businesses................ -- -- 82,500 --------- --------- --------- Net cash used in investing activities of continued operations............................................. (219,800) (146,565) (162,290) --------- --------- --------- Net cash used in investing activities of discontinued operations............................................. -- -- (8,925) --------- --------- --------- Net cash used in investing activities..................... (219,800) (146,565) (171,215) --------- --------- ---------
F-94 296 FRESENIUS MEDICAL CARE HOLDINGS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS -- (CONTINUED)
TWELVE MONTHS ENDED DECEMBER 31, --------------------------------- 2000 1999 1998 --------- --------- --------- Cash Flows from Financing Activities: Payments on settlement of investigation................ (386,815) -- -- (Decrease) increase in borrowings from affiliates...... (32,947) 172,455 445,447 Cash dividends paid.................................... (520) (520) (520) Proceeds from mandatorily redeemable preferred securities........................................... 305,500 -- -- Proceeds from issuance of debt......................... -- 37 16,385 Proceeds from receivable financing facility............ 110,300 29,400 105,600 Payments on debt and capitalized leases................ (17,660) (298,587) (599,714) Other, net............................................. (647) 799 (2,027) --------- --------- --------- Net cash used in financing activities of continued operations............................................. (22,789) (96,416) (34,829) --------- --------- --------- Net cash used in financing activities of discontinued operations............................................. -- -- (2,107) --------- --------- --------- Net cash used in financing activities..................... (22,789) (96,416) (36,936) --------- --------- --------- Effects of changes in foreign exchange rates................ 40 (522) 1,997 --------- --------- --------- Change in cash and cash equivalents......................... 20,764 5,984 (6,475) Cash and cash equivalents at beginning of period............ 12,563 6,579 13,054 --------- --------- --------- Cash and cash equivalents at end of period.................. $ 33,327 $ 12,563 $ 6,579 ========= ========= ========= Supplemental disclosures of cash flow information: Cash paid during the period for: Interest............................................... $ 223,847 $ 216,647 $ 194,141 Income taxes (received)/paid, net...................... 14,882 8,344 (19,149) Details for Acquisitions: Assets acquired........................................... 117,935 65,256 172,511 Liabilities assumed....................................... (2,334) (21) (2,374) --------- --------- --------- Cash paid................................................. 115,601 65,235 170,137 Less cash acquired........................................ -- -- -- --------- --------- --------- Net cash paid for acquisitions............................ $ 115,601 $ 65,235 $ 170,137 ========= ========= =========
See accompanying Notes to Consolidated Financial Statements F-95 297 FRESENIUS MEDICAL CARE HOLDINGS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998 (IN THOUSANDS, EXCEPT SHARE AMOUNTS)
PREFERRED STOCKS COMMON STOCK CAPITAL IN RETAINED OTHER -------------------- -------------------- EXCESS EARNINGS COMPREHENSIVE SHARES AMOUNT SHARES AMOUNT OF PAR VALUE (DEFICIT) INCOME TOTAL EQUITY ---------- ------- ---------- ------- ------------ --------- ------------- ------------ BALANCE, DECEMBER 31, 1997.................... 89,136,435 $16,318 90,000,000 $90,000 $1,921,853 $ (40,686) $ (835) $1,986,650 Net Loss.................. -- -- -- -- -- (58,950) -- (58,950) Cash dividends on preferred stock......... -- -- -- -- -- (520) -- (520) Tax benefit on International transfer.. -- -- -- -- 20,382 -- -- 20,382 Other comprehensive income.................. -- -- -- -- -- -- 1,872 1,872 ---------- ------- ---------- ------- ---------- --------- ------ ---------- BALANCE, DECEMBER 31, 1998.................... 89,136,435 $16,318 90,000,000 $90,000 $1,942,235 $(100,156) $1,037 $1,949,434 ========== ======= ========== ======= ========== ========= ====== ========== Net Loss.................. -- -- -- -- -- (327,027) -- (327,027) Cash dividends on preferred stock......... -- -- -- -- -- (520) -- (520) Tax benefit of dispositions of stock options................. -- -- -- -- 822 -- -- 822 Other comprehensive income.................. -- -- -- -- -- -- (625) (625) Other adjustments......... -- -- -- -- (23) -- -- (23) ---------- ------- ---------- ------- ---------- --------- ------ ---------- BALANCE, DECEMBER 31, 1999.................... 89,136,435 $16,318 90,000,000 $90,000 $1,943,034 $(427,703) $ 412 $1,622,061 ========== ======= ========== ======= ========== ========= ====== ========== Net Income................ -- -- -- -- -- 105,250 -- 105,250 Cash dividends on preferred stock......... -- -- -- -- -- (520) -- (520) Other comprehensive income.................. -- -- -- -- -- -- (174) (174) Other adjustments......... -- -- -- -- (647) -- -- (647) ---------- ------- ---------- ------- ---------- --------- ------ ---------- BALANCE, DECEMBER 31, 2000.................... 89,136,435 $16,318 90,000,000 $90,000 $1,942,387 $(322,973) $ 238 $1,725,970 ========== ======= ========== ======= ========== ========= ====== ==========
See accompanying Notes to Consolidated Financial Statements F-96 298 FRESENIUS MEDICAL CARE HOLDINGS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (DOLLARS IN THOUSANDS) NOTE 1. THE COMPANY Fresenius Medical Care Holdings, Inc., a New York corporation ("the Company") is a subsidiary of Fresenius Medical Care AG, a German corporation ("FMC" or "Fresenius Medical Care"). The Company conducts its operations through five principal subsidiaries, National Medical Care, Inc., ("NMC"); Fresenius USA Marketing Inc., Fresenius USA Manufacturing Inc., and SRC Holding Company, Inc., ("SRC"), all Delaware corporations and Fresenius USA Inc., a Massachusetts corporation. The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries, NMC, FUSA, and SRC and those financial statements where the Company controls professional corporations in accordance with Emerging Issues Task Force Issue 97-2. The Company is primarily engaged in (i) providing kidney dialysis services, clinical laboratory testing and renal diagnostic services, and (ii) manufacturing and distributing products and equipment for dialysis treatment. Effective January 1, 1998, the Company transferred legal ownership of substantially all of its international operations to FMC. The transfer of contributed capital of $199 million was accounted for on the cost basis. BASIS OF PRESENTATION BASIS OF CONSOLIDATION The consolidated financial statements in this report at December 31, 2000, 1999 and 1998, respectively, reflect all adjustments that, in the opinion of management, are necessary for the fair presentation of the consolidated results for all periods presented. All intercompany transactions and balances have been eliminated in consolidation. EARNINGS PER SHARE Basic earnings per share are computed by dividing net income available to common shareholders by the weighted-average number of common shares outstanding during the year. Diluted earnings per share includes the effect of all dilutive potential common shares that were outstanding during the year. The number of shares used to compute basic and diluted earnings per share was 90,000 in all periods as there were no potential common shares and no adjustments to income to be considered for purposes of the diluted earnings per shares calculation.
TWELVE MONTHS ENDED DECEMBER 31, -------------------------------- 2000 1999 1998 -------- -------- -------- The weighted average number of shares of Common Stock were as follows............................................... 90,000 90,000 90,000 -------- -------- --------
F-97 299 FRESENIUS MEDICAL CARE HOLDINGS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) (DOLLARS IN THOUSANDS) Net income (loss) used in the computation of earnings per share is as follows:
TWELVE MONTHS ENDED DECEMBER 31, --------------------------------- 2000 1999 1998 -------- --------- -------- CONSOLIDATED Net income (loss)......................................... $105,250 $(327,027) $(58,950) Dividends paid on preferred stocks........................ (520) (520) (520) -------- --------- -------- Income (loss) used in per share computation of earnings... $104,730 $(327,547) $(59,470) -------- --------- -------- Basic and fully dilutive earnings (loss) per share........ $ 1.16 $ (3.64) $ (0.66) ======== ========= ========
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES USE OF ESTIMATES The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions affecting the reported amounts of assets and liabilities (including disclosed amounts of contingent assets and liabilities) at the dates of the consolidated financial statements and the reported revenues and expenses during the reporting periods. Actual amounts could differ from those estimates. CASH EQUIVALENTS Cash equivalents consist of highly liquid instruments with maturities of three months or less when purchased. DERIVATIVE FINANCIAL INSTRUMENTS Foreign currency contracts -- Gains and losses on foreign currency contracts that are designated and effective as hedges of existing assets, liabilities (including borrowings) and firm commitments are deferred and recorded as an adjustment to general and administrative expenses or cost of goods sold in the period in which the related transaction is consummated. Gains and losses on other foreign currency contracts are recognized at each reporting period. Interest rate swaps -- Interest rate agreements that are designated and effective as a hedge of a debt or other long-term obligations are accounted for on an accrual basis. That is, the interest payable and interest receivable under the swaps terms are accrued and recorded as an adjustment to interest expense of the designated liabilities or obligations. Amounts due from and payable to the counterparties of interest rate swaps are recorded on an accrual basis at each reporting date on amounts computed by reference of the respective interest rate swap contract. Realized gains and losses that occur from the early termination or of foreign currency contracts and interest rate swaps are recorded in the consolidated statement of operations over the remaining period of the original agreement. Gains and losses arising from the interest differential on contracts that hedge specific borrowings are recorded as a component of interest expense over the life of the contract. The effectiveness of the hedge is measured by a historical and probable future high correlation of changes in the fair value of the hedging instruments with changes in the value of the hedged item. If correlation ceases to exist, hedge accounting will be terminated and gains on losses recorded in other income. To date, high correlation has always been achieved. F-98 300 FRESENIUS MEDICAL CARE HOLDINGS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) (DOLLARS IN THOUSANDS) REVENUE RECOGNITION Revenues are recognized on the date services and related products are provided/shipped and are recorded at amounts estimated to be received under reimbursement arrangements with third-party payors, including Medicare and Medicaid. The Company establishes appropriate allowances based upon factors surrounding credit risks of specific third party payors, historical trends and other information. Retroactive adjustments are accrued on an estimated basis in the period the related services are rendered and adjusted in future periods as final settlements are determined. Net Revenues from machines sales for 2000 and 1999 include $54.5 million and $36.0 million, respectively, of net revenues for machines sold to a third party leasing company which are utilized by the dialysis services division to provide services to our customers. The profits on these sales are deferred and amortized to earnings over the lease terms. INVENTORIES Inventories are stated at the lower of cost (first-in, first-out method) or market. PROPERTIES AND EQUIPMENT Properties and equipment are stated at cost. Significant improvements are capitalized; repairs and maintenance costs that do not extend the lives of the assets are charged to expense as incurred. The cost and accumulated depreciation of assets sold or otherwise disposed of are removed from the accounts, and any resulting gain or loss is included in income when the assets are disposed. The cost of properties and equipment is depreciated over estimated useful lives on a straight-line basis as follows: buildings -- 20 to 40 years, equipment and furniture -- 3 to 10 years, and leasehold improvements -- the shorter of the lease term or useful life. For income tax purposes, depreciation is calculated using accelerated methods to the extent permitted. EXCESS OF COST OVER THE FAIR VALUE OF NET ASSETS ACQUIRED AND OTHER INTANGIBLE ASSETS The Company has adopted the following useful lives and methods to amortize intangible assets: trade name, 40 years; goodwill -- 25 to 40 years on a straight-line basis; acute care agreements -- over the term of the agreement, generally from 1 to 2 years; patient relationships and other intangible assets -- over the estimated period to be benefited, generally from 5 to 6 years on a straight line basis. Goodwill is the excess of the purchase price over the fair value of identifiable net assets acquired on business combinations accounted for as a purchase. DEBT ISSUANCE COSTS Costs related to the issuance of debt are amortized over the term of the related obligation using a straight line method. SELF INSURANCE PROGRAMS The Company is self insured for professional, product and general liability, auto and worker's compensation claims up to predetermined amounts above which third party insurance applies. Estimates include ultimate costs for both reported and incurred but not reported claims. F-99 301 FRESENIUS MEDICAL CARE HOLDINGS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) (DOLLARS IN THOUSANDS) IMPAIRMENT In accordance with Statement of Financial Accounting Standards No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of ", the Company reviews the carrying value of its long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of assets may not be recoverable. The Company considers various valuation factors including discounted cash flows, fair values and replacement costs to assess any impairment of goodwill and other long lived assets. FOREIGN CURRENCY TRANSLATION The Company follows the provisions of Statement of Financial Accounting Standards No. 52, "Foreign Currency Translation". Substantially all assets and liabilities of the Company's foreign subsidiaries are translated at year end exchange rates, while revenue and expenses are translated at exchange rates prevailing during the year. Adjustments for foreign currency translation fluctuations are excluded from net earnings and are deferred in the cumulative translation adjustment component of equity. In addition, the translation of certain intercompany borrowings denominated in foreign currencies, which are considered foreign equity investments, is included in the cumulative translation adjustment. Gains and losses resulting from the translation of revenues and expenses and intercompany borrowings, which are not considered equity investments, are included in general and administrative expense. Translation gains amounted to $5,927, $58 and $766 for the twelve months ended December 31, 2000, 1999 and 1998, respectively. INCOME TAXES Deferred income taxes are provided for temporary differences between the reporting of income and expense for financial reporting and tax return purposes. Deferred tax liabilities or assets at the end of each period are determined using the tax rates then in effect for the periods when taxes are actually expected to be paid or recovered. Accordingly, income tax expense provisions will increase or decrease in the period in which a change in tax rates is enacted. RESEARCH AND DEVELOPMENT Research and development costs are expensed as incurred. COMPREHENSIVE INCOME The Company has adopted the provisions of SFAS No. 130, Reporting Comprehensive Income. This statement requires that all items that are required to be recognized under accounting standards as components of comprehensive income be reported in a financial statement that is displayed with the same prominence as other financial statements. This statement further requires that the Company classify items of other comprehensive income by their nature in a financial statement and display the accumulated balance of other comprehensive income separately from retained earnings and additional paid-in capital in the equity section of a statement of financial position. PENSION AND OTHER POSTRETIREMENT BENEFITS Effective December 31, 1998, the Company adopted SFAS No. 132, "Employers' Disclosures about Pensions and Other Postretirement Benefits". The provisions of SFAS No. 132 revise employers' disclosures about pension and other post retirement benefit plans. It does not change the measurement or F-100 302 FRESENIUS MEDICAL CARE HOLDINGS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) (DOLLARS IN THOUSANDS) recognition of these plans. It standardized the disclosure requirements for pensions and other post retirement benefits to the extent practicable. NEW PRONOUNCEMENTS In June 1998, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards ("SFAS") No. 133, Accounting for Derivative Instruments and Hedging Activities ("SFAS 133"). SFAS 133 requires the recognition of the fair value of all derivative instruments on the balance sheet. Subsequent to the issuance of SFAS 133, the FASB received many requests to clarify certain issues causing difficulties in implementation. In June 2000, the FASB issued SFAS 138, which responds to those requests by amending certain provisions of SFAS 133. These amendments include allowing foreign-currency denominated assets and liabilities to qualify for hedge accounting, permitting the offsetting of certain inter-entity foreign currency exposures that reduce the need for third party derivatives and redefining the nature of interest rate risk to avoid sources of ineffectiveness. The Company is adopting SFAS 133, and the corresponding amendments under SFAS 138 effective as January 1, 2001. The adoption of SFAS 133, as amended by SFAS 138, results in the recording of assets related to forward currency contracts of approximately $12.9 million and a liability for interest rate swaps off approximately $24.6 million. The offset to each of these transition adjustments will be recorded to other comprehensive income. The Company expects that approximately $2.0 million deferred gains on foreign currency contracts will be recognized to earnings during fiscal year 2000. In December 1999, the United States Securities and Exchange Commission ("SEC") issued Staff Accounting Bulletin 101, Revenue Recognition in Financial Statements ("SAB 101"). SAB 101 provides the staff's views in applying generally accepted accounting principles to selected revenue recognition issues, as well as examples of how the staff applies revenue recognition guidance to specific circumstances. In June 2000, SAB 101B was issued by the SEC further delaying the date of SAB 101 until the fourth quarter of the fiscal year beginning after December 15, 1999. The impact of the adoption of SAB 101 is not significant. In May 2000, the Emerging Issues Task Force ("EITF") issued EITF 00-014, Accounting for Certain Sales Incentives, which establishes accounting for point of sales coupons, rebates, and free merchandise. This EITF requires that an entity report these sales incentives that reduce the price paid to be netted directly against revenues. EITF 00-014 is effective no later than the second quarter of 2000. The impact of the adoption of EITF-00-14 is not significant. In September 2000, the Financial Accounting Standards Board issued SFAS No. 140, Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities, which replaces SFAS No. 125 and rescinds SFAS No. 127. SFAS No. 140 provides the accounting and reporting standards for securitizations and other transfers of financial assets and collateral. These standards are based on consistent application of a financial-components approach that focuses on control. This Statement also provides consistent standards for distinguishing transfers of financial assets that are sales from transfers that are secured borrowings. SFAS No. 140 is effective for transfers after March 31, 2001 and is effective for disclosures about securitizations and collateral for fiscal years ending after December 15, 2000. There is no impact for the adoption of SFAS No. 140. 1996 RESTRUCTURING COSTS In 1996, the Company accrued approximately $50,000 for restructuring costs relating to the closing of certain renal products manufacturing and distribution operations as well as the closing of certain clinics of F-101 303 FRESENIUS MEDICAL CARE HOLDINGS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) (DOLLARS IN THOUSANDS) the Homecare Division. These restructuring costs primarily relate to severance payments and lease commitments. Through the period ended December 31, 2000 approximately $49,000 in payments and other charges have been applied against these restructuring costs. The restructuring plan has been completed and the remaining outstanding balance will be used primarily for the remaining lease commitments for closed production facilities. RECLASSIFICATION Certain 1999 and 1998 amounts have been reclassified to conform with the 2000 presentation. NOTE 3. ACQUISITIONS The Company acquired certain health care facilities, and clinical laboratories, for a total consideration of $115,601, $65,235 and $170,137 for the twelve months ended December 31, 2000, 1999 and 1998, respectively. These acquisitions have been accounted for as purchase transactions and, accordingly, are included in the results of operations from the dates of acquisition. The excess of the total acquisition costs over the fair value of tangible net assets acquired was $93,417, $62,376 and $157,836 for the twelve months ended December 31, 2000, 1999 and 1998, respectively. Had the acquisitions that occurred during the twelve months ended December 31, 2000 been consummated on January 1, 1999, unaudited proforma net revenues for the twelve months ended December 31, 2000 and 1999 would have been $3,139,406 and $2,929,550, respectively. Unaudited proforma income (loss) from continuing operations before cumulative effect of change in accounting for start up costs would have been $106,505 and ($325,648) for the twelve months ended December 31, 2000 and 1999, respectively. Had the acquisitions that occurred during the twelve months ended December 31, 1999 been consummated on January 1, 1998, unaudited proforma net revenues for the twelve months ended December 31, 1999 and 1998 would have been $2,829,989 and $2,606,856, respectively. Unaudited proforma income from continuing operations before cumulative effect of change in accounting for start up costs would have been ($328,167) and $49,676 for the twelve months ended December 31, 1999 and 1998, respectively. NOTE 4. OTHER BALANCE SHEET ITEMS
DECEMBER 31, ------------------------ 2000 1999 ---------- ---------- INVENTORIES Raw materials............................................. $ 44,787 $ 41,045 Manufactured goods in process............................. 10,516 8,748 Manufactured and purchased inventory available for sale... 80,520 90,748 ---------- ---------- 135,823 140,541 Health care supplies...................................... 55,876 42,571 ---------- ---------- Total............................................. $ 191,699 $ 183,112 ========== ==========
Under the terms of certain purchase commitments, the Company is obligated to purchase raw materials and health care supplies during 2001 amounting to $55,483. F-102 304 FRESENIUS MEDICAL CARE HOLDINGS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) (DOLLARS IN THOUSANDS) OTHER CURRENT ASSETS Miscellaneous accounts receivable......................... $ 98,668 $ 91,042 Deposits and prepaid expenses............................. 40,414 39,729 ---------- ---------- Total............................................. $ 139,082 $ 130,771 ========== ========== EXCESS OF COST OVER THE FAIR VALUE OF NET ASSETS ACQUIRED AND OTHER INTANGIBLE ASSETS: Goodwill, less accumulated amortization of $302,757 and $228,426............................................... $2,701,281 $2,713,385 Patient relationships, less accumulated amortization of $116,856 and $87,169................................... 72,662 92,898 Other intangible assets, less accumulated amortization of $145,267 and $109,109.................................. 448,101 459,208 ---------- ---------- Total............................................. $3,222,044 $3,265,491 ========== ========== ACCRUED LIABILITIES Accrued operating expenses................................ $ 36,062 $ 46,019 Accrued insurance......................................... 47,021 54,702 Accrued legal and compliance costs........................ 1,601 9,441 Accrued salaries and wages................................ 50,988 53,371 Accounts receivable credit balances....................... 38,215 48,932 Accrued interest.......................................... 14,974 19,125 Accrued other............................................. 16,529 21,669 Accrued physician compensation............................ 17,649 17,721 Accrued other related costs for OIG investigation......... 4,986 20,378 ---------- ---------- Total............................................. $ 228,025 $ 291,358 ========== ==========
Accounts receivable credit balances principally reflect overpayments from third party payors and are in the process of repayment. NOTE 5. SALE OF ACCOUNTS RECEIVABLE On September 27, 1997, NMC established a new $204,000 receivable financing facility (the "A/R Facility") with NationsBank, N.A. (now known as Bank of America, N.A.) to replace its former facility with CitiCorp. The A/R Facility was amended on February 27, 1998 to increase the commitment amount to $331,500. It was further amended on September 27, 1999 to increase the commitment amount to $360,000 and to add WestDeutsche Landesbank Girozentrale, New York Branch, as an additional Administrative Agent. On October 26, 2000, the amount was increased to $500,000 and Bayerische Landesbank, New York Branch, became an additional Administrative Agent. The current agreement carries an effective interest rate based on commercial paper, which was approximately 6.59% at December 31, 2000, and matures on October 25, 2001. At December 31, 2000 and 1999, $445,300 and $335,000 had been received pursuant to such sales, respectively; these amounts are reflected as reductions to accounts receivable. Under the terms of the agreement, new interests in accounts receivable are sold as collections reduce previously sold accounts receivable. The costs related to such sales are expensed as incurred and recorded as interest expense and related financing costs. There were no gains or losses on these transactions. F-103 305 FRESENIUS MEDICAL CARE HOLDINGS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) (DOLLARS IN THOUSANDS) NOTE 6. DEBT Long-term debt to outside parties consists of:
DECEMBER 31, -------------------- 2000 1999 -------- -------- NMC Credit Facility.................................... $732,500 $738,150 Note payable for settlement of investigation........... 85,920 -- Other.................................................. 7,120 17,454 -------- -------- 825,540 755,604 Less amounts classified as current..................... 237,014 140,539 -------- -------- $588,526 $615,065 ======== ========
In September 1996, NMC entered into a credit agreement with a group of banks (collectively, the "Lenders"), pursuant to which the Lenders made available to NMC and certain specified subsidiaries and affiliates an aggregate of $2,000,000 through two credit facilities (collectively, the "NMC Credit Facility"). The NMC Credit Facility, as amended, includes: (i) a revolving credit facility of up to $1,000,000 for up to seven years (of which up to $250,000 is available for letters of credit, up to $450,000 is available for borrowings in certain non-U.S. currencies, up to $50,000 is available as swing lines in U.S. dollars and up to $20,000 is available as swing lines in certain non-U.S. currencies) ("Facility 1") and (ii) a term loan facility of $1,000,000 for up to seven years ("Facility 2"). Loans under the NMC Credit Facility bear interest at one of the following rates, at either (i) LIBOR plus an applicable margin or (ii) a base rate equal to the sum of (1) the higher from time to time of (A) the prime rate of Bank of America, N.A. or (B) the federal funds rate plus 0.50% and (2) an applicable margin. A commitment fee is payable to the Lenders equal to a percentage per annum applied against the unused portion of the NMC Credit Facility. In addition to scheduled quarterly principal payments under Facility 2, the NMC Credit Facility will be reduced by certain portions of the net cash proceeds from certain sales of assets, sales of accounts receivable and the issuance of subordinated debt and equity securities. All borrowings outstanding under Facility 1 are due and payable at the end of the seventh year. Prepayments are permitted at any time without penalty, except in certain defined periods. The NMC Credit Agreement contains certain affirmative and negative covenants with respect to the Company, NMC and its subsidiaries, customary for this type of agreement. In December 1999, the Company successfully amended certain covenants including, among other things, financial ratios contained in its NMC Credit Facility that would have been affected by the impact of the settlement related to the U.S. Government investigation. At December 31, 2000, the Company was in compliance with all such covenants. In February 1998, $250,000 of Facility 2 was repaid, primarily using borrowings from affiliates. The voluntary prepayment reduced the available financing under the agreement to $1,750,000. The Company has made all of its scheduled principal payments, reducing the amount available under the NMC Credit Facility at the end of 2000 and 1999 to $1,577,500 and $1,716,250, respectively. At December 31, 2000 and 1999 the Company had available $698,000 and $777,000, respectively, of additional borrowing capacity under the NMC Credit Facility including $103,000 and $49,000 respectively, available for additional letters of credit. F-104 306 FRESENIUS MEDICAL CARE HOLDINGS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) (DOLLARS IN THOUSANDS) Borrowings from affiliates consists of:
DECEMBER 31, ------------------------ 2000 1999 ---------- ---------- Fresenius Medical Care AG, borrowings at interest rates approximating 7.75%......................... $ 18,850 $ 42,949 Fresenius AG, borrowings at interest rates approximating 7.34 - 7.38%........................ 209,000 330,000 Fresenius Medical Care Trust Finance S.a.r.l., borrowings at interest rates of 8.43% and 9.25%... 786,524 786,524 Fresenius Acquisition, LLC at interest rates approximating 6.87%............................... 113,121 -- Other............................................... 1,013 1,982 ---------- ---------- 1,128,508 1,161,455 Less amounts classified as current.................. 341,643 372,949 ---------- ---------- Total............................................... $ 786,865 $ 788,506 ========== ==========
Scheduled maturities of long-term debt and borrowings from affiliates are as follows: 2001..................................................... $ 578,657 2002..................................................... 151,985 2003..................................................... 150,000 2004..................................................... 282,500 2005..................................................... 0 2006 and thereafter...................................... 790,865 ---------- Total.................................................... $1,954,007 ==========
NOTE 7. SPECIAL CHARGE FOR SETTLEMENT OF INVESTIGATION AND RELATED COSTS On January 18, 2000, the Company, NMC and certain affiliated companies executed definitive agreements (the "Settlement Agreements") with the United States Government (the "Government") to settle (i) matters concerning violations of federal laws and (ii) NMC's claims with respect to outstanding Medicare receivables for nutrition therapy (collectively, the "Settlement"). Under the Settlement with the Government, the Company entered into a note payable for the settlement payment obligations to the Government. Interest on installment payments to the Government will accrue at 6.3% on $51.2 million of the obligation and at 7.5% annually on the balance, until paid in full. In February 2000, the Company made initial payments to the Government totaling $286.4 million. The remaining obligations is payable in six quarterly installments which began in April 2000 and will end in July 2001. The first four quarterly installments were made in the amount of $35.4 million including interest at 7.5%. The first three of these four payments were made in April, July, and October 2000 to the Government totaling $106.2 million including interest. The fourth installment was made in January 2001. The remaining two installments of $27.8 million including interest at 6.3% will be made in April and July 2001, respectively. F-105 307 FRESENIUS MEDICAL CARE HOLDINGS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) (DOLLARS IN THOUSANDS) In addition, the Company received approximately $59.2 million from the Government related to the Company's claims for outstanding Medicare receivables. The Company received $54.0 million in 2000 and a final payment of $5.2 million in February 2001. NOTE 8. DISCONTINUED OPERATIONS Effective June 1, 1998, the Company classified its non-renal diagnostic services business ("Non-Renal Diagnostic Services") and homecare business ("Homecare") as discontinued operations. The Company disposed of its Non-Renal Diagnostic Services division and its Homecare division on June 26, 1998 and July 29, 1998, respectively. In connection with the sale of Homecare, the Company retained the assets and the operations associated with the delivery of IDPN. The Company recorded a net after tax loss of $97 million in 1998 on the sale of these businesses. The net loss on the disposal of these businesses and their results of operations have been accounted for as discontinued operations. IDPN receivables of $153.5 million, that had been included in net assets of discontinued operations were resolved as part of the Settlement Agreements with the Government as part of the OIG Investigation. As a result, a $94.3 million write-off was taken against these receivables. The remaining receivables were reclassified to other current and non-current IDPN receivables on the balance sheet. The Company has collected approximately $54.0 million from the Government, and the remaining portion will be collected on February 2001. Operating results of discontinued operations are presented below: DISCONTINUED OPERATIONS -- RESULTS OF OPERATIONS The revenues and results of operations of the discontinued operations of Non Renal Diagnostic Services and Homecare divisions were as follows:
TWELVE MONTHS ENDED DECEMBER 31, -------------------------------- 2000 1999 1998 -------- -------- -------- NET REVENUES....................................... $ -- $ -- $120,940 -------- -------- -------- Loss from operations before income tax benefit..... -- -- (14,212) Income tax benefit................................. -- -- (5,543) -------- -------- -------- Loss from operations............................... -- -- (8,669) -------- -------- -------- Loss on disposal before income tax benefit......... -- -- (140,000) Income tax benefit................................. -- -- (42,772) -------- -------- -------- Loss on disposal................................... -- -- (97,228) -------- -------- -------- Loss from discontinued operations.................. -- -- (105,897) ======== ======== ========
NOTE 9. INCOME TAXES Income (loss) from continuing operations before income taxes are as follows:
TWELVE MONTHS ENDED DECEMBER 31, --------------------------------- 2000 1999 1998 -------- --------- -------- Domestic.......................................... $201,305 $(410,034) $126,347 Foreign........................................... 2,266 1,970 (63) -------- --------- -------- Total income (loss)..................... $203,571 $(408,064) $126,284 ======== ========= ========
F-106 308 FRESENIUS MEDICAL CARE HOLDINGS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) (DOLLARS IN THOUSANDS) The provision (benefit) for income taxes was as follows:
TWELVE MONTHS ENDED DECEMBER 31, --------------------------------- 2000 1999 1998 -------- --------- -------- Current tax expense Federal.......................... $ 2,616 $ 1,545 $44,777 State.............................................. 10,195 9,916 12,406 Foreign............................................ 610 626 530 ------- -------- ------- Total current.............................. 13,421 12,087 57,713 Deferred tax (benefit) expense Federal............... 79,858 (87,926) 14,642 State.............................................. 4,712 (4,981) 2,092 Foreign............................................ 330 (217) -- ------- -------- ------- Total deferred tax (benefit)............... 84,900 (93,124) 16,734 ------- -------- ------- Total provision (benefit).................. $98,321 $(81,037) $74,447 ======= ======== =======
Deferred tax liabilities (assets) are comprised of the following:
DECEMBER 31, ---------------------- 2000 1999 --------- --------- Allowance for doubtful accounts...................... $ (22,928) $ (26,345) Insurance liability.................................. (388) (21,125) Legal liability...................................... (11,461) (13,109) Deferred and incentive compensation.................. (8,547) (9,055) Pension and benefit accruals......................... (19,623) (19,424) Accrued interest..................................... (47,259) (36,181) Inventory reserves................................... (6,099) (5,236) Accrued expenses..................................... (7,033) (13,643) Other temporary differences.......................... (4,392) (4,653) Government settlement................................ (5,302) (92,469) Loss carry forwards.................................. (11,222) (5,301) --------- --------- Gross deferred tax assets.......................... (144,254) (246,541) Deferred tax assets valuation........................ 2,622 5,029 --------- --------- Deferred tax assets................................ (141,632) (241,512) --------- --------- Depreciation and amortization........................ 140,864 156,113 Other temporary differences.......................... 524 255 --------- --------- Gross deferred tax liabilities..................... 141,388 156,368 --------- --------- Net deferred tax (asset) liabilities............... $ (244) $ (85,144) ========= =========
F-107 309 FRESENIUS MEDICAL CARE HOLDINGS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) (DOLLARS IN THOUSANDS) The provision (benefit) for income taxes for the twelve months ended December 31, 2000, 1999, and 1998 differed from the amount of income taxes determined by applying the applicable statutory federal income tax rate to pretax earnings as a result of the following differences:
TWELVE MONTHS ENDED DECEMBER 31, --------------------------------- 2000 1999 1998 ------ ------- ------ Statutory federal tax rate (benefit)..................... 35.0% (35.0)% 35.0% State income taxes, net of federal tax benefit........... 4.7 0.8 7.5 Amortization of goodwill................................. 10.2 5.1 16.6 Government Settlement.................................... (2.3) 8.7 -- Foreign losses and taxes................................. 0.6 (0.1) 0.4 Other.................................................... 0.1 0.6 (0.6) ---- ----- ---- Effective tax rate (benefit)............................. 48.3% (19.9)% 58.9% ==== ===== ====
The net (decrease) increase in the valuation allowance for deferred tax assets was $(2,407), $(311) and $1,972 for the twelve months ended December 31, 2000, 1999, and 1998, respectively. It is the Company's expectation that it is more likely than not to generate future taxable income to utilize its net deferred tax asset. The changes for all three years relate to activities incurred by foreign subsidiaries. At December 31, 2000, there were approximately $6,750 of foreign net operating losses, the majority of which expire within seven years. The Company also has $21,500 of Federal net operating losses which will begin to expire in the year 2018. Provision has not been made for additional federal, state, or foreign taxes on $5,509 of undistributed earnings of foreign subsidiaries. Those earnings have been, and will continue to be reinvested. The earnings could be subject to additional tax if they were remitted as dividends, if foreign earnings were loaned to the Company or a U.S. affiliate or if the Company should sell its stock in the subsidiaries. The Company estimates that the distribution of these earnings would result in $ 2,166 of additional foreign withholding and federal income taxes. NOTE 10. PROPERTIES AND EQUIPMENT
DECEMBER 31, ---------------------- 2000 1999 --------- --------- Land and improvements................................ $ 5,135 $ 5,205 Buildings............................................ 63,937 68,812 Capitalized lease property........................... 3,312 6,668 Leasehold improvements............................... 235,096 201,405 Equipment and furniture.............................. 403,701 363,244 Construction in progress............................. 38,176 25,028 --------- --------- 749,357 670,362 Accumulated depreciation and amortization............ (292,421) (241,569) --------- --------- Properties and equipment, net........................ $ 456,936 $ 428,793 ========= =========
Depreciation expense relating to properties and equipment amounted to $80,034, $80,803 and $81,683 for the years ended December 31, 2000, 1999 and 1998, respectively. F-108 310 FRESENIUS MEDICAL CARE HOLDINGS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) (DOLLARS IN THOUSANDS) Included in properties and equipment as of December 31, 2000, and 1999 were $26,816 and $25,355, respectively, of peritoneal dialysis cycler machines which the Company leases to customers with end-stage renal disease on a month-to-month basis. Rental income for the peritoneal dialysis cycler machines was $12,472, $8,762, and $7,679 for the twelve months ended December 31, 2000, 1999 and 1998, respectively. LEASES In September 2000, the Company entered into an amended operating lease arrangement with a bank that covers approximately $65,165 of equipment in its dialyzer manufacturing facility in Ogden, Utah. The agreement has a basic term expiration date of January 1, 2010, renewal options and a purchase option at the greater of 20% of the original cost or the fair market value. Future minimum payments under noncancelable leases (principally for clinics and offices) as of December 31, 2000 are as follows:
OPERATING LEASES CAPITAL LEASES TOTAL ---------------- -------------- -------- 2001........................................ $136,936 $ 342 $137,278 2002........................................ 117,394 300 117,694 2003........................................ 104,414 284 104,698 2004........................................ 130,577 230 130,807 2005........................................ 55,153 292 55,445 2006 and beyond............................. 131,552 -- 131,552 -------- ------ -------- Total minimum payments............ $676,026 $1,448 $677,474 ======== ======== Less interest and operating costs........... 323 ------ Present value of minimum lease Payments ($215 payable in 2001).................... $1,125 ------
Rental expense for operating leases was $157,335, $132,248 and $103,838 for the years ended December 31, 2000, 1999 and 1998, respectively. Amortization of properties under capital leases amounted to $369, $852, and $968 for the years ended December 31, 2000, 1999 and 1998, respectively. Lease agreements frequently include renewal options and require that the Company pay for utilities, taxes, insurance and maintenance expenses. Options to purchase are also included in some lease agreements, particularly capital leases. NOTE 11. MANDATORILY REDEEMABLE PREFERRED SECURITIES During the fourth quarter of 2000, a wholly-owned subsidiary of the Company issued to NMC 1,000 shares of Series A Preferred Stock and 1,700 shares of Series C Preferred Stock that were then transferred to FMC for proceeds of $113,500 and $192,000, respectively ("Redeemable Preferred Securities"). The Redeemable Preferred Securities are identical in substance except that the Series A shares rank prior to the Series C shares both as to dividends and liquidation, dissolution or winding-up of the subsidiary. The Redeemable Preferred Securities have a par value of $.01 per share. The holders of the securities are entitled to receive dividends in amount of dollars per share equal to approximately 8% of the share issuance price. The dividends will be declared and paid in cash at least annually. Upon liquidation or dissolution or winding up of the subsidiary, the holders of the Redeemable Preferred Securities are entitled to an amount equal to the liquidation preference for each share of stock plus an amount equal to all accrued and unpaid dividends thereon through the date of distribution. The F-109 311 FRESENIUS MEDICAL CARE HOLDINGS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) (DOLLARS IN THOUSANDS) liquidation preference is the sum of the issuance price plus, for each year or portion thereof an amount equal to one-half of one percent of the issue price, not to exceed 5%. The Redeemable Preferred Securities will be sold to the Company in two years for an amount equal to Euros 341,385 plus any accrued and unpaid dividends. Accordingly, the mandatorily redeemable preferred securities are deemed to Euro liability and the risk of foreign currency fluctuations are hedged through forward currency contracts. The holders of the Redeemable Preferred Securities have the participation rights of the holders of all other classes of capital stock of the subsidiary. NOTE 12. PENSION AND OTHER POST RETIREMENT BENEFITS DEFINED BENEFIT PENSION PLANS Substantially all domestic employees are covered by NMC's non-contributory, defined benefit pension plan. Each year NMC contributes at least the minimum required by the Employee Retirement Income Security Act of 1974, as amended. Plan assets consist primarily of publicly traded common stock, fixed income securities and cash equivalents. The following provides a reconciliation of benefit obligations, plan assets, and funded status of the plans.
TWELVE MONTHS ENDED DECEMBER 31, -------------------------------- 2000 1999 1998 -------- -------- -------- CHANGE IN BENEFIT OBLIGATION Benefit obligation at beginning of year.................... $ 87,737 $ 87,464 $ 72,025 Service Cost............................................... 9,987 8,212 7,416 Interest Cost.............................................. 6,713 5,966 5,217 Amendments................................................. -- (5) -- Actuarial (gain)/loss...................................... 3,752 (12,496) 5,810 Divestures................................................. -- -- (1,717) Benefits Paid.............................................. (2,748) (1,404) (1,287) -------- -------- -------- Benefit obligation at end of year.......................... $105,441 $ 87,737 $ 87,464 -------- -------- -------- CHANGE ON PLAN ASSETS Fair value of plan assets at beginning of year............. 86,794 77,019 65,088 Actual return on plan assets............................... (2,098) 11,179 13,218 Employee contribution...................................... -- -- -- Benefits paid.............................................. (2,748) (1,404) (1,287) -------- -------- -------- Fair value of plan assets at end of year................... $ 81,948 $ 86,794 $ 77,019 -------- -------- -------- Funded Status.............................................. (23,493) (942) (10,444) Unrecognized net (gain)/loss............................... (14,367) (30,993) (15,239) Unrecognized prior service cost............................ (4) (4) -- -------- -------- -------- Accrued benefit costs...................................... $(37,864) $(31,939) $(25,683) -------- -------- -------- WEIGHTED -- AVERAGE ASSUMPTIONS AS OF DECEMBER 31, Discount rate.............................................. 7.50% 7.50% 6.75% Expected return of plan assets............................. 9.70 9.70 9.70 Rate of compensation increase.............................. 4.50 4.50 4.50
F-110 312 FRESENIUS MEDICAL CARE HOLDINGS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) (DOLLARS IN THOUSANDS)
TWELVE MONTHS ENDED DECEMBER 31, -------------------------------- 2000 1999 1998 -------- -------- -------- COMPONENTS OF NET PERIOD BENEFIT COST Service Cost............................................... $ 9,987 $ 8,212 $ 7,416 Interest Cost.............................................. 6,713 5,966 5,217 Expected return on plan assets............................. (8,345) (7,401) (6,430) Amortization of prior service cost......................... (1) (1) -- Recognized net (gain)/loss................................. (2,429) (520) (891) Curtailment net (gain)..................................... -- -- (1,717) -------- -------- -------- Net periodic benefit costs................................. $ 5,925 $ 6,256 $ 3,595 -------- -------- --------
NMC also sponsors a supplemental executive retirement plan to provide certain key executives with benefits in excess of normal pension benefits. The projected benefit obligation was $5,453 and $3,057 at December 31, 2000 and 1999, respectively. Pension expense for this plan, for the twelve months ended December 31, 2000, 1999 and 1998 was $983, $402 and $374, respectively. NMC does not provide any postretirement benefits to its employees other than those provided under its pension plan and supplemental executive retirement plan. DEFINED CONTRIBUTION PLANS The Company's employees are eligible to join 401(k) Savings Plan once they have achieved a minimum of 90 days of service and if they have more than 900 hours of service before their one year anniversary date. Under the provisions of the 401(k) plan, employees are allowed to contribute up to 16% of their salaries. The Company contributes 50% of their savings up to 6% of saved pay after one year. The Company's total contributions for the year ended December 31, 2000, 1999 and 1998 was $8,786, $7,298 and $7,617, respectively. NOTE 13. EQUITY PREFERRED STOCK At December 31, 2000 and 1999, the components of the Company's preferred stocks as presented in the Consolidated Balance Sheet and the Consolidated Statement of Changes in Equity are as follows: PREFERRED STOCKS, $100 PAR VALUE -- 6% Cumulative(1); 40,000 shares authorized; 36,460 outstanding............................................... $ 3,646 -- 8% Cumulative Class A(2); 50,000 shares authorized; 16,176 outstanding....................................... 1,618 -- 8% Noncumulative Class B(2); 40,000 shares authorized; 21,483 outstanding....................................... 2,148 ------- $ 7,412 -------
F-111 313 FRESENIUS MEDICAL CARE HOLDINGS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) (DOLLARS IN THOUSANDS) PREFERRED STOCKS, $.10 PAR VALUE - -- Noncumulative Class D(3); 100,000,000 shares authorized; 89,062,316 outstanding................................... 8,906 ------- Total Preferred................................... $16,318 =======
- --------------- (1) 160 votes per share (2) 16 votes per share (3) 1/10 vote per share STOCK OPTIONS In 1996, FMC adopted a stock incentive plan (the "FMC Plan") under which the Company's key management and executive employees are eligible. Under the FMC Plan, eligible employees will have the right to acquire Preference Shares of FMC. Options granted under the FMC Plan will be evidenced by a non-transferable convertible bond and corresponding non-recourse loan to the employee, secured solely by the bond with which it was made. The bonds mature in ten years and are generally fully convertible after three to five years. Each convertible bond, which is DM denominated, entitles the holder thereof to convert the bond in Preference Shares equal to the face amount of the bond divided by the Preference Share's nominal value. During 1997, FMC granted 2,697,438 options (of which 216,663 were forfeited) to the Company, under the FMC Plan. At December 31, 1997 no options were exercisable. During 2000, 1999 and 1998 a total of 75,833, 30,065, and, 2,169,711 awards were cancelled or forfeited resulting in awards outstanding of 205,166 for 2000, 280,999 for 1999 and 311,064 in 1998. If the 205,166 awards outstanding at December 31, 2000 were exercised, a total of approximately 68.389 non-voting preferred shares would be issued. At December 31, 2000, 205,166 options were exercisable under the FMC plan. During 1998, the FMC adopted a new stock incentive plan ("FMC 98 Plan") under which the Company's key management and executive employees are eligible. Under the FMC 98 Plan, eligible employees will have the right to acquire Preference Shares of FMC. Options granted under the FMC 98 Plan will be evidenced by a non-transferable convertible bond and a corresponding non-recourse loan to the employee, secured solely by the bond with which it was made. Each convertible bond, which will be DM denominated, will entitle the holder thereof to convert the bond in Preference Shares equal to the face amount of the bond divided by the Preference Share's nominal value. During 1998, FMC awarded 1,024,083 options and exercisable upon vesting for 1,024,083 Preference Shares. During 1999, FMC granted 571,940 Preference Shares. During 1999, options for 140,168 Preference Shares were forfeited or cancelled under the FMC 98 Plan. During 2000, FMC granted 653,325 Preference Shares and 303,123 Preference Shares were forfeited or cancelled. In addition, 10,060 stock options from the FMC 98 Plan were exercised with 10,060 Preference Shares being issued. At December 31, 2000, there were 568,887 Preference Shares for which grants could be issued. Grants for 660,270 Preference Shares were exercisable under the FMC 98 Plan at December 31, 2000. NOTE 14. FINANCIAL INSTRUMENTS MARKET RISK The Company is exposed to market risks due to changes in interest rates and foreign currency rates. The Company uses derivative financial instruments, including interest rate swaps and foreign exchange contracts, as part of its risk management strategy. These instruments are used as a means of hedging exposure to interest rate and foreign currency fluctuations in connection with firm commitments and debt obligations. The Company does not hold or issue derivative instruments for trading or speculative purposes. F-112 314 FRESENIUS MEDICAL CARE HOLDINGS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) (DOLLARS IN THOUSANDS) The mark-to-market valuations of the financial instruments and of associated underlying exposures are closely monitored at all times. The Company uses portfolio sensitivities and stress tests to monitor risk. Overall financial strategies and the effects of using derivatives are reviewed periodically. FOREIGN CURRENCY CONTRACTS The Company uses foreign exchange contracts as a hedge against foreign exchange risks associated with the settlement of foreign currency denominated payables and firm commitments. At December 31, 2000 and 1999, the Company had outstanding foreign currency contracts for the purchase of Euros ("EUR") totaling $450,856 and $41,925, respectively. The contracts outstanding at December 31, 2000 include forward contracts for delivery of EUR between January 2001 and November 2003, at rates ranging from $0.8489 to $0.9374 per EUR. The fair value of forward currency contracts are the estimated amounts that the Company would receive or pay to terminate the agreement at the reporting date, taking into account the current exchange rates and the current creditworthiness of the counterparties. At December 31, 2000 and 1999, the Company would have received approximately $20,400 and $2,800, respectively, to terminate the contracts. INTEREST RATE AGREEMENTS At December 31, 2000 and 1999, the Company had interest rate swaps and option agreements outstanding with various commercial banks for notional amounts totaling $1,050,000 and $1,600,000, respectively. All of these agreements were entered into for other than trading purposes. In the year 2000, the Company purchased new interest rate swaps with $450,000 notional amount and closed out its option agreements (cap and floor with notional amount of $150,000). Hedges totalling $850,000 expired on January 4, 2000. The rest of the contracts mature at various dates between November 2003 and November 2007. For a notional amount of $1,050,000, the interest rate swaps effectively change the Company's interest rate exposure on its variable-rate loans under the NMC Credit Facility (drawn as of December 31, 2000: $732,500), and drawdowns under the receivables financing facility (drawn as of December 31, 2000: $445,300) to fixed rates of interest ranging between 6.05% and 6.611%. Under the NMC Credit Facility, the Company agreed to maintain at least $500,000 of interest rate protection. The Company closed out its option agreements (cap and floor with notional amount of $150,000) in November 2000 and is amortizing the loss over the original term of the agreements. The fair value of the interest rate swaps and options is the estimated amount that the Company would receive or pay to terminate the agreements. The fair value of these agreements at December 31, 2000 and 1999 would require the Company to pay approximately $24,600 and receive approximately $9,200, respectively. These estimates are subjective in nature and involve uncertainties and matters of significant judgement and therefore cannot be determined with precision. Changes in assumptions significantly affect the estimates. CREDIT RISK The Company is exposed to credit risk to the extent of potential nonperformance by counterparties on financial instruments. As of December 31, 2000, the Company's credit exposure was insignificant and limited to the fair value stated above; the Company believes the risk of incurring losses due to credit risk is remote. F-113 315 FRESENIUS MEDICAL CARE HOLDINGS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) (DOLLARS IN THOUSANDS) FAIR VALUE OF OTHER FINANCIAL INSTRUMENTS At December 31, 2000 and 1999, the carrying value of cash, cash equivalents, accounts receivable, prepaid expenses, accounts payable, accrued expenses, short-term borrowings, short-term borrowings and mandatorily redeemable preferred securities with related parties and current liabilities approximated their fair values, based on the short-term maturities of these instruments. In addition, the Company is a "Subsidiary Guarantor" along with its parent company, FMC, for the issuance of Trust Preferred Securities on the books of FMC at a carrying value of $952,727 and $964,103, at December 31, 2000 and 1999 respectively. FMC and Subsidiary Guarantors guarantee the Trust Preferred Securities through a series of undertakings. At December 31, 2000 and 1999, the carrying value of these Trust Preferred Securities exceeded their fair value by $54,900 and $20,059, respectively. The fair value of these Trust Preferred Securities is based upon market quotes. NOTE 15. RELATED PARTY TRANSACTIONS AND ALLOCATIONS SERVICES Related party transactions pertaining to services performed and products purchased/sold between affiliates are recorded as net accounts payable to affiliates on the balance sheet. At December 31, 2000 and 1999, the Company had net accounts payable of $6,317 and $12,361, respectively. BORROWINGS WITH AFFILIATES The Company has various outstanding borrowings with FMC and affiliates. The funds were used for general corporate purposes. The loans are due at various maturities. See Note 6 -- "Debt, -- Borrowings from Affiliates" for details and See Note 11 -- "Mandatorily Redeemable Preferred Securities". NOTE 16. COMMITMENTS AND CONTINGENCIES LEGAL PROCEEDINGS COMMERCIAL INSURER LITIGATION In 1997, the Company, NMC, and certain named NMC subsidiaries, were served with a civil complaint filed by Aetna Life Insurance Company in the U.S. District Court for the Southern District of New York. The lawsuit alleges inappropriate billing practices for nutritional therapy, diagnostic and clinical laboratory tests and misrepresentations. In April 1999, Aetna amended its complaint to include its affiliate, Aetna U.S. Healthcare, Inc., as an additional plaintiff, and to make certain other limited changes in its pleading. The amended complaint seeks unspecified damages and costs. In February 2000, the Company was served with a similar complaint filed by Connecticut General Life Insurance Company, Equitable Life Assurance Society for the United States, Cigna Employee Benefits Services, Inc. and Guardian Life Insurance Company of America, Inc. (Connecticut General Life Insurance Company et al v. National Medical Care et al, 00-Civ-0932) seeking unspecified damages and costs. However, the Company, NMC and its subsidiaries believe that there are substantial defenses to the claims asserted, and intend to vigorously defend both lawsuits. Other private payors have contacted the Company and may assert that NMC received excess payment and, similarly, may join either lawsuit or file their own lawsuit seeking reimbursement and other damages. The Company has filed counterclaims against the plaintiffs in these matters based on inappropriate claim denials and delays in claim payments. F-114 316 FRESENIUS MEDICAL CARE HOLDINGS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) (DOLLARS IN THOUSANDS) Although the ultimate outcome on the Company of these proceedings cannot be predicted at this time, an adverse result could have a material adverse effect on the Company's business, financial condition and result of operations. OBRA 93 The Omnibus Budget Reconciliation Act of 1993 affected the payment of benefits under Medicare and employer health plans for dual-eligible ESRD patients. In July 1994, the Health Care Financing Administration issued an instruction to Medicare claims processors to the effect that Medicare benefits for the patients affected by that act would be subject to a new 18-month "coordination of benefits" period. This instruction had a positive impact on NMC's dialysis revenues because, during the 18-month coordination of benefits period, patients' employer health plans were responsible for payment, which was generally at rates higher than those provided under Medicare. In April 1995, the Health Care Financing Administration issued a new instruction, reversing its original instruction in a manner that would substantially diminish the positive effect of the original instruction on NMC's dialysis business. The Health Care Financing Administration further proposed that its new instruction be effective retroactive to August 1993, the effective date of the Omnibus Budget Reconciliation Act of 1993. NMC ceased to recognize the incremental revenue realized under the original instruction as of July 1, 1995, but it continued to bill employer health plans as primary payors for patients affected by the Omnibus Budget Reconciliation Act of 1993 through December 31, 1995. As of January 1, 1996, NMC commenced billing Medicare as primary payor for dual eligible ESRD patients affected by the act, and then began to re-bill in compliance with the revised policy for services rendered between April 24 and December 31, 1995. On May 5, 1995, NMC filed a complaint in the U.S. District Court for the District of Columbia (National Medical Care, Inc. and Bio-Medical Applications of Colorado, Inc. d/b/a Northern Colorado Kidney Center v. Shalala, C.A. No.95-0860 (WBB) seeking to preclude the Health Care Financing Administration from retroactively enforcing its April 24, 1995 implementation of the Omnibus Budget Reconciliation Act of 1993 provision relating to the coordination of benefits for dual eligible ESRD patients. On May 9, 1995, NMC moved for a preliminary injunction to preclude the Health Care Financing Administration from enforcing its new policy retroactively, that is, to billing for services provided between August 10, 1993 and April 23, 1995. On June 6, 1995, the court granted NMC's request for a preliminary injunction and in December of 1996, NMC moved for partial summary judgment seeking a declaration from the Court that the Health Care Financing Administration's retroactive application of the April 1995 rule was legally invalid. The Health Care Financing Administration cross-moved for summary judgment on the grounds that the April 1995 rule was validly applied prospectively. In January 1998, the court granted NMC's motion for partial summary judgment and entered a declaratory judgment in favor of NMC, holding the Health Care Financing Administration's retroactive application of the April 1995 rule legally invalid. Based on its finding, the Court also permanently enjoined the Health Care Financing Administration from enforcing and applying the April 1995 rule retroactively against NMC. The Court took no action on the Health Care Financing Administration's motion for summary judgment pending completion of the outstanding discovery. On October 5, 1998, NMC filed its own motion for summary judgment requesting that the Court declare the Health Care Financing Administration's prospective application of the April 1995 rule invalid and permanently enjoin Health Care Financing Administration from prospectively enforcing and applying the April 1995 rule. The Court has not yet ruled on the parties' motions. The Health Care Financing Administration elected not to appeal the Court's June 1995 and January 1998 orders. The Health Care Financing Administration may, however, appeal all rulings at the F-115 317 FRESENIUS MEDICAL CARE HOLDINGS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) (DOLLARS IN THOUSANDS) conclusion of the litigation. If the Health Care Financing Administration should successfully appeal so that the revised interpretation would be applied retroactively, NMC may be required to refund the payment received from employer health plans for services provided after August 10, 1993 under the Health Care Financing Administration's original implementation, and to re-bill Medicare for the same services, which would result in a loss to NMC of approximately $120 million attributable to all periods prior to December 31, 1995. Also, in this event, the Company's business, financial condition and results of operations would be materially adversely affected. In July, 2000, NMC filed a complaint in the U.S. District Court for the Eastern District of Virginia (National Medical Care, Inc. and Bio-Medical Applications of Virginia, Inc. v. Aetna Life Insurance, Co., Inc. Aetna U.S. Healthcare, Inc. and John Does 1-10) seeking recovery against Aetna U.S. Healthcare and health plans administered by Aetna U.S. Healthcare for claims related to primary payor liability for dual eligible ESRD patients under the Omnibus Budget Reconciliation Act of 1993. On January 16, 2001, the Court stayed the action pending resolution of the District of Columbia Court action. OTHER LITIGATION AND POTENTIAL EXPOSURES From time to time, the Company is a party to or may be threatened with other litigation arising in the ordinary course of its business. Management regularly analyzes current information including, as applicable, the Company's defenses and insurance coverage and, as necessary, provides accruals for probable liabilities for the eventual disposition of these matters. The ultimate outcome of these matters is not expected to materially affect the Company's financial position, results of operations or cash flows. The Company, like other health care providers, conducts its operations under intense government regulation and scrutiny. The Company must comply with regulations which relate to or govern the safety and efficacy of medical products and supplies, the operation of manufacturing facilities, laboratories and dialysis clinics, and environmental and occupational health and safety. The Company must also comply with the U.S. anti-kickback statute, the False Claims Act, the Stark Law, and other federal and state fraud and abuse laws. Applicable laws or regulations may be amended, or enforcement agencies or courts may make interpretations that differ from the Company's or the manner in which the Company conduct its business. In the U.S., enforcement has become a high priority for the federal government and some states. In addition, the provisions of the False Claims Act authorizing payment of a portion of any recovery to the party bringing the suit encourage private plaintiffs to commence "whistle blower" actions. By virtue of this regulatory environment, as well as our corporate integrity agreement with the government, the Company expects that its business activities and practices will continue to be subject to extensive review by regulatory authorities and private parties, and continuing inquiries, claims and litigation relating to its compliance with applicable laws and regulations. The Company may not always be aware that an inquiry or action has begun, particularly in the case of "whistle blower" actions, which are initially filed under court seal. The Company operates a large number of facilities throughout the U.S. In such a decentralized system, it is often difficult to maintain the desired level of oversight and control over the thousands of individuals employed by many affiliate companies. The Company relies upon its management structure, regulatory and legal resources, and the effective operation of its compliance program to direct, manage and monitor the activities of these employees. On occasion, the Company may identify instances where employees, deliberately or inadvertently, have submitted inadequate or false billings. The actions of such persons may subject the Company and its subsidiaries to liability under the False Claims Act, among other laws, and the Company cannot predict whether law enforcement authorities may use such information to initiate further investigations of the business practices disclosed or any of its other business activities. F-116 318 FRESENIUS MEDICAL CARE HOLDINGS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) (DOLLARS IN THOUSANDS) Physicians, hospitals and other participants in the health care industry are also subject to a large number of lawsuits alleging professional negligence, malpractice, product liability, worker's compensation or related claims, many of which involve large claims and significant defense costs. The Company has been subject to these suits due to the nature of its business and the Company expects that those types of lawsuits may continue. Although the Company maintains insurance at a level which it believes to be prudent, the Company cannot assure that the coverage limits will be adequate or that insurance will cover all asserted claims. A successful claim against the Company or any of its subsidiaries in excess of insurance coverage could have a material adverse effect upon the Company and the results of its operations. Any claims, regardless of their merit or eventual outcome, also may have a material adverse effect on the Company's reputation and business. The Company has also had claims asserted against it and has had lawsuits filed against it relating to businesses that it has acquired or divested. These claims and suits relate both to operation of the businesses and to the acquisition and divestiture transactions. The Company has asserted its own claims, and claims for indemnification. Although the ultimate outcome on the Company cannot be predicted at this time, an adverse result could have a material adverse effect upon the Company's business, financial condition, and results of operations. CONTINGENT NON-NMC LIABILITIES OF W. R. GRACE & CO. (NOW KNOWN AS FRESENIUS MEDICAL CARE HOLDINGS, INC.) The Company was formed as a result of a series of transactions pursuant to the Agreement and Plan of Reorganization (the "Merger") dated as of February 4, 1996 by and between W.R. Grace & Co. ("Grace") and Fresenius AG. In connection with the Merger, W.R. Grace & Co.-Conn. ("Grace Chemicals") agreed to indemnify the Company and NMC against all liabilities of the Company and its successors, whether relating to events occurring before or after the Merger, other than liabilities arising from or relating to NMC operations. The Company may be contingently liable for certain liabilities with respect to pre-Merger matters that are not related to NMC operations. Grace Chemicals has filed for reorganization under Chapter 11 of the U.S. Bankruptcy Code. If Grace Chemicals' indemnity obligation is terminated or limited as a result of this bankruptcy proceeding, and the Company is held liable for pre-Merger obligations of Grace Chemicals, the Company's business, financial condition, and results of operations may be adversely affected. On September 28, 2000, Mesquita, et al. v. W. R. Grace & Company, et al. (Sup. Court of Calif., S.F. County, #315465) was filed as a class action by plaintiffs claiming to be creditors of Grace Chemicals against Grace Chemicals, the Company, and other defendants, principally alleging that the Merger was a fraudulent transfer, violated the uniform fraudulent transfer act, and constituted a conspiracy. An amended complaint was filed subsequently with substantially similar allegations (Abner et al. v. W. R. Grace & Company, et al.). The Company has requested indemnification from Grace Chemicals pursuant to the Merger agreement. If the Merger is determined to have been a fraudulent transfer, if material damages are proved by the plaintiff, and if the Company is not able to collect, in whole or in part, on the indemnity, a judgment could have a material adverse effect on the Company's business, financial condition and results of operations. The Company believes that no fraudulent transfer or conspiracy occurred and intends to defend the case vigorously. Were events to violate the tax-free nature of the Merger, the resulting tax liability would be the obligation of the Company. Subject to representations by Grace Chemicals, the Company and Fresenius AG, Grace Chemicals has agreed to indemnify the Company for such a tax liability. If the Company was not able to collect on the indemnity, the tax liability would have a material adverse effect on the Company's business, the financial condition of the Company and the results of operations. F-117 319 FRESENIUS MEDICAL CARE HOLDINGS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) (DOLLARS IN THOUSANDS) NOTE 17. SIGNIFICANT RELATIONS For the periods presented, approximately 63% of the Company's health care services net revenues are paid by and subject to regulations under governmental programs, primarily Medicare and Medicaid. The Company maintains reserves for losses related to these programs, including uncollectible accounts receivable, and such losses have been within management's expectations. Revenues from EPO accounted for approximately 28% of the Dialysis Services net revenues for the twelve months ended December 31, 2000 and materially contribute to Dialysis Services operating earnings. EPO is produced by a single source manufacturer, Amgen, Inc., and any interruption of supply could materially adversely affect the Company's business and results of operations. NOTE 18. INDUSTRY SEGMENTS AND INFORMATION ABOUT FOREIGN OPERATIONS The Company adopted SFAS No. 131, Disclosure about Segments of an Enterprise and Related Information during the fourth quarter of 1998. SFAS No. 131 established the standards for reporting information about operating statements in annual financial statements and requires selected information about operating segments in interim financial reports issued to stockholders. The Company's reportable segments are Dialysis Services and Dialysis Products. For purposes of segment reporting, the Dialysis Services Division and Spectra Renal Management are combined and reported as Dialysis Services. These divisions are aggregated because of their similar economic classifications. These include the fact that they are both health care service providers whose services are provided to a common patient population, and both receive a significant portion of their net revenue from Medicare and other government and non-government third party payors. The Dialysis Products segment reflects the activity of the Dialysis Products Division only. The accounting policies of the operating segments are the same as those described in the summary of significant accounting policies. The Company generally evaluates division operating performance based on Earnings Before Interest and Taxes (EBIT) but does use Earning Before Interest, Taxes, Depreciation and Amortization (EBITDA) in some cases. The table below provides information for the years ended December 31, 2000, 1999 and 1998 pertaining to the Company's operations by geographic area.
UNITED STATES ASIA/PACIFIC TOTAL ------------- ------------ ---------- NET REVENUES FOR TWELVE MONTHS ENDED 2000................................................. $3,085,320 $ 3,855 $3,089,175 1999................................................. 2,811,380 3,853 2,815,233 1998................................................. 2,564,785 6,621 2,571,406 OPERATING EARNINGS FOR TWELVE MONTHS ENDED 2000................................................. $ 520,790 $ 30 $ 520,820 1999................................................. 511,847 444 512,291 1998................................................. 446,725 1,013 447,738 ASSETS AT DECEMBER 31, 2000................................................. 2,810,514 10,394 2,820,908 1999................................................. 2,553,763 10,112 2,563,875 1998................................................. 2,461,863 9,584 2,471,447
F-118 320 FRESENIUS MEDICAL CARE HOLDINGS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) (DOLLARS IN THOUSANDS) The table below provides information for the years ended December 31, 2000, 1999 and 1998 pertaining to the Company's two industry segments.
LESS DIALYSIS DIALYSIS INTERSEGMENT SERVICES PRODUCTS SALES TOTAL ---------- -------- ------------ ---------- NET REVENUES FOR TWELVE MONTHS ENDED 2000....................................... $2,624,520 $716,757 $252,102 $3,089,175 1999....................................... 2,339,185 706,709 230,661 2,815,233 1998....................................... 2,116,185 662,324 207,103 2,571,406 OPERATING EARNINGS FOR TWELVE MONTHS ENDED 2000....................................... 402,887 117,933 -- 520,820 1999....................................... 386,479 125,812 -- 512,291 1998....................................... 344,208 103,530 -- 447,738 ASSETS AT DECEMBER 31 2000....................................... 2,176,055 644,853 -- 2,820,908 1999....................................... 1,918,612 645,263 -- 2,563,875 1998....................................... 1,815,368 656,079 -- 2,471,447 CAPITAL EXPENDITURES FOR TWELVE MONTHS ENDED 2000....................................... 72,421 28,775 -- 101,196 1999....................................... 59,061 15,519 -- 74,580 1998....................................... 54,821 13,147 -- 67,968 DEPRECIATION AND AMORTIZATION OF PROPERTIES AND EQUIPMENT FOR TWELVE MONTHS ENDED 2000....................................... 120,985 23,749 -- 144,734 1999....................................... 117,059 21,936 -- 138,995 1998....................................... 114,240 22,175 -- 136,415
F-119 321 FRESENIUS MEDICAL CARE HOLDINGS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) (DOLLARS IN THOUSANDS) The table below provides the reconciliations of reportable segment operating earnings, assets, capital expenditures, and depreciation and amortization to the Company's consolidated totals.
TWELVE MONTHS ENDED DECEMBER 31, -------------------------------------- SEGMENT RECONCILIATION 2000 1999 1998 - ---------------------- ---------- ---------- ---------- INCOME (LOSS) FROM CONTINUING OPERATIONS BEFORE INCOME TAXES AND CUMULATIVE EFFECTIVE OF CHANGE IN ACCOUNTING FOR START UP COSTS: Total operating earnings for reportable segments..... $ 520,820 $ 512,291 $ 447,738 Corporate G&A (including foreign exchange)........... (95,860) (113,375) (108,618) Research and development expense..................... (4,127) (4,065) (4,060) Net interest expense................................. (187,315) (201,915) (208,776) Interest expense on settlement of investigation, net............................................... (29,947) -- -- Special charge for settlement of investigation and related costs..................................... -- (601,000) -- ---------- ---------- ---------- Income (Loss) before income taxes and cumulative effective of change in accounting for start up costs............................................. $ 203,571 $ (408,064) $ 126,284 ========== ========== ========== ASSETS: Total assets for reportable segments................. $2,820,908 $2,563,875 $2,471,447 Intangible assets not allocated to segments.......... 1,934,643 2,006,985 2,067,648 Accounts receivable financing agreement.............. (445,300) (335,000) (305,600) Net assets of discontinued operations and IDPN accounts receivable............................... 5,189 59,151 151,067 Corporate assets and other........................... 237,918 349,557 228,841 ---------- ---------- ---------- Total Assets......................................... $4,553,358 $4,644,568 $4,613,403 ========== ========== ========== CAPITAL EXPENDITURES Total capital expenditures for reportable segments... $ 101,196 $ 74,580 $ 67,968 Corporate capital expenditures....................... 3,003 6,750 6,685 ---------- ---------- ---------- Total Capital Expenditures........................... $ 104,199 $ 81,330 $ 74,653 ========== ========== ========== DEPRECIATION AND AMORTIZATION: Total depreciation and amortization for reportable segments.......................................... $ 144,734 $ 138,995 $ 136,415 Corporate depreciation and amortization.............. 78,136 78,957 79,799 ---------- ---------- ---------- Total Depreciation and Amortization.................. $ 222,870 $ 217,952 $ 216,214 ========== ========== ==========
F-120 322 FRESENIUS MEDICAL CARE HOLDINGS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) (DOLLARS IN THOUSANDS) NOTE 19. QUARTERLY SUMMARY (UNAUDITED)
1ST QUARTER 2ND QUARTER 3RD QUARTER 4TH QUARTER ----------- ----------- ----------- ----------- 2000 Net revenues................................. $745,115 $760,724 $794,694 $788,642 Cost of health care services and medical supplies................................... 506,858 512,494 544,011 545,459 Operating expenses........................... 139,899 141,199 140,944 137,478 Interest expense, net........................ 47,118 49,269 46,892 44,036 Interest expense, on settlement of investigation.............................. 6,185 7,666 7,951 8,145 -------- -------- -------- -------- Total expenses............................. 700,060 710,628 739,798 735,118 -------- -------- -------- -------- Earnings before income taxes................. 45,055 50,096 54,896 53,524 Provision for income taxes................... 21,961 24,927 27,227 24,206 -------- -------- -------- -------- Net income................................... $ 23,094 $ 25,169 $ 27,669 $ 29,318 ======== ======== ======== ======== Basic and fully dilutive earnings per share...................................... $ 0.26 $ 0.28 $ 0.31 $ 0.31 -------- -------- -------- --------
1ST QUARTER 2ND QUARTER 3RD QUARTER 4TH QUARTER ----------- ----------- ----------- ----------- 1999 Net revenues................................. $672,140 $698,466 $ 711,850 $732,777 Cost of health care services and medical supplies................................... 450,432 471,548 477,726 480,008 Operating expenses........................... 134,003 129,403 131,995 145,267 Interest expense, net........................ 50,126 52,504 49,524 49,761 Special charge for settlement of investigations and related costs........... -- -- 590,000 11,000 -------- -------- ---------- -------- Total expenses............................. 634,561 653,455 1,249,245 686,036 -------- -------- ---------- -------- Earnings before income taxes................. 37,579 45,011 (537,395) 46,741 Provision (Benefit) for income taxes......... 19,952 23,607 (150,190) 25,594 -------- -------- ---------- -------- Net income (loss)............................ $ 17,627 $ 21,404 $ (387,205) $ 21,147 ======== ======== ========== ======== Basic and fully dilutive earnings per share...................................... $ 0.19 $ 0.24 $ (4.30) $ 0.23 -------- -------- ---------- --------
F-121 323 PRINCIPAL EXECUTIVE OFFICES OF FRESENIUS MEDICAL CARE AG Else-Kroner Strasse 1 61352 Bad Homburg Germany FRESENIUS MEDICAL CARE CAPITAL TRUST IV FRESENIUS MEDICAL CARE CAPITAL TRUST V 95 Hayden Avenue 95 Hayden Avenue Lexington, Massachusetts 02173 Lexington, Massachusetts 02173 United States of America United States of America
LEGAL ADVISORS TO FRESENIUS MEDICAL CARE AG As to United States Law As to German Law O'MELVENY & MYERS LLP NORR STIEFENHOFER LUTZ 153 East 53rd Street Victoriaplatz 2 New York, New York 10022 40477 Dusseldorf United States of America Germany
AUDITORS TO FRESENIUS MEDICAL CARE AG KPMG DEUTSCHE TREUHAND-GESELLSCHAFT AKTIENGESELLSCHAFT WIRTSCHAFTSPRUFUNGSGESELLSCHAFT Marie-Curie-Strasse 30 60439 Frankfurt am Main Germany TO FRESENIUS MEDICAL CARE HOLDINGS, INC. KPMG LLP 99 High Street Boston, Massachusetts 02110 United States of America TRUST IV PAYING AGENT TRUST V U.S. PAYING AGENT TRUST V EUROPEAN PAYING AGENT AND STATE STREET BANK AND TRUST STATE STREET BANK AND TRUST REGISTRAR COMPANY COMPANY Deutsche Bank AG London Corporate Trust Department Corporate Trust Department Winchester House 225 Asylum Street, 23rd Floor 225 Asylum Street, 23rd Floor 1 Great Winchester Street Hartford, Connecticut 06103 Hartford, Connecticut 06103 London EC2N 2DB United States of America United States of America United Kingdom
LUXEMBOURG PAYING AGENT AND LISTING AGENT BANQUE GENERALE DU LUXEMBOURG 127 Avenue Monterey L.2951 Luxembourg 324 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- [FRESENIUS MEDICAL CARE LOGO] ALL TENDERED OLD USD TRUST PREFERRED OFFER TO EXCHANGE ALL OUTSTANDING 7 7/8% TRUST SECURITIES, EXECUTED LETTERS OF TRANSMITTAL AND PREFERRED SECURITIES OTHER RELATED DOCUMENTS IN THE USD EXCHANGE OFFER SHOULD BE DIRECTED TO THE EXCHANGE AGENT (Liquidation Amount $1,000 per FOR THE USD EXCHANGE OFFER AS FOLLOWS: Trust Preferred Security) By Mail FOR State Street Bank and Trust Company 7 7/8% TRUST PREFERRED SECURITIES Corporate Trust Department P.O. Box 778 (Liquidation Amount $1,000 per Boston, MA 02102-0778 Trust Preferred Security) Attn: Ralph Jones OF By Overnight or Hand Delivery FRESENIUS MEDICAL CARE State Street Bank and Trust Company CAPITAL TRUST IV Corporate Trust Department 2 Avenue de Lafayette GUARANTEED ON A SENIOR SUBORDINATED BASIS TO THE Corporate Trust Window, 5th Floor EXTENT SET FORTH IN THIS PROSPECTUS BY Boston, MA 02111-1724 Attn: Ralph Jones FRESENIUS MEDICAL CARE AG By Facsimile State Street Bank and Trust Company Attn: Ralph Jones 617-662-1452 To Confirm Receipt: 617-662-1548 * * * ALL TENDERED OLD EURO TRUST PREFERRED SECURITIES OFFER TO EXCHANGE ALL OUTSTANDING EXECUTED LETTERS OF TRANSMITTAL AND OTHER RELATED DOCU- 7 3/8% TRUST PREFERRED SECURITIES MENTS IN THE EURO EXCHANGE OFFER SHOULD BE DIRECTED TO (Liquidation Amount E1,000 per CLEARSTREAM, LUXEMBOURG AND EUROCLEAR IN ACCORDANCE Trust Preferred Security) WITH THE USUAL PROCEDURES OF THOSE AGENCIES. QUESTIONS FOR REGARDING THE EURO EXCHANGE OFFER MAY BE ADDRESSED 7 3/8% TRUST PREFERRED SECURITIES TO THE EURO EXCHANGE AGENT AS FOLLOWS: (Liquidation Amount E1,000 per By Mail, Overnight or Hand Delivery or by Facsimile Trust Preferred Security) Deutsche Bank AG LondonWinchester House OF 1 Great Winchester Street FRESENIUS MEDICAL CARE London EC2N 2DB England CAPITAL TRUST V Attn: Corporate Trust and Agency Services GUARANTEED ON A SENIOR SUBORDINATED BASIS TO THE Fax No.: ++44 (0)207 547-0271 EXTENT SET FORTH IN THIS PROSPECTUS BY To Confirm Receipt: ++44 (0)207 545-8000 FRESENIUS MEDICAL CARE AG
- -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 325 PART II INFORMATION NOT REQUIRED IN PROSPECTUS ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS Under German law, Fresenius Medical Care may indemnify its officers and, under certain circumstances, German labor law requires a stock corporation to do so. However, Fresenius Medical Care may not, as a general matter, indemnify members of the Management Board or the Supervisory Board. A stock corporation may, however, purchase directors and officers insurance, and Fresenius Medical Care has arranged for such insurance coverage at what it believes to be commercially reasonable rates and on what it believes to be commercially reasonable terms and conditions. Such insurance is subject to any mandatory restrictions imposed by German law. In addition, German law may permit a corporation to indemnify a member of the management or supervisory board for attorneys' fees incurred if such member is the successful party in a suit in a country such as the U.S., where winning parties are required to bear their own costs, if German law would have required the losing party to pay such member's attorneys' fees had the suit been brought in Germany. ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES (A) EXHIBITS
EXHIBIT NO. DESCRIPTION - ------- ----------- 2.1 Agreement and Plan of Reorganization dated as of February 4, 1996 between W.R. Grace & Co. and Fresenius AG (incorporated by reference to Appendix A to the Joint Proxy Statement- Prospectus of Fresenius Medical Care AG, W.R. Grace & Co. and Fresenius USA, Inc., dated August 2, 1996) 2.2 Distribution Agreement by and among W.R. Grace & Co., W.R. Grace & Co.-Conn. and Fresenius AG dated as of February 4, 1996 (incorporated by reference to Appendix A to the Joint Proxy Statement-Prospectus of Fresenius Medical Care AG, W.R. Grace & Co. and Fresenius USA, Inc., dated August 2, 1996) 2.3 Contribution Agreement by and among Fresenius AG, Sterilpharma GmbH and W.R. Grace & Co.-Conn. dated February 4, 1996 (incorporated by reference to Exhibit E to Appendix A to the Joint Proxy-Statement Prospectus of Fresenius Medical Care AG, W.R. Grace & Co. and Fresenius USA, Inc., dated August 2, 1996). 3.1 Memorandum and Articles of Association (Satzung) of Fresenius Medical Care AG (the "Company") (English translation)(1) 4.1 Credit Agreement dated as of September 27, 1996 among National Medical Care, Inc. and Certain Subsidiaries and Affiliates, as Borrowers, Certain Subsidiaries and Affiliates, as Guarantors, the Lenders named therein, NationsBank, N.A.(now known as Bank of America N.A., as paying agent and the Bank of Nova Scotia, The Chase Manhattan Bank, Dresdner Bank AG and NationsBank, N.A., as Managing Agents (the "NMC Credit Agreement") (incorporated by reference to the Form 6-K of the Company dated October 15, 1996 and the exhibits thereto) 4.2 Amendment dated as of November 26, 1996 to NMC Credit Agreement (incorporated by reference to Exhibit 4.1 to the Form 8-K of Fresenius Medical Care Holdings, Inc. ("FMCH") dated December 16, 1996. 4.3 Amendment No. 2 dated December 12, 1996 to NMC Credit Agreement (incorporated by reference to Exhibit 4.2 to the Form 10-K of FMCH for the year ended December 31, 1996, filed March 31, 1997). 4.4 Amendment No. 3 dated June 13, 1997 to NMC Credit Agreement (incorporated by reference to Exhibit 10.1 to the Form 10-Q of FMCH for the quarter ended September 30, 1997, filed November 14, 1997).
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EXHIBIT NO. DESCRIPTION - ------- ----------- 4.5 Amendment No. 4 dated August 26, 1997 to NMC Credit Agreement (incorporated by reference to Exhibit 10.2 to the Form 10-Q of FMCH for the quarter ended September 30, 1997, filed November 14, 1997). 4.6 Amendment No. 5 dated as of November 12, 1997 to NMC Credit Agreement (incorporated by reference to Exhibit 4.6 to the Form 10-K of FMCH for the year ended December 31, 1997 filed March 24, 1998). 4.7 Consents of Majority Banks under the NMC Credit Agreement to increase additional subordinated indebtedness permitted by Amendment No. 5 from $500 million to $650 million (incorporated by reference to Exhibit 1.2 to the Form 20-F of the Company for the year ended December 31, 1997, filed March 27, 1998). 4.8 Amendment No. 6, dated as of June 30, 1998, to the NMC Credit Agreement (Incorporated by reference to Exhibit 10.1 to FMCH's Quarterly Report on Form 10-Q, for the three months ended June 30, 1998, filed August 10, 1998). 4.9 Amendment No. 7 dated as of December 31, 1998 to the NMC Credit Agreement (Incorporated by reference to Exhibit 1.1 to the Company's Annual Report on Form 20-F, for the year ended December 31, 1998, filed March 24, 1999). 4.10 Amendment No. 8 dated as of June 30, 1999 to the NMC Credit Agreement (Incorporated by reference to FMCH's Annual Report on Form 10-K, for the year ended December 31, 1999, filed March 30, 2000). 4.11 Amendment No. 9 dated as of December 15, 1999 to the NMC Credit Agreement (Incorporated by reference to FMCH's Annual Report on Form 10-K, for the year ended December 31, 1999, filed March 30, 2000). 4.12 Amendment No. 10 dated as of September 21, 2000 to the NMC Credit Agreement (Incorporated by reference to FMCH's Quarterly Report on Form 10-Q, for the quarter ended September 30, 2000, filed November 13, 2000). 4.13 Amendment No. 11 dated as of May 31, 2001 to the NMC Credit Agreement(1) 4.14 Amendment No. 12 dated as of June 30, 2001 to the NMC Credit Agreement(1) 4.15 Receivables Purchase Agreement dated August 28, 1997 between National Medical Care, Inc. and NMC Funding Corporation. (Incorporated by reference to Exhibit 10.3 to FMCH's Quarterly Report on Form 10-Q, for the three months ended September 30, 1997, filed November 14, 1997). 4.16 Amendment dated as of September 28, 1998 to the Receivables Purchase Agreement dated as of August 28, 1997, by and between NMC Funding Corporation, as Purchaser and National Medical Care, Inc., as Seller. (Incorporated by reference to Exhibit 10.1 to FMCH's Quarterly Report on Form 10-Q, for the three months ended September 30, 1998, filed November 12, 1998). 4.17 Amended and Restated Transfer and Administration Agreement dated as of October 26, 2000 among Compass US Acquisition LLC, NMC Funding Corporation, National Medical Care, Inc., Enterprise Funding Corporation, the Bank Investors listed therein, Westdeutsche Landesbank Girozentrale, New York Branch, as an administrative agent and Bank of America N.A., as an administrative agent. (Incorporated by reference to FMCH's Annual Report on Form 10-K, for the year ended December 31, 2000, filed April 2, 2001). 4.18 Declaration of Trust Establishing Fresenius Medical Care Capital Trust, dated November 22, 1996 (incorporated by reference to Exhibit 2.2 to the Form 20-F of the Company for the year ended December 31, 1996 filed April 7, 1997). 4.19 Amended and Restated Declaration of Trust of Fresenius Medical Care Capital Trust, dated November 27, 1996 (incorporated by reference to Exhibit 2.3 to the Form 20-F of the Company for the year ended December 31, 1996 filed April 7, 1997).
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EXHIBIT NO. DESCRIPTION - ------- ----------- 4.20 Senior Subordinated Indenture dated November 7, 1996, among Fresenius Medical Care AG, State Street Bank and Trust Company (as successor to Fleet National Bank) as Trustee and the Subsidiary Guarantors named therein (Incorporated by reference to Exhibit 2.4 to the Company's Annual Report on Form 20-F for the year ended December 31, 1996, filed April 7, 1997). 4.21 First Supplemental Indenture dated as of February 19, 1998 to Senior Subordinated Indenture dated November 27, 1996, among Fresenius Medical Care AG, FMC Trust Finance S.a.r.l. Luxembourg, State Street Bank and Trust Company, successor to Fleet National Bank as Trustee and the Subsidiary Guarantors named therein (incorporated by reference to Exhibit 1.3 to the Form 20-F of the Company for the year ended December 31, 1997 filed March 27, 1998). 4.22 Guarantee Agreement dated November 27, 1996, between Fresenius Medical Care AG and State Street Bank and Trust Company (as successor to Fleet National Bank) as Trustee (incorporated by reference to Exhibit 2.5 to the Company's Form 20-F for the year ended December 31, 1996 filed April 7, 1997). 4.23 Agreement as to Expenses and Liabilities between Fresenius Medical Care AG and Fresenius Medical Care Capital Trust dated November 27, 1996 (incorporated by reference to Exhibit 2.6 to the Company's Form 20-F for the year ended December 31, 1996 filed April 7, 1997). 4.24 Pledge and Security Agreement dated November 27, 1996 between Fresenius Medical Care AG and State Street Bank and Trust Company (as successor to Fleet National Bank) (incorporated by reference to Exhibit 2.7 to the Company's Form 20-F for the year ended December 31, 1996 filed April 7, 1997). 4.25 Second Supplemental Indenture dated as of November 30, 1998 among Fresenius Medical Care AG, FMC Trust Finance S.a.r.l. Luxembourg, State Street Bank and Trust Company, as Trustee, and the Subsidiary Guarantors named therein. (Incorporated by reference to Exhibit 1.2 to the Company's Annual Report on Form 20-F for the year ended December 31, 1998, filed March 24, 1999) 4.26 Amendment No. 1 dated as of November 30, 1998 to Amended and Restated Declaration of Trust of Fresenius Medical Care Capital Trust. (Incorporated by reference to Exhibit 1.3 to the Company's Annual Report on Form 20-F for the year ended December 31, 1998, filed March 24, 1999). 4.27 Amendment to Guarantee Agreement dated as of November 30, 1998 between Fresenius Medical Care AG and State Street Bank and Trust Company, as successor trustee to Fleet National Bank, with respect to Fresenius Medical Care Capital Trust. (Incorporated by reference to Exhibit 1.4 to the Company's Annual Report on Form 20-F for the year ended December 31, 1998, filed March 24, 1999). 4.28 Amendment to Pledge and Security Agreement dated as of November 30, 1998 between Fresenius Medical Care AG and State Street Bank and Trust Company as successor trustee and collateral agent to Fleet National Bank, with respect to Fresenius Medical Care Capital Trust. (Incorporated by reference to Exhibit 1.5 to the Company's Annual Report on Form 20-F for the year ended December 31, 1998, filed March 24, 1999). 4.29 Amendment to Intercreditor and Subordination Agreement dated as of November 30, 1998 between State Street Bank and Trust Company, as successor trustee and collateral agent to Fleet National Bank and NationsBank, N.A., as paying agent under the NMC Credit Agreement, with respect to Fresenius Medical Care Capital Trust. (Incorporated by reference to Exhibit 1.6 to the Company's Annual Report on Form 20-F for the year ended December 31, 1998, filed March 24, 1999). 4.30 Declaration of Trust of Fresenius Medical Care Capital Trust II, dated February 12, 1998 (incorporated by reference to Exhibit 2.1 to the Form 20-F of the Company for the year ended December 31, 1997 filed March 27, 1998).
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EXHIBIT NO. DESCRIPTION - ------- ----------- 4.31 Declaration of Trust of Fresenius Medical Care Capital Trust III, dated February 12, 1998 (incorporated by reference to Exhibit 2.2 to the Form 20-F of the Company for the year ended December 31, 1997 filed March 27, 1998). 4.32 First Amendment to Declaration of Trust of Fresenius Medical Care Capital Trust III, dated February 12, 1998 (incorporated by reference to Exhibit 2.3 to the Form 20-F of the Company for the year ended December 31, 1997 filed March 27, 1998). 4.33 Amended and Restated Declaration of Trust of Fresenius Medical Care Capital Trust II, dated as of February 19, 1998 (incorporated by reference to Exhibit 2.4 to the Form 20-F of the Company for the year ended December 31, 1997 filed March 27, 1998). 4.34 Amended and Restated Declaration of Trust of Fresenius Medical Care Capital Trust III, dated as of February 19, 1998 (incorporated by reference to Exhibit 2.5 to the Form 20-F of the Company for the year ended December 31, 1997 filed March 27, 1998). 4.35 Senior Subordinated Indenture (U.S. Dollar denominated) dated as of February 19, 1998, among Fresenius Medical Care AG, FMC Trust Finance S.a.r.l. Luxembourg, State Street Bank and Trust Company, as Trustee, and the Subsidiary Guarantors named therein (incorporated by reference to Exhibit 2.6 to the Form 20-F of the Company for the year ended December 31, 1997 filed March 27, 1998). 4.36 Senior Subordinated Indenture (DM denominated) dated as of February 19, 1998, among Fresenius Medical Care AG, FMC Trust Finance S.ar.l. Luxembourg, State Street Bank and Trust Company, as Trustee, and the Subsidiary Guarantors named therein (incorporated by reference to Exhibit 2.7 to the Form 20-F of the Company for the year ended December 31, 1997 filed March 27, 1998). 4.37 Guarantee Agreement dated as of February 19, 1998 between Fresenius Medical Care AG and State Street Bank and Trust Company as Trustee, with respect to Fresenius Medical Care Capital Trust II (incorporated by reference to Exhibit 2.8 to the Form 20-F of the Company for the year ended December 31, 1997 filed March 27, 1998). 4.38 Guarantee Agreement dated as of February 19, 1998 between Fresenius Medical Care AG and State Street Bank and Trust Company as Trustee, with respect to Fresenius Medical Care Capital Trust III (incorporated by reference to Exhibit 2.9 to the Form 20-F of the Company for the year ended December 31, 1997 filed March 27, 1998). 4.39 Agreement as to Expenses and Liabilities between Fresenius Medical Care AG and Fresenius Medical Care Capital Trust II dated as of February 19, 1998 (incorporated by reference to Exhibit 2.10 to the Form 20-F of the Company for the year ended December 31, 1997 filed March 27, 1998). 4.40 Agreement as to Expenses and Liabilities between Fresenius Medical Care AG and Fresenius Medical Care Capital Trust III dated as of February 19, 1998 (incorporated by reference to Exhibit 2.11 to the Form 20-F of the Company for the year ended December 31, 1997 filed March 27, 1998). 4.41 Declaration of Trust of Fresenius Medical Care Capital Trust IV, dated February 12, 1998(1) 4.42 First Amendment to Declaration of Trust of Fresenius Medical Care Capital Trust IV, dated June 5, 2001(1) 4.43 Declaration of Trust of Fresenius Medical Care Capital Trust V, dated June 1, 2001(1) 4.44 Amended and Restated Declaration of Trust of Fresenius Medical Care Capital Trust IV, dated as of June 6, 2001(1) 4.45 Amended and Restated Declaration of Trust of Fresenius Medical Care Capital Trust V, dated as of June 15, 2001(1)
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EXHIBIT NO. DESCRIPTION - ------- ----------- 4.46 Senior Subordinated Indenture (U.S. Dollar denominated) dated as of June 6, 2001, among Fresenius Medical Care AG, FMC Trust Finance S.a.r.l. Luxembourg-III, State Street Bank and Trust Company, as Trustee, and the Subsidiary Guarantors named therein(1) 4.47 Senior Subordinated Indenture (Euro denominated) dated as of June 15, 2001, among Fresenius Medical Care AG, FMC Trust Finance S.a.r.l. Luxembourg-III, State Street Bank and Trust Company, as Trustee, and the Subsidiary Guarantors named therein(1) 4.48 Guarantee Agreement dated as of June 6, 2001 between Fresenius Medical Care AG and State Street Bank and Trust Company as Trustee, with respect to Fresenius Medical Care Capital Trust IV(1) 4.49 Guarantee Agreement dated as of June 15, 2001 between Fresenius Medical Care AG and State Street Bank and Trust Company as Trustee, with respect to Fresenius Medical Care Capital Trust V(1) 4.50 Agreement as to Expenses and Liabilities between Fresenius Medical Care AG and Fresenius Medical Care Capital Trust IV dated as of June 6, 2001(1) 4.51 Agreement as to Expenses and Liabilities between Fresenius Medical Care AG and Fresenius Medical Care Capital Trust V dated as of June 15, 2001(1) 5.1 Opinion of Richards, Layton & Finger, P.A. re validity(1) 5.2 Opinion of O'Melveny & Myers LLP re validity(1) 5.3 Opinion of Norr Stiefenhofer Lutz re validity(1) 5.4 Opinion of Wildgen & Partners re validity(1) 8.1 Opinion of O'Melveny & Myers LLP as to U.S. tax matters(1) 8.2 Opinion of KPMG-Luxembourg as to Luxembourg tax matters(1) 10.1 FMC Ordinary Shares Pooling Agreement dated September 27, 1996 by and between Fresenius AG, Fresenius Medical Care AG and the individuals acting from time to time as Independent Directors (Incorporated by reference to Exhibit 10.1 to FMC's Registration Statement on Form F-1, Registration No. 333-05922, filed November 4, 1996). 10.2 FMC Preference Shares Pooling Agreement dated November 27, 1996 by and between Fresenius AG, Fresenius Medical Care AG and the individuals acting from time to time as Independent Directors (incorporated by reference to Exhibit 2.7 to the Form 20-F of the Company for the year ended December 31, 1996 filed April 7, 1997). 10.3 Lease Agreement for Office Buildings dated September 30, 1996 by and between Fresenius AG and Fresenius Medical Care Deutschland GmbH (Incorporated by reference to Exhibit 10.3 to the Company's Registration Statement on Form F-1, Registration No. 333-05922, filed November 16, 1996). 10.4 Lease Agreement for Manufacturing Facilities dated September 30, 1996 by and between Fresenius Immobilien-Verwaltungs-GmbH & Co. Objekt Schweinfurt KG and Fresenius Medical Care Deutschland GmbH (Incorporated by reference to Exhibit 10.4 to the Company's Registration Statement on Form F-1, Registration No. 333-05922, filed November 16, 1996). 10.5 Lease Agreement for Manufacturing Facilities dated September 30, 1996 by and between Fresenius AG and Fresenius Medical Care Deutschland GmbH (Incorporated by reference to Exhibit 10.5 to the Company's Registration Statement on Form F-1, Registration No. 333-05922, filed November 16, 1996). 10.6 Transition Services Agreement dated September 27, 1996 by and between Fresenius AG and Fresenius Medical Care AG (Incorporated by reference to Exhibit 10.6 to the Company's Registration Statement on Form F-1, Registration No. 333-05922, filed November 16, 1996).
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EXHIBIT NO. DESCRIPTION - ------- ----------- 10.7 Forms of Supply Agreements between subsidiaries of Fresenius AG and subsidiaries of Fresenius Medical Care AG (Incorporated by reference to Exhibit 10.7 to the Company's Registration Statement on Form F-1, Registration No. 333-05922, filed November 16, 1996). 10.8 Trademark License Agreement dated September 27, 1996 by and between Fresenius AG and Fresenius Medical Care AG (Incorporated by reference to Exhibit 10.8 to the Company's Registration Statement on Form F-1, Registration No. 333-05922, filed November 16, 1996). 10.9 Technology License Agreement (Biofine(TM)) dated September 27, 1996 by and between Fresenius AG and Fresenius Medical Care AG (Incorporated by reference to Exhibit 10.9 to the Company's Registration Statement on Form F-1, Registration No. 333-05922, filed November 16, 1996). 10.10 Cross-License Agreement dated September 27, 1996 by and between Fresenius AG and Fresenius Medical Care AG (Incorporated by reference to Exhibit 10.10 to the Company's Registration Statement on Form F-1, Registration No. 333-05922, filed November 16, 1996). 10.11 Lease Agreement for Office Buildings dated September 30, 1996 by and between Fresenius AG and Fresenius Medical Care Deutschland GmbH (Daimler Str.). (Incorporated by reference to Exhibit 2.8 to the Company's Annual Report on Form 20-F for the year ended December 31, 1996, filed April 7, 1997). 10.12 Post-Closing Covenants Agreement dated September 27, 1996 among Fresenius AG, W.R. Grace & Co., W.R. Grace & Co.-Conn., and Fresenius Medical Care AG (Incorporated by reference to Exhibit 10.11 to the Company's Registration Statement on Form F-1, Registration No. 333-05922, filed November 16, 1996). 10.13 Fresenius Medical Care AG Rollover Stock Option Plan (incorporated by reference to the Registration Statement on Form S-8 of Fresenius Medical Care AG, dated September 30, 1996) 10.14 Fresenius Medical Care AG 1996 Stock Incentive Plan, (incorporated by reference to the Registration Statement on Form S-8 of Fresenius Medical Care AG, dated October 1, 1996) 10.15 Fresenius Medical Care AG 1998 Stock Incentive Plan adopted effective as of April 6, 1998. (Incorporated by reference to Exhibit 4.8 to the Company's Report on Form 6-K for the three months ended March 31, 1998, filed May 14, 1998). 10.16 Fresenius Medical Care AG Stock Option Plan of June 10, 1998 (for non-North American employees). (Incorporated by reference to Exhibit 1.2 to the Company's Annual Report on Form 20-F, for the year ended December 31, 1998, filed March 24, 1999). 10.17 Fresenius Medical Care Aktiengesellschaft 2001 International Stock Incentive Plan(1) 10.18 Employee Benefits and Compensation Agreement dated September 27, 1996 by and among W.R. Grace & Co., National Medical Care, Inc., and W.R. Grace & Co.-Conn. (incorporated by reference to Exhibit 10.14 to the Company's Registration Statement on Form F-1, Registration No. 333-05922, filed November 16, 1996). 10.19 Primary Guarantee dated July 31, 1996 (incorporated by reference to the Registration Statement on Form F-4 of Fresenius Medical Care AG, dated August 2, 1996 and the exhibits thereto) 10.20 Secondary Guarantee dated July 31, 1996 (incorporated by reference to the Registration Statement on Form F-4 of Fresenius Medical Care AG, dated August 2, 1996 and the exhibits thereto) 10.21 Letter Agreement dated July 31, 1996 (incorporated by reference to the Registration Statement on Form F-4 of Fresenius Medical Care AG, dated August 2, 1996 and the exhibits thereto) 10.22 Purchase Agreement, effective January 1, 1995, between Baxter Health Care Corporation and National Medical Care, Inc., including the addendum thereto (incorporated by reference to the Form SE of Fresenius Medical Care AG, dated July 29, 1996 and the exhibits thereto)
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EXHIBIT NO. DESCRIPTION - ------- ----------- 10.23 Product Purchase Agreement, effective January 1, 2001 between Amgen, Inc. and National Medical Care, Inc. and Everest Healthcare Services Corporation (incorporated by reference to Exhibit 10.3 to the Form 10-Q of FMCH for the three months ended March 31, 2001 filed May 15, 2001(2) 10.24 Letter Agreement dated September 27, 1996 between W.R. Grace & Co.-Conn. and Fresenius Medical Care AG (incorporated by reference to the Form 6-K of Fresenius Medical Care AG, dated October 15, 1996 and the exhibits thereto) 10.25 Subordinated Loan Note dated as of May 18, 1999, among National Medical Care, Inc and Certain Subsidiaries with Fresenius AG as lender. (Incorporated by reference to FMCH's Quarterly Report on Form 10-Q, for the three months ended September 30, 1999, filed November 22, 1999). 10.26 Employment Agreement dated January 1, 1992 by and between Ben J. Lipps and Fresenius USA, Inc. (incorporated herein by reference to the Annual Report on Form 10-K of Fresenius USA, Inc., for the year ended December 31, 1992). 10.27 Modification to FUSA Employment Agreement effective as of January 1, 1998 by and between Dr. Ben J. Lipps and Fresenius Medical Care AG. (Incorporated by reference to Exhibit 10.1 to the Company's Report on Form 6-K, for the three months ended March 31, 1998, filed May 14, 1998). 10.28 Plea Agreement dated January 13, 2000 by and among Lifechem, Inc., the United States Department of Justice and the United States Attorney for the District of Massachusetts. (Incorporated by reference to Exhibit 10.6 to FMCH's Current Report on Form 8-K dated January 21, 2000). 10.29 Plea Agreement dated January 13, 2000 by and among NMC Medical Products, Inc., the United States Department of Justice and the United States Attorney for the District of Massachusetts. (Incorporated by reference to Exhibit 10.7 to FMCH's Current Report on Form 8-K dated January 21, 2000). 10.30 Plea Agreement dated January 13, 2000 by and among NMC Homecare, Inc., the United States Department of Justice and the United States Attorney for the District of Massachusetts. (Incorporated by reference to Exhibit 10.8 to FMCH's Current Report on Form 8-K dated January 21, 2000). 10.31 Letter Agreement dated January 17, 2000 by and among FMCH, the United States Department of Justice and the United States Attorney for the District of Massachusetts. (Incorporated by reference to Exhibit 10.9 to FMCH's Current Report on Form 8-K dated January 21, 2000). 10.32 Corporate Integrity Agreement dated January 18, 2000 between FMCH and Office of the Inspector General of the Department of Health and Human Services. (Incorporated by reference to Exhibit 10.1 to FMCH's Current Report on Form 8-K dated January 21, 2000). 10.33 Settlement Agreement and Release dated January 18, 2000 by and among United States of America, Lifechem, Inc., NMC Medical Products, Inc., National Medical Care, Inc., FMCH and Jay A. Buford, Russell J. Davis and William L. Schoff. (Incorporated by reference to Exhibit 10.2 to FMCH's Current Report on Form 8-K dated January 21, 2000). 10.34 Settlement Agreement and Release dated January 18, 2000 by and among United States of America, NMC Homecare, Inc., National Medical Care, Inc., FMCH Ven-A-Care of the Florida Keys, Inc. and Dana R. Austin. (Incorporated by reference to Exhibit 10.3 to FMCH's Current Report on Form 8-K dated January 21, 2000).
II-7 332
EXHIBIT NO. DESCRIPTION - ------- ----------- 10.35 Settlement Agreement and Release dated January 18, 2000 by and among United States of America, Clinical Diagnostic Systems, Inc., NMC Diagnostic Services, Inc., Bio-Medical Applications Management Company, Inc., National Medical Care, Inc. and FMCH. (Incorporated by reference to Exhibit 10.4 to FMCH's Current Report on Form 8-K dated January 21, 2000). 10.36 Settlement Agreement and Release dated January 18, 2000 by and among United States of America, National Medical Care, Inc., FMCH, Gregory S. Price and Richard Bradford. (Incorporated by reference to Exhibit 10.5 to FMCH's Current Report on Form 8-K dated January 21, 2000). 10.37 Registration Rights Agreement dated as of March 2, 2000 between Fresenius Medical Care AG and the Franconia Investors (incorporated by reference to Exhibit 2.3 to the Company's Form 20-F for the year ended December 31, 1999 filed June 2, 2000). 10.38 Registration Rights Agreement dated June 6, 2001 between Fresenius Medical Care Capital Trust IV, Fresenius Medical Care AG, FMC Trust Finance S.a.r.l. Luxembourg-III, FMCH and Fresenius Medical Care Deutschland GmbH and the Initial Purchasers of the USD Trust Preferred Securities(1) 10.39 Registration Rights Agreement dated June 15, 2001 between Fresenius Medical Care Capital Trust V, Fresenius Medical Care AG, FMC Trust Finance S.a.r.l. Luxembourg-III, FMCH and Fresenius Medical Care Deutschland GmbH and the Initial Purchasers of the Euro Trust Preferred Securities(1) 12.1 Statement re Computation of Ratios -- Fresenius Medical Care AG(1) 12.2 Statement re Computation of Ratios -- Fresenius Medical Care Holdings, Inc.(1) 23.1 Consent of KPMG Deutsche Treuhand-Gesellschaft Aktiengesellschaft Wirtschaftsprufungsgesellschaft(1) 23.2 Consent of KPMG LLP(1) 23.4 Consent of Richards, Layton & Finger, P.A. (included in Exhibit 5.1) 23.5 Consent of O'Melveny & Myers LLP (included in Exhibits 5.2 and 8.1) 23.6 Consent of Norr Stiefenhofer Lutz (included in Exhibit 5.3) 23.7 Consent of Wildgen & Partners (included in Exhibit 5.4) 23.8 Consent of KPMG Luxembourg (included in Exhibit 8.2) 24.1 Powers of Attorney (part of signature pages) 25.1 Statement of Eligibility of Trustee re 7 7/8% Trust Preferred Securities(1) 25.2 Statement of Eligibility of Trustee re 7 3/8% Trust Preferred Securities(1) 25.3 Statement of Eligibility of Trustee re Company Guarantees of 7 7/8% Trust Preferred Securities(1) 25.4 Statement of Eligibility of Trustee re Company Guarantees of 7 3/8% Trust Preferred Securities(1) 25.5 Statement of Eligibility of Trustee re 7 7/8% Senior Subordinated Notes due 2011(1) 25.6 Statement of Eligibility of Trustee re 7 3/8% Senior Subordinated Notes due 2011(1) 99.1 Form of Letter of Transmittal(1) 99.2 Form of Notice of Guaranteed Delivery for holders of 7 7/8% Trust Preferred Securities(1)
- --------------- (1) Filed Herewith (2) Confidential treatment has been requested as to certain portions of this Exhibit II-8 333 (B) FINANCIAL STATEMENT SCHEDULES (I) SCHEDULE II -- FRESENIUS MEDICAL CARE HOLDING, INC. -- VALUATION AND QUALIFYING ACCOUNTS (II) SCHEDULE II -- FRESENIUS MEDICAL CARE AG -- VALUATION AND QUALIFYING ACCOUNTS II-9 334 SCHEDULE II FRESENIUS MEDICAL CARE HOLDINGS, INC. AND SUBSIDIARIES VALUATION AND QUALIFYING ACCOUNTS (DOLLARS IN THOUSANDS)
ADDITIONS (DEDUCTIONS) -------------------------- CHARGED BALANCE AT (CREDITED) TO BALANCE AT BEGINNING COSTS AND END OF OF YEAR EXPENSES OTHER NET PERIOD ------------ ------------- --------- ------------- Allowances for notes and accounts receivable: Twelve months ended December 31, 2000... $63,012 $62,949 $(45,495) $80,466 Twelve months ended December 31 1999,... 49,209 42,243 (28,440) 63,012 Twelve months ended December 31, 1998... 53,109 54,709 (58,609) 49,209
II-10 335 SCHEDULE II FRESENIUS MEDICAL CARE AG VALUATIONS AND QUALIFYING ACCOUNTS (IN THOUSANDS)
(REDUCTION) BALANCE AT CHARGE TO DEDUCTIONS/ BALANCE AT BEGINNING COSTS AND WRITE-OFFS/ END OF OF PERIOD EXPENSES RECOVERIES PERIOD ---------- ----------- ----------- ---------- Allowance for doubtful accounts: Year ended December 31, 2000................ $101,262 $69,967 $60,048 $111,181 Year ended December 31, 1999................ 78,167 46,418 23,323 101,262 Year ended December 31, 1998................ 75,653 56,426 53,912 78,167
II-11 336 ITEM 22. UNDERTAKINGS The undersigned registrant hereby undertakes that, for purposes of determining any liability under the Securities Act of 1933, each filing of the registrant's annual report pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (and, where applicable, each filing of an employee benefit plan's annual report pursuant to Section 15(d) of the Securities Act Exchange Act of 1934) that is incorporated by reference in the registration statement 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. The undersigned registrant hereby undertakes that: (1) Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suite or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue. (2) 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 ruled 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. (3) 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. The undersigned registrant hereby undertakes: (1) To respond to requests for information that is incorporated by reference into the prospectus pursuant to Items 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; and (2) To arrange or provide for a facility in the U.S. for the purpose of responding to such requests. The undertaking in subparagraph (1) above include information contained in documents filed subsequent to the effective date of the registration statement through the date of responding to the request. 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-12 337 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the Registrant certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form F-4 and has duly caused this Registration Statement to be signed on its behalf by the undersigned thereunto duly authorized, in Bad Homburg, Germany, on the 2 day of August, 2001. FRESENIUS MEDICAL CARE AG By: /s/ BEN LIPPS ------------------------------------ Ben J. Lipps Chairman of the Management Board By: /s/ ROBERTO FUSTE ------------------------------------ Roberto Fuste Member of the Management Board POWER OF ATTORNEY Each person whose signature appears below hereby authorizes any agent for service named in this Registration Statement and any Authorized Representative in the United States named in this Registration Statement to file one or more amendments (including, without limitations, post-effective amendments) to this Registration Statement, which amendments may make such changes in this Registration Statement as such agent for service or such Authorized Representative deems appropriate, and each such person hereby appoints any such agent for service and any such Authorized Representative in the United States, acting singly, as attorney-in-fact to execute in the name and on behalf of each such person, individually and in each capacity stated below, any such amendments to this Registration Statement. Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed by the following persons in the capacities indicated on the dates indicated.
SIGNATURE CAPACITY DATE --------- -------- ---- /s/ BEN LIPPS Chairman of the Management Board August 2, 2001 - --------------------------------------------------- (Principal Executive Officer and Ben J. Lipps Principal Financial Officer) and Authorized Representative in the United States /s/ DR. EMANUELE GATTI Member of the Management Board August 2, 2001 - --------------------------------------------------- Dr. Emanuele Gatti /s/ ROBERTO FUSTE Member of the Management Board August 2, 2001 - --------------------------------------------------- Roberto Fuste /s/ JOSEF DINGER Senior Vice President, Controlling August 2, 2001 - --------------------------------------------------- and Corporate Accounting Josef Dinger (Principal Accounting Officer)
II-13 338 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the Registrant certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form F-4 and has duly caused this Registration Statement to be signed on its behalf by the undersigned thereunto duly authorized, in Bad Homburg, Germany, on the 2 day of August, 2001. FRESENIUS MEDICAL CARE DEUTSCHLAND GMBH By: /s/ EMANUELE GATTI ------------------------------------ Dr. Emanuele Gatti Managing Director By: /s/ ROLF GROOS ------------------------------------ Rolf Groos Member of the Management Board POWER OF ATTORNEY Each person whose signature appears below hereby authorizes any agent for service named in this Registration Statement and any Authorized Representative in the United States named in this Registration Statement to file one or more amendments (including, without limitations, post-effective amendments) to this Registration Statement, which amendments may make such changes in this Registration Statement as such agent for service or such Authorized Representative deems appropriate, and each such person hereby appoints any such agent for service and any such Authorized Representative in the United States, acting singly, as attorney-in-fact to execute in the name and on behalf of each such person, individually and in each capacity stated below, any such amendments to this Registration Statement. Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed by the following persons in the capacities indicated on the dates indicated.
SIGNATURE CAPACITY DATE --------- -------- ---- /s/ EMANUELE GATTI Member of the Management Board August 2, 2001 - --------------------------------------------------- (Chief Executive Officer) Dr. Emanuele Gatti /s/ ROBERTO FUSTE Member of the Management Board August 2, 2001 - --------------------------------------------------- Roberto Fuste /s/ ROLF GROOS Member of the Management Board August 2, 2001 - --------------------------------------------------- Rolf Groos /s/ NORBERT WEBER Member of the Management Board August 2, 2001 - --------------------------------------------------- Norbert Weber /s/ BEN LIPPS Authorized Representative in the August 2, 2001 - --------------------------------------------------- United States Ben J. Lipps
II-14 339 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the Registrant certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form F-4 and has duly caused this Registration Statement to be signed on its behalf by the undersigned thereunto duly authorized, in Lexington, Massachusetts, on the 2nd day of August, 2001. FRESENIUS MEDICAL CARE HOLDINGS, INC. By: /s/ BEN LIPPS ------------------------------------ Ben J. Lipps President and Chairman of the Board of Directors POWER OF ATTORNEY Each person whose signature appears below hereby authorizes any agent for service named in this Registration Statement and any Authorized Representative in the United States named in this Registration Statement to file one or more amendments (including, without limitations, post-effective amendments) to this Registration Statement, which amendments may make such changes in this Registration Statement as such agent for service or such Authorized Representative deems appropriate, and each such person hereby appoints any such agent for service and any such Authorized Representative in the United States, acting singly, as attorney-in-fact to execute in the name and on behalf of each such person, individually and in each capacity stated below, any such amendments to this Registration Statement. Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed by the following persons in the capacities indicated on the dates indicated.
SIGNATURE CAPACITY DATE --------- -------- ---- /s/ BEN LIPPS President and Chairman of the August 2, 2001 - --------------------------------------------------- Board of Directors (Principal Ben J. Lipps Executive Officer) /s/ JERRY SCHNEIDER Vice President, Treasurer and August 2, 2001 - --------------------------------------------------- Member of the Board of Jerry Schneider Directors (Principal Financial and Principal Accounting Officer) /s/ JOHN MARKUS Member of the Board of Directors August 2, 2001 - --------------------------------------------------- John Markus
II-15 340 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the Registrant certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form F-4 and has duly caused this Registration Statement to be signed on its behalf by the undersigned thereunto duly authorized, in Bad Homburg, Germany, on the 2 day of August, 2001. FRESENIUS MEDICAL CARE CAPITAL TRUST IV By: /s/ BEN LIPPS ------------------------------------ Ben Lipps Company Trustee POWER OF ATTORNEY Each person whose signature appears below hereby authorizes any agent for service named in this Registration Statement and any Authorized Representative in the United States named in this Registration Statement to file one or more amendments (including, without limitations, post-effective amendments) to this Registration Statement, which amendments may make such changes in this Registration Statement as such agent for service or such Authorized Representative deems appropriate, and each such person hereby appoints any such agent for service and any such Authorized Representative in the United States, acting singly, as attorney-in-fact to execute in the name and on behalf of each such person, individually and in each capacity stated below, any such amendments to this Registration Statement. Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed by the following persons in the capacities indicated on the dates indicated.
SIGNATURE CAPACITY DATE --------- -------- ---- /s/ BEN LIPPS Company Trustee August 2, 2001 - --------------------------------------------------- Ben J. Lipps Company Trustee , 2001 - --------------------------------------------------- Karl-Dieter Schwab /s/ JOSEF DINGER Company Trustee August 2, 2001 - --------------------------------------------------- Josef Dinger
II-16 341 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the Registrant certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form F-4 and has duly caused this Registration Statement to be signed on its behalf by the undersigned thereunto duly authorized, in Bad Homburg, Germany, on the 2 day of August, 2001. FRESENIUS MEDICAL CARE CAPITAL TRUST V By: /s/ BEN LIPPS ------------------------------------ Ben J. Lipps Company Trustee POWER OF ATTORNEY Each person whose signature appears below hereby authorizes any agent for service named in this Registration Statement and any Authorized Representative in the United States named in this Registration Statement to file one or more amendments (including, without limitations, post-effective amendments) to this Registration Statement, which amendments may make such changes in this Registration Statement as such agent for service or such Authorized Representative deems appropriate, and each such person hereby appoints any such agent for service and any such Authorized Representative in the United States, acting singly, as attorney-in-fact to execute in the name and on behalf of each such person, individually and in each capacity stated below, any such amendments to this Registration Statement. Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed by the following persons in the capacities indicated on the dates indicated.
SIGNATURE CAPACITY DATE --------- -------- ---- /s/ BEN LIPPS Company Trustee August 2, 2001 - --------------------------------------------------- Ben J. Lipps Company Trustee , 2001 - --------------------------------------------------- Karl-Dieter Schwab /s/ JOSEF DINGER Company Trustee August 2, 2001 - --------------------------------------------------- Josef Dinger
II-17 342 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the Registrant certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form F-4 and has duly caused this Registration Statement to be signed on its behalf by the undersigned thereunto duly authorized, in Luxembourg, on the 2 day of August, 2001. FMC TRUST FINANCE S.A.R.L LUXEMBOURG-III By: /s/ GABRIELE DUX ------------------------------------ Gabriele Dux Sole Manager POWER OF ATTORNEY Each person whose signature appears below hereby authorizes any agent for service named in this Registration Statement and any Authorized Representative in the United States named in this Registration Statement to file one or more amendments (including, without limitations, post-effective amendments) to this Registration Statement, which amendments may make such changes in this Registration Statement as such agent for service or such Authorized Representative deems appropriate, and each such person hereby appoints any such agent for service and any such Authorized Representative in the United States, acting singly, as attorney-in-fact to execute in the name and on behalf of each such person, individually and in each capacity stated below, any such amendments to this Registration Statement. Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed by the following persons in the capacities indicated on the dates indicated.
SIGNATURE CAPACITY DATE --------- -------- ---- /s/ GABRIELE DUX Sole Manager and Director August 2, - --------------------------------------------------- 2001 Gabriele Dux /s/ BEN LIPPS Authorized Representative in the August 2, - --------------------------------------------------- United States 2001 Ben J. Lipps
II-18 EX-3.1 3 y51284ex3-1.txt MEMORANDUM AND ARTICLES OF ASSOCIATION 1 EXHIBIT 3.1 ARTICLES OF ASSOCIATION OF FRESENIUS MEDICAL CARE AKTIENGESELLSCHAFT I. GENERAL TERMS ARTICLE 1 FIRM NAME AND REGISTERED OFFICE The Company is a stock corporation. The name of the Company is Fresenius Medical Care Aktiengesellschaft The registered office of the Company is in Hof an der Saale. ARTICLE 2 PURPOSE (1) The purpose of the Company is a) the development, production and distribution of as well as the trading in health care products, systems and procedures, including dialysis; b) the projecting, planning, establishment, acquisition and operation of health care businesses, including, but not limited to, dialysis centers, also in separate enterprises or through third parties as well as the participation in such dialysis centers; c) the development, production and distribution of other pharmaceutical products and the provision of services in this field; d) the provision of advice in the medical and pharmaceutical areas as well as the scientific information and documentation; e) the provision of laboratory services for dialysis and non-dialysis patients and homecare medical services. The Company will operate itself or through subsidiaries at home and abroad. 2 - 2 - (2) The Company shall be entitled to enter into any and all business transactions and take any and all measures which seem to be necessary or useful to achieve the purpose of the Company and may, in particular without limitation, participate in other enterprises of the same or similar kind, take over the management and/or the representation of such enterprises, transfer company divisions, including essential company divisions, to enterprises in which the Company holds an interest and establish branches at home and abroad. ARTICLE 3 NOTIFICATIONS AND PUBLICATIONS (1) All notifications of the Company shall be made in the Bundesanzeiger [Federal Gazette]. (2) English short versions of the notices of shareholders' meetings which must provide for the place, date and time and the items on the agenda of the shareholders' meeting and the prerequisites of participation in the meetings as well as English short versions of the other notifications shall also be published in The Wall Street Journal and in The New York Times. With the consent of the supervisory board which must decide unanimously on such consent, the management board may determine deviations from this provision. II. CAPITAL STOCK AND SHARES ARTICLE 4 CAPITAL STOCK (1) The capital stock of the Company amounts to Euro 239,994,112.00 and is divided into seventy million (70,000,000) bearer shares of the common stock and 23,747,700 non-voting bearer shares of the preferred stock. In case of issuance of non-voting bearer shares of the preferred stock, particulars thereof are set forth in Article 19. No consent of the preferred shareholders shall be required for the issuance of non-voting preferred shares which, for the distribution of the profits or the corporate assets, will be equal to or be preferred to the non-voting preferred shares existing from time to time. 3 - 3 - (2) The capital stock in the amount of DM 100,000 available at the transformation was raised through change of the legal form of Fresenius Medical Care GmbH with registered office in Hof an der Saale, the previous legal entity owning the assets and liabilities of the Company. (3) The Managing Board shall be authorized, with the approval of the Supervisory Board, to increase the capital stock of the company during the period up to 29 May 2005 by a maximum amount of EUR 30,720,000.00 through the non-recurrent or recurrent issue of new non-voting bearer preference shares (Authorized Capital I). The number of shares has to increase in proportion to the capital stock. The increases in capital have to take place against cash contributions. The Managing Board shall also be entitled, in each case subject to the approval of the Supervisory Board, to decide on an exclusion of the subscription right of the shareholders. However, such an exclusion of the subscription right shall only be permissible for fractional amounts. (4) The Managing Board shall be authorized, with the approval of the Supervisory Board, to increase the capital stock of the Corporation during the period up to 22 May 2006 by a maximum amount of Euro 20,480,000.00 through the non-recurrent or recurrent issue of new non-voting bearer preference shares (Authorized Capital II). The number of shares has to increase in proportion to the capital stock. The increases in capital may take place against cash contributions or contributions in kind. The Managing Board shall also be entitled, in each case subject to the approval of the Supervisory Board, to decide on an exclusion of the subscription right of the shareholders. However, such an exclusion of the subscription right shall only be permissible if, in case of a capital increase against cash contributions, the issue price is not significantly lower than the stock exchange price, and/or, in case of a capital increase against contributions in kind, the purpose of such increase is to acquire an enterprise or an interest in an enterprise. (5) The capital stock of the Corporation is contingently increased by a maximum of Euro 6,144,000, divided into a maximum of 2.4 million par value shares, through the issue of new, non-voting bearer preference shares. The conditional capital increase will be made only to the extent that the holders of the convertible bonds issued by Fresenius Medical Care Aktiengesellschaft on the basis of the authority of the shareholders' meeting of September 24, 1996 will exercise their rights to convert the bonds into new shares. The new shares will participate in the profits as from the beginning of the business year in which they are created as a result of exercise of conversion rights. 4 - 4 - (6) The capital stock of the Corporation is contingently increased by a maximum of Euro 3,072,000, divided into a maximum of 1.2 million par value shares, through the issue of new, non-voting bearer preference shares. The conditional capital increase will be made only to the extent that subscription rights are granted pursuant to the stock option program in accordance with the resolution passed at the shareholders' meeting of June 10, 1998, and of the resolution of the shareholders' meeting of May 30, 2000, and the owners of the subscription rights exercise their subscription rights. The new non-voting bearer shares of the preferred stock will participate in the profits as from the beginning of the business year in which issuance occurs. (7) The capital stock of the Corporation is contingently increased by a maximum of Euro 10,240,000, divided into a maximum of 4 million non-voting bearer preference shares, through the issue of new non-voting bearer preference shares in order to secure the convertible bonds adopted by resolution in the general meeting of 23 May 2001. The contingent capital increase shall only take place insofar as convertible bonds for par value shares are issued according to the international participation scheme for employees pursuant to the resolution of the general meeting of 23 May 2001 and insofar as the holders of such convertible bonds exercise their conversion right. The new non-voting bearer preference shares shall participate in profits as of the start of the fiscal year in which they are issued. (8) In case of a capital increase, the profit participation may be determined in derogation of Section 60, para. 2 AktG [German Corporation Law]. ARTICLE 5 SHARES (1) The shares will be no par value bearer shares. (2) The Company shall be entitled to issue share certificates made out to bearer each evidencing a plurality of shares (several-share certificates). (3) The form of the share certificates and of the dividend coupons and renewal coupons shall be determined by the management board with the consent of the supervisory board. (4) The Company shall take the necessary measures to achieve that its shares will, as far as possible, be admitted for official quotation on the stock exchange in 5 - 5 - Frankfurt am Main and in suitable form - e.g. as "American Depositary Shares" - on the New York Stock Exchange and that such admissions will be maintained. With the consent of the supervisory board which must decide unanimously on such consent, the management board may determine deviations from this provision. III. CONSTITUTION OF THE COMPANY A. MANAGEMENT BOARD ARTICLE 6 COMPOSITION (1) The management board shall consist of at least two (2) persons. The supervisory board may provide for a greater number. The supervisory board may also appoint deputy management board members. Until the first-time appointment of one or more further management board members, the management board shall consist of one person even if the Company's balance sheet total exceeds DM 3 million. (2) The resolutions of the management board shall be adopted by a simple majority of the votes unless otherwise required by law. If a chairman of the management board has been appointed, he shall have the casting vote in case of a tie. ARTICLE 7 REPRESENTATION OF THE COMPANY (1) The Company shall be represented by two (2) members of the management board or by one (1) member of the management board jointly with a "Prokurist". Until the entry of one or more further management board members, the Company will be represented by one management board member alone. The power of prokura is to be granted only as joint power of prokura subject to the restrictions referred to in Article 7 (3) below. (2) The supervisory board may grant the right of individual representation to individual or several management board members and revoke such right at any time. The supervisory board may appoint a chairman of the management board. 6 - 6 - (3) The express prior consent of the supervisory board shall be required for the following: a) acquisition, alienation or encumbrance of real estate and equivalent rights if and to the extent that, in the individual case, an amount of Euro 2,556,459.41 or, in case of encumbrance, the security for the allowed credit line is exceeded; b) acquisition, establishment, alienation of or charges on shareholdings in other enterprises if and to the extent that an amount of Euro 2,556,459.41 is exceeded in the individual case; c) starting of new, and the discontinuance of existing, lines of business or establishments; d) conclusion of any legal transaction of the Company with or toward another undertaking holding the majority of the shares in the Company within the meaning of Section 16 AktG or with or toward an enterprise affiliated with such undertaking within the meaning of Section 15 AktG if and when such legal transaction is beyond the ordinary course of business or the amount involved in such legal transaction exceeds Euro 1,533,875.64. e) consenting to the performance of any of the above legal acts by an affiliated company. f) conclusion, modification or termination of contracts between business enterprises within the meaning of Sections 291 et seq. AktG. (4) Notwithstanding the overall responsibility of the management board, the supervisory board shall, in particular in rules of procedure for the management board, assign the management board duties to the individual management board members and, within the framework of the imperative legal provisions and the Articles of Association, determine the relations of the management board members among each other and with the Company and, in extension of Article 7 (3) above, define the acts for which the management board shall require the express prior consent of the supervisory board. The supervisory board may give consents pursuant to Article 7 (3) above also generally, with or without time limit and also to individual members of the management board, in particular, the 7 - 7 - chairman of the management board. The supervisory board may, at any time, extend, restrict or revoke the rules of procedure for the management board. B. SUPERVISORY BOARD ARTICLE 8 ELECTION AND TERM OF OFFICE OF THE SUPERVISORY BOARD (1) The supervisory board consists of six (6) members. All six (6) members shall be elected by the shareholders' meeting according to the provisions of the German Aktiengesetz. (2) Unless expressly otherwise resolved by the shareholders' meeting, the supervisory board members shall be appointed to hold office until the end of the ordinary shareholders' meeting which resolves on the exoneration for the fourth business year after commencement of the term of office. The year in which the term of office commences shall not be considered for this calculation. Reelection of supervisory board members shall be permissible. (3) If a member elected by the shareholders' meeting withdraws from the supervisory board before expiration of his term of office, a new member is to be elected in the next shareholders' meeting to replace the withdrawing member. The newly elected member shall hold office for the remaining term of office of the withdrawing member. (4) The shareholders' meeting may, for the supervisory board members to be elected by it, appoint substitute members who will become members of the supervisory board on the basis of a specific order to be determined upon election if and when supervisory board members withdraw before expiration of their term of office. Their position as substitute members shall revive if and when the shareholders' meeting elects a new member instead of the withdrawing supervisory board member replaced by such substitute member. The term of office of the substitute member shall end upon completion of the shareholders' meeting in which an election according to Article 8 (3) is made. (5) Each member of the supervisory board may resign from office by giving one month's written notice to the chairman of the supervisory board even without good cause. Notice of resignation from office by the chairman of the supervisory board shall be given to his deputy. 8 - 8 - ARTICLE 9 CONSTITUTION OF THE SUPERVISORY BOARD (1) Following the shareholders' meeting in which the supervisory board has been newly elected, the supervisory board shall hold a meeting without special notice of meeting and, where necessary, shall elect in such meeting from among its members a chairman and a deputy chairman for the whole term of office of the elected persons as supervisory board members. (2) If the chairman or his deputy resigns his office before expiration of his term of office, the supervisory board shall immediately hold a new election to replace the resigning chairman/deputy. ARTICLE 10 MEETINGS AND RESOLUTIONS OF THE SUPERVISORY BOARD (1) The meetings of the supervisory board shall be called by the chairman by written notice subject to a notice period of fourteen (14) days. The individual items on the agenda must be stated in the notice of meeting. In urgent cases, this period may be shortened or the meeting may be called by telegram, telex, telefax or telephone. (2) The resolutions of the supervisory board shall be adopted in meetings. The resolutions may be passed by written document, by telegram, telex, telefax or telephone if the chairman of the supervisory board or, in case of the chairman being prevented, his deputy so directs and all members of the supervisory board approve of such procedure expressly or by voting. (3) The supervisory board shall constitute a quorum if half the members making up the entire board take part in the adoption of the resolution. Those items on the agenda which have not been announced properly within the meaning of para. (1) above may be voted on only if none of the present members objects thereto. (4) If members of the supervisory board are prevented from attending the meeting, they may have another member of the supervisory board submit their written votes. Such delivery of the written vote shall be deemed to be participation in the adoption of the resolution. (5) Resolutions of the supervisory board shall require the majority of the votes cast unless otherwise provided by law or the Articles of Association. In case of a tie, a 9 - 9 - new vote shall be taken on the same issue at the request of the chairman of the supervisory board or of another member of the supervisory board. In the event that such new vote leads again to a tie, the chairman of the supervisory board shall have two (2) votes (to the legally permissible extent, this shall apply also to committees of the supervisory board of which he is a member). Article 10 (4) shall be applicable to the casting of the second vote. The deputy of the chairman of the supervisory board shall not be entitled to such second vote. (6) Minutes of the meetings of the supervisory board shall be prepared and translated into the English language. The minutes shall be signed by the chairman of the meeting. Any minutes to be prepared with respect to resolutions adopted by written document, by telegram, telex, telefax or telephone shall be signed by the chairman of the supervisory board. ARTICLE 11 RIGHTS AND DUTIES OF THE SUPERVISORY BOARD (1) The supervisory board shall have the rights and duties defined by imperative legal provisions and these Articles of Association. (2) The supervisory board shall, at any time, have the right to supervise the entire management of the management board and to inspect and audit all books and records, including the minutes of the meetings of the management board, as well as the assets of the Company. This right to inspect and audit can also be claimed by any individual supervisory board member; if the management board objects to this right, it may be enforced only if and when the request is supported by another supervisory board member. The supervisory board member must direct his request to the chairman of the supervisory board who shall pass the request on to the management board or, if a chairman of the management board has been appointed (Art. 7 (2) sentence 2), to such chairman. (3) The management board shall regularly report to the supervisory board. In addition, the supervisory board may request the submission of a report if and when there is reasonable cause therefor including where such cause relates to a business event at an affiliated company which has become known to the management board and which may substantially influence the situation of the Company. Article 11 (2), sentences 2 and 3 shall apply mutatis mutandis. (4) The supervisory board shall issue rules of procedure for the management board in accordance with Article 7 (4). 10 - 10 - (5) The supervisory board shall be entitled, without resolution of the shareholders' meeting, to make amendments to the Articles of Association which concern only the wording. This shall also apply to the cases referred to in Article 4 (3). ARTICLE 12 RULES OF PROCEDURE OF THE SUPERVISORY BOARD The supervisory board shall, within the framework of the imperative legal provisions and the Articles of Association, establish rules of procedure for itself which shall take into account, in particular, the interests of those supervisory board members who do not speak German. ARTICLE 13 REMUNERATION OF SUPERVISORY BOARD MEMBERS (1) The members of the supervisory board shall be reimbursed for the expenses incurred in the exercise of their office, including any value-added tax. (2) Each member of the Supervisory Board shall receive a fixed fee of US$ 60,000.00 per annum for each full fiscal year, payable in four equal installments at the end of each calendar quarter. In the event that the shareholders' meeting, taking into consideration the annual results, resolves a higher remuneration by a three fourths majority of the votes cast, such higher remuneration shall be payable. (3) If a business year is no complete calendar year, the remuneration shall be paid on a pro rata temporis basis. The chairman of the supervisory board shall receive twice the remuneration of a supervisory board member, and his deputy shall receive one and a half times the remuneration of a supervisory board member. (4) The Company shall pay the remuneration of the supervisory board members subject to statutory deductions. 11 - 11 - C. SHAREHOLDERS' MEETING ARTICLE 14 CALLING OF THE SHAREHOLDERS' MEETING (1) The shareholders' meeting shall be called no later than one month before the day by the end of which the shares must be deposited according to Article 15 of these Articles of Association with the day of calling and the day of deposit not to be considered for such calculation. (2) No later than on the last day of the convocation period, also the English short version pursuant to Article 3 (2) shall be published. (3) The shareholders' meeting shall be held at the place where the registered office of the Company is located, or in a German city where a stock exchange is situated or at the place where the registered office of a domestic affiliated company is located. ARTICLE 15 ATTENDANCE AT THE SHAREHOLDERS' MEETING (1) Those shareholders shall be entitled to attend the shareholders' meeting who deposit their shares no later than on the fifth day before the shareholders' meeting with the Company, or a Notary in the Federal Republic of Germany, or a Wertpapiersammelbank [bank for the central depository of securities] or with any other body designated in the notice of meeting, during the business hours until the end of the shareholders' meeting. If the credit institutions are closed on the last day of deposit, the period of deposit shall end on the preceding working day of the credit institutions. (2) If the shares are deposited with a German Notary or with a Wertpapiersammelbank, the certificate to be issued by them shall be submitted to the cash office of the Company no later than on the first working day, except the Saturday, after expiration of the period of deposit. (3) Shares shall be deemed to have been properly deposited if they are blocked until the end of the shareholders' meeting at a credit institution in the name of and with the consent of a depository. 12 - 12 - ARTICLE 16 DATE OF THE ORDINARY SHAREHOLDERS' MEETING The shareholders' meeting which accepts the adopted annual financial statement or, as the case may me, resolves on the adoption of the annual financial statement and on the approval of the actions of the management board and the supervisory board and on the disposition of the profits (ordinary shareholders' meeting) shall be held within the first eight (8) months of a business year. ARTICLE 17 CHAIRMANSHIP AT THE SHAREHOLDERS' MEETING AND VOTING (1) The shareholders' meeting shall be chaired by the chairman of the supervisory board or, if he is prevented or at the request of the chairman of the supervisory board, by another supervisory board member to be designated by the chairman of the supervisory board. If and when no such designation has been made and the chairman of the supervisory board is prevented, another member to be designated by the supervisory board shall preside over the shareholders' meeting. (2) The chairman shall chair the meeting, determine the order of items to be dealt with as well as the kind and form of the voting. (3) The majorities of the votes cast and of the capital stock represented for the adoption of the resolution which are required for the resolutions of the shareholders' meeting shall be governed by the statutory provisions. In case of a tie, a motion shall be deemed denied. (4) Each share of the common stock shall grant one (1) vote in the shareholders' meeting. The preferred shares shall be non-voting, unless otherwise required by imperative legal provisions; otherwise, sentence 1 of this paragraph shall apply mutatis mutandis. IV. ANNUAL FINANCIAL STATEMENT AND DISPOSITION OF PROFITS ARTICLE 18 BUSINESS YEAR, RENDERING OF ACCOUNTS 13 - 13 - (1) The business year shall be the calendar year. (2) Within the first three (3) months of the business year but no later than within the maximum period required by imperative legal provisions, the management board shall prepare the annual financial statement and the management report for the preceding business year and submit the same to the auditors. (3) Immediately after receipt of the auditor's report, the management board shall submit to the supervisory board the annual financial statement, the management report and the auditor's report. (4) At the same time, the management board shall submit to the supervisory board the proposal which he intends to make to the shareholders' meeting in respect of the disposition of profits. ARTICLE 19 DISPOSITION OF PROFITS (1) The shareholders' meeting shall resolve on the disposition of the balance sheet profits subject to the following paragraphs (2) to (4) of this Article. (2) Out of the annual balance sheet profits, the non-voting preferred shares (Article 4) shall receive a dividend which exceeds that for the common shares by an amount of Euro 0.06 per preferred share, but at least a dividend in an amount of Euro 0.12 per preferred share. (3) The minimum dividend of Euro 0.12 per preferred share shall take precedence over the distribution of a dividend on the common shares. (4) In the event that the balance sheet profits for one or more business years are insufficient to distribute Euro 0.12 per preferred share, the lacking sums shall be paid subsequently without interest out of the balance sheet profits for the following business years, i.e. after distribution of the minimum dividend on the preferred shares for these business years and before distribution of a dividend on the common shares. The right to subsequent payment shall be part of the profit share for the business year from the balance sheet profits of which the subsequent payment on the preferred shares is made. 14 - 14 - V. FORMATION EXPENSES ARTICLE 20 FORMATION EXPENSES The formation expenses (Notary's fees, court costs, costs of notification) amount up to DM 5,000 (in words: five thousand German Marks). EX-4.13 4 y51284ex4-13.txt AMENDMENT NO. 11 TO CREDIT AGREEMENT 1 EXHIBIT 4.13 AMENDMENT NO. 11 THIS AMENDMENT NO. 11, dated as of May 31, 2001 (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 BANK OF AMERICA, N.A., (formerly known as 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 the Lenders identified therein, and NationsBank, N.A., as Paying Agent. WHEREAS, the Company has requested the modification of certain 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: 1. The Credit Agreement is amended and modified in the following respects: 1.1 Section 8.1(m) is hereby amended by deleting the reference to "$950 million" and replacing it with a reference to "$1.20 billion". 1.2 It is hereby agreed that the provisions of Section 3.3 shall not apply with respect to any Net Proceeds of Additional Subdebt issued on or after the date hereof and clause (D) of Section 3.3(b)(ii) is hereby deleted in it entiriety. 2. The effectiveness of this Amendment is subject to receipt by the Paying Agent of the following: (i) copies of this Amendment executed by the Company and the other members of the Consolidated Group identified on the signature pages hereto, and (ii) the consent of the Required Lenders. 2 3. Except as modified hereby, all of the terms and provisions of the Credit Agreement (and Exhibits and Schedules) remain in full force and effect. 4. The Credit Parties hereby affirm (i) the representations and warranties set out in Section 6 of the Credit Agreement are true and correct as of the date hereof (except those which expressly relate to an earlier period) and (ii) no Default or Event of Default presently exists. 5. 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 Moore & Van Allen, PLLC. 6. 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. 7. 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] 2 3 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 --------------------------------- Name: Title: FRESENIUS MEDICAL CARE AG By --------------------------------- Name: Title: By --------------------------------- Name: Title: NMC DO BRASIL LTDA., a Brazil corporation By --------------------------------- Name: Title: NATIONAL MEDICAL CARE OF SPAIN, S.A., a Spanish corporation By --------------------------------- Name: Title: NATIONAL MEDICAL CARE OF TAIWAN, INC., a Delaware corporation By --------------------------------- Name: Title: NMC CENTRO MEDICO NACIONAL, LDA., a Portuguese corporation By --------------------------------- Name: Title: 4 FRESENIUS MEDICAL CARE ARGENTINA, S.A., as successor by merger to NMC DE ARGENTINA, S.A., an Argentine corporation By --------------------------------- Name: Title: FRESENIUS USA, INC., a Massachusetts corporation By --------------------------------- Name: Title: FRESENIUS MEDICAL CARE DEUTSCHLAND GmbH, a German corporation By --------------------------------- Name: Title: By --------------------------------- Name: Title: FRESENIUS MEDICAL CARE GROUPE FRANCE (formerly known as Fresenius Groupe France S.A.), a French corporation By --------------------------------- Name: Title: FRESENIUS MEDICAL CARE HOLDING, S.p.A., an Italian corporation By --------------------------------- Name: Title: FRESENIUS MEDICAL CARE ESPANA S.A., a Spanish corporation By --------------------------------- Name: Title: 5 FRESENIUS MEDICAL CARE MAGYAROSZA KfG, a Hungarian corporation By --------------------------------- Name: Title: BIO-MEDICAL APPLICATIONS OF ALABAMA, INC. By --------------------------------- Name: Title: BIO-MEDICAL APPLICATIONS OF FLORIDA, INC. By --------------------------------- Name: Title: BIO-MEDICAL APPLICATIONS OF GEORGIA, INC. By --------------------------------- Name: Title: BIO-MEDICAL APPLICATIONS OF INDIANA, INC. By --------------------------------- Name: Title: BIO-MEDICAL APPLICATIONS OF KENTUCKY, INC. By --------------------------------- Name: Title: BIO-MEDICAL APPLICATIONS OF LOUISIANA, INC. By --------------------------------- Name: Title: 6 BIO-MEDICAL APPLICATIONS OF MARYLAND, INC. By --------------------------------- Name: Title: BIO-MEDICAL APPLICATIONS OF MASSACHUSETTS, INC. By --------------------------------- Name: Title: BIO-MEDICAL APPLICATIONS OF NORTH CAROLINA, INC. By --------------------------------- Name: Title: BIO-MEDICAL APPLICATIONS OF OHIO, INC. By --------------------------------- Name: Title: BIO-MEDICAL APPLICATIONS OF PENNSYLVANIA, INC. By --------------------------------- Name: Title: BIO-MEDICAL APPLICATIONS OF SOUTH CAROLINA, INC. By --------------------------------- Name: Title: BIO-MEDICAL APPLICATIONS OF TEXAS, INC. By --------------------------------- Name: Title: 7 BIO-MEDICAL APPLICATIONS OF VIRGINIA, INC. By --------------------------------- Name: Title: LIFECHEM, INC., a Delaware corporation By --------------------------------- Name: Title: GUARANTORS: FRESENIUS MEDICAL CARE HOLDINGS, INC., a New York corporation formerly known as WRG-NY By --------------------------------- Name: Title: NATIONAL MEDICAL CARE, INC., a Delaware corporation By --------------------------------- Name: Title: BIO-MEDICAL APPLICATIONS MANAGEMENT CO., INC., a Delaware corporation By --------------------------------- Name: Title: FRESENIUS MEDICAL CARE AG, a German corporation By --------------------------------- Name: Title: By --------------------------------- Name: Title: 8 FRESENIUS USA, INC., a Massachusetts corporation By --------------------------------- Name: Title: FRESENIUS MEDICAL CARE DEUTSCHLAND GmbH, a German corporation By --------------------------------- Name: Title: By --------------------------------- Name: Title: FRESENIUS MEDICAL CARE GROUPE FRANCE, a French corporation (formerly known as Fresenius Groupe France S.A.) By --------------------------------- Name: Title: FRESENIUS SECURITIES, INC., a California corporation By --------------------------------- Name: Title: NEOMEDICA, INC., a Delaware corporation By --------------------------------- Name: Title: FMC FINANCE S.A., a Luxembourg corporation By --------------------------------- Name: Title: 9 FMC TRUST FINANCE S.a.r.l. LUXEMBOURG, a Luxembourg corporation By --------------------------------- Name: Title: PAYING AGENT: BANK OF AMERICA, N.A. (formerly known as NationsBank, N.A.), as Paying Agent for and on behalf of the Lenders By --------------------------------- Name: Title: 10 CONSENT TO AMENDMENT NO. 11 Bank of America, N.A. (formerly known as NationsBank, N.A.), as Paying Agent 101 N. Tryon Street, 15th Floor NC1-001-15-04 Charlotte, North Carolina 28255 Attn: James D. Young, 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. (now known as Bank of America, N.A.), as Paying Agent. Terms used but not otherwise defined shall have the meanings provided in the Credit Agreement. Amendment No. 11 dated May 31, 2001 (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: EX-4.14 5 y51284ex4-14.txt AMENDMENT NO. 12 TO CREDIT AGREEMENT 1 EXHIBIT 4.14 AMENDMENT NO. 12 THIS AMENDMENT NO. 12, dated as of June 30, 2001 (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 BANK OF AMERICA, N.A., (formerly known as 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 the Lenders identified therein, and NationsBank, N.A., as Paying Agent. WHEREAS, the Company has requested the modification of certain 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: 1. The Credit Agreement is amended and modified in the following respects: 1.1 Section 8.1 is hereby amended by deleting clause (f) therefrom in its entirety and substituting the following clause in its place as a new clause (f): (f) in addition to other Indebtedness permitted by this Section 8.1, (A) other Funded Debt of Holdings and its Foreign Subsidiaries in an aggregate amount not to exceed $200 million (or the approximate Dollar Equivalent thereof on the date on which the amount thereof is fixed, to the extent that any such Indebtedness is issued in Foreign Currency) and (B) other Funded Debt of Holdings and its Foreign Subsidiaries in an aggregate amount not to exceed $400 million at any time outstanding; provided, however that (i) neither the Company nor any of its Subsidiaries shall have any obligation with respect to any such Funded Debt; (ii) no more than $50 million of the Funded Debt permitted by subclause (B) may be incurred, created or assumed by 2 Holdings (except as a Guaranty Obligation) and (iii) no more than $250 million in aggregate principal amount of Funded Debt permitted by subclause (B) may be guaranteed by Holdings. 1.2 Section 8.1 is hereby further amended by deleting clause (j) therefrom in its entirety and inserting the following in its place: (j) [INTENTIONALLY OMITTED]; 1.3 Section 8.4(d) is hereby amended by deleting the reference to "$400,000,000" in subclause (B) thereof and inserting a reference to "$600 million" in its place. 1.4 It is hereby understood and agreed that the acquisition by Holdings and its Subsidiaries of Everest Healthcare Services Corporation on January 5, 2001 shall be deemed to have occurred in calendar year 2000 for purposes of Section 8.4(d), as a permitted use of the proceeds of the Equity Transactions occurring during 2000, as contemplated by Amendment No. 10 to the Credit Agreement. 2. The Lenders hereby waive compliance with the provisions of the Credit Agreement as in effect before the execution and delivery of this Amendment to the extent, and only to the extent, that any transaction or action of any member of the Consolidated Group have been consented to hereby or would have been permitted by the provisions of the Credit Agreement, as amended hereby. 3. The effectiveness of this Amendment is subject to receipt by the Paying Agent of the following: (i) copies of this Amendment executed by the Company and the other members of the Consolidated Group identified on the signature pages hereto, (ii) the consent of the Required Lenders; and (iii) an amendment fee in an amount equal to seven and one-half basis points (0.075%) of the aggregate amount of Commitments held by the Lenders consenting to this Amendment for the ratable benefit of such consenting Lenders. 4. Except as modified hereby, all of the terms and provisions of the Credit Agreement (and Exhibits and Schedules) remain in full force and effect. 5. The Credit Parties hereby affirm (i) the representations and warranties set out in Section 6 of the Credit Agreement are true and correct as of the date hereof (except those which expressly relate to an earlier period) and (ii) no Default or Event of Default presently exists. 6. 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 Moore & Van Allen, PLLC. 7. 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. 2 3 8. 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] 3 4 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 --------------------------------- Name: Title: FRESENIUS MEDICAL CARE AG By --------------------------------- Name: Title: By --------------------------------- Name: Title: NMC DO BRASIL LTDA., a Brazil corporation By --------------------------------- Name: Title: NATIONAL MEDICAL CARE OF SPAIN, S.A., a Spanish corporation By --------------------------------- Name: Title: NATIONAL MEDICAL CARE OF TAIWAN, INC., a Delaware corporation By --------------------------------- Name: Title: NMC CENTRO MEDICO NACIONAL, LDA., a Portuguese corporation By --------------------------------- Name: Title: 5 FRESENIUS MEDICAL CARE ARGENTINA, S.A., as successor by merger to NMC DE ARGENTINA, S.A., an Argentine corporation By --------------------------------- Name: Title: FRESENIUS USA, INC., a Massachusetts corporation By --------------------------------- Name: Title: FRESENIUS MEDICAL CARE DEUTSCHLAND GmbH, a German corporation By --------------------------------- Name: Title: By --------------------------------- Name: Title: FRESENIUS MEDICAL CARE GROUPE FRANCE (formerly known as Fresenius Groupe France S.A.), a French corporation By --------------------------------- Name: Title: FRESENIUS MEDICAL CARE HOLDING, S.p.A., an Italian corporation By --------------------------------- Name: Title: FRESENIUS MEDICAL CARE ESPANA S.A., a Spanish corporation By --------------------------------- Name: Title: 6 FRESENIUS MEDICAL CARE MAGYAROSZA KfG, a Hungarian corporation By --------------------------------- Name: Title: BIO-MEDICAL APPLICATIONS OF ALABAMA, INC. By --------------------------------- Name: Title: BIO-MEDICAL APPLICATIONS OF FLORIDA, INC. By --------------------------------- Name: Title: BIO-MEDICAL APPLICATIONS OF GEORGIA, INC. By --------------------------------- Name: Title: BIO-MEDICAL APPLICATIONS OF INDIANA, INC. By --------------------------------- Name: Title: BIO-MEDICAL APPLICATIONS OF KENTUCKY, INC. By --------------------------------- Name: Title: BIO-MEDICAL APPLICATIONS OF LOUISIANA, INC. By --------------------------------- Name: Title: 7 BIO-MEDICAL APPLICATIONS OF MARYLAND, INC. By --------------------------------- Name: Title: BIO-MEDICAL APPLICATIONS OF MASSACHUSETTS, INC. By --------------------------------- Name: Title: BIO-MEDICAL APPLICATIONS OF NORTH CAROLINA, INC. By --------------------------------- Name: Title: BIO-MEDICAL APPLICATIONS OF OHIO, INC. By --------------------------------- Name: Title: BIO-MEDICAL APPLICATIONS OF PENNSYLVANIA, INC. By --------------------------------- Name: Title: BIO-MEDICAL APPLICATIONS OF SOUTH CAROLINA, INC. By --------------------------------- Name: Title: BIO-MEDICAL APPLICATIONS OF TEXAS, INC. By --------------------------------- Name: Title: 8 BIO-MEDICAL APPLICATIONS OF VIRGINIA, INC. By: --------------------------------- Name: Title: LIFECHEM, INC., a Delaware corporation By --------------------------------- Name: Title: GUARANTORS: FRESENIUS MEDICAL CARE HOLDINGS, INC., a New York corporation formerly known as WRG-NY By --------------------------------- Name: Title: NATIONAL MEDICAL CARE, INC., a Delaware corporation By --------------------------------- Name: Title: BIO-MEDICAL APPLICATIONS MANAGEMENT CO., INC., a Delaware corporation By --------------------------------- Name: Title: FRESENIUS MEDICAL CARE AG, a German corporation By --------------------------------- Name: Title: By --------------------------------- Name: Title: 9 FRESENIUS USA, INC., a Massachusetts corporation By --------------------------------- Name: Title: FRESENIUS MEDICAL CARE DEUTSCHLAND GmbH, a German corporation By --------------------------------- Name: Title: By --------------------------------- Name: Title: FRESENIUS MEDICAL CARE GROUPE FRANCE, a French corporation (formerly known as Fresenius Groupe France S.A.) By --------------------------------- Name: Title: FRESENIUS SECURITIES, INC., a California corporation By --------------------------------- Name: Title: NEOMEDICA, INC., a Delaware corporation By --------------------------------- Name: Title: FMC FINANCE S.A., a Luxembourg corporation By --------------------------------- Name: Title: 10 FMC TRUST FINANCE S.a.r.l. LUXEMBOURG, a Luxembourg corporation By --------------------------------- Name: Title: QCI HOLDINGS, INC., a Delaware corporation By --------------------------------- Name: Title: SRC HOLDINGS, INC., a Delaware corporation By --------------------------------- Name: Title: PAYING AGENT: BANK OF AMERICA, N.A. (formerly known as NationsBank, N.A.), as Paying Agent for and on behalf of the Lenders By --------------------------------- Name: Title: 11 CONSENT TO AMENDMENT NO. 12 Bank of America, N.A. (formerly known as NationsBank, N.A.), as Paying Agent 101 N. Tryon Street, 15th Floor NC1-001-15-04 Charlotte, North Carolina 28255 Attn: James D. Young, 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. (now known as Bank of America, N.A.), as Paying Agent. Terms used but not otherwise defined shall have the meanings provided in the Credit Agreement. Amendment No. 12 dated June 30, 2001 (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: EX-4.41 6 y51284ex4-41.txt DECLARATION OF TRUST 1 EXHIBIT 4.41 DECLARATION OF TRUST OF FRESENIUS MEDICAL CARE CAPITAL TRUST IV DATED AS OF FEBRUARY 12, 1998 2 TABLE OF CONTENTS
Page ---- ARTICLE I DEFINITIONS SECTION 1.1 Definitions.............................................. 1 ARTICLE II ORGANIZATION SECTION 2.1 Name..................................................... 3 SECTION 2.2 Office................................................... 3 SECTION 2.3 Purposes and Functions of the Trust...................... 3 SECTION 2.4 Authority................................................ 3 SECTION 2.5 Title to Property of the Trust........................... 4 SECTION 2.6 Powers of the Trustee.................................... 4 SECTION 2.7 Filing of Certificate of Trust........................... 4 SECTION 2.8 Duration of Trust........................................ 5 SECTION 2.9 Responsibilities of the Sponsor.......................... 5 SECTION 2.10 Declaration Binding on Securities Holders................ 5 ARTICLE III TRUSTEES SECTION 3.1 Trustees................................................. 5 SECTION 3.2 Company Trustees......................................... 5 SECTION 3.3 Delaware Trustee......................................... 6 SECTION 3.4 Preferred Trustee........................................ 6 SECTION 3.5 Not Responsible for Recitals or Sufficiency of Declaration........................................... 6 ARTICLE IV LIMITATION OF LIABILITY OF HOLDERS OF SECURITIES, TRUSTEES OR OTHERS SECTION 4.1 Exculpation.............................................. 7 SECTION 4.2 Fiduciary Duty........................................... 7 SECTION 4.3 Indemnification.......................................... 8 SECTION 4.4 Outside Businesses....................................... 10 ARTICLE V AMENDMENTS, TERMINATION, MISCELLANEOUS SECTION 5.1 Amendments............................................... 10 SECTION 5.2 Termination of Trust..................................... 10 SECTION 5.3 Governing Law............................................ 11 SECTION 5.4 Headings................................................. 11 SECTION 5.5 Successors and Assigns................................... 11 SECTION 5.6 Partial Enforceability................................... 11 SECTION 5.7 Counterparts............................................. 11
2 3 DECLARATION OF TRUST OF FRESENIUS MEDICAL CARE CAPITAL TRUST IV February 12, 1998 DECLARATION OF TRUST ("Declaration") dated and effective as of February 12, 1998, by the Trustees (as defined herein), the Sponsor (as defined herein) and by the holders, from time to time, of undivided beneficial interests in the Trust to be issued pursuant to this Declaration; WHEREAS, the Trustees and the Sponsor wish to declare and establish Fresenius Medical Care Capital Trust IV (the "Trust"), a trust under the Delaware Business Trust Act pursuant to this Declaration and a Certificate of Trust to be filed with the Secretary of State of the State of Delaware to provide for, among other things, (i) the issuance of the Common Securities by the Trust to the Sponsor, (ii) the issuance and sale of the Trust Preferred Securities by the Trust pursuant to the Purchase Agreement, (iii) the acquisition by the Trust from the Sponsor of all of the right, title and interest in the Notes and (iv) the appointment of the Trustees; WHEREAS, as of the date hereof, no interests in the Trust have been issued; NOW, THEREFORE, it being the intention of the parties hereto to establish the Trust as a business trust under the Delaware Business Trust Act and that this Declaration constitute the governing instrument of such business trust, the Trustees declare that all assets contributed to the Trust will be held in trust for the benefit of the holders, from time to time, of the securities representing undivided beneficial interests in the assets of the Trust issued hereunder, subject to the provisions of this Declaration. ARTICLE I DEFINITIONS SECTION 1.1 Definitions. Unless the context otherwise requires: (a) Capitalized terms used in this Declaration but not defined in the preamble above have the respective meanings assigned to them in this Section 1.1; (b) a term defined anywhere in this Declaration has the same meaning throughout; (c) all references to "the Declaration" or "this Declaration" are to this Declaration of Trust as modified, supplemented or amended from time to time; 3 4 (d) all references in this Declaration to Articles and Sections are to Articles and Sections of this Declaration unless otherwise specified; and (e) a reference to the singular includes the plural and vice versa. "Affiliate" of any specified Person means any other Person directly or indirectly controlling or controlled by or under direct or indirect common control with such specified Person, provided, however, that an Affiliate of the Sponsor shall not be deemed to include the Trust. For the purposes of this definition, "control" when used with respect to any specified Person means the power to direct the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise; and the terms "controlling" and "controlled" have meanings correlative to the foregoing. "Business Day" means any day other than a day on which banking institutions in the City of New York are authorized or required by law to close. "Business Trust Act" means Chapter 38 of Title 12 of the Delaware Code, 12 Del. C. Section 3801 et seq., as it may be amended from time to time, or any successor legislation. "Closing Date" has the meaning set forth in the Purchase Agreement. "Commission" means the Securities and Exchange Commission. "Common Security" means a security representing a common undivided beneficial interest in the assets of the Trust with such terms as may be set out in any amendment to this Declaration, and two or more such securities are herein referred to as "Common Securities". "Company Indemnified Person" means (a) any Company Trustee; (b) any Affiliate of any Company Trustee; (c) any officers, directors, shareholders, members, partners, employees, representatives or agents of any Company Trustee; or (d) any employee or agent of the Trust or its Affiliates. "Company Trustee" has the meaning set forth in Section 3.1. "Covered Person" means (a) any officer, director, shareholder, partner, member, representative, employee or agent of (i) the Trust or (ii) the Trust's Affiliates and (b) any holder of Securities. "Delaware Trustee" has the meaning set forth in Section 3.1. "Exchange Act" means the Securities Exchange Act of 1934, as amended from time to time, or any successor legislation. "Fiduciary Indemnified Person" has the meaning set forth in Section 4.3(b). "Holder" means the person in whose name a certificate representing a Security is registered. 4 5 "Indemnified Person" means a Company Indemnified Person or a Fiduciary Indemnified Person. "Indenture Trustee" means State Street Bank and Trust Company, as trustee under the Senior Subordinated Indenture until a successor is appointed thereunder, and thereafter means such successor trustee. "Note Issuer" means FMC Trust Finance S.a.r.l. Luxembourg in its capacity as the issuer of the Notes under the Indenture. "Notes" means the deutsche mark denominated series of Senior Subordinated Notes due 2008 to be issued under the Senior Subordinated Indenture by the Note Issuer and acquired by the Trust. "Person" means a legal person, including any individual, corporation, estate, partnership, joint venture, association, joint stock company, limited liability company, trust, unincorporated association, or government or any agency or political subdivision thereof, or any other entity of whatever nature. "Preferred Trustee" has the meaning set forth in Section 3.4. "Purchase Agreement" has the meaning set forth in Section 2.6(b)(iv). "Securities" means the Common Securities and the Trust Preferred Securities. "Securities Act" means the Securities Act of 1933, as amended from time to time, or any successor legislation. "Senior Subordinated Indenture" means the indenture dated as of the Closing Date to be entered into among FMC Trust Finance S.a.r.l. Luxembourg, Fresenius Medical Care AG, Fresenius Medical Care Holdings, Inc. ("FMCH"), Fresenius Medical Deutschland GmbH ("D-GmbH"), and State Street Bank and Trust Company, as trustee and any indenture supplemental thereto pursuant to which the Notes are to be issued. "Sponsor" means the Person executing this Declaration as sponsor of the Trust, in its capacity as such. "Trustee" or "Trustees" means each Person who has signed this Declaration as a trustee, so long as such Person shall continue in office in accordance with the terms hereof, and all other Persons who may from time to time be duly appointed, qualified and serving as Trustees in accordance with the provisions hereof, and references herein to a Trustee or the Trustees shall refer to such Person or Persons solely in their capacity as trustees hereunder. "Trust Preferred Security" means a security representing a preferred undivided beneficial interest in the assets of the Trust with such terms as may be set out in any amendment to or amendment and restatement of this Declaration, and two or more such securities are herein referred to as "Trust Preferred Securities." 5 6 ARTICLE II ORGANIZATION SECTION 2.1 Name. The Trust created by this Declaration is named "Fresenius Medical Care Capital Trust IV." The Trust's activities may be conducted under the name of the Trust or any other name deemed advisable by the Company Trustees. SECTION 2.2 Office. The address of the principal executive office of the Trust is c/o Fresenius Medical Care AG, Borkenberg 14, 61440 Oberursel, Germany. At any time, the Company Trustees may designate another principal office. SECTION 2.3 Purposes and Functions of the Trust. The exclusive purposes and functions of the Trust are (a) to issue and sell the Securities and use the proceeds from such sale to acquire the Notes and (b) except as otherwise limited herein, to engage in only those other activities necessary, appropriate, convenient or incidental thereto. SECTION 2.4 Authority. Subject to the limitations provided in this Declaration, the Company Trustees shall have exclusive and complete authority to carry out the purposes of the Trust. An action taken by the Company Trustees in accordance with their powers shall constitute the act of and serve to bind the Trust. In dealing with the Company Trustees acting on behalf of the Trust, no person shall be required to inquire into the authority of the Company Trustees to bind the Trust. Persons dealing with the Trust are entitled to rely conclusively on the power and authority of the Company Trustees as set forth in this Declaration. SECTION 2.5 Title to Property of the Trust. Legal title to all assets of the Trust shall be vested in the Trust. SECTION 2.6 Powers of the Trustee. The Company Trustees shall have the exclusive power and authority to cause the Trust to engage in the following activities: (a) to issue and sell the Trust Preferred Securities and the Common Securities in accordance with this Declaration; (b) in connection with the issue and sale of the Trust Preferred Securities, at the direction of the Sponsor, to: 6 7 (i) execute and deliver or file such documents and take such other steps, as shall enable the Trust to offer, issue and sell the Trust Preferred Securities without registration under the Securities Act as a transaction by an issuer not involving any public offering within the meaning of Section 4(2) of the Securities Act, as an "offshore transaction" within the meaning of Regulation S under the Securities Act, or pursuant to one or more other available exemptions from registration under the Securities Act, and as shall enable purchasers of the Trust Preferred Securities to resell the Trust Preferred Securities to qualified institutional buyers (as that term is defined in Rule 144A, under the Securities Act) without registration under the Securities Act pursuant to the exemption from registration provided by the aforesaid Rule 144A, in offshore transactions pursuant to Regulation S under the Securities Act or pursuant to another available exemption. (ii) execute and file any documents prepared by the Sponsor and its Affiliates, or take any acts as determined by the Sponsor and its Affiliates, to be necessary in order to qualify or register all or part of the Trust Preferred Securities in any State in which the Sponsor and its Affiliates have determined to qualify or register such Trust Preferred Securities for sale in connection with the original offer and sale of the Trust Preferred Securities, the filing of the registration statement referred to clause (v) below, or both; (iii) execute and file an application, prepared by the Sponsor, to any national stock exchange, any foreign stock exchange, The PORTAL(SM) Market of the NASDAQ Stock Market, Inc. or the Nasdaq Stock Market's National Market for listing upon notice of issuance of any Trust Preferred Securities; (iv) execute and enter into a purchase agreement providing for the issuance and sale of the Trust Preferred Securities (the "Purchase Agreement"); and (v) to execute and file with the Commission a registration statement prepared by the Sponsor and its Affiliates, including any amendments thereto, in relation to an offer to exchange the Trust Preferred Securities, Notes, and any related guarantees for Trust Preferred Securities, Notes and related guarantees which have been registered under the Securities Act, having substantially identical terms to those of the Trust Preferred Securities, Notes and guarantees, a "shelf registration statement" under the Securities Act with respect to the resale of the Trust Preferred Securities, the Notes and the related guarantees, or both; (c) to employ or otherwise engage employees and agents (who may be designated as officers with titles) and managers, contractors, advisors, counsel, accountants, investment bankers, and consultants and provide for reasonable compensation for such services; (d) to incur expenses which are necessary, appropriate, convenient or incidental to carry out any of the purposes of this Declaration; and (e) to execute all documents or instruments, perform all duties and powers, and do all things for and on behalf of the Trust in all matters necessary, appropriate, convenient or incidental to the foregoing. 7 8 SECTION 2.7 Filing of Certificate of Trust. On or after the date of execution of this Declaration, the Trustees shall cause the filing of the Certificate of Trust for the Trust in the form attached hereto as Exhibit "A" with the Secretary of State of the State of Delaware. SECTION 2.8 Duration of Trust. The Trust, absent termination pursuant to the provisions of Section 5.2, shall terminate on February 28, 2027. SECTION 2.9 Responsibilities of the Sponsor. In connection with the issuance and sale of the Trust Preferred Securities, the Sponsor shall have the exclusive right and responsibility to engage in the following activities: (a) to prepare, together with its Affiliates, a Preliminary Offering Memorandum, an Offering Memorandum, and any required amendments or supplements thereto in relation to the Trust Preferred Securities, including any amendments thereto; (b) to prepare, together with its Affiliates, for filing by the Trust with the Commission a registration statement in relation to the Trust Preferred Securities, as contemplated by Section 2.6(b)(v); (c) to determine the States in which to take appropriate action to qualify or register for sale all or part of the Trust Preferred Securities and to do any and all such acts, other than actions which must be taken by the Trust, and advise the Trust of actions it must take, and prepare for execution and filing any documents to be executed and filed by the Trust, as the Sponsor deems necessary or advisable in order to comply with the applicable laws of any such States; (d) if deemed appropriate by the Sponsor, to prepare for filing by the Trust an application to any national stock exchange, any foreign stock exchange, The PORTAL(SM) Market of the NASDAQ Stock Market, Inc. or the Nasdaq Stock Market's National Market for listing upon notice of issuance of any Trust Preferred Securities; and (e) to negotiate the terms of the Purchase Agreement providing for the sale of the Trust Preferred Securities. SECTION 2.10 Declaration Binding on Securities Holders. Every Person by virtue of having become a Holder of a Security or any interest therein in accordance with the terms of this Declaration, shall be deemed to have expressly assented and agreed to the terms of, and shall be bound by, this Declaration. ARTICLE III TRUSTEES 8 9 SECTION 3.1 Trustees. The number of Trustees initially shall be two (2), and thereafter the number of Trustees shall be such number as shall be fixed from time to time by a written instrument signed by the Sponsor. The Sponsor is entitled to appoint or remove without cause any Trustee at any time; provided, however, that the number of Trustees shall in no event be less than two (2); provided, further, that one Trustee, in the case of a natural person, shall be a person who is a resident of the State of Delaware or that, if not a natural person, is an entity which has its principal place of business in the State of Delaware and meets any other requirements imposed by applicable law (the "Delaware Trustee"); provided, further, that there shall be at least one trustee who is an employee or officer of, or is affiliated with the Sponsor or any of its Affiliates (a "Company Trustee"). A Trustee may resign upon 30 days' prior notice to the Sponsor. SECTION 3.2 Company Trustees. The initial Company Trustee shall be: Dr. Ben J. Lipps. (a) Except as expressly set forth in this Declaration, any power of the Company Trustees may be exercised by, or with the consent of, any one such Company Trustee. (b) Unless otherwise determined by the Company Trustees, and except as otherwise required by the Business Trust Act, any Company Trustee is authorized to execute on behalf of the Trust any documents which the Company Trustees have the power and authority to cause the Trust to execute pursuant to Section 2.6 provided, that, the registration statement referred to in Section 2.6(b)(v), including any amendments thereto, shall be signed by at least a majority of the Company Trustees; and (c) A Company Trustee may, by power of attorney consistent with applicable law, delegate to any other natural person over the age of 21 his or her power for the purposes of signing any documents which the Company Trustees have power and authority to cause the Trust to execute pursuant to Section 2.6. SECTION 3.3 Delaware Trustee. The initial Delaware Trustee shall be: First Union Trust Company, National Association. Notwithstanding any other provision of this Declaration, the Delaware Trustee shall not be entitled to exercise any of the powers, nor shall the Delaware Trustee have any of the duties and responsibilities of the Company Trustees described in this Declaration. The Delaware Trustee shall be a Trustee for the sole and limited purpose of fulfilling the requirements of Section 3807 of the Business Trust Act. Notwithstanding anything herein to the contrary, the Delaware Trustee shall not be liable for the acts or omissions to acts of the Trust, of the Sponsor or of the Company Trustees and shall have no liability to any Person for the debts, obligations or liabilities of the Trust, except that the Delaware Trustee shall be liable to the Sponsor for the gross negligence or willful misconduct of the Delaware Trustee. 9 10 In the event that the Delaware Trustee is unsure of the course of action to be taken by it hereunder, the Delaware Trustee may request instructions from the Sponsor and to the extent the Delaware Trustee follows such instructions in good faith, it shall not be liable to any person. In the event that no instructions are provided within the time requested by the Delaware Trustee, it shall have no duty or liability for its failure to take any action or for any action it takes in good faith. SECTION 3.4 Preferred Trustee. Prior to the issuance of the Trust Preferred Securities and Common Securities, the Sponsor shall appoint a trustee (the "Preferred Trustee") meeting the requirements of an eligible trustee of the Trust Indenture Act of 1939, as amended, by the execution of an amendment to this Declaration executed by the Company Trustees, the Sponsor, the Preferred Trustee and the Delaware Trustee. SECTION 3.5 Not Responsible for Recitals or Sufficiency of Declaration. The recitals contained in this Declaration shall be taken as the statements of the Sponsor, and the Trustees do not assume any responsibility for their correctness. The Trustees make no representations as to the value or condition of the property of the Trust or any part thereof. The Trustees make no representations as to the validity or sufficiency of this Declaration. ARTICLE IV LIMITATION OF LIABILITY OF HOLDERS OF SECURITIES, TRUSTEES OR OTHERS SECTION 4.1 Exculpation. (a) No Indemnified Person shall be liable, responsible or accountable in damages or otherwise to the Trust or any Covered Person for any loss, damage or claim incurred by reason of any act or omission performed or omitted by such Indemnified Person in good faith on behalf of the Trust and in a manner such Indemnified Person reasonably believed to be within the scope of the authority conferred on such Indemnified Person by this Declaration or by law, except that an Indemnified Person shall be liable for any such loss, damage or claim incurred by reason of such Indemnified Person's gross negligence or willful misconduct with respect to such acts or omissions; and (b) An Indemnified Person shall be fully protected in relying in good faith upon the records of the Trust and upon such information, opinions, reports or statements presented to the Trust by any Person as to matters the Indemnified Person reasonably believes are within such other Person's professional or expert competence and who has been selected with reasonable care by or on behalf of the Trust, including information, opinions, reports or statements as to the value and amount of the assets, liabilities, profits, losses, or any other facts pertinent to the existence and amount of assets from which distributions to holders of Securities might properly be paid. SECTION 4.2 Fiduciary Duty. 10 11 (a) To the extent that, at law or in equity, an Indemnified Person has duties (including fiduciary duties) and liabilities relating thereto to the Trust or to any other Covered Person, an Indemnified Person acting under this Declaration shall not be liable to the Trust or to any other Covered Person for its good faith reliance on the provisions of this Declaration. The provisions of this Declaration, to the extent that they restrict the duties and liabilities of an Indemnified Person otherwise existing at law or in equity, are agreed by the parties hereto to replace such other duties and liabilities of such Indemnified Person; (b) Unless otherwise expressly provided herein: (i) whenever a conflict of interest exists or arises between Covered Persons; or (ii) whenever this Declaration or any other agreement contemplated herein or therein provides that an Indemnified Person shall act in a manner that is, or provides terms that are, fair and reasonable to the Trust or any Holder of Securities, the Indemnified Person shall resolve such conflict of interest, take such action or provide such terms, considering in each case the relative interest of each party (including its own interest) to such conflict, agreement, transaction or situation and the benefits and burdens relating to such interests, any customary or accepted industry practices, and any applicable generally accepted accounting practices or principles. In the absence of bad faith by the Indemnified Person, the resolution, action or term so made, taken or provided by the Indemnified Person shall not constitute a breach of this Declaration or any other agreement contemplated herein or of any duty or obligation of the Indemnified Person at law or in equity or otherwise; and (c) whenever in this Declaration an Indemnified Person is permitted or required to make a decision: (i) in its "discretion" or under a grant of similar authority, the Indemnified Person shall be entitled to consider such interests and factors as it desires, including its own interests, and shall have no duty or obligation to give any consideration to any interest of or factors affecting the Trust or any other Person; or (ii) in its "good-faith" or under another express standard, the Indemnified Person shall act under such express standard and shall not be subject to any other or different standard imposed by this Declaration or by applicable law. SECTION 4.3 Indemnification. (a) The Sponsor shall indemnify, to the full extent permitted by law, any Company Indemnified Person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by or in the right of the Trust) by reason of the fact that he is or was a Company Indemnified Person against expenses (including attorneys' fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by him in connection with such action, suit or proceeding if he acted in good faith and in a manner he 11 12 reasonably believed to be in or not opposed to the best interests of the Trust, and, with respect to any criminal action or proceeding, had no reasonable cause to believe his conduct was unlawful. The termination of any action, suit or proceeding by judgment, order, settlement, conviction, or upon a plea of nolo contendere or its equivalent, shall not, of itself, create a presumption that the Company Indemnified Person did not act in good faith and in a manner which he reasonably believed to be in or not opposed to the best interests of the Trust, and, with respect to any criminal action or proceeding, had reasonable cause to believe that his conduct was unlawful. (i) The Sponsor shall indemnify, to the full extent permitted by law, any Company Indemnified Person who was or is a party or is threatened to be made a party to any threatened, pending or completed action or suit by or in the right of the Trust to procure a judgment in its favor by reason of the fact that he is or was a Company Indemnified Person against expenses (including attorneys' fees) actually and reasonably incurred by him in connection with the defense or settlement of such action or suit if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the Trust and except that no such indemnification shall be made in respect of any claim, issue or matter as to which such Company Indemnified Person shall have been adjudged to be liable to the Trust unless and only to the extent that the Court of Chancery of Delaware or the court in which such action or suit was brought shall determine upon application that, despite the adjudication of liability but in view of all the circumstances of the case, such person is fairly and reasonably entitled to indemnity for such expenses which such Court of Chancery or such other court shall deem proper. (ii) To the extent that a Company Indemnified Person shall be successful on the merits or otherwise (including dismissal of an action without prejudice or the settlement of an action without admission of liability) in defense of any action, suit or proceeding referred to in paragraphs (i) and (ii) of this Section 4.3(a), or in defense of any claim, issue or matter therein, he shall be indemnified, to the full extent permitted by law, against expenses (including attorneys' fees) actually and reasonably incurred by him in connection therewith. (iii) Any indemnification under paragraphs (i) and (ii) of this Section 4.3(a) (unless ordered by a court) shall be made by the Sponsor only as authorized in the specific case upon a determination that indemnification of the Company Indemnified Person is proper in the circumstances because he has met the applicable standard of conduct set forth in paragraphs (i) and (ii). Such determination shall be made (1) by the Company Trustees by a majority vote of a quorum consisting of such Company Trustees who were not parties to such action, suit or proceeding, (2) if such a quorum is not obtainable, or, even if obtainable, if a quorum of disinterested Company Trustees so directs, by independent legal counsel in a written opinion, or (3) by the Common Security Holder of the Trust. (iv) Expenses (including attorneys' fees) incurred by a Company Indemnified Person in defending a civil, criminal, administrative or investigative action, suit or proceeding referred to in paragraphs (i) and (ii) of this Section 4.3(a) shall be paid by the Sponsor in advance of the final disposition of such action, suit or proceeding upon receipt of an undertaking by or on behalf of such Company Indemnified Person to repay such amount if it shall ultimately be determined that he is not entitled to be indemnified by the Sponsor as authorized in this Section 4.3(a). Notwithstanding the foregoing, no advance shall be made by the Sponsor if a 12 13 determination is reasonably and promptly made (i) by the Company Trustees by a majority vote of a quorum of disinterested Company Trustees, (ii) if such a quorum is not obtainable, or, even if obtainable, if a quorum of disinterested Company Trustees so directs, by independent legal counsel in a written opinion or (iii) the Common Security Holder of the Trust, that, based upon the facts known to the Company Trustees, counsel or the Common Security Holder at the time such determination is made, such Company Indemnified Person acted in bad faith or in a manner that such person did not believe to be in or not opposed to the best interests of the Trust, or, with respect to any criminal proceeding, that such Company Indemnified Person believed or had reasonable cause to believe his conduct was unlawful. In no event shall any advance be made in instances where the Company Trustees, independent legal counsel or Common Security Holder reasonably determine that such person deliberately breached his duty to the Trust or its Common or Preferred Security Holders. (v) The indemnification and advancement of expenses provided by, or granted pursuant to, the other paragraphs of this Section 4.3(a) shall not be deemed exclusive of any other rights to which those seeking indemnification and advancement of expenses may be entitled under any agreement, vote of stockholders or disinterested directors of the Sponsor or Preferred Security Holders of the Trust or otherwise, both as to action in his official capacity and as to action in another capacity while holding such office. All rights to indemnification under this Section 4.3(a) shall be deemed to be provided by a contract between the Sponsor and each Company Indemnified Person who serves in such capacity at any time while this Section 4.3(a) is in effect. Any repeal or modification of this Section 4.3(a) shall not affect any rights or obligations then existing. (vi) The Sponsor or the Trust may purchase and maintain insurance on behalf of any person who is or was a Company Indemnified Person against any liability asserted against him and incurred by him in any such capacity, or arising out of his status as such, whether or not the Sponsor would have the power to indemnify him against such liability under the provisions of this Section 4.3(a). (vii) For purposes of this Section 4.3(a), references to "the Trust" shall include, in addition to the resulting or surviving entity, any constituent entity (including any constituent of a constituent) absorbed in a consolidation or merger, so that any person who is or was a director, trustee, officer or employee of such constituent entity, or is or was serving at the request of such constituent entity as a director, trustee, officer, employee or agent of another entity, shall stand in the same position under the provisions of this Section 4.3(a) with respect to the resulting or surviving entity as he would have with respect to such constituent entity if its separate existence had continued. (viii) The indemnification and advancement of expenses provided by, or granted pursuant to, this Section 4.3(a) shall, unless otherwise provided when authorized or ratified, continue as to a person who has ceased to be a Company Indemnified Person and shall inure to the benefit of the heirs, executors and administrators of such a person. (b) The Sponsor agrees to indemnify (i) the Delaware Trustee, (ii) any Affiliate of the Delaware Trustee, and (iii) any officers, directors, shareholders, members, partners, 13 14 employees, representatives, nominees, custodians or agents of the Delaware Trustee (each of the Persons in (i) through (iii) being referred to as a "Fiduciary Indemnified Person") for, and to hold each Fiduciary Indemnified Person harmless against, any loss, liability or expense incurred without gross negligence or bad faith on its part, arising out of or in connection with the acceptance or administration of the trust or trusts hereunder, including the costs and expenses (including reasonable legal fees and expenses) of defending itself against, or investigating, any claim or liability in connection with the exercise or performance of any of its powers or duties hereunder. The obligation to indemnify as set forth in this Section 4.3(b) shall survive the termination of this Declaration. SECTION 4.4 Outside Businesses. Any Covered Person, the Sponsor and the Delaware Trustee may engage in or possess an interest in other business ventures of any nature or description, independently or with others, similar or dissimilar to the business of the Trust, and the Trust and the Holders of Securities shall have no rights by virtue of this Declaration in and to such independent ventures or the income or profits derived therefrom and the pursuit of any such venture, even if competitive with the business of the Trust, shall not be deemed wrongful or improper. No Covered Person, the Sponsor or the Delaware Trustee shall be obligated to present any particular investment or other opportunity to the Trust even if such opportunity is of a character that, if presented to the Trust, could be taken by the Trust, and any Covered Person, the Sponsor and the Delaware Trustee shall have the right to take for its own account (individually or as a partner or fiduciary) or to recommend to others any such particular investment or other opportunity. Any Covered Person and the Delaware Trustee may engage or be interested in any financial or other transaction with the Sponsor or any Affiliate of the Sponsor, or may act as depositary for, trustee or agent for or may act on any committee or body of holders of, securities or other obligations of the Sponsor or its Affiliates. ARTICLE V AMENDMENTS, TERMINATION, MISCELLANEOUS SECTION 5.1 Amendments. At any time before the issue of any Securities, this Declaration may be amended by, and only by, a written instrument executed by all of the Trustees and the Sponsor. SECTION 5.2 Termination of Trust. (a) The Trust shall terminate and be of no further force or effect: (i) upon the bankruptcy of the Sponsor; (ii) upon the filing of a certificate of dissolution or its equivalent with respect to the Sponsor or the revocation of the Sponsor's charter or of the Trust's certificate of trust; 14 15 (iii) upon the entry of a decree of judicial dissolution of the Sponsor or the Trust; and (iv) before the issue of any Securities, with the consent of all of the Company Trustees and the Sponsor; and (b) as soon as is practicable after the occurrence of an event referred to in Section 5.2(a), the Trustees shall file a certificate of cancellation with the Secretary of State of the State of Delaware. SECTION 5.3 Governing Law. This Declaration and the rights of the parties hereunder shall be governed by and interpreted in accordance with the laws of the State of Delaware and all rights and remedies shall be governed by such laws without regard to principles of conflict of laws. SECTION 5.4 Headings. Headings contained in this Declaration are inserted for convenience of reference only and do not affect the interpretation of this Declaration or any provision hereof. SECTION 5.5 Successors and Assigns. Whenever in this Declaration any of the parties hereto is named or referred to, the successors and assigns of such party shall be deemed to be included, and all covenants and agreements in this Declaration by the Sponsor and the Trustees shall bind and inure to the benefit of their respective successors and assigns, whether so expressed. SECTION 5.6 Partial Enforceability. If any provision of this Declaration, or the application of such provision to any Person or circumstance, shall be held invalid, the remainder of this Declaration, or the application of such provision to persons or circumstances other than those to which it is held invalid, shall not be affected thereby. SECTION 5.7 Counterparts. This Declaration may contain more than one counterpart of the signature page and this Declaration may be executed by the affixing of the signature of each of the Trustees to one of such counterpart signature pages. All of such counterpart signature pages shall be read as though one, and they shall have the same force and effect as though all of the signers had signed a single signature page. 15 16 IN WITNESS WHEREOF, the undersigned have caused these presents to be executed as of the day and year first above written. FMC TRUST FINANCE S.a.r.l. LUXEMBOURG, as Sponsor By:/s/Andrea Stopper ---------------------------------------- Name: Andrea Stopper Title: Sole Manager FIRST UNION TRUST COMPANY, NATIONAL ASSOCIATION, as Delaware Trustee By:/s/ Stephen J. Kaba ---------------------------------------- Name: Stephen J. Kaba Title: Vice President /s/ Ben J. Lipps ------------------------------------------- Dr. Ben J. Lipps, as Company Trustee 16 EX-4.42 7 y51284ex4-42.txt FIRST AMENDMENT TO DECLARATION OF TRUST 1 EXHIBIT 4.42 FIRST AMENDMENT TO DECLARATION OF TRUST OF FRESENIUS MEDICAL CARE CAPITAL TRUST IV FIRST AMENDMENT TO DECLARATION OF TRUST ("First Amendment") dated and effective as of June 5, 2001 by the "Trustees," the "Original Sponsor" and the "New Sponsor" (each as defined herein) WHEREAS, FMC Trust Finance Luxembourg S.a.r.l. Luxembourg, (the "Original Sponsor"), a Luxembourg private limited company (Societe a responsibilite limitee), Dr. Ben Lipps (the "Company Trustee") and First Union Trust Company, National Association, not in its individual capacity, but solely as Delaware Trustee, (the "Delaware Trustee" and, collectively with Dr. Lipps, the "Trustees") are parties to a Declaration of Trust dated February 12, 1998 (the "Declaration") creating Fresenius Medical Care Capital Trust IV (the "Trust") as a business trust under the Delaware Business Trust Act , and a Certificate of Trust was executed and filed with the Secretary of State of Delaware on February 12, 1998; and WHEREAS, prior to the date hereof, no Trust Securities have been issued; and WHEREAS, the Original Sponsor and the Trustees desire to amend the Declaration to provide for the withdrawal of the Original Sponsor from the Trust and to substitute the New Sponsor as the Sponsor under the Declaration; NOW, THEREFORE, it being the intention of the parties hereto to continue the Trust as a business trust under the Delaware Business Trust Act and that the Declaration, as amended hereby, constitute the governing instrument of such business trust until further amendment thereof, the parties agree as follows: 1. DEFINITIONS. Capitalized terms used in this Amendment without definition shall have the meanings assigned to them by the Declaration. 2. SUBSTITUTION OF NEW SPONSOR. The New Sponsor is hereby substituted as the Sponsor of the Trust. The New Sponsor hereby agrees to be bound by, and to perform the obligations of the Sponsor under, the Declaration, as amended hereby. 3. WITHDRAWAL OF ORIGINAL SPONSOR. The Original Sponsor hereby withdraws from the Trust and surrenders all of its rights, powers and obligations under the Declaration to the New Sponsor. 4. DECLARATION OTHERWISE UNAFFECTED. Except as expressly set forth therein, the Declaration remains in full force and effect. 5. COUNTERPARTS. This Amendment may contain more than one counterpart of the signature page and may be executed by the affixing of the signature of each of the parties to one of such counterpart signature pages. All of such counterpart signature pages shall be read as 2 though one, and they shall have the same force and effect as though all of the signers had signed a single signature page. IN WITNESS WHEREOF, the undersigned have caused these presents to be executed as of the day and year first above written. FMC TRUST FINANCE S.a.r.l. Luxembourg By: /s/ Andrea Stopper --------------------------------------- Name: Andrea Stopper Title: Sole Manager FMC TRUST FINANCE S.a.r.l. LUXEMBOURG-III By: /s/ Gabriele Dux --------------------------------------- Name: Gabriele Dux Title: Sole Manager /s/ Ben J. Lipps ----------------- Ben Lipps, as Company Trustee FIRST UNION TRUST COMPANY, NATIONAL ASSOCIATION, as Delaware Trustee By: /s/ Rita Marie Ritrovato ------------------------- Name: Rita Marie Ritrovato Title: Trust Officer EX-4.43 8 y51284ex4-43.txt DECLARATION OF TRUST 1 EXHIBIT 4.43 DECLARATION OF TRUST OF FRESENIUS MEDICAL CARE CAPITAL TRUST V DATED AS OF JUNE 1, 2001 2 TABLE OF CONTENTS
Page ---- ARTICLE I DEFINITIONS SECTION 1.1 Definitions.............................................. 1 ARTICLE II ORGANIZATION SECTION 2.1 Name..................................................... 3 SECTION 2.2 Office................................................... 3 SECTION 2.3 Purposes and Functions of the Trust...................... 3 SECTION 2.4 Authority................................................ 3 SECTION 2.5 Title to Property of the Trust........................... 4 SECTION 2.6 Powers of the Trustee.................................... 4 SECTION 2.7 Filing of Certificate of Trust........................... 4 SECTION 2.8 Duration of Trust........................................ 5 SECTION 2.9 Responsibilities of the Sponsor.......................... 5 SECTION 2.10 Declaration Binding on Securities Holders................ 5 ARTICLE III TRUSTEES SECTION 3.1 Trustees................................................. 5 SECTION 3.2 Company Trustees......................................... 5 SECTION 3.3 Delaware Trustee......................................... 6 SECTION 3.4 Preferred Trustee........................................ 6 SECTION 3.5 Not Responsible for Recitals or Sufficiency of Declaration........................................... 6 ARTICLE IV LIMITATION OF LIABILITY OF HOLDERS OF SECURITIES, TRUSTEES OR OTHERS SECTION 4.1 Exculpation.............................................. 7 SECTION 4.2 Fiduciary Duty........................................... 7 SECTION 4.3 Indemnification.......................................... 8 SECTION 4.4 Outside Businesses....................................... 10 ARTICLE V AMENDMENTS, TERMINATION, MISCELLANEOUS SECTION 5.1 Amendments............................................... 10 SECTION 5.2 Termination of Trust..................................... 10 SECTION 5.3 Governing Law............................................ 11 SECTION 5.4 Headings................................................. 11 SECTION 5.5 Successors and Assigns................................... 11 SECTION 5.6 Partial Enforceability................................... 11 SECTION 5.7 Counterparts............................................. 11
i 3 DECLARATION OF TRUST OF FRESENIUS MEDICAL CARE CAPITAL TRUST V June 1, 2001 DECLARATION OF TRUST ("Declaration") dated and effective as of June 1, 2001 by the Trustees (as defined herein), the Sponsor (as defined herein) and by the holders, from time to time, of undivided beneficial interests in the Trust to be issued pursuant to this Declaration; WHEREAS, the Trustees and the Sponsor wish to declare and establish Fresenius Medical Care Capital Trust V (the "Trust"), a trust under the Delaware Business Trust Act pursuant to this Declaration and a Certificate of Trust to be filed with the Secretary of State of the State of Delaware to provide for, among other things, (i) the issuance of the Common Securities by the Trust to the Sponsor, (ii) the issuance and sale of the Trust Preferred Securities by the Trust pursuant to the Purchase Agreement, (iii) the acquisition by the Trust from the Sponsor of all of the right, title and interest in the Notes and (iv) the appointment of the Trustees; WHEREAS, as of the date hereof, no interests in the Trust have been issued; NOW, THEREFORE, it being the intention of the parties hereto to establish the Trust as a business trust under the Delaware Business Trust Act and that this Declaration constitute the governing instrument of such business trust, the Trustees declare that all assets contributed to the Trust will be held in trust for the benefit of the holders, from time to time, of the securities representing undivided beneficial interests in the assets of the Trust issued hereunder, subject to the provisions of this Declaration. ARTICLE I DEFINITIONS SECTION 1.1 Definitions. Unless the context otherwise requires: (a) Capitalized terms used in this Declaration but not defined in the preamble above have the respective meanings assigned to them in this Section 1.1; (b) a term defined anywhere in this Declaration has the same meaning throughout; (c) all references to "the Declaration" or "this Declaration" are to this Declaration of Trust as modified, supplemented or amended from time to time; (d) all references in this Declaration to Articles and Sections are to Articles and Sections of this Declaration unless otherwise specified; and (e) a reference to the singular includes the plural and vice versa. "Affiliate" of any specified Person means any other Person directly or indirectly controlling or controlled by or under direct or indirect common control with such specified Person, provided, however, that an Affiliate of the Sponsor shall not be deemed to include the Trust. For the purposes of this definition, "control" when used with respect to any specified Person means the power to direct the management and policies of such Person, directly or 1 4 indirectly, whether through the ownership of voting securities, by contract or otherwise; and the terms "controlling" and "controlled" have meanings correlative to the foregoing. "Business Day" means any day other than a day on which banking institutions in the City of New York are authorized or required by law to close. "Business Trust Act" means Chapter 38 of Title 12 of the Delaware Code, 12 Del. C. Section 3801 et seq., as it may be amended from time to time, or any successor legislation. "Closing Date" has the meaning set forth in the Purchase Agreement. "Commission" means the Securities and Exchange Commission. "Common Security" means a security representing a common undivided beneficial interest in the assets of the Trust with such terms as may be set out in any amendment to this Declaration, and two or more such securities are herein referred to as "Common Securities". "Company Indemnified Person" means (a) any Company Trustee; (b) any Affiliate of any Company Trustee; (c) any officers, directors, shareholders, members, partners, employees, representatives or agents of any Company Trustee; or (d) any employee or agent of the Trust or its Affiliates. "Company Trustee" has the meaning set forth in Section 3.1. "Covered Person" means (a) any officer, director, shareholder, partner, member, representative, employee or agent of (i) the Trust or (ii) the Trust's Affiliates and (b) any holder of Securities. "Delaware Trustee" has the meaning set forth in Section 3.1. "Exchange Act" means the Securities Exchange Act of 1934, as amended from time to time, or any successor legislation. "Fiduciary Indemnified Person" has the meaning set forth in Section 4.3(b). "Holder" means the person in whose name a certificate representing a Security is registered. "Indemnified Person" means a Company Indemnified Person or a Fiduciary Indemnified Person. "Indenture Trustee" means State Street Bank and Trust Company, as trustee under the Senior Subordinated Indenture until a successor is appointed thereunder, and thereafter means such successor trustee. "Note Issuer" means FMC Trust Finance S.a.r.l. Luxembourg-III in its capacity as the issuer of the Notes under the Indenture. "Notes" means the euro denominated series of Senior Subordinated Notes due 2011 to be issued under the Senior Subordinated Indenture by the Note Issuer and acquired by the Trust. "Person" means a legal person, including any individual, corporation, estate, partnership, joint venture, association, joint stock company, limited liability company, trust, unincorporated association, or government or any agency or political subdivision thereof, or any other entity of whatever nature. "Preferred Trustee" has the meaning set forth in Section 3.4. "Purchase Agreement" has the meaning set forth in Section 2.6(b)(iv). 2 5 "Securities" means the Common Securities and the Trust Preferred Securities. "Securities Act" means the Securities Act of 1933, as amended from time to time, or any successor legislation. "Senior Subordinated Indenture" means the indenture dated as of the Closing Date to be entered into among FMC Trust Finance S.a.r.l. Luxembourg-III, Fresenius Medical Care AG, Fresenius Medical Care Holdings, Inc. ("FMCH"), Fresenius Medical Deutschland GmbH ("D-GmbH"), and State Street Bank and Trust Company, as trustee and any indenture supplemental thereto pursuant to which the Notes are to be issued. "Sponsor" means the Person executing this Declaration as sponsor of the Trust, in its capacity as such. "Trustee" or "Trustees" means each Person who has signed this Declaration as a trustee, so long as such Person shall continue in office in accordance with the terms hereof, and all other Persons who may from time to time be duly appointed, qualified and serving as Trustees in accordance with the provisions hereof, and references herein to a Trustee or the Trustees shall refer to such Person or Persons solely in their capacity as trustees hereunder. "Trust Preferred Security" means a security representing a preferred undivided beneficial interest in the assets of the Trust with such terms as may be set out in any amendment to or amendment and restatement of this Declaration, and two or more such securities are herein referred to as "Trust Preferred Securities." ARTICLE II ORGANIZATION SECTION 2.1 Name. The Trust created by this Declaration is named "Fresenius Medical Care Capital Trust V." The Trust's activities may be conducted under the name of the Trust or any other name deemed advisable by the Company Trustees. SECTION 2.2 Office. The address of the principal executive office of the Trust is c/o Fresenius Medical Care AG, Else-Kroner-Strasse 1, 61352 Bad Homburg v.d.H., Germany. At any time, the Company Trustees may designate another principal office. SECTION 2.3 Purposes and Functions of the Trust. The exclusive purposes and functions of the Trust are (a) to issue and sell the Securities and use the proceeds from such sale to acquire the Notes and (b) except as otherwise limited herein, to engage in only those other activities necessary, appropriate, convenient or incidental thereto. SECTION 2.4 Authority. Subject to the limitations provided in this Declaration, the Company Trustees shall have exclusive and complete authority to carry out the purposes of the Trust. An action taken by the Company Trustees in accordance with their powers shall constitute the act of and serve to bind the Trust. In dealing with the Company Trustees acting on behalf of the Trust, no person shall be required to inquire into the authority of the Company Trustees to bind the Trust. Persons dealing with the Trust are entitled to rely conclusively on the power and authority of the Company Trustees as set forth in this Declaration. SECTION 2.5 Title to Property of the Trust. 3 6 Legal title to all assets of the Trust shall be vested in the Trust. SECTION 2.6 Powers of the Trustee. The Company Trustees shall have the exclusive power and authority to cause the Trust to engage in the following activities: (a) to issue and sell the Trust Preferred Securities and the Common Securities in accordance with this Declaration; (b) in connection with the issue and sale of the Trust Preferred Securities, at the direction of the Sponsor, to: (i) execute and deliver or file such documents and take such other steps, as shall enable the Trust to offer, issue and sell the Trust Preferred Securities without registration under the Securities Act as a transaction by an issuer not involving any public offering within the meaning of Section 4(2) of the Securities Act, as an "offshore transaction" within the meaning of Regulation S under the Securities Act, or pursuant to one or more other available exemptions from registration under the Securities Act, and as shall enable purchasers of the Trust Preferred Securities to resell the Trust Preferred Securities to qualified institutional buyers (as that term is defined in Rule 144A, under the Securities Act) without registration under the Securities Act pursuant to the exemption from registration provided by the aforesaid Rule 144A, in offshore transactions pursuant to Regulation S under the Securities Act or pursuant to another available exemption. (ii) execute and file any documents prepared by the Sponsor and its Affiliates, or take any acts as determined by the Sponsor and its Affiliates, to be necessary in order to qualify or register all or part of the Trust Preferred Securities in any State in which the Sponsor and its Affiliates have determined to qualify or register such Trust Preferred Securities for sale in connection with the original offer and sale of the Trust Preferred Securities, the filing of the registration statement referred to clause (v) below, or both; (iii) execute and file an application, prepared by the Sponsor, to any national stock exchange, any foreign stock exchange, The PORTALSM Market of the NASDAQ Stock Market, Inc. or the Nasdaq Stock Market's National Market for listing upon notice of issuance of any Trust Preferred Securities; (iv) execute and enter into a purchase agreement providing for the issuance and sale of the Trust Preferred Securities (the "Purchase Agreement"); and (v) to execute and file with the Commission a registration statement prepared by the Sponsor and its Affiliates, including any amendments thereto, in relation to an offer to exchange the Trust Preferred Securities, Notes, and any related guarantees for Trust Preferred Securities, Notes and related guarantees which have been registered under the Securities Act, having substantially identical terms to those of the Trust Preferred Securities, Notes and guarantees, a "shelf registration statement" under the Securities Act with respect to the resale of the Trust Preferred Securities, the Notes and the related guarantees, or both; (c) to employ or otherwise engage employees and agents (who may be designated as officers with titles) and managers, contractors, advisors, counsel, accountants, investment bankers, and consultants and provide for reasonable compensation for such services; (d) to incur expenses which are necessary, appropriate, convenient or incidental to carry out any of the purposes of this Declaration; and (e) to execute all documents or instruments, perform all duties and powers, and do all things for and on behalf of the Trust in all matters necessary, appropriate, convenient or incidental to the foregoing. 4 7 SECTION 2.7 Filing of Certificate of Trust. On or after the date of execution of this Declaration, the Trustees shall cause the filing of the Certificate of Trust for the Trust in substantially the form attached hereto as Exhibit "A" with the Secretary of State of the State of Delaware. SECTION 2.8 Duration of Trust. The Trust, absent termination pursuant to the provisions of Section 5.2, shall terminate on June 15, 2030. SECTION 2.9 Responsibilities of the Sponsor. In connection with the issuance and sale of the Trust Preferred Securities, the Sponsor shall have the exclusive right and responsibility to engage in the following activities: (a) to prepare, together with its Affiliates, a Preliminary Offering Circular, an Offering Circular, and any required amendments or supplements thereto in relation to the Trust Preferred Securities, including any amendments thereto; (b) to prepare, together with its Affiliates, for filing by the Trust with the Commission a registration statement in relation to the Trust Preferred Securities, as contemplated by Section 2.6(b)(v); (c) to determine the States in which to take appropriate action to qualify or register for sale all or part of the Trust Preferred Securities and to do any and all such acts, other than actions which must be taken by the Trust, and advise the Trust of actions it must take, and prepare for execution and filing any documents to be executed and filed by the Trust, as the Sponsor deems necessary or advisable in order to comply with the applicable laws of any such States; (d) if deemed appropriate by the Sponsor, to prepare for filing by the Trust an application to any national stock exchange, any foreign stock exchange, The PORTALSM Market of the NASDAQ Stock Market, Inc. or the Nasdaq Stock Market's National Market for listing upon notice of issuance of any Trust Preferred Securities; and (e) to negotiate the terms of the Purchase Agreement providing for the sale of the Trust Preferred Securities. SECTION 2.10 Declaration Binding on Securities Holders. Every Person by virtue of having become a Holder of a Security or any interest therein in accordance with the terms of this Declaration, shall be deemed to have expressly assented and agreed to the terms of, and shall be bound by, this Declaration. ARTICLE III TRUSTEES SECTION 3.1 Trustees. The number of Trustees initially shall be two (2), and thereafter the number of Trustees shall be such number as shall be fixed from time to time by a written instrument signed by the Sponsor. The Sponsor is entitled to appoint or remove without cause any Trustee at any time; provided, however, that the number of Trustees shall in no event be less than two (2); provided, further, that one Trustee, in the case of a natural person, shall be a person who is a resident of the State of Delaware or that, if not a natural person, is an entity which has 5 8 its principal place of business in the State of Delaware and meets any other requirements imposed by applicable law (the "Delaware Trustee"); provided, further, that there shall be at least one trustee who is an employee or officer of, or is affiliated with the Sponsor or any of its Affiliates (a "Company Trustee"). A Trustee may resign upon 30 days' prior notice to the Sponsor. SECTION 3.2 Company Trustees. The initial Company Trustee shall be: Dr. Ben J. Lipps. (a) Except as expressly set forth in this Declaration, any power of the Company Trustees may be exercised by, or with the consent of, any one such Company Trustee. (b) Unless otherwise determined by the Company Trustees, and except as otherwise required by the Business Trust Act, any Company Trustee is authorized to execute on behalf of the Trust any documents which the Company Trustees have the power and authority to cause the Trust to execute pursuant to Section 2.6 provided, that, the registration statement referred to in Section 2.6(b)(v), including any amendments thereto, shall be signed by at least a majority of the Company Trustees; and (c) A Company Trustee may, by power of attorney consistent with applicable law, delegate to any other natural person over the age of 21 his or her power for the purposes of signing any documents which the Company Trustees have power and authority to cause the Trust to execute pursuant to Section 2.6. SECTION 3.3 Delaware Trustee. The initial Delaware Trustee shall be: First Union Trust Company, National Association. Notwithstanding any other provision of this Declaration, the Delaware Trustee shall not be entitled to exercise any of the powers, nor shall the Delaware Trustee have any of the duties and responsibilities of the Company Trustees described in this Declaration. The Delaware Trustee shall be a Trustee for the sole and limited purpose of fulfilling the requirements of Section 3807 of the Business Trust Act. Notwithstanding anything herein to the contrary, the Delaware Trustee shall not be liable for the acts or omissions to acts of the Trust, of the Sponsor or of the Company Trustees and shall have no liability to any Person for the debts, obligations or liabilities of the Trust, except that the Delaware Trustee shall be liable to the Sponsor for the gross negligence or willful misconduct of the Delaware Trustee. In the event that the Delaware Trustee is unsure of the course of action to be taken by it hereunder, the Delaware Trustee may request instructions from the Sponsor and to the extent the Delaware Trustee follows such instructions in good faith, it shall not be liable to any person. In the event that no instructions are provided within the time requested by the Delaware Trustee, it shall have no duty or liability for its failure to take any action or for any action it takes in good faith. SECTION 3.4 Preferred Trustee. Prior to the issuance of the Trust Preferred Securities and Common Securities, the Sponsor shall appoint a trustee (the "Preferred Trustee") meeting the requirements of an eligible trustee of the Trust Indenture Act of 1939, as amended, by the execution of an amendment to this Declaration executed by the Company Trustees, the Sponsor, the Preferred Trustee and the Delaware Trustee. SECTION 3.5 Not Responsible for Recitals or Sufficiency of Declaration. The recitals contained in this Declaration shall be taken as the statements of the Sponsor, and the Trustees do not assume any responsibility for their correctness. The Trustees make no representations as to the 6 9 value or condition of the property of the Trust or any part thereof. The Trustees make no representations as to the validity or sufficiency of this Declaration. ARTICLE IV LIMITATION OF LIABILITY OF HOLDERS OF SECURITIES, TRUSTEES OR OTHERS SECTION 4.1 Exculpation. (a) No Indemnified Person shall be liable, responsible or accountable in damages or otherwise to the Trust or any Covered Person for any loss, damage or claim incurred by reason of any act or omission performed or omitted by such Indemnified Person in good faith on behalf of the Trust and in a manner such Indemnified Person reasonably believed to be within the scope of the authority conferred on such Indemnified Person by this Declaration or by law, except that an Indemnified Person shall be liable for any such loss, damage or claim incurred by reason of such Indemnified Person's gross negligence or willful misconduct with respect to such acts or omissions; and (b) An Indemnified Person shall be fully protected in relying in good faith upon the records of the Trust and upon such information, opinions, reports or statements presented to the Trust by any Person as to matters the Indemnified Person reasonably believes are within such other Person's professional or expert competence and who has been selected with reasonable care by or on behalf of the Trust, including information, opinions, reports or statements as to the value and amount of the assets, liabilities, profits, losses, or any other facts pertinent to the existence and amount of assets from which distributions to holders of Securities might properly be paid. SECTION 4.2 Fiduciary Duty. (a) To the extent that, at law or in equity, an Indemnified Person has duties (including fiduciary duties) and liabilities relating thereto to the Trust or to any other Covered Person, an Indemnified Person acting under this Declaration shall not be liable to the Trust or to any other Covered Person for its good faith reliance on the provisions of this Declaration. The provisions of this Declaration, to the extent that they restrict the duties and liabilities of an Indemnified Person otherwise existing at law or in equity, are agreed by the parties hereto to replace such other duties and liabilities of such Indemnified Person; (b) Unless otherwise expressly provided herein: (i) whenever a conflict of interest exists or arises between Covered Persons; or (ii) whenever this Declaration or any other agreement contemplated herein or therein provides that an Indemnified Person shall act in a manner that is, or provides terms that are, fair and reasonable to the Trust or any Holder of Securities, the Indemnified Person shall resolve such conflict of interest, take such action or provide such terms, considering in each case the relative interest of each party (including its own interest) to such conflict, agreement, transaction or situation and the benefits and burdens relating to such interests, any customary or accepted industry practices, and any applicable generally accepted accounting practices or principles. In the absence of bad faith by the Indemnified Person, the resolution, action or term so made, taken or provided by the Indemnified Person shall not constitute a breach of this Declaration or any other agreement contemplated herein or of any duty or obligation of the Indemnified Person at law or in equity or otherwise; and (c) whenever in this Declaration an Indemnified Person is permitted or required to make a decision: 7 10 (i) in its "discretion" or under a grant of similar authority, the Indemnified Person shall be entitled to consider such interests and factors as it desires, including its own interests, and shall have no duty or obligation to give any consideration to any interest of or factors affecting the Trust or any other Person; or (ii) in its "good-faith" or under another express standard, the Indemnified Person shall act under such express standard and shall not be subject to any other or different standard imposed by this Declaration or by applicable law. SECTION 4.3 Indemnification. (a) The Sponsor shall indemnify, to the full extent permitted by law, any Company Indemnified Person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by or in the right of the Trust) by reason of the fact that he is or was a Company Indemnified Person against expenses (including attorneys' fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by him in connection with such action, suit or proceeding if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the Trust, and, with respect to any criminal action or proceeding, had no reasonable cause to believe his conduct was unlawful. The termination of any action, suit or proceeding by judgment, order, settlement, conviction, or upon a plea of nolo contendere or its equivalent, shall not, of itself, create a presumption that the Company Indemnified Person did not act in good faith and in a manner which he reasonably believed to be in or not opposed to the best interests of the Trust, and, with respect to any criminal action or proceeding, had reasonable cause to believe that his conduct was unlawful. (i) The Sponsor shall indemnify, to the full extent permitted by law, any Company Indemnified Person who was or is a party or is threatened to be made a party to any threatened, pending or completed action or suit by or in the right of the Trust to procure a judgment in its favor by reason of the fact that he is or was a Company Indemnified Person against expenses (including attorneys' fees) actually and reasonably incurred by him in connection with the defense or settlement of such action or suit if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the Trust and except that no such indemnification shall be made in respect of any claim, issue or matter as to which such Company Indemnified Person shall have been adjudged to be liable to the Trust unless and only to the extent that the Court of Chancery of Delaware or the court in which such action or suit was brought shall determine upon application that, despite the adjudication of liability but in view of all the circumstances of the case, such person is fairly and reasonably entitled to indemnity for such expenses which such Court of Chancery or such other court shall deem proper. (ii) To the extent that a Company Indemnified Person shall be successful on the merits or otherwise (including dismissal of an action without prejudice or the settlement of an action without admission of liability) in defense of any action, suit or proceeding referred to in paragraphs (i) and (ii) of this Section 4.3(a), or in defense of any claim, issue or matter therein, he shall be indemnified, to the full extent permitted by law, against expenses (including attorneys' fees) actually and reasonably incurred by him in connection therewith. (iii) Any indemnification under paragraphs (i) and (ii) of this Section 4.3(a) (unless ordered by a court) shall be made by the Sponsor only as authorized in the specific case upon a determination that indemnification of the Company Indemnified Person is proper in the circumstances because he has met the applicable standard of conduct set forth in paragraphs (i) and (ii). Such determination shall be made (1) by the Company Trustees by a majority vote of a quorum consisting of such Company Trustees who were not parties to such action, suit or proceeding, (2) if such a quorum is not obtainable, or, even if obtainable, if a quorum of disinterested Company Trustees so directs, by independent legal counsel in a written opinion, or (3) by the Common Security Holder of the Trust. (iv) Expenses (including attorneys' fees) incurred by a Company Indemnified Person in defending a civil, criminal, administrative or investigative action, suit or 8 11 proceeding referred to in paragraphs (i) and (ii) of this Section 4.3(a) shall be paid by the Sponsor in advance of the final disposition of such action, suit or proceeding upon receipt of an undertaking by or on behalf of such Company Indemnified Person to repay such amount if it shall ultimately be determined that he is not entitled to be indemnified by the Sponsor as authorized in this Section 4.3(a). Notwithstanding the foregoing, no advance shall be made by the Sponsor if a determination is reasonably and promptly made (i) by the Company Trustees by a majority vote of a quorum of disinterested Company Trustees, (ii) if such a quorum is not obtainable, or, even if obtainable, if a quorum of disinterested Company Trustees so directs, by independent legal counsel in a written opinion or (iii) the Common Security Holder of the Trust, that, based upon the facts known to the Company Trustees, counsel or the Common Security Holder at the time such determination is made, such Company Indemnified Person acted in bad faith or in a manner that such person did not believe to be in or not opposed to the best interests of the Trust, or, with respect to any criminal proceeding, that such Company Indemnified Person believed or had reasonable cause to believe his conduct was unlawful. In no event shall any advance be made in instances where the Company Trustees, independent legal counsel or Common Security Holder reasonably determine that such person deliberately breached his duty to the Trust or its Common or Preferred Security Holders. (v) The indemnification and advancement of expenses provided by, or granted pursuant to, the other paragraphs of this Section 4.3(a) shall not be deemed exclusive of any other rights to which those seeking indemnification and advancement of expenses may be entitled under any agreement, vote of stockholders or disinterested directors of the Sponsor or Preferred Security Holders of the Trust or otherwise, both as to action in his official capacity and as to action in another capacity while holding such office. All rights to indemnification under this Section 4.3(a) shall be deemed to be provided by a contract between the Sponsor and each Company Indemnified Person who serves in such capacity at any time while this Section 4.3(a) is in effect. Any repeal or modification of this Section 4.3(a) shall not affect any rights or obligations then existing. (vi) The Sponsor or the Trust may purchase and maintain insurance on behalf of any person who is or was a Company Indemnified Person against any liability asserted against him and incurred by him in any such capacity, or arising out of his status as such, whether or not the Sponsor would have the power to indemnify him against such liability under the provisions of this Section 4.3(a). (vii) For purposes of this Section 4.3(a), references to "the Trust" shall include, in addition to the resulting or surviving entity, any constituent entity (including any constituent of a constituent) absorbed in a consolidation or merger, so that any person who is or was a director, trustee, officer or employee of such constituent entity, or is or was serving at the request of such constituent entity as a director, trustee, officer, employee or agent of another entity, shall stand in the same position under the provisions of this Section 4.3(a) with respect to the resulting or surviving entity as he would have with respect to such constituent entity if its separate existence had continued. (viii) The indemnification and advancement of expenses provided by, or granted pursuant to, this Section 4.3(a) shall, unless otherwise provided when authorized or ratified, continue as to a person who has ceased to be a Company Indemnified Person and shall inure to the benefit of the heirs, executors and administrators of such a person. (b) The Sponsor agrees to indemnify (i) the Delaware Trustee, (ii) any Affiliate of the Delaware Trustee, and (iii) any officers, directors, shareholders, members, partners, employees, representatives, nominees, custodians or agents of the Delaware Trustee (each of the Persons in (i) through (iii) being referred to as a "Fiduciary Indemnified Person") for, and to hold each Fiduciary Indemnified Person harmless against, any loss, liability or expense incurred without gross negligence or bad faith on its part, arising out of or in connection with the acceptance or administration of the trust or trusts hereunder, including the costs and expenses (including reasonable legal fees and expenses) of defending itself against, or investigating, any claim or liability in connection with the exercise or performance of any of its powers or duties hereunder. The obligation to indemnify as set forth in this Section 4.3(b) shall survive the termination of this Declaration. SECTION 4.4 Outside Businesses. 9 12 Any Covered Person, the Sponsor and the Delaware Trustee may engage in or possess an interest in other business ventures of any nature or description, independently or with others, similar or dissimilar to the business of the Trust, and the Trust and the Holders of Securities shall have no rights by virtue of this Declaration in and to such independent ventures or the income or profits derived therefrom and the pursuit of any such venture, even if competitive with the business of the Trust, shall not be deemed wrongful or improper. No Covered Person, the Sponsor or the Delaware Trustee shall be obligated to present any particular investment or other opportunity to the Trust even if such opportunity is of a character that, if presented to the Trust, could be taken by the Trust, and any Covered Person, the Sponsor and the Delaware Trustee shall have the right to take for its own account (individually or as a partner or fiduciary) or to recommend to others any such particular investment or other opportunity. Any Covered Person and the Delaware Trustee may engage or be interested in any financial or other transaction with the Sponsor or any Affiliate of the Sponsor, or may act as depositary for, trustee or agent for or may act on any committee or body of holders of, securities or other obligations of the Sponsor or its Affiliates. ARTICLE V AMENDMENTS, TERMINATION, MISCELLANEOUS SECTION 5.1 Amendments. At any time before the issue of any Securities, this Declaration may be amended by, and only by, a written instrument executed by all of the Trustees and the Sponsor. SECTION 5.2 Termination of Trust. (a) The Trust shall terminate and be of no further force or effect: (i) upon the bankruptcy of the Sponsor; (ii) upon the filing of a certificate of dissolution or its equivalent with respect to the Sponsor or the revocation of the Sponsor's charter or of the Trust's certificate of trust; (iii) upon the entry of a decree of judicial dissolution of the Sponsor or the Trust; and (iv) before the issue of any Securities, with the consent of all of the Company Trustees and the Sponsor; and (b) as soon as is practicable after the occurrence of an event referred to in Section 5.2(a), the Trustees shall file a certificate of cancellation with the Secretary of State of the State of Delaware. SECTION 5.3 Governing Law. This Declaration and the rights of the parties hereunder shall be governed by and interpreted in accordance with the laws of the State of Delaware and all rights and remedies shall be governed by such laws without regard to principles of conflict of laws. SECTION 5.4 Headings. Headings contained in this Declaration are inserted for convenience of reference only and do not affect the interpretation of this Declaration or any provision hereof. SECTION 5.5 Successors and Assigns. 10 13 Whenever in this Declaration any of the parties hereto is named or referred to, the successors and assigns of such party shall be deemed to be included, and all covenants and agreements in this Declaration by the Sponsor and the Trustees shall bind and inure to the benefit of their respective successors and assigns, whether so expressed. SECTION 5.6 Partial Enforceability. If any provision of this Declaration, or the application of such provision to any Person or circumstance, shall be held invalid, the remainder of this Declaration, or the application of such provision to persons or circumstances other than those to which it is held invalid, shall not be affected thereby. SECTION 5.7 Counterparts. This Declaration may contain more than one counterpart of the signature page and this Declaration may be executed by the affixing of the signature of each of the Trustees to one of such counterpart signature pages. All of such counterpart signature pages shall be read as though one, and they shall have the same force and effect as though all of the signers had signed a single signature page. 11 14 IN WITNESS WHEREOF, the undersigned have caused these presents to be executed as of the day and year first above written. FRESENIUS MEDICAL CARE AG, as Sponsor By: /s/ Emanuele Gatti --------------------------------------- Name: Emanuele Gatti Title: Member of the By: /s/ Rainer Runte --------------------------------------- Name: Rainer Runte Title: General Counsel and Sr. /s/ Ben Lipps -------------- Ben Lipps, as Company Trustee FIRST UNION TRUST COMPANY, NATIONAL ASSOCIATION, as Delaware Trustee By: /s/ Anita M. Roselli --------------------------------------- Name: Anita M. Roselli Title: Trust Officer 12 EX-4.44 9 y51284ex4-44.txt AMENDED AND RESTATED DECLARATION OF TRUST 1 EXHIBIT 4.44 EXECUTION COPY AMENDED AND RESTATED DECLARATION OF TRUST FRESENIUS MEDICAL CARE CAPITAL TRUST IV DATED AS OF JUNE 6, 2001 2 TABLE OF CONTENTS
PAGE ARTICLE I DEFINED TERMS SECTION 1.1 Definitions....................................................................1 ARTICLE II ESTABLISHMENT OF THE TRUST SECTION 2.1 Name..........................................................................11 SECTION 2.2 Office of the Delaware Trustee; Principal Place of Business...................11 SECTION 2.3 Initial Contribution of Trust Property; Organizational Expenses..............11 SECTION 2.4 Issuance of the Preferred Securities..........................................11 SECTION 2.5 Issuance of the Common Securities; Subscription and Purchase of the Notes.....12 SECTION 2.6 Purposes and Functions of the Trust...........................................12 SECTION 2.7 Authorization to Enter into Certain Transactions..............................12 SECTION 2.8 Assets of Trust...............................................................16 SECTION 2.9 Title to Trust Property.......................................................16 ARTICLE III PAYMENT ACCOUNT SECTION 3.1 Payment Account...............................................................16 ARTICLE IV DISTRIBUTIONS; REDEMPTION SECTION 4.1 Distributions.................................................................17 SECTION 4.2 Redemption....................................................................17 SECTION 4.3 Subordination of Common Securities............................................19 SECTION 4.4 Payment Procedures............................................................20 SECTION 4.5 Tax Returns and Reports.......................................................20 SECTION 4.6 Payment of Taxes, Duties, Etc. of the Trust...................................20 SECTION 4.7 Payments under Indenture......................................................20 SECTION 4.8 Change of Control.............................................................20 SECTION 4.9 Offer to Repurchase Upon Asset Disposition....................................21 ARTICLE V TRUST SECURITIES CERTIFICATES SECTION 5.1 Initial Ownership.............................................................22 SECTION 5.2 The Trust Securities Certificates.............................................22 SECTION 5.3 Execution and Delivery of Trust Securities Certificates.......................23
i 3 SECTION 5.4 Registration of Transfer and Exchange of Preferred Securities Certificates....23 SECTION 5.5 Mutilated, Destroyed, Lost or Stolen Trust Securities Certificates............24 SECTION 5.6 Persons Deemed Securityholders................................................24 SECTION 5.7 Access to List of Securityholders' Names and Addresses........................24 SECTION 5.8 Maintenance of Office or Agency...............................................25 SECTION 5.9 Appointment of Paying Agent...................................................25 SECTION 5.10 Ownership of Common Securities by Sponsor....................................26 SECTION 5.11 Book-Entry Preferred Securities Certificates; Common Securities Certificate..26 SECTION 5.12 Notices to Clearing Agency...................................................27 SECTION 5.13 Definitive Preferred Securities Certificates.................................27 SECTION 5.14 Rights of Securityholders; Waivers of Past Defaults..........................28 ARTICLE VI ACTS OF SECURITYHOLDERS; MEETINGS; VOTING SECTION 6.1 Limitations on Voting Rights..................................................30 SECTION 6.2 Notice of Meetings............................................................33 SECTION 6.3 Meetings of Preferred Securityholders.........................................33 SECTION 6.4 Voting Rights.................................................................34 SECTION 6.5 Proxies, etc..................................................................34 SECTION 6.6 Securityholder Action by Written Consent......................................34 SECTION 6.7 Record Date for Voting and Other Purposes.....................................34 SECTION 6.8 Acts of Securityholders.......................................................35 SECTION 6.9 Inspection of Records.........................................................36 ARTICLE VII REPRESENTATIONS AND WARRANTIES SECTION 7.1 Representations and Warranties of the Bank, the Preferred Trustee and the Delaware Trustee...................................................................36 SECTION 7.2 Representations and Warranties of Sponsor.....................................37 ARTICLE VIII THE TRUSTEES SECTION 8.1 Certain Duties and Responsibilities...........................................38 SECTION 8.2 Certain Notices...............................................................40 SECTION 8.3 Certain Rights of Preferred Trustee...........................................40 SECTION 8.4 Not Responsible for Recitals or Issuance of Securities........................42 SECTION 8.5 May Hold Securities...........................................................42 SECTION 8.6 Compensation; Indemnity; Fees.................................................42 SECTION 8.7 Corporate Preferred Trustee Required; Eligibility of Trustees.................44 SECTION 8.8 Conflicting Interests.........................................................44 SECTION 8.9 Co-Trustees and Separate Trustee..............................................44 SECTION 8.10 Resignation and Removal; Appointment of Successor............................46 SECTION 8.11 Acceptance of Appointment by Successor.......................................47
ii 4 SECTION 8.12 Merger, Conversion, Consolidation or Succession to Business..................48 SECTION 8.13 Preferential Collection of Claims Against Sponsor or Trust...................48 SECTION 8.14 Preferred Trustee May File Proofs of Claim...................................48 SECTION 8.15 Reports by Preferred Trustee.................................................49 SECTION 8.16 Reports to the Preferred Trustee.............................................50 SECTION 8.17 Evidence of Compliance with Conditions Precedent.............................50 SECTION 8.18 Number of Trustees...........................................................50 SECTION 8.19 Delegation of Power..........................................................51 ARTICLE IX TERMINATION, LIQUIDATION AND MERGER SECTION 9.1 Termination Upon Expiration Date..............................................51 SECTION 9.2 Early Termination.............................................................51 SECTION 9.3 Termination...................................................................52 SECTION 9.4 Liquidation...................................................................52 SECTION 9.5 Mergers, Consolidations, Amalgamations or Replacements of the Trust............54 ARTICLE X MISCELLANEOUS PROVISIONS SECTION 10.1 Limitation of Rights of Securityholders......................................55 SECTION 10.2 Amendment....................................................................56 SECTION 10.3 Separability.................................................................57 SECTION 10.4 Governing Law................................................................57 SECTION 10.5 Submission to Jurisdiction...................................................58 SECTION 10.6 Payments Due on Non-Business Day.............................................58 SECTION 10.7 Successors...................................................................58 SECTION 10.8 Headings.....................................................................59 SECTION 10.9 Reports, Notices and Demands.................................................59 SECTION 10.10 Agreement Not to Petition...................................................60 SECTION 10.11 Trust Indenture Act; Conflict with Trust Indenture Act.......................60 SECTION 10.12 Acceptance of Terms of Declaration, Trust Guarantee and Indenture...........61 SECTION 10.13 Liquidated Damages Under Registration Rights Agreement......................61 SECTION 10.14 Counterparts................................................................61
EXHIBIT A - Form of Certificate of Trust of Fresenius Medical Care Capital Trust IV EXHIBIT B - DTC's Standard Form of Letter of Representations EXHIBIT C - Form of Common Securities Certificate EXHIBIT D - Form of Expense Agreement EXHIBIT E-1 - Form of Initial Preferred Securities Certificate EXHIBIT E-2 - Form of Exchange Preferred Securities Certificate EXHIBIT F-1 - Form of Transfer Certificate - Restricted Book-Entry Preferred Securities Certificate to Regulation S Book-Entry Preferred Securities Certificate
iii 5 EXHIBIT F-2 - Form of Transfer Certificate - Temporary Regulation S Book-Entry Preferred Securities Certificate to Restricted Book-Entry Preferred Securities Certificate EXHIBIT F-3 - Form of Transfer Certificate - Temporary Regulation S Book-Entry Preferred Securities Certificate to Permanent Regulation S Book Entry Preferred Securities Certificate EXHIBIT G-1 - Certificate to be Delivered upon Exchange of Initial Preferred Securities EXHIBIT G-2 - Certificate to be Delivered upon Exchange of Preferred Securities
iv 6 FRESENIUS MEDICAL CARE CAPITAL TRUST IV CERTAIN SECTIONS OF THIS DECLARATION OF TRUST RELATING TO SECTIONS 310 THROUGH 318 OF THE TRUST INDENTURE ACT OF 1939:
TRUST INDENTURE DECLARATION ACT SECTION SECTION - --------------- ------- (Section)310 (a)(1)............................................ 8.7 (a)(2)............................................ 8.7 (a)(3)............................................ 8.9 (a)(4)............................................ 2.7(a)(ii) (b)............................................... 8.8 (Section)311 (a)............................................... 8.13 (b)............................................... 8.13 (Section)312 (a)............................................... 5.7 (b)............................................... 5.7 (c)............................................... 5.7 (Section)313 (a).............................................. 8.15(a) (a)(4)............................................ 8.15(b) (b)............................................... 8.15(b) (c)............................................... 10.9 (d)............................................... 8.15(c) (Section)314 (a).............................................. 8.16 (b)............................................... Not Applicable (c)(1)............................................ 8.17 (c)(2)............................................ 8.17 (c)(3)............................................ Not Applicable (d)............................................... Not Applicable (e)............................................... 1.1, 8.17 (Section)315 (a).............................................. 8.1(a), 8.3(a) (b)............................................... 8.2, 10.9 (c)............................................... 8.1(a) (d)............................................... 8.1, 8.3 (e)............................................... Not Applicable (Section)316 (a).............................................. Not Applicable (a)(1)(A)......................................... Not Applicable (a)(1)(B)......................................... Not Applicable (a)(2)............................................ Not Applicable (b)............................................... 5.14 (c)............................................... 6.7 (Section)317 (a)(1)........................................... Not Applicable (a)(2)............................................ Not Applicable (b)............................................... 5.9 (Section)318 (a)............................................... 10.11
---------- Note: This reconciliation and tie sheet shall not, for any purpose, be deemed to be a part of the Declaration of Trust. v 7 AMENDED AND RESTATED DECLARATION OF TRUST OF FRESENIUS MEDICAL CARE CAPITAL TRUST IV June 6, 2001 AMENDED AND RESTATED DECLARATION OF TRUST ("Declaration") dated and effective as of June 6, 2001, by the Trustees (as defined herein), the Sponsor (as defined herein) and by the holders, from time to time, of undivided beneficial interests in the Trust (as defined herein) to be issued pursuant to this Declaration; WHEREAS, First Union Trust Company, National Association, a national banking association, and Dr. Ben J. Lipps, as trustees, and FMC Trust Finance S.a.r.l. Luxembourg (the "Original Sponsor"), as original sponsor, created Fresenius Medical Care Capital Trust IV (the "Trust") as a business trust under the Delaware Business Trust Act (as defined below) pursuant to a Declaration of Trust, dated as of February 12, 1998 (the "Original Declaration"), and a Certificate of Trust executed and filed with the Secretary of State of the State of Delaware on February 12, 1998, attached as Exhibit A; WHEREAS, since the date of the creation of the Trust through the date hereof, no Trust Securities (as defined herein) have been issued and the Trust has not conducted any business nor incurred any liabilities and the Trust has not been caused to conduct any business nor to incur any liabilities; WHEREAS, pursuant to a First Amendment to Declaration of Trust dated and effective as of June 5, 2001 attached as Exhibit A-1, FMC Trust Finance S.a.r.l. Luxembourg-III (the "Issuer") was substituted for the Original Sponsor and the Original Sponsor withdrew from the Trust; WHEREAS, all of the Trustees, the Issuer, and the Sponsor, by this Declaration, amend and restate each and every term and provision of the Original Declaration as set forth herein to provide for, among other things, (i) the issuance of the Common Securities (as defined herein) by the Trust to the Sponsor, (ii) the issuance and sale of the Preferred Securities (as defined herein) by the Trust pursuant to the Purchase Agreement (as defined herein), (iii) the acquisition by the Trust from the Issuer of all of the right, title and interest in the Notes (as defined herein) and (iv) the appointment of the Trustees; NOW, THEREFORE, it being the intention of the parties hereto to continue the Trust as a business trust under the Delaware Business Trust Act and that this Declaration constitute the governing instrument of such business trust, the Trustees declare that all assets contributed to the Trust will be held in trust for the benefit of the holders, from time to time, of the securities representing undivided beneficial interests in the assets of the Trust issued hereunder, subject to the provisions of this Declaration. ARTICLE I DEFINED TERMS 1 8 .1 Definitions. For all purposes of this Declaration, except as otherwise expressly provided or unless the context otherwise requires: (A) the terms defined in this Article have the meanings assigned to them in this Article and include the plural as well as the singular; (B) all other terms used herein that are defined in the Trust Indenture Act, either directly or by reference therein, have the meanings assigned to them therein; (C) unless the context otherwise requires, any reference to an "Article" or a "Section" refers to an Article or a Section, as the case may be, of this Declaration; and the words "herein", "hereof" and "hereunder" and other words of similar import refer to this Declaration as a whole and not to any particular Article, Section or other subdivision. "Act" has the meaning specified in Section 6.8. "Additional Payments" means, with respect to Trust Securities of a given Liquidation Amount and/or a given period, the Additional Sums (as defined in the Indenture) paid by the Issuer on a Like Amount of Notes for such period. "Additional Amounts" has the meaning specified in Section 10.19 of the Indenture. "Affiliate" of any specified Person means any other Person directly or indirectly controlling or controlled by or under direct or indirect common control with such specified Person, provided, however, that an Affiliate of the Sponsor shall not be deemed to include the Trust, Fresenius Medical Care Capital Trust, a Delaware business trust, Fresenius Medical Care Capital Trust II, a Delaware business trust, Fresenius Medical Care Capital Trust III, a Delaware business trust, or any business trust organized and operated on substantially similar terms. For the purposes of this definition, "control" when used with respect to any specified Person means the power to direct the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise; and the terms "controlling" and "controlled" have meanings correlative to the foregoing. "Bank" means the Preferred Trustee in its separate corporate capacity and not in its capacity as Preferred Trustee. "Bankruptcy Event" means, with respect to any Person, under the relevant jurisdiction: (a) the entry of a decree or order by a court having jurisdiction in the premises judging such Person a bankrupt or insolvent, or approving as properly filed a petition seeking reorganization, arrangement, adjudication or composition of or in respect of such Person under any applicable bankruptcy, insolvency, reorganization or other similar law of Germany, the United States, any State thereof or the District of Columbia, or the jurisdiction of formation of the Issuer, or appointing a receiver, liquidator, assignee, trustee, sequestrator 2 9 (or other similar official) of such Person or of any substantial part of its property or ordering the winding up or liquidation of its affairs, and the continuance of any such decree or order unstayed and in effect for a period of 60 consecutive days; or (b) the institution by such Person of proceedings to be adjudicated a bankrupt or insolvent, or the consent by it to the institution of bankruptcy or insolvency proceedings against it, or the filing by it of a petition or answer or consent seeking reorganization or relief under any applicable bankruptcy, insolvency, reorganization or other similar law of Germany, the United States, any State thereof or the District of Columbia, or the jurisdiction of formation of the Issuer, or the consent by it to the filing of any such petition or to the appointment of a receiver, liquidator, assignee, trustee, sequestrator (or similar official) of such Person or of any substantial part of its property, or the making by it of an assignment for the benefit of creditors, or the admission by it in writing of its inability to pay its debts generally as they become due and its willingness to be adjudicated a bankrupt, or the taking of corporate action by such Person in furtherance of any such action. "Bankruptcy Laws" has the meaning specified in Section 10.10. "Book-Entry Preferred Securities Certificate" means a Preferred Securities Certificate, ownership and transfers of interests in which shall be made through book entries by a Clearing Agency as described in Section 5.11. "Business Day" means any day other than (i) a Saturday or Sunday, (ii) a day on which banking institutions in New York City, Frankfurt am Main or Luxembourg are authorized or required by law or executive order to remain closed or (iii) a day on which the Corporate Trust Office of the Preferred Trustee or, with respect to the Notes, the Corporate Trust Office of the Indenture Trustee under the Indenture, is closed for business. "Certificate Depository Agreement" means the agreement among the Trust, the Sponsor and DTC, as the initial Clearing Agency, dated as of the Closing Date, relating to the Trust Securities Certificates, substantially in the form attached as Exhibit B, as the same may be amended and supplemented from time to time. "Clearing Agency" means an organization registered as a "clearing agency" pursuant to Section 17A of the Exchange Act. DTC will be the initial Clearing Agency. "Clearing Agency Participant" means a broker, dealer, bank, other financial institution or other Person for whom from time to time a Clearing Agency effects book-entry transfers and pledges of securities deposited with the Clearing Agency. "Closing Date" has the meaning specified in the Purchase Agreement, which date is also the date of execution and delivery of this Declaration. "Code" means the Internal Revenue Code of 1986, as amended. "Commission" means the United States Securities and Exchange Commission. "Common Securities Certificate" means a certificate evidencing ownership of Common Securities, substantially in the form attached as Exhibit C. 3 10 "Common Security" means an undivided beneficial interest in the assets of the Trust, having a Liquidation Amount of $1,000 and having the rights provided therefor in this Declaration, including the right to receive Distributions and a Liquidation Distribution as provided herein. "Company Trustee" means each of Dr. Ben J. Lipps, Dr. Karl-Dieter Schwab and Josef Dinger, solely in such Person's capacity as Company Trustee of the Trust and not in such Person's individual capacity, or such Company Trustee's successor in interest in such capacity, or any successor trustee appointed as herein provided. "Corporate Trust Office" means the principal office of the Preferred Trustee located at 225 Asylum Street, Hartford, Connecticut 06103. "Declaration" means this Amended and Restated Declaration of Trust, as the same may be modified, amended or supplemented in accordance with the applicable provisions hereof, including all exhibits hereto and, for all purposes of this Declaration and any such modification, amendment or supplement, the provisions of the Trust Indenture Act that are deemed to be a part of and govern this Declaration and any such modification, amendment or supplement, respectively. "Declaration Event of Default" means a Note Event of Default or a default by the Sponsor under the Guarantee Agreement. "Definitive Preferred Securities Certificates" means either or both (as the context requires) of (a) Preferred Securities Certificates issued as a typewritten Preferred Securities Certificate or certificates representing Book-Entry Preferred Securities Certificates as provided in Section 5.11(a), and (b) Preferred Securities Certificates issued in certificated, fully registered form as provided in Section 5.13. "Delaware Business Trust Act" means Chapter 38 of Title 12 of the Delaware Code, 12 Del. C. (Section ) 3801, et seq., as it may be amended from time to time. "Delaware Trustee" means First Union Trust Company, National Association, a national banking association, not in its individual capacity but solely in its capacity as Delaware Trustee of the Trust formed hereunder and not in its individual capacity, or its successor in interest in such capacity, or any successor trustee appointed as herein provided. "Distribution Compliance Period" means with respect to each Temporary Regulation S Book-Entry Preferred Securities Certificate, the period of 40 days beginning on the date hereof. "Distribution Date" has the meaning specified in Section 4.1(a). "Distributions" means amounts payable in respect of the Trust Securities as provided in Section 4.1. "DTC" means The Depository Trust Company, the initial Clearing Agency. "Exchange Act" means the Securities Exchange Act of 1934, as amended. 4 11 "Exchange Offer" means the exchange offer contemplated by the Registration Rights Agreement. "Exchange Preferred Security" means an undivided beneficial preferred interest in the assets of the Trust, having a Liquidation Amount of $1,000 and having the rights provided therefor in this Declaration, including the right to receive Distributions and a Liquidation Distribution, as provided herein, and to be issued hereunder in connection with the Exchange Offer. "Exchange Guarantee Agreement" has the meaning specified in Section 1.1 of the Guarantee Agreement. "Expense Agreement" means the Agreement as to Expenses and Liabilities between the Sponsor and the Trust, substantially in the form attached as Exhibit D, as amended from time to time. "Expiration Date" has the meaning specified in Section 9.1. "Guarantee Agreement" means the Initial Guarantee Agreement and, when and if issued, the Exchange Guarantee Agreement. "Guarantors" means, with respect to the Notes, the Sponsor, Fresenius Medical Care Holdings, Inc., a New York corporation, and Fresenius Medical Care Deutschland GmbH, a German limited liability company. "Guaranty" or "Guaranties" has the meaning specified in Section 1.1 of the Indenture. "Holder" has the meaning specified under the definition of "Securityholder." "Indenture" means the Senior Subordinated Indenture, dated as of June 6, 2001, among the Issuer, as issuer, the Indenture Trustee, as trustee, and the Guarantors with respect to the issuance of the Notes, as amended or supplemented from time to time. "Indenture Trustee" means State Street Bank and Trust Company, a Massachusetts chartered trust company, solely in its capacity as Trustee under the Indenture and not in its individual capacity, and any successor thereto in such capacity. "Initial Guarantee Agreement" means the Guarantee Agreement, dated as of June 6, 2001 between the Sponsor and the Guarantee Trustee, on behalf of and for the benefit of the Holders of the Initial Preferred Securities, as may be modified, amended or supplemented and in effect from time to time. "Initial Preferred Security" means a preferred undivided beneficial interest in the assets of the Trust, having a Liquidation Amount of $1,000 and having the rights provided therefor in this Declaration, including the right to receive Distributions and a Liquidation Distribution, as provided herein and issued on the Closing Date and not registered under the Securities Act. 5 12 "Investment Company Event" means the receipt by the Sponsor of an Opinion of Counsel, rendered by a law firm having a recognized national tax and securities practice, to the effect that, as a result of the occurrence of a change in law or regulation or a change in interpretation or application of law or regulation by any legislative body, court, governmental agency or regulatory authority (a "Change in 1940 Act Law"), the Trust is or will be considered an investment company which is required to be registered under the 1940 Act, which Change in 1940 Act Law becomes effective on or after the date of original issuance of the Preferred Securities under this Declaration. "Issuer" means FMC Trust Finance S.a.r.l. Luxembourg-III, the issuer under the Indenture, or its Successor (as defined therein). "Lien" means any lien, pledge, charge, encumbrance, mortgage, deed of trust, adverse ownership interest, hypothecation, assignment, security interest or preference, priority or other security agreement or preferential arrangement of any kind or nature whatsoever. "Like Amount" means (a) with respect to a redemption or repurchase of Trust Securities, Trust Securities having a Liquidation Amount equal to the principal amount of Notes to be contemporaneously redeemed or repurchased in accordance with the Indenture the proceeds of which will be used to pay the Redemption Price of such Trust Securities, and (b) with respect to a distribution of Notes to Holders of Trust Securities in connection with a dissolution or liquidation of the Trust, Notes having a principal amount equal to the Liquidation Amount of the Trust Securities of the Holder to whom such Notes are distributed. "Liquidated Damages" means amounts payable to the Holders of Preferred Securities as liquidated damages as defined in and pursuant to Section 5 of the Registration Rights Agreement. "Liquidation Amount" means the stated amount of $1,000 per Trust Security; provided, that Initial Preferred Securities may only be transferred in minimum blocks of $100,000 aggregate liquidation amount until exchanged for Exchange Preferred Securities pursuant to the Exchange Offer. "Liquidation Date" means the date on which Notes are to be distributed to Holders of Trust Securities in connection with a termination and liquidation of the Trust pursuant to Section 9.4(a). "Liquidation Distribution" has the meaning specified in Section 9.4(d). "1940 Act" means the Investment Company Act of 1940, as amended. "Note Event of Default" means an "Event of Default" as defined in the Indenture. "Note Redemption Date" means, with respect to any Notes to be redeemed or repurchased under the Indenture, the date fixed for redemption or repurchase under the Indenture. "Note Tax Event" means a "Tax Event" as defined in the Indenture. 6 13 "Notes" means the Issuer's 7 7/8% Senior Subordinated Notes due 2011 issued pursuant to the Indenture, including any Exchange Securities (as defined in the Indenture). "Officers' Certificate" means a certificate signed by the Chief Executive Officer and/or Chief Financial Officer and a Member of the Managing Board of the Sponsor, and delivered to the appropriate Trustee. Any Officers' Certificate delivered with respect to compliance with a condition or covenant provided for in this Declaration shall include: (a) a statement that each officer signing the Officers' Certificate has read the covenant or condition and the definitions relating thereto; (b) a brief statement of the nature and scope of the examination or investigation undertaken by each officer in rendering the Officers' Certificate; (c) a statement that each such officer has made such examination or investigation as, in such officer's opinion, is necessary to enable such officer to express an informed opinion as to whether or not such covenant or condition has been complied with; and (d) a statement as to whether, in the opinion of each such officer, such condition or covenant has been complied with. "Opinion of Counsel" means a written opinion of counsel, who may be counsel for the Trust or the Sponsor, but not an employee of any thereof, and who shall be reasonably acceptable to the Preferred Trustee. "Original Declaration" has the meaning specified in the recitals to this Declaration. "Outstanding", when used with respect to Trust Securities means, as of the date of determination, all Trust Securities theretofore executed and delivered under this Declaration, except: (a) Trust Securities theretofore cancelled by the Preferred Trustee or delivered to the Preferred Trustee for cancellation; (b) Trust Securities for whose payment or redemption money in the necessary amount has been theretofore deposited with the Preferred Trustee or any Paying Agent for the Holders of such Trust Securities; provided, that if such Trust Securities are to be redeemed, notice of such redemption has been duly given pursuant to this Declaration; and (c) Preferred Securities which have been paid or in exchange for or in lieu of which other Preferred Securities have been executed and delivered pursuant to Sections 5.4, 5.5, 5.11 and 5.13; provided, however, that in determining whether the Holders of the requisite Liquidation Amount of the Outstanding Preferred Securities have given any request, demand, authorization, direction, notice, consent or waiver hereunder, Preferred Securities owned by the Sponsor, any Trustee (other than the Preferred Trustee acting in a capacity other than its individual capacity or its capacity as Preferred Trustee) or any Affiliate of the Sponsor or any 7 14 Trustee (other than the Preferred Trustee acting in a capacity other than its individual capacity or its capacity as Preferred Trustee) shall be disregarded and deemed not to be Outstanding, except that (a) in determining whether any Trustee shall be protected in relying upon any such request, demand, authorization, direction, notice, consent or waiver, only Preferred Securities that such Trustee knows to be so owned shall be so disregarded and (b) the foregoing shall not apply at any time when all of the outstanding Preferred Securities are owned by the Sponsor, one or more of the Trustees and/or any such Affiliate. Preferred Securities so owned which have been pledged in good faith may be regarded as Outstanding if the pledgee establishes to the satisfaction of the Company Trustees the pledgee's right so to act with respect to such Preferred Securities and that the pledgee is not the Sponsor, any Trustee or any Affiliate of the Sponsor or any such Trustee. "Owner" means each Person who is the beneficial owner of an interest in a Global Preferred Securities Certificate as reflected in the records of the Clearing Agency or, if a Clearing Agency Participant is not the Owner, then as reflected in the records of a Person maintaining an account with such Clearing Agency (directly or indirectly, in accordance with the rules of such Clearing Agency). "Paying Agent" means any paying agent or co-paying agent appointed pursuant to Section 5.9 and shall initially be the Bank. "Payment Account" means a segregated non-interest-bearing corporate trust account maintained by the Preferred Trustee with the Bank in its trust department for the benefit of the Securityholders in which all amounts paid in respect of the Notes will be held and from which the Preferred Trustee, as Paying Agent, shall make payments to the Securityholders in accordance with Sections 4.1 and 4.2. "Permanent Regulation S Book-Entry Preferred Securities Certificates" has the meaning set forth in Section 5.11 of this Declaration. "Person" means any individual, corporation, partnership, joint venture, association, joint-stock company, trust, unincorporated organization, government or any agency, instrumentality or political subdivision thereof, or any other entity. "Preferred Securities Certificate" means a certificate evidencing ownership of Preferred Securities, substantially in the form attached as Exhibit E-1 or Exhibit E-2, as the case may be. "Preferred Security" means the Initial Preferred Securities and, when and if issued as provided herein and in the Registration Rights Agreement, any one of the Exchange Preferred Securities. "Preferred Trustee" means State Street Bank and Trust Company, a Massachusetts chartered trust company, solely in its capacity as Preferred Trustee of the Trust heretofore formed and not in its individual capacity, or its successor in interest in such capacity, or any successor Preferred Trustee appointed as herein provided. "Pricing Schedule" shall have the meaning assigned to it below under the definition of Purchase Agreement. 8 15 "Purchase Agreement" means the Purchase Agreement, dated May 28, 2001, as amended by the Pricing Schedule, dated May 30, 2001, relating to the offering and sale of the Initial Preferred Securities among the Trust, the Issuer, the Guarantors and the Initial Purchasers named therein, as the same may be amended from time to time. "Redemption Date" means, with respect to any Trust Security to be redeemed, the date fixed for such redemption by or pursuant to this Declaration; provided, that each Note Redemption Date and the stated maturity of the Notes shall be a Redemption Date for a Like Amount of Trust Securities. "Redemption Price" means, with respect to any Trust Security, the Redemption Price (as defined in the Indenture) for the concurrent redemption of a Like Amount of Notes, allocated on a pro rata basis, plus accrued and unpaid Distributions to the Redemption Date, plus the related amount of the premium, if any, paid by the Issuer upon the concurrent redemption of a Like Amount of Notes, allocated on a pro rata basis (based on Liquidation Amounts) among the Trust Securities. "Registration Rights Agreement" means the Registration Rights Agreement dated as of June 6, 2001 among the Initial Purchasers named therein, the Trust, the Issuer and the Guarantors, as such agreement may be amended, modified or supplemented from time to time in accordance with the terms thereof. "Regulation S" means Regulation S under the Securities Act, as such rule may be amended from time to time, or any similar rule or regulation hereafter adopted by the Commission. "Regulation S Book-Entry Preferred Securities Certificates" means together the Permanent Regulation S Book-Entry Preferred Securities Certificates and the Temporary Regulation S Book-Entry Preferred Securities Certificates. "Relevant Trustee" shall have the meaning specified in Section 8.10. "Restricted Book-Entry Preferred Securities Certificates" has the meaning set forth in Section 5.11 of this Declaration. "Rule 144" means rule 144 under the Securities Act, as such rule may be amended from time to time, or any similar rule or regulation hereafter adopted by the Commission. "Rule 144A" means rule 144A under the Securities Act, as such rule may be amended from time to time, or any similar rule or regulation hereafter adopted by the Commission. "Securities Act" means the Securities Act of 1933, as amended. "Securities Register" and "Securities Registrar" have the respective meanings specified in Section 5.4. "Securityholder" or "Holder" means a Person in whose name a Trust Security or Trust Securities is registered in the Securities Register; any such Person shall be deemed to 9 16 be a beneficial owner within the meaning of the Delaware Business Trust Act; provided, however, that in determining whether the Holders of the requisite amount of Preferred Securities have voted on any matter provided for in this Declaration, then for the purpose of any such determination, so long as Definitive Preferred Securities Certificates have not been issued, the term Securityholders or Holders as used herein shall refer to the Owners. "Shelf Registration Statement" shall have the meaning set forth in the Registration Rights Agreement. "Sponsor" means Fresenius Medical Care AG, a corporation organized and existing under the laws of Germany, including any successors or assigns. "Tax Event" means the receipt by the Sponsor of an Opinion of Counsel of nationally recognized tax counsel to the effect that, as a result of (a) any amendment to, or change (including any announced prospective change) in, the laws (or any regulations thereunder) of the United States, Germany, or the jurisdiction of formation of the Issuer (currently Luxembourg), or any political subdivision or taxing authority thereof or therein, (other than any amendment or change implementing, complying with, or introduced in order to conform to, or otherwise arising as a result of or in connection with, any European Union Directive on the taxation of savings implementing the conclusions of the ECOFIN Council meeting of 26-27 November 2000) or (b) any amendment to or change in an interpretation or application of such laws or regulations by any legislative body, court, governmental agency or regulatory authority (including the enactment of any legislation and the publication of any judicial decision or regulatory determination on or after the date of issuance of the Preferred Securities under this Declaration, but not including any amendment or change implementing, complying with, or introduced in order to conform to, or otherwise arising as a result of or in connection with, any European Union Directive on the taxation of savings implementing the conclusions of the ECOFIN Council meeting of 26-27 November 2000), which amendment or change is effective or which pronouncement or decision is announced on or after the date of issuance of the Preferred Securities under this Declaration, there is more than an insubstantial risk that (i) the Trust is, or will be within 90 days after the date of such Opinion of Counsel, subject to United States Federal or German income tax, or income tax in the jurisdiction of formation of the Issuer (currently Luxembourg), in each case with respect to interest received or accrued on the Notes, (ii) interest payable by the Issuer on the Notes is not, or within 90 days after the date of such Opinion of Counsel, will not be, deductible by the Issuer or the Sponsor, in whole or in part, for United States Federal or German income tax purposes or for purposes of any income tax imposed by the jurisdiction of formation of the Issuer (currently Luxembourg) or (iii) the Trust is, or will be within 90 days after the date of such Opinion of Counsel, subject to more than a de minimis amount of other taxes, duties, assessments or other governmental charges of whatever nature imposed by the United States, Germany or the jurisdiction of formation of the Issuer (currently Luxembourg), or any other taxing authority. "Temporary Regulation S Book-Entry Preferred Securities Certificates" has the meaning set forth in Section 5.11 of this Declaration. "Trust" means Fresenius Medical Care Capital Trust IV, the Delaware business trust referred to in the recitals to the Declaration. 10 17 "Trust Guarantee" means the guarantee of the Sponsor, on a senior subordinated basis, of the payment of Distributions and of payments on liquidation or redemption of the Trust Securities, to the extent of funds held by the Trust, as set forth in the Guarantee Agreement executed and delivered by the Sponsor and State Street Bank and Trust Company, as trustee, contemporaneously with the execution and delivery of this Declaration, for the benefit of the Holders of Preferred Securities, as amended from time to time. "Trust Indenture Act" means the Trust Indenture Act of 1939 as in force at the date as of which this instrument was executed; provided, however, that in the event the Trust Indenture Act of 1939 is amended after such date, "Trust Indenture Act" means, to the extent required by any such amendment, the Trust Indenture Act of 1939 as so amended. "Trust Property" means (a) the Notes, (b) the rights of the Preferred Trustee under the Trust Guarantee, (c) any cash on deposit in, or owing to, the Payment Account, (d) the Guaranties and (e) all proceeds and rights in respect of the foregoing and any other property and assets for the time being held or deemed to be held by the Preferred Trustee pursuant to the terms of this Declaration. "Trust Securities Certificate" means any one of the Common Securities Certificates or the Preferred Securities Certificates. "Trust Security" means any one of the Common Securities or the Preferred Securities. "Trustees" means, collectively, the Preferred Trustee, the Delaware Trustee and the Company Trustees. "$" or "U.S. dollar" means the United States dollar, the lawful currency of the United States of America. ARTICLE II ESTABLISHMENT OF THE TRUST .1 Name. The Trust heretofore formed and hereby continued shall be known as "Fresenius Medical Care Capital Trust IV," as such name may be modified from time to time by the Company Trustees following written notice to the Holders of Trust Securities and the other Trustees, in which name the Trustees may conduct the business of the Trust, make and execute contracts and other instruments on behalf of the Trust and sue and be sued. .2 Office of the Delaware Trustee; Principal Place of Business. The address of the Delaware Trustee in the State of Delaware is c/o First Union Trust Company, National Association, One Rodney Square, 920 King Street, Wilmington, Delaware 19801, Attention: Corporate Trust Administration, or such other address in the State of Delaware as the Delaware Trustee may designate by written notice to the Securityholders and the Sponsor. The principal executive office of the Trust is c/o National 11 18 Medical Care, Inc., Two Ledgemont Center, 95 Hayden Avenue, Lexington, Massachusetts 02173. .3 Initial Contribution of Trust Property; Organizational Expenses. The Preferred Trustee acknowledges receipt in trust from the Sponsor of the sum of $100, which constitutes the initial Trust Property in connection with the Original Declaration. The Sponsor shall pay organizational expenses of the Trust as they arise or shall, upon request of any Trustee, promptly reimburse such Trustee for any such expenses paid by such Trustee. The Sponsor shall make no claim upon the Trust Property for the payment of such expenses. .4 Issuance of the Preferred Securities. On May 28, 2001 the Sponsor, the other Guarantors and a Company Trustee, on behalf of the Trust, executed and delivered the Purchase Agreement. On May 30, 2001, the Issuer, the Sponsor, the other Guarantors and a Company Trustee, on behalf of the Trust executed and delivered the Pricing Schedule. Contemporaneously with the execution and delivery of this Declaration, a Company Trustee, on behalf of the Trust, shall execute (and, in the case of Preferred Securities Certificates, the Preferred Trustee shall authenticate) in accordance with Section 5.2 and deliver to the Initial Purchasers named in the Purchase Agreement, Preferred Securities Certificates, registered in the name of the nominee of the initial Clearing Agency, in an aggregate amount of 225,000 Preferred Securities having an aggregate Liquidation Amount of $225,000,000 against receipt of such aggregate purchase price of such Preferred Securities of $221,163,750, which amount the Company Trustee shall promptly deliver to the Preferred Trustee. .5 Issuance of the Common Securities; Subscription and Purchase of the Notes. Contemporaneously with the execution and delivery of this Declaration, a Company Trustee, on behalf of the Trust, shall execute in accordance with Section 5.2 and deliver to the Sponsor Common Securities Certificates, registered in the name of the Sponsor, in an aggregate amount of 225 Common Securities having an aggregate Liquidation Amount of $221,163.75 against payment by the Sponsor of such amount. Contemporaneously therewith, a Company Trustee, on behalf of the Trust, shall subscribe to and purchase from the Issuer Notes, registered in the name of the Trust and having an aggregate principal amount equal to $225,225,000 and, in satisfaction of the purchase price for such Notes, the Preferred Trustee, on behalf of the Trust, shall deliver to the Issuer the sum of $221,384,913.75. .6 Purposes and Functions of the Trust. The exclusive purposes and functions of the Trust are (a) to issue and sell Trust Securities and use the proceeds from such sale to acquire the Notes, (b) to consummate the Exchange Offer, and (c) to engage in only those other activities necessary, convenient or incidental thereto. The Sponsor hereby appoints the Trustees as trustees of the Trust, to have all the rights, powers and duties to the extent set forth herein, and the Trustees hereby accept such appointment. The Preferred Trustee hereby declares that it will hold the Trust Property in 12 19 trust upon and subject to the conditions set forth herein for the benefit of the Trust and the Securityholders. The Company Trustees shall have all rights, powers and duties set forth herein and in accordance with applicable law with respect to accomplishing the purposes of the Trust. The Delaware Trustee shall not be entitled to exercise any powers, nor shall the Delaware Trustee have any of the duties and responsibilities, of the Preferred Trustee or the Company Trustees set forth herein. Notwithstanding anything herein or elsewhere to the contrary, the Delaware Trustee shall be one of the Trustees of the Trust for the sole and exclusive purpose of fulfilling the requirements of Section 3807(a) of the Delaware Business Trust Act and shall have no duties except for those duties set forth herein that are expressly required to be performed by the Delaware Trustee. .7 Authorization to Enter into Certain Transactions. (A) The Trustees shall conduct the affairs of the Trust in accordance with the terms of this Declaration. Subject to the limitations set forth in paragraph (b) of this Section 2.7, and in accordance with the following provisions (i) and (ii), the Trustees shall have the authority to enter into all transactions and agreements determined by the Trustees to be appropriate in exercising the authority, express or implied, otherwise granted to the Trustees under this Declaration, and to perform all acts in furtherance thereof, including without limitation, the following: (i) As among the Trustees, each Company Trustee, acting singly, shall have the power and authority to act on behalf of the Trust with respect to the following matters: (A) the issuance and sale of the Trust Securities; (B) causing the Trust to enter into, and to execute, deliver and perform on behalf of the Trust, the Purchase Agreement, the Expense Agreement, the Certificate Depository Agreement and such other agreements as may be necessary or desirable in connection with the purposes and function of the Trust; (C) causing the Trust to enter into, and to execute, deliver and perform on behalf of the Trust, the Registration Right Rights Agreement and assisting in the registration of the Exchange Preferred Securities, as contemplated by the Registration Rights Agreement, under the Securities Act and under state securities or blue sky laws, and the qualification of this Declaration as a trust indenture under the Trust Indenture Act; (D) assisting in the registration of the Exchange Preferred Securities under the Exchange Act and the preparation and filing of all periodic and other reports and other documents pursuant to the foregoing as well as in one or more applications to exempt the Trust from the periodic reporting requirements of the Exchange Act; (E) the sending of notices (other than notices of default) and other information regarding the Trust Securities and the Notes to the Securityholders in accordance with this Declaration; 13 20 (F) the appointment of a Paying Agent, authenticating agent and Securities Registrar in accordance with this Declaration; (G) executing the Trust Securities on behalf of the Trust in accordance with this Declaration; (H) registering transfer of the Trust Securities in accordance with this Declaration; (I) executing and delivering closing certificates, if any, pursuant to the Purchase Agreement and an application for a taxpayer identification number for the Trust; (J) to the extent provided in this Declaration, the winding up of the affairs of and liquidation of the Trust and the preparation, execution and filing of the certificate of cancellation with the Secretary of State of the State of Delaware; (K) unless otherwise determined by the Sponsor, the Preferred Trustee or the Company Trustees, or as otherwise required by the Delaware Business Trust Act or the Trust Indenture Act, to execute on behalf of the Trust (either acting alone or together with any or all of the Company Trustees) any documents that the Company Trustees have the power to execute pursuant to this Declaration; and (L) the taking of any action incidental to the foregoing as the Trustees may from time to time determine is necessary or advisable to give effect to the terms of this Declaration for the benefit of the Securityholders (without consideration of the effect of any such action on any particular Securityholder). (ii) As among the Trustees, the Preferred Trustee shall have the power, duty and authority to act on behalf of the Trust with respect to the following matters: (A) the authentication of the Preferred Securities; (B) the establishment of the Payment Account; (C) the receipt of the Notes; (D) the collection of interest, principal and any other payments made in respect of the Notes in the Payment Account; (E) the distribution of amounts owed to the Securityholders in respect of the Trust Securities; (F) the exercise of all of the rights, powers and privileges of a holder of the Notes; (G) the sending of notices of default and other information regarding the Trust Securities and the Notes to the Securityholders in accordance with this Declaration; 14 21 (H) the distribution of the Trust Property in accordance with the terms of this Declaration; (I) to the extent provided in this Declaration, the winding up of the affairs of and liquidation of the Trust and the preparation, execution and filing of the certificate of cancellation with the Secretary of State of the State of Delaware; (J) after a Declaration Event of Default, the taking of any action incidental to the foregoing as the Preferred Trustee may from time to time determine is necessary or advisable to give effect to the terms of this Declaration and protect and conserve the Trust Property for the benefit of the Securityholders (without consideration of the effect of any such action on any particular Securityholder); and (K) except as otherwise provided in this Section 2.7(A)(ii), the Preferred Trustee shall have none of the duties, liabilities, powers or the authority of the Company Trustees set forth in Section 2.7(A)(i). (B) So long as this Declaration remains in effect, the Trust (or the Trustees acting on behalf of the Trust) shall not undertake any business, activities or transaction except as expressly provided herein or contemplated hereby. In particular, the Trustees shall not (i) acquire any investments or engage in any activities not authorized by this Declaration, (ii) sell, assign, transfer, exchange, mortgage, pledge, set-off or otherwise dispose of any of the Trust Property or interests therein, including to Securityholders, except as expressly provided herein, (iii) take any action that would cause the Trust to fail or cease to qualify for United States Federal income tax purposes as a grantor trust or another entity which is not subject to United States Federal income tax at the entity level and the assets and income of which are treated for United States Federal income tax purposes as held and derived directly by holders of interests in the entity, (iv) incur any indebtedness for borrowed money or issue any other debt or (v) take or consent to any action that would result in the placement of a Lien on any of the Trust Property. The Company Trustees shall defend all claims and demands of all Persons at any time claiming any Lien on any of the Trust Property adverse to the interest of the Trust or the Securityholders in their capacity as Securityholders. (C) In connection with the issue and sale of the Preferred Securities, the Sponsor shall have the right and responsibility to assist the Trust with respect to, or effect on behalf of the Trust, the following (and any actions taken by the Sponsor in furtherance of the following prior to the date of this Declaration are hereby ratified and confirmed in all respects): (i) the preparation by the Trust of an Offering Circular, including any supplements or amendments thereto, and the taking of any action necessary or desirable to sell the Initial Preferred Securities in a transaction or a series of transactions exempt from the registration requirements of the Securities Act; (ii) the preparation and filing by the Trust with the Commission and the execution on behalf of the Trust of a registration statement on the appropriate form in relation to the Exchange Preferred Securities, as contemplated by the Registration Rights Agreement, including any amendments thereto; 15 22 (iii) the determination of the States in which to take appropriate action to qualify or register for sale all or part of the Preferred Securities and the taking of any and all such acts, other than actions which must be taken by or on behalf of the Trust, and the advice to the Trustees of actions they must take on behalf of the Trust, and the preparation for execution and filing of any documents to be executed and filed by the Trust or on behalf of the Trust, as the Sponsor deems necessary or advisable in order to comply with the applicable laws of any such States in connection with the sale of the Preferred Securities; (iv) the negotiation of the terms of, and the execution and delivery of, the Purchase Agreement providing for the sale of the Initial Preferred Securities and such other agreements as may be necessary or desirable in connection with the consummation thereof; and (v) the taking of any other actions necessary or desirable to carry out any of the foregoing activities. (D) Notwithstanding anything herein to the contrary, the Company Trustees are authorized and directed to conduct the affairs of the Trust and to operate the Trust so that the Trust will not be deemed to be an "investment company" required to be registered under the 1940 Act, or taxed as a corporation for United States Federal or German income tax purposes or for purposes of any income tax imposed by the jurisdiction of formation of the Issuer and so that the Notes will be treated as indebtedness of the Issuer and the Sponsor for United States Federal or German income tax purposes and for purposes of any income tax imposed by the jurisdiction of formation of the Issuer. In this connection, the Sponsor and the Company Trustees are authorized to take any action, not inconsistent with applicable law, the Certificate of Trust or this Declaration, that each of the Sponsor and the Company Trustees determines in their discretion to be necessary or desirable for such purposes, as long as such action does not adversely affect in any material respect the interests of the Holders of Preferred Securities. .8 Assets of Trust. The assets of the Trust shall consist of the Trust Property. .9 Title to Trust Property. Legal title to all Trust Property shall be vested at all times in the Preferred Trustee (in its capacity as such) and shall be held and administered by the Preferred Trustee for the benefit of the Trust and the Securityholders in accordance with this Declaration. ARTICLE III PAYMENT ACCOUNT .1 Payment Account. (A) On or prior to the Closing Date, the Preferred Trustee shall establish the Payment Account. The Preferred Trustee and any agent of the Preferred Trustee shall have exclusive control and sole right of withdrawal with respect to the Payment Account for the purpose of making withdrawals from the Payment Account in accordance with this 16 23 Declaration. All monies and other property deposited or held from time to time in the Payment Account shall be held by the Preferred Trustee in the Payment Account for the exclusive benefit of the Securityholders and for distribution as herein provided, including (and subject to) any priority of payments provided for herein. (B) The Preferred Trustee shall deposit in the Payment Account, promptly upon receipt, all payments of principal of or interest on, and any other payments or proceeds with respect to, the Notes. Amounts held in the Payment Account shall not be invested by the Preferred Trustee pending distribution thereof. ARTICLE IV DISTRIBUTIONS; REDEMPTION .1 Distributions. (A) Distributions on the Trust Securities shall be cumulative, and will accumulate whether or not there are funds of the Trust available for the payment of Distributions. Distributions shall accrue from the date of issuance of the Preferred Securities, and shall be payable quarterly in arrears on March 15, June 15, September 15 and December 15 of each year, commencing on September 15, 2001. If any date on which a Distribution is otherwise payable on the Trust Securities is not a Business Day, then the payment of such Distribution shall be made on the next succeeding day that is a Business Day (and without any interest or other payment in respect of any such delay) except that, if such Business Day is in the next succeeding calendar year, payment of such Distribution shall be made on the immediately preceding Business Day, in each case with the same force and effect as if made on such date (each date on which distributions are payable in accordance with this Section 4.1(a), a "Distribution Date"). (B) The Trust Securities represent undivided beneficial interests in the Trust Property. Distributions on the Trust Securities shall be payable at a rate of 7.875% per annum of the Liquidation Amount of the Trust Securities. Distributions in arrears for more than one quarter (and interest thereon) will accrue interest (compounded quarterly) at the same rate. The amount of Distributions payable for any full period shall be computed on the basis of a 360-day year of twelve 30-day months. The amount of Distributions for any partial period shall be computed on the basis of the number of days elapsed in a 360-day year of twelve 30-day months. The amount of Distributions payable for any period shall include the Additional Payments and the Additional Amounts, if any, for such period. (C) Distributions on the Trust Securities shall be made by the Preferred Trustee from the Payment Account and shall be payable on each Distribution Date only to the extent that the Trust has funds then legally available in the Payment Account for the payment of such Distributions. (D) Distributions on the Trust Securities with respect to a Distribution Date shall be payable to the Holders thereof as they appear on the Securities Register for the Trust Securities at the close of business on the relevant record date, which shall be 15 days prior to such Distribution Date. .2 Redemption. 17 24 (A) On each Note Redemption Date and on the stated maturity of the Notes, the Trust will be required to redeem a Like Amount of Trust Securities at the Redemption Price. The Trust Securities shall not be redeemed unless all accrued and unpaid Distributions have been paid on all Trust Securities for all quarterly distribution periods terminating on or prior to the Redemption Date. (B) Notice of redemption shall be given by the Preferred Trustee by first-class mail, postage prepaid, mailed not less than 30 nor more than 60 days prior to the Redemption Date to each Holder of Trust Securities to be redeemed, at such Holder's address appearing in the Security Register. All notices of redemption shall be irrevocable and shall state: (i) the Redemption Date; (ii) the Redemption Price; (iii) the CUSIP number; (iv) if less than all the Outstanding Trust Securities are to be redeemed, the identification and the total Liquidation Amount of the particular Trust Securities to be redeemed; and (v) that on the Redemption Date the Redemption Price will become due and payable upon each such Trust Security to be redeemed and that distributions thereon will cease to accrue on and after said date; and (vi) the place or places where the Trust Securities are to be surrendered for the payment of the Redemption Price. (C) The Trust Securities redeemed on each Redemption Date shall be redeemed at the Redemption Price with the proceeds from the contemporaneous redemption of Notes. Redemptions of the Trust Securities shall be made and the Redemption Price shall be payable on each Redemption Date only to the extent that the Trust has funds then legally available in the Payment Account for the payment of such Redemption Price. (D) If the Preferred Trustee gives a notice of redemption in respect of any Preferred Securities, then, by 12:00 noon, New York City time, on the Redemption Date, subject to Section 4.2(c), the Preferred Trustee will, so long as the Preferred Securities are in book-entry-only form, in its capacity as Paying Agent, irrevocably deposit with the Paying Agent for such Preferred Securities, to the extent available therefor, funds sufficient to pay the applicable Redemption Price and will give such Paying Agent (if other than the Preferred Trustee) irrevocable instructions and authority to pay the Redemption Price to the holders thereof. If the Preferred Securities are no longer in book-entry-only form, the Preferred Trustee, subject to Section 4.2(c), will irrevocably deposit with the Paying Agent, to the extent available therefor, funds sufficient to pay the applicable Redemption Price and will give the Paying Agent irrevocable instructions and authority to pay the Redemption Price to the Holders thereof upon surrender of their Preferred Securities Certificates. Notwithstanding the foregoing, Distributions payable on or prior to the Redemption Date for any Trust Securities called for redemption shall be payable to the Holders of such Trust Securities as they appear on the Register for the Trust Securities on the relevant record dates for the related 18 25 Distribution Dates. If notice of redemption shall have been given and funds deposited as required, then upon the date of such deposit, all rights of Securityholders holding Trust Securities so called for redemption will cease, except the right of such Securityholders to receive the Redemption Price and any Distribution payable on or prior to the Redemption Date, but without interest, and such Securities will cease to be Outstanding. In the event that any date on which any Redemption Price is payable is not a Business Day, then payment of the Redemption Price payable on such date will be made on the next succeeding day that is a Business Day (and without any interest or other payment in respect of any such delay), except that, if such Business Day falls in the next calendar year, such payment will be made on the immediately preceding Business Day, in each case, with the same force and effect as if made on such date. In the event that payment of the Redemption Price in respect of any Trust Securities called for redemption is improperly withheld or refused and not paid either by the Trust or by the Sponsor pursuant to the Trust Guarantee, Distributions on such Trust Securities will continue to accrue, at the then applicable rate, from the Redemption Date originally established by the Trust for such Trust Securities to the date such Redemption Price is actually paid, in which case the actual payment date will be the date fixed for redemption for purposes of calculating the Redemption Price (other than for purposes of calculating any premium). (E) Payment of the Redemption Price on the Trust Securities shall be made to the record holders thereof as they appear on the Securities Register for the Trust Securities at the close of business on the relevant record date, which shall be 15 days prior to the relevant Redemption Date. In the event that any date on which payment of the Redemption Price on the Preferred Securities is not a Business Day, payment of the Redemption Price on such date will be made on the next succeeding day which is a Business Day (without any distribution or other payment in respect of any such delay) except that, if such Business Day is in the next succeeding calendar year, such payment shall be made on the immediately preceding Business Day, in each case with the same force and effect as if made on such date. (F) Subject to the foregoing and applicable law (including, without limitation, United States Federal securities laws), the Sponsor or its subsidiaries may at any time and from time to time purchase Outstanding Preferred Securities by tender, in the open market or by private agreement. .3 Subordination of Common Securities. Payment of Distributions (including Additional Payments and Additional Amounts if applicable) on, and the Redemption Price of, the Trust Securities, as applicable, shall be made pro rata among the Common Securities and the Preferred Securities based on the respective Liquidation Amounts of the Trust Securities; provided, however, that if on any Distribution Date or Redemption Date a Declaration Event of Default shall have occurred and be continuing, no payment of any Distribution (including Additional Payments and Additional Amounts, if applicable) on, or Redemption Price of, any Common Security, and no other payment on account of the redemption, liquidation or other acquisition of Common Securities, shall be made unless payment in full in cash of all accumulated and unpaid Distributions (including Additional Payments and Additional Amounts, if applicable) on all Outstanding Preferred Securities for all Distribution periods terminating on or prior thereto, or in the case of payment of the Redemption Price the full amount of such Redemption Price on all 19 26 Outstanding Preferred Securities, shall have been made or provided for, and all funds immediately available to the Preferred Trustee shall first be applied to the payment in full in cash of all Distributions (including Additional Payments and Additional Amounts, if applicable) on, or the Redemption Price of, Preferred Securities then due and payable. .4 Payment Procedures. Payments of Distributions (including Additional Payments and Additional Amounts, if applicable) in respect of the Preferred Securities shall be made by check mailed to the address of the Person entitled thereto as such address shall appear on the Securities Register or, if the Preferred Securities are held by a Clearing Agency, such Distributions shall be made to the Paying Agent by wire transfer in immediately available funds, which shall credit the relevant Persons' accounts on the applicable distribution dates. Payments in respect of the Common Securities shall be made in such manner as shall be mutually agreed between the Preferred Trustee and the Common Securityholder(s). .5 Tax Returns and Reports. The Company Trustees shall prepare (or cause to be prepared), at the Sponsor's expense, and file all United States Federal, state and local tax and information returns and reports required to be filed by or in respect of the Trust. In this regard, the Company Trustees shall (a) prepare and file (or cause to be prepared and filed) the appropriate Internal Revenue Service Form required to be filed in respect of the Trust in each taxable year of the Trust and (b) prepare and furnish (or cause to be prepared and furnished) to each Securityholder the appropriate Internal Revenue Service form required to be provided on such form. The Company Trustees shall provide the Sponsor and the Preferred Trustee with a copy of all such returns and reports promptly after such filing or furnishing. The Preferred Trustee and the Company Trustees shall comply with United States Federal withholding and backup withholding tax laws and information reporting requirements with respect to any payments to Securityholders under the Trust Securities. .6 Payment of Taxes, Duties, Etc. of the Trust. Upon receipt under the Notes of Additional Sums or Additional Amounts and the written direction of the Sponsor, the Preferred Trustee shall promptly pay any taxes, duties or governmental charges of whatsoever nature (other than withholding taxes) imposed on the Trust by the United States or any other taxing authority. .7 Payments under Indenture. Any amount payable hereunder to any Holder of Preferred Securities (and any Owner with respect thereto) shall be reduced by the amount of any corresponding payment such Holder (and Owner) has directly received pursuant to Section 5.8 of the Indenture. .8 Change of Control. (A) Upon the occurrence of a Change of Control Triggering Event (as defined in the Indenture), each Holder shall have the right to require, and the Sponsor will cause, the Trust to repurchase all or any part of such Holder's Trust Securities at a purchase price in 20 27 cash equal to 101% of the Liquidation Amount thereof plus accrued and unpaid Distributions thereon (including Additional Payments and Additional Amounts, if applicable), if any, to the date of purchase. (B) Within 30 days following a Change of Control Triggering Event, the Company Trustees shall mail a notice to each Holder with a copy to the Preferred Trustee stating: (1) that a Change of Control Triggering Event has occurred and that such Holder has the right to require the Trust to purchase all or any part of such Holder's Trust Securities at a purchase price in cash equal to 101% of the Liquidation Amount thereof plus accrued and unpaid Distributions thereon (including Additional Payments and Additional Amounts, if applicable), if any, to the date of purchase; (2) the circumstances and relevant facts regarding such Change of Control Triggering Event (including information with respect to pro forma historical income, cash flow and capitalization after giving effect to such Change of Control (as defined in the Indenture)); (3) the repurchase date (which shall be no earlier than 30 days nor later than 60 days from the date such notice is mailed); and (4) the instructions determined by the Company Trustees, reasonably acceptable to the Preferred Trustee and consistent with the covenant described hereunder, that a Holder must follow in order to have its Preferred Securities purchased. (C) The Trust shall, and the Sponsor shall cause the Trust to, comply, to the extent applicable, with the requirements of Section 14(e) of the Exchange Act and any other securities laws or regulations in connection with the repurchase of Preferred Securities pursuant to this covenant. To the extent that the provisions of any securities laws or regulations conflict with the provisions of this covenant, the Trust shall, and the Sponsor shall cause the Trust to, comply with the applicable securities laws and regulations and shall not be deemed to have breached its obligations under this covenant by virtue thereof. (D) Upon the occurrence of a Change of Control Triggering Event, the Preferred Trustee shall exercise its right under the Indenture to require the Issuer to redeem Notes having a principal amount equal to the aggregate Liquidation Amount of Trust Securities to be repurchased pursuant to this Section 4.8. .9 Offer to Repurchase Upon Asset Disposition. If the Issuer makes an offer to repurchase Notes in the event of an Asset Disposition (as defined in the Indenture) pursuant to Section 10.13 of the Indenture, then the Sponsor will cause the Trust to offer to repurchase a Like Amount of Preferred Securities, at a purchase price equal to 100% of the Liquidation Amount of the Preferred Securities (without premium), plus accrued and unpaid Distributions thereon to the date of purchase. In the event of any such offer to purchase Notes pursuant to Section 10.13 of the Indenture, the parties hereto agree to follow procedures to offer to purchase such Like Amount of Preferred Securities on terms substantially similar to the procedures set forth in Section 4.8 with respect to a Change of Control offer (including compliance, to the extent applicable, with the requirements of Section 14(e) of the Exchange Act). 21 28 ARTICLE V Trust Securities Certificates .1 Initial Ownership. Upon the formation of the Trust and the contribution by the Sponsor pursuant to Section 2.3 and until the issuance of the Trust Securities, and at any time during which no Trust Securities are outstanding, the Sponsor shall be the sole beneficial owner of the Trust. .2 The Trust Securities Certificates. (A) The Preferred Securities Certificates shall be issued in minimum denominations of $1,000 Liquidation Amount and integral multiples of $1,000 in excess thereof, and the Common Securities Certificates shall be issued in denominations of $1,000 Liquidation Amount and integral multiples thereof. The Initial Preferred Securities may only be issued and transferred with minimum liquidation amounts of $100,000 or more. The Trust Securities Certificates shall be executed on behalf of the Trust by manual or facsimile signature of at least one Company Trustee (and, in the case of Preferred Securities Certificates, shall be authenticated by the Preferred Trustee by manually executing a certificate of authentication substantially in the form appearing in Exhibit E hereto). Trust Securities Certificates bearing the manual or facsimile signatures, as the case may be, of individuals who were, at the time when such signatures shall have been affixed, authorized to sign on behalf of the Trust, shall be validly issued and entitled to the benefits of this Declaration, notwithstanding that such individuals or any of them shall have ceased to be so authorized prior to the delivery of such Trust Securities Certificates or did not hold such offices at the date of delivery of such Trust Securities Certificates. A transferee of a Trust Securities Certificate shall become a Securityholder, and shall be entitled to the rights and subject to the obligations of a Securityholder hereunder, upon due registration of such Trust Securities Certificate in such transferee's name pursuant to Sections 5.4, 5.11 and 5.13. Prior to the issuance of any Exchange Preferred Securities, the Sponsor shall deliver to the Preferred Trustee an Opinion of Counsel substantially to the effect that: (i) the Exchange Preferred Securities have been duly authorized and, when executed and authenticated in accordance with the provisions of the Declaration and delivered in exchange for the Initial Preferred Securities in accordance with the Declaration and the Exchange Offer, will be entitled to the benefits of the Declaration and will be legally valid and binding obligations of the Trust, enforceable in accordance with their terms subject to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar laws of general applicability relating to or affecting creditors' rights and to general equity principles; and (ii) when the Exchange Preferred Securities are executed and authenticated in accordance with the provisions of the Declaration and delivered in exchange for the Initial Preferred Securities in accordance with the Declaration and the Exchange Offer, the Exchange Guarantee Agreement relating thereto will be the legally valid and binding obligation of the Sponsor, enforceable in accordance with its terms subject to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar laws of general applicability relating to or affecting creditors' rights and general equity principles. (B) Pending the preparation of definitive Trust Securities Certificates, at least one Company Trustee, on behalf of the Trust may execute, (and, in the case of Preferred 22 29 Securities the Preferred Trustee shall authenticate by manually executing a certificate of authentication substantially in the form appearing in Exhibit E) and deliver, temporary Trust Securities Certificates which are printed, lithographed, typewritten, mimeographed or otherwise produced, in any authorized denomination, substantially of the tenor of the definitive Trust Securities Certificates in lieu of which they are issued and with such appropriate insertions, omissions, substitutions and other variations as the officers executing such Trust Securities Certificates and Guaranties, as the case may be, may determine, as evidenced by their execution of such Trust Securities Certificates and Guaranties, as the case may be. If temporary Trust Securities Certificates are issued, the Company Trustees will cause definitive Trust Securities Certificates (which may be printed, lithographed, typewritten, mimeographed or otherwise produced) to be prepared without unreasonable delay. After the preparation of definitive Trust Securities Certificates, the temporary Trust Securities Certificates shall be exchangeable for definitive Trust Securities Certificates upon surrender of the temporary Trust Securities Certificates at the office or agency of the Company Trustees designated for that purpose without charge to the Securityholder. Upon surrender for cancellation of any one or more temporary Trust Securities Certificates, at least one Company Trustee, on behalf of the Trust shall execute (and, in the case of Preferred securities the Preferred Trustee shall authenticate by manually executing a certificate of authentication substantially in the form appearing in Exhibit E) and deliver in exchange therefore a like principal amount of definitive Trust Securities Certificates of authorized denominations having the same terms and like tenor. Until so exchanged, the temporary Trust Securities Certificates shall in all respects be entitled to the same benefits under this Declaration as definitive Trust Securities Certificates. .3 Execution and Delivery of Trust Securities Certificates. On the Closing Date, the Company Trustees shall cause Trust Securities Certificates, in an aggregate Liquidation Amount as provided in Sections 2.4 and 2.5 and as contemplated by Section 5.11, to be executed on behalf of the Trust and delivered to or upon the written order of the Sponsor, signed by any member of the Managing Board or without further corporate action by the Sponsor, in authorized denominations; and, in the case of Preferred Securities, the Preferred Trustee shall cause such Preferred Securities Certificates to be authenticated and delivered to or upon the written order of the Sponsor in authorized denominations. .4 Registration of Transfer and Exchange of Preferred Securities Certificates. (A) The Sponsor shall keep or cause to be kept, at the office or agency maintained pursuant to Section 5.8, a register or registers for the purpose of registering Trust Securities Certificates and transfers and exchanges of Preferred Securities Certificates (the "Securities Register") in which the registrar designated by the Sponsor (the "Securities Registrar"), subject to such reasonable regulations as it may prescribe, shall provide for the registration of Preferred Securities Certificates and Common Securities Certificates (subject to Section 5.10 in the case of the Common Securities Certificates) and registration of transfers and exchanges of Preferred Securities Certificates as herein provided. The Bank shall be the initial Securities Registrar. 23 30 (B) Subject to Sections 5.11, 5.13 and 5.4(D) hereof, upon surrender for registration of transfer of any Preferred Securities Certificate at the office or agency maintained pursuant to Section 5.8, the Company Trustees or any one of them shall execute and deliver to the Preferred Trustee, and the Preferred Trustee shall authenticate and deliver, in the name of the designated transferee or transferees, one or more new Preferred Securities Certificates in authorized denominations of a like aggregate Liquidation Amount dated the date of authentication by such Preferred Trustee and bearing such restrictive legends as may be required by this Declaration, provided that Initial Preferred Securities may only be transferred with minimum liquidation amounts of $100,000 or more. The Securities Registrar shall not be required to register the transfer of any Preferred Securities that have been called for redemption. At the option of a Holder, Preferred Securities Certificates may be exchanged for other Preferred Securities Certificates in authorized denominations of the same class and of a like aggregate Liquidation Amount, bearing such restrictive legends as may be required by this Declaration and bearing a certificate number not contemporaneously Outstanding, upon surrender of the Preferred Securities Certificates to be exchanged at the office or agency maintained pursuant to Section 5.8. Whenever any Preferred Securities Certificates are so surrendered for exchange, the Company Trustees or any one of them shall execute and deliver to the Preferred Trustee, and the Preferred Trustee shall authenticate and deliver, the Preferred Securities Certificates that the Holder making the exchange is entitled to receive. (C) All Preferred Securities issued upon any registration of transfer or exchange of Preferred Securities shall evidence the same interest in the assets of the Trust, and be entitled to the same benefits under this Declaration, as the Preferred Securities surrendered upon such registration of transfer or exchange. (D) The following transfer restrictions shall apply to the transfer of Initial Preferred Securities: (i) Transfer of beneficial interests in a Restricted Book-Entry Preferred Securities Certificate to a Regulation S Book-Entry Preferred Securities Certificate. A beneficial interest in a Restricted Book-Entry Preferred Securities Certificate may be exchanged for a beneficial interest in a Regulation S Book-Entry Preferred Securities Certificate only in connection with a pending transfer of such interest that complies with Regulation S or Rule 144A under the Securities Act and only if a written instrument of transfer duly executed by the Holder thereof or his attorney and substantially in the form of Exhibit F-1 is first delivered to the Securities Registrar by or on behalf of the Person who is the beneficial owner of such interest immediately prior to such transfer. (ii) Transfer of beneficial interests in a Regulation S Book-Entry Preferred Securities Certificate to a Restricted Book-Entry Preferred Securities Certificate. A beneficial interest in a Regulation S Book-Entry Preferred Securities Certificate may be exchanged for a beneficial interest in a Restricted Book-Entry Preferred Securities Certificate only in connection with a pending transfer of such interest that complies with Rule 144A under the Securities Act and only if a written instrument of transfer duly executed by the Holder thereof or his attorney and substantially in the form of Exhibit F-2 and, if the Sponsor, so requests, evidence 24 31 reasonably satisfactory to them (which shall include an opinion of counsel to the Holder) as to the compliance with the restrictions set forth in the legend set forth in Section 5.4(G)(i), is first delivered to the Securities Registrar by or on behalf of the Person who is the beneficial owner of such interest immediately prior to such transfer. (iii) Transfer of beneficial interests in a Temporary Regulation S Book-Entry Preferred Securities Certificate to a Permanent Regulation S Book-Entry Preferred Securities Certificate. A beneficial interest in a Temporary Regulation S Book-Entry Preferred Securities Certificate may be exchanged for a beneficial interest in a Permanent Regulation S Book-Entry Preferred Securities Certificate only if (a) the Distribution Compliance Period has ended and (b) a written certification substantially in the form of Exhibit F-3 has been delivered to the Securities Registrar by or on behalf of the Person who is the beneficial owner of such interest immediately prior to such exchange. Notwithstanding any provision of this Declaration, no amount shall be paid hereunder (or under the Trust Securities and the Notes) in respect of the Temporary Regulation S Book-Entry Preferred Securities Certificate or any portion thereof; rather the Paying Agent shall hold any such amount that becomes payable pending exchange of such security (or portion) for the Permanent Regulation S Book-Entry Preferred Securities Certificate (or a portion thereof) and upon such exchange shall promptly pay such amount to the Holder of such Permanent Regulation S Book-Entry Preferred Securities Certificate. No such suspension of payment shall result in a default under the Book-Entry Preferred Securities Certificates, if the suspended payment is made promptly upon such exchange. (E) Every Preferred Securities Certificate presented or surrendered for registration of transfer or exchange shall be accompanied by a written instrument of transfer substantially in the form appearing in Exhibit E (under the heading "Assignment"), duly executed by the Holder or his attorney duly authorized in writing. Each Preferred Securities Certificate surrendered for registration of transfer or exchange shall be cancelled and subsequently disposed of by a Company Trustee in accordance with such Person's customary practice. No service charge shall be made for any registration of transfer or exchange of Preferred Securities Certificates, but the Securities Registrar may require payment of a sum sufficient to cover any tax or governmental charge that may be imposed in connection with any transfer or exchange of Preferred Securities Certificates. (F) The Preferred Trustee and Securities Registrar shall have no obligation or duty to monitor, determine or inquire as to compliance with any restrictions on transfer imposed under this Declaration or under applicable law with respect to any transfer of any interest in any Trust Securities Certificate other than to require delivery of such certificates and other documentation or evidence as are expressly required by, and to do so if and when expressly required by, the terms of this Declaration, and to examine the same to determine substantial compliance as to form with the express requirements hereof. (G) Legends. 25 32 (iv) Each Initial Preferred Securities Certificate (and all Initial Preferred Securities Certificates issued in exchange therefor or substitution thereof) shall bear a legend in substantially the following form: THIS PREFERRED SECURITY HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S. PERSONS, EXCEPT AS SET FORTH IN THE SECOND SENTENCE HEREOF. BY ITS ACQUISITION HEREOF OR OF A BENEFICIAL INTEREST HEREIN, THE HOLDER (1) REPRESENTS THAT (A) IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) (A "QIB") OR (B) IT IS ACQUIRING THIS PREFERRED SECURITY IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH REGULATION S UNDER THE SECURITIES ACT, (2) AGREES THAT IT WILL NOT RESELL OR OTHERWISE TRANSFER THIS PREFERRED SECURITY EXCEPT (A) TO THE TRUST OR ANY OF ITS SUBSIDIARIES, (B) TO A PERSON WHOM THE SELLER REASONABLY BELIEVES IS A QIB PURCHASING FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QIB IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, (C) IN AN OFFSHORE TRANSACTION MEETING THE REQUIREMENTS OF RULE 903 OR 904 OF THE SECURITIES ACT, (D) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144 UNDER THE SECURITIES ACT, (E) IN ACCORDANCE WITH ANOTHER EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT (AND BASED UPON AN OPINION OF COUNSEL ACCEPTABLE TO THE TRUST) OR (F) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT AND, IN EACH CASE, IN ACCORDANCE WITH THE APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR ANY OTHER APPLICABLE JURISDICTION AND (3) AGREES THAT IT WILL DELIVER TO EACH PERSON TO WHOM THIS PREFERRED SECURITY OR AN INTEREST HEREIN IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. AS USED HEREIN, THE TERMS "OFFSHORE TRANSACTION" AND "UNITED STATES" HAVE THE MEANINGS GIVEN TO THEM BY RULE 902 OF REGULATION S UNDER THE SECURITIES ACT. UNTIL THE PREFERRED SECURITIES ARE REGISTERED PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT FILED UNDER THE SECURITIES ACT, PREFERRED SECURITIES MAY ONLY BE TRANSFERRED IN MINIMUM BLOCKS OF $ 100,000 AGGREGATE LIQUIDATION AMOUNT. (ii) Every Initial Preferred Securities Certificate representing a Temporary Regulation S Book-Entry Preferred Securities Certificate shall bear a legend substantially to the following effect (with such changes as may be determined by the Sponsor, based upon advice of independent U.S. counsel). THIS PREFERRED CERTIFICATE IS A TEMPORARY REGULATION S CERTIFICATE WITHIN THE MEANING OF THE DECLARATION REFERRED TO HEREIN, AND NO PAYMENTS WILL BE MADE IN RESPECT OF ANY PORTION HEREOF UNLESS AND UNTIL SUCH PORTION HAS BEEN EXCHANGED FOR A PORTION OF A PERMANENT REGULATION S CERTIFICATE, UPON CERTIFICATION OF NON-U.S. 26 33 BENEFICIAL OWNERSHIP AFTER THE DISTRIBUTION COMPLIANCE PERIOD AS PROVIDED IN THE DECLARATION. UNTIL SUCH CERTIFICATION IS PROVIDED TO THE SECURITIES REGISTRAR AND SUCH PORTION IS EXCHANGED FOR A PORTION OF THE PERMANENT REGULATION S SECURITY, SETTLEMENT OF TRADES THROUGH THE DEPOSITORY TRUST COMPANY OF BENEFICIAL INTERESTS IN THIS REGULATION S SECURITY WILL BE EFFECTED SOLELY THROUGH DTC'S DEPOSIT WITHDRAWAL AT CUSTODIAN DWAC SYSTEM. (iii) The Exchange Preferred Securities Certificates upon their issuance pursuant to the Exchange Offer shall not bear the legends set forth under (i) and (ii) above. (iv) As long as the Preferred Securities are represented by Book-Entry Preferred Securities Certificates, such Book-Entry Preferred Securities Certificates shall bear a legend substantially to the following effect: UNLESS THIS PREFERRED SECURITY CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO FRESENIUS MEDICAL CARE CAPITAL TRUST IV OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY PREFERRED SECURITY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN. .5 Mutilated, Destroyed, Lost or Stolen Trust Securities Certificates. If (a) any mutilated Trust Securities Certificate shall be surrendered to the Securities Registrar, or if the Securities Registrar shall receive evidence to its satisfaction of the destruction, loss or theft of any Trust Securities Certificate and (b) there shall be delivered to the Securities Registrar and the Company Trustees such security or indemnity as may be required by them to save each of them harmless, then in the absence of notice that such Trust Securities Certificate shall have been acquired by a bona fide purchaser, the Company Trustees, or any one of them, on behalf of the Trust shall execute and make available for delivery, in exchange for or in lieu of any such mutilated, destroyed, lost or stolen Trust Securities Certificate, a new Trust Securities Certificate of like class, tenor and denomination. In connection with the issuance of any new Trust Securities Certificate under this Section, the Company Trustees or the Securities Registrar may require the payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in connection therewith. Any duplicate Trust Securities Certificate issued pursuant to this Section shall constitute conclusive evidence of an undivided beneficial interest in the assets of the Trust, as if originally issued, whether or not the lost, stolen or destroyed Trust Securities Certificate shall be found at any time. .6 Persons Deemed Securityholders. 27 34 The Company Trustees or the Securities Registrar shall treat the Person in whose name any Trust Securities Certificate shall be registered in the Securities Register as the owner of such Trust Securities Certificate for the purpose of receiving Distributions and for all other purposes whatsoever, and neither the Trustees nor the Securities Registrar shall be bound by any notice to the contrary. .7 Access to List of Securityholders' Names and Addresses. Each Holder of a Trust Securities Certificate, and each Owner shall be deemed to have agreed not to hold the Sponsor, the Preferred Trustee, the Delaware Trustee or the Company Trustees accountable by reason of the disclosure of its name and address, regardless of the source from which such information was derived. .8 Maintenance of Office or Agency. The Company Trustees shall maintain an office or offices or agency or agencies where Preferred Securities Certificates may be surrendered for registration of transfer or exchange and where notices and demands to or upon the Trustees in respect of the Trust Securities Certificates may be served. The Company Trustees initially designate State Street Bank and Trust Company, 225 Asylum Street, Hartford, Connecticut 06103, Attn: Corporate Trust Administrations, as its principal corporate trust office for such purposes; State Street Bank and Trust Company will use the services of Banque Generale du Luxembourg, 50 Avenue J.F. Kennedy, L-2951 Luxembourg to perform its functions under this Section 5.8. The Company Trustees shall give prompt written notice to the Sponsor and to the Securityholders of any change in the location of the Securities Register or any such office or agency. .9 Appointment of Paying Agent. (A) The Paying Agent shall make Distributions to Securityholders from the Payment Account and shall report the amounts of such Distributions to the Preferred Trustee (if the Preferred Trustee is not then serving as the Paying Agent) and the Company Trustees. Any Paying Agent shall have the revocable power to withdraw funds from the Payment Account for the purpose of making Distributions. The Company Trustees may revoke such power and remove the Paying Agent if such Trustees determine in their sole discretion that the Paying Agent shall have failed to perform its obligations under this Declaration in any material respect. The Paying Agent shall initially be the Bank, and any co-paying agent chosen by the Bank, and acceptable to the Company Trustees and the Sponsor. Any Person acting as Paying Agent shall be permitted to resign as Paying Agent upon 30 days' written notice to the Company Trustees and the Preferred Trustee (if the Preferred Trustee is not then serving as the Paying Agent). In the event that the Bank shall no longer be the Paying Agent or a successor Paying Agent shall resign or its authority to act be revoked, the Company Trustees shall appoint a successor that is acceptable to the Preferred Trustee and the Sponsor to act as Paying Agent (which shall be a bank or trust company). The Company Trustees shall cause such successor Paying Agent or any additional Paying Agent appointed by the Company Trustees to execute and deliver to the Trustees an instrument in which such successor Paying Agent or additional Paying Agent shall agree with the Trustees that as Paying Agent, such successor Paying Agent or additional Paying Agent will hold all sums, if any, held by it for payment to the Securityholders in trust for the benefit of the Securityholders entitled thereto 28 35 until such sums shall be paid to such Securityholders. The Paying Agent shall return all unclaimed funds to the Preferred Trustee and upon removal of a Paying Agent such Paying Agent shall also return all funds in its possession to the Preferred Trustee. The provisions of Sections 8.1, 8.3 and 8.6 herein shall apply to the Bank also in its role as Paying Agent, for so long as the Bank shall act as Paying Agent and, to the extent applicable, to any other paying agent appointed hereunder. Any reference in this Declaration to the Paying Agent shall include any co-paying agent unless the context requires otherwise. If the Paying Agent shall be retained as paying agent for the payment of Liquidated Damages by the Sponsor or its Affiliates, funds received by the Paying Agent for the purpose of paying any such Liquidated Damages shall not constitute Trust Property and shall not be commingled with funds or other assets of the Trust. (B) If any European Union Directive on the taxation of savings implementing the conclusions of the ECOFIN Council meeting of 26-27 November 2000 or any law implementing or complying with, or introduced in order to conform to, such Directive is introduced, the Company Trustees shall ensure that the Trust maintains a Paying Agent in a member state of the European Union that will not be obliged to withhold or deduct for or on account of tax pursuant to any such Directive or law. .10 Ownership of Common Securities by Sponsor. On the Closing Date, the Sponsor shall acquire and retain beneficial and record ownership of the Common Securities. To the fullest extent permitted by law, other than a transfer in connection with a consolidation or merger of the Sponsor into another corporation, or any conveyance, transfer or lease by the Sponsor of its properties and assets substantially as an entirety to any Person, pursuant to Article VIII of the Indenture, any attempted transfer of the Common Securities shall be void. The Company Trustees shall cause each Common Securities Certificate issued to the Sponsor to contain a legend stating "THIS CERTIFICATE IS NOT TRANSFERABLE EXCEPT AS PROVIDED IN SECTION 5.10 OF THE DECLARATION". .11 Book-Entry Preferred Securities Certificates; Common Securities Certificate. (A) Upon their original issuance, Preferred Securities Certificates shall be issued in the form of one or more Book-Entry Preferred Securities Certificates registered in the name of DTC, as Clearing Agency, or its nominee and deposited with DTC or the Securities Registrar as custodian for DTC for credit by DTC to the respective accounts of the Owners thereof (or such other accounts as they may direct) in accordance with DTC's applicable rules and procedures. (B) Initial Preferred Securities offered and sold to QIBs shall be issued in the form of one or more permanent global Preferred Securities Certificates, in substantially the form appearing in Exhibit E-1 (a "Restricted Book-Entry Preferred Securities Certificate"). Initial Preferred Securities offered and sold in reliance on Regulation S shall be issued in the form of one or more global Preferred Securities Certificates in temporary form (collectively, a "Temporary Regulation S Book-Entry Preferred Securities Certificate"), which shall be exchangeable in whole or in part for one or more Preferred Securities Certificates in permanent form (a "Permanent Regulation S Book-Entry Preferred Securities Certificate" 29 36 and, together with the Temporary Regulation S Book-Entry Preferred Securities Certificate for which it is exchangeable, the "Regulation S Book-Entry Preferred Securities Certificates" and together with the Restricted Book-Entry Preferred Securities Certificate, the "Book-Entry Preferred Securities Certificates"), in accordance with Section 5.4(D) and 5.4(G). The number of Preferred Securities Certificates represented by the Book-Entry Preferred Securities Certificates may from time to time be increased or decreased by adjustments made on the records of the Securities Registrar and the Clearing Agency or their nominees as herein provided. (C) Each Book-Entry Preferred Securities Certificate shall constitute a single Preferred Securities Certificate for all purposes of this Declaration. No Owner will receive a Definitive Preferred Securities Certificate representing such Owner's interest in such Preferred Securities, except as provided in Section 5.13. unless and until Definitive Preferred Securities Certificates have been issued to Owners pursuant to Section 5.13: (ii) the provisions of this Section 5.11(C) shall be in full force and effect; (iii) the Securities Registrar and the Trustees shall be entitled to deal with the Clearing Agency for all purposes of this Declaration relating to the Book-Entry Preferred Securities Certificates (including the giving of instructions or directions to Owners of Book-Entry Preferred Securities Certificates but excluding the payment of the Liquidation Amount of and Distributions on the Book-Entry Preferred Securities Certificates) as the sole Holder of Book-Entry Preferred Securities Certificates and shall have no obligations to the Owners thereof; (iv) to the extent that the provisions of this Section 5.11 conflict with any other provisions of this Declaration, the provisions of this Section 5.11 shall control; and (v) the rights of the Owners of the Book-Entry Preferred Securities Certificates shall be exercised only through the Clearing Agency and shall be limited to those established by law and agreements between such Owners and the Clearing Agency and/or the Clearing Agency Participants. Pursuant to the Certificate Depository Agreement, unless and until Definitive Preferred Securities Certificates are issued pursuant to Section 5.13, the initial Clearing Agency will make book-entry transfers among the Clearing Agency Participants. (D) Preferred Securities Certificates in respect of Initial Preferred Securities and the Preferred Trustee's certificate of authentication shall be in substantially in the form of Exhibit E-1 hereto, which is hereby incorporated in and expressly made a part of this Declaration. Any Preferred Securities Certificates in respect of Exchange Preferred Securities and the Preferred Trustee's certificate of authentication shall be substantially in the form of Exhibit E-2 hereto, which is incorporated in and expressly made a part of this Declaration. The Preferred Securities Certificates may have notations, legends or endorsements required by law, stock exchange rule, agreements to which the Trust is subject, if any, or usage. Each Preferred Security Certificate shall be dated the date of its authentication. 30 37 (E) A single Common Securities Certificate representing the Common Securities shall be issued to the Sponsor in the form of a definitive Common Securities Certificate. .12 Notices to Clearing Agency. To the extent that a notice or other communication to the Owners is required under this Declaration, unless and until Definitive Preferred Securities Certificates shall have been issued to Owners pursuant to Section 5.13, the Preferred Trustee and the Company Trustees shall give all such notices and communications specified herein to be given to Owners to the Clearing Agency and the Paying Agent (if other than the Preferred Trustee), and shall have no obligations to the Owners. .13 Definitive Preferred Securities Certificates. Notwithstanding any other provision in this Declaration, no Book-Entry Preferred Securities Certificate may be exchanged in whole or in part for Preferred Securities Certificates registered, and no transfer of a Book-Entry Preferred Securities Certificate in whole or in part may be registered, in the name of any Person other than the Clearing Agency for such Book-Entry Preferred Securities Certificates or a nominee thereof unless (a) the Clearing Agency advises the Trust in writing that the Clearing Agency is no longer willing or able to properly discharge its responsibilities with respect to the Book-Entry Preferred Securities Certificates or the Clearing Agency ceases to be a clearing agency registered under the Exchange Act at a time when it is required to be so registered to act as such clearing agent, and a qualified successor shall not have been appointed by the Trust within 90 days, (b) the Sponsor at its option advises the Trustees in writing that it elects to terminate the book-entry system through the Clearing Agency or (c) after the occurrence of a Declaration Event of Default, Owners of Book-Entry Preferred Securities Certificates representing beneficial interests aggregating at least a majority of the Liquidation Amount advise the Company Trustees in writing that the continuation of a book-entry system through the Clearing Agency is no longer in the best interest of the Owners of Book-Entry Preferred Securities Certificates, then the Company Trustees shall notify the Clearing Agency and the Clearing Agency shall notify all Owners of Book-Entry Preferred Securities Certificates and the other Trustees of the occurrence of any such event and of the availability of the Definitive Preferred Securities Certificates to Owners of such class or classes, as applicable, requesting the same by delivery of a certificate in substantially the form of Exhibit G-1 (in the case of Initial Preferred Securities) or Exhibit G-2 (in the case of Exchange Preferred Securities). Upon surrender to the Company Trustees of the typewritten Preferred Securities Certificate or Certificates representing the Book-Entry Preferred Securities Certificates by the Clearing Agency, accompanied by registration instructions, the Company Trustees, or any one of them, shall execute the Definitive Preferred Securities Certificates in accordance with the instructions of the Clearing Agency. Neither the Securities Registrar nor the Trustees shall be liable for any delay in delivery of such instructions, and each may conclusively rely on, and shall be protected in relying on, such instructions. Upon the issuance of Definitive Preferred Securities Certificates, the Trustees shall recognize the Holders of the Definitive Preferred Securities Certificates as Securityholders. The Definitive Preferred Securities Certificates shall be printed, lithographed or engraved or may be produced in any other manner as is reasonably 31 38 acceptable to the Company Trustees, as evidenced by the execution thereof by the Company Trustees or any one of them. .14 Rights of Securityholders; Waivers of Past Defaults. (A) The legal title to the Trust Property is vested exclusively in the Preferred Trustee (in its capacity as such) in accordance with Section 2.9, and the Securityholders shall not have any right or title therein other than the undivided beneficial interest in the assets of the Trust conferred by their Trust Securities and they shall have no right to call for any partition or division of property, profits or rights of the Trust except as described below. The Trust Securities shall be personal property giving only the rights specifically set forth therein, in this Declaration and in the Delaware Business Trust Act. The Trust Securities shall have no preemptive or similar rights and when issued and delivered to Securityholders against payment of the purchase price therefor will be fully paid and nonassessable by the Trust. The Holders of the Trust Securities, in their capacities as such, shall be entitled to the same limitation of personal liability extended to stockholders of private corporations for profit organized under the General Corporation Law of the State of Delaware without giving effect to principles of conflict of laws. (B) For so long as any Preferred Securities remain Outstanding, if, upon a Declaration Event of Default, the Indenture Trustee fails or the holders of not less than 25% in principal amount of the outstanding Notes fail to declare the principal of all of the Notes to be immediately due and payable, the Preferred Trustee may exercise such right, subject to the provisions below, by a notice in writing to the Issuer, the Sponsor and the Indenture Trustee; and upon any such declaration such principal amount of and the accrued interest on all of the Notes shall become immediately due and payable, provided, that the payment of principal and interest on such Notes shall remain subordinated to the extent provided in the Indenture. At any time after such a declaration of acceleration with respect to the Notes has been made and before a judgment or decree for payment of the money due has been obtained by the Indenture Trustee as in the Indenture provided, the Holders of a majority in Liquidation Amount of the Preferred Securities, by written notice to the Preferred Trustee, the Issuer, the Sponsor and the Indenture Trustee, may rescind and annul such declaration and its consequences if: (i) the Issuer has paid or deposited with the Indenture Trustee a sum sufficient to pay: (A) all overdue installments of interest (including any Additional Sums) on all of the Notes; (B) the principal of (and premium, if any, on) any Notes which have become due otherwise than by such declaration of acceleration and interest thereon at the rate borne by the Notes; (C) all sums paid or advanced by the Indenture Trustee under the Indenture and the reasonable compensation, expenses, disbursements and advances of the Indenture Trustee, the Preferred Trustee and the Delaware Trustee, their agents and counsel; and 32 39 (ii) any Note Event of Default, other than the non-payment of the principal of the Notes which has become due solely by such acceleration, has been cured or waived as provided in Section 5.13 of the Indenture. In the case of any Declaration Event of Default, the Holder of Common Securities will be deemed to have waived any right to act with respect to any such Declaration Event of Default under this Declaration until the effect of all such Declaration Events of Default with respect to the Preferred Securities have been cured, waived or otherwise eliminated. Until any such Declaration Event of Default with respect to the Preferred Securities has been so cured, waived or otherwise eliminated, the Preferred Trustee shall act solely on behalf of the Holders of Preferred Securities and not the Holder of the Common Securities, and only the Holders of Preferred Securities will have the right to direct the Preferred Trustee to act on their behalf. The holders of a majority in aggregate Liquidation Amount of the Preferred Securities may, on behalf of the Holders of all the Preferred Securities, waive any past default under the Indenture, except a default in the payment of principal or interest (unless such default has been cured and a sum sufficient to pay all matured installments of interest and principal due otherwise than by acceleration has been deposited with the Indenture Trustee) or a default in respect of a covenant or provision which under the Indenture cannot be modified or amended without the consent of the holder of each outstanding Note. No such rescission shall affect any subsequent default or impair any right consequent thereon. The Preferred Trustee shall not, as the initial holder of the Notes, for so long as it holds such Notes waive any Note Event of Default without the consent of Holders of a majority in aggregate Liquidation Amount of Preferred Securities then Outstanding. A waiver of a Note Event of Default will constitute a waiver of the corresponding Declaration Event of Default. Upon receipt by the Preferred Trustee of written notice declaring such rescission and annulment by Holders of Preferred Securities all or part of which is represented by Book-Entry Preferred Securities Certificates, a record date shall be established for determining Holders of Outstanding Preferred Securities entitled to join in such notice, which record date shall be at the close of business on the day the Preferred Trustee receives such notice. The Holders on such record date, or their duly designated proxies, and only such Persons, shall be entitled to join in such notice, whether or not such Holders remain Holders after such record date; provided, that, unless such declaration of rescission and annulment shall have become effective by virtue of the requisite percentage having joined in such notice prior to the day which is 90 days after such record date, such notice of declaration of rescission and annulment shall automatically and without further action by any Holder be canceled and of no further effect. Nothing in this paragraph shall prevent a Holder, or a proxy of a Holder, from giving, after expiration of such 90-day period, a new written notice of declaration of rescission and annulment that is identical to a written notice which has been canceled pursuant to the proviso to the preceding sentence, in which event a new record date shall be established pursuant to the provisions of this Section 5.14(b). (C) For so long as any Preferred Securities remain Outstanding, to the fullest extent permitted by law and subject to the terms of this Declaration and the Indenture, if a Declaration Event of Default has occurred and is continuing and such event is attributable to 33 40 the failure of the Issuer to pay interest on or principal of the Notes on the date such interest or principal is otherwise payable (or in the case of redemption, the redemption date), then the Holders of at least 25% in Liquidation Amount of the Preferred Securities shall have the right to appoint a trustee (the "Special Trustee") to act on behalf of all Holders of Preferred Securities. The Special Trustee so appointed shall represent the Holders of all Outstanding Preferred Securities unless Holders of at least a majority in Liquidation Amount of the Outstanding Preferred Securities appoint an alternative Special Trustee, in which case the Special Trustee appointed in accordance with the preceding sentence shall resign as Special Trustee. At no time can there be more than one Special Trustee acting on behalf of the Holders of Preferred Securities. The Special Trustee shall have the right to directly institute a proceeding against the Issuer or the Guarantors (a "Trustee Action") for enforcement of payment to Holders of Preferred Securities of the principal of or interest on the Notes having a principal amount equal to the aggregate Liquidation Amount of the Preferred Securities of such Holders. In connection with any such Trustee Action, the rights of the Holder of the Common Securities will be subrogated to the rights of any Holder of Preferred Securities to the extent of any payment made by the Issuer or the Guarantors to such Holder of Preferred Securities as a result of such Trustee Action. Except as set forth in Section 5.14(b) and (c), the Holders of Preferred Securities shall have no right to exercise directly any right or remedy available to the holders of, or in respect of, the Notes; provided, however, that if the Preferred Trustee or the Special Trustee do not enforce such payment obligations, a Holder of Preferred Securities will have the right, to the fullest extent permitted by law, to bring an action on behalf of the Trust to enforce the Trust's rights under the Notes and the Indenture. ARTICLE VI ACTS OF SECURITYHOLDERS; MEETINGS; VOTING .1 Limitations on Voting Rights. (A) Except as provided in this Section, in Sections 5.14, 8.10 and 10.2 and in the Indenture and as otherwise required by law, no Holder of Preferred Securities shall have any right to vote or in any manner otherwise control the administration, operation and management of the Trust or the obligations of the parties hereto, nor shall anything herein set forth, or contained in the terms of the Trust Securities Certificates, be construed so as to constitute the Securityholders from time to time as partners or members of an association. (B) Subject to the requirement of the Preferred Trustee obtaining an Opinion of Counsel in certain circumstances set forth in the last sentence of this paragraph, Holders of a majority in Liquidation Amount of all Outstanding Preferred Securities have the right to direct the time, method and place of conducting any proceeding for any remedy available to the Preferred Trustee (or Special Trustee, if appointed), or direct the exercise of any trust or power conferred upon the Preferred Trustee under the Declaration including the right to direct the Preferred Trustee, as holder of the Notes, to (i) exercise the remedies available under the Indenture with respect to the Notes or the Guaranties, (ii) waive any past Event of Default that is waiveable under the Indenture, (iii) exercise any right to rescind or annul a declaration that the principal of all the Notes shall be due and payable or (iv) consent to any amendment, modification, or termination of the Indenture or the Notes where such consent shall be required; provided, however, that, where a consent or action under the Indenture would 34 41 require the consent or act of the holders of more than a majority of the aggregate principal amount of Notes affected thereby, only Holders of the percentage of the Liquidation Amount of all Outstanding Preferred Securities which is at least equal to the percentage required under the Indenture may direct the Preferred Trustee to give such consent or take such action; provided, further, that the Indenture cannot be amended in any way which would cause the Trust to fail or cease to be classified for purposes of United States Federal income taxation as other than a grantor trust or other entity which is not subject to United States Federal income tax at the entity level and the assets and income of which are treated for United States Federal income tax purposes as held and derived directly by holders of interests in the entity. The Trustees shall not revoke any action previously authorized or approved by a vote of the Holders of Preferred Securities, except by a subsequent vote of the Holders of Preferred Securities. If the Preferred Trustee or the Special Trustee fails to enforce its rights under the Notes to receive interest or principal on the Notes on the date such interest or principal is otherwise payable (or in the case of redemption, the redemption date), a Holder of Preferred Securities may, to the fullest extent permitted by law, institute a legal proceeding on behalf of the Trust against the Issuer or the Guarantors to enforce the Trust's rights under the Notes or the Guaranties without first instituting any legal proceeding against the Preferred Trustee or any other person or entity. Holders of Preferred Securities shall not be able to exercise directly any other remedies available to the holders of the Notes unless the Preferred Trustee or the Indenture Trustee, acting for the benefit of the Preferred Trustee, fail to do so. In such event, Holders of at least 25% in Liquidation Amount of all Outstanding Preferred Securities shall have a right to institute such proceedings. The Preferred Trustee shall notify all Holders of Preferred Securities of any notice of default received from the Indenture Trustee with respect to the Notes. Such notice shall state that such Event of Default also constitutes a Declaration Event of Default. Except with respect to directing the time, method and place of conducting a proceeding for a remedy, the Preferred Trustee shall not take any of the actions described in clause (i), (ii) or (iii) above unless the Preferred Trustee has obtained an Opinion of Counsel rendered by a law firm having a nationally recognized tax and securities practice to the effect that, as a result of such action, the Trust will not fail to be classified as a grantor trust for United States Federal income tax purposes or another entity which is not subject to United States Federal income tax at the entity level and the assets and income of which are treated for United States Federal income tax purposes as held and derived directly by holders of interests in the entity. (C) In the event the consent of the Preferred Trustee, as the holder of the Notes, is required under the Indenture with respect to any amendment, modification or termination of the Indenture, the Preferred Trustee shall request the direction of the Holders of Preferred Securities with respect to such amendment, modification or termination and shall vote with respect to such amendment, modification or termination as directed by a majority in Liquidation Amount of all Outstanding Preferred Securities; provided, however, that, where a consent under the Indenture would require the consent of the holders of more than a majority of the aggregate principal amount of the Notes, the Preferred Trustee may only give such consent at the direction of the Holders of at least the same proportion in Liquidation Amount of all Outstanding Preferred Securities; provided, further, that the Indenture cannot be amended in any way which would cause the Trust to fail or cease to be classified for purposes of United States Federal income taxation as other than a grantor trust or other entity which is not subject to United States Federal income tax at the entity level and the assets and income of which are treated for United States Federal income tax purposes as held and derived directly 35 42 by holders of interests in the entity. The Preferred Trustee shall not take any such action in accordance with the directions of the Holders of Preferred Securities unless the Preferred Trustee has obtained an Opinion of Counsel rendered by a law firm having a nationally recognized tax and securities practice to the effect that for the purposes of United States Federal income tax the Trust will not be classified as other than a grantor trust or another entity which is not subject to United States Federal income tax at the entity level and the assets and income of which are treated for United States Federal income tax purposes as held and derived directly by holders of interests in the entity. (D) If any proposed amendment to the Declaration pursuant to Section 10.2 provides for, or the Trustees otherwise propose to effect, (i) any action that would adversely affect in any material respect the powers, preferences or special rights of the Trust Securities, whether by way of amendment to the Declaration or otherwise, or (ii) the dissolution, winding-up or termination of the Trust, other than pursuant to the terms of this Declaration, then the Holders of the Trust Securities as a class will be entitled to vote on such amendment or proposal and such amendment or proposal shall not be effective except with the approval of the Holders of at least a majority in Liquidation Amount of the Trust Securities affected thereby; provided, that if any amendment or proposal referred to in clause (i) above would adversely affect only the Preferred Securities or the Common Securities, then only the affected class will be entitled to vote on such amendment or proposal and such amendment or proposal shall not be effective except with the approval of at least a majority in Liquidation Amount of such class of Trust Securities. (E) Notwithstanding that Holders of Preferred Securities are entitled to vote or consent under any of the circumstances described herein, any of the Preferred Securities that are owned at such time by the Sponsor or any entity directly or indirectly controlling or controlled by, or under direct or indirect common control with, the Sponsor, shall not be entitled to vote or consent and shall, for purposes of such vote or consent, be treated as if such Preferred Securities were not Outstanding. (F) Holders of Preferred Securities will have no rights to appoint or remove, or increase or decrease the number of, the Trustees, who may be appointed, removed or replaced, increased or decreased solely by the Sponsor as the indirect or direct Holder of all of the Common Securities. No vote or consent of the Holders of Preferred Securities will be required for the Trust to redeem and cancel Preferred Securities or distribute Notes in accordance with the Declaration. .2 Notice of Meetings. Notice of all meetings at which the Preferred Securityholders are entitled to vote shall be given by the Preferred Trustee pursuant to Section 10.9 to each Preferred Securityholder of record, at his registered address, at least 15 days and not more than 90 days before the meeting. Notice of all matters upon which action by written consent of the Preferred Securityholders is to be taken shall be given by the Preferred Trustee pursuant to Section 10.9 to each Preferred Securityholder of record, at his registered address, contemporaneously with any request for or solicitation of such consents. Each such notice shall include a statement setting forth the following information: (i) the date, place and purpose of such meeting or the date by which such action is to be taken and the purpose thereof; (ii) a description of any resolution proposed for adoption at such meeting on which 36 43 such Holders are entitled to vote or of such matter upon which written consent is sought; and (iii) instructions for the delivery of proxies or consents. At any such meeting, any business properly before the meeting may be so considered whether or not stated in the notice of the meeting. Any adjourned meeting may be held as adjourned without further notice. .3 Meetings of Preferred Securityholders. Any required approval or direction of Holders of Preferred Securities may be given at a separate meeting of Holders of Preferred Securities convened for such purpose, at a meeting of all of the Holders of Trust Securities or pursuant to written consent. No annual meeting of Securityholders is required to be held. The Company Trustees, however, shall call a meeting of Securityholders to vote on any matter upon the written request of the Preferred Securityholders of record of 25% of the Preferred Securities (based upon their Liquidation Amount) and the Company Trustees or the Preferred Trustee may, at any time in their discretion, call a meeting of Preferred Securityholders to vote on any matters as to which Preferred Securityholders are entitled to vote. Preferred Securityholders of record of 50% of the Outstanding Preferred Securities (based upon their Liquidation Amount), present in person or by proxy, shall constitute a quorum at any meeting of Securityholders. If a quorum is present at a meeting, an affirmative vote by the Preferred Securityholders of record present, in person or by proxy, holding more than a majority of the Preferred Securities (based upon their Liquidation Amount) held by the Preferred Securityholders of record present, either in person or by proxy, at such meeting shall constitute the action of the Securityholders, unless this Declaration requires a greater number of affirmative votes. .4 Voting Rights. Securityholders shall be entitled to one vote for each $1,000 of Liquidation Amount represented by their Trust Securities in respect of any matter as to which such Securityholders are entitled to vote. .5 Proxies, etc. At any meeting of Securityholders, any Securityholder entitled to vote thereat may vote by proxy, provided, that no proxy shall be voted at any meeting unless it shall have been placed on file with the Company Trustees, or with such other officer or agent of the Trust as the Company Trustees may direct, for verification prior to the time at which such vote shall be taken. Proxies may be solicited in the name of the Preferred Trustee or one or more officers of the Preferred Trustee. Only Securityholders of record shall be entitled to vote. When Trust Securities are held jointly by several persons, any one of them may vote at any meeting in person or by proxy in respect of such Trust Securities, but if more than one of them shall be present at such meeting in person or by proxy, and such joint owners or their proxies so present disagree as to any vote to be cast, such vote shall not be received in respect of such Trust Securities. A proxy purporting to be executed by or on behalf of a Securityholder shall be deemed valid unless challenged at or prior to its exercise, and the burden of proving 37 44 invalidity shall rest on the challenger. No proxy shall be valid more than three years after its date of execution. .6 Securityholder Action by Written Consent. Any action which may be taken by Securityholders at a meeting may be taken without a meeting if Securityholders holding more than a majority of all Outstanding Trust Securities (based upon their Liquidation Amount) entitled to vote in respect of such action (or such larger proportion thereof as shall be required by any express provision of this Declaration) shall consent to the action in writing. Any such action shall be effective at the time specified in or determined in accordance with the notice distributed pursuant to Section 6.2 hereof. .7 Record Date for Voting and Other Purposes. For the purposes of determining the Securityholders who are entitled to notice of and to vote at any meeting or by written consent, or to participate in any Distribution on the Trust Securities in respect of which a record date is not otherwise provided for in this Declaration, or for the purpose of any other action, the Company Trustees may from time to time fix a date, not more than 90 days prior to the date of any meeting of Securityholders or the payment of a distribution or other action, as the case may be, as a record date for the determination of the identity of the Securityholders of record for such purposes. .8 Acts of Securityholders. Any request, demand, authorization, direction, notice, consent, waiver or other action provided or permitted by this Declaration to be given, made or taken by Securityholders or Owners may be embodied in and evidenced by one or more instruments of substantially similar tenor signed by such Securityholders or Owners in person or by an agent duly appointed in writing; and, except as otherwise expressly provided herein, such action shall become effective when such instrument or instruments are delivered to a Company Trustee. Such instrument or instruments (and the action embodied therein and evidenced thereby) are herein sometimes referred to as the "Act" of the Securityholders or Owners signing such instrument or instruments. Proof of execution of any such instrument or of a writing appointing any such agent shall be sufficient for any purpose of this Declaration and (subject to Section 8.1) conclusive in favor of the Trustees, if made in the manner provided in this Section. The fact and date of the execution by any Person of any such instrument or writing may be proved by the affidavit of a witness of such execution or by a certificate of a notary public or other officer authorized by law to take acknowledgments of deeds, certifying that the individual signing such instrument or writing acknowledged to him the execution thereof. Where such execution is by a signer acting in a capacity other than his individual capacity, such certificate or affidavit shall also constitute sufficient proof of his authority. The fact and date of the execution of any such instrument or writing, or the authority of the Person executing the same, may also be proved in any other manner which any Trustee receiving the same deems sufficient. 38 45 The ownership of Preferred Securities shall be proved by the Securities Register. Any request, demand, authorization, direction, notice, consent, waiver or other Act of the Securityholder of any Trust Security shall bind every future Securityholder of the same Trust Security and the Securityholder of every Trust Security issued upon the registration of transfer thereof or in exchange therefor or in lieu thereof in respect of anything done, omitted or suffered to be done by the Trustees or the Trust in reliance thereon, whether or not notation of such action is made upon such Trust Security. Without limiting the foregoing, a Securityholder entitled hereunder to take any action hereunder with regard to any particular Trust Security may do so with regard to all or any part of the Liquidation Amount of such Trust Security or by one or more duly appointed agents each of which may do so pursuant to such appointment with regard to all or any part of such liquidation amount. If any dispute shall arise between the Securityholders and the Company Trustees or among such Securityholders or Trustees with respect to the authenticity, validity or binding nature of any request, demand, authorization, direction, consent, waiver or other Act of such Securityholder or Trustee under this Article VI, then the determination of such matter by the Preferred Trustee shall be conclusive with respect to such matter. A Securityholder may institute a legal proceeding directly against the Sponsor under the Trust Guarantee to enforce its rights under the Trust Guarantee without first instituting a legal proceeding against the Guarantee Trustee (as defined in the Guarantee Agreement), the Trust or any person or entity. .9 Inspection of Records. Upon reasonable notice to the Company Trustees and the Preferred Trustee, the records of the Trust shall be open to inspection by Securityholders during normal business hours for any purpose reasonably related to such Securityholder's interest as a Securityholder. ARTICLE VII REPRESENTATIONS AND WARRANTIES .1 Representations and Warranties of the Bank, the Preferred Trustee and the Delaware Trustee. The Preferred Trustee and the Delaware Trustee, as the case may be, each severally on behalf of and only as to itself, hereby represents and warrants for the benefit of the Sponsor, the Company Trustees and the Securityholders that: (A) the Preferred Trustee is a Massachusetts chartered trust company duly organized, validly existing and in good standing under the laws of such Commonwealth; (B) the Preferred Trustee has full corporate power, authority and legal right to execute, deliver and perform its obligations under this Declaration and has 39 46 taken all necessary action to authorize the execution, delivery and performance by it of this Declaration; (C) the Delaware Trustee is a national banking association duly organized, validly existing and in good standing under the laws of the United States; (D) the Delaware Trustee has full corporate power, authority and legal right to execute, deliver and perform its obligations under this Declaration and has taken all necessary action to authorize the execution, delivery and performance by it of this Declaration; (E) this Declaration has been duly authorized, executed and delivered by the Preferred Trustee and the Delaware Trustee and constitutes the valid and legally binding agreement of each of the Preferred Trustee and the Delaware Trustee enforceable against each of them in accordance with its terms, subject to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar laws of general applicability relating to or affecting creditors' rights and to general equity principles; (F) the execution, delivery and performance of this Declaration by the Preferred Trustee and the Delaware Trustee, respectively, has been duly authorized by all necessary corporate or other action on the part of the Preferred Trustee and the Delaware Trustee, respectively, and does not require any approval of stockholders, of the Preferred Trustee or the Delaware Trustee and such execution, delivery and performance will not (i) violate the Charter or By-laws of the Preferred Trustee or the Delaware Trustee, (ii) violate any provision of, or constitute, with or without notice or lapse of time, a default under, or result in the creation or imposition of, any Lien on any properties included in the Trust Property pursuant to the provisions of, any indenture, mortgage, credit agreement, license or other agreement or instrument to which the Preferred Trustee or the Delaware Trustee is a party or by which it is bound, or (iii) violate any law, governmental rule or regulation of the Commonwealth of Massachusetts, or the United States, as the case may be, governing the banking, trust or general powers of the Preferred Trustee or the banking, trust or general powers of the Delaware Trustee (as appropriate in context) or any order, judgment or decree applicable to the Preferred Trustee or the Delaware Trustee; (G) neither the authorization, execution or delivery by the Preferred Trustee or the Delaware Trustee of this Declaration nor the consummation of any of the transactions by the Preferred Trustee or the Delaware Trustee (as appropriate in context) contemplated herein requires the consent or approval of, the giving of notice to, the registration with or the taking of any other action with respect to (i) any governmental authority or agency under any existing Federal or State law governing the banking, trust or general powers of the Preferred Trustee (ii) with respect to any governmental authority or agency under any existing Federal or Delaware law governing the banking or trust powers of the Delaware Trustee (in each case, other than (a) the qualification of this Declaration, the Indenture and the Trust Guarantee under the Trust Indenture Act upon issuance of Exchange Preferred Securities hereunder, and (b) the filing of the Certificate of Trust as required under the Delaware Business Trust Act); and 40 47 (H) there are no proceedings pending or, to the best of each of the Preferred Trustee's and the Delaware Trustee's knowledge, threatened against or affecting the Preferred Trustee or the Delaware Trustee in any court or before any governmental authority, agency or arbitration board or tribunal which, individually or in the aggregate, would materially and adversely affect the Trust or would question the right, power and authority of the Preferred Trustee or the Delaware Trustee, as the case may be, to enter into or perform its obligations as one of the Trustees under this Declaration. .2 Representations and Warranties of Sponsor. The Sponsor hereby represents and warrants for the benefit of the Securityholders that: (A) the Trust Securities Certificates issued on the Closing Date on behalf of the Trust have been duly authorized and will have been duly and validly executed, issued and delivered by the Trustees pursuant to the terms and provisions of, and in accordance with the requirements of, this Declaration and the Securityholders will be, as of each such date, entitled to the benefits of this Declaration; (B) there are no taxes, fees or other governmental charges payable by the Trust (or the Trustees on behalf of the Trust) under the laws of the State of Delaware or any political subdivision thereof in connection with the execution, delivery and performance by the Preferred Trustee or the Delaware Trustee, as the case may be, of this Declaration; and (C) to its knowledge, since the date of the creation of the Trust through the date hereof, no Trust Securities have been issued and the Trust has not conducted any business nor incurred any liabilities and the Trust has not been caused to conduct any business nor to incur any liabilities. ARTICLE VIII THE TRUSTEES .1 Certain Duties and Responsibilities. (A) The duties and responsibilities of the Trustees shall be as provided by this Declaration and, in the case of the Preferred Trustee, subject to Section 10.11(a) hereof, the Trust Indenture Act. Notwithstanding the foregoing, no provision of this Declaration shall require the Trustees to expend or risk their own funds or otherwise incur any financial liability in the performance of any of their duties hereunder, or in the exercise of any of their rights or powers, if they 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. Whether or not therein expressly so provided, every provision of this Declaration relating to the conduct or affecting the liability of or affording protection to the Trustees shall be subject to the provisions of this Section 8.1. Nothing in this Declaration shall be construed to release the Preferred Trustee from liability for its own negligent action, its own negligent failure to act, or its own willful misconduct. The Delaware Trustee shall have no personal liability under this Declaration except to the Trust, the Sponsor and the Holders for its gross negligence or willful 41 48 misconduct. To the extent that, at law or in equity, a Company Trustee or the Delaware Trustee has duties (including fiduciary duties) and liabilities relating thereto to the Trust or to the Securityholders, such Company Trustee or the Delaware Trustee shall not be liable to the Trust or to any Securityholder for such Trustee's good faith reliance on the provisions of this Declaration. The provisions of this Declaration, to the extent that they restrict the duties and liabilities of the Company Trustees and the Delaware Trustee otherwise existing at law or in equity, are agreed by the Sponsor and the Securityholders to replace such other duties and liabilities of the Company Trustees and the Delaware Trustee. (B) All payments made by the Preferred Trustee or a Paying Agent in respect of the Trust Securities shall be made only from the revenue and proceeds from the Trust Property and only to the extent that there shall be sufficient revenue or proceeds from the Trust Property to enable the Preferred Trustee or a Paying Agent to make payments in accordance with the terms hereof. Each Securityholder, by its acceptance of a Trust Security, agrees that it will look solely to the revenue and proceeds from the Trust Property to the extent legally available for distribution to it as herein provided and that the Trustees are not personally liable to it for any amount distributable in respect of any Trust Security or for any other liability in respect of any Trust Security. This Section 8.1(b) does not limit the liability of the Trustees expressly set forth elsewhere in this Declaration or, in the case of the Preferred Trustee, in the Trust Indenture Act. (C) Subject to Section 5.14 hereof, if a Declaration Event of Default has occurred and is continuing, the Preferred Trustee shall enforce this Declaration for the benefit of the Holders. The Preferred Trustee, before the occurrence of any Declaration Event of Default and after the curing of all Declaration Events of Default that may have occurred, shall undertake to perform only such duties as are specifically set forth in this Declaration (including pursuant to Section 10.11), and no implied covenants shall be read into this Declaration against the Preferred Trustee. If a Declaration Event of Default has occurred (that has not been cured or waived pursuant to Section 5.14), the Preferred Trustee shall exercise such of the rights and powers vested in it by this Declaration, 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 or her own affairs. (D) No provision of this Declaration shall be construed to relieve the Preferred Trustee from liability for its own negligent action, its own negligent failure to act, or its own willful misconduct, except that: (i) the Preferred Trustee shall not be liable for any error of judgment made in good faith by an authorized officer of the Preferred Trustee, unless it shall be proved that the Preferred Trustee was negligent in ascertaining the pertinent facts; (ii) the Preferred Trustee shall not be liable with respect to any action taken or omitted to be taken by it in good faith in accordance with the direction of the Holders of not less than a majority in Liquidation Amount of the Trust Securities relating to the time, method and place of conducting any proceeding for any remedy available to the Preferred Trustee, or exercising any trust or power conferred upon the Preferred Trustee under this Declaration; 42 49 (iii) the Preferred Trustee's sole duty with respect to the custody, safe keeping and physical preservation of the Notes and the Payment Account shall be to deal with such Property in a similar manner as the Preferred Trustee deals with similar property for its own account, subject to the protections and limitations on liability afforded to the Preferred Trustee under this Declaration and the Trust Indenture Act; (iv) the Preferred Trustee shall not be liable for any interest on any money received by it except as it may otherwise agree with the Sponsor; and money held by the Preferred Trustee need not be segregated from other funds held by it except in relation to the Payment Account maintained by the Preferred Trustee pursuant to Section 3.1 and except to the extent otherwise required by law; and (v) the Preferred Trustee shall not be responsible for monitoring the compliance by the Company Trustees or the Sponsor with their respective duties under this Declaration, nor shall the Preferred Trustee be liable for the default or misconduct of the Company Trustees or the Sponsor. .2 Certain Notices. Within five Business Days after the occurrence of any Declaration Event of Default actually known to an officer in the Corporate Trust Administration office of the Preferred Trustee, the Preferred Trustee shall transmit, in the manner and to the extent provided in Section 10.9, notice of such Declaration Event of Default to the Securityholders, the Company Trustees, the Delaware Trustee and the Sponsor, unless such Declaration Event of Default shall have been cured or waived. .3 Certain Rights of Preferred Trustee. Subject to the provisions of Section 8.1: (A) the Preferred Trustee may rely and shall be protected in acting or refraining from acting in good faith upon any resolution, Opinion of Counsel, certificate, written representation of a Holder or transferee, certificate of auditors or any other certificate, statement, instrument, opinion, report, notice, request, consent, order, appraisal, bond, debenture, note, other evidence of indebtedness or other paper or document believed by it to be genuine and to have been signed or presented by the proper party or parties; (B) if (i) in performing its duties under this Declaration the Preferred Trustee is required to decide between alternative courses of action or (ii) in construing any of the provisions of this Declaration the Preferred Trustee finds the same ambiguous or inconsistent with any other provisions contained herein or (iii) the Preferred Trustee is unsure of the application of any provision of this Declaration, then, except as to any matter as to which the Preferred Securityholders are entitled to vote under the terms of this Declaration, the Preferred Trustee shall deliver a notice to the Sponsor requesting written instructions of the Sponsor as to the course of action to be taken and the Preferred Trustee shall take such action, or refrain from taking such action, as the Preferred Trustee shall be instructed in writing to take, or to refrain from taking, by the Sponsor; provided, however, that if the Preferred Trustee does not 43 50 receive such instructions of the Sponsor within ten Business Days after it has delivered such notice, or such reasonably shorter period of time set forth in such notice (which to the extent practicable shall not be less than five Business Days), it may, but shall be under no duty to, take or refrain from taking such action not inconsistent with this Declaration as it shall deem advisable and in the best interests of the Securityholders, in which event the Preferred Trustee shall have no liability except for its own bad faith, negligence or willful misconduct; (C) any direction or act of the Sponsor or the Company Trustees contemplated by this Declaration shall be sufficiently evidenced by an Officers' Certificate with respect to the Sponsor and a certificate of any one of the Company Trustees with respect to the Company Trustees; (D) whenever in the administration of this Declaration, the Preferred Trustee shall deem it desirable that a matter be established before undertaking, suffering or omitting any action hereunder, the Preferred Trustee (unless other evidence is herein specifically prescribed) may, in the absence of bad faith on its part, request and rely upon an Officers' Certificate or certificate from any one of the Company Trustees which, upon receipt of such request, shall be promptly delivered by the Sponsor or the Company Trustees; (E) the Preferred Trustee shall have no duty to see to any recording, filing or registration of any instrument (including any financing or continuation statement or any filing under tax or securities laws) or any rerecording, refiling or re-registration thereof; (F) the Preferred Trustee may consult with counsel (which counsel may be counsel to the Sponsor or any of its Affiliates, and may include any of its employees) and the written advice of such counsel shall be full and complete authorization and protection in respect of any action taken, suffered or omitted by it hereunder in good faith and in reliance thereon and in accordance with such advice, such counsel may be counsel to the Sponsor or any of its Affiliates, and may include any of its employees; the Preferred Trustee shall have the right at any time to seek instructions concerning the administration of this Declaration from any court of competent jurisdiction; (G) the Preferred Trustee shall be under no obligation to exercise any of the rights or powers vested in it by this Declaration at the request or direction of any of the Securityholders pursuant to this Declaration, unless such Securityholders shall have offered to the Preferred Trustee reasonable security or indemnity against the costs, expenses and liabilities which might be incurred by it in compliance with such request or direction; (H) the Preferred Trustee shall not be bound to make any investigation into the facts or matters stated in any resolution, certificate, statement, instrument, opinion, report, notice, request, consent, order, approval, bond, debenture, note or other evidence of indebtedness or other paper or document, unless requested in writing to do so by one or more Securityholders; 44 51 (I) the Preferred Trustee may execute any of the trusts or powers hereunder or perform any duties hereunder either directly or by or through its agents or attorneys, provided, that the Preferred Trustee shall be responsible for its own negligence or recklessness with respect to selection of any agent or attorney appointed by it hereunder; (J) whenever in the administration of this Declaration the Preferred Trustee shall deem it desirable to receive instructions with respect to enforcing any remedy or right or taking any other action hereunder the Preferred Trustee (i) may request instructions from the Holders of the Trust Securities which instructions may only be given by the Holders of the same proportion in Liquidation Amount of the Trust Securities as would be entitled to direct the Preferred Trustee under the terms of the Trust Securities in respect of such remedy, right or action, (ii) may refrain from enforcing such remedy or right or taking such other action until such instructions are received, and (iii) shall be protected in acting in accordance with such instructions; (K) except as otherwise expressly provided by this Declaration, the Preferred Trustee shall not be under any obligation to take any action that is discretionary under the provisions of this Declaration; and (l) if the Initial Purchasers named in the Purchase Agreement request or if the Clearing Agency requires that the Preferred Securities be identified on the Clearing Agency records by reference to the liquidation amount or in increments of the liquidation value of the Preferred Securities, the Preferred Trustee is authorized to take any actions necessary to comply with such request or requirement. No provision of this Declaration shall be deemed to impose any duty or obligation on the Preferred Trustee to perform any act or acts or exercise any right, power, duty or obligation conferred or imposed on it, in any jurisdiction in which it shall be illegal, or in which the Preferred Trustee shall be unqualified or incompetent in accordance with applicable law, to perform any such act or acts, or to exercise any such right, power, duty or obligation. No permissive power or authority available to the Preferred Trustee shall be construed to be a duty. .4 Not Responsible for Recitals or Issuance of Securities. The recitals contained herein and in the Trust Securities Certificates shall be taken as the statements of the Trust, and the Trustees (other than the Company Trustees) do not assume any responsibility for their correctness. The Trustees (other than the Company Trustees) shall not be accountable for the use or application by the Sponsor or the Issuer of the proceeds of the Notes. .5 May Hold Securities. Except as provided in the definition of the term "Outstanding" in Article I, any Trustee or any other agent of any Trustee or the Trust, in its individual or any other capacity, may become the owner or pledgee of Trust Securities and, subject to Sections 8.8 and 8.13, may otherwise deal with the Trust with the same rights it would have if it were not a Trustee or such other agent. 45 52 .6 Compensation; Indemnity; Fees. The Sponsor agrees: (A) to pay to the Trustees and to any Paying Agent appointed by the Sponsor from time to time reasonable compensation for all services rendered by them hereunder (which compensation shall not be limited by any provision of law in regard to the compensation of a trustee of an express trust); (B) except as otherwise expressly provided herein, to reimburse the Trustees and Paying Agent upon request for all reasonable expenses, disbursements and advances incurred or made by the Trustees and Paying Agent in accordance with any provision of this Declaration (including the reasonable compensation and the expenses and disbursements of its agents and counsel), except any such expense, disbursement or advance as may be attributable to its negligence (or, in the case of the Delaware Trustee, gross negligence) or bad faith; (C) to the fullest extent permitted by applicable law, to indemnify and hold harmless (i) each Trustee, (ii) each Paying Agent, (iii) any Affiliate of any Trustee (other than the Sponsor), (iv) any officer, director, shareholder, employee, representative or agent of any Trustee, and (v) any employee or agent of the Trust or its Affiliates (other than the Sponsor) (referred to herein as an "Indemnified Person"), from and against any loss, damage, liability, tax, penalty, expense or claim of any kind or nature whatsoever incurred by such Indemnified Person by reason of the creation, operation or termination of the Trust or any act or omission performed or omitted by such Indemnified Person in good faith on behalf of the Trust and in a manner such Indemnified Person reasonably believed to be within the scope of authority conferred on such Indemnified Person by this Declaration, except that no Indemnified Person shall be entitled to be indemnified in respect of any loss, damage or claim incurred by such Indemnified Person by reason of its negligence (or, in the case of the Delaware Trustee and its related Indemnified Persons, gross negligence) or willful misconduct with respect to such acts or omissions; and (D) to the fullest extent permitted by applicable law, to advance expenses (including legal fees) incurred by an Indemnified Person in defending any claim, demand, action, suit or proceeding, from time to time, prior to the final disposition of such claim, demand, action, suit or proceeding upon receipt by the Sponsor of (i) a written affirmation by or on behalf of the Indemnified Person of its or his good faith belief that it or he has met the standard of conduct set forth in this Section 8.6 and (ii) an undertaking by or on behalf of the Indemnified Person to repay such amount if it shall be determined that the Indemnified Person is not entitled to be indemnified as authorized in the preceding subsection. The provisions of this Section 8.6 shall survive the termination of this Declaration and the removal or resignation of any Trustee or Paying Agent. No Trustee may claim any lien or charge on any Trust Property as a result of any amount due pursuant to this Section 8.6. 46 53 The Sponsor, the Issuer (subject to the Indenture) and any Trustee may engage in or possess an interest in other business ventures of any nature or description, independently or with others, similar or dissimilar to the business of the Trust, and the Trust and the Holders of Trust Securities shall have no rights by virtue of this Declaration in and to such independent ventures or the income or profits derived therefrom, and the pursuit of any such venture, even if competitive with the business of the Trust, shall not be deemed wrongful or improper. Neither the Sponsor, nor any Trustee, shall be obligated to present any particular investment or other opportunity to the Trust even if such opportunity is of a character that, if presented to the Trust, could be taken by the Trust, and the Sponsor or any Trustee shall have the right to take for its own account (individually or as a partner or fiduciary) or to recommend to others any such particular investment or other opportunity. Any Trustee may engage or be interested in any financial or other transaction with the Sponsor or any Affiliate of the Sponsor, or may act as depository for, trustee or agent for, or act on any committee or body of holders of, securities or other obligations of the Sponsor or its Affiliates. .7 Corporate Preferred Trustee Required; Eligibility of Trustees. (A) There shall at all times be a Preferred Trustee hereunder with respect to the Trust Securities. The Preferred Trustee shall be a Person that is eligible pursuant to the Trust Indenture Act to act as such and has a combined capital and surplus of at least $50,000,000. If any such Person publishes reports of condition at least annually, pursuant to law or to the requirements of its supervising or examining authority, then for the purposes of this Section, the combined capital and surplus of such Person shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published. If at any time the Preferred Trustee with respect to the Trust Securities shall cease to be eligible in accordance with the provisions of this Section, it shall resign immediately in the manner and with the effect hereinafter specified in this Article. (B) There shall at all times be one or more Company Trustees hereunder with respect to the Trust Securities. Each Company Trustee shall be either a natural person who is at least 21 years of age or a legal entity that shall act through one or more persons authorized to bind that entity. (C) There shall at all times be a Delaware Trustee with respect to the Trust Securities. The Delaware Trustee shall either be (i) a natural person who is at least 21 years of age and a resident of the State of Delaware or (ii) a legal entity with its principal place of business in the State of Delaware and that otherwise meets the requirements of applicable Delaware law that shall act through one or more persons authorized to bind such entity. .8 Conflicting Interests. (A) If the Preferred Trustee has or shall acquire a conflicting interest within the meaning of the Trust Indenture Act, the Preferred Trustee shall either eliminate such interest or resign, to the extent and in the manner provided by, and subject to the provisions of, the Trust Indenture Act and this Declaration. (B) The Guarantee Agreement and the Indenture as well as the Guarantee Agreements, Declarations and Indentures relating to the 9% Trust Preferred Securities of Fresenius Medical Care Capital Trust, the 7 7/8% USD Trust Preferred Securities of Fresenius 47 54 Medical Care Capital Trust II and the 7 3/8% DM Trust Preferred Securities of Fresenius Medical Care Capital Trust III shall be deemed to be specifically described in this Declaration for the purposes of clause (i) of the first proviso contained in Section 310(b) of the Trust Indenture Act. .9 Co-Trustees and Separate Trustee. Unless a Declaration Event of Default shall have occurred and be continuing, at any time or times, for the purpose of meeting the legal requirements of the Trust Indenture Act or of any jurisdiction in which any part of the Trust Property may at the time be located, the Sponsor and the Company Trustees, by agreed action of the majority of such Trustees, shall have power to appoint, and upon the written request of the Company Trustees, the Sponsor shall for such purpose join with the Company Trustees in the execution, delivery, and performance of all instruments and agreements necessary or proper to appoint, one or more Persons approved by the Preferred Trustee either to act as co-trustee, jointly with the Preferred Trustee, of all or any part of such Trust Property, or to the extent required by law to act as separate trustee of any such property, in either case with such powers as may be provided in the instrument of appointment, and to vest in such Person or Persons in the capacity aforesaid, any property, title, right or power deemed necessary or desirable, subject to the other provisions of this Section. If the Sponsor does not join in such appointment within 15 days after the receipt by it of a request so to do, or in case a Declaration Event of Default has occurred and is continuing, the Preferred Trustee alone shall have power to make such appointment. Any co- trustee or separate trustee appointed pursuant to this Section shall either be (i) a natural person who is at least 21 years of age and a resident of the United States or (ii) a legal entity with its principal place of business in the United States that shall act through one or more persons authorized to bind such entity. Should any written instrument from the Sponsor be required by any co-trustee or separate trustee so appointed for more fully confirming to such co-trustee or separate trustee such property, title, right, or power, any and all such instruments shall, on request, be executed, acknowledged and delivered by the Sponsor. Every co-trustee or separate trustee shall, to the extent permitted by law, but to such extent only, be appointed subject to the following terms, namely: (A) The Trust Securities shall be executed, authenticated and delivered and all rights, powers, duties, and obligations hereunder in respect of the custody of securities, cash and other personal property held by, or required to be deposited or pledged with, the Trustees specified hereunder, shall be exercised, solely by such Trustees and not by such co-trustee or separate trustee. (B) The rights, powers, duties, and obligations hereby conferred or imposed upon the Preferred Trustee in respect of any property covered by such appointment shall be conferred or imposed upon and exercised or performed by the Preferred Trustee or by the Preferred Trustee and such co-trustee or separate trustee jointly, as shall be provided in the instrument appointing such co-trustee or separate trustee, except to the extent that under any law of any jurisdiction in which any particular act is to be performed, the Preferred Trustee shall be incompetent or 48 55 unqualified to perform such act, in which event such rights, powers, duties and obligations shall be exercised and performed by such co-trustee or separate trustee. (C) The Preferred Trustee at any time, by an instrument in writing executed by it, with the written concurrence of the Sponsor and the Issuer, may accept the resignation of or remove any co-trustee or separate trustee appointed under this Section, and, in case a Declaration Event of Default has occurred and is continuing, the Preferred Trustee shall have power to accept the resignation of, or remove, any such co-trustee or separate trustee without the concurrence of the Sponsor. Upon the written request of the Preferred Trustee, the Sponsor and the Issuer shall join with the Preferred Trustee in the execution, delivery and performance of all instruments and agreements necessary or proper to effectuate such resignation or removal. A successor to any co-trustee or separate trustee so resigned or removed may be appointed in the manner provided in this Section. (D) No co-trustee or separate trustee hereunder shall be personally liable by reason of any act or omission of the Preferred Trustee or any other trustee hereunder. (E) The Preferred Trustee shall not be liable by reason of any act or omission of a co-trustee or separate trustee. (F) Any Act of Holders delivered to the Preferred Trustee shall be deemed to have been delivered to each such co-trustee and separate trustee. .10 Resignation and Removal; Appointment of Successor. No resignation or removal of any Trustee (the "Relevant Trustee") and no appointment of a successor Trustee pursuant to this Article shall become effective until the acceptance of appointment by the successor Trustee in accordance with the applicable requirements of Section 8.11. Subject to the immediately preceding paragraph, the Relevant Trustee may resign at any time by giving written notice thereof to the Securityholders, the Sponsor, the Issuer and the other Trustees. If the instrument of acceptance by the successor Trustee required by Section 8.11 shall not have been delivered to the Relevant Trustee within 30 days after the giving of such notice of resignation, the Relevant Trustee may petition, at the expense of the Trust, any court of competent jurisdiction for the appointment of a successor Relevant Trustee. Unless a Declaration Event of Default shall have occurred and be continuing, any Trustee may be removed at any time by Act of the Common Securityholder(s). If a Declaration Event of Default shall have occurred and be continuing, the Preferred Trustee or the Delaware Trustee, or both of them, may be removed at such time by Act of the Holders of a majority in Liquidation Amount of the Preferred Securities, delivered to the Relevant Trustee (in its individual capacity and on behalf of the Trust). A Company Trustee may be removed by the Common Securityholder(s) at any time. 49 56 If any Trustee shall resign, be removed or become incapable of acting as Trustee, or if a vacancy shall occur in the office of any Trustee for any cause, at a time when no Declaration Event of Default shall have occurred and be continuing, the Common Securityholder(s), by Act of the Common Securityholder(s) delivered to the retiring Trustee, shall promptly appoint a successor Trustee or Trustees, and the retiring Trustee shall comply with the applicable requirements of Section 8.11. If the Preferred Trustee or the Delaware Trustee shall resign, be removed or become incapable of continuing to act as the Preferred Trustee or the Delaware Trustee, as the case may be, at a time when a Declaration Event of Default shall have occurred and be continuing, the Preferred Securityholders, by Act of the Securityholders of a majority in Liquidation Amount of the Preferred Securities then Outstanding delivered to the retiring Relevant Trustee, shall promptly appoint a successor Relevant Trustee or Trustees, and such successor Trustee shall comply with the applicable requirements of Section 8.11. If a Company Trustee shall resign, be removed or become incapable of acting as Company Trustee, at a time when a Declaration Event of Default shall have occurred and be continuing, the Common Securityholder(s) by Act of the Common Securityholder(s) delivered to the Company Trustee shall promptly appoint a successor Company Trustee or Company Trustees and such successor Company Trustee or Trustees shall comply with the applicable requirements of Section 8.11. If no successor Relevant Trustee shall have been so appointed by the Common Securityholder(s) or the Preferred Securityholders and accepted appointment in the manner required by Section 8.11, any Trustee may or any Securityholder who has been a Securityholder of Trust Securities for at least six months may, on behalf of himself and all others similarly situated, petition any court of competent jurisdiction for the appointment of a successor Relevant Trustee. The Preferred Trustee shall give notice of each resignation and each removal of a Trustee and each appointment of a successor Trustee to all Securityholders in the manner provided in Section 10.9 and shall give notice to the Sponsor. Each notice shall include the name of the successor Relevant Trustee and the address of its Corporate Trust Office if it is the Preferred Trustee. Notwithstanding the foregoing or any other provision of this Declaration, in the event any Company Trustee or a Delaware Trustee who is a natural person dies or becomes, in the opinion of the Sponsor, incompetent or incapacitated, the vacancy created by such death, incompetence or incapacity may be filled by (a) the unanimous act of remaining Company Trustees if there are at least two of them or (b) otherwise by the Sponsor (with the successor in each case being a Person who satisfies the eligibility requirement for Company Trustees or Delaware Trustee, as the case may be, set forth in Section 8.7). .11 Acceptance of Appointment by Successor. In case of the appointment hereunder of a successor Trustee such successor Trustee so appointed shall execute, acknowledge and deliver to the Trust and to the retiring Trustee an instrument accepting such appointment, and thereupon the resignation or removal of the retiring Trustee shall become effective and such successor Trustee, without any further act, deed or conveyance, shall become vested with all the rights, powers, trusts and duties of the retiring Trustee; but, on the request of the Sponsor or the successor Trustee, such retiring Trustee shall, upon payment of its charges, execute and deliver an instrument transferring to such successor Trustee all the rights, powers and trusts of the retiring Trustee and if the 50 57 Preferred Trustee is the resigning Trustee shall duly assign, transfer and deliver to the successor Trustee all property and money held by such retiring Preferred Trustee hereunder. In case of the appointment hereunder of a successor Relevant Trustee, the retiring Relevant Trustee and each successor Relevant Trustee with respect to the Trust Securities shall execute and deliver an amendment hereto wherein each successor Relevant Trustee shall accept such appointment and which (a) shall contain such provisions as shall be necessary or desirable to transfer and confirm to, and to vest in, each successor Relevant Trustee all the rights, powers, trusts and duties of the retiring Relevant Trustee with respect to the Trust Securities and the Trust and (b) shall add to or change any of the provisions of this Declaration as shall be necessary to provide for or facilitate the administration of the Trust by more than one Relevant Trustee, it being understood that nothing herein or in such amendment shall constitute such Relevant Trustees co-trustees and upon the execution and delivery of such amendment the resignation or removal of the retiring Relevant Trustee shall become effective to the extent provided therein and each such successor Relevant Trustee, without any further act, deed or conveyance, shall become vested with all the rights, powers, trusts and duties of the retiring Relevant Trustee; but, on request of the Trust or any successor Relevant Trustee such retiring Relevant Trustee shall duly assign, transfer and deliver to such successor Relevant Trustee all Trust Property, all proceeds thereof and money held by such retiring Relevant Trustee hereunder with respect to the Trust Securities and the Trust. Upon request of any such successor Relevant Trustee, the Trust shall execute any and all instruments for more fully and certainly vesting in and confirming to such successor Relevant Trustee all such rights, powers and trusts referred to in the first or second preceding paragraph, as the case may be. No successor Relevant Trustee shall accept its appointment unless at the time of such acceptance such successor Relevant Trustee shall be qualified and eligible under this Article. .12 Merger, Conversion, Consolidation or Succession to Business. Any corporation, association or other entity into which the Preferred Trustee or the Delaware Trustee may be merged or converted or with which it may be consolidated, or any corporation, association or other entity resulting from any merger, conversion or consolidation to which such Relevant Trustee shall be a party, or any corporation, association or other entity succeeding to all or substantially all the corporate trust business of such Relevant Trustee, shall be the successor of such Relevant Trustee hereunder, provided such corporation, association or other entity shall be otherwise qualified and eligible under this Article, without the execution or filing of any paper or any further act on the part of any of the parties hereto. .13 Preferential Collection of Claims Against Sponsor or Trust. If and when the Preferred Trustee shall be or become a creditor of the Sponsor, any other Guarantor, the Issuer or the Trust (or any other obligor upon the Preferred Securities), the Preferred Trustee shall be subject to the provisions of the Trust Indenture Act regarding the collection of claims against the Sponsor, any other Guarantor, the Issuer or the Trust (or any such other obligor). 51 58 .14 Preferred Trustee May File Proofs of Claim. In case of the pendency of any receivership, insolvency, liquidation, bankruptcy, reorganization, arrangement, adjustment, composition or other similar judicial proceeding relative to the Trust or any other obligor upon the Trust Securities or the property of the Trust or of such other obligor or their creditors, the Preferred Trustee (irrespective of whether any Distributions on the Trust Securities shall then be due and payable as therein expressed or by declaration or otherwise and irrespective of whether the Preferred Trustee shall have made any demand on the Trust for the payment of any past due Distributions) shall be entitled and empowered, to the fullest extent permitted by law, by intervention in such proceeding or otherwise: (A) to file and prove a claim for the whole amount of any Distributions owing and unpaid in respect of the Trust Securities and to file such other papers or documents as may be necessary or advisable in order to have the claims of the Preferred Trustee (including any claim for the reasonable compensation, expenses, disbursements and advances of the Preferred Trustee, its agents and counsel) and of the Holders allowed in such judicial proceeding, and (B) to collect and receive any moneys or other property payable or deliverable on any such claims and to distribute the same; and any custodian, receiver, assignee, trustee, liquidator, sequestrator or other similar official in any such judicial proceeding is hereby authorized by each Holder to make such payments to the Preferred Trustee and, in the event the Preferred Trustee shall consent to the making of such payments directly to the Holders, to pay to the Preferred Trustee any amount due it for the reasonable compensation, expenses, disbursements and advances of the Preferred Trustee, its agents and counsel, and any other amounts due the Preferred Trustee. Nothing herein contained shall be deemed to authorize the Preferred Trustee to authorize or consent to or accept or adopt on behalf of any Holder any plan of reorganization, arrangement adjustment or compensation affecting the Trust Securities or the rights of any Holder thereof or to authorize the Preferred Trustee to vote in respect of the claim of any Holder in any such proceeding. .15 Reports by Preferred Trustee. (A) Not later than 60 days after May 15 of each year commencing with May 15, 2002, the Preferred Trustee shall transmit to all Securityholders in accordance with Section 10.9, and to the Sponsor, a brief report, to the extent required by the Trust Indenture Act, with respect to any of the following events which may have occurred within the previous 12 months (or, in the case of the initial report, the period since the Closing Date): (i) its eligibility under Section 8.7 or, in lieu thereof, if to the best of its knowledge it has continued to be eligible under said Section, a written statement to such effect; 52 59 (ii) a statement that the Preferred Trustee has complied with all of its obligations under this Declaration or, if the Preferred Trustee has not complied in any material respect with such obligations, a description of such noncompliance; and (iii) any change in the property and funds in its possession as Preferred Trustee since the date of its last report and any action taken by the Preferred Trustee in the performance of its duties hereunder which it has not previously reported and which in its opinion materially affects the Trust Securities. (B) In addition, the Preferred Trustee shall transmit to Securityholders such reports concerning the Preferred Trustee and its actions under this Declaration as may be required pursuant to the Trust Indenture Act at the times and in the manner provided pursuant thereto. (C) A copy of each such report shall, at the time of such transmission to Holders, be filed by the Preferred Trustee with the Commission and with the Sponsor. .16 Reports to the Preferred Trustee. The Sponsor and the Company Trustees on behalf of the Trust shall provide to the Preferred Trustee such documents, reports and information as required by Section 314 of the Trust Indenture Act (if any) and the compliance certificate required by Section 314(a) of the Trust Indenture Act in the form, in the manner and at the times required by Section 314 of the Trust Indenture Act. .17 Evidence of Compliance with Conditions Precedent. Each of the Sponsor and the Company Trustees on behalf of the Trust shall provide to the Preferred Trustee such evidence of compliance with any conditions precedent, if any, provided for in this Declaration that relate to any of the matters set forth in Section 314 (c) of the Trust Indenture Act. Any certificate or opinion required to be given by an officer pursuant to Section 314(c)(1) of the Trust Indenture Act shall be given in the form of an Officers' Certificate. .18 Number of Trustees. (A) The number of Trustees shall be five, provided, that the Holder of all of the Common Securities by written instrument may increase or decrease the number of Company Trustees. Subject to Section 8.7(c), the Preferred Trustee and the Delaware Trustee may be the same Person, in which case the number of Trustees may be less than five. (B) If a Trustee ceases to hold office for any reason and the number of Company Trustees is not reduced pursuant to Section 8.18(a), or if the number of Trustees is increased pursuant to Section 8.18(a), a vacancy shall occur. The vacancy shall be filled with a Trustee appointed in accordance with Section 8.10. (C) The death, resignation, retirement, removal, bankruptcy, incompetence or incapacity to perform the duties of a Trustee shall not operate to annul the Trust. Whenever a vacancy in the number of Company Trustees shall occur, until such vacancy is filled by the 53 60 appointment of an Company Trustee in accordance with Section 8.10, the Company Trustees in office, regardless of their number (and notwithstanding any other provision of this Agreement), shall have all the powers granted to the Company Trustees and shall discharge all the duties imposed upon the Company Trustees by this Declaration. .19 Delegation of Power. (A) Any Company Trustee may, by power of attorney consistent with applicable law, delegate to any other natural person over the age of 21 his or her power for the purpose of executing any documents contemplated in Section 2.7(a), including any registration statement or amendment thereto filed with the Commission, or making any other governmental filing; and (B) The Company Trustees shall have power to delegate from time to time to such of their number or to the Sponsor the doing of such things and the execution of such instruments either in the name of the Trust or the names of the Company Trustees or otherwise as the Company Trustees may deem expedient, to the extent such delegation is not prohibited by applicable law or contrary to the provisions of this Declaration, as set forth herein. ARTICLE IX TERMINATION, LIQUIDATION AND MERGER .1 Termination Upon Expiration Date. Unless earlier dissolved, the Trust shall automatically dissolve on December 31, 2030 (the "Expiration Date"), at which time the Trust Property shall be distributed in accordance with Section 9.4. .2 Early Termination. The first to occur of any of the following events is an "Early Termination Event": (A) the occurrence of a Bankruptcy Event in respect of, or the liquidation of, the Sponsor (or, in the case of a transfer pursuant to Section 5.10 hereof, the Holder of Common Securities); (B) the filing of a certificate of dissolution or its equivalent with respect to the Sponsor (or, in the case of a transfer pursuant to Section 5.10 hereof, the Holder of Common Securities); or the revocation of the charter or its equivalent of the Sponsor (or, in the case of a transfer pursuant to Section 5.10 hereof, the Holder of Common Securities) and the expiration of 90 days after the date of revocation without a reinstatement thereof; (C) the entry of a decree of judicial dissolution of the Sponsor (or, in the case of a transfer pursuant to Section 5.10 hereof, the Holder of Common Securities) or the Trust by a court of competent jurisdiction; 54 61 (D) all of the Trust Securities shall have been called for redemption and the Redemption Price shall have been paid to the Holders in accordance with the terms of the Trust Securities; (E) the distribution of all of the Trust Property; (F) the written direction to the Preferred Trustee from the Sponsor (or, in the case of a transfer pursuant to Section 5.10 hereof, the Holder of Common Securities) at any time (which direction is optional and wholly within the discretion of the Sponsor) to terminate the Trust and to distribute Notes to Securityholders in exchange for the Preferred Securities; (G) the redemption of all of the Preferred Securities in connection with the redemption of all of the Notes; (H) subject to Section 9.4(e), the occurrence of a Tax Event; and (I) the occurrence of an Investment Company Event. .3 Termination. The respective obligations and responsibilities of the Trustees and the Trust created and continued hereby shall terminate upon the latest to occur of the following: (a) the distribution by the Preferred Trustee to Securityholders upon the liquidation of the Trust pursuant to Section 9.4, or upon the redemption or repurchase of all of the Trust Securities pursuant to Sections 4.2, 4.8 or 4.9 of all amounts required to be distributed hereunder upon the final payment of the Trust Securities; (b) the payment of any expenses owed by the Trust; and (c) the discharge of all administrative duties of the Company Trustees, including the performance of any tax reporting obligations with respect to the Trust or the Securityholders. .4 Liquidation. (A) If an Early Termination Event specified in Section 9.2 (with the exception of clauses (d) and (g)) occurs or upon the Expiration Date, the Trust shall be dissolved by the Preferred Trustee and the Company Trustees as expeditiously as such Trustees determine to be possible by distributing, after satisfaction of liabilities to creditors of the Trust as provided by applicable law, to each Securityholder a Like Amount of Notes, subject to Section 9.4(d). Notice of dissolution shall be given by the Preferred Trustee by first-class mail, postage prepaid mailed not later than 30 nor more than 60 days prior to the Liquidation Date to each Holder of Trust Securities at such Holder's address appearing in the Securities Register. All notices of dissolution shall: (i) state the Liquidation Date; (ii) state that from and after the Liquidation Date, the Trust Securities will no longer be deemed to be Outstanding and any Trust Securities Certificates not surrendered for exchange will be deemed to represent a Like Amount of Notes; and (iii) provide such information with respect to the mechanics by which Holders may exchange Trust Securities Certificates for Notes, or if Section 9.4(d) applies 55 62 receive a Liquidation Distribution, as the Company Trustees or the Preferred Trustee shall deem appropriate. (B) Except where Section 9.2(d), 9.2(g) or 9.4(d) applies, in order to effect the dissolution of the Trust and distribution of the Notes to Securityholders, the Preferred Trustee shall establish a record date for such distribution (which shall be not more than 45 days prior to the Liquidation Date) and, either itself acting as exchange agent or through the appointment of a separate exchange agent, shall establish such procedures as it shall deem appropriate to effect the distribution of Notes in exchange for the Outstanding Trust Securities Certificates. (C) Except where Section 9.2(d), 9.2(g) or 9.4(d) applies, after the Liquidation Date, (i) the Trust Securities will no longer be deemed to be Outstanding, (ii) certificates representing a Like Amount of Notes will be issued to holders of Trust Securities Certificates, upon surrender of such certificates to the Company Trustees or their agent for exchange, (iii) any Trust Securities Certificates not so surrendered for exchange will be deemed to represent a Like Amount of Notes, accruing interest at the rate provided for in the Notes from the last Distribution Date on which a Distribution was made on such Trust Securities Certificates until such certificates are so surrendered (and until such certificates are so surrendered, no payments of interest or principal will be made to Holders of Trust Securities Certificates with respect to such Notes) and (iv) all rights of Securityholders holding Trust Securities will cease, except the right of such Securityholders to receive Notes upon surrender of Trust Securities Certificates, provided, that Termination of the Trust shall not affect the right of the Holders of Preferred Securities to receive Liquidated Damages under the Registration Rights Agreement as and when provided therein. (D) In the event that, notwithstanding the other provisions of this Section 9.4, whether because of an order for dissolution entered by a court of competent jurisdiction or otherwise, distribution of the Notes in the manner provided herein is determined by the Preferred Trustee not to be practical, the Trust Property shall be liquidated, and the Trust shall be dissolved, wound-up or terminated, by the Preferred Trustee in such manner as the Preferred Trustee determines. In such event, on the date of the dissolution, winding-up or other termination of the Trust, Securityholders will be entitled to receive out of the assets of the Trust available for distribution to Securityholders, after satisfaction of liabilities to creditors of the Trust as provided by applicable law, an amount equal to the Liquidation Amount per Trust Security plus accumulated and unpaid Distributions thereon to the date of payment (such amount being the "Liquidation Distribution"). If, upon any such dissolution, winding up or termination, the Liquidation Distribution can be paid only in part because the Trust has insufficient assets available to pay in full the aggregate Liquidation Distribution, then, subject to the next succeeding sentence, the amounts payable by the Trust on the Trust Securities shall be paid on a pro rata basis (based upon Liquidation Amounts). The Holder of the Common Securities will be entitled to receive Liquidation Distributions upon any such dissolution, winding-up or termination pro rata (determined as aforesaid) with Holders of Preferred Securities, except that, if a Declaration Event of Default has occurred and is continuing, the Preferred Securities shall have a priority over the Common Securities. (E) If the Early Termination Event specified in Section 9.2(h) occurs, the Trust shall be dissolved within 90 days following the occurrence of such Tax Event as provided in 56 63 this Section 9.4; provided, however, that such dissolution and distribution shall be conditioned on (i) the Trustees' receipt of an Opinion of Counsel of a nationally recognized independent tax counsel experienced in such matters (a "No Recognition Opinion") which opinion may rely on published revenue rulings of the Internal Revenue Service, to the effect that the Holders of the Preferred Securities will not recognize any income, gain or loss for United States Federal income tax purposes as a result of such liquidation and distribution of Notes, and (ii) the Issuer or the Sponsor being unable to avoid such Tax Event within such 90-day period by taking some ministerial action or pursuing some other reasonable measure that will have no adverse effect on the Trust, the Issuer, the Sponsor or the Holders of the Preferred Securities and will involve no material cost. If (i) the Sponsor has received an Opinion of Counsel (a "Redemption Tax Opinion") of a nationally recognized independent United States or German tax counsel or advisors, or nationally recognized independent counsel or advisors of the jurisdiction of formation of the Issuer (initially Luxembourg), as the case may be, experienced in such matters that, as a result of a Tax Event, there is more than an insubstantial risk that the Issuer or the Sponsor would be precluded from deducting the interest on the Notes for United States Federal or German income tax purposes, or for purposes of any income tax imposed by the jurisdiction of formation of the Issuer, even after the Notes were distributed to the Holders of the Preferred Securities upon liquidation of the Trust as provided above, or (ii) the Trustees shall have been informed by such tax counsel that it cannot deliver a No Recognition Opinion, the Issuer has the right to redeem the Notes in whole, in which case all the Preferred Securities and Common Securities will be entitled to receive the Liquidation Distribution. .5 Mergers, Consolidations, Amalgamations or Replacements of the Trust. The Trust may not consolidate, amalgamate, merge with or into, or be replaced by, or convey, transfer or lease its properties and assets substantially as an entirety to any corporation or other body, except pursuant to this Section 9.5. At the request of the Sponsor, with the consent of the Company Trustees and without the consent of the Holders of Preferred Securities, the Preferred Trustee or the Delaware Trustee, the Trust may consolidate, amalgamate, merge with or into, or be replaced by or convey, transfer or lease its properties and assets substantially as an entirety to, a trust organized as such under the laws of any state of the United States of America; provided, that (i) if the Trust is not the survivor, such successor entity either (a) expressly assumes all of the obligations of the Trust with respect to the Trust Securities or (b) substitutes for the Trust Securities other securities having substantially the same terms as the Trust Securities (the "Successor Securities") so long as the Successor Securities rank the same as the Trust Securities with respect to Distributions and payments upon liquidation, redemption and otherwise, (ii) the Sponsor expressly appoints a trustee of such successor entity possessing substantially the same powers and duties as the Preferred Trustee as the holder of the Notes, (iii) the Preferred Securities or any Successor Securities are listed or traded, or any Successor Securities will be listed upon notification of issuance, on any national securities exchange or other organization on which the Preferred Securities are then listed or traded, if any, (iv) such merger, consolidation, amalgamation, replacement, conveyance, transfer or lease does not cause the Preferred Securities (including any Successor Securities) to be downgraded by any nationally recognized statistical rating organization, (v) such merger, consolidation, amalgamation, replacement, conveyance, transfer or lease does not adversely affect the rights, preferences and privileges of the holders of the Trust Securities (including any Successor Securities) in any material respect, (vi) such successor entity has a purpose substantially identical to that of the Trust, (vii) the Sponsor has 57 64 provided a guarantee to the holders of the Successor Securities with respect to such successor entity having substantially the same terms as the Trust Guarantee, (viii) prior to such merger, consolidation, amalgamation, replacement, conveyance, transfer or lease the Sponsor has received an Opinion of Counsel rendered by a law firm having a nationally recognized tax and securities practice to the effect that (x) such successor entity will be treated as a grantor trust for United States Federal income tax purposes or otherwise as an entity that is not subject to United States Federal income tax at the entity level and the assets and income of which are treated for United States Federal income tax purposes as held and derived directly by holders of interests in the entity, (y) following such merger, consolidation, amalgamation, replacement, conveyance, transfer or lease, neither the Sponsor nor such successor entity will be required to register as an investment company under the 1940 Act and (z) such merger, consolidation, amalgamation or replacement, conveyance, transfer or lease, will not adversely affect the rights, preferences, privileges and limited liability of the Preferred Securities in any material respect, and (ix) the Company Trustees shall have furnished the Delaware Trustee and the Preferred Trustee at least five Business Days' prior written notice of the consummation of such merger, consolidation, amalgamation, replacement, conveyance, transfer or lease; provided, however, that the failure to provide such notice shall not affect the validity of any such transaction. Notwithstanding the foregoing, the Trust shall not, except with the consent of holders of 100% in Liquidation Amount of the Trust Securities, consolidate, amalgamate, merge with or into, or be replaced by or convey, transfer or lease its properties and assets substantially as an entirety to any other entity or permit any other entity to consolidate, amalgamate, merge with or into, or replace it if such consolidation, amalgamation, merger, replacement, conveyance, transfer or lease would cause the Trust or the successor entity to be classified as other than a grantor trust for United States Federal income tax purposes or another entity which is not subject to United States Federal income tax at the entity level and the assets and income of which are treated for United States Federal income tax purposes as held and derived directly by holders of interests in the entity. ARTICLE X Miscellaneous Provisions .1 Limitation of Rights of Securityholders. The death or incapacity of any person having an interest, beneficial or otherwise, in Trust Securities shall not operate to terminate this Declaration, nor entitle the legal representatives or heirs of such person or any Securityholder for such person, to claim an accounting, take any action or bring any proceeding in any court for a partition or winding up of the arrangements contemplated hereby, nor otherwise affect the rights, obligations and liabilities of the parties hereto or any of them. .2 Amendment. (A) This Declaration may be amended from time to time by the Trustees and the Sponsor, without the consent of any Securityholders, (i) to cure any ambiguity, correct or supplement any provision herein which may be inconsistent with any other provision herein, or to make any other provisions with respect to matters or questions arising under this Declaration, which shall not be inconsistent with the other provisions of this Declaration, or (ii) to modify, eliminate or add to any provisions of this Declaration to such extent as shall be 58 65 necessary to ensure that the Trust will be classified for United States Federal income tax purposes as a grantor trust or other entity which is not subject to United States Federal income tax at the entity level and the assets and income of which are treated for United States Federal income tax purposes as held and derived directly by holders of interests in the entity at all times that any Trust Securities are outstanding or to ensure that the Trust will not be required to register as an investment company under the 1940 Act, or (iii) to reflect the establishment of procedures to affect an offer to repurchase Preferred Securities pursuant to Sections 4.8 or 4.9; provided, however, that in the case of clause (i) such action shall not adversely affect in any material respect the interests of any Securityholder, and any amendments of this Declaration shall become effective when notice thereof is given to the Securityholders. (B) If any proposed amendment provides for, or the Trustees or the Sponsor otherwise propose to effect, (i) any action that would adversely affect the powers, preferences or special rights of the Trust Securities, whether by way of amendment to the Declaration or otherwise or (ii) the dissolution, winding-up or termination of the Trust other than pursuant to the terms of the Declaration, then the Securityholders voting together as a single class will be entitled to vote on such amendment or proposal and such amendment or proposal shall not be effective except with the approval of at least a majority (based upon Liquidation Amounts) of the Trust Securities affected thereby; provided, that if any amendment or proposal referred to in clause (i) would adversely affect only the Preferred Securities or the Common Securities, then only the affected class will be entitled to vote on such amendment or proposal and such amendment or proposal shall not be effective except with the approval of at least a majority (based on Liquidation Amounts) of such class of Trust Securities; provided, further, that no amendment or modification may be made to the Declaration if such amendment or modification would (x) cause the Trust to be classified for purposes of United States Federal income taxation as other than a grantor trust or another entity which is not subject to United States Federal income tax at the entity level and the assets and income of which are treated for United States Federal income tax purposes as held and derived directly by holders of interest in the entity, (y) reduce or otherwise adversely affect the powers of the Trustees or (z) cause the Trust to be deemed an investment company which is required to be registered under the 1940 Act. (C) Except as provided in Section 10.2(b) and 10.2(d) hereof, any provision of this Declaration may be amended by the Trustees and the Sponsor with (i) the consent of Securityholders representing not less than a majority (based upon Liquidation Amounts) of the Trust Securities then Outstanding and (ii) receipt by the Trustees of an Opinion of Counsel to the effect that such amendment or the exercise of any power granted to the Trustees in accordance with such amendment will not affect the Trust's status for United States Federal income tax purposes, as a grantor trust or other entity which is not subject to United States Federal income tax at the entity level and the assets and income of which are treated for United States Federal income tax purposes as held and derived directly by holders of interests in the entity, or cause the Trust to be deemed an investment company which is required to register under the 1940 Act. (D) In addition to and notwithstanding any other provision in this Declaration, without the consent of each affected Securityholder (such consent being obtained in accordance with Section 6.3 or 6.6 hereof), this Declaration may not be amended to (i) change 59 66 the amount or timing of any Distribution on the Trust Securities or otherwise adversely affect the amount of any Distribution required to be made in respect of the Trust Securities as of a specified date or (ii) restrict the right of a Securityholder to institute suit for the enforcement of any such payment on or after such date; notwithstanding any other provision herein, without the unanimous consent of the Securityholders (such consent being obtained in accordance with Section 6.3 or 6.6 hereof), this paragraph (c) of this Section 10.2 may not be amended. (E) Notwithstanding any other provisions of this Declaration, no Trustee shall enter into or consent to any amendment to this Declaration which would cause the Trust to fail or cease to qualify for the exemption from status of an investment company under the 1940 Act or fail or cease to be classified for purposes of United States Federal income taxation as other than a grantor trust or another entity which is not subject to United States Federal income tax at the entity level and the assets and income of which are treated for United States Federal income tax purposes as held and derived directly by holders of interests in the entity. (F) Notwithstanding anything in this Declaration to the contrary, without the consent of the Sponsor or the Issuer, this Declaration may not be amended in a manner which imposes any additional obligation on the Sponsor or the Issuer, as the case may be. (G) In the event that any amendment to this Declaration is made, the Company Trustees shall promptly provide to the Sponsor a copy of such amendment. (H) Neither the Preferred Trustee nor the Delaware Trustee shall be required to amend this Declaration in any manner which affects its own rights, duties or immunities under this Declaration. The Preferred Trustee and the Delaware Trustee shall be entitled to receive an Opinion of Counsel and an Officers' Certificate stating that any amendment to this Declaration is in compliance with this Declaration. .3 Separability. In case any provision in this Declaration or in the Trust Securities Certificates shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby. .4 Governing Law. THIS DECLARATION AND THE RIGHTS AND OBLIGATIONS OF EACH OF THE SECURITYHOLDERS, THE TRUST AND THE TRUSTEES WITH RESPECT TO THIS DECLARATION AND THE TRUST SECURITIES SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF DELAWARE WITHOUT GIVING EFFECT TO PRINCIPLES OF CONFLICT OF LAWS. .5 Submission to Jurisdiction. The Sponsor hereby appoints Fresenius Medical Care Holdings, Inc. ("FMCH") c/o CT Corporation System through its office at 1633 Broadway, New York, New York 10019 as its authorized agent (the "Authorized Agent") upon which process may be 60 67 served in any legal action or proceeding against it with respect to its obligations under this Declaration or the Trust Securities instituted in any federal or state court in the Borough of Manhattan, The City of New York, by any Trustee or the Holder of any Trust Securities and agrees that service of process upon such authorized agent, together with written notice of said service to the Sponsor by the person serving the same, addressed as provided in Section 10.09, shall be deemed in every respect effective service of process upon the Sponsor in any such legal action or proceeding, and the Sponsor hereby irrevocably submits to the non-exclusive jurisdiction of any such court in respect of any such legal action or proceeding. Such appointment shall be irrevocable until the Trust has been terminated in accordance with Article IX hereof. Notwithstanding the foregoing, the Sponsor reserves the right to appoint another Person located or with an office in the Borough of Manhattan, The City of New York, selected in its discretion, as a successor Authorized Agent, and upon acceptance of such appointment by such a successor the appointment of the prior Authorized Agent shall terminate. If for any reason FMCH or CT Corporation System ceases to be able to act as the Authorized Agent or to have an address in the Borough of Manhattan, The City of New York, the Sponsor will appoint a successor Authorized Agent in accordance with the preceding sentence. The Sponsor further agrees to take any and all action, including the filing of any and all documents and instruments as may be necessary to continue such designation and appointment of such agent in full force and effect until the Trust has been terminated in accordance with Article IX hereof. Service of process upon the Authorized Agent addressed to it at the address set forth above, as such address may be changed within the Borough of Manhattan, The City of New York by notice given by the Authorized Agent to the Trustees, together with written notice of such service mailed or delivered to the Sponsor shall be deemed, in every respect, effective service of process on the Sponsor. .6 Payments Due on Non-Business Day. If the date fixed for any payment on any Trust Security shall be a day that is not a Business Day, then such payment need not be made on such date but may be made on the next succeeding day that is a Business Day (except as otherwise provided in Sections 4.1(a) and 4.2(d)), with the same force and effect as though made on the date fixed for such payment, and no interest shall accrue thereon for the period after such date. .7 Successors. This Declaration shall be binding upon and shall inure to the benefit of any successor to the Sponsor, the Trust or the Relevant Trustee, including any successor by operation of law. Except in connection with a consolidation, merger or sale involving the Sponsor that is permitted under Article VIII of the Indenture and pursuant to which the assignee agrees in writing to perform the Sponsor's obligations hereunder, the Sponsor shall not assign its obligations hereunder. .8 Headings. The Article and Section headings are for convenience only and shall not affect the construction of this Declaration. .9 Reports, Notices and Demands. 61 68 Any report, notice, demand or other communication which by any provision of this Declaration is required or permitted to be given or served to or upon any Securityholder or the Sponsor may be given or served in writing by deposit thereof, first-class postage prepaid, in the United States mail, hand delivery or facsimile transmission, in each case, addressed, (a) in the case of a Preferred Securityholder, to such Preferred Securityholder as such Securityholder's name and address may appear on the Securities Register; (b) in the case of the Common Securityholder(s) or the Sponsor, to Fresenius Medical Care AG, Else-Kroner Str. 1, 61346 Bad Homburg v.d.H., Germany, Attn: Chief Executive Officer, facsimile no.: 011-49-6172-609-2103, and (c) in the case of the Issuer, to FMC Trust Finance S.a.r.l., Luxembourg-III, 7A, rue Robert Stumper, L-2557 Luxembourg with a copy to the Sponsor. Any notice to Preferred Securityholders shall also be given to such Owners as have, within two years preceding the giving of such notice, filed their names and addresses with the Preferred Trustee for that purpose. Such notice, demand or other communication to or upon a Securityholder shall be deemed to have been sufficiently given or made, for all purposes, upon hand delivery, mailing or transmission. Any notice, demand or other communication which by any provision of this Declaration is required or permitted to be given or served to or upon the Trust, the Preferred Trustee, the Delaware Trustee or the Company Trustees shall be given in writing by deposit thereof, first-class postage prepaid, in the United States mail, hand delivery or facsimile transmission, in each case, addressed (until another address is published by the Trust) as follows: (a) with respect to the Preferred Trustee to State Street Bank and Trust Company, 225 Asylum Street, Hartford, Connecticut 06103, Attention: Corporate Trust Administration; (b) with respect to the Delaware Trustee, to First Union Trust Company, National Association, One Rodney Square, 920 King Street, Wilmington, Delaware 19801, Attention: Corporate Trust Administration; (c) with respect to the Company Trustees, to them at the address above for notices to the Sponsor, marked "Attention: Company Trustees of Fresenius Medical Care Capital Trust IV;" (d) with respect to the Paying Agent to State Street Bank and Trust Company, 225 Asylum Street, Hartford, Connecticut 06103, Attention: Corporate Trust Administration, with a copy to Banque Generale du Luxembourg, 50 Avenue J.F. Kennedy, L-2951 Luxembourg. Such notice, demand or other communication to or upon the Trust or the Preferred Trustee shall be deemed to have been sufficiently given or made only upon actual receipt of the writing by the Trust or the Preferred Trustee. All notices regarding the Preferred Securities shall be published in the Luxemburger Wort or in such other publication as required by the rules of the Luxembourg Stock Exchange. Any notice will become effective for all purposes on the date of its publication. There may (provided that, in the case of Preferred Securities listed on the Luxembourg Stock Exchange, the rules of the Luxembourg Stock Exchange so permit) be substituted for such publication in such newspaper the delivery of the relevant notice to the applicable clearing system for communication by it to the Securityholders. Any such notice shall be deemed to have been given to the Securityholders on the seventh day after the day on which the said notice was given to all applicable clearing systems. The Company Trustees shall be responsible for compliance with this paragraph and shall provide directions to the Preferred Trustee in connection therewith. .10 Agreement Not to Petition. 62 69 Each of the Trustees, the Sponsor, and the Issuer agree for the benefit of the Securityholders that, until at least one year and one day after the Trust has been terminated in accordance with Article IX, they shall not file, or join in the filing of, a petition against the Trust under any bankruptcy, insolvency, reorganization or other similar law (including, without limitation, the United States Bankruptcy Code) (collectively "Bankruptcy Laws") or otherwise join in the commencement of any proceeding against the Trust under any Bankruptcy Law. In the event the Sponsor takes action in violation of this Section 10.10, the Preferred Trustee agrees, for the benefit of Securityholders, that at the expense of the Sponsor, it shall file an answer with the bankruptcy court or otherwise properly contest the filing of such petition by the Sponsor against the Trust or the commencement of such action and raise the defense that the Sponsor has agreed in writing not to take such action and should be stopped and precluded therefrom and such other defenses, if any, as counsel for the Trustee or the Trust may assert. The provisions of this Section 10.10 shall survive the termination of this Declaration. .11 Trust Indenture Act; Conflict with Trust Indenture Act. (A) This Declaration shall be subject to and governed by the Trust Indenture Act upon the consummation of the Exchange Offer pursuant to the Registration Rights Agreement. Until such Exchange Offer, the Trust Indenture Act shall not apply to this Declaration, except to the extent otherwise expressly provided herein. (B) The Preferred Trustee shall be the only Trustee which is a trustee for the purposes of the Trust Indenture Act. (C) If any provision hereof limits, qualifies or conflicts with another provision hereof which is required to be included in this Declaration by any of the provisions of the Trust Indenture Act, such required provision shall control. If any provision of this Declaration modifies or excludes any provision of the Trust Indenture Act which may be so modified or excluded, the latter provision shall be deemed to apply to this Declaration as so modified or excluded, as the case may be. (D) The application of the Trust Indenture Act to this Declaration shall not affect the nature of the Securities as equity securities representing undivided beneficial interests in the assets of the Trust. .12 Acceptance of Terms of Declaration, Trust Guarantee and Indenture. THE RECEIPT AND ACCEPTANCE OF A TRUST SECURITY OR ANY INTEREST THEREIN BY OR ON BEHALF OF A SECURITYHOLDER OR ANY BENEFICIAL OWNER, WITHOUT ANY SIGNATURE OR FURTHER MANIFESTATION OF ASSENT, SHALL CONSTITUTE THE UNCONDITIONAL ACCEPTANCE BY THE SECURITYHOLDER AND ALL OTHERS HAVING A BENEFICIAL INTEREST IN SUCH TRUST SECURITY OF ALL THE TERMS AND PROVISIONS OF THIS DECLARATION, THE GUARANTEE AGREEMENT AND THE INDENTURE, AND AGREEMENT TO THE SUBORDINATION PROVISIONS AND OTHER TERMS OF THE TRUST GUARANTEE AND THE INDENTURE, AND SHALL CONSTITUTE THE AGREEMENT OF THE TRUST, SUCH SECURITYHOLDER AND SUCH OTHERS THAT THE TERMS AND PROVISIONS OF THIS DECLARATION 63 70 SHALL BE BINDING, OPERATIVE AND EFFECTIVE AS BETWEEN THE TRUST AND SUCH SECURITYHOLDER AND SUCH OTHERS. .13 Liquidated Damages Under Registration Rights Agreement. Under the Registration Rights Agreement, in the event that (i) certain registration statements under the Securities Act are not filed on or prior to the applicable deadline set forth in the Registration Rights Agreement, (ii) any such registration statement, if filed, is not declared effective on or prior to the applicable deadline set forth in the Registration Rights Agreement, or (iii) the Exchange Offer has not been "Consummated" (as defined in the Registration Rights Agreement) or upon the occurrence of certain other conditions, then additional payments in the form of Liquidated Damages shall accrue at the rate per $1,000 Liquidation Amount of Preferred Securities set forth in the Registration Rights Agreement. Upon filing or effectiveness of any such registration statement, the Consummation of the Exchange Offer or upon cessation of any such other conditions, as the case may be, the obligation to pay such Liquidated Damages with respect to the event in question shall cease. .14 Counterparts. This Declaration may be executed in any number of counterparts, each of which so executed shall be deemed to be an original, but all such counterparts shall together constitute but one and the same instrument. 64 71 FRESENIUS MEDICAL CARE AG, as Sponsor By: /s/ Emanuele Gatti ------------------- Name: Emanuele Gatti Title: Member of the Management Board By:/s/ Rainer Runte ---------------------------------------- Name: Rainer Runte Title: General Counsel and Senior Vice President /s/ Ben Lipps ------------------------------------------- Ben Lipps, as Company Trustee /s/ Karl-Dieter Schwab ------------------------------------------- Dr. Karl-Dieter Schwab, as Company Trustee /s/Josef Dinger ------------------------------------------- Josef Dinger, as Company Trustee FMC TRUST FINANCE S.A.R.L. LUXEMBOURG-III By: /s/ Gabriele Dux --------------------------------------- Name: Gabriele Dux Title: Sole Manager 65 72 STATE STREET BANK AND TRUST COMPANY, as Preferred Trustee By: /s/ Elizabeth C. Hammer --------------------------------------- Name: Elizabeth C. Hammer Title: Vice President FIRST UNION TRUST COMPANY, NATIONAL ASSOCIATION, as Delaware Trustee By:/s/ Rita Marie Ritrovato ---------------------------------------- Name: Rita Marie Ritrovato Title: Trust Officer 66 73 EXHIBIT A FORM OF CERTIFICATE OF TRUST AS FILED FEBRUARY 12, 1998 CERTIFICATE OF TRUST OF FRESENIUS MEDICAL CARE CAPITAL TRUST IV This Certificate of Trust of Fresenius Medical Care Capital Trust IV (the "Trust") is being duly executed and filed by the undersigned, as trustees, to form a business trust under the Delaware Business Trust Act (12 Del. C. (Section ) 3801 et seq.). 1. Name. The name of the business trust formed hereby is Fresenius Medical Care Capital Trust IV. 2. Delaware Trustee. The name and business address of the trustee of the Trust with a principal place of business in the State of Delaware are: First Union Trust Company, National Association, One Rodney Square, 1st Floor, 920 King Street, Delaware 19801. In Witness Whereof, the undersigned, being the Trustees of the Trust, have executed this Certificate of. FIRST UNION TRUST COMPANY, NATIONAL ASSOCIATION, not in its individual capacity but solely as Trustee By: /s/ Stephen J.Kaba ------------------ Name: Stephen J. Kaba Title: Vice President /s/ Ben J. Lipps ----------------- Dr. Ben J. Lipps, not in his individual capacity, but solely as Trustee 67 74 EXHIBIT A-1 FIRST AMENDMENT TO DECLARATION OF TRUST OF FRESENIUS MEDICAL CARE CAPITAL TRUST IV FIRST AMENDMENT TO DECLARATION OF TRUST ("First Amendment") dated and effective as of June 5, 2001 by the "Trustees," the "Original Sponsor" and the "New Sponsor" (each as defined herein) WHEREAS, FMC Trust Finance Luxembourg S.a.r.l. Luxembourg, (the "Original Sponsor"), a Luxembourg private limited company (Societe a responsibilite limitee), Dr. Ben Lipps (the "Company Trustee") and First Union Trust Company, National Association, not in its individual capacity, but solely as Delaware Trustee, (the "Delaware Trustee" and, collectively with Dr. Lipps, the "Trustees") are parties to a Declaration of Trust dated February 12, 1998 (the "Declaration") creating Fresenius Medical Care Capital Trust IV (the "Trust") as a business trust under the Delaware Business Trust Act, and a Certificate of Trust was executed and filed with the Secretary of State of Delaware on February 12, 1998; and WHEREAS, prior to the date hereof, no Trust Securities have been issued; and WHEREAS, the Original Sponsor and the Trustees desire to amend the Declaration to provide for the withdrawal of the Original Sponsor from the Trust and to substitute the New Sponsor as the Sponsor under the Declaration; NOW, THEREFORE, it being the intention of the parties hereto to continue the Trust as a business trust under the Delaware Business Trust Act and that the Declaration, as amended hereby, constitute the governing instrument of such business trust until further amendment thereof, the parties agree as follows: 1. DEFINITIONS. Capitalized terms used in this Amendment without definition shall have the meanings assigned to them by the Declaration. 2. SUBSTITUTION OF NEW SPONSOR. The New Sponsor is hereby substituted as the Sponsor of the Trust. The New Sponsor hereby agrees to be bound by, and to perform the obligations of the Sponsor under, the Declaration, as amended hereby. 3. WITHDRAWAL OF ORIGINAL SPONSOR. The Original Sponsor hereby withdraws from the Trust and surrenders all of its rights, powers and obligations under the Declaration to the New Sponsor. 4. DECLARATION OTHERWISE UNAFFECTED. Except as expressly set forth therein, the Declaration remains in full force and effect. 5. COUNTERPARTS. This Amendment may contain more than one counterpart of the signature page and may be executed by the affixing of the signature of each of the parties to one of such counterpart signature pages. All of such counterpart signature pages shall be read as though one, and they shall have the same force and effect as though all of the signers had signed a single signature page. 68 75 IN WITNESS WHEREOF, the undersigned have caused these presents to be executed as of the day and year first above written. FMC TRUST FINANCE S.A.R.L. LUXEMBOURG By: ------------------------------ Name: Title: FMC TRUST FINANCE S.A.R.L. LUXEMBOURG-III By: ------------------------------ Name: Title: ---------------------------------- Dr. Ben Lipps, as Company Trustee 69 76 FIRST UNION TRUST COMPANY, NATIONAL ASSOCIATION as Delaware Trustee By: ------------------------- Name: Title: 70 77 EXHIBIT B [DTC STANDARD FORM OF LETTER OF REPRESENTATIONS] 71 78 EXHIBIT C [FORM OF COMMON SECURITIES CERTIFICATE] THIS CERTIFICATE IS NOT TRANSFERABLE EXCEPT AS PROVIDED IN SECTION 5.10 OF THE DECLARATION. THIS COMMON SECURITY HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S. PERSONS, EXCEPT AS SET FORTH IN THE SECOND SENTENCE HEREOF. BY ITS ACQUISITION HEREOF OR OF A BENEFICIAL INTEREST HEREIN, THE HOLDER (1) REPRESENTS THAT (A) IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) (A "QIB") OR (B) IT IS ACQUIRING THIS COMMON SECURITY IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH REGULATION S UNDER THE SECURITIES ACT, (2) AGREES THAT IT WILL NOT RESELL OR OTHERWISE TRANSFER THIS COMMON SECURITY EXCEPT (A) TO THE TRUST OR ANY OF ITS SUBSIDIARIES, (B) TO A PERSON WHOM THE SELLER REASONABLY BELIEVES IS A QIB PURCHASING FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QIB IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, (C) IN AN OFFSHORE TRANSACTION MEETING THE REQUIREMENTS OF RULE 903 OR 904 OF THE SECURITIES ACT, (D) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144 UNDER THE SECURITIES ACT, (E) IN ACCORDANCE WITH ANOTHER EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT (AND BASED UPON AN OPINION OF COUNSEL ACCEPTABLE TO THE TRUST) OR (F) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT AND, IN EACH CASE, IN ACCORDANCE WITH THE APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR ANY OTHER APPLICABLE JURISDICTION AND (3) AGREES THAT IT WILL DELIVER TO EACH PERSON TO WHOM THIS COMMON SECURITY OR AN INTEREST HEREIN IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. AS USED HEREIN, THE TERMS "OFFSHORE TRANSACTION" AND "UNITED STATES" HAVE THE MEANINGS GIVEN TO THEM BY RULE 902 OF REGULATION S UNDER THE SECURITIES ACT. 72 79 CERTIFICATE NUMBER NUMBER OF COMMON SECURITIES C-1 TWO HUNDRED TWENTY FIVE (225) CERTIFICATE EVIDENCING COMMON SECURITIES OF FRESENIUS MEDICAL CARE CAPITAL TRUST IV COMMON SECURITIES (LIQUIDATION AMOUNT $1,000 PER COMMON SECURITY) Fresenius Medical Care Capital Trust IV, a statutory business trust formed under the laws of the State of Delaware (the "Trust"), hereby certifies that Fresenius Medical Care AG (the "Holder") is the registered owner of two hundred twenty five (225) common securities of the Trust representing beneficial interests of the Trust and designated the 7 7/8% Common Securities (liquidation amount $1,000 per Common Security) (the "Common Securities"). Except as provided in Section 5.10 of the Declaration (as defined below) the Common Securities are not transferable and any attempted transfer hereof shall be void. The designations, rights, privileges, restrictions, preferences and other terms and provisions of the Common Securities are set forth in, and this certificate and the Common Securities represented hereby are issued and shall in all respects be subject to the terms and provisions of, the Amended and Restated Declaration of Trust of Fresenius Medical Care Capital Trust IV dated as of June 6, 2001, as the same may be amended from time to time (the "Declaration") including the designation of the terms of the Common Securities as set forth therein. Capitalized terms used herein and not otherwise defined have the meanings assigned to them by the Declaration. The Holder is entitled to the benefits of the Guarantee Agreement with respect to the Common Securities entered into by Fresenius Medical Care AG, a corporation organized under the laws of Germany, and the Trust, dated as of June 6, 2001, to the extent provided therein. The Trust will furnish a copy of the Declaration to the Holder without charge upon written request to the Trust at its principal place of business or registered office. Upon receipt of this certificate, the Holder is bound by the Declaration and is entitled to the benefits thereunder. 73 80 IN WITNESS WHEREOF, one of the Company Trustees of the Trust has executed this certificate this 6 day of June, 2001. FRESENIUS MEDICAL CARE CAPITAL TRUST IV Name: ----------------------------------- Company Trustee 74 81 REVERSE OF SECURITY Distributions payable on each Common Security will be fixed at a rate per annum of 7 7/8% (the "Distribution Rate") of the Liquidation Amount of $1,000 per Common Security, such rate being the rate of interest payable on the Notes held by the Preferred Trustee. Distributions in arrears for more than one quarter (and interest thereon) will bear interest thereon compounded quarterly at the Distribution Rate (to the extent permitted by applicable law). The term "Distributions," as used herein, includes such cash distribution and any such interest payable unless otherwise stated. A Distribution is payable only to the extent that payments are made in respect of the Notes held by the Preferred Trustee and to the extent the Preferred Trustee has funds on hand in the Payment Account legally available therefor. Distributions on the Common Securities will accumulate from the most recent date to which Distributions have been paid or, if no Distributions have been paid, from June 6, 2001, and will be payable quarterly in arrears on March 15, June 15, September 15 and December 15 of each year, commencing September 15, 2001. Distributions will be computed on the basis of a 360-day year constituting twelve 30-day months and, for any period of less than a full calendar month, the number of days elapsed in such month. The Company Trustees shall, at the direction of all of the Holder(s) of the Common Securities, at any time terminate the Trust and, after satisfaction of liabilities to creditors of the Trust, cause the Notes to be distributed by the Preferred Trustee to the Holders of the Common Securities in liquidation of the Trust as provided in the Declaration. The Common Securities shall be redeemable as provided in the Declaration. 75 82 EXHIBIT D [FORM OF EXPENSE AGREEMENT] AGREEMENT AS TO EXPENSES AND LIABILITIES AGREEMENT dated as of June 6, 2001, between Fresenius Medical Care AG, a corporation organized under the laws of Germany (the "Company"), and Fresenius Medical Care Capital Trust IV, a Delaware business trust (the "Trust"). WHEREAS, the Trust intends to issue its Common Securities (the "Common Securities") to the Company and receive 7 7/8% Senior Subordinated Notes ("Notes"; such term, for the purposes of this Agreement shall include, where applicable the Exchange Securities as such term is defined in the Indenture) from FMC Trust Finance S.a.r.l. Luxembourg-III (the "Issuer") and to issue and sell 7 7/8% Preferred Securities (the "Preferred Securities"; such term, for the purposes of this Agreement, shall include, when applicable, the Exchange Preferred Securities) with such powers, preferences and special rights and restrictions as are set forth in the Amended and Restated Declaration of Trust dated as of June 6, 2001 as the same may be amended from time to time (the "Declaration"); WHEREAS, the Company will directly or indirectly own all of the Common Securities of the Trust and all of the Capital Stock (as defined in the Indenture) of the Issuer, which will issue the Notes; WHEREAS, capitalized terms used but not defined herein have the meanings set forth in the Declaration. Now, THEREFORE, in consideration of the purchase by each Holder of the Preferred Securities, which purchase the Company hereby agrees shall benefit the Company and which purchase the Company acknowledges will be made in reliance upon the execution and delivery of this Agreement, the Company and Trust hereby agree as follows: ARTICLE I SECTION 1. Guarantee by the Company. Subject to the terms and conditions hereof, the Company hereby irrevocably and unconditionally guarantees, on a senior subordinated basis (to the extent and in the manner set forth in the Indenture with respect to the Notes), to each person or entity to whom the Trust is now or hereafter becomes indebted or liable (the "Beneficiaries") the full payment, when and as due, of any and all Obligations (as hereinafter defined) to such Beneficiaries. As used herein, "Obligations" means any costs, expenses or liabilities of the Trust (including, without limitation, any and all taxes, costs and expenses, such as underwriting discounts and commissions, payable with respect to the issuance of the Preferred Securities), other than obligations of the Trust to pay to holders of any Preferred Securities or other similar interests in the Trust the amounts due such holders pursuant to the terms of the Preferred Securities or such other similar interests, as the case may be, and United States withholding 76 83 taxes. This Agreement is intended to be for the benefit of, and to be enforceable by, all such Beneficiaries, whether or not such Beneficiaries have received notice hereof. SECTION 1.2. Term of Agreement. This Agreement shall terminate and be of no further force and effect upon the later of (a) the date on which full payment has been made of all amounts payable to all Holders of all the Preferred Securities (whether upon redemption, liquidation, exchange or otherwise) and (b) the date on which there are no Beneficiaries remaining; provided, however, that this Agreement shall continue to be effective or shall be reinstated, as the case may be, if at any time any Holder of the Preferred Securities or any Beneficiary must restore payment of any sums paid under the Preferred Securities, under any Obligation, under the Guarantee Agreement dated the date hereof by the Company and State Street Bank and Trust Company as guarantee trustee or under this Agreement for any reason whatsoever. This Agreement is continuing, irrevocable, unconditional and absolute. SECTION 1.3. Waiver of Notice. The Company hereby waives notice of acceptance of this Agreement and of any Obligation to which it applies or may apply, and the Company hereby waives presentment, demand for payment, protest, notice of nonpayment, notice of dishonor, notice of redemption and all other notices and demands. SECTION 1.4. No Impairment. The obligations, covenants, agreements and duties of the Company under this Agreement shall in no way be affected or impaired by reason of the happening from time to time of any of the following: (a) the extension of time for the payment by the Trust of all or any portion of the Obligations or for the performance of any other obligation under, arising out of, or in connection with, the Obligations; (b) any failure, omission, delay or lack of diligence on the part of the Beneficiaries to enforce, assert or exercise any right, privilege, power or remedy conferred on the Beneficiaries with respect to the Obligations or any action on the part of the Trust granting indulgence or extension of any kind; or (c) the voluntary or involuntary liquidation, dissolution, sale of any collateral, receivership, insolvency, bankruptcy, assignment for the benefit of creditors, reorganization, arrangement, composition or readjustment of debt of, or other similar proceedings affecting, the Trust or any of the assets of the Trust. There shall be no obligation of the Beneficiaries to give notice to, or obtain the consent of, the Company with respect to the happening of any of the foregoing. SECTION 1.5. Enforcement. 77 84 A Beneficiary may enforce this Agreement directly against the Company and the Company waives any right or remedy to require that any action be brought against the Trust or any other person or entity before proceeding against the Company. SECTION 1.6. Subrogation. The Company shall be subrogated to all (if any) rights of the Trust in respect of any amounts paid to the Beneficiaries by the Company under this Agreement; provided, however, that the Company shall not (except to the extent required by mandatory provisions of law) be entitled to enforce or exercise any rights which it may acquire by way of subrogation or any indemnity, reimbursement or other agreement, in all cases as a result of payment under this Agreement, if, at the time of any such payment, any amounts are due and unpaid under this Agreement. ARTICLE II SECTION 2.1. Assignment. Except in connection with a consolidation, merger or sale involving the Company that is permitted under Article VIII of the Indenture, this Agreement may not be assigned by either party hereto without the consent of the other, and any purported assignment without such consent shall be void. SECTION 2.2. Binding Effect. All guarantees and agreements contained in this Agreement shall bind the successors, assigns, receivers, trustees and representatives of the Company and shall inure to the benefit of the Beneficiaries. SECTION 2.3. Amendment. So long as there remains any Beneficiary or any Preferred Securities are outstanding, this Agreement shall not be modified or amended in any manner adverse to such Beneficiary or to the Holders of the Preferred Securities without the consent of a Majority in Liquidation Amount of the holders of Preferred Securities. SECTION 2.4. Notices. Any notice, request or other communication required or permitted to be given hereunder shall be given in writing by delivering the same against receipt therefor by facsimile transmission (confirmed by mail), telex or by registered or certified mail, addressed as follows (and if so given, shall be deemed given when mailed or upon receipt of an answer-back, if sent by telex): Fresenius Medical Care Capital Trust IV c/o State Street Bank and Trust Company 225 Asylum Street Hartford, Connecticut 06103 Facsimile No.: 860-244-1889 Attention: Corporate Trust Administration 78 85 Fresenius Medical Care AG Else-Kroner Str. 1, 61346 Bad Homburg v.d.H., Germany Facsimile No.: 011-49-6172-609-2103 Attention: Chief Financial Officer SECTION 2.5. Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT GIVING EFFECT TO PRINCIPLES OF CONFLICT OF LAWS. SECTION 2.6. Submission to Jurisdiction. The Company hereby appoints Fresenius Medical Care Holdings, Inc. ("FMCH") c/o CT Corporation System acting through its office at 1633 Broadway, New York, New York 10019 as its authorized agent (the "Authorized Agent") upon which process may be served in any legal action or proceeding against it with respect to its obligations under this Agreement instituted in any federal or state court in the Borough of Manhattan, The City of New York, by the Trust or a Beneficiary and agrees that service of process upon such authorized agent, together with written notice of said service to the Company by the person serving the same, addressed as provided in Section 2.4, shall be deemed in every respect effective service of process upon the Company in any such legal action or proceeding, and the Company hereby irrevocably submits to the non-exclusive jurisdiction of any such court in respect of any such legal action or proceeding. Such appointment shall be irrevocable until this Agreement has been terminated in accordance with Section 1.3 hereof. Notwithstanding the foregoing, the Company reserves the right to appoint another Person located or with an office in the Borough of Manhattan, The City of New York, selected in its discretion, as a successor Authorized Agent, and upon acceptance of such appointment by such a successor the appointment of the prior Authorized Agent shall terminate. If for any reason FMCH or CT Corporation System ceases to be able to act as the Authorized Agent or to have an address in the Borough of Manhattan, The City of New York, the Company will appoint a successor Authorized Agent in accordance with the preceding sentence. The Company further agrees to take any and all action, including the filing of any and all documents and instruments as may be necessary to continue such designation and appointment of such agent in full force and effect until this Agreement has been terminated in accordance with Section 1.3 hereof. Service of process upon the Authorized Agent addressed to it at the address set forth above, as such address may be changed within the Borough of Manhattan, The City of New York by notice given by the Authorized Agent to the Trustees, together with written notice of such service mailed or delivered to the Company shall be deemed, in every respect, effective service of process on the Company. 79 86 THIS AGREEMENT is executed as of the day and year first above written. FRESENIUS MEDICAL CARE AG By: -------------------------------------- Name: Title: By: -------------------------------------- Name: Title: FRESENIUS MEDICAL CARE CAPITAL TRUST IV By: -------------------------------------- Name: Company Trustee 80 87 EXHIBIT E-1 [FORM OF INITIAL PREFERRED SECURITIES CERTIFICATE] THIS PREFERRED SECURITY HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S. PERSONS, EXCEPT AS SET FORTH IN THE SECOND SENTENCE HEREOF. BY ITS ACQUISITION HEREOF OR OF A BENEFICIAL INTEREST HEREIN, THE HOLDER (1) REPRESENTS THAT (A) IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) (A "QIB") OR (B) IT IS ACQUIRING THIS PREFERRED SECURITY IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH REGULATION S UNDER THE SECURITIES ACT, (2) AGREES THAT IT WILL NOT RESELL OR OTHERWISE TRANSFER THIS PREFERRED SECURITY EXCEPT (A) TO THE TRUST OR ANY OF ITS SUBSIDIARIES, (B) TO A PERSON WHOM THE SELLER REASONABLY BELIEVES IS A QIB PURCHASING FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QIB IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, (C) IN AN OFFSHORE TRANSACTION MEETING THE REQUIREMENTS OF RULE 903 OR 904 OF THE SECURITIES ACT, (D) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144 UNDER THE SECURITIES ACT, (E) IN ACCORDANCE WITH ANOTHER EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT (AND BASED UPON AN OPINION OF COUNSEL ACCEPTABLE TO THE TRUST) OR (F) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT AND, IN EACH CASE, IN ACCORDANCE WITH THE APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR ANY OTHER APPLICABLE JURISDICTION AND (3) AGREES THAT IT WILL DELIVER TO EACH PERSON TO WHOM THIS PREFERRED SECURITY OR AN INTEREST HEREIN IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. AS USED HEREIN, THE TERMS "OFFSHORE TRANSACTION" AND "UNITED STATES" HAVE THE MEANINGS GIVEN TO THEM BY RULE 902 OF REGULATION S UNDER THE SECURITIES ACT. UNTIL THE PREFERRED SECURITIES ARE REGISTERED PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT FILED UNDER THE SECURITIES ACT, PREFERRED SECURITIES MAY ONLY BE TRANSFERRED IN MINIMUM BLOCKS OF $ 100,000 AGGREGATE LIQUIDATION AMOUNT. [TO BE INSERTED ON FORM OF GLOBAL PREFERRED SECURITY - UNLESS THIS PREFERRED SECURITY CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO FRESENIUS MEDICAL CARE CAPITAL TRUST IV OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY PREFERRED SECURITY 81 88 CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.] [TO BE INSERTED ON FORM OF GLOBAL TEMPORARY REGULATION S PREFERRED SECURITY CERTIFICATE. - THIS CERTIFICATE IS A TEMPORARY REGULATION S CERTIFICATE WITHIN THE MEANING OF THE DECLARATION REFERRED TO HEREIN, AND NO PAYMENTS WILL BE MADE IN RESPECT OF ANY PORTION HEREOF UNLESS AND UNTIL SUCH PORTION HAS BEEN EXCHANGED FOR A PORTION OF A PERMANENT REGULATION S CERTIFICATE, UPON CERTIFICATION OF NON-U.S. BENEFICIAL OWNERSHIP AFTER THE DISTRIBUTION COMPLIANCE PERIOD AS PROVIDED IN THE DECLARATION. UNTIL SUCH CERTIFICATION IS PROVIDED TO THE SECURITIES REGISTRAR AND SUCH PORTION IS EXCHANGED FOR A PORTION OF THE PERMANENT REGULATION S SECURITY, SETTLEMENT OF TRADES THROUGH THE DEPOSITORY TRUST COMPANY OF BENEFICIAL INTERESTS IN THIS REGULATION S SECURITY WILL BE EFFECTED SOLELY THROUGH DTC'S DEPOSIT WITHDRAWAL AT CUSTODIAN DWAC SYSTEM.] 82 89 CERTIFICATE NUMBER NUMBER OF PREFERRED SECURITIES P- CUSIP NO. _________ CERTIFICATE EVIDENCING PREFERRED SECURITIES OF FRESENIUS MEDICAL CARE CAPITAL TRUST IV 7 7/8% TRUST PREFERRED SECURITIES (LIQUIDATION AMOUNT $1,000 PER PREFERRED SECURITY) Fresenius Medical Care Capital Trust IV, a statutory business trust formed under the laws of the State of Delaware (the "Trust"), hereby certifies that ________________ (the "Holder") is the registered owner of _______________(___) preferred securities of the Trust representing an undivided beneficial interest in the assets of the Trust and designated the Fresenius Medical Care Capital Trust IV 7 7/8% Trust Preferred Securities, (liquidation amount $1,000 per Preferred Security) (the "Preferred Securities"). The Preferred Securities are transferable on the books and records of the Trust, in person or by a duly authorized attorney, upon surrender of this certificate duly endorsed and in proper form for transfer as provided in Section 5.4 of the Declaration (as defined below). The designations, rights, privileges, restrictions, preferences and other terms and provisions of the Preferred Securities are set forth in, and this certificate and the Preferred Securities represented hereby are issued and shall in all respects be subject to the terms and provisions of, the Amended and Restated Declaration of Trust of Fresenius Medical Care Capital Trust IV dated as of June 6, 2001, as the same may be amended from time to time (the "Declaration") including the designation of the terms of Preferred Securities as set forth therein. Capitalized terms used herein and not otherwise defined have the meanings assigned to them by the Declaration. The Holder is entitled to the benefits of the Guarantee Agreement entered into by Fresenius Medical Care AG, a corporation organized under the laws of Germany, and State Street Bank and Trust Company, as guarantee trustee, dated as of June 6, 2001 (the "Trust Guarantee"), to the extent provided therein. The Trust will furnish a copy of the Declaration and the Trust Guarantee to the Holder without charge upon written request to the Trust at its principal place of business or registered office. Upon receipt of this certificate, the Holder is bound by the Declaration and is entitled to the benefits thereunder. 83 90 In Witness Whereof, one of the Company Trustees of the Trust has executed this certificate this 6th day of June, 2001. Fresenius Medical Care Capital Trust IV Name: ------------------------------ Company Trustee PREFERRED TRUSTEE'S CERTIFICATE OF AUTHENTICATION This is one of the Preferred Securities referred to in the within-mentioned Declaration. State Street Bank and Trust Company, as Preferred Trustee By: ------------------------------ Authorized Signatory 84 91 REVERSE OF SECURITY Distributions payable on each Preferred Security will be fixed at a rate per annum of 7 7/8% (the "Distribution Rate") of the Liquidation Amount of $1,000 per Preferred Security, such rate being the rate of interest payable on the Notes held by the Preferred Trustee. Distributions in arrears for more than one quarter (and interest thereon) will bear interest thereon compounded quarterly at the Distribution Rate (to the extent permitted by applicable law). The term "Distributions," as used herein, includes such cash distribution and any such interest payable unless otherwise stated. A Distribution is payable only to the extent that payments are made in respect of the Notes held by the Preferred Trustee and to the extent the Preferred Trustee has funds on hand in the Payment Account legally available therefor. Distributions on the Preferred Securities will accumulate from the most recent date to which Distributions have been paid or, if no Distributions have been paid, from June 6, 2001 and will be payable quarterly in arrears on March 15, June 15, September 15 and December 15, of each year, commencing on September 15, 2001. Distributions will be computed on the basis of a 360-day year constituting twelve 30-day months and, for any period of less than a full calendar month, the number of days elapsed in such month. Under the terms and conditions of, and in the circumstances set forth in, the Registration Rights Agreement referred to in the Declaration, Liquidated Damages (as defined in such Registration Rights Agreement) may be payable in respect of the Preferred Securities. The Company Trustees shall, at the direction of all of the Holders of the Common Securities, at any time terminate the Trust and, after satisfaction of liabilities to creditors of the Trust, cause the Notes to be distributed by the Preferred Trustee to the holders of the Preferred Securities in liquidation of the Trust as provided in the Declaration. The Preferred Securities shall be redeemable as provided in the Declaration. 85 92 ASSIGNMENT FOR VALUE RECEIVED, the undersigned assigns and transfers this Preferred Security to: (Insert assignee's social security or tax identification number) (Insert address and zip code of assignee) and irrevocably appoints agent to transfer this Preferred Security Certificate on the books of the Trust. The agent may substitute another to act for him or her. Date: --------------- Signature: (Sign exactly as your name appears on the other side of this Preferred Security Certificate) The signature(s) should be guaranteed by an eligible guarantor institution (banks, stockbrokers, savings and loan associations and credit unions with membership in an approved signature guarantee medallion program), pursuant to S.E.C. Rule 17Ad-15. 86 93 SCHEDULE OF EXCHANGES OF INTERESTS IN THE GLOBAL SECURITY The following exchanges of a part of this Global Preferred Security Certificate have been made: Liquidation Date of Exchange Amount of Amount of Amount of this Signature of decrease in increase in Global authorized Liquidation Liquidation Preferred officer of Amount of this Amount of this Security Preferred Global Global Certificate Trustee or Preferred Preferred following such Securities Security Security decrease Registrar Certificate Certificate (or increase) 87 94 EXHIBIT E-2 [FORM OF EXCHANGE PREFERRED SECURITIES CERTIFICATE] [TO BE INSERTED ON FORM OF GLOBAL PREFERRED SECURITY--UNLESS THIS PREFERRED SECURITY CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO FRESENIUS MEDICAL CARE CAPITAL TRUST IV OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY PREFERRED SECURITY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.] E-2 95 CERTIFICATE NUMBER NUMBER OF PREFERRED SECURITIES P- CUSIP NO. _________ CERTIFICATE EVIDENCING PREFERRED SECURITIES OF FRESENIUS MEDICAL CARE CAPITAL TRUST IV 7 7/8% TRUST PREFERRED SECURITIES (LIQUIDATION AMOUNT $1,000 PER PREFERRED SECURITY) Fresenius Medical Care Capital Trust IV, a statutory business trust formed under the laws of the State of Delaware (the "Trust"), hereby certifies that ___________(the "Holder") is the registered owner of __________ (_____) preferred securities of the Trust representing an undivided beneficial interest in the assets of the Trust and designated the Fresenius Medical Care Capital Trust IV 7 7/8% Trust Preferred Securities, (liquidation amount $1,000 per Preferred Security) (the "Preferred Securities"). The Preferred Securities are transferable on the books and records of the Trust, in person or by a duly authorized attorney, upon surrender of this certificate duly endorsed and in proper form for transfer as provided in Section 5.4 of the Declaration (as defined below). The designations, rights, privileges, restrictions, preferences and other terms and provisions of the Preferred Securities are set forth in, and this certificate and the Preferred Securities represented hereby are issued and shall in all respects be subject to the terms and provisions of, the Amended and Restated Declaration of Trust of Fresenius Medical Care Capital Trust IV dated as of June 6, 2001, as the same may be amended from time to time (the "Declaration") including the designation of the terms of Preferred Securities as set forth therein. Capitalized terms used herein and not otherwise defined have the meanings assigned to them by the Declaration. The Holder is entitled to the benefits of the Guarantee Agreement entered into by Fresenius Medical Care AG, a corporation organized under the laws of Germany, and State Street Bank and Trust Company, as guarantee trustee, dated as of June 6, 2001 (the "Trust Guarantee"), to the extent provided therein. The Trust will furnish a copy of the Declaration and the Trust Guarantee to the Holder without charge upon written request to the Trust at its principal place of business or registered office. Upon receipt of this certificate, the Holder is bound by the Declaration and is entitled to the benefits thereunder. E-2 96 In Witness Whereof, one of the Company Trustees of the Trust has executed this certificate this ____th day of __________, 2001. Fresenius Medical Care Capital Trust IV BY: -------------------------------------- Name: as Company Trustee PREFERRED TRUSTEE'S CERTIFICATE OF AUTHENTICATION This is one of the Preferred Securities referred to in the within-mentioned Declaration. STATE STREET BANK AND TRUST COMPANY, as Preferred Trustee By: -------------------------------------- Authorized Signatory E-2 97 REVERSE OF SECURITY Distributions payable on each Preferred Security will be fixed at a rate per annum of 7 7/8% (the "Distribution Rate") of the Liquidation Amount of $1,000 per Preferred Security, such rate being the rate of interest payable on the Notes held by the Preferred Trustee. Distributions in arrears for more than one quarter (and interest thereon) will bear interest thereon compounded quarterly at the Distribution Rate (to the extent permitted by applicable law). The term "Distributions," as used herein, includes such cash distribution and any such interest payable unless otherwise stated. A Distribution is payable only to the extent that payments are made in respect of the Notes held by the Preferred Trustee and to the extent the Preferred Trustee has funds on hand in the Payment Account legally available therefor. Distributions on the Preferred Securities will accumulate from the most recent date to which Distributions have been paid or, if no Distributions have been paid, from June 6, 2001 and will be payable quarterly in arrears on March 15, June 15, September 15 and December 15, of each year, commencing on September 15, 2001. Distributions will be computed on the basis of a 360-day year constituting twelve 30-day months and, for any period of less than a full calendar month, the number of days elapsed in such month. Under the terms and conditions of, and in the circumstances set forth in, the Registration Rights Agreement referred to in the Declaration, Liquidated Damages (as defined in such Registration Rights Agreement) may be payable in respect of the Preferred Securities. The Company Trustees shall, at the direction of all of the Holders of the Common Securities, at any time terminate the Trust and, after satisfaction of liabilities to creditors of the Trust, cause the Notes to be distributed by the Preferred Trustee to the holders of the Preferred Securities in liquidation of the Trust as provided in the Declaration. The Preferred Securities shall be redeemable as provided in the Declaration. E-2 98 ASSIGNMENT FOR VALUE RECEIVED, the undersigned assigns and transfers this Preferred Security to: (Insert assignee's social security or tax identification number) (Insert address and zip code of assignee) and irrevocably appoints agent to transfer this Preferred Security Certificate on the books of the Trust. The agent may substitute another to act for him or her. Date: --------------- Signature: (Sign exactly as your name appears on the other side of this Preferred Security Certificate) The signature(s) should be guaranteed by an eligible guarantor institution (banks, stockbrokers, savings and loan associations and credit unions with membership in an approved signature guarantee medallion program), pursuant to S.E.C. Rule 17Ad-15. E-2 99 SCHEDULE OF EXCHANGES OF INTERESTS IN THE GLOBAL SECURITY The following exchanges of a part of this Global Preferred Security Certificate have been made: Liquidation Date of Exchange Amount of Amount of Amount of this Signature of decrease in increase in Global authorized Liquidation Liquidation Preferred officer of Amount of this Amount of this Security Preferred Global Global Certificate Trustee or Preferred Preferred following such Securities Security Security decrease Registrar Certificate Certificate (or increase) E-2 100 EXHIBIT F-1 [FORM OF TRANSFER CERTIFICATE] -- RESTRICTED BOOK-ENTRY PREFERRED SECURITIES CERTIFICATE TO REGULATION S BOOK-ENTRY PREFERRED SECURITIES CERTIFICATE (Transfers pursuant to Section 5.4(D)(i) of the Declaration) Fresenius Medical Care Capital Trust IV, c/o State Street Bank and Trust Company 225 Asylum Street Hartford, Connecticut Fax: (860) 244-1889 Attention: Corporate Trust Administration Re: Fresenius Medical Care Capital Trust IV 7 7/8% Trust Preferred Securities Reference is hereby made to the Amended and Restated Declaration of Trust of Fresenius Medical Care Capital Trust IV (the "Trust"), dated as of June 6, 2001 (the "Declaration"). Terms used but not defined herein and defined in Regulation S under the U.S. Securities Act of 1933, as amended (the "Securities Act") or in the Declaration shall have the meanings given to them in Regulation S or the Declaration, as the case may be. This certificate relates to [_________] aggregate Liquidation Amount of Initial Preferred Securities, which are beneficial interests in the Restricted Book-Entry Preferred Securities Certificate with CUSIP #35802QAA6 (the "Specified Securities"): The person in whose name this certificate is executed below (the "Undersigned") hereby certifies that either (i) it is the sole beneficial owner of the Specified Securities or (ii) it is acting on behalf of all the beneficial owners of the Specified Securities and is duly authorized by them to do so. Such beneficial owner or owners are referred to herein collectively as the "Owner". The Specified Securities are held in book-entry form through a Clearing Agency or its nominee in the name of the Undersigned, as or on behalf of the Owner. The Owner has requested that the Specified Securities be transferred to a person (the "Transferee") who will take delivery in the form of an interest in the Regulation S Book-Entry Preferred Securities Certificate with CUSIP#U31427AA2. In connection with such transfer, the Owner hereby certifies that such transfer is being effected in accordance with Rule 904 or Rule 144 under the Securities Act and with all applicable securities laws of the states of the United States and other jurisdictions. Accordingly, the Owner hereby further certifies as follows: F-1 101 Rule 904 Transfers. If the transfer is being effected in accordance with Rule 904: (A) the Owner is not a distributor of the Specified Securities, an affiliate of the Trust or any such distributor or a person acting on behalf of any of the foregoing; (B) the offer of the Specified Securities was not made to a person in the United States; (C) either: (i) at the time the buy order was originated, the Transferee was outside the United States or the Owner and any person acting on its behalf reasonably believed that the Transferee was outside the United States, or (ii) the transaction is being executed in, on or through the facilities of the Eurobond market, as regulated by the Association of International Bond Dealers, or another designated offshore securities market and neither the Owner nor any person acting on its behalf knows that the transaction has been prearranged with a buyer in the United States; (D) no directed selling efforts have been made in the United States by or on behalf of the Owner or any affiliate thereof; (E) if the Owner is a dealer in securities or has received a selling concession, fee or other remuneration in respect of the Specified Securities, and the transfer is to occur during the Distribution Compliance Period, then the requirements of Rule 904(b)(1) have been satisfied; and (F) the transaction is not part of a plan or scheme to evade the registration requirements of the Securities Act. Rule 144 Transfers. If the transfer is being effected pursuant to Rule 144: (G) the transfer is occurring after the first anniversary of the latest original issue date for the Preferred Securities (including any issued after the initial offering, unless the Trust determines otherwise) and is being effected in accordance with the applicable amount, manner of sale and notice requirements of Rule 144; or (H) the transfer is occurring after the second anniversary of the latest original issue date for the Preferred Securities (including any issued after the initial offering, unless the Trust determines otherwise) and the Owner is not, and during the preceding three months has not been, an affiliate of the Trust. This certificate and the statements contained herein are made for your benefit and the benefit of the Trust and the Initial Purchasers under the Purchase Agreement. F-1 102 Dated: --------------------- (Print the name of the Undersigned, as such term is defined in the second paragraph of this certificate.) By: --------------------------------- Name: Title: (If the Undersigned is a corporation, partnership or fiduciary, the title of the person signing on behalf of the Undersigned must be stated.) F-1 103 EXHIBIT F-2 [FORM OF TRANSFER CERTIFICATE] -- REGULATION S BOOK-ENTRY PREFERRED SECURITIES CERTIFICATE TO RESTRICTED BOOK-ENTRY PREFERRED SECURITIES CERTIFICATE (Transfers pursuant to Section 5.4(D)(ii) of the Declaration) Fresenius Medical Care Capital Trust IV, c/o State Street Bank and Trust Company 225 Asylum Street Hartford, Connecticut Fax: (860) 244-1889 Attention: Corporate Trust Administration Re: Fresenius Medical Care Capital Trust IV 7 7/8% Trust Preferred Securities Reference is hereby made to the Amended and Restated Declaration of Trust of Fresenius Medical Care Capital Trust IV (the "Trust"), dated as of June 6, 2001 (the "Declaration"). Terms used but not defined herein and defined in Regulation S under the U.S. Securities Act of 1933, as amended (the "Securities Act") or in the Declaration shall have the meanings given to them in Regulation S or the Declaration, as the case may be. This certificate relates to [_________] aggregate Liquidation Amount of Initial Preferred Securities, which are interests in the Regulation S Book-Entry Preferred Securities Certificate with CUSIP#U31427AA2 (the "Specified Securities"): The person in whose name this certificate is executed below (the "Undersigned") hereby certifies that either (i) it is the sole beneficial owner of the Specified Securities or (ii) it is acting on behalf of all the beneficial owners of the Specified Securities and is duly authorized by them to do so. Such beneficial owner or owners are referred to herein collectively as the "Owner". The Specified Securities are held in book-entry form through a Clearing Agency or its nominee in the name of the Undersigned, as or on behalf of the Owner. The Owner has requested that the Specified Securities be transferred to a person (the "Transferee") who will take delivery in the form of an interest in the Restricted Book-Entry Preferred Securities Certificate with CUSIP#35802QAA6. In connection with such transfer, the Owner hereby certifies that such transfer is being effected in accordance with Rule 144A under the Securities Act and with all applicable securities laws of the states of the F-2 104 United States and other jurisdictions. Accordingly, the Owner hereby further certifies as follows: the Specified Securities are being transferred to a person that the Owner and any person acting on its behalf reasonably believe is a "qualified institutional buyer" within the meaning of Rule 144A, acquiring for its own account or for the account of a qualified institutional buyer; and (2) the Owner and any person acting on its behalf have taken reasonable steps to ensure that the Transferee is aware that the Owner may be relying on Rule 144A in connection with the transfer. This certificate and the statements contained herein are made for your benefit and the benefit of the Trust and the Initial Purchasers under the Purchase Agreement. Dated: --------------------- (Print the name of the Undersigned, as such term is defined in the second paragraph of this certificate.) By: --------------------------------- Name: Title: (If the Undersigned is a corporation, partnership or fiduciary, the title of the person signing on behalf of the Undersigned must be stated.) F-2 105 EXHIBIT F-3 [FORM OF TRANSFER CERTIFICATE] -- TEMPORARY REGULATION S BOOK-ENTRY PREFERRED SECURITIES CERTIFICATE TO PERMANENT REGULATION S BOOK-ENTRY PREFERRED SECURITIES CERTIFICATE (Transfers pursuant to Section 5.4(D)(iii) of the Declaration) Fresenius Medical Care Capital Trust IV, c/o State Street Bank and Trust Company 225 Asylum Street Hartford, Connecticut Fax: (860) 244-1889 Attention: Corporate Trust Administration Re: Fresenius Medical Care Capital Trust IV 7 7/8% Trust Preferred Securities Reference is hereby made to the Amended and Restated Declaration of Fresenius Medical Care Capital Trust IV, dated as of January June 6, 2001 (the "Declaration"). Terms used but not defined herein and defined in Regulation S under the U.S. Securities Act of 1933, as amended (the "Securities Act") or in the Declaration shall have the meanings given to them in Regulation S or the Declaration, as the case may be. This certificate relates to [_________] aggregate Liquidation Amount of Initial Preferred Securities, which are interests in the Temporary Regulation S Book-Entry Preferred Securities Certificate with CUSIP# U31427AA2 (the "Specified Securities"): The person in whose name this certificate is executed below (the "Undersigned") hereby certifies that either (i) it is the sole beneficial owner of the Specified Securities or (ii) it is acting on behalf of all the beneficial owners of the Specified Securities and is duly authorized by them to do so. Such beneficial owner or owners are referred to herein collectively as the "Owner". The Specified Securities are held in book-entry form through a Clearing Agency or its nominee in the name of the Undersigned, as or on behalf of the Owner. The Owner has requested that the Specified Securities be exchanged for an interest in the Permanent Regulation S Book-Entry Preferred Securities Certificate, which is not permitted to occur during the Distribution Compliance Period. Accordingly: if this certificate is given prior to the expiry of the Distribution Compliance Period, the Owner hereby requests that such exchange be made as soon as practicable on or after such date and hereby certifies that the Owner is not now a U.S. person and, on such date, will be the Owner of the Specified Securities and will not be a U.S. person, or F-3 106 (2) if this certificate is given on or after the expiry of the Distribution Compliance Period, the Owner hereby requests that such exchange be made as soon as practicable and hereby certifies that the Owner is not a U.S. person and is the Owner of the Specified Securities. This certificate and the statements contained herein are made for your benefit and the benefit of the Trust and the Initial Purchasers under the Purchase Agreement. Dated: (Print the name of the Undersigned, as such term is defined in the second paragraph of this certificate.) By: --------------------------------- Name: Title: (If the Undersigned is a corporation, partnership or fiduciary, the title of the person signing on behalf of the Undersigned must be stated.) F-3 107 EXHIBIT G-1 CERTIFICATE TO BE DELIVERED UPON EXCHANGE OF INITIAL PREFERRED SECURITIES This certificate relates to Preferred Securities in $___________ Liquidation Amount held by the undersigned. The undersigned (check one box below): [ ] has requested the Company Trustees by written order to deliver in exchange for its beneficial interest in the Book-Entry Preferred Security held by the Depository a Preferred Security or Preferred Securities in definitive, registered form of authorized denominations and an aggregate Liquidation Amount equal to its beneficial interest in such Book-Entry Preferred Security (or the portion thereof indicated above) in accordance with Section 5.13 of the Declaration; [ ] has as requested the Company Trustees by written order to exchange or register the transfer of a Preferred Security or Preferred Securities in accordance with Section 5.5 of the Declaration. In connection with any transfer or exchange of any of the Preferred Securities evidenced by this certificate occurring prior to the date that is two years after the later of the date of original issuance of such Preferred Securities and the last date, if any, on which such Preferred Securities were owned by the Trust or any Affiliate of the Trust, the undersigned confirms that such Preferred Securities are being: CHECK ONE BOX BELOW: (1) [ ] transferred to the Trust; or (2) [ ] transferred pursuant to and in compliance with Rule 144A under the Securities act of 1993, as amended; or (3) [ ] transferred pursuant to another available exemption from the registration requirements of the Securities Act of 1993, as amended. Unless one of the boxes is checked, the Company Trustees shall refuse to register any of the Preferred Securities evidenced by this certificate in the name of any person other than the registered holder thereof; provided, however, that if box (3) is checked, the Company Trustees or the Trust may require, prior to registering any such transfer of the Preferred Securities, in its sole discretion, such legal opinions, certifications and other information as an Company Trustee or the Trust has reasonably requested to confirm that such transfer is being made pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act of 1933, as amended, such as the exemption provided by Rule 144 under such Act; provided further that if box (2) is checked, the transferee must also certify that it is a qualified institutional buyer as defined in Rule 144A. G-1 108 --------------------- Signature Signature Guarantee: --------------------- Signature (Signature must be guaranteed by a participant in a signature guarantee medallion program) G-1 109 EXHIBIT G-2 CERTIFICATE TO BE DELIVERED UPON EXCHANGE OF PREFERRED SECURITIES This certificate relates to Preferred Securities in $___________ Liquidation Amount held in (check applicable space) ____ global or _____ definitive form by the undersigned. The undersigned (check one box below): [ ] has requested the Company Trustees by written order to deliver in exchange for its beneficial interest in the Book-Entry Preferred Security held by the Depository a Preferred Security or Preferred Securities in definitive, registered form of authorized denominations and an aggregate Liquidation Amount equal to its beneficial interest in such Book-Entry Preferred Security (or the portion thereof indicated above) in accordance with Section 5.13 of the Declaration; [ ] has requested the Company Trustees by written order to exchange or register the transfer of a Preferred Security or Preferred Securities in accordance with Section 5.5 of the Declaration. --------------------- Signature Signature Guarantee: --------------------- Signature (Signature must be guaranteed by a participant in a signature guarantee medallion program) G-2 EX-4.45 10 y51284ex4-45.txt AMENDED AND RESTATED DECLARATION OF TRUST 1 EXHIBIT 4.45 EXECUTION COPY AMENDED AND RESTATED DECLARATION OF TRUST FRESENIUS MEDICAL CARE CAPITAL TRUST V DATED AS OF JUNE 15, 2001 2 TABLE OF CONTENTS
PAGE ARTICLE I DEFINED TERMS SECTION 1.1 Definitions.........................................................................................1 ARTICLE II ESTABLISHMENT OF THE TRUST SECTION 2.1 Name...............................................................................................11 SECTION 2.2 Office of the Delaware Trustee; Principal Place of Business........................................11 SECTION 2.3 Initial Contribution of Trust Property; Organizational Expenses...................................11 SECTION 2.4 Issuance of the Preferred Securities...............................................................11 SECTION 2.5 Issuance of the Common Securities; Subscription and Purchase of the Notes..........................12 SECTION 2.6 Purposes and Functions of the Trust................................................................12 SECTION 2.7 Authorization to Enter into Certain Transactions...................................................12 SECTION 2.8 Assets of Trust....................................................................................16 SECTION 2.9 Title to Trust Property............................................................................16 ARTICLE III PAYMENT ACCOUNT SECTION 3.1 Payment Account....................................................................................16 ARTICLE IV DISTRIBUTIONS; REDEMPTION SECTION 4.1 Distributions......................................................................................17 SECTION 4.2 Redemption.........................................................................................17 SECTION 4.3 Subordination of Common Securities.................................................................19 SECTION 4.4 Payment Procedures.................................................................................20 SECTION 4.5 Tax Returns and Reports............................................................................20 SECTION 4.6 Payment of Taxes, Duties, Etc. of the Trust........................................................20 SECTION 4.7 Payments under Indenture...........................................................................20 SECTION 4.8 Change of Control..................................................................................20 SECTION 4.9 Offer to Repurchase Upon Asset Disposition.........................................................21 ARTICLE V TRUST SECURITIES CERTIFICATES SECTION 5.1 Initial Ownership..................................................................................22 SECTION 5.2 The Trust Securities Certificates..................................................................22 SECTION 5.3 Execution and Delivery of Trust Securities Certificates............................................23 SECTION 5.4 Registration of Transfer and Exchange of Preferred Securities Certificates.........................23
i 3 SECTION 5.5 Mutilated, Destroyed, Lost or Stolen Trust Securities Certificates.................................24 SECTION 5.6 Persons Deemed Securityholders.....................................................................24 SECTION 5.7 Access to List of Securityholders' Names and Addresses.............................................24 SECTION 5.8 Maintenance of Office or Agency....................................................................25 SECTION 5.9 Appointment of Paying Agent........................................................................25 SECTION 5.10 Ownership of Common Securities by Sponsor.........................................................26 SECTION 5.11 Book-Entry Preferred Securities Certificates; Common Securities Certificate.......................26 SECTION 5.12 Notices to Clearing Agency........................................................................27 SECTION 5.13 Definitive Preferred Securities Certificates......................................................27 SECTION 5.14 Rights of Securityholders; Waivers of Past Defaults...............................................28 ARTICLE VI ACTS OF SECURITYHOLDERS; MEETINGS; VOTING SECTION 6.1 Limitations on Voting Rights.......................................................................30 SECTION 6.2 Notice of Meetings.................................................................................33 SECTION 6.3 Meetings of Preferred Securityholders..............................................................33 SECTION 6.4 Voting Rights......................................................................................34 SECTION 6.5 Proxies, etc.......................................................................................34 SECTION 6.6 Securityholder Action by Written Consent...........................................................34 SECTION 6.7 Record Date for Voting and Other Purposes..........................................................34 SECTION 6.8 Acts of Securityholders............................................................................35 SECTION 6.9 Inspection of Records..............................................................................36 ARTICLE VII REPRESENTATIONS AND WARRANTIES SECTION 7.1 Representations and Warranties of the Bank, the Preferred Trustee and the Delaware Trustee.........36 SECTION 7.2 Representations and Warranties of Sponsor..........................................................37 ARTICLE VIII THE TRUSTEES SECTION 8.1 Certain Duties and Responsibilities................................................................38 SECTION 8.2 Certain Notices....................................................................................40 SECTION 8.3 Certain Rights of Preferred Trustee................................................................40 SECTION 8.4 Not Responsible for Recitals or Issuance of Securities.............................................42 SECTION 8.5 May Hold Securities................................................................................42 SECTION 8.6 Compensation; Indemnity; Fees......................................................................42 SECTION 8.7 Corporate Preferred Trustee Required; Eligibility of Trustees......................................44 SECTION 8.8 Conflicting Interests..............................................................................44 SECTION 8.9 Co-Trustees and Separate Trustee...................................................................44 SECTION 8.10 Resignation and Removal; Appointment of Successor.................................................46 SECTION 8.11 Acceptance of Appointment by Successor............................................................47 SECTION 8.12 Merger, Conversion, Consolidation or Succession to Business.......................................48 SECTION 8.13 Preferential Collection of Claims Against Sponsor or Trust........................................48 SECTION 8.14 Preferred Trustee May File Proofs of Claim........................................................48
ii 4 SECTION 8.15 Reports by Preferred Trustee......................................................................49 SECTION 8.16 Reports to the Preferred Trustee..................................................................50 SECTION 8.17 Evidence of Compliance with Conditions Precedent..................................................50 SECTION 8.18 Number of Trustees................................................................................50 SECTION 8.19 Delegation of Power...............................................................................51 ARTICLE IX TERMINATION, LIQUIDATION AND MERGER SECTION 9.1 Termination Upon Expiration Date...................................................................51 SECTION 9.2 Early Termination..................................................................................51 SECTION 9.3 Termination........................................................................................52 SECTION 9.4 Liquidation........................................................................................52 SECTION 9.5 Mergers, Consolidations, Amalgamations or Replacements of the Trust.................................54 ARTICLE X MISCELLANEOUS PROVISIONS SECTION 10.1 Limitation of Rights of Securityholders...........................................................55 SECTION 10.2 Amendment.........................................................................................56 SECTION 10.3 Separability......................................................................................57 SECTION 10.4 Governing Law.....................................................................................57 SECTION 10.5 Submission to Jurisdiction........................................................................58 SECTION 10.6 Payments Due on Non-Business Day..................................................................58 SECTION 10.7 Successors........................................................................................58 SECTION 10.8 Headings..........................................................................................59 SECTION 10.9 Reports, Notices and Demands......................................................................59 SECTION 10.10 Agreement Not to Petition........................................................................60 SECTION 10.11 Trust Indenture Act; Conflict with Trust Indenture Act............................................60 SECTION 10.12 Acceptance of Terms of Declaration, Trust Guarantee and Indenture................................61 SECTION 10.13 Liquidated Damages Under Registration Rights Agreement...........................................61 SECTION 10.14 Counterparts.....................................................................................61
EXHIBIT A - Form of Certificate of Trust of Fresenius Medical Care Capital Trust V EXHIBIT B - [Intentionally Left Blank] EXHIBIT C - Form of Common Securities Certificate EXHIBIT D - Form of Expense Agreement EXHIBIT E-1 - Form of Initial Preferred Securities Certificate EXHIBIT E-2 - Form of Exchange Preferred Securities Certificate EXHIBIT F-1 - Form of Transfer Certificate - Restricted Book-Entry Preferred Securities Certificate to Regulation S Book-Entry Preferred Securities Certificate EXHIBIT F-2 - Form of Transfer Certificate - Temporary Regulation S Book-Entry Preferred Securities Certificate to Restricted Book-Entry Preferred Securities Certificate EXHIBIT F-3 - Form of Transfer Certificate - Temporary Regulation S Book-Entry Preferred Securities Certificate to Permanent Regulation S Book Entry Preferred Securities Certificate iii 5 EXHIBIT G-1 - Certificate to be Delivered upon Exchange of Initial Preferred Securities EXHIBIT G-2 - Certificate to be Delivered upon Exchange of Preferred Securities iv 6 FRESENIUS MEDICAL CARE CAPITAL TRUST V CERTAIN SECTIONS OF THIS DECLARATION OF TRUST RELATING TO SECTIONS 310 THROUGH 318 OF THE TRUST INDENTURE ACT OF 1939:
TRUST INDENTURE DECLARATION ACT SECTION SECTION - --------------- ------- (Section)310 (a)(1)......................................................... 8.7 (a)(2).............................................................. 8.7 (a)(3).............................................................. 8.9 (a)(4).............................................................. 2.7(a)(ii) (b)................................................................. 8.8 (Section)311 (a)............................................................ 8.13 (b)................................................................. 8.13 (Section)312 (a)............................................................ 5.7 (b)................................................................. 5.7 (c)................................................................. 5.7 (Section)313 (a)............................................................ 8.15(a) (a)(4).............................................................. 8.15(b) (b)................................................................. 8.15(b) (c)................................................................. 10.9 (d)................................................................. 8.15(c) (Section)314 (a)............................................................ 8.16 (b)................................................................. Not Applicable (c)(1).............................................................. 8.17 (c)(2).............................................................. 8.17 (c)(3).............................................................. Not Applicable (d)................................................................. Not Applicable (e)................................................................. 1.1, 8.17 (Section)315 (a)............................................................ 8.1(a), 8.3(a) (b)................................................................. 8.2, 10.9 (c)................................................................. 8.1(a) (d)................................................................. 8.1, 8.3 (e)................................................................. Not Applicable (Section)316 (a)............................................................ Not Applicable (a)(1)(A)........................................................... Not Applicable (a)(1)(B)........................................................... Not Applicable (a)(2).............................................................. Not Applicable (b)................................................................. 5.14 (c)................................................................. 6.7 (Section)317 (a)(1)......................................................... Not Applicable (a)(2).............................................................. Not Applicable (b)................................................................. 5.9 (Section)318 (a)............................................................ 10.11
---------- Note: This reconciliation and tie sheet shall not, for any purpose, be deemed to be a part of the Declaration of Trust. v 7 AMENDED AND RESTATED DECLARATION OF TRUST OF FRESENIUS MEDICAL CARE CAPITAL TRUST V June 15, 2001 AMENDED AND RESTATED DECLARATION OF TRUST ("Declaration") dated and effective as of June 15, 2001, by the Trustees (as defined herein), the Sponsor (as defined herein), the Issuer (as defined herein) and by the holders, from time to time, of undivided beneficial interests in the Trust (as defined herein) to be issued pursuant to this Declaration; WHEREAS, First Union Trust Company, National Association, a national banking association, and Dr. Ben J. Lipps, as trustees, and Fresenius Medical Care AG (the "Sponsor"), as sponsor, created Fresenius Medical Care Capital Trust V (the "Trust") as a business trust under the Delaware Business Trust Act (as defined below) pursuant to a Declaration of Trust, dated as of June 1, 2001 (the "Original Declaration"), and a Certificate of Trust executed and filed with the Secretary of State of the State of Delaware on June 1, 2001, attached as Exhibit A; WHEREAS, since the date of the creation of the Trust through the date hereof, no Trust Securities (as defined herein) have been issued and the Trust has not conducted any business nor incurred any liabilities and the Trust has not been caused to conduct any business nor to incur any liabilities; WHEREAS, all of the Trustees, FMC Trust Finance S.a.r.l. Luxembourg-III, as Issuer, and the Sponsor, by this Declaration, amend and restate each and every term and provision of the Original Declaration as set forth herein to provide for, among other things, (i) the issuance of the Common Securities (as defined herein) by the Trust to the Sponsor, (ii) the issuance and sale of the Preferred Securities (as defined herein) by the Trust pursuant to the Purchase Agreement (as defined herein), (iii) the acquisition by the Trust from the Issuer of all of the right, title and interest in the Notes (as defined herein) and (iv) the appointment of the Trustees; NOW, THEREFORE, it being the intention of the parties hereto to continue the Trust as a business trust under the Delaware Business Trust Act and that this Declaration constitute the governing instrument of such business trust, the Trustees declare that all assets contributed to the Trust will be held in trust for the benefit of the holders, from time to time, of the securities representing undivided beneficial interests in the assets of the Trust issued hereunder, subject to the provisions of this Declaration. ARTICLE I DEFINED TERMS .1 Definitions. 1 8 For all purposes of this Declaration, except as otherwise expressly provided or unless the context otherwise requires: (A) the terms defined in this Article have the meanings assigned to them in this Article and include the plural as well as the singular; (B) all other terms used herein that are defined in the Trust Indenture Act, either directly or by reference therein, have the meanings assigned to them therein; (C) unless the context otherwise requires, any reference to an "Article" or a "Section" refers to an Article or a Section, as the case may be, of this Declaration; and the words "herein", "hereof" and "hereunder" and other words of similar import refer to this Declaration as a whole and not to any particular Article, Section or other subdivision. "Act" has the meaning specified in Section 6.8. "Additional Payments" means, with respect to Trust Securities of a given Liquidation Amount and/or a given period, the Additional Sums (as defined in the Indenture) paid by the Issuer on a Like Amount of Notes for such period. "Additional Amounts" has the meaning specified in Section 10.19 of the Indenture. "Affiliate" of any specified Person means any other Person directly or indirectly controlling or controlled by or under direct or indirect common control with such specified Person, provided, however, that an Affiliate of the Sponsor shall not be deemed to include the Trust, Fresenius Medical Care Capital Trust, a Delaware business trust, Fresenius Medical Care Capital Trust II, a Delaware business trust, Fresenius Medical Care Capital Trust III, a Delaware business trust, Fresenius Medical Care Capital Trust IV, or any business trust organized and operated on substantially similar terms. For the purposes of this definition, "control" when used with respect to any specified Person means the power to direct the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise; and the terms "controlling" and "controlled" have meanings correlative to the foregoing. "Bank" means the Preferred Trustee in its separate corporate capacity and not in its capacity as Preferred Trustee. "Bankruptcy Event" means, with respect to any Person, under the relevant jurisdiction: (a) the entry of a decree or order by a court having jurisdiction in the premises judging such Person a bankrupt or insolvent, or approving as properly filed a petition seeking reorganization, arrangement, adjudication or composition of or in respect of such Person under any applicable bankruptcy, insolvency, reorganization or other similar law of Germany, the United States, any State thereof or the District of Columbia, or the jurisdiction of formation of the Issuer, or appointing a receiver, liquidator, assignee, trustee, sequestrator (or other similar official) of such Person or of any substantial part of its property or ordering 2 9 the winding up or liquidation of its affairs, and the continuance of any such decree or order unstayed and in effect for a period of 60 consecutive days; or (b) the institution by such Person of proceedings to be adjudicated a bankrupt or insolvent, or the consent by it to the institution of bankruptcy or insolvency proceedings against it, or the filing by it of a petition or answer or consent seeking reorganization or relief under any applicable bankruptcy, insolvency, reorganization or other similar law of Germany, the United States, any State thereof or the District of Columbia, or the jurisdiction of formation of the Issuer, or the consent by it to the filing of any such petition or to the appointment of a receiver, liquidator, assignee, trustee, sequestrator (or similar official) of such Person or of any substantial part of its property, or the making by it of an assignment for the benefit of creditors, or the admission by it in writing of its inability to pay its debts generally as they become due and its willingness to be adjudicated a bankrupt, or the taking of corporate action by such Person in furtherance of any such action. "Bankruptcy Laws" has the meaning specified in Section 10.10. "Book-Entry Preferred Securities Certificate" means a Preferred Securities Certificate, ownership and transfers of interests in which shall be made through book entries by a Clearing Agency as described in Section 5.11. "Business Day" means any day other than (i) a Saturday or Sunday, (ii) a day on which banking institutions in New York City, London, Frankfurt am Main or Luxembourg are authorized or required by law or executive order to remain closed, (iii) a day on which the Trans-European Automated Real-Time Gross-settlement Express Transfer System is authorized or required by law to remain closed or (iv) a day on which the Corporate Trust Office of the Preferred Trustee or, with respect to the Notes, the Corporate Trust Office of the Indenture Trustee under the Indenture, is closed for business. "Clearing Agency" means an organization registered, or operating under an exemption from registration, as a "clearing agency" pursuant to Section 17A of the Exchange Act. Euroclear and Clearstream, Luxembourg will be the two initial Clearing Agencies. "Clearing Agency Participant" means a broker, dealer, bank, other financial institution or other Person for whom from time to time a Clearing Agency effects book-entry transfers and pledges of securities deposited with the Clearing Agency. "Clearstream, Luxembourg" means Clearstream Banking, societe anonyme, one of the initial Clearing Agencies. "Closing Date" has the meaning specified in the Purchase Agreement, which date is also the date of execution and delivery of this Declaration. "Code" means the Internal Revenue Code of 1986, as amended. "Commission" means the United States Securities and Exchange Commission. "Common Depositary" means Deutsche Bank AG London as common depositary for Euroclear and Clearstream, Luxembourg, with whom the Book-Entry Preferred Securities Certificates shall be deposited. 3 10 "Common Securities Certificate" means a certificate evidencing ownership of Common Securities, substantially in the form attached as Exhibit C. "Common Security" means an undivided beneficial interest in the assets of the Trust, having a Liquidation Amount of Euro 1,000 and having the rights provided therefor in this Declaration, including the right to receive Distributions and a Liquidation Distribution as provided herein. "Company Trustee" means each of Dr. Ben J. Lipps, Dr. Karl-Dieter Schwab and Josef Dinger, solely in such Person's capacity as Company Trustee of the Trust and not in such Person's individual capacity, or such Company Trustee's successor in interest in such capacity, or any successor trustee appointed as herein provided. "Corporate Trust Office" means the principal office of the Preferred Trustee located at 225 Asylum Street, Hartford, Connecticut 06103. "Declaration" means this Amended and Restated Declaration of Trust, as the same may be modified, amended or supplemented in accordance with the applicable provisions hereof, including all exhibits hereto and, for all purposes of this Declaration and any such modification, amendment or supplement, the provisions of the Trust Indenture Act that are deemed to be a part of and govern this Declaration and any such modification, amendment or supplement, respectively. "Declaration Event of Default" means a Note Event of Default or a default by the Sponsor under the Guarantee Agreement. "Definitive Preferred Securities Certificates" means either or both (as the context requires) of (a) Preferred Securities Certificates issued as a typewritten Preferred Securities Certificate or certificates representing Book-Entry Preferred Securities Certificates as provided in Section 5.11(a), and (b) Preferred Securities Certificates issued in certificated, fully registered form as provided in Section 5.13. "Delaware Business Trust Act" means Chapter 38 of Title 12 of the Delaware Code, 12 Del. C. (Section) 3801, et seq., as it may be amended from time to time. "Delaware Trustee" means First Union Trust Company, National Association, a national banking association, not in its individual capacity but solely in its capacity as Delaware Trustee of the Trust formed hereunder and not in its individual capacity, or its successor in interest in such capacity, or any successor trustee appointed as herein provided. "Distribution Compliance Period" means with respect to each Temporary Regulation S Book-Entry Preferred Securities Certificate, the period of 40 days beginning on the date hereof. "Distribution Date" has the meaning specified in Section 4.1(a). "Distributions" means amounts payable in respect of the Trust Securities as provided in Section 4.1. "Euro " or "euro" means the euro, the common currency of the European Monetary Union. 4 11 "Euroclear" means Morgan Guaranty Trust Company of New York, Brussels office, operator of Euroclear System, one of the initial Clearing Agencies. "Exchange Act" means the Securities Exchange Act of 1934, as amended. "Exchange Offer" means the exchange offer contemplated by the Registration Rights Agreement. "Exchange Preferred Security" means an undivided beneficial preferred interest in the assets of the Trust, having a Liquidation Amount of Euro 1,000 and having the rights provided therefor in this Declaration, including the right to receive Distributions and a Liquidation Distribution, as provided herein, and to be issued hereunder in connection with the Exchange Offer. "Exchange Guarantee Agreement" has the meaning specified in Section 1.1 of the Guarantee Agreement. "Expense Agreement" means the Agreement as to Expenses and Liabilities between the Sponsor and the Trust, substantially in the form attached as Exhibit D, as amended from time to time. "Expiration Date" has the meaning specified in Section 9.1. "Guarantee Agreement" means the Initial Guarantee Agreement and, when and if issued, the Exchange Guarantee Agreement. "Guarantors" means, with respect to the Notes, the Sponsor, Fresenius Medical Care Holdings, Inc., a New York corporation, and Fresenius Medical Care Deutschland GmbH, a German limited liability company. "Guaranty" or "Guaranties" has the meaning specified in Section 1.1 of the Indenture. "Holder" has the meaning specified under the definition of "Securityholder." "Indenture" means the Senior Subordinated Indenture, dated as of June 15, 2001, among the Issuer, as issuer, the Indenture Trustee, as trustee, and the Guarantors with respect to the issuance of the Notes, as amended or supplemented from time to time. "Indenture Trustee" means State Street Bank and Trust Company, a Massachusetts chartered trust company, solely in its capacity as Trustee under the Indenture and not in its individual capacity, and any successor thereto in such capacity. "Initial Guarantee Agreement" means the Guarantee Agreement, dated as of June 15, 2001 between the Sponsor and the Guarantee Trustee, on behalf of and for the benefit of the Holders of the Initial Preferred Securities, as may be modified, amended or supplemented and in effect from time to time. "Initial Preferred Security" means a preferred undivided beneficial interest in the assets of the Trust, having a Liquidation Amount of Euro 1,000 and having the rights provided therefor in this Declaration, including the right to receive Distributions and a Liquidation 5 12 Distribution, as provided herein and issued on the Closing Date and not registered under the Securities Act. "Investment Company Event" means the receipt by the Sponsor of an Opinion of Counsel, rendered by a law firm having a recognized national tax and securities practice, to the effect that, as a result of the occurrence of a change in law or regulation or a change in interpretation or application of law or regulation by any legislative body, court, governmental agency or regulatory authority (a "Change in 1940 Act Law"), the Trust is or will be considered an investment company which is required to be registered under the 1940 Act, which Change in 1940 Act Law becomes effective on or after the date of original issuance of the Preferred Securities under this Declaration. "Issuer" means FMC Trust Finance S.a.r.l. Luxembourg-III, the issuer under the Indenture, or its Successor (as defined therein). "Lien" means any lien, pledge, charge, encumbrance, mortgage, deed of trust, adverse ownership interest, hypothecation, assignment, security interest or preference, priority or other security agreement or preferential arrangement of any kind or nature whatsoever. "Like Amount" means (a) with respect to a redemption or repurchase of Trust Securities, Trust Securities having a Liquidation Amount equal to the principal amount of Notes to be contemporaneously redeemed or repurchased in accordance with the Indenture the proceeds of which will be used to pay the Redemption Price of such Trust Securities, and (b) with respect to a distribution of Notes to Holders of Trust Securities in connection with a dissolution or liquidation of the Trust, Notes having a principal amount equal to the Liquidation Amount of the Trust Securities of the Holder to whom such Notes are distributed. "Liquidated Damages" means amounts payable to the Holders of Preferred Securities as liquidated damages as defined in and pursuant to Section 5 of the Registration Rights Agreement. "Liquidation Amount" means the stated amount of Euro 1,000 per Trust Security; provided, that Initial Preferred Securities may only be transferred in minimum blocks of Euro 100,000 aggregate liquidation amount until exchanged for Exchange Preferred Securities pursuant to the Exchange Offer. "Liquidation Date" means the date on which Notes are to be distributed to Holders of Trust Securities in connection with a termination and liquidation of the Trust pursuant to Section 9.4(a). "Liquidation Distribution" has the meaning specified in Section 9.4(d). "1940 Act" means the Investment Company Act of 1940, as amended. "Nominee for the Common Depositary" means BT Globenet Nominees Limited, nominee for the Common Depositary, in whose name the Book-Entry Preferred Securities Certificates shall be registered. "Note Event of Default" means an "Event of Default" as defined in the Indenture. 6 13 "Note Redemption Date" means, with respect to any Notes to be redeemed or repurchased under the Indenture, the date fixed for redemption or repurchase under the Indenture. "Note Tax Event" means a "Tax Event" as defined in the Indenture. "Notes" means the Issuer's 7 3/8% Senior Subordinated Notes due 2011 issued pursuant to the Indenture, including any Exchange Securities (as defined in the Indenture). "Officers' Certificate" means a certificate signed by the Chief Executive Officer and/or Chief Financial Officer and a Member of the Managing Board of the Sponsor, and delivered to the appropriate Trustee. Any Officers' Certificate delivered with respect to compliance with a condition or covenant provided for in this Declaration shall include: (a) a statement that each officer signing the Officers' Certificate has read the covenant or condition and the definitions relating thereto; (b) a brief statement of the nature and scope of the examination or investigation undertaken by each officer in rendering the Officers' Certificate; (c) a statement that each such officer has made such examination or investigation as, in such officer's opinion, is necessary to enable such officer to express an informed opinion as to whether or not such covenant or condition has been complied with; and (d) a statement as to whether, in the opinion of each such officer, such condition or covenant has been complied with. "Opinion of Counsel" means a written opinion of counsel, who may be counsel for the Trust or the Sponsor, but not an employee of any thereof, and who shall be reasonably acceptable to the Preferred Trustee. "Original Declaration" has the meaning specified in the recitals to this Declaration. "Outstanding", when used with respect to Trust Securities means, as of the date of determination, all Trust Securities theretofore executed and delivered under this Declaration, except: (a) Trust Securities theretofore cancelled by the Preferred Trustee or delivered to the Preferred Trustee for cancellation; (b) Trust Securities for whose payment or redemption money in the necessary amount has been theretofore deposited with the Preferred Trustee or any Paying Agent for the Holders of such Trust Securities; provided, that if such Trust Securities are to be redeemed, notice of such redemption has been duly given pursuant to this Declaration; and (c) Preferred Securities which have been paid or in exchange for or in lieu of which other Preferred Securities have been executed and delivered pursuant to Sections 5.4, 5.5, 5.11 and 5.13; 7 14 provided, however, that in determining whether the Holders of the requisite Liquidation Amount of the Outstanding Preferred Securities have given any request, demand, authorization, direction, notice, consent or waiver hereunder, Preferred Securities owned by the Sponsor, any Trustee (other than the Preferred Trustee acting in a capacity other than its individual capacity or its capacity as Preferred Trustee) or any Affiliate of the Sponsor or any Trustee (other than the Preferred Trustee acting in a capacity other than its individual capacity or its capacity as Preferred Trustee) shall be disregarded and deemed not to be Outstanding, except that (a) in determining whether any Trustee shall be protected in relying upon any such request, demand, authorization, direction, notice, consent or waiver, only Preferred Securities that such Trustee knows to be so owned shall be so disregarded and (b) the foregoing shall not apply at any time when all of the outstanding Preferred Securities are owned by the Sponsor, one or more of the Trustees and/or any such Affiliate. Preferred Securities so owned which have been pledged in good faith may be regarded as Outstanding if the pledgee establishes to the satisfaction of the Company Trustees the pledgee's right so to act with respect to such Preferred Securities and that the pledgee is not the Sponsor, any Trustee or any Affiliate of the Sponsor or any such Trustee. "Owner" means each Person who is the beneficial owner of an interest in a Global Preferred Securities Certificate as reflected in the records of the Clearing Agency or, if a Clearing Agency Participant is not the Owner, then as reflected in the records of a Person maintaining an account with such Clearing Agency (directly or indirectly, in accordance with the rules of such Clearing Agency). "Paying Agent" means any paying agent or co-paying agent appointed pursuant to Section 5.9. "Payment Account" means a corporate trust account maintained by the Preferred Trustee or its agent for the benefit of the Securityholders in which all amounts paid in respect of the Notes will be held and from which the Paying Agent shall make payments to the Securityholders in accordance with Sections 4.1 and 4.2. "Permanent Regulation S Book-Entry Preferred Securities Certificates" has the meaning set forth in Section 5.11 of this Declaration. "Person" means any individual, corporation, partnership, joint venture, association, joint-stock company, trust, unincorporated organization, government or any agency, instrumentality or political subdivision thereof, or any other entity. "Preferred Securities Certificate" means a certificate evidencing ownership of Preferred Securities, substantially in the form attached as Exhibit E-1 or Exhibit E-2, as the case may be. "Preferred Security" means the Initial Preferred Securities and, when and if issued as provided herein and in the Registration Rights Agreement, any one of the Exchange Preferred Securities. "Preferred Trustee" means State Street Bank and Trust Company, a Massachusetts chartered trust company, solely in its capacity as Preferred Trustee of the Trust heretofore formed and not in its individual capacity, or its successor in interest in such capacity, or any successor Preferred Trustee appointed as herein provided. 8 15 "Purchase Agreement" means the Purchase Agreement, dated June 12, 2001, relating to the offering and sale of the Initial Preferred Securities among the Trust, the Issuer, the Guarantors and the Initial Purchasers named therein, as the same may be amended from time to time. "Redemption Date" means, with respect to any Trust Security to be redeemed, the date fixed for such redemption by or pursuant to this Declaration; provided, that each Note Redemption Date and the stated maturity of the Notes shall be a Redemption Date for a Like Amount of Trust Securities. "Redemption Price" means, with respect to any Trust Security, the Redemption Price (as defined in the Indenture) for the concurrent redemption of a Like Amount of Notes, allocated on a pro rata basis, plus accrued and unpaid Distributions to the Redemption Date, plus the related amount of the premium, if any, paid by the Issuer upon the concurrent redemption of a Like Amount of Notes, allocated on a pro rata basis (based on Liquidation Amounts) among the Trust Securities. "Registration Rights Agreement" means the Registration Rights Agreement dated as of June 15, 2001 among the Initial Purchasers named therein, the Trust, the Issuer and the Guarantors, as such agreement may be amended, modified or supplemented from time to time in accordance with the terms thereof. "Regulation S" means Regulation S under the Securities Act, as such rule may be amended from time to time, or any similar rule or regulation hereafter adopted by the Commission. "Regulation S Book-Entry Preferred Securities Certificates" means together the Permanent Regulation S Book-Entry Preferred Securities Certificates and the Temporary Regulation S Book-Entry Preferred Securities Certificates. "Relevant Trustee" shall have the meaning specified in Section 8.10. "Restricted Book-Entry Preferred Securities Certificates" has the meaning set forth in Section 5.11 of this Declaration. "Rule 144" means rule 144 under the Securities Act, as such rule may be amended from time to time, or any similar rule or regulation hereafter adopted by the Commission. "Rule 144A" means rule 144A under the Securities Act, as such rule may be amended from time to time, or any similar rule or regulation hereafter adopted by the Commission. "Securities Act" means the Securities Act of 1933, as amended. "Securities Register" and "Securities Registrar" have the respective meanings specified in Section 5.4. "Securityholder" or "Holder" means a Person in whose name a Trust Security or Trust Securities is registered in the Securities Register; any such Person shall be deemed to be a beneficial owner within the meaning of the Delaware Business Trust Act; provided, 9 16 however, that in determining whether the Holders of the requisite amount of Preferred Securities have voted on any matter provided for in this Declaration, then for the purpose of any such determination, so long as Definitive Preferred Securities Certificates have not been issued, the term Securityholders or Holders as used herein shall refer to the Owners. "Shelf Registration Statement" shall have the meaning set forth in the Registration Rights Agreement. "Sponsor" means Fresenius Medical Care AG, a corporation organized and existing under the laws of Germany, including any successors or assigns. "Tax Event" means the receipt by the Sponsor of an Opinion of Counsel of nationally recognized tax counsel to the effect that, as a result of (a) any amendment to, or change (including any announced prospective change) in, the laws (or any regulations thereunder) of the United States, Germany, or the jurisdiction of formation of the Issuer (currently Luxembourg), or any political subdivision or taxing authority thereof or therein, (other than any amendment or change implementing, complying with, or introduced in order to conform to, or otherwise arising as a result of or in connection with, any European Union Directive on the taxation of savings implementing the conclusions of the ECOFIN Council meeting of 26-27 November 2000) or (b) any amendment to or change in an interpretation or application of such laws or regulations by any legislative body, court, governmental agency or regulatory authority (including the enactment of any legislation and the publication of any judicial decision or regulatory determination on or after the date of issuance of the Preferred Securities under this Declaration, but not including any amendment or change implementing, complying with, or introduced in order to conform to, or otherwise arising as a result of or in connection with, any European Union Directive on the taxation of savings implementing the conclusions of the ECOFIN Council meeting of 26-27 November 2000), which amendment or change is effective or which pronouncement or decision is announced on or after the date of issuance of the Preferred Securities under this Declaration, there is more than an insubstantial risk that (i) the Trust is, or will be within 90 days after the date of such Opinion of Counsel, subject to United States Federal or German income tax, or income tax in the jurisdiction of formation of the Issuer (currently Luxembourg), in each case with respect to interest received or accrued on the Notes, (ii) interest payable by the Issuer on the Notes is not, or within 90 days after the date of such Opinion of Counsel, will not be, deductible by the Issuer or the Sponsor, in whole or in part, for United States Federal or German income tax purposes or for purposes of any income tax imposed by the jurisdiction of formation of the Issuer (currently Luxembourg) or (iii) the Trust is, or will be within 90 days after the date of such Opinion of Counsel, subject to more than a de minimis amount of other taxes, duties, assessments or other governmental charges of whatever nature imposed by the United States, Germany or the jurisdiction of formation of the Issuer (currently Luxembourg), or any other taxing authority. "Temporary Regulation S Book-Entry Preferred Securities Certificates" has the meaning set forth in Section 5.11 of this Declaration. "Trust" means Fresenius Medical Care Capital Trust V, the Delaware business trust referred to in the recitals to the Declaration. "Trust Guarantee" means the guarantee of the Sponsor, on a senior subordinated basis, of the payment of Distributions and of payments on liquidation or redemption of the Trust Securities, to the extent of funds held by the Trust, as set forth in the 10 17 Guarantee Agreement executed and delivered by the Sponsor and State Street Bank and Trust Company, as trustee, contemporaneously with the execution and delivery of this Declaration, for the benefit of the Holders of Preferred Securities, as amended from time to time. "Trust Indenture Act" means the Trust Indenture Act of 1939 as in force at the date as of which this instrument was executed; provided, however, that in the event the Trust Indenture Act of 1939 is amended after such date, "Trust Indenture Act" means, to the extent required by any such amendment, the Trust Indenture Act of 1939 as so amended. "Trust Property" means (a) the Notes, (b) the rights of the Preferred Trustee under the Trust Guarantee, (c) any cash on deposit in, or owing to, the Payment Account, (d) the Guaranties and (e) all proceeds and rights in respect of the foregoing and any other property and assets for the time being held or deemed to be held by the Preferred Trustee pursuant to the terms of this Declaration. "Trust Securities Certificate" means any one of the Common Securities Certificates or the Preferred Securities Certificates. "Trust Security" means any one of the Common Securities or the Preferred Securities. "Trustees" means, collectively, the Preferred Trustee, the Delaware Trustee and the Company Trustees. ARTICLE II ESTABLISHMENT OF THE TRUST .1 Name. The Trust heretofore formed and hereby continued shall be known as "Fresenius Medical Care Capital Trust V," as such name may be modified from time to time by the Company Trustees following written notice to the Holders of Trust Securities and the other Trustees, in which name the Trustees may conduct the business of the Trust, make and execute contracts and other instruments on behalf of the Trust and sue and be sued. .2 Office of the Delaware Trustee; Principal Place of Business. The address of the Delaware Trustee in the State of Delaware is c/o First Union Trust Company, National Association, One Rodney Square, 920 King Street, Wilmington, Delaware 19801, Attention: Corporate Trust Administration, or such other address in the State of Delaware as the Delaware Trustee may designate by written notice to the Securityholders and the Sponsor. The principal executive office of the Trust is c/o National Medical Care, Inc., Two Ledgemont Center, 95 Hayden Avenue, Lexington, Massachusetts 02173. .3 Initial Contribution of Trust Property; Organizational Expenses. The Preferred Trustee acknowledges receipt in trust from the Sponsor of the sum of Euro 100, which constitutes the initial Trust Property in connection with the Original 11 18 Declaration. The Sponsor shall pay organizational expenses of the Trust as they arise or shall, upon request of any Trustee, promptly reimburse such Trustee for any such expenses paid by such Trustee. The Sponsor shall make no claim upon the Trust Property for the payment of such expenses. .4 Issuance of the Preferred Securities. On June 12, 2001 the Issuer, the Sponsor, the other Guarantors and a Company Trustee, on behalf of the Trust, executed and delivered the Purchase Agreement. Contemporaneously with the execution and delivery of this Declaration, a Company Trustee, on behalf of the Trust, shall execute (and, in the case of Preferred Securities Certificates, the Preferred Trustee shall authenticate) in accordance with Section 5.2 and deliver to the Initial Purchasers named in the Purchase Agreement, Preferred Securities Certificates, registered in the name of the Nominee for the Common Depositary, in an aggregate amount of 300,000 Preferred Securities having an aggregate Liquidation Amount of Euro 300,000,000 against receipt of such aggregate purchase price of such Preferred Securities of Euro 297,378,000, which amount the Company Trustee shall promptly deliver to the Preferred Trustee. .5 Issuance of the Common Securities; Subscription and Purchase of the Notes. Contemporaneously with the execution and delivery of this Declaration, a Company Trustee, on behalf of the Trust, shall execute in accordance with Section 5.2 and deliver to the Sponsor Common Securities Certificates, registered in the name of the Sponsor, in an aggregate amount of 300 Common Securities having an aggregate Liquidation Amount of Euro 300,000 against payment by the Sponsor of Euro 297,378. Contemporaneously therewith, a Company Trustee, on behalf of the Trust, shall subscribe to and purchase from the Issuer Notes, registered in the name of the Trust and having an aggregate principal amount equal to Euro 300,300,000 and, in satisfaction of the purchase price for such Notes, the Preferred Trustee, on behalf of the Trust, shall deliver to the Issuer the sum of Euro 297,675,378. .6 Purposes and Functions of the Trust. The exclusive purposes and functions of the Trust are (a) to issue and sell Trust Securities and use the proceeds from such sale to acquire the Notes, (b) to consummate the Exchange Offer, and (c) to engage in only those other activities necessary, convenient or incidental thereto. The Sponsor hereby appoints the Trustees as trustees of the Trust, to have all the rights, powers and duties to the extent set forth herein, and the Trustees hereby accept such appointment. The Preferred Trustee hereby declares that it will hold the Trust Property in trust upon and subject to the conditions set forth herein for the benefit of the Trust and the Securityholders. The Company Trustees shall have all rights, powers and duties set forth herein and in accordance with applicable law with respect to accomplishing the purposes of the Trust. The Delaware Trustee shall not be entitled to exercise any powers, nor shall the Delaware Trustee have any of the duties and responsibilities, of the Preferred Trustee or the Company Trustees set forth herein. Notwithstanding anything herein or elsewhere to the contrary, the Delaware Trustee shall be one of the Trustees of the Trust for the sole and exclusive purpose of fulfilling the requirements of Section 3807(a) of the Delaware Business Trust Act and shall have no duties except for those duties set forth herein that are expressly required to be performed by the Delaware Trustee. 12 19 .7 Authorization to Enter into Certain Transactions. (A) The Trustees shall conduct the affairs of the Trust in accordance with the terms of this Declaration. Subject to the limitations set forth in paragraph (b) of this Section 2.7, and in accordance with the following provisions (i) and (ii), the Trustees shall have the authority to enter into all transactions and agreements determined by the Trustees to be appropriate in exercising the authority, express or implied, otherwise granted to the Trustees under this Declaration, and to perform all acts in furtherance thereof, including without limitation, the following: (i) As among the Trustees, each Company Trustee, acting singly, shall have the power and authority to act on behalf of the Trust with respect to the following matters: (A) the issuance and sale of the Trust Securities; (B) causing the Trust to enter into, and to execute, deliver and perform on behalf of the Trust, the Purchase Agreement, the Expense Agreement and such other agreements as may be necessary or desirable in connection with the purposes and function of the Trust; (C) causing the Trust to enter into, and to execute, deliver and perform on behalf of the Trust, the Registration Right Rights Agreement and assisting in the registration of the Exchange Preferred Securities, as contemplated by the Registration Rights Agreement, under the Securities Act and under state securities or blue sky laws, and the qualification of this Declaration as a trust indenture under the Trust Indenture Act; (D) assisting in the registration of the Exchange Preferred Securities under the Exchange Act and the preparation and filing of all periodic and other reports and other documents pursuant to the foregoing as well as in one or more applications to exempt the Trust from the periodic reporting requirements of the Exchange Act; (E) the sending of notices (other than notices of default) and other information regarding the Trust Securities and the Notes to the Securityholders in accordance with this Declaration; (F) the appointment of a Paying Agent, authenticating agent and Securities Registrar in accordance with this Declaration; (G) executing the Trust Securities on behalf of the Trust in accordance with this Declaration; (H) registering transfer of the Trust Securities in accordance with this Declaration; (I) executing and delivering closing certificates, if any, pursuant to the Purchase Agreement and an application for a taxpayer identification number for the Trust; 13 20 (J) to the extent provided in this Declaration, the winding up of the affairs of and liquidation of the Trust and the preparation, execution and filing of the certificate of cancellation with the Secretary of State of the State of Delaware; (K) unless otherwise determined by the Sponsor, the Preferred Trustee or the Company Trustees, or as otherwise required by the Delaware Business Trust Act or the Trust Indenture Act, to execute on behalf of the Trust (either acting alone or together with any or all of the Company Trustees) any documents that the Company Trustees have the power to execute pursuant to this Declaration; and (L) the taking of any action incidental to the foregoing as the Trustees may from time to time determine is necessary or advisable to give effect to the terms of this Declaration for the benefit of the Securityholders (without consideration of the effect of any such action on any particular Securityholder). (ii) As among the Trustees, the Preferred Trustee shall have the power, duty and authority to act on behalf of the Trust with respect to the following matters: (A) the authentication of the Preferred Securities; (B) the establishment of the Payment Account; (C) the receipt of the Notes; (D) the collection of interest, principal and any other payments made in respect of the Notes in the Payment Account; (E) the distribution of amounts owed to the Securityholders in respect of the Trust Securities; (F) the exercise of all of the rights, powers and privileges of a holder of the Notes; (G) the sending of notices of default and other information regarding the Trust Securities and the Notes to the Securityholders in accordance with this Declaration; (H) the distribution of the Trust Property in accordance with the terms of this Declaration; (I) to the extent provided in this Declaration, the winding up of the affairs of and liquidation of the Trust and the preparation, execution and filing of the certificate of cancellation with the Secretary of State of the State of Delaware; (J) after a Declaration Event of Default, the taking of any action incidental to the foregoing as the Preferred Trustee may from time to time determine is necessary or advisable to give effect to the terms of this Declaration and protect and conserve the Trust Property for the benefit of the Securityholders (without consideration of the effect of any such action on any particular Securityholder); and 14 21 (K) except as otherwise provided in this Section 2.7(A)(ii), the Preferred Trustee shall have none of the duties, liabilities, powers or the authority of the Company Trustees set forth in Section 2.7(A)(i). (B) So long as this Declaration remains in effect, the Trust (or the Trustees acting on behalf of the Trust) shall not undertake any business, activities or transaction except as expressly provided herein or contemplated hereby. In particular, the Trustees shall not (i) acquire any investments or engage in any activities not authorized by this Declaration, (ii) sell, assign, transfer, exchange, mortgage, pledge, set-off or otherwise dispose of any of the Trust Property or interests therein, including to Securityholders, except as expressly provided herein, (iii) take any action that would cause the Trust to fail or cease to qualify for United States Federal income tax purposes as a grantor trust or another entity which is not subject to United States Federal income tax at the entity level and the assets and income of which are treated for United States Federal income tax purposes as held and derived directly by holders of interests in the entity, (iv) incur any indebtedness for borrowed money or issue any other debt or (v) take or consent to any action that would result in the placement of a Lien on any of the Trust Property. The Company Trustees shall defend all claims and demands of all Persons at any time claiming any Lien on any of the Trust Property adverse to the interest of the Trust or the Securityholders in their capacity as Securityholders. (C) In connection with the issue and sale of the Preferred Securities, the Sponsor shall have the right and responsibility to assist the Trust with respect to, or effect on behalf of the Trust, the following (and any actions taken by the Sponsor in furtherance of the following prior to the date of this Declaration are hereby ratified and confirmed in all respects): (i) the preparation by the Trust of an Offering Circular, including any supplements or amendments thereto, and the taking of any action necessary or desirable to sell the Initial Preferred Securities in a transaction or a series of transactions exempt from the registration requirements of the Securities Act; (ii) the preparation and filing by the Trust with the Commission and the execution on behalf of the Trust of a registration statement on the appropriate form in relation to the Exchange Preferred Securities, as contemplated by the Registration Rights Agreement, including any amendments thereto; (iii) the determination of the States in which to take appropriate action to qualify or register for sale all or part of the Preferred Securities and the taking of any and all such acts, other than actions which must be taken by or on behalf of the Trust, and the advice to the Trustees of actions they must take on behalf of the Trust, and the preparation for execution and filing of any documents to be executed and filed by the Trust or on behalf of the Trust, as the Sponsor deems necessary or advisable in order to comply with the applicable laws of any such States in connection with the sale of the Preferred Securities; (iv) the negotiation of the terms of, and the execution and delivery of, the Purchase Agreement providing for the sale of the Initial Preferred Securities and such other agreements as may be necessary or desirable in connection with the consummation thereof; and 15 22 (v) the taking of any other actions necessary or desirable to carry out any of the foregoing activities. (D) Notwithstanding anything herein to the contrary, the Company Trustees are authorized and directed to conduct the affairs of the Trust and to operate the Trust so that the Trust will not be deemed to be an "investment company" required to be registered under the 1940 Act, or taxed as a corporation for United States Federal or German income tax purposes or for purposes of any income tax imposed by the jurisdiction of formation of the Issuer and so that the Notes will be treated as indebtedness of the Issuer and the Sponsor for United States Federal or German income tax purposes and for purposes of any income tax imposed by the jurisdiction of formation of the Issuer. In this connection, the Sponsor and the Company Trustees are authorized to take any action, not inconsistent with applicable law, the Certificate of Trust or this Declaration, that each of the Sponsor and the Company Trustees determines in their discretion to be necessary or desirable for such purposes, as long as such action does not adversely affect in any material respect the interests of the Holders of Preferred Securities. .8 Assets of Trust. The assets of the Trust shall consist of the Trust Property. .9 Title to Trust Property. Legal title to all Trust Property shall be vested at all times in the Preferred Trustee (in its capacity as such) and shall be held and administered by the Preferred Trustee for the benefit of the Trust and the Securityholders in accordance with this Declaration. ARTICLE III PAYMENT ACCOUNT .1 Payment Account. (A) On or prior to the Closing Date, the Preferred Trustee shall establish the Payment Account. The Preferred Trustee and any agent of the Preferred Trustee shall have exclusive control and sole right of withdrawal with respect to the Payment Account for the purpose of making withdrawals from the Payment Account in accordance with this Declaration. All monies and other property deposited or held from time to time in the Payment Account shall be held by or on behalf of the Preferred Trustee in the Payment Account for the exclusive benefit of the Securityholders and for distribution as herein provided, including (and subject to) any priority of payments provided for herein. (B) The Preferred Trustee shall deposit in the Payment Account, promptly upon receipt, all payments of principal of or interest on, and any other payments or proceeds with respect to, the Notes. Amounts held in the Payment Account shall not be invested by the Preferred Trustee pending distribution thereof. 16 23 ARTICLE IV DISTRIBUTIONS; REDEMPTION .1 Distributions. (A) Distributions on the Trust Securities shall be cumulative, and will accumulate whether or not there are funds of the Trust available for the payment of Distributions. Distributions shall accrue from the date of issuance of the Preferred Securities, and shall be payable quarterly in arrears on March 15, June 15, September 15 and December 15 of each year, commencing on September 15, 2001. If any date on which a Distribution is otherwise payable on the Trust Securities is not a Business Day, then the payment of such Distribution shall be made on the next succeeding day that is a Business Day (and without any interest or other payment in respect of any such delay) except that, if such Business Day is in the next succeeding calendar year, payment of such Distribution shall be made on the immediately preceding Business Day, in each case with the same force and effect as if made on such date (each date on which distributions are payable in accordance with this Section 4.1(a), a "Distribution Date"). (B) The Trust Securities represent undivided beneficial interests in the Trust Property. Distributions on the Trust Securities shall be payable at a rate of 7.375% per annum of the Liquidation Amount of the Trust Securities. Distributions in arrears for more than one quarter (and interest thereon) will accrue interest (compounded quarterly) at the same rate. The amount of Distributions payable for any full period shall be computed on the basis of a 360-day year of twelve 30-day months. The amount of Distributions for any partial period shall be computed on the basis of the number of days elapsed in a 360-day year of twelve 30-day months. The amount of Distributions payable for any period shall include the Additional Payments and the Additional Amounts, if any, for such period. (C) Distributions on the Trust Securities shall be made by or on behalf of the Preferred Trustee through the Paying Agent from the Payment Account and shall be payable on each Distribution Date only to the extent that the Trust has funds then legally available in the Payment Account for the payment of such Distributions. (D) Distributions on the Trust Securities with respect to a Distribution Date shall be payable to the Holders thereof as they appear on the Securities Register for the Trust Securities at the close of business on the relevant record date, which shall be 15 days prior to such Distribution Date. .2 Redemption. (A) On each Note Redemption Date and on the stated maturity of the Notes, the Trust will be required to redeem a Like Amount of Trust Securities at the Redemption Price. The Trust Securities shall not be redeemed unless all accrued and unpaid Distributions have been paid on all Trust Securities for all quarterly distribution periods terminating on or prior to the Redemption Date. (B) Notice of redemption shall be given by the Preferred Trustee by first-class mail, postage prepaid, mailed not less than 30 nor more than 60 days prior to the Redemption Date to each Holder of Trust Securities to be redeemed, at such Holder's address appearing in the Security Register. All notices of redemption shall be irrevocable and shall state: 17 24 (i) the Redemption Date; (ii) the Redemption Price; (iii) the ISIN number and the Common Code; (iv) if less than all the Outstanding Trust Securities are to be redeemed, the identification and the total Liquidation Amount of the particular Trust Securities to be redeemed; and (v) that on the Redemption Date the Redemption Price will become due and payable upon each such Trust Security to be redeemed and that distributions thereon will cease to accrue on and after said date; and (vi) the place or places where the Trust Securities are to be surrendered for the payment of the Redemption Price. (C) The Trust Securities redeemed on each Redemption Date shall be redeemed at the Redemption Price with the proceeds from the contemporaneous redemption of Notes. Redemptions of the Trust Securities shall be made and the Redemption Price shall be payable on each Redemption Date only to the extent that the Trust has funds then legally available in the Payment Account for the payment of such Redemption Price. (D) If the Preferred Trustee gives a notice of redemption in respect of any Preferred Securities, then, by 10:00 a.m., London Time, on the Redemption Date, subject to Section 4.2(c), the Preferred Trustee will, so long as the Preferred Securities are in book-entry-only form, irrevocably deposit with the Paying Agent for such Preferred Securities, to the extent available therefor, funds sufficient to pay the applicable Redemption Price and will give such Paying Agent (if other than the Preferred Trustee) irrevocable instructions and authority to pay the Redemption Price to the holders thereof. If the Preferred Securities are no longer in book-entry-only form, the Preferred Trustee, subject to Section 4.2(c), will irrevocably deposit with the Paying Agent, to the extent available therefor, funds sufficient to pay the applicable Redemption Price and will give the Paying Agent irrevocable instructions and authority to pay the Redemption Price to the Holders thereof upon surrender of their Preferred Securities Certificates. Notwithstanding the foregoing, Distributions payable on or prior to the Redemption Date for any Trust Securities called for redemption shall be payable to the Holders of such Trust Securities as they appear on the Register for the Trust Securities on the relevant record dates for the related Distribution Dates. If notice of redemption shall have been given and funds deposited as required, then upon the date of such deposit, all rights of Securityholders holding Trust Securities so called for redemption will cease, except the right of such Securityholders to receive the Redemption Price and any Distribution payable on or prior to the Redemption Date, but without interest, and such Securities will cease to be Outstanding. In the event that any date on which any Redemption Price is payable is not a Business Day, then payment of the Redemption Price payable on such date will be made on the next succeeding day that is a Business Day (and without any interest or other payment in respect of any such delay), except that, if such Business Day falls in the next calendar year, such payment will be made on the immediately preceding Business Day, in each case, with the same force and effect as if made on such date. In the event that payment of the Redemption Price in respect of any Trust Securities called for redemption is improperly withheld or refused and not paid either by the Trust or by the Sponsor pursuant to the Trust Guarantee, 18 25 Distributions on such Trust Securities will continue to accrue, at the then applicable rate, from the Redemption Date originally established by the Trust for such Trust Securities to the date such Redemption Price is actually paid, in which case the actual payment date will be the date fixed for redemption for purposes of calculating the Redemption Price (other than for purposes of calculating any premium). (E) Payment of the Redemption Price on the Trust Securities shall be made to the record holders thereof as they appear on the Securities Register for the Trust Securities at the close of business on the relevant record date, which shall be 15 days prior to the relevant Redemption Date. In the event that any date on which payment of the Redemption Price on the Preferred Securities is not a Business Day, payment of the Redemption Price on such date will be made on the next succeeding day which is a Business Day (without any distribution or other payment in respect of any such delay) except that, if such Business Day is in the next succeeding calendar year, such payment shall be made on the immediately preceding Business Day, in each case with the same force and effect as if made on such date. (F) Subject to the foregoing and applicable law (including, without limitation, United States Federal securities laws), the Sponsor or its subsidiaries may at any time and from time to time purchase Outstanding Preferred Securities by tender, in the open market or by private agreement. .3 Subordination of Common Securities. Payment of Distributions (including Additional Payments and Additional Amounts if applicable) on, and the Redemption Price of, the Trust Securities, as applicable, shall be made pro rata among the Common Securities and the Preferred Securities based on the respective Liquidation Amounts of the Trust Securities; provided, however, that if on any Distribution Date or Redemption Date a Declaration Event of Default shall have occurred and be continuing, no payment of any Distribution (including Additional Payments and Additional Amounts, if applicable) on, or Redemption Price of, any Common Security, and no other payment on account of the redemption, liquidation or other acquisition of Common Securities, shall be made unless payment in full in cash of all accumulated and unpaid Distributions (including Additional Payments and Additional Amounts, if applicable) on all Outstanding Preferred Securities for all Distribution periods terminating on or prior thereto, or in the case of payment of the Redemption Price the full amount of such Redemption Price on all Outstanding Preferred Securities, shall have been made or provided for, and all funds immediately available to the Preferred Trustee shall first be applied to the payment in full in cash of all Distributions (including Additional Payments and Additional Amounts, if applicable) on, or the Redemption Price of, Preferred Securities then due and payable. .4 Payment Procedures. Payments of Distributions (including Additional Payments and Additional Amounts, if applicable) in respect of the Preferred Securities shall be made in euros by check mailed to the address of the Person entitled thereto as such address shall appear on the Securities Register or, if the Preferred Securities are held by a Clearing Agency, such Distributions shall be made to the Paying Agent by wire transfer in immediately available funds, which shall credit the relevant Persons' accounts on the applicable distribution dates. Payments in respect of the Common Securities shall be made in such manner as shall be mutually agreed between the Preferred Trustee and the Common Securityholder(s). 19 26 .5 Tax Returns and Reports. The Company Trustees shall prepare (or cause to be prepared), at the Sponsor's expense, and file all United States Federal, state and local tax and information returns and reports required to be filed by or in respect of the Trust. In this regard, the Company Trustees shall (a) prepare and file (or cause to be prepared and filed) the appropriate Internal Revenue Service Form required to be filed in respect of the Trust in each taxable year of the Trust and (b) prepare and furnish (or cause to be prepared and furnished) to each Securityholder the appropriate Internal Revenue Service form required to be provided on such form. The Company Trustees shall provide the Sponsor and the Preferred Trustee with a copy of all such returns and reports promptly after such filing or furnishing. The Paying Agent and the Company Trustees shall comply with applicable withholding and backup withholding tax laws and information reporting requirements with respect to any payments to Securityholders under the Trust Securities. .6 Payment of Taxes, Duties, Etc. of the Trust. Upon receipt under the Notes of Additional Sums or Additional Amounts and the written direction of the Sponsor, the Preferred Trustee shall promptly pay any taxes, duties or governmental charges of whatsoever nature (other than withholding taxes) imposed on the Trust by the United States or any other taxing authority. .7 Payments under Indenture. Any amount payable hereunder to any Holder of Preferred Securities (and any Owner with respect thereto) shall be reduced by the amount of any corresponding payment such Holder (and Owner) has directly received pursuant to Section 5.8 of the Indenture. .8 Change of Control. (A) Upon the occurrence of a Change of Control Triggering Event (as defined in the Indenture), each Holder shall have the right to require, and the Sponsor will cause, the Trust to repurchase all or any part of such Holder's Trust Securities at a purchase price in cash equal to 101% of the Liquidation Amount thereof plus accrued and unpaid Distributions thereon (including Additional Payments and Additional Amounts, if applicable), if any, to the date of purchase. (B) Within 30 days following a Change of Control Triggering Event, the Company Trustees shall mail a notice to each Holder with a copy to the Preferred Trustee stating: (1) that a Change of Control Triggering Event has occurred and that such Holder has the right to require the Trust to purchase all or any part of such Holder's Trust Securities at a purchase price in cash equal to 101% of the Liquidation Amount thereof plus accrued and unpaid Distributions thereon (including Additional Payments and Additional Amounts, if applicable), if any, to the date of purchase; (2) the circumstances and relevant facts regarding such Change of Control Triggering Event (including information with respect to pro forma historical income, cash flow and capitalization after giving effect to such Change of Control (as defined in the Indenture)); (3) the repurchase date (which shall be no earlier than 30 days nor later than 60 days from the date such notice is mailed); and (4) the instructions determined by the Company Trustees, reasonably acceptable to the Preferred Trustee and consistent with 20 27 the covenant described hereunder, that a Holder must follow in order to have its Preferred Securities purchased. (C) The Trust shall, and the Sponsor shall cause the Trust to, comply, to the extent applicable, with the requirements of Section 14(e) of the Exchange Act and any other securities laws or regulations in connection with the repurchase of Preferred Securities pursuant to this covenant. To the extent that the provisions of any securities laws or regulations conflict with the provisions of this covenant, the Trust shall, and the Sponsor shall cause the Trust to, comply with the applicable securities laws and regulations and shall not be deemed to have breached its obligations under this covenant by virtue thereof. (D) Upon the occurrence of a Change of Control Triggering Event, the Preferred Trustee shall exercise its right under the Indenture to require the Issuer to redeem Notes having a principal amount equal to the aggregate Liquidation Amount of Trust Securities to be repurchased pursuant to this Section 4.8. .9 Offer to Repurchase Upon Asset Disposition. If the Issuer makes an offer to repurchase Notes in the event of an Asset Disposition (as defined in the Indenture) pursuant to Section 10.13 of the Indenture, then the Sponsor will cause the Trust to offer to repurchase a Like Amount of Preferred Securities, at a purchase price equal to 100% of the Liquidation Amount of the Preferred Securities (without premium), plus accrued and unpaid Distributions thereon to the date of purchase. In the event of any such offer to purchase Notes pursuant to Section 10.13 of the Indenture, the parties hereto agree to follow procedures to offer to purchase such Like Amount of Preferred Securities on terms substantially similar to the procedures set forth in Section 4.8 with respect to a Change of Control offer (including compliance, to the extent applicable, with the requirements of Section 14(e) of the Exchange Act). ARTICLE V Trust Securities Certificates .1 Initial Ownership. Upon the formation of the Trust and the contribution by the Sponsor pursuant to Section 2.3 and until the issuance of the Trust Securities, and at any time during which no Trust Securities are outstanding, the Sponsor shall be the sole beneficial owner of the Trust. .2 The Trust Securities Certificates. (A) The Preferred Securities Certificates shall be issued in minimum denominations of Euro 1,000 Liquidation Amount and integral multiples of Euro 1,000 in excess thereof, and the Common Securities Certificates shall be issued in denominations of Euro 1,000 Liquidation Amount and integral multiples thereof. The Initial Preferred Securities may only be issued and transferred with minimum liquidation amounts of Euro 100,000 or more. The Trust Securities Certificates shall be executed on behalf of the Trust by manual or facsimile signature of at least one Company Trustee (and, in the case of Preferred Securities Certificates, shall be authenticated by the Preferred Trustee by manually executing a certificate of authentication 21 28 substantially in the form appearing in Exhibit E hereto). Trust Securities Certificates bearing the manual or facsimile signatures, as the case may be, of individuals who were, at the time when such signatures shall have been affixed, authorized to sign on behalf of the Trust, shall be validly issued and entitled to the benefits of this Declaration, notwithstanding that such individuals or any of them shall have ceased to be so authorized prior to the delivery of such Trust Securities Certificates or did not hold such offices at the date of delivery of such Trust Securities Certificates. A transferee of a Trust Securities Certificate shall become a Securityholder, and shall be entitled to the rights and subject to the obligations of a Securityholder hereunder, upon due registration of such Trust Securities Certificate in such transferee's name pursuant to Sections 5.4, 5.11 and 5.13. Prior to the issuance of any Exchange Preferred Securities, the Sponsor shall deliver to the Preferred Trustee an Opinion of Counsel substantially to the effect that: (i) the Exchange Preferred Securities have been duly authorized and, when executed and authenticated in accordance with the provisions of the Declaration and delivered in exchange for the Initial Preferred Securities in accordance with the Declaration and the Exchange Offer, will be entitled to the benefits of the Declaration and will be legally valid and binding obligations of the Trust, enforceable in accordance with their terms subject to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar laws of general applicability relating to or affecting creditors' rights and to general equity principles; and (ii) when the Exchange Preferred Securities are executed and authenticated in accordance with the provisions of the Declaration and delivered in exchange for the Initial Preferred Securities in accordance with the Declaration and the Exchange Offer, the Exchange Guarantee Agreement relating thereto will be the legally valid and binding obligation of the Sponsor, enforceable in accordance with its terms subject to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar laws of general applicability relating to or affecting creditors' rights and general equity principles. (B) Pending the preparation of definitive Trust Securities Certificates, at least one Company Trustee, on behalf of the Trust may execute, (and, in the case of Preferred Securities the Preferred Trustee shall authenticate by manually executing a certificate of authentication substantially in the form appearing in Exhibit E) and deliver, temporary Trust Securities Certificates which are printed, lithographed, typewritten, mimeographed or otherwise produced, in any authorized denomination, substantially of the tenor of the definitive Trust Securities Certificates in lieu of which they are issued and with such appropriate insertions, omissions, substitutions and other variations as the officers executing such Trust Securities Certificates and Guaranties, as the case may be, may determine, as evidenced by their execution of such Trust Securities Certificates and Guaranties, as the case may be. If temporary Trust Securities Certificates are issued, the Company Trustees will cause definitive Trust Securities Certificates (which may be printed, lithographed, typewritten, mimeographed or otherwise produced) to be prepared without unreasonable delay. After the preparation of definitive Trust Securities Certificates, the temporary Trust Securities Certificates shall be exchangeable for definitive Trust Securities Certificates upon surrender of the temporary Trust Securities Certificates at the office or agency of the Company Trustees designated for that purpose without charge to the Securityholder. Upon surrender for cancellation of any one or more temporary Trust Securities Certificates, at least one Company Trustee, on behalf of the Trust shall execute (and, in the case of Preferred securities the Preferred Trustee shall authenticate by manually executing a certificate of 22 29 authentication substantially in the form appearing in Exhibit E) and deliver in exchange therefore a like liquidation amount of definitive Trust Securities Certificates of authorized denominations having the same terms and like tenor. Until so exchanged, the temporary Trust Securities Certificates shall in all respects be entitled to the same benefits under this Declaration as definitive Trust Securities Certificates. .3 Execution and Delivery of Trust Securities Certificates. On the Closing Date, the Company Trustees shall cause Trust Securities Certificates, in an aggregate Liquidation Amount as provided in Sections 2.4 and 2.5 and as contemplated by Section 5.11, to be executed on behalf of the Trust and delivered to or upon the written order of the Sponsor, signed by any member of the Managing Board or without further corporate action by the Sponsor, in authorized denominations; and, in the case of Preferred Securities, the Preferred Trustee shall cause such Preferred Securities Certificates to be authenticated and delivered to or upon the written order of the Sponsor in authorized denominations. .4 Registration of Transfer and Exchange of Preferred Securities Certificates. (A) The Sponsor shall keep or cause to be kept, at the office or agency maintained pursuant to Section 5.8, a register or registers for the purpose of registering Trust Securities Certificates and transfers and exchanges of Preferred Securities Certificates (the "Securities Register") in which the registrar designated by the Sponsor (the "Securities Registrar"), subject to such reasonable regulations as it may prescribe, shall provide for the registration of Preferred Securities Certificates and Common Securities Certificates (subject to Section 5.10 in the case of the Common Securities Certificates) and registration of transfers and exchanges of Preferred Securities Certificates as herein provided. The Sponsor has appointed on the date hereof Deutsche Bank AG London as the initial Securities Registrar. (B) Subject to Sections 5.11, 5.13 and 5.4(D) hereof, upon surrender for registration of transfer of any Preferred Securities Certificate at the office or agency maintained pursuant to Section 5.8, the Company Trustees or any one of them shall execute and deliver to the Preferred Trustee, and the Preferred Trustee shall authenticate and deliver, in the name of the designated transferee or transferees, one or more new Preferred Securities Certificates in authorized denominations of a like aggregate Liquidation Amount dated the date of authentication by such Preferred Trustee and bearing such restrictive legends as may be required by this Declaration, provided that Initial Preferred Securities may only be transferred with minimum liquidation amounts of Euro 100,000 or more. The Securities Registrar shall not be required to register the transfer of any Preferred Securities that have been called for redemption. At the option of a Holder, Preferred Securities Certificates may be exchanged for other Preferred Securities Certificates in authorized denominations of the same class and of a like aggregate Liquidation Amount, bearing such restrictive legends as may be required by this Declaration and bearing a certificate number not contemporaneously Outstanding, upon surrender of the Preferred Securities Certificates to be exchanged at the office or agency maintained pursuant to Section 5.8. Whenever any Preferred Securities Certificates are so surrendered for exchange, the Company Trustees or any one of them shall execute and deliver to the Preferred Trustee, and the Preferred Trustee shall authenticate and deliver, the Preferred Securities Certificates that the Holder making the exchange is entitled to receive. 23 30 (C) All Preferred Securities issued upon any registration of transfer or exchange of Preferred Securities shall evidence the same interest in the assets of the Trust, and be entitled to the same benefits under this Declaration, as the Preferred Securities surrendered upon such registration of transfer or exchange. (D) The following transfer restrictions shall apply to the transfer of Initial Preferred Securities: (i) Transfer of beneficial interests in a Restricted Book-Entry Preferred Securities Certificate to a Regulation S Book-Entry Preferred Securities Certificate. A beneficial interest in a Restricted Book-Entry Preferred Securities Certificate may be exchanged for a beneficial interest in a Regulation S Book-Entry Preferred Securities Certificate only in connection with a pending transfer of such interest that complies with Regulation S or Rule 144A under the Securities Act and only if a written instrument of transfer duly executed by the Holder thereof or his attorney and substantially in the form of Exhibit F-1 is first delivered to the Securities Registrar by or on behalf of the Person who is the beneficial owner of such interest immediately prior to such transfer. (ii) Transfer of beneficial interests in a Regulation S Book-Entry Preferred Securities Certificate to a Restricted Book-Entry Preferred Securities Certificate. A beneficial interest in a Regulation S Book-Entry Preferred Securities Certificate may be exchanged for a beneficial interest in a Restricted Book-Entry Preferred Securities Certificate only in connection with a pending transfer of such interest that complies with Rule 144A under the Securities Act and only if a written instrument of transfer duly executed by the Holder thereof or his attorney and substantially in the form of Exhibit F-2 and, if the Sponsor, so requests, evidence reasonably satisfactory to them (which shall include an opinion of counsel to the Holder) as to the compliance with the restrictions set forth in the legend set forth in Section 5.4(G)(i), is first delivered to the Securities Registrar by or on behalf of the Person who is the beneficial owner of such interest immediately prior to such transfer. (iii) Transfer of beneficial interests in a Temporary Regulation S Book-Entry Preferred Securities Certificate to a Permanent Regulation S Book-Entry Preferred Securities Certificate. A beneficial interest in a Temporary Regulation S Book-Entry Preferred Securities Certificate may be exchanged for a beneficial interest in a Permanent Regulation S Book-Entry Preferred Securities Certificate only if (a) the Distribution Compliance Period has ended and (b) a written certification substantially in the form of Exhibit F-3 has been delivered to the Securities Registrar by or on behalf of the Person who is the beneficial owner of such interest immediately prior to such exchange. Notwithstanding any provision of this Declaration, no amount shall be paid hereunder (or under the Trust Securities and the Notes) in respect of the Temporary Regulation S Book-Entry Preferred Securities Certificate or any portion thereof; rather the Paying Agent shall hold any such amount that becomes payable pending exchange of such security (or portion) for the Permanent Regulation S Book-Entry Preferred Securities 24 31 Certificate (or a portion thereof) and upon such exchange shall promptly pay such amount to the Holder of such Permanent Regulation S Book-Entry Preferred Securities Certificate. No such suspension of payment shall result in a default under the Book-Entry Preferred Securities Certificates, if the suspended payment is made promptly upon such exchange. (E) Every Preferred Securities Certificate presented or surrendered for registration of transfer or exchange shall be accompanied by a written instrument of transfer substantially in the form appearing in Exhibit E (under the heading "Assignment"), duly executed by the Holder or his attorney duly authorized in writing. Each Preferred Securities Certificate surrendered for registration of transfer or exchange shall be cancelled and subsequently disposed of by a Company Trustee in accordance with such Person's customary practice. No service charge shall be made for any registration of transfer or exchange of Preferred Securities Certificates, but the Securities Registrar may require payment of a sum sufficient to cover any tax or governmental charge that may be imposed in connection with any transfer or exchange of Preferred Securities Certificates. (F) The Preferred Trustee and Securities Registrar shall have no obligation or duty to monitor, determine or inquire as to compliance with any restrictions on transfer imposed under this Declaration or under applicable law with respect to any transfer of any interest in any Trust Securities Certificate other than to require delivery of such certificates and other documentation or evidence as are expressly required by, and to do so if and when expressly required by, the terms of this Declaration, and to examine the same to determine substantial compliance as to form with the express requirements hereof. (G) Legends. (iv) Each Initial Preferred Securities Certificate (and all Initial Preferred Securities Certificates issued in exchange therefor or substitution thereof) shall bear a legend in substantially the following form or in such other form as may be required by the Clearing Agencies or the Common Depositary to appear on the Initial Preferred Securities Certificate issued to the Common Depositary. THIS PREFERRED SECURITY HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S. PERSONS, EXCEPT AS SET FORTH IN THE SECOND SENTENCE HEREOF. BY ITS ACQUISITION HEREOF OR OF A BENEFICIAL INTEREST HEREIN, THE HOLDER (1) REPRESENTS THAT (A) IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) (A "QIB") OR (B) IT IS ACQUIRING THIS PREFERRED SECURITY IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH REGULATION S UNDER THE SECURITIES ACT, (2) AGREES THAT IT WILL NOT RESELL OR OTHERWISE TRANSFER THIS PREFERRED SECURITY EXCEPT (A) TO THE TRUST OR ANY OF ITS SUBSIDIARIES, (B) TO A PERSON WHOM THE SELLER REASONABLY BELIEVES IS A QIB PURCHASING FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QIB IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, (C) IN AN OFFSHORE TRANSACTION MEETING THE REQUIREMENTS OF RULE 903 OR 904 OF THE SECURITIES ACT, (D) IN A TRANSACTION MEETING 25 32 THE REQUIREMENTS OF RULE 144 UNDER THE SECURITIES ACT, (E) IN ACCORDANCE WITH ANOTHER EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT (AND BASED UPON AN OPINION OF COUNSEL ACCEPTABLE TO THE TRUST) OR (F) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT AND, IN EACH CASE, IN ACCORDANCE WITH THE APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR ANY OTHER APPLICABLE JURISDICTION AND (3) AGREES THAT IT WILL DELIVER TO EACH PERSON TO WHOM THIS PREFERRED SECURITY OR AN INTEREST HEREIN IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. AS USED HEREIN, THE TERMS "OFFSHORE TRANSACTION" AND "UNITED STATES" HAVE THE MEANINGS GIVEN TO THEM BY RULE 902 OF REGULATION S UNDER THE SECURITIES ACT. UNTIL THE PREFERRED SECURITIES ARE REGISTERED PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT FILED UNDER THE SECURITIES ACT, PREFERRED SECURITIES MAY ONLY BE TRANSFERRED IN MINIMUM BLOCKS OF Euro 100,000 AGGREGATE LIQUIDATION AMOUNT. (ii) Every Initial Preferred Securities Certificate representing a Temporary Regulation S Book-Entry Preferred Securities Certificate shall bear a legend substantially to the following effect (with such changes as may be determined by the Sponsor, based upon advice of independent U.S. counsel). THIS PREFERRED CERTIFICATE IS A TEMPORARY REGULATION S CERTIFICATE WITHIN THE MEANING OF THE DECLARATION REFERRED TO HEREIN, AND NO PAYMENTS WILL BE MADE IN RESPECT OF ANY PORTION HEREOF UNLESS AND UNTIL SUCH PORTION HAS BEEN EXCHANGED FOR A PORTION OF A PERMANENT REGULATION S CERTIFICATE, UPON CERTIFICATION OF NON-U.S. BENEFICIAL OWNERSHIP AFTER THE DISTRIBUTION COMPLIANCE PERIOD AS PROVIDED IN THE DECLARATION. (iii) The Exchange Preferred Securities Certificates upon their issuance pursuant to the Exchange Offer shall not bear the legends set forth under (i) and (ii) above. (iv) As long as the Preferred Securities are represented by Book-Entry Preferred Securities Certificates deposited with the Common Depositary, such Book-Entry Preferred Securities Certificates shall bear a legend substantially to the following effect: UNLESS THIS PREFERRED SECURITY IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF DEUTSCHE BANK AG LONDON AS THE COMMON DEPOSITARY FOR MORGAN GUARANTY TRUST COMPANY OF NEW YORK, BRUSSELS OFFICE, OPERATOR OF THE EUROCLEAR SYSTEM AND CLEARSTREAM BANKING, SOCIETE ANONYME (THE "COMMON DEPOSITARY"), TO FRESENIUS MEDICAL CARE CAPITAL TRUST V OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE, OR PAYMENT, AND ANY PREFERRED SECURITY ISSUED IS REGISTERED IN THE NAME OF BT GLOBENET NOMINEES LIMITED, OR IN SUCH OTHER NOMINEE NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE COMMON DEPOSITARY (AND 26 33 ANY PAYMENT IS MADE TO BT GLOBENET NOMINEES LIMITED OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE COMMON DEPOSITARY), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL IN AS MUCH AS THE REGISTERED OWNER HEREOF, BT GLOBENET NOMINEES LIMITED HAS AN INTEREST HEREIN. TRANSFERS OF THIS PREFERRED SECURITY SHALL BE LIMITED TO TRANSFERS IN WHOLE, BUT NOT IN PART, TO NOMINEES OF THE COMMON DEPOSITARY OR TO A SUCCESSOR THEREOF OR SUCH SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF THIS PREFERRED SECURITY SHALL BE LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN THE AMENDED AND RESTATED DECLARATION OF TRUST REFERRED TO ON THE REVERSE HEREOF. .5 Mutilated, Destroyed, Lost or Stolen Trust Securities Certificates. If (a) any mutilated Trust Securities Certificate shall be surrendered to the Securities Registrar, or if the Securities Registrar shall receive evidence to its satisfaction of the destruction, loss or theft of any Trust Securities Certificate and (b) there shall be delivered to the Securities Registrar and the Company Trustees such security or indemnity as may be required by them to save each of them harmless, then in the absence of notice that such Trust Securities Certificate shall have been acquired by a bona fide purchaser, the Company Trustees, or any one of them, on behalf of the Trust shall execute and make available for delivery, in exchange for or in lieu of any such mutilated, destroyed, lost or stolen Trust Securities Certificate, a new Trust Securities Certificate of like class, tenor and denomination. In connection with the issuance of any new Trust Securities Certificate under this Section, the Company Trustees or the Securities Registrar may require the payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in connection therewith. Any duplicate Trust Securities Certificate issued pursuant to this Section shall constitute conclusive evidence of an undivided beneficial interest in the assets of the Trust, as if originally issued, whether or not the lost, stolen or destroyed Trust Securities Certificate shall be found at any time. .6 Persons Deemed Securityholders. The Trustees, the Paying Agent or the Securities Registrar shall treat the Person in whose name any Trust Securities Certificate shall be registered in the Securities Register as the owner of such Trust Securities Certificate for the purpose of receiving Distributions and for all other purposes whatsoever, and none of the Trustees, the Paying Agent or the Securities Registrar shall be bound by any notice to the contrary. .7 Access to List of Securityholders' Names and Addresses. Each Holder of a Trust Securities Certificate, and each Owner shall be deemed to have agreed not to hold the Sponsor, the Preferred Trustee, the Delaware Trustee or the Company Trustees accountable by reason of the disclosure of its name and address, regardless of the source from which such information was derived. 27 34 .8 Maintenance of Office or Agency. The Company Trustees shall maintain an office or offices or agency or agencies where Preferred Securities Certificates may be surrendered for registration of transfer or exchange and where notices and demands to or upon the Trustees in respect of the Trust Securities Certificates may be served. The Company Trustees initially designate Deutsche Bank AG London, Winchester House, 1 Great Winchester Street, London EC2N 2DB Attention: Client Services, Corporate Trust and Agency Services, as its principal corporate trust office for such purposes; the Securities Registrar will use the services of Banque Generale du Luxembourg, 50 Avenue J.F. Kennedy, L-2951 Luxembourg to perform its functions under this Section 5.8. The Company Trustees shall give prompt written notice to the Sponsor, the Preferred Trustee and the Securityholders of any change in the location of the Securities Register or any such office or agency. .9 Appointment of Paying Agent. (A) The Paying Agent shall make Distributions to Securityholders from the Payment Account and shall report the amounts of such Distributions to the Preferred Trustee (if the Preferred Trustee is not then serving as the Paying Agent) and the Company Trustees. Any Paying Agent shall have the revocable power to withdraw funds from the Payment Account for the purpose of making Distributions. The Company Trustees may revoke such power and remove the Paying Agent if such Trustees determine in their sole discretion that the Paying Agent shall have failed to perform its obligations under this Declaration in any material respect. Any Person acting as Paying Agent shall be permitted to resign as Paying Agent upon 30 days' written notice to the Company Trustees and the Preferred Trustee (if the Preferred Trustee is not then serving as the Paying Agent). In the event that the Paying Agent or a successor Paying Agent shall resign or its authority to act be revoked, the Company Trustees shall appoint a successor that is acceptable to the Preferred Trustee and the Sponsor to act as Paying Agent (which shall be a bank or trust company). The Company Trustees shall cause such successor Paying Agent or any additional Paying Agent appointed by the Company Trustees to execute and deliver to the Trustees an instrument in which such successor Paying Agent or additional Paying Agent shall agree with the Trustees that as Paying Agent, such successor Paying Agent or additional Paying Agent will hold all sums, if any, held by it for payment to the Securityholders in trust for the benefit of the Securityholders entitled thereto until such sums shall be paid to such Securityholders. The Paying Agent shall return all unclaimed funds to the Preferred Trustee and upon removal of a Paying Agent such Paying Agent shall also return all funds in its possession to the Preferred Trustee. The provisions of Sections 8.1, 8.3 and 8.6 herein shall apply to the Bank also in its role as Paying Agent, for so long as the Bank shall act as Paying Agent and to any other paying agent appointed hereunder. Any reference in this Declaration to the Paying Agent shall include any co-paying agent unless the context requires otherwise. If the Paying Agent shall be retained as paying agent for the payment of Liquidated Damages by the Sponsor or its Affiliates, funds received by the Paying Agent for the purpose of paying any such Liquidated Damages shall not constitute Trust Property and shall not be commingled with funds or other assets of the Trust. The Paying Agent shall initially be the Bank, and any co-paying agent chosen by the Bank and the Trust, and acceptable to the Company Trustees and the Sponsor. The Bank and the Trust have appointed on the date hereof Deutsche Bank AG London as a co-Paying Agent, and sole Paying Agent with respect to payments in euros, and the Trustees and the Sponsor have acknowledged such appointment by executing this Declaration. 28 35 (B) If any European Union Directive on the taxation of savings implementing the conclusions of the ECOFIN Council meeting of 26-27 November 2000 or any law implementing or complying with, or introduced in order to conform to, such Directive is introduced, the Company Trustees shall ensure that the Trust maintains a Paying Agent in a member state of the European Union that will not be obliged to withhold or deduct for or on account of tax pursuant to any such Directive or law. .10 Ownership of Common Securities by Sponsor. On the Closing Date, the Sponsor shall acquire and retain beneficial and record ownership of the Common Securities. To the fullest extent permitted by law, other than a transfer in connection with a consolidation or merger of the Sponsor into another corporation, or any conveyance, transfer or lease by the Sponsor of its properties and assets substantially as an entirety to any Person, pursuant to Article VIII of the Indenture, any attempted transfer of the Common Securities shall be void. The Company Trustees shall cause each Common Securities Certificate issued to the Sponsor to contain a legend stating "THIS CERTIFICATE IS NOT TRANSFERABLE EXCEPT AS PROVIDED IN SECTION 5.10 OF THE DECLARATION". .11 Book-Entry Preferred Securities Certificates; Common Securities Certificate. (A) Upon their original issuance, Preferred Securities Certificates shall be issued in the form of one or more Book-Entry Preferred Securities Certificates registered in the name of the Nominee for the Common Depositary and deposited with the Common Depositary for the initial Clearing Agencies for credit by the initial Clearing Agencies to the respective accounts of the Owners thereof (or such other accounts as they may direct) in accordance with the initial Clearing Agencies' applicable rules and procedures. (B) Initial Preferred Securities offered and sold to QIBs shall be issued in the form of one or more permanent global Preferred Securities Certificates, in substantially the form appearing in Exhibit E-1 (a "Restricted Book-Entry Preferred Securities Certificate"). Initial Preferred Securities offered and sold in reliance on Regulation S shall be issued in the form of one or more global Preferred Securities Certificates in temporary form (collectively, a "Temporary Regulation S Book-Entry Preferred Securities Certificate"), which shall be exchangeable in whole or in part for one or more Preferred Securities Certificates in permanent form (a "Permanent Regulation S Book-Entry Preferred Securities Certificate" and, together with the Temporary Regulation S Book-Entry Preferred Securities Certificate for which it is exchangeable, the "Regulation S Book-Entry Preferred Securities Certificates" and together with the Restricted Book-Entry Preferred Securities Certificate, the "Book-Entry Preferred Securities Certificates"), in accordance with Section 5.4(D) and 5.4(G). The number of Preferred Securities Certificates represented by the Book-Entry Preferred Securities Certificates may from time to time be increased or decreased by adjustments made on the records of the Securities Registrar and the Clearing Agency or their nominees as herein provided. (C) Each Book-Entry Preferred Securities Certificate shall constitute a single Preferred Securities Certificate for all purposes of this Declaration. No Owner will receive a Definitive Preferred Securities Certificate representing such Owner's interest in such Preferred 29 36 Securities, except as provided in Section 5.13. unless and until Definitive Preferred Securities Certificates have been issued to Owners pursuant to Section 5.13: (ii) the provisions of this Section 5.11(C) shall be in full force and effect; (iii) the Securities Registrar and the Trustees shall be entitled to deal with the Clearing Agency for all purposes of this Declaration relating to the Book-Entry Preferred Securities Certificates (including the giving of instructions or directions to Owners of Book-Entry Preferred Securities Certificates but excluding the payment of the Liquidation Amount of and Distributions on the Book-Entry Preferred Securities Certificates) as the sole Holder of Book-Entry Preferred Securities Certificates and shall have no obligations to the Owners thereof; (iv) to the extent that the provisions of this Section 5.11 conflict with any other provisions of this Declaration, the provisions of this Section 5.11 shall control; and (v) the rights of the Owners of the Book-Entry Preferred Securities Certificates shall be exercised only through the Clearing Agencies and shall be limited to those established by law and agreements between such Owners and the Clearing Agencies and/or the Clearing Agency Participants. Unless and until Definitive Preferred Securities Certificates are issued pursuant to Section 5.13, the initial Clearing Agencies will make book-entry transfers among the Clearing Agency Participants in accordance with their respective procedures. (D) Preferred Securities Certificates in respect of Initial Preferred Securities and the Preferred Trustee's certificate of authentication shall be in substantially in the form of Exhibit E-1 hereto, which is hereby incorporated in and expressly made a part of this Declaration. Any Preferred Securities Certificates in respect of Exchange Preferred Securities and the Preferred Trustee's certificate of authentication shall be substantially in the form of Exhibit E-2 hereto, which is incorporated in and expressly made a part of this Declaration. The Preferred Securities Certificates may have notations, legends or endorsements required by law, stock exchange rule, agreements to which the Trust is subject, if any, or usage. Each Preferred Security Certificate shall be dated the date of its authentication. (E) A single Common Securities Certificate representing the Common Securities shall be issued to the Sponsor in the form of a definitive Common Securities Certificate. .12 Notices to Clearing Agency. To the extent that a notice or other communication to the Owners is required under this Declaration, unless and until Definitive Preferred Securities Certificates shall have been issued to Owners pursuant to Section 5.13, the Preferred Trustee and the Company Trustees shall give all such notices and communications specified herein to be given to Owners to the Clearing Agencies and the Paying Agent (if other than the Preferred Trustee), and shall have no obligations to the Owners. .13 Definitive Preferred Securities Certificates. 30 37 Notwithstanding any other provision in this Declaration, no Book-Entry Preferred Securities Certificate may be exchanged in whole or in part for Preferred Securities Certificates registered, and no transfer of a Book-Entry Preferred Securities Certificate in whole or in part may be registered, in the name of any Person other than the Common Depositary for such Book-Entry Preferred Securities Certificates or a nominee thereof unless (a) the Clearing Agencies advise the Trust in writing that the Clearing Agencies are no longer willing or able to properly discharge their responsibilities with respect to the Book-Entry Preferred Securities Certificates or the Clearing Agencies cease to be registered under the Exchange Act at a time when they are required to be so registered to act as such clearing agents, and a qualified successor shall not have been appointed by the Trust within 90 days, (b) the Sponsor at its option advises the Trustees in writing that it elects to terminate the book-entry system through the Clearing Agencies or (c) after the occurrence of a Declaration Event of Default, Owners of Book-Entry Preferred Securities Certificates representing beneficial interests aggregating at least a majority of the Liquidation Amount advise the Company Trustees in writing that the continuation of a book-entry system through the Clearing Agencies is no longer in the best interest of the Owners of Book-Entry Preferred Securities Certificates, then the Company Trustees shall notify the Clearing Agencies and the Clearing Agencies shall notify all Owners of Book-Entry Preferred Securities Certificates and the other Trustees of the occurrence of any such event and of the availability of the Definitive Preferred Securities Certificates to Owners of such class or classes, as applicable, requesting the same by delivery of a certificate in substantially the form of Exhibit G-1 (in the case of Initial Preferred Securities) or Exhibit G-2 (in the case of Exchange Preferred Securities). Upon surrender to the Company Trustees of the typewritten Preferred Securities Certificate or Certificates representing the Book-Entry Preferred Securities Certificates by the Clearing Agencies, accompanied by registration instructions, the Company Trustees, or any one of them, shall execute the Definitive Preferred Securities Certificates in accordance with the instructions of the Clearing Agencies. If any of the events described in (a) or (b) occur with respect to one of the Clearing Agencies, the book-entry system shall continue through the remaining Clearing Agency, and no Definitive Preferred Securities Certificates shall be issued. Neither the Securities Registrar nor the Trustees shall be liable for any delay in delivery of such instructions, and each may conclusively rely on, and shall be protected in relying on, such instructions. Upon the issuance of Definitive Preferred Securities Certificates, the Trustees shall recognize the Holders of the Definitive Preferred Securities Certificates as Securityholders. The Definitive Preferred Securities Certificates shall be printed, lithographed or engraved or may be produced in any other manner as is reasonably acceptable to the Company Trustees, as evidenced by the execution thereof by the Company Trustees or any one of them. .14 Rights of Securityholders; Waivers of Past Defaults. (A) The legal title to the Trust Property is vested exclusively in the Preferred Trustee (in its capacity as such) in accordance with Section 2.9, and the Securityholders shall not have any right or title therein other than the undivided beneficial interest in the assets of the Trust conferred by their Trust Securities and they shall have no right to call for any partition or division of property, profits or rights of the Trust except as described below. The Trust Securities shall be personal property giving only the rights specifically set forth therein, in this Declaration and in the Delaware Business Trust Act. The Trust Securities shall have no preemptive or similar rights and when issued and delivered to Securityholders against payment of the purchase price therefor will be fully paid and nonassessable by the Trust. The Holders of 31 38 the Trust Securities, in their capacities as such, shall be entitled to the same limitation of personal liability extended to stockholders of private corporations for profit organized under the General Corporation Law of the State of Delaware without giving effect to principles of conflict of laws. (B) For so long as any Preferred Securities remain Outstanding, if, upon a Declaration Event of Default, the Indenture Trustee fails or the holders of not less than 25% in principal amount of the outstanding Notes fail to declare the principal of all of the Notes to be immediately due and payable, the Preferred Trustee may exercise such right, subject to the provisions below, by a notice in writing to the Issuer, the Sponsor and the Indenture Trustee; and upon any such declaration such principal amount of and the accrued interest on all of the Notes shall become immediately due and payable, provided, that the payment of principal and interest on such Notes shall remain subordinated to the extent provided in the Indenture. At any time after such a declaration of acceleration with respect to the Notes has been made and before a judgment or decree for payment of the money due has been obtained by the Indenture Trustee as in the Indenture provided, the Holders of a majority in Liquidation Amount of the Preferred Securities, by written notice to the Preferred Trustee, the Issuer, the Sponsor and the Indenture Trustee, may rescind and annul such declaration and its consequences if: (i) the Issuer has paid or deposited with the Indenture Trustee a sum sufficient to pay: (A) all overdue installments of interest (including any Additional Sums) on all of the Notes; (B) the principal of (and premium, if any, on) any Notes which have become due otherwise than by such declaration of acceleration and interest thereon at the rate borne by the Notes; (C) all sums paid or advanced by the Indenture Trustee under the Indenture and the reasonable compensation, expenses, disbursements and advances of the Indenture Trustee, the Preferred Trustee and the Delaware Trustee, their agents and counsel; and (ii) any Note Event of Default, other than the non-payment of the principal of the Notes which has become due solely by such acceleration, has been cured or waived as provided in Section 5.13 of the Indenture. In the case of any Declaration Event of Default, the Holder of Common Securities will be deemed to have waived any right to act with respect to any such Declaration Event of Default under this Declaration until the effect of all such Declaration Events of Default with respect to the Preferred Securities have been cured, waived or otherwise eliminated. Until any such Declaration Event of Default with respect to the Preferred Securities has been so cured, waived or otherwise eliminated, the Preferred Trustee shall act solely on behalf of the Holders of Preferred Securities and not the Holder of the Common Securities, and only the Holders of Preferred Securities will have the right to direct the Preferred Trustee to act on their behalf. 32 39 The holders of a majority in aggregate Liquidation Amount of the Preferred Securities may, on behalf of the Holders of all the Preferred Securities, waive any past default under the Indenture, except a default in the payment of principal or interest (unless such default has been cured and a sum sufficient to pay all matured installments of interest and principal due otherwise than by acceleration has been deposited with the Indenture Trustee) or a default in respect of a covenant or provision which under the Indenture cannot be modified or amended without the consent of the holder of each outstanding Note. No such rescission shall affect any subsequent default or impair any right consequent thereon. The Preferred Trustee shall not, as the initial holder of the Notes, for so long as it holds such Notes waive any Note Event of Default without the consent of Holders of a majority in aggregate Liquidation Amount of Preferred Securities then Outstanding. A waiver of a Note Event of Default will constitute a waiver of the corresponding Declaration Event of Default. Upon receipt by the Preferred Trustee of written notice declaring such rescission and annulment by Holders of Preferred Securities all or part of which is represented by Book-Entry Preferred Securities Certificates, a record date shall be established for determining Holders of Outstanding Preferred Securities entitled to join in such notice, which record date shall be at the close of business on the day the Preferred Trustee receives such notice. The Holders on such record date, or their duly designated proxies, and only such Persons, shall be entitled to join in such notice, whether or not such Holders remain Holders after such record date; provided, that, unless such declaration of rescission and annulment shall have become effective by virtue of the requisite percentage having joined in such notice prior to the day which is 90 days after such record date, such notice of declaration of rescission and annulment shall automatically and without further action by any Holder be canceled and of no further effect. Nothing in this paragraph shall prevent a Holder, or a proxy of a Holder, from giving, after expiration of such 90-day period, a new written notice of declaration of rescission and annulment that is identical to a written notice which has been canceled pursuant to the proviso to the preceding sentence, in which event a new record date shall be established pursuant to the provisions of this Section 5.14(b). (C) For so long as any Preferred Securities remain Outstanding, to the fullest extent permitted by law and subject to the terms of this Declaration and the Indenture, if a Declaration Event of Default has occurred and is continuing and such event is attributable to the failure of the Issuer to pay interest on or principal of the Notes on the date such interest or principal is otherwise payable (or in the case of redemption, the redemption date), then the Holders of at least 25% in Liquidation Amount of the Preferred Securities shall have the right to appoint a trustee (the "Special Trustee") to act on behalf of all Holders of Preferred Securities. The Special Trustee so appointed shall represent the Holders of all Outstanding Preferred Securities unless Holders of at least a majority in Liquidation Amount of the Outstanding Preferred Securities appoint an alternative Special Trustee, in which case the Special Trustee appointed in accordance with the preceding sentence shall resign as Special Trustee. At no time can there be more than one Special Trustee acting on behalf of the Holders of Preferred Securities. The Special Trustee shall have the right to directly institute a proceeding against the Issuer or the Guarantors (a "Trustee Action") for enforcement of payment to Holders of Preferred Securities of the principal of or interest on the Notes having a principal amount equal to the aggregate Liquidation Amount of the Preferred Securities of such Holders. In connection with any such Trustee Action, the rights of the Holder of the 33 40 Common Securities will be subrogated to the rights of any Holder of Preferred Securities to the extent of any payment made by the Issuer or the Guarantors to such Holder of Preferred Securities as a result of such Trustee Action. Except as set forth in Section 5.14(b) and (c), the Holders of Preferred Securities shall have no right to exercise directly any right or remedy available to the holders of, or in respect of, the Notes; provided, however, that if the Preferred Trustee or the Special Trustee do not enforce such payment obligations, a Holder of Preferred Securities will have the right, to the fullest extent permitted by law, to bring an action on behalf of the Trust to enforce the Trust's rights under the Notes and the Indenture. ARTICLE VI ACTS OF SECURITYHOLDERS; MEETINGS; VOTING .1 Limitations on Voting Rights. (A) Except as provided in this Section, in Sections 5.14, 8.10 and 10.2 and in the Indenture and as otherwise required by law, no Holder of Preferred Securities shall have any right to vote or in any manner otherwise control the administration, operation and management of the Trust or the obligations of the parties hereto, nor shall anything herein set forth, or contained in the terms of the Trust Securities Certificates, be construed so as to constitute the Securityholders from time to time as partners or members of an association. (B) Subject to the requirement of the Preferred Trustee obtaining an Opinion of Counsel in certain circumstances set forth in the last sentence of this paragraph, Holders of a majority in Liquidation Amount of all Outstanding Preferred Securities have the right to direct the time, method and place of conducting any proceeding for any remedy available to the Preferred Trustee (or Special Trustee, if appointed), or direct the exercise of any trust or power conferred upon the Preferred Trustee under the Declaration including the right to direct the Preferred Trustee, as holder of the Notes, to (i) exercise the remedies available under the Indenture with respect to the Notes or the Guaranties, (ii) waive any past Event of Default that is waiveable under the Indenture, (iii) exercise any right to rescind or annul a declaration that the principal of all the Notes shall be due and payable or (iv) consent to any amendment, modification, or termination of the Indenture or the Notes where such consent shall be required; provided, however, that, where a consent or action under the Indenture would require the consent or act of the holders of more than a majority of the aggregate principal amount of Notes affected thereby, only Holders of the percentage of the Liquidation Amount of all Outstanding Preferred Securities which is at least equal to the percentage required under the Indenture may direct the Preferred Trustee to give such consent or take such action; provided, further, that the Indenture cannot be amended in any way which would cause the Trust to fail or cease to be classified for purposes of United States Federal income taxation as other than a grantor trust or other entity which is not subject to United States Federal income tax at the entity level and the assets and income of which are treated for United States Federal income tax purposes as held and derived directly by holders of interests in the entity. The Trustees shall not revoke any action previously authorized or approved by a vote of the Holders of Preferred Securities, except by a subsequent vote of the Holders of Preferred Securities. If the Preferred Trustee or the Special Trustee fails to enforce its rights under the Notes to receive interest or principal on the Notes on the date such interest or principal is otherwise payable (or in the case of redemption, the redemption date), a Holder of Preferred Securities may, to the fullest extent permitted by law, institute a legal proceeding on behalf of 34 41 the Trust against the Issuer or the Guarantors to enforce the Trust's rights under the Notes or the Guaranties without first instituting any legal proceeding against the Preferred Trustee or any other person or entity. Holders of Preferred Securities shall not be able to exercise directly any other remedies available to the holders of the Notes unless the Preferred Trustee or the Indenture Trustee, acting for the benefit of the Preferred Trustee, fail to do so. In such event, Holders of at least 25% in Liquidation Amount of all Outstanding Preferred Securities shall have a right to institute such proceedings. The Preferred Trustee shall notify all Holders of Preferred Securities of any notice of default received from the Indenture Trustee with respect to the Notes. Such notice shall state that such Event of Default also constitutes a Declaration Event of Default. Except with respect to directing the time, method and place of conducting a proceeding for a remedy, the Preferred Trustee shall not take any of the actions described in clause (i), (ii) or (iii) above unless the Preferred Trustee has obtained an Opinion of Counsel rendered by a law firm having a nationally recognized tax and securities practice to the effect that, as a result of such action, the Trust will not fail to be classified as a grantor trust for United States Federal income tax purposes or another entity which is not subject to United States Federal income tax at the entity level and the assets and income of which are treated for United States Federal income tax purposes as held and derived directly by holders of interests in the entity. (C) In the event the consent of the Preferred Trustee, as the holder of the Notes, is required under the Indenture with respect to any amendment, modification or termination of the Indenture, the Preferred Trustee shall request the direction of the Holders of Preferred Securities with respect to such amendment, modification or termination and shall vote with respect to such amendment, modification or termination as directed by a majority in Liquidation Amount of all Outstanding Preferred Securities; provided, however, that, where a consent under the Indenture would require the consent of the holders of more than a majority of the aggregate principal amount of the Notes, the Preferred Trustee may only give such consent at the direction of the Holders of at least the same proportion in Liquidation Amount of all Outstanding Preferred Securities; provided, further, that the Indenture cannot be amended in any way which would cause the Trust to fail or cease to be classified for purposes of United States Federal income taxation as other than a grantor trust or other entity which is not subject to United States Federal income tax at the entity level and the assets and income of which are treated for United States Federal income tax purposes as held and derived directly by holders of interests in the entity. The Preferred Trustee shall not take any such action in accordance with the directions of the Holders of Preferred Securities unless the Preferred Trustee has obtained an Opinion of Counsel rendered by a law firm having a nationally recognized tax and securities practice to the effect that for the purposes of United States Federal income tax the Trust will not be classified as other than a grantor trust or another entity which is not subject to United States Federal income tax at the entity level and the assets and income of which are treated for United States Federal income tax purposes as held and derived directly by holders of interests in the entity. (D) If any proposed amendment to the Declaration pursuant to Section 10.2 provides for, or the Trustees otherwise propose to effect, (i) any action that would adversely affect in any material respect the powers, preferences or special rights of the Trust Securities, whether by way of amendment to the Declaration or otherwise, or (ii) the dissolution, winding-up or termination of the Trust, other than pursuant to the terms of this Declaration, then the Holders of the Trust Securities as a class will be entitled to vote on such amendment or proposal and such amendment or proposal shall not be effective except with the approval of 35 42 the Holders of at least a majority in Liquidation Amount of the Trust Securities affected thereby; provided, that if any amendment or proposal referred to in clause (i) above would adversely affect only the Preferred Securities or the Common Securities, then only the affected class will be entitled to vote on such amendment or proposal and such amendment or proposal shall not be effective except with the approval of at least a majority in Liquidation Amount of such class of Trust Securities. (E) Notwithstanding that Holders of Preferred Securities are entitled to vote or consent under any of the circumstances described herein, any of the Preferred Securities that are owned at such time by the Sponsor or any entity directly or indirectly controlling or controlled by, or under direct or indirect common control with, the Sponsor, shall not be entitled to vote or consent and shall, for purposes of such vote or consent, be treated as if such Preferred Securities were not Outstanding. (F) Holders of Preferred Securities will have no rights to appoint or remove, or increase or decrease the number of, the Trustees, who may be appointed, removed or replaced, increased or decreased solely by the Sponsor as the indirect or direct Holder of all of the Common Securities. No vote or consent of the Holders of Preferred Securities will be required for the Trust to redeem and cancel Preferred Securities or distribute Notes in accordance with the Declaration. .2 Notice of Meetings. Notice of all meetings at which the Preferred Securityholders are entitled to vote shall be given by the Preferred Trustee pursuant to Section 10.9 to each Preferred Securityholder of record, at his registered address, at least 15 days and not more than 90 days before the meeting. Notice of all matters upon which action by written consent of the Preferred Securityholders is to be taken shall be given by the Preferred Trustee pursuant to Section 10.9 to each Preferred Securityholder of record, at his registered address, contemporaneously with any request for or solicitation of such consents. Each such notice shall include a statement setting forth the following information: (i) the date, place and purpose of such meeting or the date by which such action is to be taken and the purpose thereof; (ii) a description of any resolution proposed for adoption at such meeting on which such Holders are entitled to vote or of such matter upon which written consent is sought; and (iii) instructions for the delivery of proxies or consents. At any such meeting, any business properly before the meeting may be so considered whether or not stated in the notice of the meeting. Any adjourned meeting may be held as adjourned without further notice. .3 Meetings of Preferred Securityholders. Any required approval or direction of Holders of Preferred Securities may be given at a separate meeting of Holders of Preferred Securities convened for such purpose, at a meeting of all of the Holders of Trust Securities or pursuant to written consent. No annual meeting of Securityholders is required to be held. The Company Trustees, however, shall call a meeting of Securityholders to vote on any matter upon the written request of the Preferred Securityholders of record of 25% of the Preferred Securities (based upon their Liquidation Amount) and the Company Trustees or the Preferred Trustee may, at any time in their discretion, call a meeting of Preferred Securityholders to vote on any matters as to which Preferred Securityholders are entitled to vote. 36 43 Preferred Securityholders of record of 50% of the Outstanding Preferred Securities (based upon their Liquidation Amount), present in person or by proxy, shall constitute a quorum at any meeting of Securityholders. If a quorum is present at a meeting, an affirmative vote by the Preferred Securityholders of record present, in person or by proxy, holding more than a majority of the Preferred Securities (based upon their Liquidation Amount) held by the Preferred Securityholders of record present, either in person or by proxy, at such meeting shall constitute the action of the Securityholders, unless this Declaration requires a greater number of affirmative votes. .4 Voting Rights. Securityholders shall be entitled to one vote for eachEuro 1,000 of Liquidation Amount represented by their Trust Securities in respect of any matter as to which such Securityholders are entitled to vote. .5 Proxies, etc. At any meeting of Securityholders, any Securityholder entitled to vote thereat may vote by proxy, provided, that no proxy shall be voted at any meeting unless it shall have been placed on file with the Company Trustees, or with such other officer or agent of the Trust as the Company Trustees may direct, for verification prior to the time at which such vote shall be taken. Proxies may be solicited in the name of the Preferred Trustee or one or more officers of the Preferred Trustee. Only Securityholders of record shall be entitled to vote. When Trust Securities are held jointly by several persons, any one of them may vote at any meeting in person or by proxy in respect of such Trust Securities, but if more than one of them shall be present at such meeting in person or by proxy, and such joint owners or their proxies so present disagree as to any vote to be cast, such vote shall not be received in respect of such Trust Securities. A proxy purporting to be executed by or on behalf of a Securityholder shall be deemed valid unless challenged at or prior to its exercise, and the burden of proving invalidity shall rest on the challenger. No proxy shall be valid more than three years after its date of execution. .6 Securityholder Action by Written Consent. Any action which may be taken by Securityholders at a meeting may be taken without a meeting if Securityholders holding more than a majority of all Outstanding Trust Securities (based upon their Liquidation Amount) entitled to vote in respect of such action (or such larger proportion thereof as shall be required by any express provision of this Declaration) shall consent to the action in writing. Any such action shall be effective at the time specified in or determined in accordance with the notice distributed pursuant to Section 6.2 hereof. .7 Record Date for Voting and Other Purposes. For the purposes of determining the Securityholders who are entitled to notice of and to vote at any meeting or by written consent, or to participate in any Distribution on the Trust Securities in respect of which a record date is not otherwise provided for in this Declaration, or for the purpose of any other action, the Company Trustees may from time to 37 44 time fix a date, not more than 90 days prior to the date of any meeting of Securityholders or the payment of a distribution or other action, as the case may be, as a record date for the determination of the identity of the Securityholders of record for such purposes. .8 Acts of Securityholders. Any request, demand, authorization, direction, notice, consent, waiver or other action provided or permitted by this Declaration to be given, made or taken by Securityholders or Owners may be embodied in and evidenced by one or more instruments of substantially similar tenor signed by such Securityholders or Owners in person or by an agent duly appointed in writing; and, except as otherwise expressly provided herein, such action shall become effective when such instrument or instruments are delivered to a Company Trustee. Such instrument or instruments (and the action embodied therein and evidenced thereby) are herein sometimes referred to as the "Act" of the Securityholders or Owners signing such instrument or instruments. Proof of execution of any such instrument or of a writing appointing any such agent shall be sufficient for any purpose of this Declaration and (subject to Section 8.1) conclusive in favor of the Trustees, if made in the manner provided in this Section. The fact and date of the execution by any Person of any such instrument or writing may be proved by the affidavit of a witness of such execution or by a certificate of a notary public or other officer authorized by law to take acknowledgments of deeds, certifying that the individual signing such instrument or writing acknowledged to him the execution thereof. Where such execution is by a signer acting in a capacity other than his individual capacity, such certificate or affidavit shall also constitute sufficient proof of his authority. The fact and date of the execution of any such instrument or writing, or the authority of the Person executing the same, may also be proved in any other manner which any Trustee receiving the same deems sufficient. The ownership of Preferred Securities shall be proved by the Securities Register. Any request, demand, authorization, direction, notice, consent, waiver or other Act of the Securityholder of any Trust Security shall bind every future Securityholder of the same Trust Security and the Securityholder of every Trust Security issued upon the registration of transfer thereof or in exchange therefor or in lieu thereof in respect of anything done, omitted or suffered to be done by the Trustees or the Trust in reliance thereon, whether or not notation of such action is made upon such Trust Security. Without limiting the foregoing, a Securityholder entitled hereunder to take any action hereunder with regard to any particular Trust Security may do so with regard to all or any part of the Liquidation Amount of such Trust Security or by one or more duly appointed agents each of which may do so pursuant to such appointment with regard to all or any part of such liquidation amount. If any dispute shall arise between the Securityholders and the Company Trustees or among such Securityholders or Trustees with respect to the authenticity, validity or binding nature of any request, demand, authorization, direction, consent, waiver or other Act of such Securityholder or Trustee under this Article VI, then the determination of such matter by the Preferred Trustee shall be conclusive with respect to such matter. 38 45 A Securityholder may institute a legal proceeding directly against the Sponsor under the Trust Guarantee to enforce its rights under the Trust Guarantee without first instituting a legal proceeding against the Guarantee Trustee (as defined in the Guarantee Agreement), the Trust or any person or entity. .9 Inspection of Records. Upon reasonable notice to the Company Trustees and the Preferred Trustee, the records of the Trust shall be open to inspection by Securityholders during normal business hours for any purpose reasonably related to such Securityholder's interest as a Securityholder. ARTICLE VII REPRESENTATIONS AND WARRANTIES .1 Representations and Warranties of the Bank, the Preferred Trustee and the Delaware Trustee. The Preferred Trustee and the Delaware Trustee, as the case may be, each severally on behalf of and only as to itself, hereby represents and warrants for the benefit of the Sponsor, the Company Trustees and the Securityholders that: (A) the Preferred Trustee is a Massachusetts chartered trust company duly organized, validly existing and in good standing under the laws of such Commonwealth; (B) the Preferred Trustee has full corporate power, authority and legal right to execute, deliver and perform its obligations under this Declaration and has taken all necessary action to authorize the execution, delivery and performance by it of this Declaration; (C) the Delaware Trustee is a national banking association duly organized, validly existing and in good standing under the laws of the United States; (D) the Delaware Trustee has full corporate power, authority and legal right to execute, deliver and perform its obligations under this Declaration and has taken all necessary action to authorize the execution, delivery and performance by it of this Declaration; (E) this Declaration has been duly authorized, executed and delivered by the Preferred Trustee and the Delaware Trustee and constitutes the valid and legally binding agreement of each of the Preferred Trustee and the Delaware Trustee enforceable against each of them in accordance with its terms, subject to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar laws of general applicability relating to or affecting creditors' rights and to general equity principles; (F) the execution, delivery and performance of this Declaration by the Preferred Trustee and the Delaware Trustee, respectively, has been duly authorized by all necessary corporate or other action on the part of the Preferred Trustee and the Delaware Trustee, respectively, and does not require any approval of stockholders, of the Preferred Trustee or the Delaware Trustee and such execution, delivery and 39 46 performance will not (i) violate the Charter or By-laws of the Preferred Trustee or the Delaware Trustee, (ii) violate any provision of, or constitute, with or without notice or lapse of time, a default under, or result in the creation or imposition of, any Lien on any properties included in the Trust Property pursuant to the provisions of, any indenture, mortgage, credit agreement, license or other agreement or instrument to which the Preferred Trustee or the Delaware Trustee is a party or by which it is bound, or (iii) violate any law, governmental rule or regulation of the Commonwealth of Massachusetts, or the United States, as the case may be, governing the banking, trust or general powers of the Preferred Trustee or the banking, trust or general powers of the Delaware Trustee (as appropriate in context) or any order, judgment or decree applicable to the Preferred Trustee or the Delaware Trustee; (G) neither the authorization, execution or delivery by the Preferred Trustee or the Delaware Trustee of this Declaration nor the consummation of any of the transactions by the Preferred Trustee or the Delaware Trustee (as appropriate in context) contemplated herein requires the consent or approval of, the giving of notice to, the registration with or the taking of any other action with respect to (i) any governmental authority or agency under any existing Federal or State law governing the banking, trust or general powers of the Preferred Trustee (ii) with respect to any governmental authority or agency under any existing Federal or Delaware law governing the banking or trust powers of the Delaware Trustee (in each case, other than (a) the qualification of this Declaration, the Indenture and the Trust Guarantee under the Trust Indenture Act upon issuance of Exchange Preferred Securities hereunder, and (b) the filing of the Certificate of Trust as required under the Delaware Business Trust Act); and (H) there are no proceedings pending or, to the best of each of the Preferred Trustee's and the Delaware Trustee's knowledge, threatened against or affecting the Preferred Trustee or the Delaware Trustee in any court or before any governmental authority, agency or arbitration board or tribunal which, individually or in the aggregate, would materially and adversely affect the Trust or would question the right, power and authority of the Preferred Trustee or the Delaware Trustee, as the case may be, to enter into or perform its obligations as one of the Trustees under this Declaration. .2 Representations and Warranties of Sponsor. The Sponsor hereby represents and warrants for the benefit of the Securityholders that: (A) the Trust Securities Certificates issued on the Closing Date on behalf of the Trust have been duly authorized and will have been duly and validly executed, issued and delivered by the Trustees pursuant to the terms and provisions of, and in accordance with the requirements of, this Declaration and the Securityholders will be, as of each such date, entitled to the benefits of this Declaration; (B) there are no taxes, fees or other governmental charges payable by the Trust (or the Trustees on behalf of the Trust) under the laws of the State of Delaware or any political subdivision thereof in connection with the execution, delivery 40 47 and performance by the Preferred Trustee or the Delaware Trustee, as the case may be, of this Declaration; and (C) to its knowledge, since the date of the creation of the Trust through the date hereof, no Trust Securities have been issued and the Trust has not conducted any business nor incurred any liabilities and the Trust has not been caused to conduct any business nor to incur any liabilities. ARTICLE VIII THE TRUSTEES .1 Certain Duties and Responsibilities. (A) The duties and responsibilities of the Trustees shall be as provided by this Declaration and, in the case of the Preferred Trustee, subject to Section 10.11(a) hereof, the Trust Indenture Act. Notwithstanding the foregoing, no provision of this Declaration shall require the Trustees to expend or risk their own funds or otherwise incur any financial liability in the performance of any of their duties hereunder, or in the exercise of any of their rights or powers, if they 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. Whether or not therein expressly so provided, every provision of this Declaration relating to the conduct or affecting the liability of or affording protection to the Trustees shall be subject to the provisions of this Section 8.1. Nothing in this Declaration shall be construed to release the Preferred Trustee from liability for its own negligent action, its own negligent failure to act, or its own willful misconduct. The Delaware Trustee shall have no personal liability under this Declaration except to the Trust, the Sponsor and the Holders for its gross negligence or willful misconduct. To the extent that, at law or in equity, a Company Trustee or the Delaware Trustee has duties (including fiduciary duties) and liabilities relating thereto to the Trust or to the Securityholders, such Company Trustee or the Delaware Trustee shall not be liable to the Trust or to any Securityholder for such Trustee's good faith reliance on the provisions of this Declaration. The provisions of this Declaration, to the extent that they restrict the duties and liabilities of the Company Trustees and the Delaware Trustee otherwise existing at law or in equity, are agreed by the Sponsor and the Securityholders to replace such other duties and liabilities of the Company Trustees and the Delaware Trustee. (B) All payments made by the Preferred Trustee or a Paying Agent in respect of the Trust Securities shall be made only from the revenue and proceeds from the Trust Property and only to the extent that there shall be sufficient revenue or proceeds from the Trust Property to enable the Preferred Trustee or a Paying Agent to make payments in accordance with the terms hereof. Each Securityholder, by its acceptance of a Trust Security, agrees that it will look solely to the revenue and proceeds from the Trust Property to the extent legally available for distribution to it as herein provided and that the Trustees are not personally liable to it for any amount distributable in respect of any Trust Security or for any other liability in respect of any Trust Security. This Section 8.1(b) does not limit the liability of the Trustees expressly set forth elsewhere in this Declaration or, in the case of the Preferred Trustee, in the Trust Indenture Act. (C) Subject to Section 5.14 hereof, if a Declaration Event of Default has occurred and is continuing, the Preferred Trustee shall enforce this Declaration for the benefit of the Holders. The Preferred Trustee, before the occurrence of any Declaration Event of 41 48 Default and after the curing of all Declaration Events of Default that may have occurred, shall undertake to perform only such duties as are specifically set forth in this Declaration (including pursuant to Section 10.11), and no implied covenants shall be read into this Declaration against the Preferred Trustee. If a Declaration Event of Default has occurred (that has not been cured or waived pursuant to Section 5.14), the Preferred Trustee shall exercise such of the rights and powers vested in it by this Declaration, 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 or her own affairs. (D) No provision of this Declaration shall be construed to relieve the Preferred Trustee from liability for its own negligent action, its own negligent failure to act, or its own willful misconduct, except that: (i) the Preferred Trustee shall not be liable for any error of judgment made in good faith by an authorized officer of the Preferred Trustee, unless it shall be proved that the Preferred Trustee was negligent in ascertaining the pertinent facts; (ii) the Preferred Trustee shall not be liable with respect to any action taken or omitted to be taken by it in good faith in accordance with the direction of the Holders of not less than a majority in Liquidation Amount of the Trust Securities relating to the time, method and place of conducting any proceeding for any remedy available to the Preferred Trustee, or exercising any trust or power conferred upon the Preferred Trustee under this Declaration; (iii) the Preferred Trustee's sole duty with respect to the custody, safe keeping and physical preservation of the Notes and the Payment Account shall be to deal with such Property in a similar manner as the Preferred Trustee deals with similar property for its own account, subject to the protections and limitations on liability afforded to the Preferred Trustee under this Declaration and the Trust Indenture Act; (iv) the Preferred Trustee shall not be liable for any interest on any money received by it except as it may otherwise agree with the Sponsor; and money held by the Preferred Trustee need not be segregated from other funds held by it except in relation to the Payment Account maintained by the Preferred Trustee pursuant to Section 3.1 and except to the extent otherwise required by law; and (v) the Preferred Trustee shall not be responsible for monitoring the compliance by the Company Trustees or the Sponsor with their respective duties under this Declaration, nor shall the Preferred Trustee be liable for the default or misconduct of the Company Trustees or the Sponsor. .2 Certain Notices. Within five Business Days after the occurrence of any Declaration Event of Default actually known to an officer in the Corporate Trust Administration office of the Preferred Trustee, the Preferred Trustee shall transmit, in the manner and to the extent provided in Section 10.9, notice of such Declaration Event of Default to the Securityholders, the Company Trustees, the Delaware Trustee and the Sponsor, unless such Declaration Event of Default shall have been cured or waived. 42 49 .3 Certain Rights of Preferred Trustee. Subject to the provisions of Section 8.1: (A) the Preferred Trustee may rely and shall be protected in acting or refraining from acting in good faith upon any resolution, Opinion of Counsel, certificate, written representation of a Holder or transferee, certificate of auditors or any other certificate, statement, instrument, opinion, report, notice, request, consent, order, appraisal, bond, debenture, note, other evidence of indebtedness or other paper or document believed by it to be genuine and to have been signed or presented by the proper party or parties; (B) if (i) in performing its duties under this Declaration the Preferred Trustee is required to decide between alternative courses of action or (ii) in construing any of the provisions of this Declaration the Preferred Trustee finds the same ambiguous or inconsistent with any other provisions contained herein or (iii) the Preferred Trustee is unsure of the application of any provision of this Declaration, then, except as to any matter as to which the Preferred Securityholders are entitled to vote under the terms of this Declaration, the Preferred Trustee shall deliver a notice to the Sponsor requesting written instructions of the Sponsor as to the course of action to be taken and the Preferred Trustee shall take such action, or refrain from taking such action, as the Preferred Trustee shall be instructed in writing to take, or to refrain from taking, by the Sponsor; provided, however, that if the Preferred Trustee does not receive such instructions of the Sponsor within ten Business Days after it has delivered such notice, or such reasonably shorter period of time set forth in such notice (which to the extent practicable shall not be less than five Business Days), it may, but shall be under no duty to, take or refrain from taking such action not inconsistent with this Declaration as it shall deem advisable and in the best interests of the Securityholders, in which event the Preferred Trustee shall have no liability except for its own bad faith, negligence or willful misconduct; (C) any direction or act of the Sponsor or the Company Trustees contemplated by this Declaration shall be sufficiently evidenced by an Officers' Certificate with respect to the Sponsor and a certificate of any one of the Company Trustees with respect to the Company Trustees; (D) whenever in the administration of this Declaration, the Preferred Trustee shall deem it desirable that a matter be established before undertaking, suffering or omitting any action hereunder, the Preferred Trustee (unless other evidence is herein specifically prescribed) may, in the absence of bad faith on its part, request and rely upon an Officers' Certificate or certificate from any one of the Company Trustees which, upon receipt of such request, shall be promptly delivered by the Sponsor or the Company Trustees; (E) the Preferred Trustee shall have no duty to see to any recording, filing or registration of any instrument (including any financing or continuation statement or any filing under tax or securities laws) or any rerecording, refiling or re-registration thereof; 43 50 (F) the Preferred Trustee may consult with counsel (which counsel may be counsel to the Sponsor or any of its Affiliates, and may include any of its employees) and the written advice of such counsel shall be full and complete authorization and protection in respect of any action taken, suffered or omitted by it hereunder in good faith and in reliance thereon and in accordance with such advice, such counsel may be counsel to the Sponsor or any of its Affiliates, and may include any of its employees; the Preferred Trustee shall have the right at any time to seek instructions concerning the administration of this Declaration from any court of competent jurisdiction; (G) the Preferred Trustee shall be under no obligation to exercise any of the rights or powers vested in it by this Declaration at the request or direction of any of the Securityholders pursuant to this Declaration, unless such Securityholders shall have offered to the Preferred Trustee reasonable security or indemnity against the costs, expenses and liabilities which might be incurred by it in compliance with such request or direction; (H) the Preferred Trustee shall not be bound to make any investigation into the facts or matters stated in any resolution, certificate, statement, instrument, opinion, report, notice, request, consent, order, approval, bond, debenture, note or other evidence of indebtedness or other paper or document, unless requested in writing to do so by one or more Securityholders; (I) the Preferred Trustee may execute any of the trusts or powers hereunder or perform any duties hereunder either directly or by or through its agents or attorneys, provided, that the Preferred Trustee shall be responsible for its own negligence or recklessness with respect to selection of any agent or attorney appointed by it hereunder; (J) whenever in the administration of this Declaration the Preferred Trustee shall deem it desirable to receive instructions with respect to enforcing any remedy or right or taking any other action hereunder the Preferred Trustee (i) may request instructions from the Holders of the Trust Securities which instructions may only be given by the Holders of the same proportion in Liquidation Amount of the Trust Securities as would be entitled to direct the Preferred Trustee under the terms of the Trust Securities in respect of such remedy, right or action, (ii) may refrain from enforcing such remedy or right or taking such other action until such instructions are received, and (iii) shall be protected in acting in accordance with such instructions; (K) except as otherwise expressly provided by this Declaration, the Preferred Trustee shall not be under any obligation to take any action that is discretionary under the provisions of this Declaration; and (l) if the Initial Purchasers named in the Purchase Agreement request or if the Clearing Agency requires that the Preferred Securities be identified on the Clearing Agency records by reference to the liquidation amount or in increments of the liquidation value of the Preferred Securities, the Preferred Trustee is authorized to take any actions necessary to comply with such request or requirement. 44 51 No provision of this Declaration shall be deemed to impose any duty or obligation on the Preferred Trustee to perform any act or acts or exercise any right, power, duty or obligation conferred or imposed on it, in any jurisdiction in which it shall be illegal, or in which the Preferred Trustee shall be unqualified or incompetent in accordance with applicable law, to perform any such act or acts, or to exercise any such right, power, duty or obligation. No permissive power or authority available to the Preferred Trustee shall be construed to be a duty. .4 Not Responsible for Recitals or Issuance of Securities. The recitals contained herein and in the Trust Securities Certificates shall be taken as the statements of the Trust, and the Trustees (other than the Company Trustees) do not assume any responsibility for their correctness. The Trustees (other than the Company Trustees) shall not be accountable for the use or application by the Sponsor or the Issuer of the proceeds of the Notes. .5 May Hold Securities. Except as provided in the definition of the term "Outstanding" in Article I, any Trustee or any other agent of any Trustee or the Trust, in its individual or any other capacity, may become the owner or pledgee of Trust Securities and, subject to Sections 8.8 and 8.13, may otherwise deal with the Trust with the same rights it would have if it were not a Trustee or such other agent. .6 Compensation; Indemnity; Fees. The Sponsor agrees: (A) to pay to the Trustees and to any Paying Agent appointed by the Sponsor from time to time reasonable compensation for all services rendered by them hereunder (which compensation shall not be limited by any provision of law in regard to the compensation of a trustee of an express trust); (B) except as otherwise expressly provided herein, to reimburse the Trustees and Paying Agent upon request for all reasonable expenses, disbursements and advances incurred or made by the Trustees and Paying Agent in accordance with any provision of this Declaration (including the reasonable compensation and the expenses and disbursements of its agents and counsel), except any such expense, disbursement or advance as may be attributable to its negligence (or, in the case of the Delaware Trustee, gross negligence) or bad faith; (C) to the fullest extent permitted by applicable law, to indemnify and hold harmless (i) each Trustee, (ii) each Paying Agent, (iii) any Affiliate of any Trustee (other than the Sponsor), (iv) any officer, director, shareholder, employee, representative or agent of any Trustee, and (v) any employee or agent of the Trust or its Affiliates (other than the Sponsor) (referred to herein as an "Indemnified Person"), from and against any loss, damage, liability, tax, penalty, expense or claim of any kind or nature whatsoever incurred by such Indemnified Person by reason of the creation, operation or termination of the Trust or any act or omission performed or omitted by such Indemnified Person in good faith on behalf of the Trust and in a manner such 45 52 Indemnified Person reasonably believed to be within the scope of authority conferred on such Indemnified Person by this Declaration, except that no Indemnified Person shall be entitled to be indemnified in respect of any loss, damage or claim incurred by such Indemnified Person by reason of its negligence (or, in the case of the Delaware Trustee and its related Indemnified Persons, gross negligence) or willful misconduct with respect to such acts or omissions; and (D) to the fullest extent permitted by applicable law, to advance expenses (including legal fees) incurred by an Indemnified Person in defending any claim, demand, action, suit or proceeding, from time to time, prior to the final disposition of such claim, demand, action, suit or proceeding upon receipt by the Sponsor of (i) a written affirmation by or on behalf of the Indemnified Person of its or his good faith belief that it or he has met the standard of conduct set forth in this Section 8.6 and (ii) an undertaking by or on behalf of the Indemnified Person to repay such amount if it shall be determined that the Indemnified Person is not entitled to be indemnified as authorized in the preceding subsection. The provisions of this Section 8.6 shall survive the termination of this Declaration and the removal or resignation of any Trustee or Paying Agent. No Trustee may claim any lien or charge on any Trust Property as a result of any amount due pursuant to this Section 8.6. The Sponsor, the Issuer (subject to the Indenture) and any Trustee may engage in or possess an interest in other business ventures of any nature or description, independently or with others, similar or dissimilar to the business of the Trust, and the Trust and the Holders of Trust Securities shall have no rights by virtue of this Declaration in and to such independent ventures or the income or profits derived therefrom, and the pursuit of any such venture, even if competitive with the business of the Trust, shall not be deemed wrongful or improper. Neither the Sponsor, nor any Trustee, shall be obligated to present any particular investment or other opportunity to the Trust even if such opportunity is of a character that, if presented to the Trust, could be taken by the Trust, and the Sponsor or any Trustee shall have the right to take for its own account (individually or as a partner or fiduciary) or to recommend to others any such particular investment or other opportunity. Any Trustee may engage or be interested in any financial or other transaction with the Sponsor or any Affiliate of the Sponsor, or may act as depository for, trustee or agent for, or act on any committee or body of holders of, securities or other obligations of the Sponsor or its Affiliates. .7 Corporate Preferred Trustee Required; Eligibility of Trustees. (A) There shall at all times be a Preferred Trustee hereunder with respect to the Trust Securities. The Preferred Trustee shall be a Person that is eligible pursuant to the Trust Indenture Act to act as such and has a combined capital and surplus of at least $50,000,000. If any such Person publishes reports of condition at least annually, pursuant to law or to the requirements of its supervising or examining authority, then for the purposes of this Section, the combined capital and surplus of such Person shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published. If at any time the Preferred Trustee with respect to the Trust Securities shall cease to be eligible in accordance with the provisions of this Section, it shall resign immediately in the manner and with the effect hereinafter specified in this Article. 46 53 (B) There shall at all times be one or more Company Trustees hereunder with respect to the Trust Securities. Each Company Trustee shall be either a natural person who is at least 21 years of age or a legal entity that shall act through one or more persons authorized to bind that entity. (C) There shall at all times be a Delaware Trustee with respect to the Trust Securities. The Delaware Trustee shall either be (i) a natural person who is at least 21 years of age and a resident of the State of Delaware or (ii) a legal entity with its principal place of business in the State of Delaware and that otherwise meets the requirements of applicable Delaware law that shall act through one or more persons authorized to bind such entity. .8 Conflicting Interests. (A) If the Preferred Trustee has or shall acquire a conflicting interest within the meaning of the Trust Indenture Act, the Preferred Trustee shall either eliminate such interest or resign, to the extent and in the manner provided by, and subject to the provisions of, the Trust Indenture Act and this Declaration. (B) The Guarantee Agreement and the Indenture as well as the Guarantee Agreements, Declarations and Indentures relating to the 9% Trust Preferred Securities due 2006 of Fresenius Medical Care Capital Trust, the 7 7/8% USD Trust Preferred Securities due 2008 of Fresenius Medical Care Capital Trust II, the 7 3/8% DM Trust Preferred Securities due 2008 of Fresenius Medical Care Capital Trust III and the 7 7/8% USD Trust Preferred Securities due 2011 of Fresenius Medical Care Capital Trust IV shall be deemed to be specifically described in this Declaration for the purposes of clause (i) of the first proviso contained in Section 310(b) of the Trust Indenture Act. .9 Co-Trustees and Separate Trustee. Unless a Declaration Event of Default shall have occurred and be continuing, at any time or times, for the purpose of meeting the legal requirements of the Trust Indenture Act or of any jurisdiction in which any part of the Trust Property may at the time be located, the Sponsor and the Company Trustees, by agreed action of the majority of such Trustees, shall have power to appoint, and upon the written request of the Company Trustees, the Sponsor shall for such purpose join with the Company Trustees in the execution, delivery, and performance of all instruments and agreements necessary or proper to appoint, one or more Persons approved by the Preferred Trustee either to act as co-trustee, jointly with the Preferred Trustee, of all or any part of such Trust Property, or to the extent required by law to act as separate trustee of any such property, in either case with such powers as may be provided in the instrument of appointment, and to vest in such Person or Persons in the capacity aforesaid, any property, title, right or power deemed necessary or desirable, subject to the other provisions of this Section. If the Sponsor does not join in such appointment within 15 days after the receipt by it of a request so to do, or in case a Declaration Event of Default has occurred and is continuing, the Preferred Trustee alone shall have power to make such appointment. Any co- trustee or separate trustee appointed pursuant to this Section shall either be (i) a natural person who is at least 21 years of age and a resident of the United States or (ii) a legal entity with its principal place of business in the United States that shall act through one or more persons authorized to bind such entity. 47 54 Should any written instrument from the Sponsor be required by any co-trustee or separate trustee so appointed for more fully confirming to such co-trustee or separate trustee such property, title, right, or power, any and all such instruments shall, on request, be executed, acknowledged and delivered by the Sponsor. Every co-trustee or separate trustee shall, to the extent permitted by law, but to such extent only, be appointed subject to the following terms, namely: (A) The Trust Securities shall be executed, authenticated and delivered and all rights, powers, duties, and obligations hereunder in respect of the custody of securities, cash and other personal property held by, or required to be deposited or pledged with, the Trustees specified hereunder, shall be exercised, solely by such Trustees and not by such co-trustee or separate trustee. (B) The rights, powers, duties, and obligations hereby conferred or imposed upon the Preferred Trustee in respect of any property covered by such appointment shall be conferred or imposed upon and exercised or performed by the Preferred Trustee or by the Preferred Trustee and such co-trustee or separate trustee jointly, as shall be provided in the instrument appointing such co-trustee or separate trustee, except to the extent that under any law of any jurisdiction in which any particular act is to be performed, the Preferred Trustee shall be incompetent or unqualified to perform such act, in which event such rights, powers, duties and obligations shall be exercised and performed by such co-trustee or separate trustee. (C) The Preferred Trustee at any time, by an instrument in writing executed by it, with the written concurrence of the Sponsor and the Issuer, may accept the resignation of or remove any co-trustee or separate trustee appointed under this Section, and, in case a Declaration Event of Default has occurred and is continuing, the Preferred Trustee shall have power to accept the resignation of, or remove, any such co-trustee or separate trustee without the concurrence of the Sponsor. Upon the written request of the Preferred Trustee, the Sponsor and the Issuer shall join with the Preferred Trustee in the execution, delivery and performance of all instruments and agreements necessary or proper to effectuate such resignation or removal. A successor to any co-trustee or separate trustee so resigned or removed may be appointed in the manner provided in this Section. (D) No co-trustee or separate trustee hereunder shall be personally liable by reason of any act or omission of the Preferred Trustee or any other trustee hereunder. (E) The Preferred Trustee shall not be liable by reason of any act or omission of a co-trustee or separate trustee. (F) Any Act of Holders delivered to the Preferred Trustee shall be deemed to have been delivered to each such co-trustee and separate trustee. .10 Resignation and Removal; Appointment of Successor. No resignation or removal of any Trustee (the "Relevant Trustee") and no appointment of a successor Trustee pursuant to this Article shall become effective until the 48 55 acceptance of appointment by the successor Trustee in accordance with the applicable requirements of Section 8.11. Subject to the immediately preceding paragraph, the Relevant Trustee may resign at any time by giving written notice thereof to the Securityholders, the Sponsor, the Issuer and the other Trustees. If the instrument of acceptance by the successor Trustee required by Section 8.11 shall not have been delivered to the Relevant Trustee within 30 days after the giving of such notice of resignation, the Relevant Trustee may petition, at the expense of the Trust, any court of competent jurisdiction for the appointment of a successor Relevant Trustee. Unless a Declaration Event of Default shall have occurred and be continuing, any Trustee may be removed at any time by Act of the Common Securityholder(s). If a Declaration Event of Default shall have occurred and be continuing, the Preferred Trustee or the Delaware Trustee, or both of them, may be removed at such time by Act of the Holders of a majority in Liquidation Amount of the Preferred Securities, delivered to the Relevant Trustee (in its individual capacity and on behalf of the Trust). A Company Trustee may be removed by the Common Securityholder(s) at any time. If any Trustee shall resign, be removed or become incapable of acting as Trustee, or if a vacancy shall occur in the office of any Trustee for any cause, at a time when no Declaration Event of Default shall have occurred and be continuing, the Common Securityholder(s), by Act of the Common Securityholder(s) delivered to the retiring Trustee, shall promptly appoint a successor Trustee or Trustees, and the retiring Trustee shall comply with the applicable requirements of Section 8.11. If the Preferred Trustee or the Delaware Trustee shall resign, be removed or become incapable of continuing to act as the Preferred Trustee or the Delaware Trustee, as the case may be, at a time when a Declaration Event of Default shall have occurred and be continuing, the Preferred Securityholders, by Act of the Securityholders of a majority in Liquidation Amount of the Preferred Securities then Outstanding delivered to the retiring Relevant Trustee, shall promptly appoint a successor Relevant Trustee or Trustees, and such successor Trustee shall comply with the applicable requirements of Section 8.11. If a Company Trustee shall resign, be removed or become incapable of acting as Company Trustee, at a time when a Declaration Event of Default shall have occurred and be continuing, the Common Securityholder(s) by Act of the Common Securityholder(s) delivered to the Company Trustee shall promptly appoint a successor Company Trustee or Company Trustees and such successor Company Trustee or Trustees shall comply with the applicable requirements of Section 8.11. If no successor Relevant Trustee shall have been so appointed by the Common Securityholder(s) or the Preferred Securityholders and accepted appointment in the manner required by Section 8.11, any Trustee may or any Securityholder who has been a Securityholder of Trust Securities for at least six months may, on behalf of himself and all others similarly situated, petition any court of competent jurisdiction for the appointment of a successor Relevant Trustee. The Preferred Trustee shall give notice of each resignation and each removal of a Trustee and each appointment of a successor Trustee to all Securityholders in the manner provided in Section 10.9 and shall give notice to the Sponsor. Each notice shall include the name of the successor Relevant Trustee and the address of its Corporate Trust Office if it is the Preferred Trustee. 49 56 Notwithstanding the foregoing or any other provision of this Declaration, in the event any Company Trustee or a Delaware Trustee who is a natural person dies or becomes, in the opinion of the Sponsor, incompetent or incapacitated, the vacancy created by such death, incompetence or incapacity may be filled by (a) the unanimous act of remaining Company Trustees if there are at least two of them or (b) otherwise by the Sponsor (with the successor in each case being a Person who satisfies the eligibility requirement for Company Trustees or Delaware Trustee, as the case may be, set forth in Section 8.7). .11 Acceptance of Appointment by Successor. In case of the appointment hereunder of a successor Trustee such successor Trustee so appointed shall execute, acknowledge and deliver to the Trust and to the retiring Trustee an instrument accepting such appointment, and thereupon the resignation or removal of the retiring Trustee shall become effective and such successor Trustee, without any further act, deed or conveyance, shall become vested with all the rights, powers, trusts and duties of the retiring Trustee; but, on the request of the Sponsor or the successor Trustee, such retiring Trustee shall, upon payment of its charges, execute and deliver an instrument transferring to such successor Trustee all the rights, powers and trusts of the retiring Trustee and if the Preferred Trustee is the resigning Trustee shall duly assign, transfer and deliver to the successor Trustee all property and money held by such retiring Preferred Trustee hereunder. In case of the appointment hereunder of a successor Relevant Trustee, the retiring Relevant Trustee and each successor Relevant Trustee with respect to the Trust Securities shall execute and deliver an amendment hereto wherein each successor Relevant Trustee shall accept such appointment and which (a) shall contain such provisions as shall be necessary or desirable to transfer and confirm to, and to vest in, each successor Relevant Trustee all the rights, powers, trusts and duties of the retiring Relevant Trustee with respect to the Trust Securities and the Trust and (b) shall add to or change any of the provisions of this Declaration as shall be necessary to provide for or facilitate the administration of the Trust by more than one Relevant Trustee, it being understood that nothing herein or in such amendment shall constitute such Relevant Trustees co-trustees and upon the execution and delivery of such amendment the resignation or removal of the retiring Relevant Trustee shall become effective to the extent provided therein and each such successor Relevant Trustee, without any further act, deed or conveyance, shall become vested with all the rights, powers, trusts and duties of the retiring Relevant Trustee; but, on request of the Trust or any successor Relevant Trustee such retiring Relevant Trustee shall duly assign, transfer and deliver to such successor Relevant Trustee all Trust Property, all proceeds thereof and money held by such retiring Relevant Trustee hereunder with respect to the Trust Securities and the Trust. Upon request of any such successor Relevant Trustee, the Trust shall execute any and all instruments for more fully and certainly vesting in and confirming to such successor Relevant Trustee all such rights, powers and trusts referred to in the first or second preceding paragraph, as the case may be. No successor Relevant Trustee shall accept its appointment unless at the time of such acceptance such successor Relevant Trustee shall be qualified and eligible under this Article. .12 Merger, Conversion, Consolidation or Succession to Business. 50 57 Any corporation, association or other entity into which the Preferred Trustee or the Delaware Trustee may be merged or converted or with which it may be consolidated, or any corporation, association or other entity resulting from any merger, conversion or consolidation to which such Relevant Trustee shall be a party, or any corporation, association or other entity succeeding to all or substantially all the corporate trust business of such Relevant Trustee, shall be the successor of such Relevant Trustee hereunder, provided such corporation, association or other entity shall be otherwise qualified and eligible under this Article, without the execution or filing of any paper or any further act on the part of any of the parties hereto. .13 Preferential Collection of Claims Against Sponsor or Trust. If and when the Preferred Trustee shall be or become a creditor of the Sponsor, any other Guarantor, the Issuer or the Trust (or any other obligor upon the Preferred Securities), the Preferred Trustee shall be subject to the provisions of the Trust Indenture Act regarding the collection of claims against the Sponsor, any other Guarantor, the Issuer or the Trust (or any such other obligor). .14 Preferred Trustee May File Proofs of Claim. In case of the pendency of any receivership, insolvency, liquidation, bankruptcy, reorganization, arrangement, adjustment, composition or other similar judicial proceeding relative to the Trust or any other obligor upon the Trust Securities or the property of the Trust or of such other obligor or their creditors, the Preferred Trustee (irrespective of whether any Distributions on the Trust Securities shall then be due and payable as therein expressed or by declaration or otherwise and irrespective of whether the Preferred Trustee shall have made any demand on the Trust for the payment of any past due Distributions) shall be entitled and empowered, to the fullest extent permitted by law, by intervention in such proceeding or otherwise: (A) to file and prove a claim for the whole amount of any Distributions owing and unpaid in respect of the Trust Securities and to file such other papers or documents as may be necessary or advisable in order to have the claims of the Preferred Trustee (including any claim for the reasonable compensation, expenses, disbursements and advances of the Preferred Trustee, its agents and counsel) and of the Holders allowed in such judicial proceeding, and (B) to collect and receive any moneys or other property payable or deliverable on any such claims and to distribute the same; and any custodian, receiver, assignee, trustee, liquidator, sequestrator or other similar official in any such judicial proceeding is hereby authorized by each Holder to make such payments to the Preferred Trustee and, in the event the Preferred Trustee shall consent to the making of such payments directly to the Holders, to pay to the Preferred Trustee any amount due it for the reasonable compensation, expenses, disbursements and advances of the Preferred Trustee, its agents and counsel, and any other amounts due the Preferred Trustee. Nothing herein contained shall be deemed to authorize the Preferred Trustee to authorize or consent to or accept or adopt on behalf of any Holder any plan of reorganization, 51 58 arrangement adjustment or compensation affecting the Trust Securities or the rights of any Holder thereof or to authorize the Preferred Trustee to vote in respect of the claim of any Holder in any such proceeding. .15 Reports by Preferred Trustee. (A) Not later than 60 days after May 15 of each year commencing with May 15, 2002, the Preferred Trustee shall transmit to all Securityholders in accordance with Section 10.9, and to the Sponsor, a brief report, to the extent required by the Trust Indenture Act, with respect to any of the following events which may have occurred within the previous 12 months (or, in the case of the initial report, the period since the Closing Date): (i) its eligibility under Section 8.7 or, in lieu thereof, if to the best of its knowledge it has continued to be eligible under said Section, a written statement to such effect; (ii) a statement that the Preferred Trustee has complied with all of its obligations under this Declaration or, if the Preferred Trustee has not complied in any material respect with such obligations, a description of such noncompliance; and (iii) any change in the property and funds in its possession as Preferred Trustee since the date of its last report and any action taken by the Preferred Trustee in the performance of its duties hereunder which it has not previously reported and which in its opinion materially affects the Trust Securities. (B) In addition, the Preferred Trustee shall transmit to Securityholders such reports concerning the Preferred Trustee and its actions under this Declaration as may be required pursuant to the Trust Indenture Act at the times and in the manner provided pursuant thereto. (C) A copy of each such report shall, at the time of such transmission to Holders, be filed by the Preferred Trustee with the Commission and with the Sponsor. .16 Reports to the Preferred Trustee. The Sponsor and the Company Trustees on behalf of the Trust shall provide to the Preferred Trustee such documents, reports and information as required by Section 314 of the Trust Indenture Act (if any) and the compliance certificate required by Section 314(a) of the Trust Indenture Act in the form, in the manner and at the times required by Section 314 of the Trust Indenture Act. .17 Evidence of Compliance with Conditions Precedent. Each of the Sponsor and the Company Trustees on behalf of the Trust shall provide to the Preferred Trustee such evidence of compliance with any conditions precedent, if any, provided for in this Declaration that relate to any of the matters set forth in Section 314 (c) of the Trust Indenture Act. Any certificate or opinion required to be given by an officer pursuant to Section 314(c)(1) of the Trust Indenture Act shall be given in the form of an Officers' Certificate. .18 Number of Trustees. 52 59 (A) The number of Trustees shall be five, provided, that the Holder of all of the Common Securities by written instrument may increase or decrease the number of Company Trustees. Subject to Section 8.7(c), the Preferred Trustee and the Delaware Trustee may be the same Person, in which case the number of Trustees may be less than five. (B) If a Trustee ceases to hold office for any reason and the number of Company Trustees is not reduced pursuant to Section 8.18(a), or if the number of Trustees is increased pursuant to Section 8.18(A), a vacancy shall occur. The vacancy shall be filled with a Trustee appointed in accordance with Section 8.10. (C) The death, resignation, retirement, removal, bankruptcy, incompetence or incapacity to perform the duties of a Trustee shall not operate to annul the Trust. Whenever a vacancy in the number of Company Trustees shall occur, until such vacancy is filled by the appointment of an Company Trustee in accordance with Section 8.10, the Company Trustees in office, regardless of their number (and notwithstanding any other provision of this Agreement), shall have all the powers granted to the Company Trustees and shall discharge all the duties imposed upon the Company Trustees by this Declaration. .19 Delegation of Power. (A) Any Company Trustee may, by power of attorney consistent with applicable law, delegate to any other natural person over the age of 21 his or her power for the purpose of executing any documents contemplated in Section 2.7(A), including any registration statement or amendment thereto filed with the Commission, or making any other governmental filing; and (B) The Company Trustees shall have power to delegate from time to time to such of their number or to the Sponsor the doing of such things and the execution of such instruments either in the name of the Trust or the names of the Company Trustees or otherwise as the Company Trustees may deem expedient, to the extent such delegation is not prohibited by applicable law or contrary to the provisions of this Declaration, as set forth herein. ARTICLE IX TERMINATION, LIQUIDATION AND MERGER .1 Termination Upon Expiration Date. Unless earlier dissolved, the Trust shall automatically dissolve on December 31, 2030 (the "Expiration Date"), at which time the Trust Property shall be distributed in accordance with Section 9.4. .2 Early Termination. The first to occur of any of the following events is an "Early Termination Event": 53 60 (A) the occurrence of a Bankruptcy Event in respect of, or the liquidation of, the Sponsor (or, in the case of a transfer pursuant to Section 5.10 hereof, the Holder of Common Securities); (B) the filing of a certificate of dissolution or its equivalent with respect to the Sponsor (or, in the case of a transfer pursuant to Section 5.10 hereof, the Holder of Common Securities); or the revocation of the charter or its equivalent of the Sponsor (or, in the case of a transfer pursuant to Section 5.10 hereof, the Holder of Common Securities) and the expiration of 90 days after the date of revocation without a reinstatement thereof; (C) the entry of a decree of judicial dissolution of the Sponsor (or, in the case of a transfer pursuant to Section 5.10 hereof, the Holder of Common Securities) or the Trust by a court of competent jurisdiction; (D) all of the Trust Securities shall have been called for redemption and the Redemption Price shall have been paid to the Holders in accordance with the terms of the Trust Securities; (E) the distribution of all of the Trust Property; (F) the written direction to the Preferred Trustee from the Sponsor (or, in the case of a transfer pursuant to Section 5.10 hereof, the Holder of Common Securities) at any time (which direction is optional and wholly within the discretion of the Sponsor) to terminate the Trust and to distribute Notes to Securityholders in exchange for the Preferred Securities; (G) the redemption of all of the Preferred Securities in connection with the redemption of all of the Notes; (H) subject to Section 9.4(e), the occurrence of a Tax Event; and (I) the occurrence of an Investment Company Event. .3 Termination. The respective obligations and responsibilities of the Trustees and the Trust created and continued hereby shall terminate upon the latest to occur of the following: (a) the distribution by the Preferred Trustee to Securityholders upon the liquidation of the Trust pursuant to Section 9.4, or upon the redemption or repurchase of all of the Trust Securities pursuant to Sections 4.2, 4.8 or 4.9 of all amounts required to be distributed hereunder upon the final payment of the Trust Securities; (b) the payment of any expenses owed by the Trust; and (c) the discharge of all administrative duties of the Company Trustees, including the performance of any tax reporting obligations with respect to the Trust or the Securityholders. .4 Liquidation. (A) If an Early Termination Event specified in Section 9.2 (with the exception of clauses (d) and (g)) occurs or upon the Expiration Date, the Trust shall be dissolved by the Preferred Trustee and the Company Trustees as expeditiously as such Trustees determine to be possible by distributing, after satisfaction of liabilities to creditors of the Trust as provided 54 61 by applicable law, to each Securityholder a Like Amount of Notes, subject to Section 9.4(d). Notice of dissolution shall be given by the Preferred Trustee by first-class mail, postage prepaid mailed not later than 30 nor more than 60 days prior to the Liquidation Date to each Holder of Trust Securities at such Holder's address appearing in the Securities Register. All notices of dissolution shall: (i) state the Liquidation Date; (ii) state that from and after the Liquidation Date, the Trust Securities will no longer be deemed to be Outstanding and any Trust Securities Certificates not surrendered for exchange will be deemed to represent a Like Amount of Notes; and (iii) provide such information with respect to the mechanics by which Holders may exchange Trust Securities Certificates for Notes, or if Section 9.4(D) applies receive a Liquidation Distribution, as the Company Trustees or the Preferred Trustee shall deem appropriate. (B) Except where Section 9.2(D), 9.2(G) or 9.4(D) applies, in order to effect the dissolution of the Trust and distribution of the Notes to Securityholders, the Preferred Trustee shall establish a record date for such distribution (which shall be not more than 45 days prior to the Liquidation Date) and, either itself acting as exchange agent or through the appointment of a separate exchange agent, shall establish such procedures as it shall deem appropriate to effect the distribution of Notes in exchange for the Outstanding Trust Securities Certificates. (C) Except where Section 9.2(D), 9.2(G) or 9.4(D) applies, after the Liquidation Date, (i) the Trust Securities will no longer be deemed to be Outstanding, (ii) certificates representing a Like Amount of Notes will be issued to holders of Trust Securities Certificates, upon surrender of such certificates to the Company Trustees or their agent for exchange, (iii) any Trust Securities Certificates not so surrendered for exchange will be deemed to represent a Like Amount of Notes, accruing interest at the rate provided for in the Notes from the last Distribution Date on which a Distribution was made on such Trust Securities Certificates until such certificates are so surrendered (and until such certificates are so surrendered, no payments of interest or principal will be made to Holders of Trust Securities Certificates with respect to such Notes) and (iv) all rights of Securityholders holding Trust Securities will cease, except the right of such Securityholders to receive Notes upon surrender of Trust Securities Certificates, provided, that Termination of the Trust shall not affect the right of the Holders of Preferred Securities to receive Liquidated Damages under the Registration Rights Agreement as and when provided therein. (D) In the event that, notwithstanding the other provisions of this Section 9.4, whether because of an order for dissolution entered by a court of competent jurisdiction or otherwise, distribution of the Notes in the manner provided herein is determined by the Preferred Trustee not to be practical, the Trust Property shall be liquidated, and the Trust shall be dissolved, wound-up or terminated, by the Preferred Trustee in such manner as the Preferred Trustee determines. In such event, on the date of the dissolution, winding-up or other termination of the Trust, Securityholders will be entitled to receive out of the assets of the Trust available for distribution to Securityholders, after satisfaction of liabilities to creditors of the Trust as provided by applicable law, an amount equal to the Liquidation Amount per Trust Security plus accumulated and unpaid Distributions thereon to the date of 55 62 payment (such amount being the "Liquidation Distribution"). If, upon any such dissolution, winding up or termination, the Liquidation Distribution can be paid only in part because the Trust has insufficient assets available to pay in full the aggregate Liquidation Distribution, then, subject to the next succeeding sentence, the amounts payable by the Trust on the Trust Securities shall be paid on a pro rata basis (based upon Liquidation Amounts). The Holder of the Common Securities will be entitled to receive Liquidation Distributions upon any such dissolution, winding-up or termination pro rata (determined as aforesaid) with Holders of Preferred Securities, except that, if a Declaration Event of Default has occurred and is continuing, the Preferred Securities shall have a priority over the Common Securities. (E) If the Early Termination Event specified in Section 9.2(H) occurs, the Trust shall be dissolved within 90 days following the occurrence of such Tax Event as provided in this Section 9.4; provided, however, that such dissolution and distribution shall be conditioned on (i) the Trustees' receipt of an Opinion of Counsel of a nationally recognized independent tax counsel experienced in such matters (a "No Recognition Opinion") which opinion may rely on published revenue rulings of the Internal Revenue Service, to the effect that the Holders of the Preferred Securities will not recognize any income, gain or loss for United States Federal income tax purposes as a result of such liquidation and distribution of Notes, and (ii) the Issuer or the Sponsor being unable to avoid such Tax Event within such 90-day period by taking some ministerial action or pursuing some other reasonable measure that will have no adverse effect on the Trust, the Issuer, the Sponsor or the Holders of the Preferred Securities and will involve no material cost. If (i) the Sponsor has received an Opinion of Counsel (a "Redemption Tax Opinion") of a nationally recognized independent United States or German tax counsel or advisors, or nationally recognized independent counsel or advisors of the jurisdiction of formation of the Issuer (initially Luxembourg), as the case may be, experienced in such matters that, as a result of a Tax Event, there is more than an insubstantial risk that the Issuer or the Sponsor would be precluded from deducting the interest on the Notes for United States Federal or German income tax purposes, or for purposes of any income tax imposed by the jurisdiction of formation of the Issuer, even after the Notes were distributed to the Holders of the Preferred Securities upon liquidation of the Trust as provided above, or (ii) the Trustees shall have been informed by such tax counsel that it cannot deliver a No Recognition Opinion, the Issuer has the right to redeem the Notes in whole, in which case all the Preferred Securities and Common Securities will be entitled to receive the Liquidation Distribution. .5 Mergers, Consolidations, Amalgamations or Replacements of the Trust. The Trust may not consolidate, amalgamate, merge with or into, or be replaced by, or convey, transfer or lease its properties and assets substantially as an entirety to any corporation or other body, except pursuant to this Section 9.5. At the request of the Sponsor, with the consent of the Company Trustees and without the consent of the Holders of Preferred Securities, the Preferred Trustee or the Delaware Trustee, the Trust may consolidate, amalgamate, merge with or into, or be replaced by or convey, transfer or lease its properties and assets substantially as an entirety to, a trust organized as such under the laws of any state of the United States of America; provided, that (i) if the Trust is not the survivor, such successor entity either (a) expressly assumes all of the obligations of the Trust with respect to the Trust Securities or (b) substitutes for the Trust Securities other securities having substantially the same terms as the Trust Securities (the "Successor Securities") so long as the Successor Securities rank the same as the Trust Securities with respect to Distributions and 56 63 payments upon liquidation, redemption and otherwise, (ii) the Sponsor expressly appoints a trustee of such successor entity possessing substantially the same powers and duties as the Preferred Trustee as the holder of the Notes, (iii) the Preferred Securities or any Successor Securities are listed or traded, or any Successor Securities will be listed upon notification of issuance, on any national securities exchange or other organization on which the Preferred Securities are then listed or traded, if any, (iv) such merger, consolidation, amalgamation, replacement, conveyance, transfer or lease does not cause the Preferred Securities (including any Successor Securities) to be downgraded by any nationally recognized statistical rating organization, (v) such merger, consolidation, amalgamation, replacement, conveyance, transfer or lease does not adversely affect the rights, preferences and privileges of the holders of the Trust Securities (including any Successor Securities) in any material respect, (vi) such successor entity has a purpose substantially identical to that of the Trust, (vii) the Sponsor has provided a guarantee to the holders of the Successor Securities with respect to such successor entity having substantially the same terms as the Trust Guarantee, (viii) prior to such merger, consolidation, amalgamation, replacement, conveyance, transfer or lease the Sponsor has received an Opinion of Counsel rendered by a law firm having a nationally recognized tax and securities practice to the effect that (x) such successor entity will be treated as a grantor trust for United States Federal income tax purposes or otherwise as an entity that is not subject to United States Federal income tax at the entity level and the assets and income of which are treated for United States Federal income tax purposes as held and derived directly by holders of interests in the entity, (y) following such merger, consolidation, amalgamation, replacement, conveyance, transfer or lease, neither the Sponsor nor such successor entity will be required to register as an investment company under the 1940 Act and (z) such merger, consolidation, amalgamation or replacement, conveyance, transfer or lease, will not adversely affect the rights, preferences, privileges and limited liability of the Preferred Securities in any material respect, and (ix) the Company Trustees shall have furnished the Delaware Trustee and the Preferred Trustee at least five Business Days' prior written notice of the consummation of such merger, consolidation, amalgamation, replacement, conveyance, transfer or lease; provided, however, that the failure to provide such notice shall not affect the validity of any such transaction. Notwithstanding the foregoing, the Trust shall not, except with the consent of holders of 100% in Liquidation Amount of the Trust Securities, consolidate, amalgamate, merge with or into, or be replaced by or convey, transfer or lease its properties and assets substantially as an entirety to any other entity or permit any other entity to consolidate, amalgamate, merge with or into, or replace it if such consolidation, amalgamation, merger, replacement, conveyance, transfer or lease would cause the Trust or the successor entity to be classified as other than a grantor trust for United States Federal income tax purposes or another entity which is not subject to United States Federal income tax at the entity level and the assets and income of which are treated for United States Federal income tax purposes as held and derived directly by holders of interests in the entity. ARTICLE X Miscellaneous Provisions .1 Limitation of Rights of Securityholders. The death or incapacity of any person having an interest, beneficial or otherwise, in Trust Securities shall not operate to terminate this Declaration, nor entitle the legal representatives or heirs of such person or any Securityholder for such person, to claim an accounting, take any action or bring any proceeding in any court for a partition or winding up 57 64 of the arrangements contemplated hereby, nor otherwise affect the rights, obligations and liabilities of the parties hereto or any of them. .2 Amendment. (A) This Declaration may be amended from time to time by the Trustees and the Sponsor, without the consent of any Securityholders, (i) to cure any ambiguity, correct or supplement any provision herein which may be inconsistent with any other provision herein, or to make any other provisions with respect to matters or questions arising under this Declaration, which shall not be inconsistent with the other provisions of this Declaration, or (ii) to modify, eliminate or add to any provisions of this Declaration to such extent as shall be necessary to ensure that the Trust will be classified for United States Federal income tax purposes as a grantor trust or other entity which is not subject to United States Federal income tax at the entity level and the assets and income of which are treated for United States Federal income tax purposes as held and derived directly by holders of interests in the entity at all times that any Trust Securities are outstanding or to ensure that the Trust will not be required to register as an investment company under the 1940 Act, or (iii) to reflect the establishment of procedures to affect an offer to repurchase Preferred Securities pursuant to Sections 4.8 or 4.9; provided, however, that in the case of clause (i) such action shall not adversely affect in any material respect the interests of any Securityholder, and any amendments of this Declaration shall become effective when notice thereof is given to the Securityholders. (B) If any proposed amendment provides for, or the Trustees or the Sponsor otherwise propose to effect, (i) any action that would adversely affect the powers, preferences or special rights of the Trust Securities, whether by way of amendment to the Declaration or otherwise or (ii) the dissolution, winding-up or termination of the Trust other than pursuant to the terms of the Declaration, then the Securityholders voting together as a single class will be entitled to vote on such amendment or proposal and such amendment or proposal shall not be effective except with the approval of at least a majority (based upon Liquidation Amounts) of the Trust Securities affected thereby; provided, that if any amendment or proposal referred to in clause (i) would adversely affect only the Preferred Securities or the Common Securities, then only the affected class will be entitled to vote on such amendment or proposal and such amendment or proposal shall not be effective except with the approval of at least a majority (based on Liquidation Amounts) of such class of Trust Securities; provided, further, that no amendment or modification may be made to the Declaration if such amendment or modification would (x) cause the Trust to be classified for purposes of United States Federal income taxation as other than a grantor trust or another entity which is not subject to United States Federal income tax at the entity level and the assets and income of which are treated for United States Federal income tax purposes as held and derived directly by holders of interest in the entity, (y) reduce or otherwise adversely affect the powers of the Trustees or (z) cause the Trust to be deemed an investment company which is required to be registered under the 1940 Act. (C) Except as provided in Section 10.2(B) and 10.2(D) hereof, any provision of this Declaration may be amended by the Trustees and the Sponsor with (i) the consent of Securityholders representing not less than a majority (based upon Liquidation Amounts) of the Trust Securities then Outstanding and (ii) receipt by the Trustees of an Opinion of Counsel to the effect that such amendment or the exercise of any power granted to the Trustees in 58 65 accordance with such amendment will not affect the Trust's status for United States Federal income tax purposes, as a grantor trust or other entity which is not subject to United States Federal income tax at the entity level and the assets and income of which are treated for United States Federal income tax purposes as held and derived directly by holders of interests in the entity, or cause the Trust to be deemed an investment company which is required to register under the 1940 Act. (D) In addition to and notwithstanding any other provision in this Declaration, without the consent of each affected Securityholder (such consent being obtained in accordance with Section 6.3 or 6.6 hereof), this Declaration may not be amended to (i) change the amount or timing of any Distribution on the Trust Securities or otherwise adversely affect the amount of any Distribution required to be made in respect of the Trust Securities as of a specified date or (ii) restrict the right of a Securityholder to institute suit for the enforcement of any such payment on or after such date; notwithstanding any other provision herein, without the unanimous consent of the Securityholders (such consent being obtained in accordance with Section 6.3 or 6.6 hereof), this paragraph (c) of this Section 10.2 may not be amended. (E) Notwithstanding any other provisions of this Declaration, no Trustee shall enter into or consent to any amendment to this Declaration which would cause the Trust to fail or cease to qualify for the exemption from status of an investment company under the 1940 Act or fail or cease to be classified for purposes of United States Federal income taxation as other than a grantor trust or another entity which is not subject to United States Federal income tax at the entity level and the assets and income of which are treated for United States Federal income tax purposes as held and derived directly by holders of interests in the entity. (F) Notwithstanding anything in this Declaration to the contrary, without the consent of the Sponsor or the Issuer, this Declaration may not be amended in a manner which imposes any additional obligation on the Sponsor or the Issuer, as the case may be. (G) In the event that any amendment to this Declaration is made, the Company Trustees shall promptly provide to the Sponsor a copy of such amendment. (H) Neither the Preferred Trustee nor the Delaware Trustee shall be required to amend this Declaration in any manner which affects its own rights, duties or immunities under this Declaration. The Preferred Trustee and the Delaware Trustee shall be entitled to receive an Opinion of Counsel and an Officers' Certificate stating that any amendment to this Declaration is in compliance with this Declaration. .3 Separability. In case any provision in this Declaration or in the Trust Securities Certificates shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby. .4 Governing Law. THIS DECLARATION AND THE RIGHTS AND OBLIGATIONS OF EACH OF THE SECURITYHOLDERS, THE TRUST AND THE TRUSTEES WITH RESPECT TO THIS DECLARATION AND THE TRUST SECURITIES SHALL BE 59 66 CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF DELAWARE WITHOUT GIVING EFFECT TO PRINCIPLES OF CONFLICT OF LAWS. .5 Submission to Jurisdiction. The Sponsor hereby appoints Fresenius Medical Care Holdings, Inc. ("FMCH") c/o CT Corporation System through its office at 1633 Broadway, New York, New York 10019 as its authorized agent (the "Authorized Agent") upon which process may be served in any legal action or proceeding against it with respect to its obligations under this Declaration or the Trust Securities instituted in any federal or state court in the Borough of Manhattan, The City of New York, by any Trustee or the Holder of any Trust Securities and agrees that service of process upon such authorized agent, together with written notice of said service to the Sponsor by the person serving the same, addressed as provided in Section 10.09, shall be deemed in every respect effective service of process upon the Sponsor in any such legal action or proceeding, and the Sponsor hereby irrevocably submits to the non-exclusive jurisdiction of any such court in respect of any such legal action or proceeding. Such appointment shall be irrevocable until the Trust has been terminated in accordance with Article IX hereof. Notwithstanding the foregoing, the Sponsor reserves the right to appoint another Person located or with an office in the Borough of Manhattan, The City of New York, selected in its discretion, as a successor Authorized Agent, and upon acceptance of such appointment by such a successor the appointment of the prior Authorized Agent shall terminate. If for any reason FMCH or CT Corporation System ceases to be able to act as the Authorized Agent or to have an address in the Borough of Manhattan, The City of New York, the Sponsor will appoint a successor Authorized Agent in accordance with the preceding sentence. The Sponsor further agrees to take any and all action, including the filing of any and all documents and instruments as may be necessary to continue such designation and appointment of such agent in full force and effect until the Trust has been terminated in accordance with Article IX hereof. Service of process upon the Authorized Agent addressed to it at the address set forth above, as such address may be changed within the Borough of Manhattan, The City of New York by notice given by the Authorized Agent to the Trustees, together with written notice of such service mailed or delivered to the Sponsor shall be deemed, in every respect, effective service of process on the Sponsor. .6 Payments Due on Non-Business Day. If the date fixed for any payment on any Trust Security shall be a day that is not a Business Day, then such payment need not be made on such date but may be made on the next succeeding day that is a Business Day (except as otherwise provided in Sections 4.1(a) and 4.2(d)), with the same force and effect as though made on the date fixed for such payment, and no interest shall accrue thereon for the period after such date. .7 Successors. This Declaration shall be binding upon and shall inure to the benefit of any successor to the Sponsor, the Trust or the Relevant Trustee, including any successor by operation of law. Except in connection with a consolidation, merger or sale involving the Sponsor that is permitted under Article VIII of the Indenture and pursuant to which the assignee agrees in writing to perform the Sponsor's obligations hereunder, the Sponsor shall not assign its obligations hereunder. 60 67 .8 Headings. The Article and Section headings are for convenience only and shall not affect the construction of this Declaration. .9 Reports, Notices and Demands. Any report, notice, demand or other communication which by any provision of this Declaration is required or permitted to be given or served to or upon any Securityholder or the Sponsor may be given or served in writing by deposit thereof, first-class postage prepaid, in the United States mail, hand delivery or facsimile transmission, in each case, addressed, (a) in the case of a Preferred Securityholder, to such Preferred Securityholder as such Securityholder's name and address may appear on the Securities Register; (b) in the case of the Common Securityholder(s) or the Sponsor, to Fresenius Medical Care AG, Else-Kroner Str. 1, 61346 Bad Homburg v.d.H., Germany, Attn: Chief Executive Officer, facsimile no.: 011-49-6172-609-2103, and (c) in the case of the Issuer, to FMC Trust Finance S.a.r.l., Luxembourg-III, 7A, rue Robert Stumper, L-2557 Luxembourg with a copy to the Sponsor. Any notice to Preferred Securityholders shall also be given to such Owners as have, within two years preceding the giving of such notice, filed their names and addresses with the Preferred Trustee for that purpose. Such notice, demand or other communication to or upon a Securityholder shall be deemed to have been sufficiently given or made, for all purposes, upon hand delivery, mailing or transmission. Any notice, demand or other communication which by any provision of this Declaration is required or permitted to be given or served to or upon the Trust, the Preferred Trustee, the Delaware Trustee or the Company Trustees shall be given in writing by deposit thereof, first-class postage prepaid, in the United States mail, hand delivery or facsimile transmission, in each case, addressed (until another address is published by the Trust) as follows: (a) with respect to the Preferred Trustee to State Street Bank and Trust Company, 225 Asylum Street, Hartford, Connecticut 06103, Attention: Corporate Trust Administration; (b) with respect to the Delaware Trustee, to First Union Trust Company, National Association, One Rodney Square, 920 King Street, Wilmington, Delaware 19801, Attention: Corporate Trust Administration; (c) with respect to the Company Trustees, to them at the address above for notices to the Sponsor, marked "Attention: Company Trustees of Fresenius Medical Care Capital Trust V;" (d) with respect to the Paying Agent to State Street Bank and Trust Company, 225 Asylum Street, Hartford, Connecticut 06103, Attention: Corporate Trust Administration, with a copy to each of (1) Deutsche Bank AG London, Winchester House, 1 Great Winchester Street, London EC2N 2DB, Attention: Client Services, Corporate Trust and Agency Services and (2) Banque Generale du Luxembourg, 50 Avenue J.F. Kennedy, L-2951 Luxembourg. Such notice, demand or other communication to or upon the Trust or the Preferred Trustee shall be deemed to have been sufficiently given or made only upon actual receipt of the writing by the Trust or the Preferred Trustee. All notices regarding the Preferred Securities shall be published in the Luxemburger Wort or in such other publication as required by the rules of the Luxembourg Stock Exchange. Any notice will become effective for all purposes on the date of its publication. There may (provided that, in the case of Preferred Securities listed on the Luxembourg Stock Exchange, the rules of the Luxembourg Stock Exchange so permit) be substituted for such publication in such newspaper the delivery of the relevant notice to the applicable clearing system for communication by it to the Securityholders. Any such notice 61 68 shall be deemed to have been given to the Securityholders on the seventh day after the day on which the said notice was given to all applicable clearing systems. The Company Trustees shall be responsible for compliance with this paragraph and shall provide directions to the Preferred Trustee in connection therewith. .10 Agreement Not to Petition. Each of the Trustees, the Sponsor, and the Issuer agree for the benefit of the Securityholders that, until at least one year and one day after the Trust has been terminated in accordance with Article IX, they shall not file, or join in the filing of, a petition against the Trust under any bankruptcy, insolvency, reorganization or other similar law (including, without limitation, the United States Bankruptcy Code) (collectively "Bankruptcy Laws") or otherwise join in the commencement of any proceeding against the Trust under any Bankruptcy Law. In the event the Sponsor takes action in violation of this Section 10.10, the Preferred Trustee agrees, for the benefit of Securityholders, that at the expense of the Sponsor, it shall file an answer with the bankruptcy court or otherwise properly contest the filing of such petition by the Sponsor against the Trust or the commencement of such action and raise the defense that the Sponsor has agreed in writing not to take such action and should be stopped and precluded therefrom and such other defenses, if any, as counsel for the Trustee or the Trust may assert. The provisions of this Section 10.10 shall survive the termination of this Declaration. .11 Trust Indenture Act; Conflict with Trust Indenture Act. (A) This Declaration shall be subject to and governed by the Trust Indenture Act upon the consummation of the Exchange Offer pursuant to the Registration Rights Agreement. Until such Exchange Offer, the Trust Indenture Act shall not apply to this Declaration, except to the extent otherwise expressly provided herein. (B) The Preferred Trustee shall be the only Trustee which is a trustee for the purposes of the Trust Indenture Act. (C) If any provision hereof limits, qualifies or conflicts with another provision hereof which is required to be included in this Declaration by any of the provisions of the Trust Indenture Act, such required provision shall control. If any provision of this Declaration modifies or excludes any provision of the Trust Indenture Act which may be so modified or excluded, the latter provision shall be deemed to apply to this Declaration as so modified or excluded, as the case may be. (D) The application of the Trust Indenture Act to this Declaration shall not affect the nature of the Securities as equity securities representing undivided beneficial interests in the assets of the Trust. .12 Acceptance of Terms of Declaration, Trust Guarantee and Indenture. THE RECEIPT AND ACCEPTANCE OF A TRUST SECURITY OR ANY INTEREST THEREIN BY OR ON BEHALF OF A SECURITYHOLDER OR ANY BENEFICIAL OWNER, WITHOUT ANY SIGNATURE OR FURTHER MANIFESTATION OF ASSENT, SHALL CONSTITUTE THE UNCONDITIONAL ACCEPTANCE BY THE SECURITYHOLDER AND ALL OTHERS HAVING A 62 69 BENEFICIAL INTEREST IN SUCH TRUST SECURITY OF ALL THE TERMS AND PROVISIONS OF THIS DECLARATION, THE GUARANTEE AGREEMENT AND THE INDENTURE, AND AGREEMENT TO THE SUBORDINATION PROVISIONS AND OTHER TERMS OF THE TRUST GUARANTEE AND THE INDENTURE, AND SHALL CONSTITUTE THE AGREEMENT OF THE TRUST, SUCH SECURITYHOLDER AND SUCH OTHERS THAT THE TERMS AND PROVISIONS OF THIS DECLARATION SHALL BE BINDING, OPERATIVE AND EFFECTIVE AS BETWEEN THE TRUST AND SUCH SECURITYHOLDER AND SUCH OTHERS. .13 Liquidated Damages Under Registration Rights Agreement. Under the Registration Rights Agreement, in the event that (i) certain registration statements under the Securities Act are not filed on or prior to the applicable deadline set forth in the Registration Rights Agreement, (ii) any such registration statement, if filed, is not declared effective on or prior to the applicable deadline set forth in the Registration Rights Agreement, or (iii) the Exchange Offer has not been "Consummated" (as defined in the Registration Rights Agreement) or upon the occurrence of certain other conditions, then additional payments in the form of Liquidated Damages shall accrue at the rate per Euro 1,000 Liquidation Amount of Preferred Securities set forth in the Registration Rights Agreement. Upon filing or effectiveness of any such registration statement, the Consummation of the Exchange Offer or upon cessation of any such other conditions, as the case may be, the obligation to pay such Liquidated Damages with respect to the event in question shall cease. .14 Counterparts. This Declaration may be executed in any number of counterparts, each of which so executed shall be deemed to be an original, but all such counterparts shall together constitute but one and the same instrument. 63 70 FRESENIUS MEDICAL CARE AG, as Sponsor By: /s/ Ben Lipps ------------------------------------ Name: Ben Lipps Title: Chief Executive Officer By: /s/ Rainer Runte ------------------------------------ Name: Rainer Runte Title: General Counsel and Sr. VP /s/ Ben Lipps ---------------------------------------- Ben Lipps, as Company Trustee /s/ Karl-Dieter Schwab ---------------------------------------- Dr. Karl-Dieter Schwab, as Company Trustee /s/ Josef Dinger ---------------------------------------- Josef Dinger, as Company Trustee FMC TRUST FINANCE S.a.r.l. LUXEMBOURG-III By: /s/ Gabriele Dux ------------------------------------ Name: Gabriele Dux Title: Sole Manager 64 71 STATE STREET BANK AND TRUST COMPANY, as Preferred Trustee By: /s/ Elizabeth C. Hammer ------------------------------------ Name: Elizabeth C. Hammer Title: Vice President FIRST UNION TRUST COMPANY, NATIONAL ASSOCIATION, as Delaware Trustee By: /s/ Rita Marie Ritrovato ------------------------------------ Name: Rita Marie Ritrovato Title: Trust Officer 65 72 EXHIBIT A FORM OF CERTIFICATE OF TRUST AS FILED JUNE 1, 2001 CERTIFICATE OF TRUST OF FRESENIUS MEDICAL CARE CAPITAL TRUST V This Certificate of Trust of Fresenius Medical Care Capital Trust V (the "Trust") is being duly executed and filed by the undersigned, as trustees, to form a business trust under the Delaware Business Trust Act (12 Del. C. (Section) 3801 et seq.). 1. Name. The name of the business trust formed hereby is Fresenius Medical Care Capital Trust V. 2. Delaware Trustee. The name and business address of the trustee of the Trust with a principal place of business in the State of Delaware are: First Union Trust Company, National Association, One Rodney Square, 1st Floor, 920 King Street, Delaware 19801. In Witness Whereof, the undersigned, being the Trustees of the Trust, have executed this Certificate of. FIRST UNION TRUST COMPANY, NATIONAL ASSOCIATION, not in its individual capacity but s olely as Trustee By: /s/ Anita M. Roselli ---------------------- Name: Anita M. Roselli Title: Trust Officer /s/ Ben J. Lipps --------------------------- Dr. Ben J. Lipps, as Company Trustee 66 73 EXHIBIT B [INTENTIONALLY LEFT BLANK] 67 74 EXHIBIT C [FORM OF COMMON SECURITIES CERTIFICATE] THIS CERTIFICATE IS NOT TRANSFERABLE EXCEPT AS PROVIDED IN SECTION 5.10 OF THE DECLARATION. THIS COMMON SECURITY HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S. PERSONS, EXCEPT AS SET FORTH IN THE SECOND SENTENCE HEREOF. BY ITS ACQUISITION HEREOF OR OF A BENEFICIAL INTEREST HEREIN, THE HOLDER (1) REPRESENTS THAT (A) IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) (A "QIB") OR (B) IT IS ACQUIRING THIS COMMON SECURITY IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH REGULATION S UNDER THE SECURITIES ACT, (2) AGREES THAT IT WILL NOT RESELL OR OTHERWISE TRANSFER THIS COMMON SECURITY EXCEPT (A) TO THE TRUST OR ANY OF ITS SUBSIDIARIES, (B) TO A PERSON WHOM THE SELLER REASONABLY BELIEVES IS A QIB PURCHASING FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QIB IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, (C) IN AN OFFSHORE TRANSACTION MEETING THE REQUIREMENTS OF RULE 903 OR 904 OF THE SECURITIES ACT, (D) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144 UNDER THE SECURITIES ACT, (E) IN ACCORDANCE WITH ANOTHER EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT (AND BASED UPON AN OPINION OF COUNSEL ACCEPTABLE TO THE TRUST) OR (F) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT AND, IN EACH CASE, IN ACCORDANCE WITH THE APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR ANY OTHER APPLICABLE JURISDICTION AND (3) AGREES THAT IT WILL DELIVER TO EACH PERSON TO WHOM THIS COMMON SECURITY OR AN INTEREST HEREIN IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. AS USED HEREIN, THE TERMS "OFFSHORE TRANSACTION" AND "UNITED STATES" HAVE THE MEANINGS GIVEN TO THEM BY RULE 902 OF REGULATION S UNDER THE SECURITIES ACT. 68 75 CERTIFICATE NUMBER NUMBER OF COMMON SECURITIES C-1 THREE HUNDRED (300) CERTIFICATE EVIDENCING COMMON SECURITIES OF FRESENIUS MEDICAL CARE CAPITAL TRUST V COMMON SECURITIES (LIQUIDATION AMOUNT Euro 1,000 PER COMMON SECURITY) Fresenius Medical Care Capital Trust V, a statutory business trust formed under the laws of the State of Delaware (the "Trust"), hereby certifies that Fresenius Medical Care AG (the "Holder") is the registered owner of Three Hundred (300) common securities of the Trust representing beneficial interests of the Trust and designated the 7 3/8% Common Securities (liquidation amount Euro 1,000 per Common Security) (the "Common Securities"). Except as provided in Section 5.10 of the Declaration (as defined below) the Common Securities are not transferable and any attempted transfer hereof shall be void. The designations, rights, privileges, restrictions, preferences and other terms and provisions of the Common Securities are set forth in, and this certificate and the Common Securities represented hereby are issued and shall in all respects be subject to the terms and provisions of, the Amended and Restated Declaration of Trust of Fresenius Medical Care Capital Trust V dated as of June 15, 2001, as the same may be amended from time to time (the "Declaration") including the designation of the terms of the Common Securities as set forth therein. Capitalized terms used herein and not otherwise defined have the meanings assigned to them by the Declaration. The Holder is entitled to the benefits of the Guarantee Agreement with respect to the Common Securities entered into by Fresenius Medical Care AG, a corporation organized under the laws of Germany, and the Trust, dated as of June 15, 2001, to the extent provided therein. The Trust will furnish a copy of the Declaration to the Holder without charge upon written request to the Trust at its principal place of business or registered office. Upon receipt of this certificate, the Holder is bound by the Declaration and is entitled to the benefits thereunder. 69 76 IN WITNESS WHEREOF, one of the Company Trustees of the Trust has executed this certificate this 15th day of June, 2001. FRESENIUS MEDICAL CARE CAPITAL TRUST V Name: ------------------------------ Company Trustee 70 77 REVERSE OF SECURITY Distributions payable on each Common Security will be fixed at a rate per annum of 7 3/8% (the "Distribution Rate") of the Liquidation Amount of Euro 1,000 per Common Security, such rate being the rate of interest payable on the Notes held by the Preferred Trustee. Distributions in arrears for more than one quarter (and interest thereon) will bear interest thereon compounded quarterly at the Distribution Rate (to the extent permitted by applicable law). The term "Distributions," as used herein, includes such cash distribution and any such interest payable unless otherwise stated. A Distribution is payable only to the extent that payments are made in respect of the Notes held by the Preferred Trustee and to the extent the Preferred Trustee has funds on hand in the Payment Account legally available therefor. Distributions on the Common Securities will accumulate from the most recent date to which Distributions have been paid or, if no Distributions have been paid, from June [15], 2001, and will be payable quarterly in arrears on March 15, June 15, September 15 and December 15 of each year, commencing September 15, 2001. Distributions will be computed on the basis of a 360-day year constituting twelve 30-day months and, for any period of less than a full calendar month, the number of days elapsed in such month. The Company Trustees shall, at the direction of all of the Holder(s) of the Common Securities, at any time terminate the Trust and, after satisfaction of liabilities to creditors of the Trust, cause the Notes to be distributed by the Preferred Trustee to the Holders of the Common Securities in liquidation of the Trust as provided in the Declaration. The Common Securities shall be redeemable as provided in the Declaration. 71 78 EXHIBIT D [FORM OF EXPENSE AGREEMENT] AGREEMENT AS TO EXPENSES AND LIABILITIES AGREEMENT dated as of June 15, 2001, between Fresenius Medical Care AG, a corporation organized under the laws of Germany (the "Company"), and Fresenius Medical Care Capital Trust V, a Delaware business trust (the "Trust"). WHEREAS, the Trust intends to issue its Common Securities (the "Common Securities") to the Company and receive 7 3/8% Senior Subordinated Notes ("Notes"; such term, for the purposes of this Agreement shall include, where applicable the Exchange Securities as such term is defined in the Indenture) from FMC Trust Finance S.a.r.l. Luxembourg-III (the "Issuer") and to issue and sell 7 3/8% Preferred Securities (the "Preferred Securities"; such term, for the purposes of this Agreement, shall include, when applicable, the Exchange Preferred Securities) with such powers, preferences and special rights and restrictions as are set forth in the Amended and Restated Declaration of Trust dated as of June 15, 2001 as the same may be amended from time to time (the "Declaration"); WHEREAS, the Company will directly or indirectly own all of the Common Securities of the Trust and all of the Capital Stock (as defined in the Indenture) of the Issuer, which will issue the Notes; WHEREAS, capitalized terms used but not defined herein have the meanings set forth in the Declaration. Now, THEREFORE, in consideration of the purchase by each Holder of the Preferred Securities, which purchase the Company hereby agrees shall benefit the Company and which purchase the Company acknowledges will be made in reliance upon the execution and delivery of this Agreement, the Company and Trust hereby agree as follows: ARTICLE I SECTION 1. Guarantee by the Company. Subject to the terms and conditions hereof, the Company hereby irrevocably and unconditionally guarantees, on a senior subordinated basis (to the extent and in the manner set forth in the Indenture with respect to the Notes), to each person or entity to whom the Trust is now or hereafter becomes indebted or liable (the "Beneficiaries") the full payment, when and as due, of any and all Obligations (as hereinafter defined) to such Beneficiaries. As used herein, "Obligations" means any costs, expenses or liabilities of the Trust (including, without limitation, any and all taxes, costs and expenses, such as underwriting discounts and commissions, payable with respect to the issuance of the Preferred Securities), other than obligations of the Trust to pay to holders of any Preferred Securities or other similar interests in the Trust the amounts due such holders pursuant to the terms of the Preferred Securities or such other similar interests, as the case may be, and United States withholding 72 79 taxes. This Agreement is intended to be for the benefit of, and to be enforceable by, all such Beneficiaries, whether or not such Beneficiaries have received notice hereof. SECTION 1.2. Term of Agreement. This Agreement shall terminate and be of no further force and effect upon the later of (a) the date on which full payment has been made of all amounts payable to all Holders of all the Preferred Securities (whether upon redemption, liquidation, exchange or otherwise) and (b) the date on which there are no Beneficiaries remaining; provided, however, that this Agreement shall continue to be effective or shall be reinstated, as the case may be, if at any time any Holder of the Preferred Securities or any Beneficiary must restore payment of any sums paid under the Preferred Securities, under any Obligation, under the Guarantee Agreement dated the date hereof by the Company and State Street Bank and Trust Company as guarantee trustee or under this Agreement for any reason whatsoever. This Agreement is continuing, irrevocable, unconditional and absolute. SECTION 1.3. Waiver of Notice. The Company hereby waives notice of acceptance of this Agreement and of any Obligation to which it applies or may apply, and the Company hereby waives presentment, demand for payment, protest, notice of nonpayment, notice of dishonor, notice of redemption and all other notices and demands. SECTION 1.4. No Impairment. The obligations, covenants, agreements and duties of the Company under this Agreement shall in no way be affected or impaired by reason of the happening from time to time of any of the following: (a) the extension of time for the payment by the Trust of all or any portion of the Obligations or for the performance of any other obligation under, arising out of, or in connection with, the Obligations; (b) any failure, omission, delay or lack of diligence on the part of the Beneficiaries to enforce, assert or exercise any right, privilege, power or remedy conferred on the Beneficiaries with respect to the Obligations or any action on the part of the Trust granting indulgence or extension of any kind; or (c) the voluntary or involuntary liquidation, dissolution, sale of any collateral, receivership, insolvency, bankruptcy, assignment for the benefit of creditors, reorganization, arrangement, composition or readjustment of debt of, or other similar proceedings affecting, the Trust or any of the assets of the Trust. There shall be no obligation of the Beneficiaries to give notice to, or obtain the consent of, the Company with respect to the happening of any of the foregoing. SECTION 1.5. Enforcement. 73 80 A Beneficiary may enforce this Agreement directly against the Company and the Company waives any right or remedy to require that any action be brought against the Trust or any other person or entity before proceeding against the Company. SECTION 1.6. Subrogation. The Company shall be subrogated to all (if any) rights of the Trust in respect of any amounts paid to the Beneficiaries by the Company under this Agreement; provided, however, that the Company shall not (except to the extent required by mandatory provisions of law) be entitled to enforce or exercise any rights which it may acquire by way of subrogation or any indemnity, reimbursement or other agreement, in all cases as a result of payment under this Agreement, if, at the time of any such payment, any amounts are due and unpaid under this Agreement. ARTICLE II SECTION 2.1. Assignment. Except in connection with a consolidation, merger or sale involving the Company that is permitted under Article VIII of the Indenture, this Agreement may not be assigned by either party hereto without the consent of the other, and any purported assignment without such consent shall be void. SECTION 2.2. Binding Effect. All guarantees and agreements contained in this Agreement shall bind the successors, assigns, receivers, trustees and representatives of the Company and shall inure to the benefit of the Beneficiaries. SECTION 2.3. Amendment. So long as there remains any Beneficiary or any Preferred Securities are outstanding, this Agreement shall not be modified or amended in any manner adverse to such Beneficiary or to the Holders of the Preferred Securities without the consent of a Majority in Liquidation Amount of the holders of Preferred Securities. SECTION 2.4. Notices. Any notice, request or other communication required or permitted to be given hereunder shall be given in writing by delivering the same against receipt therefor by facsimile transmission (confirmed by mail), telex or by registered or certified mail, addressed as follows (and if so given, shall be deemed given when mailed or upon receipt of an answer-back, if sent by telex): Fresenius Medical Care Capital Trust V c/o State Street Bank and Trust Company 225 Asylum Street Hartford, Connecticut 06103 Facsimile No.: 860-244-1889 Attention: Corporate Trust Administration Fresenius Medical Care AG 74 81 Else-Kroner Str. 1, 61346 Bad Homburg v.d.H., Germany Facsimile No.: 011-49-6172-609-2103 Attention: Chief Financial Officer SECTION 2.5. Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT GIVING EFFECT TO PRINCIPLES OF CONFLICT OF LAWS. SECTION 2.6. Submission to Jurisdiction. The Company hereby appoints Fresenius Medical Care Holdings, Inc. ("FMCH") c/o CT Corporation System acting through its office at 1633 Broadway, New York, New York 10019 as its authorized agent (the "Authorized Agent") upon which process may be served in any legal action or proceeding against it with respect to its obligations under this Agreement instituted in any federal or state court in the Borough of Manhattan, The City of New York, by the Trust or a Beneficiary and agrees that service of process upon such authorized agent, together with written notice of said service to the Company by the person serving the same, addressed as provided in Section 2.4, shall be deemed in every respect effective service of process upon the Company in any such legal action or proceeding, and the Company hereby irrevocably submits to the non-exclusive jurisdiction of any such court in respect of any such legal action or proceeding. Such appointment shall be irrevocable until this Agreement has been terminated in accordance with Section 1.3 hereof. Notwithstanding the foregoing, the Company reserves the right to appoint another Person located or with an office in the Borough of Manhattan, The City of New York, selected in its discretion, as a successor Authorized Agent, and upon acceptance of such appointment by such a successor the appointment of the prior Authorized Agent shall terminate. If for any reason FMCH or CT Corporation System ceases to be able to act as the Authorized Agent or to have an address in the Borough of Manhattan, The City of New York, the Company will appoint a successor Authorized Agent in accordance with the preceding sentence. The Company further agrees to take any and all action, including the filing of any and all documents and instruments as may be necessary to continue such designation and appointment of such agent in full force and effect until this Agreement has been terminated in accordance with Section 1.3 hereof. Service of process upon the Authorized Agent addressed to it at the address set forth above, as such address may be changed within the Borough of Manhattan, The City of New York by notice given by the Authorized Agent to the Trustees, together with written notice of such service mailed or delivered to the Company shall be deemed, in every respect, effective service of process on the Company. 75 82 THIS AGREEMENT is executed as of the day and year first above written. FRESENIUS MEDICAL CARE AG By: ------------------------------------- Name: Title: By: ------------------------------------- Name: Title: FRESENIUS MEDICAL CARE CAPITAL TRUST V By: ------------------------------------- Name: Company Trustee 76 83 EXHIBIT E-1 [FORM OF INITIAL PREFERRED SECURITIES CERTIFICATE] THIS PREFERRED SECURITY HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S. PERSONS, EXCEPT AS SET FORTH IN THE SECOND SENTENCE HEREOF. BY ITS ACQUISITION HEREOF OR OF A BENEFICIAL INTEREST HEREIN, THE HOLDER (1) REPRESENTS THAT (A) IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) (A "QIB") OR (B) IT IS ACQUIRING THIS PREFERRED SECURITY IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH REGULATION S UNDER THE SECURITIES ACT, (2) AGREES THAT IT WILL NOT RESELL OR OTHERWISE TRANSFER THIS PREFERRED SECURITY EXCEPT (A) TO THE TRUST OR ANY OF ITS SUBSIDIARIES, (B) TO A PERSON WHOM THE SELLER REASONABLY BELIEVES IS A QIB PURCHASING FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QIB IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, (C) IN AN OFFSHORE TRANSACTION MEETING THE REQUIREMENTS OF RULE 903 OR 904 OF THE SECURITIES ACT, (D) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144 UNDER THE SECURITIES ACT, (E) IN ACCORDANCE WITH ANOTHER EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT (AND BASED UPON AN OPINION OF COUNSEL ACCEPTABLE TO THE TRUST) OR (F) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT AND, IN EACH CASE, IN ACCORDANCE WITH THE APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR ANY OTHER APPLICABLE JURISDICTION AND (3) AGREES THAT IT WILL DELIVER TO EACH PERSON TO WHOM THIS PREFERRED SECURITY OR AN INTEREST HEREIN IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. AS USED HEREIN, THE TERMS "OFFSHORE TRANSACTION" AND "UNITED STATES" HAVE THE MEANINGS GIVEN TO THEM BY RULE 902 OF REGULATION S UNDER THE SECURITIES ACT. UNTIL THE PREFERRED SECURITIES ARE REGISTERED PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT FILED UNDER THE SECURITIES ACT, PREFERRED SECURITIES MAY ONLY BE TRANSFERRED IN MINIMUM BLOCKS OF Euro 100,000 AGGREGATE LIQUIDATION AMOUNT. [TO BE INSERTED ON FORM OF GLOBAL PREFERRED SECURITY - UNLESS THIS PREFERRED SECURITY IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF DEUTSCHE BANK AG LONDON AS THE COMMON DEPOSITARY FOR MORGAN GUARANTY TRUST COMPANY OF NEW YORK, BRUSSELS OFFICE, OPERATOR OF THE EUROCLEAR SYSTEM AND CLEARSTREAM BANKING, SOCIETE ANONYME (THE "COMMON DEPOSITARY"), TO FRESENIUS MEDICAL CARE CAPITAL TRUST V OR ITS 77 84 AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE, OR PAYMENT, AND ANY PREFERRED SECURITY ISSUED IS REGISTERED IN THE NAME OF BT GLOBENET NOMINEES LIMITED, OR IN SUCH OTHER NOMINEE NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE COMMON DEPOSITARY (AND ANY PAYMENT IS MADE TO BT GLOBENET NOMINEES LIMITED OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE COMMON DEPOSITARY), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL IN AS MUCH AS THE REGISTERED OWNER HEREOF, BT GLOBENET NOMINEES LIMITED HAS AN INTEREST HEREIN. TRANSFERS OF THIS PREFERRED SECURITY SHALL BE LIMITED TO TRANSFERS IN WHOLE, BUT NOT IN PART, TO NOMINEES OF THE COMMON DEPOSITARY OR TO A SUCCESSOR THEREOF OR SUCH SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF THIS PREFERRED SECURITY SHALL BE LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN THE AMENDED AND RESTATED DECLARATION OF TRUST REFERRED TO ON THE REVERSE HEREOF.] [TO BE INSERTED ON FORM OF GLOBAL TEMPORARY REGULATION S PREFERRED SECURITY CERTIFICATE. - THIS CERTIFICATE IS A TEMPORARY REGULATION S CERTIFICATE WITHIN THE MEANING OF THE DECLARATION REFERRED TO HEREIN, AND NO PAYMENTS WILL BE MADE IN RESPECT OF ANY PORTION HEREOF UNLESS AND UNTIL SUCH PORTION HAS BEEN EXCHANGED FOR A PORTION OF A PERMANENT REGULATION S CERTIFICATE, UPON CERTIFICATION OF NON-U.S. BENEFICIAL OWNERSHIP AFTER THE DISTRIBUTION COMPLIANCE PERIOD AS PROVIDED IN THE DECLARATION.] 78 85 CERTIFICATE NUMBER NUMBER OF PREFERRED SECURITIES ISIN - OR COMMON CODE - CERTIFICATE EVIDENCING PREFERRED SECURITIES OF FRESENIUS MEDICAL CARE CAPITAL TRUST V 7 3/8% TRUST PREFERRED SECURITIES (LIQUIDATION AMOUNT Euro 1,000 PER PREFERRED SECURITY) Fresenius Medical Care Capital Trust V, a statutory business trust formed under the laws of the State of Delaware (the "Trust"), hereby certifies that BT Globenet Nominees Limited (the "Holder") is the registered owner of _______________(___) preferred securities of the Trust representing an undivided beneficial interest in the assets of the Trust and designated the Fresenius Medical Care Capital Trust V 7 3/8% Trust Preferred Securities, (liquidation amount Euro 1,000 per Preferred Security) (the "Preferred Securities"). The Preferred Securities are transferable on the books and records of the Trust, in person or by a duly authorized attorney, upon surrender of this certificate duly endorsed and in proper form for transfer as provided in Section 5.4 of the Declaration (as defined below). The designations, rights, privileges, restrictions, preferences and other terms and provisions of the Preferred Securities are set forth in, and this certificate and the Preferred Securities represented hereby are issued and shall in all respects be subject to the terms and provisions of, the Amended and Restated Declaration of Trust of Fresenius Medical Care Capital Trust V dated as of June 15, 2001, as the same may be amended from time to time (the "Declaration") including the designation of the terms of Preferred Securities as set forth therein. Capitalized terms used herein and not otherwise defined have the meanings assigned to them by the Declaration. The Holder is entitled to the benefits of the Guarantee Agreement entered into by Fresenius Medical Care AG, a corporation organized under the laws of Germany, and State Street Bank and Trust Company, as guarantee trustee, dated as of June 15, 2001 (the "Trust Guarantee"), to the extent provided therein. The Trust will furnish a copy of the Declaration and the Trust Guarantee to the Holder without charge upon written request to the Trust at its principal place of business or registered office. Upon receipt of this certificate, the Holder is bound by the Declaration and is entitled to the benefits thereunder. 79 86 In Witness Whereof, one of the Company Trustees of the Trust has executed this certificate this 15th day of June, 2001. Fresenius Medical Care Capital Trust V Name: ----------------------------------- Company Trustee PREFERRED TRUSTEE'S CERTIFICATE OF AUTHENTICATION This is one of the Preferred Securities referred to in the within-mentioned Declaration. State Street Bank and Trust Company, as Preferred Trustee By: ----------------------------------- Authorized Signatory 80 87 REVERSE OF SECURITY Distributions payable on each Preferred Security will be fixed at a rate per annum of 7 3/8% (the "Distribution Rate") of the Liquidation Amount of Euro 1,000 per Preferred Security, such rate being the rate of interest payable on the Notes held by the Preferred Trustee. Distributions in arrears for more than one quarter (and interest thereon) will bear interest thereon compounded quarterly at the Distribution Rate (to the extent permitted by applicable law). The term "Distributions," as used herein, includes such cash distribution and any such interest payable unless otherwise stated. A Distribution is payable only to the extent that payments are made in respect of the Notes held by the Preferred Trustee and to the extent the Preferred Trustee has funds on hand in the Payment Account legally available therefor. Distributions on the Preferred Securities will accumulate from the most recent date to which Distributions have been paid or, if no Distributions have been paid, from June 15, 2001 and will be payable quarterly in arrears on March 15, June 15, September 15 and December 15, of each year, commencing on September 15, 2001. Distributions will be computed on the basis of a 360-day year constituting twelve 30-day months and, for any period of less than a full calendar month, the number of days elapsed in such month. Under the terms and conditions of, and in the circumstances set forth in, the Registration Rights Agreement referred to in the Declaration, Liquidated Damages (as defined in such Registration Rights Agreement) may be payable in respect of the Preferred Securities. The Company Trustees shall, at the direction of all of the Holders of the Common Securities, at any time terminate the Trust and, after satisfaction of liabilities to creditors of the Trust, cause the Notes to be distributed by the Preferred Trustee to the holders of the Preferred Securities in liquidation of the Trust as provided in the Declaration. The Preferred Securities shall be redeemable as provided in the Declaration. 81 88 ASSIGNMENT FOR VALUE RECEIVED, the undersigned assigns and transfers this Preferred Security to: (Insert assignee's social security or tax identification number) (Insert address and zip code of assignee) and irrevocably appoints agent to transfer this Preferred Security Certificate on the books of the Trust. The agent may substitute another to act for him or her. Date: --------------- Signature: (Sign exactly as your name appears on the other side of this Preferred Security Certificate) The signature(s) should be guaranteed by an eligible guarantor institution (banks, stockbrokers, savings and loan associations and credit unions with membership in an approved signature guarantee medallion program), pursuant to S.E.C. Rule 17Ad-15. 82 89 SCHEDULE OF EXCHANGES OF INTERESTS IN THE GLOBAL SECURITY The following exchanges of a part of this Global Preferred Security Certificate have been made: Liquidation Amount Date of Exchange Amount of decrease Amount of increase of this Global Signature of - ---------------- in Liquidation in Liquidation Preferred Security authorized officer Amount of this Amount of this Certificate of Preferred Global Preferred Global Preferred following such Trustee or Security Security decrease Securities Certificate Certificate (or increase) Registrar ----------- ----------- ------------- ---------
83 90 EXHIBIT E-2 [FORM OF EXCHANGE PREFERRED SECURITIES CERTIFICATE] UNLESS THIS PREFERRED SECURITY IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF DEUTSCHE BANK AG LONDON AS THE COMMON DEPOSITARY FOR MORGAN GUARANTY TRUST COMPANY OF NEW YORK, BRUSSELS OFFICE, OPERATOR OF THE EUROCLEAR SYSTEM AND CLEARSTREAM BANKING, SOCIETE ANONYME (THE "COMMON DEPOSITARY"), TO FRESENIUS MEDICAL CARE CAPITAL TRUST V OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE, OR PAYMENT, AND ANY PREFERRED SECURITY ISSUED IS REGISTERED IN THE NAME OF BT GLOBENET NOMINEES LIMITED, OR IN SUCH OTHER NOMINEE NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE COMMON DEPOSITARY (AND ANY PAYMENT IS MADE TO BT GLOBENET NOMINEES LIMITED OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE COMMON DEPOSITARY), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL IN AS MUCH AS THE REGISTERED OWNER HEREOF, BT GLOBENET NOMINEES LIMITED HAS AN INTEREST HEREIN. TRANSFERS OF THIS PREFERRED SECURITY SHALL BE LIMITED TO TRANSFERS IN WHOLE, BUT NOT IN PART, TO NOMINEES OF THE COMMON DEPOSITARY OR TO A SUCCESSOR THEREOF OR SUCH SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF THIS PREFERRED SECURITY SHALL BE LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN THE AMENDED AND RESTATED DECLARATION OF TRUST REFERRED TO ON THE REVERSE HEREOF.] E-2 91 CERTIFICATE NUMBER NUMBER OF PREFERRED SECURITIES ISIN - OR COMMON CODE - CERTIFICATE EVIDENCING PREFERRED SECURITIES OF FRESENIUS MEDICAL CARE CAPITAL TRUST V 7 3/8% TRUST PREFERRED SECURITIES (LIQUIDATION AMOUNT Euro 1,000 PER PREFERRED SECURITY) Fresenius Medical Care Capital Trust V, a statutory business trust formed under the laws of the State of Delaware (the "Trust"), hereby certifies that BT Globenet Nominees Limited (the "Holder") is the registered owner of __________ (_____) preferred securities of the Trust representing an undivided beneficial interest in the assets of the Trust and designated the Fresenius Medical Care Capital Trust V 7 3/8% Trust Preferred Securities, (liquidation amount Euro 1,000 per Preferred Security) (the "Preferred Securities"). The Preferred Securities are transferable on the books and records of the Trust, in person or by a duly authorized attorney, upon surrender of this certificate duly endorsed and in proper form for transfer as provided in Section 5.4 of the Declaration (as defined below). The designations, rights, privileges, restrictions, preferences and other terms and provisions of the Preferred Securities are set forth in, and this certificate and the Preferred Securities represented hereby are issued and shall in all respects be subject to the terms and provisions of, the Amended and Restated Declaration of Trust of Fresenius Medical Care Capital Trust V dated as of June 15, 2001, as the same may be amended from time to time (the "Declaration") including the designation of the terms of Preferred Securities as set forth therein. Capitalized terms used herein and not otherwise defined have the meanings assigned to them by the Declaration. The Holder is entitled to the benefits of the Guarantee Agreement entered into by Fresenius Medical Care AG, a corporation organized under the laws of Germany, and State Street Bank and Trust Company, as guarantee trustee, dated as of June 15, 2001 (the "Trust Guarantee"), to the extent provided therein. The Trust will furnish a copy of the Declaration and the Trust Guarantee to the Holder without charge upon written request to the Trust at its principal place of business or registered office. Upon receipt of this certificate, the Holder is bound by the Declaration and is entitled to the benefits thereunder. E-2 92 In Witness Whereof, one of the Company Trustees of the Trust has executed this certificate this ____th day of __________, 2001. Fresenius Medical Care Capital Trust V BY: ------------------------------------ Name: as Company Trustee PREFERRED TRUSTEE'S CERTIFICATE OF AUTHENTICATION This is one of the Preferred Securities referred to in the within-mentioned Declaration. STATE STREET BANK AND TRUST COMPANY, as Preferred Trustee By: ------------------------------------- Authorized Signatory E-2 93 REVERSE OF SECURITY Distributions payable on each Preferred Security will be fixed at a rate per annum of 7 3/8% (the "Distribution Rate") of the Liquidation Amount of Euro 1,000 per Preferred Security, such rate being the rate of interest payable on the Notes held by the Preferred Trustee. Distributions in arrears for more than one quarter (and interest thereon) will bear interest thereon compounded quarterly at the Distribution Rate (to the extent permitted by applicable law). The term "Distributions," as used herein, includes such cash distribution and any such interest payable unless otherwise stated. A Distribution is payable only to the extent that payments are made in respect of the Notes held by the Preferred Trustee and to the extent the Preferred Trustee has funds on hand in the Payment Account legally available therefor. Distributions on the Preferred Securities will accumulate from the most recent date to which Distributions have been paid or, if no Distributions have been paid, from June 15, 2001 and will be payable quarterly in arrears on March 15, June 15, September 15 and December 15, of each year, commencing on September 15, 2001. Distributions will be computed on the basis of a 360-day year constituting twelve 30-day months and, for any period of less than a full calendar month, the number of days elapsed in such month. Under the terms and conditions of, and in the circumstances set forth in, the Registration Rights Agreement referred to in the Declaration, Liquidated Damages (as defined in such Registration Rights Agreement) may be payable in respect of the Preferred Securities. The Company Trustees shall, at the direction of all of the Holders of the Common Securities, at any time terminate the Trust and, after satisfaction of liabilities to creditors of the Trust, cause the Notes to be distributed by the Preferred Trustee to the holders of the Preferred Securities in liquidation of the Trust as provided in the Declaration. The Preferred Securities shall be redeemable as provided in the Declaration. E-2 94 ASSIGNMENT FOR VALUE RECEIVED, the undersigned assigns and transfers this Preferred Security to: (Insert assignee's social security or tax identification number) (Insert address and zip code of assignee) and irrevocably appoints agent to transfer this Preferred Security Certificate on the books of the Trust. The agent may substitute another to act for him or her. Date: --------------- Signature: (Sign exactly as your name appears on the other side of this Preferred Security Certificate) The signature(s) should be guaranteed by an eligible guarantor institution (banks, stockbrokers, savings and loan associations and credit unions with membership in an approved signature guarantee medallion program), pursuant to S.E.C. Rule 17Ad-15. E-2 95 SCHEDULE OF EXCHANGES OF INTERESTS IN THE GLOBAL SECURITY The following exchanges of a part of this Global Preferred Security Certificate have been made: Liquidation Amount Date of Exchange Amount of decrease Amount of increase of this Global Signature of - ---------------- in Liquidation in Liquidation Preferred Security authorized officer Amount of this Amount of this Certificate of Preferred Global Preferred Global Preferred following such Trustee or Security Security decrease Securities Certificate Certificate (or increase) Registrar ----------- ----------- ------------- ---------
E-2 96 EXHIBIT F-1 [FORM OF TRANSFER CERTIFICATE] -- RESTRICTED BOOK-ENTRY PREFERRED SECURITIES CERTIFICATE TO REGULATION S BOOK-ENTRY PREFERRED SECURITIES CERTIFICATE (Transfers pursuant to Section 5.4(D)(i) of the Declaration) Fresenius Medical Care Capital Trust V, c/o Deutsche Bank AG London Winchester House 1 Great Winchester Street London EC2N 2DB Fax: (44) 20-7547-5782 Attention: Client Services, Corporate Trust and Agency Services Re: Fresenius Medical Care Capital Trust V 7 3/8% Trust Preferred Securities Reference is hereby made to the Amended and Restated Declaration of Trust of Fresenius Medical Care Capital Trust V (the "Trust"), dated as of June 15, 2001 (the "Declaration"). Terms used but not defined herein and defined in Regulation S under the U.S. Securities Act of 1933, as amended (the "Securities Act") or in the Declaration shall have the meanings given to them in Regulation S or the Declaration, as the case may be. This certificate relates to Euro [_________] aggregate Liquidation Amount of Initial Preferred Securities, which are beneficial interests in the Restricted Book-Entry Preferred Securities Certificate with ISIN Number XS0131200486 and Common Code 0131200048 (the "Specified Securities"): The person in whose name this certificate is executed below (the "Undersigned") hereby certifies that either (i) it is the sole beneficial owner of the Specified Securities or (ii) it is acting on behalf of all the beneficial owners of the Specified Securities and is duly authorized by them to do so. Such beneficial owner or owners are referred to herein collectively as the "Owner". The Specified Securities are held in book-entry form through a Clearing Agency or its nominee in the name of the Undersigned, as or on behalf of the Owner. The Owner has requested that the Specified Securities be transferred to a person (the "Transferee") who will take delivery in the form of an interest in the Regulation S Book-Entry Preferred Securities Certificate with ISIN Number XS0131200304 and Common Code 013120030. In connection with such transfer, the Owner hereby certifies that such transfer is being effected in accordance with Rule 904 or Rule 144 under the Securities Act and with all F-1 97 applicable securities laws of the states of the United States and other jurisdictions. Accordingly, the Owner hereby further certifies as follows: Rule 904 Transfers. If the transfer is being effected in accordance with Rule 904: (A) the Owner is not a distributor of the Specified Securities, an affiliate of the Trust or any such distributor or a person acting on behalf of any of the foregoing; (B) the offer of the Specified Securities was not made to a person in the United States; (C) either: (i) at the time the buy order was originated, the Transferee was outside the United States or the Owner and any person acting on its behalf reasonably believed that the Transferee was outside the United States, or (ii) the transaction is being executed in, on or through the facilities of the Eurobond market, as regulated by the Association of International Bond Dealers, or another designated offshore securities market and neither the Owner nor any person acting on its behalf knows that the transaction has been prearranged with a buyer in the United States; (D) no directed selling efforts have been made in the United States by or on behalf of the Owner or any affiliate thereof; (E) if the Owner is a dealer in securities or has received a selling concession, fee or other remuneration in respect of the Specified Securities, and the transfer is to occur during the Distribution Compliance Period, then the requirements of Rule 904(b)(1) have been satisfied; and (F) the transaction is not part of a plan or scheme to evade the registration requirements of the Securities Act. Rule 144 Transfers. If the transfer is being effected pursuant to Rule 144: (G) the transfer is occurring after the first anniversary of the latest original issue date for the Preferred Securities (including any issued after the initial offering, unless the Trust determines otherwise) and is being effected in accordance with the applicable amount, manner of sale and notice requirements of Rule 144; or (H) the transfer is occurring after the second anniversary of the latest original issue date for the Preferred Securities (including any issued after the initial offering, unless the Trust determines otherwise) and the Owner is not, and during the preceding three months has not been, an affiliate of the Trust. F-1 98 This certificate and the statements contained herein are made for your benefit and the benefit of the Trust and the Initial Purchasers under the Purchase Agreement. Dated: ---------------------------------- (Print the name of the Undersigned, as such term is defined in the second paragraph of this certificate.) By: ------------------------------------- Name: Title: (If the Undersigned is a corporation, partnership or fiduciary, the title of the person signing on behalf of the Undersigned must be stated.) F-1 99 EXHIBIT F-2 [FORM OF TRANSFER CERTIFICATE] -- REGULATION S BOOK-ENTRY PREFERRED SECURITIES CERTIFICATE TO RESTRICTED BOOK-ENTRY PREFERRED SECURITIES CERTIFICATE (Transfers pursuant to Section 5.4(D)(ii) of the Declaration) Fresenius Medical Care Capital Trust V, c/o Deutsche Bank AG London Winchester House 1 Great Winchester Street London EC2N 2DB Fax: (44) 20-7547-5782 Attention: Client Services, Corporate Trust and Agency Services Re: Fresenius Medical Care Capital Trust V 7 3/8% Trust Preferred Securities Reference is hereby made to the Amended and Restated Declaration of Trust of Fresenius Medical Care Capital Trust V (the "Trust"), dated as of June 15, 2001 (the "Declaration"). Terms used but not defined herein and defined in Regulation S under the U.S. Securities Act of 1933, as amended (the "Securities Act") or in the Declaration shall have the meanings given to them in Regulation S or the Declaration, as the case may be. This certificate relates to Euro [_________] aggregate Liquidation Amount of Initial Preferred Securities, which are interests in the Regulation S Book-Entry Preferred Securities Certificate wiTH ISIN Number XS0131200304 and Common Code 013120030 (the "Specified Securities"): The person in whose name this certificate is executed below (the "Undersigned") hereby certifies that either (i) it is the sole beneficial owner of the Specified Securities or (ii) it is acting on behalf of all the beneficial owners of the Specified Securities and is duly authorized by them to do so. Such beneficial owner or owners are referred to herein collectively as the "Owner". The Specified Securities are held in book-entry form through a Clearing Agency or its nominee in the name of the Undersigned, as or on behalf of the Owner. The Owner has requested that the Specified Securities be transferred to a person (the "Transferee") who will take delivery in the form of an interest in the Restricted Book-Entry Preferred Securities Certificate with ISIN Number XS0131200486 and Common F-2 100 Code 013120048. In connection with such transfer, the Owner hereby certifies that such transfer is being effected in accordance with Rule 144A under the Securities Act and with all applicable securities laws of the states of the United States and other jurisdictions. Accordingly, the Owner hereby further certifies as follows: the Specified Securities are being transferred to a person that the Owner and any person acting on its behalf reasonably believe is a "qualified institutional buyer" within the meaning of Rule 144A, acquiring for its own account or for the account of a qualified institutional buyer; and (2) the Owner and any person acting on its behalf have taken reasonable steps to ensure that the Transferee is aware that the Owner may be relying on Rule 144A in connection with the transfer. This certificate and the statements contained herein are made for your benefit and the benefit of the Trust and the Initial Purchasers under the Purchase Agreement. Dated: -------------------------- (Print the name of the Undersigned, as such term is defined in the second paragraph of this certificate.) By: ------------------------------------- Name: Title: (If the Undersigned is a corporation, partnership or fiduciary, the title of the person signing on behalf of the Undersigned must be stated.) F-2 101 EXHIBIT F-3 [FORM OF TRANSFER CERTIFICATE] -- TEMPORARY REGULATION S BOOK-ENTRY PREFERRED SECURITIES CERTIFICATE TO PERMANENT REGULATION S BOOK-ENTRY PREFERRED SECURITIES CERTIFICATE (Transfers pursuant to Section 5.4(D)(iii) of the Declaration) Fresenius Medical Care Capital Trust V, c/o Deutsche Bank AG London Winchester House 1 Great Winchester Street London EC2N 2DB Fax: (44) 20-7547-5782 Attention: Client Services, Corporate Trust and Agency Services Re: Fresenius Medical Care Capital Trust V 7 3/8% Trust Preferred Securities Reference is hereby made to the Amended and Restated Declaration of Fresenius Medical Care Capital Trust V, dated as of January June [15], 2001 (the "Declaration"). Terms used but not defined herein and defined in Regulation S under the U.S. Securities Act of 1933, as amended (the "Securities Act") or in the Declaration shall have the meanings given to them in Regulation S or the Declaration, as the case may be. This certificate relates to Euro [_________] aggregate Liquidation Amount of Initial Preferred Securities, which are interests in the Temporary Regulation S Book-Entry Preferred Securities Certificate with ISIN Number XS0131200304 and Common Code 013120030 (the "Specified Securities"): The person in whose name this certificate is executed below (the "Undersigned") hereby certifies that either (i) it is the sole beneficial owner of the Specified Securities or (ii) it is acting on behalf of all the beneficial owners of the Specified Securities and is duly authorized by them to do so. Such beneficial owner or owners are referred to herein collectively as the "Owner". The Specified Securities are held in book-entry form through a Clearing Agency or its nominee in the name of the Undersigned, as or on behalf of the Owner. The Owner has requested that the Specified Securities be exchanged for an interest in the Permanent Regulation S Book-Entry Preferred Securities Certificate, which is not permitted to occur during the Distribution Compliance Period. Accordingly: if this certificate is given prior to the expiry of the Distribution Compliance Period, the Owner hereby requests that such exchange be made as soon as practicable on or after F-3 102 such date and hereby certifies that the Owner is not now a U.S. person and, on such date, will be the Owner of the Specified Securities and will not be a U.S. person, or (2) if this certificate is given on or after the expiry of the Distribution Compliance Period, the Owner hereby requests that such exchange be made as soon as practicable and hereby certifies that the Owner is not a U.S. person and is the Owner of the Specified Securities. This certificate and the statements contained herein are made for your benefit and the benefit of the Trust and the Initial Purchasers under the Purchase Agreement. Dated: (Print the name of the Undersigned, as such term is defined in the second paragraph of this certificate.) By: ------------------------------------- Name: Title: (If the Undersigned is a corporation, partnership or fiduciary, the title of the person signing on behalf of the Undersigned must be stated.) F-3 103 EXHIBIT G-1 CERTIFICATE TO BE DELIVERED UPON EXCHANGE OF INITIAL PREFERRED SECURITIES This certificate relates to Preferred Securities in Euro___________ Liquidation Amount held by the undersigned. The undersigned (check one box below): [ ] has requested the Company Trustees by written order to deliver in exchange for its beneficial interest in the Book-Entry Preferred Security held by the Depository a Preferred Security or Preferred Securities in definitive, registered form of authorized denominations and an aggregate Liquidation Amount equal to its beneficial interest in such Book-Entry Preferred Security (or the portion thereof indicated above) in accordance with Section 5.13 of the Declaration; [ ] has as requested the Company Trustees by written order to exchange or register the transfer of a Preferred Security or Preferred Securities in accordance with Section 5.5 of the Declaration. In connection with any transfer or exchange of any of the Preferred Securities evidenced by this certificate occurring prior to the date that is two years after the later of the date of original issuance of such Preferred Securities and the last date, if any, on which such Preferred Securities were owned by the Trust or any Affiliate of the Trust, the undersigned confirms that such Preferred Securities are being: CHECK ONE BOX BELOW: (1) [ ] transferred to the Trust; or (2) [ ] transferred pursuant to and in compliance with Rule 144A under the Securities act of 1993, as amended; or (3) [ ] transferred pursuant to another available exemption from the registration requirements of the Securities Act of 1993, as amended. Unless one of the boxes is checked, the Company Trustees shall refuse to register any of the Preferred Securities evidenced by this certificate in the name of any person other than the registered holder thereof; provided, however, that if box (3) is checked, the Company Trustees or the Trust may require, prior to registering any such transfer of the Preferred Securities, in its sole discretion, such legal opinions, certifications and other information as an Company Trustee or the Trust has reasonably requested to confirm that such transfer is being made pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act of 1933, as amended, such as the exemption provided by Rule 144 under such Act; provided further that if box (2) is checked, the transferee must also certify that it is a qualified institutional buyer as defined in Rule 144A. G-1 104 --------------------- Signature Signature Guarantee: --------------------- Signature (Signature must be guaranteed by a participant in a signature guarantee medallion program) G-1 105 EXHIBIT G-2 CERTIFICATE TO BE DELIVERED UPON EXCHANGE OF PREFERRED SECURITIES This certificate relates to Preferred Securities in Euro ___________ Liquidation Amount held in (check applicable space) ____ global or _____ definitive form by the undersigned. The undersigned (check one box below): [ ] has requested the Company Trustees by written order to deliver in exchange for its beneficial interest in the Book-Entry Preferred Security held by the Depository a Preferred Security or Preferred Securities in definitive, registered form of authorized denominations and an aggregate Liquidation Amount equal to its beneficial interest in such Book-Entry Preferred Security (or the portion thereof indicated above) in accordance with Section 5.13 of the Declaration; [ ] has requested the Company Trustees by written order to exchange or register the transfer of a Preferred Security or Preferred Securities in accordance with Section 5.5 of the Declaration. --------------------- Signature Signature Guarantee: --------------------- Signature (Signature must be guaranteed by a participant in a signature guarantee medallion program) G-2 EX-4.46 11 y51284ex4-46.txt SENIOR SUBORDINATED INDENTURE 1 EXHIBIT 4.46 FMC TRUST FINANCE S.a.r.l. LUXEMBOURG-III Issuer STATE STREET BANK AND TRUST COMPANY Trustee FRESENIUS MEDICAL CARE AG Company and a Guarantor FRESENIUS MEDICAL CARE HOLDINGS, INC. AND FRESENIUS MEDICAL CARE DEUTSCHLAND GMBH Guarantors SENIOR SUBORDINATED INDENTURE DATED AS OF JUNE 6, 2001 with respect to the issuance of $225,225,000 IN AGGREGATE PRINCIPAL AMOUNT OF 7 7/8% SENIOR SUBORDINATED NOTES DUE 2011 2 TABLE OF CONTENTS
Page ---- Article I. DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION............................................2 Section 1.1 Definitions.............................................................................2 Section 1.2 Compliance Certificate and Opinions....................................................22 Section 1.3 Form of Documents Delivered to Trustee.................................................22 Section 1.4 Acts of Holders; Record Date...........................................................23 Section 1.5 Notices, etc., to Trustee, Note Issuer and Guarantors..................................24 Section 1.6 Notice to Holders; Waiver..............................................................24 Section 1.7 Conflict with Trust Indenture Act......................................................25 Section 1.8 Effect of Headings and Table of Contents...............................................25 Section 1.9 Successors and Assigns.................................................................25 Section 1.10 Separability Clause....................................................................25 Section 1.11 Benefits of Indenture..................................................................26 Section 1.12 Governing Law..........................................................................26 Section 1.13 Non-Business Days......................................................................26 Section 1.14 Duplicate Originals....................................................................26 Section 1.15 Submission to Jurisdiction.............................................................26 Article II. SECURITY AND GUARANTY FORMS......................................................................27 Section 2.1 Forms Generally........................................................................27 Section 2.2 Form of Face of Security...............................................................28 Section 2.3 Form of Reverse of Security............................................................30 Section 2.4 Additional Provisions Required in Global Security and Initial Security.................33 Section 2.5 Form of Trustee's Certificate of Authentication........................................34 Section 2.6 Form of Guaranty.......................................................................34 Article III. THE SECURITIES..................................................................................40 Section 3.1 Title and Terms........................................................................40 Section 3.2 Denominations..........................................................................41 Section 3.3 Execution, Authentication, Delivery and Dating.........................................41 Section 3.4 Temporary Securities...................................................................42 Section 3.5 Registration, Registration of Transfer and Exchange....................................42 Section 3.6 Mutilated, Destroyed, Lost and Stolen Securities.......................................44 Section 3.7 Payment of Interest; Interest Rights Preserved.........................................45 Section 3.8 Persons Deemed Owners..................................................................46 Section 3.9 Cancellation...........................................................................47 Section 3.10 Computation of Interest................................................................47 Section 3.11 Right of Set-Off.......................................................................47 Section 3.12 Agreed Tax Treatment...................................................................47 Section 3.13 CUSIP Numbers..........................................................................47 Article IV. SATISFACTION AND DISCHARGE.......................................................................48 Section 4.1 Satisfaction and Discharge of Indenture................................................48
i 3 Section 4.2 Application of Trust Money; Reinstatement..............................................49 Section 4.3 Satisfaction, Discharge and Defeasance of Securities...................................50 Article V. REMEDIES..........................................................................................52 Section 5.1 Events of Default......................................................................52 Section 5.2 Acceleration of Maturity; Rescission and Annulment.....................................53 Section 5.3 Collection of Indebtedness and Suits for Enforcement by Trustee........................55 Section 5.4 Trustee May File Proofs of Claim.......................................................55 Section 5.5 Trustee May Enforce Claims Without Possession of Securities............................56 Section 5.6 Application of Money Collected.........................................................56 Section 5.7 Limitation on Suits....................................................................57 Section 5.8 Unconditional Right of Holders to Receive Principal, Premium and Interest..............58 Section 5.9 Restoration of Rights and Remedies.....................................................58 Section 5.10 Rights and Remedies Cumulative.........................................................58 Section 5.11 Delay or Omission Not Waiver...........................................................58 Section 5.12 Control by Holders.....................................................................59 Section 5.13 Waiver of Past Defaults................................................................59 Section 5.14 Undertaking for Costs..................................................................60 Section 5.15 Waiver of Usury, Stay or Extension Laws................................................60 Article VI. THE TRUSTEE......................................................................................60 Section 6.1 Certain Duties and Responsibilities....................................................60 Section 6.2 Notice of Defaults.....................................................................61 Section 6.3 Certain Rights of Trustee..............................................................62 Section 6.4 Not Responsible for Recitals or Issuance of Securities.................................63 Section 6.5 May Hold Securities....................................................................63 Section 6.6 Money Held in Trust....................................................................63 Section 6.7 Compensation and Reimbursement.........................................................63 Section 6.8 Disqualification; Conflicting Interests................................................64 Section 6.9 Corporate Trustee Required; Eligibility................................................64 Section 6.10 Resignation and Removal; Appointment of Successor......................................65 Section 6.11 Acceptance of Appointment by Successor.................................................66 Section 6.12 Merger, Conversion, Consolidation or Succession to Business............................66 Section 6.13 Preferential Collection of Claims Against Note Issuer..................................67 Section 6.14 Appointment of Authenticating Agent....................................................67 Article VII. HOLDER'S LISTS AND REPORTS BY TRUSTEE AND NOTE ISSUER...........................................69 Section 7.1 Note Issuer to Furnish Trustee Names and Addresses of Holders..........................69 Section 7.2 Preservation of Information, Communications to Holders.................................69 Section 7.3 Reports by Trustee.....................................................................69 Section 7.4 Reports by Note Issuer.................................................................70 Article VIII. CONSOLIDATION, MERGER, CONVEYANCE, TRANSFER OR LEASE...........................................70 Section 8.1 Note Issuer May Consolidate, etc., Only on Certain Terms...............................70 Section 8.2 Guarantors May Consolidate, etc., Only on Certain Terms................................71
ii 4 Section 8.3 Successor Corporation Substituted......................................................72 Section 8.4 Successor to Note Issuer...............................................................73 Article IX. SUPPLEMENTAL INDENTURES..........................................................................73 Section 9.1 Supplemental Indentures Without Consent of Holders.....................................73 Section 9.2 Supplemental Indentures with Consent of Holders........................................74 Section 9.3 Execution of Supplemental Indentures...................................................75 Section 9.4 Effect of Supplemental Indentures......................................................75 Section 9.5 Conformity with Trust Indenture Act....................................................76 Section 9.6 Reference in Securities to Supplemental Indentures.....................................76 Article X. COVENANTS.........................................................................................76 Section 10.1 Payment of Principal, Premium and Interest.............................................76 Section 10.2 Maintenance of Office or Agency........................................................76 Section 10.3 Money for Security Payments to be Held in Trust........................................77 Section 10.4 Existence..............................................................................78 Section 10.5 Maintenance of Properties..............................................................78 Section 10.6 Payment of Taxes and Other Claims......................................................78 Section 10.7 Maintenance of Insurance...............................................................79 Section 10.8 Limitation on Incurrence of Indebtedness...............................................79 Section 10.9 Limitation on Restricted Payments......................................................80 Section 10.10 Limitation on Restrictions on Distributions from Subsidiaries..........................81 Section 10.11 Senior Subordinated Indebtedness; Liens................................................82 Section 10.12 Limitation on Affiliate Transactions...................................................83 Section 10.13 Limitation on Sales of Assets and Subsidiary Stock.....................................83 Section 10.14 Intentionally Omitted..................................................................86 Section 10.15 Change of Control......................................................................86 Section 10.16 Statement as to Compliance and Default.................................................87 Section 10.17 Ownership of the Trust and the Note Issuer; Business of the Note Issuer................87 Section 10.18 Waiver of Certain Covenants............................................................88 Section 10.19 Additional Amounts; Additional Interest................................................88 Section 10.20 Suspension of Covenants During Achievement of Investment Grade Status..................89 Article XI. REDEMPTION OF SECURITIES.........................................................................89 Section 11.1 Applicability of This Article..........................................................89 Section 11.2 Election to Redeem; Notice to Trustee..................................................89 Section 11.3 Intentionally Omitted..................................................................90 Section 11.4 Notice of Redemption...................................................................90 Section 11.5 Deposit of Redemption Price............................................................90 Section 11.6 Payment of Securities Called for Redemption............................................90 Section 11.7 Note Issuer's Right of Redemption in Certain Circumstances.............................91 Article XII. SUBORDINATION OF SECURITIES.....................................................................91 Section 12.1 Securities Subordinate to Senior Indebtedness..........................................91 Section 12.2 Payment Over of Proceeds Upon Dissolution, etc.........................................91 Section 12.3 Prior Payment to Senior Indebtedness Upon Acceleration of Securities...................92
iii 5 Section 12.4 No Payment When Senior Indebtedness in Default.........................................93 Section 12.5 Payment Permitted If No Default........................................................94 Section 12.6 Subrogation to Rights of Holders of Senior Indebtedness................................94 Section 12.7 Provisions Solely to Define Relative Rights............................................95 Section 12.8 Trustee to Effectuate Subordination....................................................95 Section 12.9 No Waiver of Subordination Provisions..................................................95 Section 12.10 Notice to Trustee......................................................................95 Section 12.11 Reliance on Judicial Order or Certificate of Liquidating Agent.........................96 Section 12.12 Trustee Not Fiduciary for Holders of Senior Indebtedness...............................96 Section 12.13 Rights of Trustee as Holder of Senior Indebtedness; Preservation of Trustee's Rights...96 Section 12.14 Article Applicable to Paying Agents....................................................96 Section 12.15 Certain Conversions or Exchanges Deemed Payment........................................96 Article XIII. GUARANTY.......................................................................................97 Section 13.1 Guaranty...............................................................................97 Section 13.2 Execution and Delivery of Guaranties..................................................100 Section 13.3 Guarantors May Consolidate, etc., on Certain Terms....................................101 Section 13.4 Release of Guarantors.................................................................101 Section 13.5 Additional Guarantors.................................................................101 Article XIV. SUBORDINATION OF GUARANTIES....................................................................102 Section 14.1 Guaranties Subordinate to Senior Indebtedness of Guarantors...........................102 Section 14.2 Payment Over of Proceeds Upon Dissolution, etc........................................102 Section 14.3 Prior Payment to Senior Indebtedness of a Guarantor Upon Acceleration of Securities...103 Section 14.4 No Payment When Senior Indebtedness of a Guarantor in Default.........................103 Section 14.5 Payment Permitted If No Default.......................................................104 Section 14.6 Subrogation to Rights of Holders of Senior Indebtedness of a Guarantor................105 Section 14.7 Provisions Solely to Define Relative Rights...........................................105 Section 14.8 Trustee to Effectuate Subordination...................................................106 Section 14.9 No Waiver of Subordination Provisions.................................................106 Section 14.10 Notice to Trustee.....................................................................106 Section 14.11 Reliance on Judicial Order or Certificate of Liquidating Agent........................106 Section 14.12 Trustee Not Fiduciary for Holders of Senior Indebtedness of the Guarantors............107 Section 14.13 Rights of Trustee as Holder of Senior Indebtedness of the Guarantors; Preservation of Trustee's Rights.................................................................107 Section 14.14 Article Applicable to Paying Agents...................................................107 Section 14.15 Certain Conversions or Exchanges Deemed Payment.......................................107 EXHIBITS EXHIBIT A Form of Amended and Restated Declaration of Trust of Fresenius Medical Care Capital Trust IV
iv 6 FMC TRUST FINANCE S.a.r.l. LUXEMBOURG-III Reconciliation and tie between the Trust Indenture Act of 1939 (including cross-references to provisions of Sections 310 to and including 317 which, pursuant to Section 318(c) of the Trust Indenture Act of 1939, as amended by the Trust Reform Act of 1990, are a part of and govern the Indenture upon consummation of the Exchange Offer (as defined in the Indenture) whether or not physically contained therein) and the Senior Subordinated Indenture, dated as of June 6, 2001.
TRUST INDENTURE INDENTURE ACT SECTION SECTION - ----------- ------- Section 310 (a)(1), (2) and (5)................................................................6.9 (a)(3).............................................................................Not Applicable (a)(4).............................................................................Not Applicable (b)................................................................................6.8 ...................................................................................6.10 (c)................................................................................Not Applicable Section 311 (a)................................................................................6.13 (b)................................................................................6.13 (b)(2).............................................................................6.13 ...................................................................................6.13 Section 312 (a)................................................................................7.1 ...................................................................................7.2(a) (b)................................................................................7.2(b) (c)................................................................................7.2(c) Section 313 (a)................................................................................7.3(a) (b)................................................................................7.3(a) (c)................................................................................7.3(a), 7.3(b) (d)................................................................................7.3(c) Section 314 (a)(1), (2) and (3)................................................................7.4 (a)(4).............................................................................10.16 (b)................................................................................Not Applicable (c)(1).............................................................................1.2 (c)(2).............................................................................1.2 (c)(3).............................................................................Not Applicable (d)................................................................................Not Applicable (e)................................................................................1.2 (f)................................................................................Not Applicable Section 315 (a)................................................................................6.1(a) (b)................................................................................6.2 ...................................................................................7.3(a)(6) (c)................................................................................6.1(b) (d)................................................................................6.1(c)
v 7 (d)(1).............................................................................6.1(a) (d)(2).............................................................................6.1(c)(2) (d)(3).............................................................................6.1(c)(3) (e)................................................................................5.14 Section 316 (a)................................................................................1.1 (a)(1)(A)..........................................................................5.12 (a)(1)(B)..........................................................................5.13 (a)(2).............................................................................Not Applicable (b)................................................................................5.8 (c)................................................................................1.4(f) Section 317 (a)(1).............................................................................5.3 (a)(2).............................................................................5.4 (b)................................................................................10.3 Section 318 (a)................................................................................1.7
- -------------- Note: This reconciliation and tie shall not, for any purpose, be deemed to be a part of the Senior Subordinated Indenture. vi 8 FMC TRUST FINANCE S.a.r.l. LUXEMBOURG-III SENIOR SUBORDINATED INDENTURE SENIOR SUBORDINATED INDENTURE dated as of June 6, 2001, among FMC TRUST FINANCE S.a.r.l. LUXEMBOURG-III, a private limited company (Societe a responsabilite limitee) organized under the laws of Luxembourg (hereinafter called the "Note Issuer") having its principal office at L-2557 Luxembourg, 7A rue Robert Stamper, as issuer, FRESENIUS MEDICAL CARE AG, a stock corporation (Aktiengesellschaft) organized under the laws of Germany (hereinafter called the "Company"), as the Company and as a Guarantor, each of the other GUARANTORS (as hereinafter defined), and STATE STREET BANK AND TRUST COMPANY, a Massachusetts chartered trust company, trustee (hereinafter called the "Trustee"). RECITALS OF THE NOTE ISSUER AND THE GUARANTORS The Note Issuer has duly authorized the execution and delivery of this Indenture to provide for the issuance of its 7 7/8% Senior Subordinated Notes due June 15, 2011 of substantially the tenor hereinafter provided, including, without limitation, Securities (this term and other capitalized terms used and not defined in these recitals having the respective meanings set forth in Article I hereof) issued to evidence loans made to the Note Issuer of the proceeds from the issuance by Fresenius Medical Care Capital Trust IV, a statutory business trust organized under the laws of Delaware (the "Trust"), of preferred trust interests in such Trust (the "Preferred Securities") and common trust interests in such Trust (the "Common Securities" and, collectively with the Preferred Securities, the "Trust Securities"), and to provide the terms and conditions upon which the Securities are to be authenticated, issued and delivered. The Company, directly or indirectly, owns beneficially and of record 100% of the Capital Stock of the Note Issuer and the other Guarantors (other than the preferred stock of Fresenius Medical Care Holdings, Inc.); the Note Issuer and the Guarantors are members of the same consolidated group of companies and are engaged in related businesses; the Guarantors will derive direct and indirect economic benefit from the issuance of the Securities; accordingly, the Guarantors have each duly authorized the execution and delivery of this Indenture to provide for the Guarantee by each of them with respect to the Securities as set forth in this Indenture. All things necessary to make the Securities, when executed by the Note Issuer and authenticated and delivered hereunder and duly issued by the Note Issuer, the valid obligations of the Note Issuer, to make the Guarantees of each of the Guarantors, when executed by the respective Guarantors and endorsed on the Securities, authenticated and delivered hereunder, the valid obligations of the respective Guarantors, and to make this Indenture a valid agreement of the Note Issuer and each of the Guarantors in accordance with its terms, have been done. NOW THEREFORE, THIS INDENTURE WITNESSETH: For and in consideration of the premises and the purchase of the Securities by the Holders thereof, it is mutually covenanted and agreed, for the equal and proportionate benefit of all Holders of the Securities, as follows: 1 9 ARTICLE I. DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION .1 Definitions. For all purposes of this Indenture, except as otherwise expressly provided or unless the context otherwise requires: (1) The terms defined in this Article have the meanings assigned to them in this Article, and include the plural as well as the singular; (2) All other terms used herein which are defined in the Trust Indenture Act, either directly or by reference therein, have the meanings assigned to them therein; (3) All accounting terms not otherwise defined herein have the meanings assigned to them in accordance with generally accepted accounting principles, and the term "generally accepted accounting principles" with respect to any computation required or permitted hereunder shall mean such accounting principles which are generally accepted at the date or time of such computation; provided, that when two or more principles are so generally accepted, it shall mean that set of principles consistent with those in use by the Company; (4) Unless otherwise specifically set forth herein, all calculations or determinations of a Person shall be performed or made on a consolidated basis in accordance with generally accepted accounting principles; and (5) The words "herein," "hereof" and "hereunder" and other words of similar import refer to this Indenture as a whole and not to any particular Article, Section or other subdivision. "Act" when used with respect to any Holder has the meaning specified in Section 1.4. "Additional Amounts" has the meaning specified in Section 10.19(a). "Additional Assets" means (i) any property or assets (other than Indebtedness and Capital Stock) in a Related Business; (ii) the Capital Stock of a Person that becomes a Subsidiary as a result of the acquisition of such Capital Stock by the Company or another Subsidiary; or (iii) Capital Stock constituting a minority interest in any Person that at such time is a Subsidiary; provided, however, that any such Subsidiary described in clauses (ii) or (iii) above is primarily engaged in a Related Business. "Additional Interest" has the meaning specified in Section 10.19(b). "Additional Sums" means the interest (compounded quarterly), if any, that shall accrue on any interest on the Securities in arrears for more than one quarter at the rate per annum specified in this Indenture for the Securities. "Affiliate" of any specified Person means any other Person, directly or indirectly, controlling or controlled by or under direct or indirect common control with such specified 2 10 Person; provided, however, that an Affiliate of the Company shall not be deemed to include the Trust, Fresenius Medical Care Capital Trust, Fresenius Medical Care Capital Trust II or Fresenius Medical Care Capital Trust III or any business trust organized and operated on such similar terms. For the purposes of this definition, "control" when used with respect to any Person means the power to direct the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise; and the terms "controlling" and "controlled" have meanings correlative to the foregoing. For purposes of Sections 10.9, 10.12 and 10.13 only, Affiliate shall also mean any beneficial owner of Capital Stock representing 5% or more of the total voting power of the Voting Stock (on a fully diluted basis) of the Company or of rights or warrants to purchase such Capital Stock (whether or not currently exercisable) and any Person who would be an Affiliate of any such beneficial owner pursuant to the first sentence hereof. "Affiliate Transaction" has the meaning specified in Section 10.12(a). "Approved Lender" has the meaning specified under the definition of "Temporary Cash Investments." "Asset Disposition" means any sale, lease, transfer or other disposition (or series of related sales, leases, transfers or dispositions) by the Company or any Subsidiary, including any disposition by means of a merger, consolidation or similar transaction (each referred to for the purposes of this definition as a "disposition"), of (i) any shares of Capital Stock of any Subsidiary (other than directors qualifying shares or shares required by applicable law to be held by a Person other than the Company or a Subsidiary), (ii) all or substantially all the assets of any division or line of business of the Company or any Subsidiary or (iii) any other assets of the Company or any Subsidiary outside of the ordinary course of business of the Company or such Subsidiary (other than, in the case of (i), (ii) and (iii) above, (y) a disposition by a Subsidiary to the Company or by the Company or a Subsidiary to a Wholly Owned Subsidiary and (z) for purposes of Section 10.13 only, a disposition that constitutes a Restricted Payment permitted by Section 10.9). "Authenticating Agent" means any Person authorized by the Trustee pursuant to Section 6.14 to act on behalf of the Trustee to authenticate Securities. "Average Life" means, as of the date of determination, with respect to any Indebtedness or Preferred Stock, the quotient obtained by dividing (i) the sum of the products of numbers of years from the date of determination to the dates of each successive scheduled principal payment of such Indebtedness or redemption or similar payment with respect to such Preferred Stock multiplied by the amount of such payment by (ii) the sum of all such payments. "Blockage Notice" has the meaning specified in Section 12.4. "Board of Directors" means, with respect to the Note Issuer, Company or a Subsidiary, as the case may be, the Board of Directors (or other body performing functions similar to any of those performed by a Board of Directors including those performed, in the case of a German corporation, by the Managing Board or the Supervisory Board) of such person or any committee thereof duly authorized to act on behalf of such Board (or other body). 3 11 "Board Resolution" means, with respect to the Note Issuer or a Guarantor, a copy of a resolution certified by the Secretary or an Assistant Secretary or a member of the Managing Board of the Note Issuer or such Guarantor to have been duly adopted by the Board of Directors, or such committee of the Board of Directors or officers of the Note Issuer or such Guarantor to which authority to act on behalf of the Board of Directors has been delegated, and to be in full force and effect on the date of such certification, and delivered to the Trustee. "Business Day" means any day other than (i) a Saturday or Sunday, (ii) a day on which banking institutions in New York City, Frankfurt am Main or Luxembourg are authorized or required by law or executive order to remain closed or (iii) a day on which the Corporate Trust Office of the Trustee or, with respect to the Preferred Securities, the Corporate Trust Office of the Preferred Trustee under the Declaration, is closed for business. "Capital Lease Obligations" means an obligation that is required to be classified and accounted for as a capital lease for financial reporting purposes in accordance with GAAP, and the amount of Indebtedness represented by such obligation shall be the capitalized amount of such obligation determined in accordance with GAAP; and the Stated Maturity thereof shall be the date of the last payment of rent or any other amount due under such lease prior to the first date upon which such lease may be terminated by the lessee without payment of a penalty. "Capital Stock" of any Person means any and all shares, interests, rights to purchase, warrants, options, participations or other equivalents of or interests in (however designated) equity of such Person, including any Preferred Stock, but excluding any debt securities convertible into such equity. "Change of Control" means any transaction or series of transactions in which any Person or group (within the meaning of Rule 13d-5 under the Exchange Act and Section 13(d) and 14(d) of the Exchange Act) other than Fresenius Aktiengesellschaft and its Subsidiaries (i) acquires all or substantially all of the Company's assets or (ii) becomes the direct or indirect "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), by way of merger, consolidation, other business combination or otherwise, of greater than 50% of the total voting power (on a fully diluted basis as if all convertible securities had been converted and all options and warrants had been exercised) entitled to vote in the election of directors of the Company or the Surviving Person (if other than the Company). "Change of Control Triggering Event" means the occurrence of both a Change of Control and a Rating Decline. "Commission" means the U.S. Securities and Exchange Commission. "Common Securities" has the meaning specified in the first paragraph of the Recitals to this Indenture. "Company" has the meaning set forth in the first paragraph of this Indenture. "Company Guarantee" means the guarantee by the Company of distributions on the Preferred Securities of the Trust for the benefit of the holders of the Preferred Securities to the extent provided in the Guarantee Agreement, executed and delivered by the Company and the Preferred Trustee pursuant to the Declaration, as the same may be amended from time to time. 4 12 "Consolidated Coverage Ratio" as of any date of determination means the ratio of (i) the aggregate amount of EBITDA for the Company's most recently ended four full fiscal quarters for which internal financial statements are available immediately preceding the date of such determination to (ii) Consolidated Interest Expense for such four fiscal quarters; provided, however, that (1) if the Company or any Subsidiary has Incurred any Indebtedness since the beginning of such period that remains outstanding or if the transaction giving rise to the need to calculate the Consolidated Coverage Ratio is an Incurrence of Indebtedness, or both, EBITDA and Consolidated Interest Expense for such period shall be calculated after giving effect on a pro forma basis to such Indebtedness as if such Indebtedness had been Incurred on the first day of such period and the discharge of any other Indebtedness repaid, repurchased, defeased or otherwise discharged with the proceeds of such new Indebtedness as if such discharge had occurred on the first day of such period, (2) if since the beginning of such period the Company or any Subsidiary shall have made any Asset Disposition, the EBITDA for such period shall be reduced by an amount equal to the EBITDA (if positive) directly attributable to the assets which are the subject of such Asset Disposition for such period, or increased by an amount equal to the EBITDA (if negative), directly attributable thereto for such period and Consolidated Interest Expense for such period shall be reduced by an amount equal to the Consolidated Interest Expense directly attributable to any Indebtedness of the Company or any Subsidiary repaid, repurchased, defeased or otherwise discharged with respect to the Company and its continuing Subsidiaries in connection with such Asset Disposition for such period (or, if the Capital Stock of any Subsidiary is sold, the Consolidated Interest Expense for such period directly attributable to the Indebtedness of such Subsidiary to the extent the Company and its continuing Subsidiaries are no longer liable for such Indebtedness after such sale), (3) if since the beginning of such period the Company or any Subsidiary (by merger or otherwise) shall have made an Investment in any Subsidiary (or any Person which becomes a Subsidiary) or an acquisition of assets, including any acquisition of assets occurring in connection with a transaction requiring a calculation to be made hereunder, which constitutes all or substantially all of an operating unit of a business, EBITDA and Consolidated Interest Expense for such period shall be calculated after giving pro forma effect thereto (including the Incurrence of any Indebtedness) as if such Investment or acquisition occurred on the first day of such period and (4) if since the beginning of such period any Person (that subsequently became a Subsidiary or was merged with or into the Company or any Subsidiary since the beginning of such period) shall have made any Asset Disposition, any Investment or acquisition of assets that would have required an adjustment pursuant to clause (2) or (3) above if made by the Company or a Subsidiary during such period, EBITDA and Consolidated Interest Expense for such period shall be calculated after giving pro forma effect thereto as if such Asset Disposition, Investment or acquisition occurred on the first day of such period. For purposes of this definition, whenever pro forma effect is to be given to an acquisition of assets, the amount of income or earnings relating thereto and the amount of Consolidated Interest Expense associated with any Indebtedness Incurred in connection therewith, the pro forma calculations shall be determined in good faith by a responsible financial or accounting officer of the Company. If any Indebtedness bears a floating rate of interest and is being given pro forma effect, the interest of such Indebtedness shall be calculated as if the rate in effect on the date of determination had been the applicable rate for the entire period (taking into account any Interest Rate Agreement applicable to such Indebtedness if such Interest Rate Agreement has a remaining term in excess of 12 months). "Consolidated Interest Expense" means, for any period, the total interest expense of the Company and its consolidated Subsidiaries, plus, to the extent not included in such total 5 13 interest expense, and to the extent incurred by the Company or its Subsidiaries, (i) interest expense attributable to capital leases, (ii) amortization of debt discount and debt issuance cost, (iii) capitalized interest, (iv) non-cash interest expenses, (v) commissions, discounts and other fees and charges owed with respect to letters of credit and bankers' acceptance financing, (vi) net costs associated with Hedging Obligations (including amortization of fees), (vii) Preferred Stock dividends in respect of all Preferred Stock held by Persons other than the Company or a Wholly Owned Subsidiary, (viii) interest incurred in connection with Investments in discontinued operations, (ix) interest accruing on any Indebtedness of any other Person to the extent such Indebtedness is Guaranteed by the Company or any Subsidiary and (x) the cash contributions to any employee stock ownership plan or similar trust to the extent such contributions are used by such plan or trust to pay interest or fees to any Person (other than the Company) in connection with Indebtedness Incurred by such plan or trust. "Consolidated Net Income" means, for any period, the net income of the Company and its consolidated Subsidiaries; provided, however, that there shall not be included in such Consolidated Net Income: (i) any net income of any Person if such Person is not a Subsidiary, except that (A) subject to the exclusion contained in clause (iv) below, the Company's equity in the net income of any such Person for such period shall be included in such Consolidated Net Income up to the aggregate amount of cash actually distributed by such Person during such period to the Company or a Subsidiary as a dividend or other distribution (subject, in the case of a dividend or other distribution paid to a Subsidiary, to the limitations contained in clause (iii) below) and (B) the Company's equity in a net loss of any such Person for such period shall be included in determining such Consolidated Net Income; (ii) any net income (or loss) of any Person acquired by the Company or a Subsidiary in a pooling of interests transaction for any period prior to the date of such acquisition; (iii) any net income of any Subsidiary that is not a Wholly Owned Subsidiary if such Subsidiary is subject to contractual, governmental or regulatory restrictions, directly or indirectly, on the payment of dividends or the making of distributions by such Subsidiary, directly or indirectly, to the Company, except that (A) subject to the exclusion contained in clause (iv) below, the Company's equity in the net income of any such Subsidiary for such period shall be included in such Consolidated Net Income up to the aggregate amount of cash actually distributed by such Subsidiary during such period to the Company or another Subsidiary as a dividend or other distribution (subject, in the case of a dividend or other distribution paid to another Subsidiary that is not a Wholly Owned Subsidiary, to the limitation contained in this clause) and (B) the Company's equity in a net loss of any such Subsidiary for such period shall be included in determining such Consolidated Net Income; (iv) any gain (but not loss) realized upon the sale or other disposition of any assets of the Company or its consolidated Subsidiaries (including pursuant to any sale and leaseback arrangement) that is not sold or otherwise disposed of in the ordinary course of business and any gain (but not loss) realized upon the sale or other disposition of any Capital Stock of any Person; (v) extraordinary gains or losses; and (vi) the cumulative effect of a change in accounting principles. "Consolidated Net Worth" means the total of the amounts shown on the balance sheet of the Company and its consolidated Subsidiaries, determined on a consolidated basis in accordance with GAAP, as of the end of the Company's most recently ended fiscal quarter for which internal financial statements are available prior to the taking of any action for the purpose of which the determination is being made, as (i) the par or stated value of all outstanding Capital Stock of the Company plus (ii) paid-in capital or capital surplus relating to 6 14 such Capital Stock plus (iii) any retained earnings or earned surplus less (A) any accumulated deficit and (B) any amounts attributable to Disqualified Stock. "Corporate Trust Office" means the principal office of the Trustee in Hartford, Connecticut. "corporation" means a corporation, association, partnership, limited liability company, business trust or other business entity. "Credit Agreements" means the Senior Credit Agreement and the Other Bank Agreements; provided, that the aggregate principal amount of Indebtedness that may be outstanding, at any one time, under such agreements does not exceed $2,500,000,000. "Currency Agreement" means any foreign currency exchange contract, currency swap agreement or other similar agreement or arrangement designed and entered into to protect the Company or any Subsidiary against fluctuations in currency exchange rates. "Declaration" means the Amended and Restated Declaration of Trust substantially in the form attached hereto as Exhibit A, as amended from time to time. "Default" means any event that is, or after notice or passage of time or both would be, an Event of Default. "Defaulted Interest" has the meaning specified in Section 3.7. "Depository" means, with respect to the Securities issuable or issued in whole or in part in the form of one or more Global Securities, the Person designated as Depository by the Note Issuer (or any successor thereto). "Disqualified Stock" means, with respect to any Person, any Capital Stock that by its terms (or by the terms of any security into which it is convertible or for which it is exchangeable) or upon the happening of any event (i) matures or is mandatorily redeemable pursuant to a sinking fund obligation or otherwise, (ii) is convertible or exchangeable for Indebtedness or Disqualified Stock or (iii) is redeemable at the option of the holder thereof, in whole or in part, in each case on or prior to the first anniversary of the Stated Maturity of the Securities; provided, however, that any Capital Stock that would not constitute Disqualified Stock but for provisions thereof giving holders thereof the right to require such Person to repurchase or redeem such Capital Stock upon the occurrence of an "asset sale" or "change of control" occurring prior to the first anniversary of the Stated Maturity of the Securities shall not constitute Disqualified Stock if the "asset sale" or "change of control" provisions applicable to such Capital Stock are not more favorable to the holders of such Capital Stock than the provisions of Sections 10.13 and 10.15. "EBITDA" for any period means the sum of Consolidated Net Income, plus Consolidated Interest Expense plus the following to the extent deducted in calculating such Consolidated Net Income: (a) all income tax expense of the Company and its Subsidiaries, (b) depreciation expense and (c) amortization expense, in each case for such period. Notwithstanding the foregoing, the provision for taxes based on the income or profits of, and the depreciation and amortization of, a Subsidiary that is not a Wholly Owned Subsidiary shall be added to Consolidated Net Income to compute EBITDA only to the extent (and in the 7 15 same proportion) that the net income of such Subsidiary was included in calculating Consolidated Net Income and only if a corresponding amount would be permitted at the date of determination to be dividended to the Company by such Subsidiary without prior approval (that has not been obtained), pursuant to the terms of its charter and all agreements, instruments, judgments, decrees, orders, statutes, rules and governmental regulations applicable to such Subsidiary or its stockholders. "Event of Default" has the meaning specified in Article V. "Exchange Act" means the U.S. Securities Exchange Act of 1934, as amended. "Exchange Offer" means the exchange offer contemplated by the Registration Rights Agreement. "Exchange Offer Registration Statement" means a registration statement of the Note Issuer, the Guarantors and the Trust pursuant to the applicable provisions of the Registration Rights Agreement on an appropriate form under the Securities Act, and all amendments and supplements to such registration statement, including post-effective amendments, in each case including the prospectus contained therein, all exhibits and materials included therewith or incorporated by reference therein pursuant to the requirements of the Securities Act or the Exchange Act. "Exchange Preferred Securities" means a series of Preferred Securities of the Trust to be issued under the Declaration in connection with the offer to exchange Preferred Securities for a new series of Preferred Securities pursuant to the Declaration and the Registration Rights Agreement. "Exchange Security" or "Exchange Securities" means any Security or Securities authenticated and delivered under this Indenture in connection with the Exchange Offer, the offer and sale of which has or have been registered under the Securities Act pursuant to the Registration Rights Agreement. "GAAP" means generally accepted accounting principles in the United States of America as in effect as of the Issue Date, including those set forth (i) in the opinions and pronouncements of the Accounting Principles Board of the American Institute of Certified Public Accountants, (ii) statements and pronouncements of the Financial Accounting Standards Board, (iii) in such other statements by such other entity as approved by a significant segment of the accounting profession, and (iv) the rules and regulations of the Commission governing the inclusion of financial statements (including pro forma financial statements) in periodic reports required to be filed pursuant to Section 13 of the Exchange Act, including opinions and pronouncements in staff accounting bulletins and similar written statements from the accounting staff of the Commission. "Global Security" means a Security in the form prescribed in Section 2.4 evidencing all or part of the Securities, issued to the Depository or its nominee for such series, and registered in the name of such Depository or its nominee. "Government Obligations" means securities which are (i) direct obligations of the United States of America or (ii) obligations of a Person controlled or supervised by and acting as an agency or instrumentality of the United States of America the payment of which is 8 16 unconditionally guaranteed by the United States of America and which, in either case, are full faith and credit obligations of the United States of America and are not callable or redeemable at the option of the issuer thereof and shall also include a depository receipt issued by a bank (as defined in Section 3(a)(2) of the Securities Act of 1933, as amended) as custodian with respect to any such Government Obligation or a specific payment of interest on or principal of any such Government Obligation held by such custodian for the account of the holder of such depository receipt; provided, that (except as required by law) such custodian is not authorized to make any deduction from the amount payable to the holder of such depository receipt from any amount received by the custodian in respect of the Government Obligation or the specific payment of interest on or principal of the Government Obligation evidenced by such depository receipt. "Guarantee" means any obligation, contingent or otherwise, of any Person directly or indirectly guaranteeing any Indebtedness or other obligation of any Person and any obligation, direct or indirect, contingent or otherwise, of such Person (i) to purchase or pay (or advance or supply funds for the purchase or payment of) such Indebtedness or other obligation of such Person (whether arising by virtue of partnership arrangements, or by agreements to keep-well, to purchase assets, goods, securities or services, to take-or-pay or to maintain financial statement conditions or otherwise) or (ii) entered into for the purpose of assuring in any other manner the obligee of such Indebtedness or other obligation of the payment thereof or to protect such obligee against loss in respect thereof (in whole or in part); provided, however, that the term Guarantee shall not include endorsements for collection or deposit in the ordinary course of business. The term Guarantee used as a verb has a corresponding meaning. "Guarantor Blockage Notice" has the meaning specified in Section 14.4(b). "Guarantor Payment Blockage Period" has the meaning specified in Section 14.4(b). "Guarantor Proceeding" has the meaning specified in Section 14.2. "Guarantor Senior Subordinated Payment" has the meaning specified in Section 14.2. "Guarantors" means the Company, Fresenius Medical Care Holdings, Inc., a New York corporation, and Fresenius Medical Care Deutschland GmbH, a German limited liability company. "Guaranty" means the Guarantee by a Guarantor of the Note Issuer's obligations with respect to the Securities. "Guaranty Agreement" means, in the context of a consolidation, merger or sale of all or substantially all of the assets of a Guarantor, an agreement by which the Surviving Person from such a transaction expressly assumes all of the obligations of such Guarantor under its Guaranty. "Hedging Obligations" of any Person means the obligations of such Person pursuant to any Interest Rate Agreement or Currency Agreement. "Holder" means a Person in whose name a Security is registered in the Securities Register. The Preferred Trustee shall be the initial Holder of the Securities. 9 17 "Incur" means issue, assume, Guarantee, incur or otherwise become liable for; provided, however, that any Indebtedness or Capital Stock of a Person existing at the time such Person becomes a Subsidiary (whether by merger, consolidation, acquisition or otherwise) shall be deemed to be Incurred by such Subsidiary at the time it becomes a Subsidiary. The term "Incurrence" when used as a noun shall have a correlative meaning. The accretion of principal of a non-interest bearing or other discount security shall be deemed the Incurrence of Indebtedness. "Indebtedness" means, with respect to any Person on any date of determination (without duplication), (i) the principal of and premium (if any) in respect of (A) indebtedness of such Person for money borrowed and (B) indebtedness evidenced by notes, debentures, bonds or other similar instruments for the payment of which such Person is responsible or liable; (ii) all Capital Lease Obligations of such Person; (iii) all obligations of such Person issued or assumed as the deferred purchase price of property or services, all conditional sale obligations of such Person and all obligations of such Person under any title retention agreement (other than (x) customary reservations or retentions of title under agreements with suppliers entered into in the ordinary course of business, (y) trade debt incurred in the ordinary course of business and due within six months of the incurrence thereof and (z) obligations incurred under a pension, retirement or deferred compensation program or arrangement regulated under the Employee Retirement Income Security Act of 1974, as amended, or the laws of a foreign government); (iv) all obligations of such Person for the reimbursement of any obligor on any letter of credit, bank guaranty, banker's acceptance or similar credit transaction (other than obligations with respect to letters of credit and bank guaranties (A) not made under the Senior Credit Agreement and (B) securing obligations (other than obligations described in clauses (i) through (iii) above) entered into in the ordinary course of business of such Person to the extent such letters of credit are not drawn upon or, if and to the extent drawn upon, such drawing is reimbursed no later than the tenth Business Day following receipt by such Person of a demand for reimbursement following payment on the letter of credit); (v) the amount of all obligations of such Person with respect to the redemption, repayment or other repurchase of any Disqualified Stock or, with respect to any subsidiary of such Person, any Preferred Stock (but excluding, in each case, any accrued dividends); (vi) all obligations of the type referred to in clauses (i) through (v) of other Persons and all dividends of other Persons for the payment of which, in either case, such Person is responsible or liable, directly or indirectly, as obligor, guarantor or otherwise, including by means of any Guarantee; (vii) all obligations of the type referred to in clauses (i) through (vi) of other Persons secured by any Lien on any property or asset of such Person (whether or not such obligation is assumed by such Person), the amount of such obligation being deemed to be the lesser of the value of such property or assets or the amount of the obligation so secured; and (viii) to the extent not otherwise included in this definition, Hedging Obligations of such Person. The amount of Indebtedness of any Person at any date shall be the outstanding balance at such date of all unconditional obligations as described above and the maximum liability, upon the occurrence of the contingency giving rise to the obligation, of any contingent obligations at such date. "Indenture" means this instrument as originally executed or as it may from time to time be supplemented or amended by one or more indentures supplemental hereto entered into pursuant to the applicable provisions hereof, including, for all purposes of this instrument and any such supplemental indenture, the provisions of the Trust Indenture Act that are deemed to 10 18 be a part of and govern this instrument and any such supplemental indenture, respectively, and shall include the terms of the Securities established as contemplated by Section 3.1. "Initial Security" or "Initial Securities" means any Security or Securities authenticated and delivered under this Indenture and not registered under the Securities Act. "Interest Payment Date" means March 14, June 14, September 14 and December 14 of each year, commencing September 14, 2001. "Interest Rate" means the rate of interest specified or determined as specified as being the rate of interest payable on the Securities. "Interest Rate Agreement" means any interest rate swap agreement, interest rate cap agreement or other financial agreement or arrangement designed and entered into to protect the Company or any Subsidiary against fluctuations in interest rates. "Investment" in any Person means any direct or indirect advance, loan (other than advances to customers in the ordinary course of business that are recorded as accounts receivable on the balance sheet of such Person) or other extensions of credit (including by way of Guarantee or similar arrangement) or capital contribution to (by means of any transfer of cash or other property to others or any payment for property or services for the account or use of others), or any purchase or acquisition of Capital Stock, Indebtedness or other similar instruments issued by such Person. "Investment Company Event" means the receipt by the Company of an Opinion of Counsel, rendered by a law firm having a nationally recognized tax and securities practice, to the effect that, as a result of the occurrence of a change in law or regulation or a change in interpretation or application of law or regulation by any legislative body, court, governmental agency or regulatory authority (a "Change in 1940 Act Law"), the Trust is or will be considered an "investment company" that is required to be registered under the 1940 Act, which Change in 1940 Act Law becomes effective on or after the date of original issuance of the Preferred Securities of the Trust. "Investment Grade" means a rating of BBB- or higher by S&P and Baa3 or higher by Moody's or the equivalent of such ratings by S&P or Moody's and the equivalent in respect of Rating Categories of any Rating Agencies substituted for S&P or Moody's. "Investment Grade Status" exists as of any time if at such time (i) the rating assigned to the Securities by Moody's is at least Baa3 (or the equivalent) or higher and (ii) the rating assigned to the Securities by S&P is at least BBB- (or the equivalent) or higher. "Issue Date" means the date on which the Securities are originally issued. "Lien" means any mortgage, pledge, security interest, encumbrance, lien or charge of any kind (including any conditional sale or other title retention agreement or lease in the nature thereof). "Liquidated Damages" means amounts payable to the holders of Preferred Securities as "Liquidated Damages" as defined in and pursuant to the Registration Rights Agreement. 11 19 "Luxco" means FMC Trust Finance S.a.r.l. Luxembourg, a private limited company (Societe a responsible Limitee) organized under the laws of Luxembourg and a wholly-owned subsidiary of the Company and, solely for purposes of Section 10.13, any successor thereto. "Maturity" when used with respect to any Security means the date on which the principal of such Security becomes due and payable as therein or herein provided, whether at the Stated Maturity or by declaration of acceleration, call for redemption or otherwise. "Moody's" means Moody's Investors Service, Inc. and its successors. "1940 Act" means the Investment Company Act of 1940, as amended. "NMC" means National Medical Care, Inc., a Delaware corporation. "Net Available Cash" from an Asset Disposition means cash payments received therefrom (including any cash payments received by way of deferred payment of principal pursuant to a note or installment receivable or otherwise, but only as and when received, but excluding any other consideration received in the form of assumption by the acquiring Person of Indebtedness or other obligations relating to such properties or assets or received in any other non-cash form) in each case net of (i) all legal, title and recording tax expenses, commissions and other fees and expenses incurred, and all U.S. federal, state, provincial, foreign and local taxes required to be accrued as a liability under GAAP, as a consequence of such Asset Disposition, (ii) all payments made on any Indebtedness which is secured by any assets subject to such Asset Disposition, in accordance with the terms of any Lien upon or other security agreement of any kind with respect to such assets, or which must by its terms, or in order to obtain a necessary consent to such Asset Disposition, or by applicable law be, repaid out of the proceeds from such Asset Disposition, (iii) all distributions and other payments required to be made to minority interest holders in Subsidiaries or joint ventures as a result of such Asset Disposition and (iv) the deduction of appropriate amounts provided by the seller as a reserve, in accordance with GAAP, against any liabilities associated with the property or other assets disposed in such Asset Disposition and retained by the Company or any Subsidiary after such Asset Disposition. "Net Cash Proceeds" with respect to any issuance or sale of Capital Stock, means the cash proceeds of such issuance or sale net of attorneys' fees, accountants' fees, underwriters' or placement agents' fees, discounts or commissions and brokerage, consultant and other fees actually incurred in connection with such issuance or sale and net of taxes paid or payable as a result thereof. "9% Indenture" means the senior subordinated indenture dated as of November 27, 1996, as amended by the supplemental indenture dated as of February 19, 1998 and the second supplemental indenture dated as of November 30, 1998, by and between Luxco, Fleet National Bank (as predecessor to State Street Bank and Trust Company), as trustee, the Company and the subsidiary guarantors named therein with respect to the issuance of the 9% senior subordinated notes of Luxco due December 1, 2006 in the aggregate principal amount of $360,360,000, as supplemented and in effect as of the date hereof, as it may be further amended, modified or otherwise supplemented from time to time. "9% Notes" means the 9% senior subordinated notes due December 1, 2006 issued pursuant to the 9% Indenture. 12 20 "Note Issuer" means the Person named as the "Note Issuer" in the first paragraph of this Indenture until a successor issuer shall have become such pursuant to Article VIII, and thereafter "Note Issuer" shall mean such successor issuer. "Note Issuer Request" and "Note Issuer Order" mean, respectively, the written request or order signed in the name of the Note Issuer by any two members of the Managing Board (if a German corporation) or of the Board of Directors (or any other two officers of the Note Issuer thereunto duly authorized) and delivered to the Trustee. "Officers' Certificate" means a certificate signed by (a) the Chairman and Chief Executive Officer, President or Vice President, and by the Treasurer, an Assistant Treasurer, the Controller, the Secretary or an Assistant Secretary, or (b) any two members of the Managing Board (if a German corporation) or of the Board of Directors, of the Company, the Note Issuer or a Guarantor, as the case may be, and delivered to the appropriate Trustee. "Opinion of Counsel" or "opinion of counsel" means, as to the Company, the Note Issuer or a Guarantor, a written opinion of counsel, who may be counsel for the Company, the Note Issuer or such Guarantor, as the case may be, but, other than in connection with the issuance of the Securities, not an employee of any thereof, and who shall be reasonably acceptable to the Trustee. "Other Bank Agreements" means any credit agreement or other agreement for loans, letters of credit, bank guaranties or other financial accommodations (and any related notes, guarantees, collateral documents, instruments and agreements executed in connection therewith) entered into by the Company or any Subsidiary with any bank; provided that the aggregate principal amount of Indebtedness that may be outstanding thereunder does not exceed $500 million, except to the extent that such additional principal amount of Indebtedness could be incurred pursuant to Section 10.8(b)(9) hereof. "Outstanding" means, when used in reference to any Securities, as of the date of determination, all Securities theretofore authenticated and delivered under this Indenture, except: (i) Securities theretofore canceled by the Trustee or delivered to the Trustee for cancellation; (ii) Securities for whose payment or redemption money in the necessary amount has been theretofore deposited with the Trustee or any Paying Agent in trust for the Holders of such Securities (other than the Note Issuer or any Guarantor) in trust or set aside and segregated in trust by the Note Issuer or a Guarantor (if the Note Issuer or a Guarantor shall act as its own Paying Agent) for the Holders of such Securities; provided, that if such Securities are to be redeemed, notice of such redemption has been duly given pursuant to this Indenture or provision therefor satisfactory to the Trustee has been made; (iii) Securities in substitution for or in lieu of which other Securities have been authenticated and delivered or which have been paid pursuant to Section 3.6, unless proof satisfactory to the Trustee is presented that any such Securities are held by Holders in whose hands such Securities are valid, binding and legal obligations of the Note Issuer; and 13 21 (iv) Securities which have been defeased pursuant to Section 4.3 hereof. provided, however, that in determining whether the Holders of the requisite principal amount of Outstanding Securities have given any request, demand, authorization, direction, notice, consent or waiver hereunder, Securities owned by the Note Issuer or any other obligor upon the Securities or any Affiliate of the Note Issuer or such other obligor shall be disregarded and deemed not to be Outstanding, except that, in determining whether the Trustee shall be protected in relying upon any such request, demand, authorization, direction, notice, consent or waiver, only Securities which the Trustee knows to be so owned shall be so disregarded. Securities so owned which have been pledged in good faith may be regarded as Outstanding if the pledgee establishes to the satisfaction of the Trustee the pledgee's right so to act with respect to such Securities and that the pledgee is not the Note Issuer or any other obligor upon the Securities or any Affiliate of the Note Issuer or such other obligor. Upon the written request of the Trustee, the Note Issuer shall furnish to the Trustee promptly an Officers' Certificate listing and identifying all Securities, if any, known by the Note Issuer to be owned or held by or for the account of the Note Issuer, or any other obligor on the Securities or any Affiliate of the Note Issuer or such obligor, and, subject to the provisions of Section 6.1, the Trustee shall be entitled to accept such Officers' Certificate as conclusive evidence of the facts therein set forth and of the fact that all Securities not listed therein are Outstanding for the purpose of any such determination. "Payment Blockage Period" has the meaning specified in Section 12.4(b). "Paying Agent" means the Trustee or any Person authorized by the Note Issuer to pay the principal of or interest on any Securities on behalf of the Note Issuer. "Permitted Investment" means an Investment by the Company or any Subsidiary in (i) a Person that shall, upon the making of such Investment, be or become a Subsidiary; provided, however, that the primary business of such Subsidiary is a Related Business; (ii) a Person if, as a result of such Investment, such other Person is merged or consolidated with or into, or transfers or conveys all or substantially all its assets to, the Company or a Subsidiary; provided, however, that such Person's primary business is a Related Business; (iii) Temporary Cash Investments; (iv) any demand deposit account with an Approved Lender; (v) receivables owing to the Company or any Subsidiary if created or acquired in the ordinary course of business and payable or dischargeable in accordance with customary trade terms; provided, however, that such trade terms may include such concessionary trade terms as the Company or any such Subsidiary deems reasonable under the circumstances; (vi) payroll, travel and similar advances to cover matters that are expected at the time of such advances ultimately to be treated as expenses for accounting purposes and that are made in the ordinary course of business; (vii) loans or advances to employees made in the ordinary course of business consistent with past practices of the Company or such Subsidiary; (viii) stock, obligations or securities received in settlement of debts created in the ordinary course of business and owing to the Company or any Subsidiary or in satisfaction of judgments; (ix) any Person to the extent such Investment represents the non-cash portion of the consideration received for an Asset Disposition as permitted pursuant to Section 10.13; and (x) any Affiliate (the primary business of which is a Related Business) that is not a Subsidiary (other than Fresenius Aktiengesellschaft), provided, that the aggregate of all such Investments outstanding at any one time under this clause (x) shall not exceed $125 million. 14 22 "Person" means any individual, corporation, partnership, joint venture, association, joint-stock company, trust, unincorporated organization, government or any agency, instrumentality or political subdivision thereof, or any other entity. "Predecessor Security" of any particular Security means every previous Security evidencing all or a portion of the same debt as that evidenced by such particular Security; and, for the purposes of this definition, any security authenticated and delivered under Section 3.6 in lieu of a lost, destroyed or stolen Security shall be deemed to evidence the same debt as the lost, destroyed or stolen Security. "Preferred Securities" has the meaning specified in the first paragraph of the Recitals to this Indenture. "Preferred Stock", as applied to the Capital Stock of any corporation, means Capital Stock of any class or classes (however designated) which is preferred as to the payment of dividends, or as to the distribution of assets upon any voluntary or involuntary liquidation or dissolution of such corporation, over shares of Capital Stock of any other class of such corporation. "Preferred Trustee" means State Street Bank and Trust Company, a Massachusetts chartered trust company, solely in its capacity as Preferred Trustee of the Trust and not in its individual capacity, or its successor in interest in such capacity, or any successor Preferred Trustee appointed as provided in the Declaration. "principal" of a Security means the principal of the Security plus the premium, if any, payable on the Security which is due or overdue or is to become due at the relevant time. "Proceeding" has the meaning specified in Section 12.2. "Rating Agencies" means (i) S&P and (ii) Moody's or (iii) if S&P or Moody's or both shall not make rating of the Securities publicly available, a nationally recognized securities rating agency or agencies, as the case may be, selected by the Company, which shall be substituted for S&P or Moody's or both, as the case may be. "Rating Category" means (i) with respect to S&P, any of the following categories: BB, B, CCC, CC, C and D (or equivalent successor categories); (ii) with respect to Moody's, any of the following categories: Ba, B, Caa, Ca, C and D (or equivalent successor categories); and (iii) the equivalent of any such category of S&P or Moody's used by another Rating Agency. In determining whether the rating of the Securities has decreased by one or more gradations, gradations within Rating Categories (+ and - for S&P, 1, 2, and 3 for Moody's; or the equivalent gradations for another Rating Agency) shall be taken into account (e.g., with respect to S&P, a decline in a rating from BB+ to BB, as well as from BB- to B+, will constitute a decrease of one gradation). "Rating Date" means the date which is 90 days prior to the earlier of (i) a Change of Control and (ii) public notice of the occurrence of a Change of Control or of the intention by the Company or any Person to effect a Change of Control. "Rating Decline" means the occurrence on or within 90 days after the date of the first public notice of the occurrence of a Change of Control or of the intention by the Company to 15 23 effect a Change of Control (which period shall be extended so long as the rating of the Securities is under publicly announced consideration for possible downgrade by any of the Rating Agencies) of: (a) in the event the Securities are rated by either Moody's or S&P on the Rating Date as Investment Grade, a decrease in the rating of the Securities by both Rating Agencies to a rating that is below Investment Grade, or (b) in the event the Securities are rated below Investment Grade by both Rating Agencies on the Rating Date, a decrease in the rating of the Securities by either Rating Agency by one or more gradations (including gradations within Rating Categories as well as between Rating Categories). "Receivables Financings" means (i) the accounts receivable financing facility of NMC contemplated by the Receivables Purchase Agreement dated as of August 28, 1997 by and between NMC, as Seller, and NMC Funding Corporation, as Purchaser and the Amended and Restated Transfer and Administration Agreement dated October 26, 2000 among Compass US Acquisition LLC, NMC Funding Corporation, National Medical Care, Inc., Enterprise Funding Corporation, the Bank Investors listed therein, Westdeutsche Landesbank Girozentrale, New York Branch, an administrative agent, and Bank of America N.A., an administrative agent, as each such agreement may be amended or supplemented from time to time, and (ii) any financing transaction or series of financing transactions that have been or may be entered into by the Company or a Subsidiary pursuant to which the Company or a Subsidiary may sell, convey or otherwise transfer to a Subsidiary or Affiliate, or any other Person, or may grant a security interest in, any receivables or interests therein secured by the merchandise or services financed thereby (whether such receivables are then existing or arising in the future) of the Company or such Subsidiary, as the case may be, and any assets related thereto, including without limitation, all security interests in merchandise or services financed thereby, the proceeds of such receivables, and other assets which are customarily sold or in respect of which security interests are customarily granted in connection with securitization transactions involving such assets. "Redemption Date," when used with respect to any Security to be redeemed, means the date fixed for such redemption by or pursuant to this Indenture. "Redemption Price," when used with respect to any Security to be redeemed, means the price at which it is to be redeemed pursuant to this Indenture. "Refinance" means, in respect of any Indebtedness, to refinance, extend, renew, refund, repay, prepay, redeem, defease or retire, or to issue other Indebtedness in exchange or replacement for, such indebtedness. "Refinanced" and "Refinancing" shall have correlative meanings. "Refinancing Indebtedness" means Indebtedness that Refinances any Indebtedness of the Company or any Subsidiary existing on the Issue Date or Incurred in compliance with the Indenture including Indebtedness that Refinances Refinancing Indebtedness; provided, however, that (i) such Refinancing Indebtedness has a Stated Maturity no earlier than the Stated Maturity of the Indebtedness being Refinanced, (ii) such Refinancing Indebtedness has an Average Life at the time such Refinancing Indebtedness is Incurred that is equal to or greater than the Average Life of the Indebtedness being Refinanced and (iii) such Refinancing Indebtedness has an aggregate principal amount (or if Incurred with original issue discount, an aggregate issue price) that is equal to or less than the aggregate principal amount (or if Incurred with original issue discount, the aggregate accreted value) then outstanding or committed (plus fees and expenses, including any premium and defeasance costs) under the 16 24 Indebtedness being Refinanced; provided further, however, that Refinancing Indebtedness shall not include (x) Indebtedness of a Subsidiary that Refinances Indebtedness of the Company or (y) Indebtedness of the Company or a Subsidiary (other than NMC or a subsidiary of NMC) that Refinances Indebtedness of another Subsidiary. "Registration Rights Agreement" means the Registration Rights Agreement dated June 6, 2001, by and among the Company, the Note Issuer, the Guarantors, the Trust and the Persons identified therein as the initial purchasers, as such agreement may be amended, modified or supplemented from time to time, relating to an exchange offer and registration rights for the Preferred Securities, the Company Guarantee, the Securities and the Guaranties. "Regular Record Date" for the interest payable on any Interest Payment Date means the date which is the 14th day immediately preceding such Interest Payment Date (whether or not a Business Day). "Related Business" means any business related, ancillary or complementary to the businesses of the Company and its Subsidiaries on the Issue Date. "Responsible Officer" when used with respect to the Trustee means any officer of the Trustee assigned by the Trustee from time to time to administer its corporate trust matters. "Restricted Payment" with respect to any Person means (i) the declaration or payment of any dividends or any other distributions of any sort in respect of its Capital Stock (including any payment in connection with any merger or consolidation involving such Person) or similar payment to the direct or indirect holders of its Capital Stock (other than dividends or distributions payable solely in its Capital Stock (other than Disqualified Stock) and dividends or distributions payable solely to the Company or a Subsidiary, and other than pro rata dividends or other distributions made by a Subsidiary that is not a Wholly Owned Subsidiary to minority stockholders (or owners of an equivalent interest in the case of a Subsidiary that is an entity other than a corporation)), (ii) the purchase, redemption or other acquisition or retirement for value of any Capital Stock of the Company held by any Person or of any Capital Stock of a Subsidiary held by any Affiliate of the Company (other than a Subsidiary), including the exercise of any option to exchange any Capital Stock (other than into Capital Stock of the Company that is not Disqualified Stock), (iii) the purchase, repurchase, redemption, defeasance or other acquisition or retirement for value, prior to scheduled maturity, scheduled repayment or scheduled sinking fund payment of any Subordinated Obligations (other than the purchase, repurchase or other acquisition of Subordinated Obligations purchased in anticipation of satisfying a sinking fund obligation, principal installment or final maturity, in each case due within one year of the date of acquisition) or (iv) the making of any Investment in any Person (other than a Permitted Investment). "Secured Indebtedness" means any Indebtedness of the Company secured by a Lien. "Securities Act" means the U.S. Securities Act of 1933 or any successor statute thereto, in each case as amended from time to time. "Securities" or "Security" means (a) any Initial Securities or Initial Security and (b) any Exchange Security or Exchange Securities. 17 25 "Securities Register" and "Securities Registrar" have the respective meanings specified in Section 3.5. "Senior Credit Agreement" means the Credit Agreement, dated as of September 27, 1996, among NMC, certain subsidiaries and affiliates thereof, the lenders referred to in such Credit Agreement, NationsBank, N.A., as paying agent, and The Bank of Nova Scotia, The Chase Manhattan Bank, Dresdner Bank AG and NationsBank, N.A., as managing agents, including any related notes, guarantees, collateral documents, instruments and agreements executed in connection with such Credit Agreement, in each case as amended, modified, renewed, refunded, replaced, restated or refinanced from time to time; provided that such amendment, modification, renewal, refunding, replacement, restatement or refinancing (i) does not cause the aggregate principal amount of Indebtedness that may be outstanding under such Credit Agreement to exceed $2.5 billion, except to the extent that such additional principal amount of Indebtedness could be incurred pursuant to Section 10.8(b)(9), and (ii) does not contain, with respect to any Subsidiary, any encumbrances or restrictions of the type contained in clauses (a), (b) and (c) of Section 10.10 that are less favorable to the Holders of Securities than the encumbrances and restrictions with respect to such Subsidiary contained in such Credit Agreement prior thereto. "Senior Indebtedness" means, with respect to the Note Issuer or a Guarantor, as the case may be, (i) Indebtedness of such Person, whether outstanding on the Issue Date or thereafter incurred and (ii) accrued and unpaid interest (including interest accruing on or after the filing of any petition in bankruptcy or for reorganization relating to such Person, whether or not the claim for such interest is allowed as a claim after such filing) in respect of (A) any Indebtedness of such Person under the Senior Credit Agreement, (B) Indebtedness of such Person for money borrowed and (C) Indebtedness evidenced by notes, debentures, bonds or other similar instruments for the payment of which such Person is responsible or liable unless, in the instrument creating or evidencing the same or pursuant to which the same is outstanding, it is provided that such obligations are subordinate in right of payment to the Securities; provided, however, that Senior Indebtedness shall not include (1) any obligation of such Person to any subsidiary or parent of such person, (2) any liability for Federal, state, local or other taxes owed or owing by such person, (3) any accounts payable or other liability to trade creditors arising in the ordinary course of business (including guarantees thereof or instruments evidencing such liabilities), (4) any Indebtedness of such Person (and any accrued and unpaid interest in respect thereof) which is expressly subordinate or junior in any respect to any other Indebtedness or other obligation of such Person, including Senior Subordinated Indebtedness or (5) that portion of any Indebtedness which at the time of incurrence is incurred in violation of the Indenture. "Senior Subordinated Indebtedness" means the 9% Notes, the 7 7/8% Notes, the 7 3/8% Notes, the Securities and any Indebtedness of the Company or the Note Issuer that specifically provides that such Indebtedness is to rank pari passu with the Company's and the Note Issuer's respective obligations with respect to the Securities in right of payment and is not subordinated by its terms in right of payment to any Indebtedness or other obligation of the Company or the Note Issuer that is not Senior Indebtedness. "Senior Subordinated Payment" has the meaning specified in Section 12.2. "7 7/8% Indenture" means the Senior Subordinated Indenture dated as of February 19, 1998, by and among Luxco, State Street Bank and Trust Company, as Trustee, the 18 26 Company and the other Guarantors with respect to the issuance of 7 7/8% Senior Subordinated Notes of Luxco due February 1, 2008 in the aggregate principal amount of $450,450,000, as it may be amended, supplemented or otherwise modified from time to time. "7 7/8% Notes" means the 7 7/8% Senior Subordinated Notes of Luxco due February 1, 2008 issued pursuant to the 7 7/8% Indenture. "7 3/8% Indenture" means the Senior Subordinated Indenture dated as of February 19, 1998, by and among Luxco, State Street Bank and Trust Company as Trustee, the Company and the other Guarantors with respect to the issuance of 7 3/8% Senior Subordinated Notes of Luxco due February 1, 2008 in the aggregate principal amount of DM 300,300,000, as it may be amended, supplemented or otherwise modified from time to time. "7 3/8% Notes" means the 7 3/8% Senior Subordinated Notes of Luxco due February 1, 2008 issued pursuant to the 7 3/8% Indenture. "Shelf Registration Statement" means a shelf registration statement of the Note Issuer, the Guarantors and the Trust pursuant to the provisions of the Registration Rights Agreement on an appropriate form under Rule 415 under the Securities Act, or any similar rule that may be adopted by the Commission, and all amendments and supplements to such registration statement, including post-effective amendments, in each case including the prospectus contained therein, all exhibits and materials included therewith or incorporated by reference therein pursuant to the requirements of the Securities Act or the Exchange Act. "S&P" means Standard & Poor's Corporation and its successors. "Specified Senior Indebtedness" means, with respect to the Company, the Note Issuer or a Guarantor, as the case may be, (i) any Indebtedness of such Person under the Senior Credit Agreement, (ii) any Refinancing Indebtedness of such Person in respect of Indebtedness specified in clause (i) and (iii) after all Indebtedness specified in clause (i) and (ii) above is no longer outstanding, any other Senior Indebtedness of such Person permitted under the Indenture the outstanding principal amount of which is more than $25 million at the time of determination and that has been designated by such Person as "Specified Senior Indebtedness." "Special Record Date" for the payment of any Defaulted Interest means a date fixed by the Trustee pursuant to Section 3.7. "Stated Maturity" means, with respect to any security, the date specified in such security as the fixed date on which the final payment of principal of such security is due and payable, including pursuant to any mandatory redemption provision (but excluding any provision providing for the repurchase of such security at the option of the Holder thereof upon the happening of any contingency unless such contingency has occurred). "Subordinated Obligation" means any Indebtedness of the Note Issuer or the Company (whether outstanding on the Issue Date or thereafter Incurred) that is subordinate or junior in right of payment to the Securities pursuant to a written agreement to that effect. "Subsidiary" means, with respect to any Person, any corporation, limited liability company, association, partnership or other business entity of which more than 50% of the total 19 27 voting power of shares of Voting Stock is at the time owned or controlled, directly or indirectly, by (i) such Person; (ii) such Person and one or more Subsidiaries of such Person; or (iii) one or more Subsidiaries of such Person. "Surviving Person" means, with respect to any Person involved in any merger, consolidation or other business combination or the sale, assignment, transfer, lease, conveyance or other disposition of all or substantially all of such Person's assets, the Person formed by or surviving such transaction or the Person to which such disposition is made. "Tax Event" means that the Company shall have obtained of an Opinion of Counsel of nationally recognized independent tax counsel to the effect that, as a result of (a) any amendment to or change (including any announced prospective change) in the laws (or any regulations promulgated thereunder) of the United States, Germany, the United Kingdom or the jurisdiction of formation of the Note Issuer (or any political subdivision or taxing authority thereof or therein) or (b) any amendment to or change to any official position regarding the application or interpretation of such laws or regulations by any legislative body, court, governmental agency or regulatory authority (including the enactment of any legislation and the publication of any judicial decision or regulatory determination on or after the date of issuance of the Preferred Securities), which amendment or change is effective or which interpretation or pronouncement is announced on or after the date of issuance of the Preferred Securities other than, in either case, any amendment or change implementing, complying with, or introduced in order to conform to, or otherwise arising as a result of or in connection with, any European Union Directive on the taxation of savings implementing the conclusions of the ECOFIN Council meeting of 26-27 November 2000, there is more than an insubstantial risk that (i) the Trust is or will be subject to U.S. Federal or German income tax, or income tax in the jurisdiction of formation of the Note Issuer, in each case with respect to interest received or accrued on the Securities, (ii) interest payable to the Trust on the Securities is not or will not be deductible for U.S. Federal or German income tax purposes or for purposes of any income tax imposed by the jurisdiction of formation of the Note Issuer or (iii) the Trust is or will be subject to more than a de minimis amount of other taxes, duties, assessments or other governmental charges of whatever nature imposed by the United States, Germany, or the jurisdiction of formation of the Note Issuer, or any other taxing authority. "Taxes" means any present or future tax, duty, levy, impost, assessment or other governmental charge (including penalties, interest and other liabilities related thereto) imposed or levied by or on behalf of the United States, Germany, the United Kingdom or the jurisdiction of formation of the Note Issuer or any Guarantor, or of any territory thereof or by an authority or agency therein or thereof having power to tax. "Temporary Cash Investments" means any of the following: (a) securities issued or directly and fully guaranteed or insured by (i) 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) and (ii) the governments of Germany and the United Kingdom, having in each case maturities of not more than twelve months from the date of acquisition, (b) time deposits and certificates of deposit, eurodollar time deposits and eurodollar certificates of deposit of (i) any lender under the Senior Credit Agreement, or (ii) any United States, German, United Kingdom or Swiss commercial bank of recognized standing (y) having capital and surplus in excess of $500,000,000 and (z) 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 20 28 thereof (any such bank being an "Approved Lender"), in each case with maturities of not more than 270 days from the date of acquisition, (c) commercial paper and variable or fixed rate notes issued by an Approved Lender (or by the parent company thereof) and maturing within six months of the date of acquisition, (d) repurchase agreements entered into by a Person with a bank or trust company (including any of the lenders under the Senior Credit Agreement) or recognized securities dealer having capital and surplus in excess of $500,000,000 for (i) direct obligations issued by or fully guaranteed by the United States of America, (ii) time deposits or certificates of deposit described under subsection (b) above, or (iii) commercial paper or other notes described under subjection (c) above, in which, in each such case, such bank, trust company or dealer shall have a perfected first priority security interest (subject to no other Liens) and having, on the date of purchase thereof, a fair market value of at least 100% of the amount of the repurchase obligations, (e) obligations of any state of the United States or any political subdivision thereof, the interest with respect to which is exempt from federal income taxation under Section 103 of the U.S. Internal Revenue Code, having a long term rating of at least AA- or Aa-3 by S&P or Moody's, respectively, and maturing within three years from the date of acquisition thereof, (f) Investments in municipal auction preferred stock (i) rated AAA (or the equivalent thereof) or better by S&P or Aaa (or the equivalent thereof) or better by Moody's and (ii) with dividends that reset at least once every 365 days and (g) Investments, classified in accordance with GAAP as current assets, in money market investment programs (i) registered under the Investment Company Act of 1940, as amended, or (ii) operated by an investment company in Germany or the United Kingdom and subject to regulations under the laws of such jurisdiction, in each case which are administered by reputable financial institutions having capital of at least $100,000,000 and the portfolios of which are limited to Investments of the character described in clauses (a), (b), (c), (e) and (f) above. "Trust" has the meaning specified in the first paragraph of the Recitals to this Indenture. "Trustee" means the Person named as the "Trustee" in the first paragraph of this Indenture until a successor Trustee shall have become such pursuant to the applicable provisions of this Indenture, and thereafter "Trustee" shall mean or include each Person who is then a Trustee hereunder. "Trust Indenture Act" means the U.S. Trust Indenture Act of 1939 as amended and as in force at the date as of which this Indenture was executed, except as provided in Section 9.5; provided, however, that in the event the Trust Indenture Act of 1939 is amended after such date, "Trust Indenture Act" means, to the extent required by any such amendment, the Trust Indenture Act of 1939 as so amended. "Trust Securities" has the meaning specified in the first paragraph of the Recitals to this Indenture. "Vice President" when used with respect to the Company, the Note Issuer, a Guarantor or the Trustee means any duly appointed vice president, whether or not designated by a number or a word or words added before or after the title "vice president." "Voting Stock" of a Person means all classes of Capital Stock or other interests (including partnership interests) of such Person then outstanding and normally entitled (without regard to the occurrence of any contingency) to vote in the election of directors, managers or trustees thereof. 21 29 "Wholly Owned Subsidiary" means a Subsidiary all the Capital Stock of which (other than (i) directors' qualifying shares and shares held by other Persons to the extent such shares are required by applicable law to be held by a Person other than the Company or a Subsidiary and (ii) shares of Preferred Stock of Fresenius Medical Care Holdings, Inc.) is owned by the Company or by one or more Wholly Owned Subsidiaries, or by the Company and one or more Wholly Owned Subsidiaries. .2 Compliance Certificate and Opinions. Upon any application or request by the Company, the Note Issuer or any other Guarantor to the Trustee to take any action under any provision of this Indenture, the Company, the Note Issuer or such Guarantor shall furnish to the Trustee an Officers' Certificate stating that all conditions precedent (including covenants, compliance with which constitutes a condition precedent), if any, provided for in this Indenture relating to the proposed action have been complied with and an Opinion of Counsel stating that in the opinion of such counsel all such conditions precedent, if any, have been complied with, except that in the case of any such application or request as to which the furnishing of such documents is specifically required by any provision of this Indenture relating to such particular application or request, no additional certificate or opinion need be furnished. Every certificate or opinion with respect to compliance with a condition precedent or covenant provided for in this Indenture (other than the certificates provided pursuant to Section 10.16) shall include: (1) a statement that each individual signing such certificate or opinion has read such covenant or condition and the definitions herein relating thereto; (2) a brief statement as to the nature and scope of the examination or investigation upon which the statements or opinions contained in such certificate or opinion are based; (3) a statement that, in the opinion of each such individual, he has made such examination or investigation as is necessary to enable him to express an informed opinion as to whether or not such covenant or condition has been complied with; and (4) a statement as to whether, in the opinion of each such individual, such condition or covenant has been complied with. .3 Form of Documents Delivered to Trustee In any case where several matters are required to be certified by, or covered by an opinion of, any specified Person, it is not necessary that all such matters be certified by, or covered by the opinion of, only one such Person, or that they be so certified or covered by only one document, but one such Person may certify or give an opinion with respect to some matters and one or more other such Persons as to other matters, and any such Person may certify or give an opinion as to such matters in one or several documents. Any certificate or opinion of an officer of the Note Issuer, the Company or another Guarantor may be based, insofar as it relates to legal matters, upon a certificate or 22 30 opinion of, or representations by, counsel, unless such officer knows, or in the exercise of reasonable care should know, that the certificate or opinion or representations with respect to the matters upon which his certificate or opinion is based are erroneous. Any such certificate or Opinion of Counsel may be based, insofar as it relates to factual matters, upon a certificate or opinion of, or representations by, an officer or officers of the Note Issuer, the Company or another Guarantor stating that the information with respect to such factual matters is in the possession of the Note Issuer, the Company or another Guarantor, unless the individual attorneys actively engaged in the transaction which is the subject matter of such opinion in the office of such counsel have actual knowledge that the certificate or opinion or representations with respect to such matters are erroneous. Where any Person is required to make, give or execute two or more applications, requests, consents, certificates, statements, opinions or other instruments under this Indenture, they may, but need not, be consolidated and form one instrument. .4 Acts of Holders; Record Date. (a) Any request, demand, authorization, direction, notice, consent, waiver or other action provided by this Indenture to be given to or taken by Holders may be embodied in and evidenced by one or more instruments of substantially similar tenor signed by such Holders in person or by an agent duly appointed in writing; and, except as herein otherwise expressly provided, such action shall become effective when such instrument or instruments is or are delivered to the Trustee, and, where it is hereby expressly required, to the Note Issuer or the Company, as applicable. Such instrument or instruments (and the action embodied therein and evidenced thereby) are herein sometimes referred to as the "Act" of the Holders signing such instrument or instruments. Proof of execution of any such instrument or of a writing appointing any such agent shall be sufficient for any purpose of this Indenture and (subject to Section 6.1) conclusive in favor of the Trustee and the Note Issuer or the Company, as applicable, if made in the manner provided in this Section 1.4. (b) The fact and date of the execution by any Person of any such instrument or writing may be proved by the affidavit of a witness of such execution or by the certificate of a notary public or other officer authorized by law to take acknowledgments of deeds, certifying that the individual signing such instrument or writing acknowledged to him the execution thereof. Where such execution is by a Person acting in other than his individual capacity, such certificate or affidavit shall also constitute sufficient proof of his authority. (c) The fact and date of the execution by any Person of any such instrument or writing, or the authority of the Person executing the same, may also be proved in any other manner which the Trustee deems sufficient and in accordance with such reasonable rules as the Trustee may determine. (d) The ownership of Securities shall be proved by the Securities Register. (e) Any request, demand, authorization, direction, notice, consent, waiver or other Act of the Holder of any Security shall bind every future Holder of the same Security and the Holder of every Security issued upon the registration of transfer thereof or in exchange therefor or in lieu thereof in respect of anything done, omitted or suffered to be done by the Trustee, the Note Issuer, or the Company in reliance thereon, whether or not notation of such action is made upon such Security. 23 31 (f) The Note Issuer may, but shall not be obligated to, fix a record date for the purpose of determining the Holders entitled to take any action under this Indenture by vote or consent. Except as otherwise provided herein, such record date shall be the later of 30 days prior to the first solicitation of such consent or vote or the date of the most recent list of Securityholders furnished to the Trustee pursuant to Section 7.1 prior to such solicitation. If a record date is fixed, those Persons who were Securityholders at such record date (or their duly designated proxies), and only those Persons, shall be entitled to take such action by vote or consent or to revoke any vote or consent previously given, whether or not such persons continue to be Holders after such record date, provided, however, that unless such vote or consent is obtained from the Holders (or their duly designated proxies) of the requisite principal amount of Outstanding Securities prior to the date which is the 90th day after such record date, any such vote or consent previously given shall automatically and without further action by any Holder be cancelled and of no further effect. .5 Notices, etc., to Trustee, Note Issuer and Guarantors. Any request, demand, authorization, direction, notice, consent, waiver or Act of Holders or other document provided or permitted by this Indenture to be made upon, given or furnished to, or filed with, (1) the Trustee by any Holder or by the Note Issuer or any Guarantor shall be sufficient for every purpose hereunder if made, given, furnished or filed in writing to or with the Trustee at its Corporate Trust office, or (2) the Note Issuer or any Guarantor by the Trustee or by any Holder shall be sufficient for every purpose (except as otherwise provided in Sections 5.1 and 5.2 hereof) hereunder if in writing and mailed, first class, postage prepaid, in the case of the Note Issuer to it at the address of the Note Issuer's principal office specified in the first paragraph of this Indenture or at any other address previously furnished in writing to the Trustee by the Note Issuer and, in the case of any Guarantor, to it at its principal office at Else-Kroner Str. 1, 61346 Bad Homburg v.d.H., Germany or at any other address previously furnished in writing to the Trustee by such Guarantor; provided, however, that all notices sent to the Note Issuer and any Guarantor pursuant to this Indenture shall be sent in copy to O'Melveny & Myers LLP (Citicorp Center, 153 East 53rd Street, New York, NY 10022-4611, Attn: Dr. Ulrich Wagner) and shall be effective five Business Days after such mailing. .6 Notice to Holders; Waiver. Where this Indenture provides for notice to Holders of any event, such notice shall be sufficiently given (unless otherwise herein expressly provided) if in writing and mailed, first class postage prepaid, to each Holder affected by such event, at the address of such Holder as it appears in the Securities Register, not later than the latest date (if any), and not earlier than the earliest date (if any), prescribed for the giving of such notice. In any case where notice to Holders is given by mail, neither the failure to mail such notice, nor any defect in any notice so mailed, to any particular Holder shall affect the sufficiency of such notice with respect to other Holders. Where this Indenture provides for notice in any manner, such notice may be waived in writing by the Person entitled to receive such notice, either before or after the event, and such waiver shall be the equivalent of such notice. Waivers of notice by Holders 24 32 shall be filed with the Trustee, but such filing shall not be a condition precedent to the validity of any action taken in reliance upon such waiver. In case by reason of the suspension of regular mail service or by reason of any other cause it shall be impracticable to give such notice by mail, then such notification as shall be made with the approval of the Trustee shall constitute a sufficient notification for every purpose hereunder. Additionally, at any time that the Securities are listed on the Luxembourg Stock Exchange all notices regarding the Securities including, without limitation, notices pursuant to Sections 3.7, 6.2, 6.10(f), 6.14, 10.13(b), 10.15(b) and 11.4 hereof, shall be published in the Luxemburger Wort or in such other publication as required by the rules of the Luxembourg Stock Exchange. Any such notice will become effective for all purposes on the date of its publication. There may (provided that, in the case of Securities listed on the Luxembourg Stock Exchange, the rules of the Luxembourg Stock Exchange so permit), be substituted for such publication in such newspaper the delivery of the relevant notice to the applicable clearing system for communication by it to the Holders. Any such notice shall be deemed to have been given to the Holders on the seventh day after the day on which the said notice was given to all applicable clearing systems. The Note Issuer shall be responsible for compliance with this paragraph and shall provide directions to the Trustee in connection therewith. .7 Conflict with Trust Indenture Act. Upon consummation of the Exchange Offer, the Trust Indenture Act shall apply to this Indenture and if any provision hereof limits, qualifies or conflicts with a provision of the Trust Indenture Act that is required or deemed under the Trust Indenture Act to be part of and govern this Indenture, the latter provision shall control. If any provision of this Indenture modifies or excludes any provision of the Trust Indenture Act that may be so modified or excluded, the latter provision shall be deemed to apply to this Indenture as so modified or to be excluded, as the case may be. .8 Effect of Headings and Table of Contents. The Article and Section headings herein and the Table of Contents are for convenience only and shall not affect the construction hereof. .9 Successors and Assigns. All covenants and agreements in this Indenture by the Note Issuer, the Company or any other Guarantor shall bind its respective successors and assigns, whether so expressed or not. .10 Separability Clause. In case any provision in this Indenture or in the Securities shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby. 25 33 .11 Benefits of Indenture. Nothing in this Indenture or in the Securities, express or implied, shall give to any Person, other than (i) the parties hereto, (ii) any Paying Agent and their successors and assigns, (iii) the holders of Senior Indebtedness (subject to Articles XII and XIV hereof), and (iv) the Holders of the Securities, any benefit or any legal or equitable right, remedy or claim under this Indenture. .12 Governing Law. THIS INDENTURE, THE SECURITIES AND THE GUARANTIES ENDORSED THEREON SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT GIVING EFFECT TO PRINCIPLES OF CONFLICT OF LAWS. .13 Non-Business Days. In any case where any Interest Payment Date, Redemption Date or Stated Maturity of any Security shall not be a Business Day, then (notwithstanding any other provision of this Indenture or the Securities) payment of interest or principal (and premium, if any) shall be made on the immediately preceding Business Day (and interest shall accrue for the period from and after such immediately preceding Business Day through such Interest Payment Date, Redemption Date or Stated Maturity, as the case may be, (in each case with the same force and effect as if made on the Interest Payment Date or Redemption Date or at the Stated Maturity)). .14 Duplicate Originals. The parties may sign any number of copies of this Indenture. Each signed copy shall be an original, but all of them together represent the same agreement. .15 Submission to Jurisdiction. Fresenius Medical Care Holdings, Inc. hereby appoints CT Corporation System through its office at 1633 Broadway, New York, New York 10019 as its authorized agent and each of the Company, the Note Issuer and each other Guarantor hereby irrevocably appoints, Fresenius Medical Care Holdings, Inc. c/o CT Corporation System through its office at 1633 Broadway, New York, New York 10019 as its authorized agent upon which process may be served in any legal action or proceeding against it with respect to its obligations under this Indenture or the Securities instituted in any federal or state court in the Borough of Manhattan, The City of New York, by the Trustee or the Holder of any Securities and agrees that service of process upon such authorized agents, together with written notice of said service to the Company by the person serving the same, addressed as provided in Section 1.5, shall be deemed in every respect effective service of process upon the Company, the Note Issuer and each other Guarantor, as the case may be, in any such legal action or proceeding, and each of the Company, the Note Issuer and each other Guarantor hereby irrevocably submits to the non-exclusive jurisdiction of any such court in respect of any such legal action or proceeding. Such appointment shall be irrevocable until this Indenture has been satisfied and discharged in accordance with Article 4 hereof. Notwithstanding the foregoing, each of the Company, the Note Issuer and each other Guarantor reserves the right to appoint another 26 34 Person located or with an office in the Borough of Manhattan, The City of New York, selected in its discretion, as a successor authorized agent, and upon acceptance of such appointment by such a successor the appointment of the prior authorized agent shall terminate. If for any reason CT Corporation System or Fresenius Medical Care Holdings, Inc., as the case may be, ceases to be able to act as an authorized agent or to have an address in the Borough of Manhattan, The City of New York, each of the Company, the Note Issuer and each other Guarantor, as the case may be, will appoint a successor authorized agent in accordance with the preceding sentence. Each of the Company, the Note Issuer and each other Guarantor further agrees to take any and all action, including the filing of any and all documents and instruments as may be necessary to continue such designation and appointment of such agent in full force and effect until this Indenture has been satisfied and discharged in accordance with Article 4 hereof. Service of process upon each authorized agent addressed to it at the respective addresses set forth above, as such addresses may be each changed within the Borough of Manhattan, The City of New York by notice given by each authorized agent to the Trustees, together with written notice of such service mailed or delivered to the Company shall be deemed, in every respect, effective service of process on the Company, the Note Issuer and each other Guarantor, as the case may be. ARTICLE II. SECURITY AND GUARANTY FORMS .1 Forms Generally. The Securities, the Guaranties to be endorsed thereon and the Trustee's certificate of authentication shall be in substantially the forms set forth in this Article, or in such other form or forms as shall be established by or pursuant to a Board Resolution or in one or more indentures supplemental hereto, in each case with such appropriate insertions, omissions, substitutions and other variations as are required or permitted by this Indenture and may have such letters, numbers or other marks of identification and such legends or endorsements placed thereon as may be required to comply with applicable tax laws or the rules of any securities exchange or as may, consistently herewith, be determined by the officers executing such Securities or Guaranties, as the case may be, as evidenced by their execution of the Securities or Guaranties, as the case may be. If the form of Securities or Guaranties is established by action taken pursuant to a Board Resolution, such Board Resolution to be delivered to the Trustee at or prior to the delivery of the Note Issuer Order contemplated by Section 3.3 with respect to the authentication and delivery of such Securities. The Trustee's certificates of authentication shall be substantially in the form set forth in this Article. The definitive Securities and Guaranties to be endorsed thereon shall be printed, lithographed or engraved or produced by any combination of these methods, if required by any securities exchange on which the Securities may be listed, on a steel engraved border or steel engraved borders or may be produced in any other manner permitted by the rules of any securities exchange on which the Securities may be listed, all as determined by the officers executing such Securities or Guaranties, as the case may be, as evidenced by their execution of such Securities or Guaranties, as the case may be. 27 35 .2 Form of Face of Security. FMC TRUST FINANCE S.a.r.l. LUXEMBOURG-III 7 7/8% SENIOR SUBORDINATED NOTES DUE JUNE 15, 2011 GUARANTEED AS TO PAYMENT OF PRINCIPAL, PREMIUM, IF ANY, AND INTEREST BY FRESENIUS MEDICAL CARE AG AND CERTAIN OF ITS SUBSIDIARIES NO.___ $225,225,000 FMC TRUST FINANCE S.a.r.l. LUXEMBOURG-III, a private limited company (Societe a responsabilite limitee) organized and existing under the laws of Luxembourg (hereinafter called the "Note Issuer", which term includes any successor corporation under the Indenture hereinafter referred to), for value received, hereby promises to pay to STATE STREET BANK AND TRUST COMPANY, as Preferred Trustee for Fresenius Medical Care Capital Trust IV or registered assigns, the principal sum of two hundred twenty-five million, two hundred twenty-five thousand dollars on June 15, 2011. The Note Issuer further promises to pay interest on said principal sum quarterly in arrears on March 14, June 14, September 14 and December 14 of each year, commencing September 14, 2001, (each such date, an "Interest Payment Date") (provided, however, that interest paid on such Interest Payment Dates will accrue through March 15, June 15, September 15, and December 15, respectively) at the rate of 7 7/8% per annum, (plus Additional Amounts and Additional Sums, if any) until the principal hereof is paid or duly provided for or made available for payment and on any overdue principal and (without duplication and to the extent that payment of such interest is enforceable under applicable law) on any interest which is in arrears more than a quarter at the rate of 7 7/8% per annum, compounded quarterly. The amount of interest payable for any period shall be computed on the basis of twelve 30-day months and a 360-day year. The amount of interest payable for any partial period shall be computed on the basis of the number of days elapsed in a 360-day year of twelve 30-day months. In the event that any date on which interest is payable on this Security is not a Business Day, then a payment of the interest payable on such date will be made on the immediately preceding Business Day (and interest shall accrue for the period from and after such immediately preceding Business Day through such Interest Payment Date, Redemption Date or Stated Maturity, as the case may be, (in each case with the same force and effect as if made on the Interest Payment Date or Redemption Date or at the Stated Maturity)). A "Business Day" shall mean any day other than (i) a Saturday or Sunday, (ii) a day on which banking institutions in New York City, Frankfurt am Main or Luxembourg are authorized or required by law or executive order to remain closed or (iii) a day on which the Corporate Trust Office of the Trustee, or, with respect to the Preferred Securities, the principal office of the Preferred Trustee under the Declaration hereinafter referred to for Fresenius Medical Care Capital Trust IV, is closed for business. The interest so payable, and punctually paid or duly provided for, on any Interest Payment Date will, as provided in the Indenture, be paid to the Person in whose name this Security 28 36 (or one or more Predecessor Securities, as defined in the Indenture) is registered at the close of business on the Regular Record Date for such interest, which shall be the date which is the fourteenth day immediately preceding such Interest Payment Date (whether or not a Business Day). Any interest not so punctually paid or duly provided for shall forthwith cease to be payable to the Holder on such Regular Record Date and may either be paid to the Person in whose name this Security (or one or more Predecessor Securities) is registered at the close of business on a Special Record Date for the payment of such Defaulted Interest to be fixed by the Trustee, notice whereof shall be given to Holders not less than 10 days prior to such Special Record Date, or be paid in any other lawful manner not inconsistent with the requirements of any securities exchange on which the Securities may be listed, and upon such notice as may be required by such exchange, all as more fully provided in said Indenture. [IF THE SECURITY IS AN INITIAL SECURITY, INSERT - Under the terms and conditions of, and in the circumstances set forth in, the Registration Rights Agreement, additional payments in the form of Liquidated Damages may be payable in respect of this Security.] Payments on this Security issued as a Global Security shall be made in immediately available funds to the Depository. In the event that this Security is issued in certificated form, the principal of (and premium, if any) and interest (including Additional Sums and Additional Amounts, if any) on the Security will be payable at the office maintained by the Note Issuer under the Indenture; provided, that unless the Security is held by the Trust or any permissible successor entity as provided under the Declaration in the event of a merger, consolidation or amalgamation of the Trust, payment of interest may be made at the option of the Note Issuer by check mailed to the address of the person entitled thereto, as such address shall appear in the Register. The indebtedness evidenced by this Security is, to the extent provided in the Indenture, subordinate and subject in right of payment to the prior payment in full of all Senior Indebtedness, and this Security is issued subject to the provisions of the Indenture with respect thereto. Each Holder of this Security, by accepting the same, (a) agrees to and shall be bound by such provisions, (b) authorizes and directs the Trustee on his behalf to take such actions as may be necessary or appropriate to effectuate the subordination so provided and (c) appoints the Trustee his attorney-in-fact for any and all such purposes. Each Holder hereof, by his acceptance hereof, waives all notice of the acceptance of the subordination provisions contained herein and in the Indenture by each holder of Senior Indebtedness, whether now outstanding or hereafter incurred, and waives reliance by each such holder upon said provisions. Reference is hereby made to the further provisions of this Security set forth on the reverse hereof, which further provisions shall for all purposes have the same effect as if set forth at this place. Unless the certificate of authentication hereon has been executed by the Trustee referred to on the reverse hereof by manual signature, this Security shall not be 29 37 entitled to any benefit under the Indenture or be valid or obligatory for any purpose. IN WITNESS WHEREOF, the Note Issuer has caused this instrument to be duly executed. Dated: June 6, 2001 FMC TRUST FINANCE S.a.r.l. LUXEMBOURG-III By: ------------------------------- Name: ------------------------------- .3 Form of Reverse of Security. This Security is one of a duly authorized issue of securities of the Note Issuer (herein called the "Securities"), issued under a Senior Subordinated Indenture, dated as of June 6, 2001 (the "Indenture"), between the Note Issuer, as Issuer, and State Street Bank and Trust Company, as Trustee (herein called the "Trustee", which term includes any successor trustee under the Indenture), Fresenius Medical Care AG (herein called the "Company"), as the Company and as a Guarantor, Fresenius Medical Care Holdings, Inc. and Fresenius Medical Care Deutschland GmbH, as Guarantors to which Indenture and all indentures supplemental thereto reference is hereby made for a statement of the respective rights, limitations of rights, duties and immunities thereunder of the Trustee, the Note Issuer, the Company and the Holders of the Securities, and of the terms upon which the Securities are, and are to be, authenticated and delivered. All terms used in this Security that are defined in the Indenture and in the Amended and Restated Declaration of Trust dated as of June 6, 2001, (the "Declaration"), for Fresenius Medical Care Capital Trust IV, shall have the meanings assigned to them in the Indenture or the Declaration, as the case may be. If a Tax Event or an Investment Company Event in respect of the Trust shall occur and be continuing, the Company shall cause the Trustees (as defined in the Declaration) to dissolve the Trust and cause Securities to be distributed to the holders of the Trust Securities in dissolution of the Trust or, in the event of a Tax Event only, may cause the Securities to be redeemed, in each case, subject to and in accordance with the provisions of the Declaration, within 90 days following the occurrence of such Tax Event or Investment Company Event. The Securities may be redeemed, at the option of the Note Issuer, subject to the provisions of Article XI of the Indenture, at any time as a whole but not in part, at 100% of the principal amount thereof, plus accrued and unpaid interest (if any) to the date of redemption (subject to the right of 30 38 Holders of record on the relevant Regular Record Date to receive interest due on the relevant Interest Payment Date), in the event the Note Issuer has become or would become obligated to pay, on the next date on which any amount would be payable with respect to the Securities, any Additional Amounts as a result of a change in or an amendment to the laws (including any regulations promulgated thereunder) of the United States, Germany, the United Kingdom, or the jurisdiction of formation of the Note Issuer (initially, Luxembourg) (or any political subdivision or taxing authority thereof or therein), or any change in or amendment to any official position regarding the application or interpretation of such laws or regulations, which change or amendment is announced or becomes effective on or after the date of the issuance of the Securities (other than, in either case, any amendment or change implementing, complying with, or introduced in order to conform to, or otherwise arising as a result of or in connection with, any European Union Directive on the taxation of savings implementing the conclusions of the ECOFIN Council meeting of 26-27 November 2000). The Securities do not have the benefit of any sinking fund obligations. If an Event of Default shall occur and be continuing, the principal of all the Securities may be declared due and payable in the manner, with the effect and subject to the conditions provided in the Indenture. As provided in the Indenture and subject to certain limitations therein set forth, the obligations of the Note Issuer under the Indenture and this Security are Guaranteed on a senior subordinated basis pursuant to Guaranties endorsed hereon. The Indenture provides that a Guarantor shall be released from its Guaranty upon compliance with certain conditions. The Indenture contains provisions for satisfaction, discharge and defeasance at any time of the entire indebtedness of this Security upon compliance by the Note Issuer with certain conditions set forth in the Indenture. The Indenture permits, with certain exceptions as therein provided, the Note Issuer, the Guarantors and the Trustee at any time to enter into a supplemental indenture or indentures for the purpose of modifying in any manner the rights and obligations of the Note Issuer, the Guarantors and of the Holders of the Securities, with the consent of the Holders of not less than a majority in principal amount of the Outstanding Securities to be affected by such supplemental indenture. The Indenture also contains provisions permitting Holders of specified percentages in aggregate outstanding principal amount of the Outstanding Securities affected thereby, on behalf of the Holders of all the Securities, to waive compliance by the Note Issuer or the Guarantors with certain provisions of the Indenture and certain past defaults under the Indenture and their consequences. Any such consent or waiver by the Holder of this Security shall be conclusive and binding upon such Holder and upon all future Holders of this Security and of any Security issued upon the registration of transfer hereof or in exchange herefor or in lieu hereof, whether or not notation of such consent or waiver is made upon this Security. 31 39 As provided in and subject to the provisions of the Indenture, if an Event of Default with respect to the Securities at the time Outstanding occurs and is continuing, then and in every such case the Trustee or the Holders of not less than 25% in aggregate outstanding principal amount of the Outstanding Securities may declare the principal amount of and interest (including Additional Sums and Additional Amounts, if any) on all the Securities to be due and payable immediately, by a notice in writing to the Note Issuer and the Guarantors (and to the Trustee if given by Holders), provided, that if the Trustee or such Holders fail to do so, the Preferred Trustee shall have such right by a notice in writing to the Note Issuer and the Trustee; and upon any such declaration such specified amount of and the accrued interest (including Additional Sums and Additional Amounts, if any) on all the Securities shall become immediately due and payable, provided, that the payment of principal and interest (including Additional Sums and Additional Amounts, if any) on such Securities shall remain subordinated to the extent provided in Article XII of the Indenture. No reference herein to the Indenture and no provision of this Security or of the Indenture shall alter or impair the obligation of the Note Issuer, which is absolute and unconditional, to pay the principal of (and premium, if any) and interest on this Security at the times, place and rate, and in the coin or currency, herein prescribed. As provided in the Indenture and subject to certain limitations therein set forth, the transfer of this Security is registrable in the Securities Register, upon surrender of this Security for registration of transfer at the office or agency of the Note Issuer maintained under Section 10.2 of the Indenture duly endorsed by, or accompanied by a written instrument of transfer in form satisfactory to the Note Issuer and the Securities Registrar duly executed by, the Holder hereof or his attorney duly authorized in writing, and thereupon one or more new Securities, of authorized denominations and for the same aggregate principal amount, will be issued to the designated transferee or transferees. No service charge shall be made for any such registration of transfer or exchange, but the Note Issuer may require payment of a sum sufficient to cover any tax or other governmental charge payable in connection therewith. Prior to due presentment of this Security for registration of transfer, the Note Issuer, the Guarantors, the Trustee and any agent of the Note Issuer, the Guarantors or the Trustee may treat the Person in whose name this Security is registered as the owner hereof, for all purposes (subject to certain limitations set forth in the Indenture), whether or not this Security be overdue, and neither the Note Issuer, the Guarantors, the Trustee nor any such agent shall be affected by notice to the contrary. The Securities are issuable only in registered form without coupons in denominations of $1,000 and any integral multiple thereof. As provided in the Indenture and subject to certain limitations therein set forth, the Securities are exchangeable for a like aggregate principal amount of Securities of a different authorized denomination, as requested by the Holder surrendering the same. 32 40 The Note Issuer and, by its acceptance of this Security or a beneficial interest therein, the Holder of, and any Person that acquires a beneficial interest in, this Security agree that for German and U.S. Federal, state and local tax purposes and for purposes of any tax imposed by the jurisdiction of formation of the Note Issuer or any political subdivision or taxing authority thereof or therein, it is intended that this Security constitute indebtedness. All terms used in this Security which are defined in the Indenture shall have the meanings assigned to them in the Indenture. THE INDENTURE AND THIS SECURITY SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO CONFLICT OF LAWS PRINCIPLES THEREOF. .4 Additional Provisions Required in Global Security and Initial Security. (a) Any Global Security issued hereunder shall, in addition to the provisions contained in Sections 2.2 and 2.3, bear a legend in substantially the following form: "This Security is a Global Security within the meaning of the Indenture hereinafter referred to and is registered in the name of The Depository Trust Company (the "Depository") or a nominee of the Depository. This Security is exchangeable for Securities registered in the name of a Person other than the Depository or its nominee only in the limited circumstances described in the Indenture and no transfer of this Security (other than a transfer of this Security as a whole by the Depository to a nominee of the Depository or by a nominee of the Depository to the Depository or another nominee of the Depository) may be registered except in limited circumstances." Unless this Security is presented by an authorized representative of The Depository Trust Company (55 Water Street, New York) to FMC TRUST FINANCE S.a.r.l. LUXEMBOURG-III or its agent for registration of transfer, exchange or payment, and any Security issued is registered in the name of Cede & Co. or such other name as requested by an authorized representative of The Depository Trust Company and any payment hereon is made to Cede & Co., ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY A PERSON IS WRONGFUL inasmuch as the registered owner hereof, Cede & Co., has an interest herein." (b) Any Initial Security issued hereunder shall, in addition to the provisions contained in Sections 2.2 and 2.3, bear a legend in substantially the following form: "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, SOLD, PLEDGED, OR OTHERWISE TRANSFERRED WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S. PERSONS, EXCEPT AS SET FORTH IN THE SECOND SENTENCE HEREOF. BY ITS ACQUISITION HEREOF OR OF A BENEFICIAL INTEREST HEREIN, THE HOLDER (1) REPRESENTS THAT 33 41 (A) IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) ("QIB") OR (B) IT IS ACQUIRING THIS SECURITY IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH REGULATION S UNDER THE SECURITIES ACT, (2) AGREES THAT IT WILL NOT RESELL OR OTHERWISE TRANSFER THIS SECURITY EXCEPT (A) TO THE ISSUER OR ANY OF ITS SUBSIDIARIES, (B) TO A PERSON WHOM THE SELLER REASONABLY BELIEVES IS A QIB PURCHASING FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QIB IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, (C) IN AN OFFSHORE TRANSACTION MEETING THE REQUIREMENTS OF RULE 903 OR 904 OF THE SECURITIES ACT, (D) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144 UNDER THE SECURITIES ACT, (E) IN ACCORDANCE WITH ANOTHER EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT (AND BASED UPON AN OPINION OF COUNSEL ACCEPTABLE TO THE NOTE ISSUER) OR (F) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT AND, IN EACH CASE, IN ACCORDANCE WITH THE APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR ANY OTHER APPLICABLE JURISDICTION AND (3) AGREES THAT IT WILL DELIVER TO EACH PERSON TO WHOM THIS SECURITY OR AN INTEREST HEREIN IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. AS USED HEREIN, THE TERM "OFFSHORE TRANSACTION" AND "UNITED STATES" HAVE THE MEANINGS GIVEN TO THEM BY RULE 902 OF REGULATION S UNDER THE SECURITIES ACT. THIS SECURITY MAY NOT BE TRANSFERRED EXCEPT IN AGGREGATE PRINCIPAL AMOUNT OF $100,000 OR MORE." .5 Form of Trustee's Certificate of Authentication. This is one of the Securities with the Guaranties endorsed thereon referred to in the within mentioned Indenture. STATE STREET BANK AND TRUST COMPANY Trustee By: ------------------------------- Authorized officer .6 Form of Guaranty. GUARANTY For value received, each of the Guarantors hereby jointly and severally unconditionally Guarantees, on a senior subordinated basis, to each Holder of a Security authenticated and delivered by the Trustee, and to the Trustee on behalf of such Holder, the due and punctual payment of the principal of (and premium, if any) and interest (including Additional Sums and Additional Amounts, if any) on such Security when and as the same shall become due and 34 42 payable, whether at the Stated Maturity, by acceleration, call for redemption, purchase or otherwise, in accordance with the terms of such Security and of this Indenture. In case of the failure of the Note Issuer punctually to make any such payment, each of the Guarantors hereby jointly and severally agrees to cause such payment to be made punctually when and as the same shall become due and payable, whether at the Stated Maturity or by acceleration, call for redemption, purchase or otherwise, and as if such payment were made by the Note Issuer. The Guarantee extends to the Note Issuer's repurchase obligations arising from a Change of Control or an Asset Disposition pursuant to the Indenture. Each of the Guarantors hereby jointly and severally agrees that its obligations hereunder shall be unconditional, irrespective of the validity, regularity or enforceability of such Security or this Indenture, the absence of any action to enforce the same, any exchange, release or non-perfection of any Lien on any collateral for, or any release or amendment or waiver of any term of any other Guarantee of, or any consent to departure from any requirement of any other Guarantee of all or any of the Securities, the election by the Trustee or any of the Holders in any proceeding under Chapter 11 of Title 11 of the United States Code (the "Bankruptcy Code") of the application of Section 1111(b)(2) of the Bankruptcy Code, or equivalent provision under applicable law, any borrowing or grant of a security interest by the Note Issuer, as debtor-in-possession, under Section 364 of the Bankruptcy Code, or equivalent provision under applicable law, the disallowance, under Section 502 of the Bankruptcy Code, or other similar applicable law, of all or any portion of the claims of the Trustee or any of the Holders for payment of any of the Securities, any waiver or consent by the Holder of such Security or by the Trustee with respect to any provisions thereof or of the Indenture, the obtaining of any judgment against the Note Issuer or any action to enforce the same or any other circumstances which might otherwise constitute a legal or equitable discharge or defense of a guarantor. Each of the Guarantors hereby waives the benefits of diligence, presentment, demand for payment, any requirement that the Trustee or any of the Holders protect, secure, perfect or insure any security interest in or other Lien on any property subject thereto or exhaust any right or take any action against the Note Issuer or any other Person or any collateral, filing of claims with a court in the event of insolvency or bankruptcy of the Note Issuer, any right to require a proceeding first against the Note Issuer, protest or notice with respect to such Security or the Indebtedness evidenced thereby and all demands whatsoever, and covenants that this Guaranty will not be discharged in respect of such Security except by complete performance of the obligations contained in such Security and in this Guaranty. Each of the Guarantors hereby agrees that, in the event of a default in payment of principal (or premium, if any) or interest (including Additional Sums and Additional Amounts, if any) on such Security, whether at their Stated Maturity, by acceleration, call for redemption, purchase or otherwise, legal proceedings may be instituted by the Trustee on behalf of, or by, the Holder of such Security, subject to the terms and conditions set forth in the Indenture, directly against each of the Guarantors to enforce this Guaranty without first proceeding against the Note Issuer. Each Guarantor agrees that, to the extent permitted by law, if, after the 35 43 occurrence and during the continuance of an Event of Default, the Trustee or any of the Holders are prevented by applicable law from exercising their respective rights to accelerate the maturity of the Securities, to collect interest on the Securities, or to enforce or exercise any other right or remedy with respect to the Securities, or the Trustee or the Holders are prevented from taking any action to realize on any collateral, such Guarantor agrees to pay to the Trustee for the account of the Holders, upon demand therefor, the amount that would otherwise have been due and payable had such rights and remedies been permitted to be exercised by the Trustee or any of the Holders. The indebtedness of each Guarantor evidenced by this Guaranty is, to the extent provided in the Indenture, subordinate and subject in right of payment to the prior payment in full of all Senior Indebtedness of such Guarantor, and this Guaranty is issued subject to the provisions of the Indenture with respect thereto. Each Holder of this Security, by accepting the same, (a) agrees to and shall be bound by such provisions, (b) authorizes and directs the Trustee on his behalf to take such action as may be necessary or appropriate to effectuate the subordination so provided and (c) appoints the Trustee his attorney-in-fact for any and all such purposes. No reference herein to the Indenture and no provision of this Guaranty or of the Indenture shall alter or impair the Guaranty of any Guarantor, which is absolute and unconditional, of the due and punctual payment of the principal (and premium, if any) and interest (including Additional Sums and Additional Amounts, if any) on the Security upon which this Guaranty is endorsed. Each Guarantor shall be subrogated to all rights of the Holder of this Security against the Note Issuer in respect of any amounts paid by such Guarantor on account of this Security pursuant to the provisions of its Guaranty or the Indenture; provided, however, that such Guarantor shall not be entitled to enforce or to receive any payments arising out of, or based upon, such right of subrogation until the principal of (and premium, if any) and interest on this Security and all other Securities issued under the Indenture shall have been paid in full. This Guaranty shall remain in full force and effect and continue to be effective should any petition be filed by or against the Note Issuer for liquidation or reorganization, or equivalent proceeding under applicable law, should the Note Issuer become insolvent or make an assignment for the benefit of creditors or should a receiver or trustee be appointed for all or any significant part of the Note Issuer's assets, or the equivalent of any of the foregoing under applicable law, and shall, to the fullest extent permitted by applicable law, continue to be effective or be reinstated, as the case may be, if at any time payment and performance of the Securities is, pursuant to applicable law, rescinded or reduced in amount, or must otherwise be restored or returned by any obligee on the Securities whether as a voidable preference, fraudulent transfer, or as otherwise provided under similar laws affecting the rights of creditors generally or under applicable laws of the jurisdiction of formation of the Note Issuer, all as though such payment or performance had not been made. In the event that 36 44 any payment, or any part thereof, is rescinded, reduced, restored or returned, the Securities shall, to the fullest extent permitted by applicable law, be reinstated and deemed reduced only by such amount paid and not so rescinded, reduced, restored or returned. The Guarantors shall have the right to seek contribution from any non-paying Guarantor so long as the exercise of such right does not impair the rights of the Holders under this Guaranty. The Guarantors or any particular Guarantor shall be released from this Guaranty upon the terms and subject to certain conditions provided in the Indenture. By delivery of a supplemental indenture to the Trustee in accordance with the terms of the Indenture or the execution of a Guaranty Agreement, each Person that becomes, or assumes the obligations of, a Guarantor after the date of the Indenture will be deemed to have executed and delivered this Guaranty for the benefit of the Holder of this Security with the same effect as if such Guarantor was named below. All terms used in this Guaranty which are defined in the Indenture referred to in the Security upon which this Guaranty is endorsed shall have the meanings assigned to them in such Indenture. This Guaranty shall not be valid or obligatory for any purpose until the certificate of authentication on the Security upon which this Guaranty is endorsed shall have been executed by the Trustee under the Indenture by manual signature. Each Guaranty (other than the Company's Guaranty) will be limited in amount to an amount not to exceed the maximum amount that can be guaranteed by the applicable Guarantor without rendering the Guaranty, as it relates to such Guarantor, voidable under applicable law relating to fraudulent conveyance or fraudulent transfer or similar laws affecting the rights of creditors generally or under applicable law of Germany. In the case of Fresenius Medical Care Deutschland GmbH ("FMCD"), the following provisions apply: A Profit and Loss Pooling Agreement (the "Agreement") (Ergebnisabfuhrungsvertrag) between the Company and FMCD dated as of August 21, 1996 was entered into the commercial register with effect from January 1, 1996. FMCD, having a stated capital of DM 80 million, had a capital reserve account of DM 168,302,162 (the "January 1, 1996 Amount") in its balance sheet as of January 1, 1996. Assuming that the January 1, 1996 Amount has not decreased by losses in the business of FMCD since January 1, 1996, at least such amount exceeds the Company's assets protecting its share capital within the meaning of Section 30 of the German GmbH Law. Since January 1, 1996, the January 1, 1996 Amount has not been decreased by the 37 45 actions of the Company (the sole shareholder of FMCD), e.g. no distributions against the January 1, 1996 Amount have been made. Based thereon, the guaranty obligations of FMCD hereunder and under FMCD's guaranty of the 9% Notes, the 7 3/8% Notes, the 7 7/8% Notes and any other Senior Subordinated Indebtedness, if any, of FMCD to which Section 30 of the German GmbH law may apply are limited to the amount of the capital reserves of FMCD as of the date hereof less its obligations as a guarantor from time to time under the Senior Credit Agreement (the "Minimum Guaranty Amount"). If, in the case of a default under the Indenture, the capital reserves are higher than such Minimum Guaranty Amount, such higher amount (the "Higher Guaranty Amount") shall serve as limitation to the obligations of FMCD, as Guarantor. In case FMCD, as Guarantor, has to sell off assets to fulfill its obligations under the Indenture, after such guaranty obligations have been drawn, and if the proceeds from the sale of such assets exceed the amount of their book value, such excess amounts shall be paid to the Trustee for the benefit of the Holders, subject to the provisions of Article XIV hereof, in addition to the Minimum Guaranty Amount or the Higher Guaranty Amount, respectively. For the determination of the applicable book value, the book value of assets which were included into the balance sheet per January 1, 1996 applies, and for such assets which were not yet included but added to the business of FMCD since that date, the book value on the day of the sale of such assets applies. Should Section 30 of the German GmbH law however require a lower Minimum Guaranty Amount or a lower Higher Guaranty Amount, then such lower amounts required by law shall be applicable. FMCD undertakes not to decrease its capital reserves, neither by capital increase from such reserve accounts nor by other kinds of contributions to its shareholders or affiliates without the prior written approval of the Holders of a majority in principal amount of the Outstanding Securities. FMCD undertakes to maintain a profit and loss pooling agreement with the Company during the term of the Indenture, in particular, to extend the term of such agreement to the term of the Indenture and not to terminate, rescind or amend such agreement without prior notice to the Trustee and the consent of the Holders of a majority in principal amount of the Outstanding Securities thereto. In case of a termination of such profit and loss pooling agreement, FMCD will grant, upon the request of the Holders of a majority in principal amount of the Outstanding Securities, collateral to minimize the legal and financial disadvantages caused by the termination of such agreement, as far as legally available under German law. FMCD undertakes to give notice immediately to the Trustee if it intends to give notice of termination to such agreement or to agree to the termination of such agreement, or if it becomes aware that the Company intends to terminate such agreement. During the term of the profit and loss pooling agreement, any and all allocations of profit to the Company and any and all cash distributions to the Company as a consequence thereof upon the terms and conditions of the profit and loss pooling agreement are permitted and unrestricted, subject to the terms of Section 30 of the German GmbH law as described above. 38 46 Reference is made to Article XIII and Article XIV of the Indenture for further provisions with respect to this Guaranty. THIS GUARANTY SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT GIVING EFFECT TO PRINCIPLES OF CONFLICT OF LAWS. IN WITNESS WHEREOF, each of the Guarantors has caused this Guaranty to be duly executed. FRESENIUS MEDICAL CARE AG, as Guarantor By: --------------------------------- Member of the Managing Board By: --------------------------------- Member of the Managing Board FRESENIUS MEDICAL CARE HOLDINGS, INC., as Guarantor By: --------------------------------- Authorized Officer FRESENIUS MEDICAL CARE DEUTSCHLAND GmbH, as Guarantor By: --------------------------------- Member of the Managing Board By: --------------------------------- Member of the Managing Board 39 47 ARTICLE III. THE SECURITIES .1 Title and Terms. The aggregate principal amount of the Securities which may be authenticated and delivered under this Indenture is limited to $225,225,000 except for Securities authenticated and delivered upon registration of transfer of, or in exchange for, or in lieu of, other Securities pursuant to Section 3.4, 3.5, 3.6, 9.6 or 11.6. The Note Issuer may issue Exchange Securities from time to time pursuant to an Exchange Offer pursuant to a Board Resolution included in an Officers' Certificate delivered to the Trustee, in authorized denominations in exchange for a like principal amount of Initial Securities. Upon any such exchange the Initial Securities shall be cancelled in accordance with Section 3.9 and shall no longer be deemed Outstanding for any purpose. In no event shall the aggregate principal amount of Initial Securities and Exchange Securities Outstanding exceed $225,225,000, except in accordance with Section 3.6. The Securities shall be known and designated as the "7 7/8% Senior Subordinated Notes due June 15, 2011" of the Note Issuer. Their Stated Maturity shall be June 15, 2011, at which time the Securities will become due and payable together with any accrued and unpaid interest thereon (including Additional Sums and Additional Amounts, if any) and they shall bear interest at the rate of 7 7/8% per annum, from the Issue Date, payable quarterly in arrears on each Interest Payment Date, to the Persons in whose name the Securities are registered at the close of business on the Regular Record Date. Interest on the Securities will accrue from the most recent date on which interest has been paid or, if no interest has been paid, from the Issue Date. Interest in arrears for more than one quarter (and interest thereon) will accrue interest (compounded quarterly) at the same rate. Payments on the Securities issued as a Global Security shall be made in immediately available funds to the Depository. In the event that Securities are issued in certificated form, the principal of (and premium, if any) and interest (including Additional Sums and Additional Amounts, if any) on the Securities shall be payable at the office maintained by the Note Issuer pursuant to Section 10.2; provided, that unless the Securities are held by the Trust or any permissible successor entity as provided under the Declaration in the event of a merger, consolidation or amalgamation of the Trust, payment of interest may be made at the option of the Note Issuer by check mailed to the address of the persons entitled thereto, as such address shall appear in the Register. The Securities shall be redeemable as provided in Article XI. The Securities shall be subordinated in right of payment to Senior Indebtedness of the Company and the Note Issuer as provided in Article XII. The Securities shall be Guaranteed by the Guarantors as provided in Article XIII. The Guaranties shall be subordinated in right of payment to Senior Indebtedness of the Guarantors as provided in Article XIV. 40 48 The Securities shall be subject to defeasance at the option of the Note Issuer as provided in Section 4.3. Unless the context otherwise requires, the Initial Securities and the Exchange Securities shall constitute one series for all purposes under this Indenture. .2 Denominations. The Securities shall be issuable only in registered form without coupons and only in denominations of $1,000 and any integral multiple thereof. The Initial Securities may only be issued and transferred in principal amounts of $100,000 or more, except in offshore transactions in reliance on Regulation S under the Securities Act. .3 Execution, Authentication, Delivery and Dating. The Securities shall be executed on behalf of the Note Issuer by any officer or officers of the Note Issuer thereunder duly authorized. The signature of any of these officers on the Securities may be manual or facsimile. Securities bearing the manual or facsimile signatures of individuals who were at any time the proper officers of the Note Issuer shall bind the Note Issuer, notwithstanding that such individuals or any of them have ceased to hold such offices prior to the authentication and delivery of such Securities or did not hold such offices at the date of such Securities. At any time and from time to time after the execution and delivery of this Indenture, the Note Issuer may deliver Securities executed by the Note Issuer and having endorsed thereon the Guaranties executed pursuant to Section 13.2 by the Guarantors to the Trustee for authentication, together with a Note Issuer Order for the authentication and delivery of such Securities with the Guaranties of the Guarantors endorsed thereon; and the Trustee in accordance with such Note Issuer Order shall authenticate and deliver such Securities with the Guaranties of the Guarantors endorsed thereon as provided in this Indenture and not otherwise. At any time and from time to time after the execution and delivery of this Indenture and after the effectiveness of a registration statement under the Securities Act with respect thereto, the Note Issuer may deliver Exchange Securities executed by the Note Issuer to the Trustee for authentication, together with a Note Issuer Order for the authentication and delivery of such Exchange Securities and a like principal amount of Initial Securities for cancellation in accordance with Section 3.9, and the Trustee in accordance with the Note Issuer Order shall authenticate and deliver such Securities. In authenticating such Exchange Securities, and accepting the additional responsibilities under this Indenture in relation to such Securities, the Trustee shall be entitled to receive, and (subject to Section 6.1) shall be fully protected in relying upon, an Opinion of Counsel substantially to the effect that: (i) the Exchange Securities have been duly authorized and, when executed and authenticated in accordance with the provisions of the Indenture and delivered in exchange for the Initial Securities in accordance with the Indenture and the Exchange Offer, will be entitled to the benefits of the Indenture and will be legally valid and binding obligations of the Note Issuer, enforceable in accordance with their terms subject to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar laws of general applicability relating to or affecting creditors' rights and to general equity principles; and (ii) when the Exchange 41 49 Securities are executed and authenticated in accordance with the provisions of the Indenture and delivered in exchange for the Initial Securities in accordance with the Indenture and the Exchange Offer, the Guaranties endorsed thereon will be the legally valid and binding obligations of the Guarantors, enforceable in accordance with their terms subject to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar laws of general applicability, relating to or affecting creditors' rights and to general equity principles. If terms have been so established, the Trustee shall not be required to authenticate such Exchange Securities if the issue of such Exchange Securities pursuant to this Indenture will affect the Trustee's own rights, duties or immunities under the Exchange Securities and this Indenture or otherwise in a manner which is not reasonably acceptable to the Trustee. Each Security shall be dated the date of its authentication. No Security or Guaranty endorsed thereon shall be entitled to any benefit under this Indenture or be valid or obligatory for any purpose, unless there appears on such Security a certificate of authentication substantially in the form provided for herein executed by the Trustee by the manual signature of one of its authorized officers, and such certificate upon any Security shall be conclusive evidence, and the only evidence, that such Security and the Guaranty endorsed thereon have been duly authenticated and delivered hereunder. .4 Temporary Securities. Pending the preparation of definitive Securities, the Note Issuer may execute, and upon Note Issuer Order the Trustee shall authenticate and deliver, temporary Securities which are printed, lithographed, typewritten, mimeographed or otherwise produced, in any authorized denomination, substantially of the tenor of the definitive Securities in lieu of which they are issued and having endorsed thereon the Guaranties substantially of the tenor of the definitive Guaranties in lieu of which they are issued duly executed by the Guarantors and with such appropriate insertions, omissions, substitutions and other variations as the officers executing such Securities and Guaranties, as the case may be, may determine, as evidenced by their execution of such Securities and Guaranties, as the case may be. If temporary Securities are issued, the Note Issuer will cause definitive Securities to be prepared without unreasonable delay. After the preparation of definitive Securities, the temporary Securities shall be exchangeable for definitive Securities upon surrender of the temporary Securities at the office or agency of the Note Issuer designated for that purpose without charge to the Holder. Upon surrender for cancellation of any one or more temporary Securities, the Note Issuer shall execute and the Trustee shall authenticate and deliver in exchange therefor a like principal amount of definitive Securities of authorized denominations having the same Issue Date and Stated Maturity, having the same terms and like tenor, and having endorsed thereon the Guaranties executed by the Guarantors. Until so exchanged, the temporary Securities shall in all respects be entitled to the same benefits under this Indenture as definitive Securities. .5 Registration, Registration of Transfer and Exchange. The Note Issuer shall cause to be kept at the Corporate Trust Office of the Trustee, a register in which, subject to such reasonable regulations as it may prescribe, the 42 50 Note Issuer shall provide for the registration of Securities and of transfers of Securities. Such register is herein sometimes referred to as the "Securities Register." The Trustee is hereby appointed "Securities Registrar" for the purpose of registering Securities and transfers of the Securities as herein provided. Upon surrender for registration of transfer of any Security at the office or agency of the Note Issuer designated for that purpose the Note Issuer shall execute, and the Trustee shall authenticate and deliver, in the name of the designated transferee or transferees, one or more new Securities of any authorized denominations, of a like aggregate principal amount, of the same Issue Date and Stated Maturity, having the same terms and like tenor, and having endorsed thereon the Guaranties executed by the Guarantors; provided that Initial Securities may only be transferred in principal amounts of $100,000 or more, except in offshore transactions in reliance on Regulation S under the Securities Act. At the option of the Holder, Securities may be exchanged for other Securities of any authorized denominations, of a like aggregate principal amount, of the same Issue Date and Stated Maturity and having the same terms and like tenor, and having endorsed thereon the Guaranties executed by the Guarantors, upon surrender of the Securities to be exchanged at such office or agency. Whenever any Securities are so surrendered for exchange, the Note Issuer shall execute, the Guarantors shall execute the Guaranties endorsed on and the Trustee shall authenticate and deliver, the Securities which the Holder making the exchange is entitled to receive. All Securities and the Guaranties endorsed thereon issued upon any registration of transfer or exchange of Securities shall be the valid obligations of the Note Issuer and the respective Guarantors, evidencing the same debt and Guaranties, and entitled to the same benefits under this Indenture, as the Securities and Guaranties surrendered upon such registration of transfer or exchange. Every Security presented or surrendered for registration of transfer or for exchange shall (if so required by the Note Issuer or the Trustee) be duly endorsed, or be accompanied by a written instrument of transfer in form satisfactory to the Note Issuer and the Securities Registrar, duly executed by the Holder thereof or his attorney duly authorized in writing. No service charge shall be made to a Holder for any registration of transfer or exchange of Securities, but the Note Issuer may require payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in connection with any registration of transfer or exchange of Securities. Notwithstanding any of the foregoing, any Global Security shall be exchangeable pursuant to this Section 3.5 for Securities registered in the names of Persons other than the Depositary for such Global Security or its nominee only if (i) such Depositary notifies the Note Issuer that it is unwilling or unable to continue as Depositary for such Global Security or if at any time such Depositary ceases to be a clearing agency registered under the Exchange Act, as amended, (ii) the Note Issuer executes and delivers to the Trustee a Note Issuer Order that such Global Security shall be so exchangeable or (iii) there shall have occurred and be continuing an Event of Default with respect to the Securities and the Holders of a majority in aggregate principal amount of this outstanding securities shall have so 43 51 requested. Any Global Security that is exchangeable pursuant to the preceding sentence shall be exchangeable for Securities registered in such names as such Depositary shall direct. Notwithstanding any other provision in this Indenture, a Global Security may not be transferred except as a whole by the Depositary with respect to such Global Security to a nominee of such Depositary or by a nominee of such Depositary to such Depositary or another nominee of such Depositary. Neither the Note Issuer nor the Trustee shall be required to, pursuant to the provisions of this Section, (a) issue, register the transfer of or exchange any Security during a period beginning at the opening of business 15 days before any selection for redemption of Securities pursuant to Article XI and ending at the close of business on the earliest date on which the relevant notice of redemption is deemed to have been given to all Holders of Securities to be so redeemed, and (b) register the transfer of or exchange any Security so selected for redemption, in whole or in part, except, in the case of any Security to be redeemed in part, any portion thereof not to be redeemed. All Initial Securities initially issued hereunder shall, upon issuance, bear the legend specified in Section 2.4 to be applied to such a Security and such required legend shall not be removed unless the Note Issuer shall have delivered to the Trustee (and the Securities Registrar, if other than the Trustee) a Note Issuer Order which states that the Security may be issued without such legend thereon. If such legend required for an Initial Security has been removed from a Security as provided above, no other Security issued in exchange for all or any part of such Security shall bear such legend, unless the Note Issuer has reasonable cause to believe that such other Security is a "restricted security" within the meaning of Rule 144 of the Securities Act and instructs the Trustee to cause a legend to appear thereon. .6 Mutilated, Destroyed, Lost and Stolen Securities. If any mutilated Security is surrendered to the Trustee together with such security or indemnity as may be required by the Note Issuer or the Trustee to save each of them harmless, the Note Issuer shall execute, the Guarantors shall execute the Guaranties endorsed on and the Trustee shall authenticate and deliver in exchange therefor, a new Security of like tenor and principal amount, having the same Issue Date and Stated Maturity and bearing the same Interest Rate as such mutilated Security, and bearing a number not contemporaneously outstanding. If there shall be delivered to the Note Issuer and to the Trustee (i) evidence to their satisfaction of the destruction, loss or theft of any Security, and (ii) such security or indemnity as may be required by each of them to save each of them, each Guarantor and any agent of either of them harmless, then, in the absence of notice to the Note Issuer or the Trustee that such Security has been acquired by a bona fide purchaser, the Note Issuer shall execute and upon its request the Trustee shall authenticate and deliver, in lieu of any such destroyed, lost or stolen Security, a new Security of like tenor and principal amount, having endorsed thereon the Guaranties executed by the Guarantors, having the same Issue Date and Stated Maturity and bearing the same Interest Rate as such destroyed, lost or stolen Security, and bearing a number not contemporaneously outstanding. 44 52 In case any such mutilated, destroyed, lost or stolen Security has become due and payable, the Note Issuer in its discretion may, instead of issuing a new Security, pay such Security. Upon the issuance of any new Security under this Section, the Note Issuer may require the payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in relation thereto and any other expenses (including the fees and expenses of the Trustee) connected therewith. Every new Security issued pursuant to this Section in lieu of any destroyed, lost or stolen Security, and the Guaranties endorsed thereon, shall constitute an original additional contractual obligation of the Note Issuer and the respective Guarantors, whether or not the destroyed, lost or stolen Security, and the Guaranties endorsed thereon, shall be at any time enforceable by anyone, and shall be entitled to all the benefits of this Indenture equally and proportionately with any and all other Securities duly issued hereunder. The provisions of this Section are exclusive and shall preclude (to the extent lawful) all other rights and remedies with respect to the replacement or payment of mutilated, destroyed, lost or stolen Securities. .7 Payment of Interest; Interest Rights Preserved. Interest on any Security which is payable, and is punctually paid or duly provided for, on any Interest Payment Date, shall be paid to the Person in whose name that Security (or one or more Predecessor Securities) is registered at the close of business on the Regular Record Date for such interest, except that interest payable on the Stated Maturity of a Security shall be paid to the Person to whom principal is paid. Any interest on any Security which is payable, but is not punctually paid or duly provided for, on any Interest Payment Date (herein called "Defaulted Interest"), shall forthwith cease to be payable to the Holder on the relevant Regular Record Date by virtue of having been such Holder, and such Defaulted Interest may be paid by the Note Issuer, at its election in each case, as provided in Clause (1) or (2) below: (1) The Note Issuer may elect to make payment of any Defaulted Interest to the Persons in whose names the Securities (or their respective Predecessor Securities) are registered at the close of business on a Special Record Date for the payment of such Defaulted Interest, which shall be fixed in the following manner. The Note Issuer shall notify the Trustee in writing of the amount of Defaulted Interest proposed to be paid on each Security and the date of the proposed payment, and at the same time the Note Issuer shall deposit with the Trustee an amount of money equal to the aggregate amount proposed to be paid in respect of such Defaulted Interest or shall make arrangements satisfactory to the Trustee for such deposit prior to the date of the proposed payment, such money when deposited to be held in trust for the benefit of the Persons entitled to such Defaulted Interest as in this Clause provided. Thereupon the Trustee shall fix a Special Record Date for the payment of such Defaulted Interest which shall be not more than 15 days and not less than 10 days prior to the date of the proposed payment and not less than 10 days after the receipt by the Trustee of the notice of the proposed payment. The Trustee 45 53 shall promptly notify the Note Issuer of such Special Record Date and, in the name and at the expense of the Note Issuer, shall cause notice of the proposed payment of such Defaulted Interest and the Special Record Date therefor to be mailed, first-class, postage prepaid, to each Holder at the address of such Holder as it appears in the Securities Register not less than 10 days prior to such Special Record Date. The Trustee may, in its discretion, in the name and at the expense of the Note Issuer, cause a similar notice to be published at least once in a newspaper, customarily published in the English language on each Business Day and of general circulation in the Borough of Manhattan, The City of New York, but such publication shall not be a condition precedent to the establishment of such Special Record Date. Notice of the proposed payment of such Defaulted Interest and the Special Record Date therefor having been mailed as aforesaid, such Defaulted Interest shall be paid to the Persons in whose names the Securities (or their respective Predecessor Securities) are registered at the close of business on such Special Record Date and shall no longer be payable pursuant to the following Clause (2). (2) The Note Issuer may make payment of any Defaulted Interest in any other lawful manner not inconsistent with the requirements of any securities exchange on which the Securities may be listed, upon such notice as may be required by such exchange (or by the Trustee if the Securities are not listed), if, after notice given by the Note Issuer to the Trustee of the proposed payment pursuant to this Clause, such manner of payment shall be deemed practicable by the Trustee. Subject to the foregoing provisions of this Section, each Security delivered under this Indenture upon registration of transfer of or in exchange for or in lieu of any other Security shall carry the rights to interest accrued and unpaid, and to accrue, which were carried by such other Security. Under the Registration Rights Agreement, in the event that (i) an Exchange Offer Registration Statement or a Shelf Registration Statement is not filed on or prior to the applicable deadline set forth in the Registration Rights Agreement, (ii) an Exchange Offer Registration Statement or a Shelf Registration Statement is not declared effective on or prior to the applicable deadline set forth in the Registration Rights Agreement, or (iii) the Exchange Offer has not been "Consummated" (as defined in the Registration Rights Agreement) or upon the occurrence of certain other conditions, then additional payments in the form of Liquidated Damages shall accrue on the principal amount of the Securities at the rate per $1,000 liquidation amount of Preferred Securities set forth in the Registration Rights Agreement. Upon filing or effectiveness of the Exchange Offer Registration Statement or the Shelf Registration Statement, Consummation of the Exchange Offer or upon cessation of any such other conditions, as the case may be, the obligation to pay such Liquidated Damages with respect to the event in question shall cease. .8 Persons Deemed Owners. Prior to the presentment of a Security for registration of transfer, the Note Issuer, the Guarantors, the Trustee and any agent of the Note Issuer, the Guarantors or the Trustee may treat the Person in whose name such Security is registered as the owner of such Security for the purpose of receiving payment of principal (and premium, if any) of and 46 54 (subject to Section 3.7) interest on such Security and for all other purposes whatsoever, whether or not such Security be overdue, and neither the Note Issuer, the Guarantors, the Trustee nor any agent of the Note Issuer, the Guarantors or the Trustee shall be affected by notice to the contrary. .9 Cancellation. All Securities surrendered for payment, redemption, registration of transfer or exchange shall, if surrendered to any Person other than the Trustee, be delivered to the Trustee, and any such Securities surrendered directly to the Trustee for any such purpose shall be promptly canceled by it. The Note Issuer may at any time deliver to the Trustee for cancellation any Securities previously authenticated and delivered hereunder which the Note Issuer may have acquired in any manner whatsoever, and all Securities so delivered shall be promptly canceled by the Trustee. No Securities shall be authenticated in lieu of or in exchange for any Securities canceled as provided in this Section, except as expressly permitted by this Indenture. All canceled Securities shall be destroyed by the Trustee and the Trustee shall deliver to the Note Issuer a certificate of such destruction. .10 Computation of Interest. Interest on the Securities shall be computed on the basis of a 360-day year of twelve 30-day months and, for any partial period, on the basis of the number of days elapsed in a 360-day year of twelve 30-day months. .11 Right of Set-Off. Notwithstanding anything to the contrary in this Indenture, the Note Issuer shall have the right to set-off any payment it or the Company is otherwise required to make hereunder in respect of any Security to the extent the Note Issuer or the Company has theretofore made, or is concurrently on the date of such payment making, a payment under the Company Guarantee relating to such Security or under Section 5.8 of this Indenture. .12 Agreed Tax Treatment. Each Security issued hereunder shall provide that the Note Issuer and, by its acceptance of a Security or a beneficial interest therein, the Holder of, and any Person that acquires a beneficial interest in, such Security agree that for German and U.S. Federal, state and local tax purposes and for purposes of any tax imposed by the jurisdiction of formation of the Note Issuer (or any political subdivision or taxing authority thereof or therein) it is intended that such Security constitute indebtedness. .13 CUSIP Numbers. The Note Issuer in issuing the Securities may use "CUSIP" numbers (if then generally in use), and, if so, the Trustee shall use "CUSIP" numbers in notices of redemption as a convenience to Holders; provided, that any such notice may state that no representation is made as to the correctness of such numbers either as printed on the Securities or as contained in any notice of a redemption and that reliance may be placed only on the other identification numbers printed on the Securities, and any such redemption shall not be affected by any defect in or omission of such numbers. 47 55 ARTICLE IV. SATISFACTION AND DISCHARGE .1 Satisfaction and Discharge of Indenture. This Indenture shall cease to be of further effect (except as to (i) any surviving rights of registration of transfer, substitution and exchange of Securities, (ii) rights hereunder of Holders to receive payments of principal of (and premium, if any) and interest (including Additional Sums and Additional Amounts, if any) on the Securities and other rights, duties and obligations of the Holders as beneficiaries hereof with respect to the amounts, if any, deposited with the Trustee pursuant to this Article IV and (iii) the rights and obligations of the Trustee hereunder), and the Trustee, on demand of and at the expense of the Note Issuer, shall execute proper instruments acknowledging satisfaction and discharge of this Indenture, when (1) either: (A) all Securities theretofore authenticated and delivered (other than (i) Securities which have been destroyed, lost or stolen and which have been replaced or paid as provided in Section 3.6 and (ii) Securities for whose payment money has theretofore been deposited in trust or segregated and held in trust by the Note Issuer and thereafter repaid to the Note Issuer or discharged from such trust, as provided in Section 10.3) have been delivered to the Trustee for cancellation; or (B) all such Securities not theretofore delivered to the Trustee for cancellation (i) have become due and payable, or (ii) will become due and payable at their Stated Maturity within one year of the date of deposit, and the Note Issuer or a Guarantor, in the case of Clause (B) (i) or (B) (ii) above, has deposited or caused to be deposited with the Trustee as trust funds in trust for such purpose an amount in the currency or currencies in which the Securities are payable sufficient (without reinvestment) to pay and discharge the entire indebtedness on such Securities not theretofore delivered to the Trustee for cancellation, for principal (and premium, if any) and interest (including Additional Sums and Additional Amounts, if any) to the date of such deposit (in the case of Securities which have become due and payable) or to the Stated Maturity; (2) the Note Issuer or a Guarantor has paid or caused to be paid all other sums payable hereunder by the Note Issuer and the Guarantors; and (3) the Note Issuer has delivered to the Trustee an Opinion of Counsel to the effect that the Holders of the Outstanding Securities will not recognize gain or loss for German and U.S. Federal income tax purposes and for purposes of any income tax imposed by the jurisdiction of formation of the Note Issuer as a result of the application of this Section 4.1 and will be subject to German and U.S. Federal income tax and any income tax imposed by the jurisdiction of formation of the Note Issuer, if 48 56 any, on the same amount as would have been the case if such satisfaction and discharge of the Indenture had not occurred; and (4) the application of this Section 4.1 shall not cause the Trustee to have a conflicting interest as defined in Section 6.8 hereof and for purposes of the Trust Indenture Act with respect to any securities of the Note Issuer; and (5) the funds deposited with the Trustee pursuant to Clause (1)(B) above shall not be deemed an "investment company" as defined in the 1940 Act, or such trust shall be qualified under the 1940 Act or exempt from regulation thereunder; and (6) the Note Issuer has delivered to the Trustee an Officers' Certificate and an Opinion of Counsel, each stating that all conditions precedent provided for in this subsection 4.1 relating to the satisfaction and discharge of this Indenture have been complied with. Notwithstanding the satisfaction and discharge of this Indenture pursuant to this Article IV, the obligations of the Note Issuer to the Trustee under Section 6.7 and, if money shall have been deposited with the Trustee pursuant to subclause (B) of Clause (1) of this Section, the obligations of the Trustee under Section 4.2 and the last paragraph of Section 10.3, shall survive. .2 Application of Trust Money; Reinstatement. Subject to the provisions of the last paragraph of Section 10.3, all money deposited with the Trustee pursuant to Section 4.1 or money or Government Obligations deposited with the Trustee pursuant to Section 4.3, or received by the Trustee in respect of Government Obligations deposited with the Trustee pursuant to Section 4.3, shall be held in trust and applied by the Trustee, in accordance with the provisions of the Securities and this Indenture, to the payment, either directly or through any Paying Agent (including the Note Issuer acting as its own Paying Agent) as the Trustee may determine, to the Persons entitled thereto, of the principal (and premium, if any) and interest (including Additional Sums and Additional Amounts, if any) for the payment of which such money or Government Obligations have been deposited with or received by the Trustee; provided, however, such moneys need not be segregated from other funds held in trust except to the extent required by law. Money so held in trust shall not be subject to the provisions of Article XII or Article XIV. The Note Issuer shall pay and indemnify the Trustee against any tax, fee or other charge imposed on or assessed against the Government Obligations deposited pursuant to Section 4.3 or the principal and interest received in respect thereof other than any such tax, fee or other charge which by law is for the account of the Holders of the Outstanding Securities. If the Trustee or the Paying Agent is unable to apply any money in accordance with Section 4.1 or 4.3 by reason of any order or judgment of any court or governmental authority enjoining, restraining or otherwise prohibiting such application, then the obligations of the Note Issuer and the Guarantors under this Indenture, the Securities and the Guaranties shall be revived and reinstated as though no deposit had occurred pursuant to this Article IV until such time as the Trustee or Paying Agent is permitted to apply all such money in 49 57 accordance with Section 4.1 or 4.3; provided, however, that if the Note Issuer or any Guarantor makes any payment of principal of (and premium, if any) or interest (including Additional Sums and Additional Amounts, if any) on any Security following the reinstatement of its obligations, the Note Issuer or such Guarantor shall be subrogated to the rights of the Holders of such Securities to receive such payment from the money held by the Trustee or the Paying Agent. .3 Satisfaction, Discharge and Defeasance of Securities. The Note Issuer shall be deemed to have paid and discharged the entire indebtedness on all the Outstanding Securities, the Guarantors shall each be released from their respective Guaranties, and the Trustee, at the expense of the Note Issuer, shall execute proper instruments acknowledging satisfaction and discharge of such indebtedness and Guaranties, when (1) with respect to all Outstanding Securities, (A) the Note Issuer has irrevocably deposited or caused to be irrevocably deposited with the Trustee as trust funds in trust for such purpose an amount sufficient to pay and discharge the entire indebtedness on all Outstanding Securities for principal (and premium, if any) and interest (including Additional Sums and Additional Amounts, if any) to the Stated Maturity or any Redemption Date as contemplated by the penultimate paragraph of this Section 4.3, as the case may be; or (B) the Note Issuer has irrevocably deposited or caused to be irrevocably deposited with the Trustee as obligations in trust for such purpose an amount of Government Obligations as will, in the written opinion of independent public accountants delivered to the Trustee, together with predetermined and certain income to accrue thereon, without consideration of any reinvestment thereof, be sufficient to pay and discharge when due the entire indebtedness on all Outstanding Securities for principal (and premium, if any) and interest (including Additional Sums and Additional Amounts, if any) to the Stated Maturity or any Redemption Date as contemplated by the penultimate paragraph of this Section 4.3, as the case may be; and (2) the Note Issuer has paid or caused to be paid all other sums payable with respect to the Outstanding Securities; and (3) the Note Issuer has delivered to the Trustee an Opinion of Counsel to the effect that the Holders of the Outstanding Securities will not recognize gain or loss for German and U.S. Federal income tax purposes or for the purposes of any income tax imposed by the jurisdiction of formation of the Note Issuer as a result of the application of this Section 4.3 and will be subject to German and U.S. Federal income tax and any income tax imposed by the jurisdiction of formation of the Note Issuer, if any, on the same amount, in the same manner as would have been the case if such satisfaction, discharge and defeasance of the Securities had not occurred; and 50 58 (4) the Note Issuer has delivered to the Trustee an Officers' Certificate to the effect that the Securities, if then listed on any securities exchange, will not be delisted as a result of the deposit pursuant to Clause (1) above; and (5) the application of this Section 4.3 shall not cause the Trustee to have a conflicting interest as defined in Section 6.8 hereof and for purposes of the Trust Indenture Act with respect to any securities of the Note Issuer; and (6) at the time of the deposit pursuant to Clause (1) above: (A) no default in the payment of all or a portion of principal of (or premium, if any) or interest on any Senior Indebtedness of the Note Issuer or any Guarantor shall have occurred and be continuing, and no event of default with respect to any such Senior Indebtedness shall have occurred and be continuing and shall have resulted in such Senior Indebtedness becoming or being declared due and payable prior to the date on which it would otherwise have become due and payable and (B) no other event of default with respect to any Senior Indebtedness of the Note Issuer or any Guarantor shall have occurred and be continuing permitting (after notice or the lapse of time, or both) the holders of such Senior Indebtedness (or a representative on behalf of the holders thereof) to declare such Senior Indebtedness due and payable prior to the date on which it would otherwise have become due and payable, or, in the case of either Clause (A) or Clause (B) above, each such default or event of default shall have been cured or waived or shall have ceased to exist; and (7) no Event of Default or event which with notice or lapse of time or both would become an Event of Default shall have occurred and be continuing on the date of such deposit; and (8) the funds deposited with the Trustee pursuant to Clause (1) above shall not be deemed an "investment company" as defined in the 1940 Act or such trust shall be qualified under the 1940 Act or exempt from regulation thereunder; and (9) the Note Issuer has delivered to the Trustee an Officers' Certificate and an Opinion of Counsel, each stating that all conditions precedent herein provided for relating to the satisfaction and discharge of the entire indebtedness on all Outstanding Securities have been complied with. Any deposits with the Trustee referred to in Section 4.3(1) above shall be irrevocable and shall be made under the terms of an escrow trust agreement in form and substance reasonably satisfactory to the Trustee. If any Outstanding Securities are to be redeemed prior to their Stated Maturity, whether pursuant to any optional or mandatory redemption provisions, the applicable escrow trust agreement shall provide therefor and the Note Issuer shall make such arrangements as are satisfactory to the Trustee for the giving of notice of redemption by the Trustee in the name, and at the expense, of the Note Issuer. If the Securities are not to become due and payable at their Stated Maturity or upon call for redemption within one year of the date of deposit, then the Note Issuer shall give, not later than the date of such deposit, notice of such deposit to the Holders. 51 59 Upon the satisfaction of the conditions set forth in this Section 4.3 with respect to all the Outstanding Securities, the terms and conditions of the Securities and Guaranties, including the terms and conditions with respect thereto set forth in this Indenture, shall no longer be binding upon, or applicable to, the Note Issuer and the Guarantors; provided, that the Note Issuer and the Guarantors shall not be discharged from any payment obligations in respect of Securities which are deemed not to be Outstanding under clause (iii) of the definition thereof if such obligations continue to be valid obligations of the Note Issuer and the Guarantors under applicable law. ARTICLE V. REMEDIES .1 Events of Default. "Event of Default," wherever used herein means any one of the following events (whatever the reason for such Event of Default and whether it shall be voluntary or involuntary or be effected by operation of law or pursuant to any judgment, decree or order of any court or any order, rule or regulation of any administrative or governmental body): (1) default in the payment of any interest upon any Security, including any Additional Sums and Additional Amounts in respect thereof, when it becomes due and payable, and continuance of such default for a period of 30 days; or (2) default in the payment of the principal of (or premium, if any, on) any Security whether at Maturity, upon redemption, by declaration or otherwise; or (3) default in the performance, or breach, in any material respect, of any covenant or warranty of the Company or the Note Issuer in this Indenture (other than a covenant or warranty a default in the performance of which or the breach of which is elsewhere in this Section specifically dealt with), and continuance of such default or breach for a period of 90 days after there has been given, by registered or certified mail, to the Note Issuer by the Trustee or to the Note Issuer and the Trustee by the Holders of at least 25% in principal amount of the Outstanding Securities a written notice specifying such default or breach and requiring it to be remedied; or (4) default under any mortgage, indenture or instrument under which there may be issued or by which there may be secured or evidenced any Indebtedness for money borrowed by the Company or any Subsidiary (or the payment of which is guaranteed by the Company or any Subsidiary), whether such Indebtedness or Guarantee now exists or is incurred after the Issue Date, if (A) such default results in the acceleration of such Indebtedness prior to its express maturity or shall constitute a default in the payment of such Indebtedness and (B) the principal amount of any such Indebtedness that has been accelerated or not paid at maturity, when added to the aggregate principal amount of all other such Indebtedness, at such time, that has been accelerated or not paid at maturity, exceeds $25 million; or (5) the dissolution, winding up or termination of the Trust, except in connection with the distribution of Securities to the holders of Preferred 52 60 Securities in dissolution of the Trust and in connection with such mergers, consolidations or amalgamations as are permitted by the Declaration; or (6) the entry of a decree or order by a court having jurisdiction in the premises adjudging the Company or the Note Issuer a bankrupt or insolvent, or approving as properly filed a petition seeking reorganization, arrangement, adjustment or composition of or in respect of the Company or the Note Issuer under any applicable German or U.S. Federal or State or other applicable foreign bankruptcy, insolvency, reorganization or other similar law, or appointing a receiver, liquidator, assignee, trustee, sequestrator (or other similar official) of the Company or the Note Issuer or of any substantial part of its property or ordering the winding up or liquidation of its affairs, and the continuance of any such decree or order unstayed and in effect for a period of 60 consecutive days; or (7) the institution by the Company or the Note Issuer of proceedings to be adjudicated a bankrupt or insolvent, or the consent by it to the institution of bankruptcy or insolvency proceedings against it, or the filing by it of a petition or answer or consent seeking reorganization or relief under any applicable German or United States Federal or State or other applicable foreign bankruptcy, insolvency, reorganization or other similar law, or the consent by it to the filing of any such petition or to the appointment of a receiver, liquidator, assignee, trustee, sequestrator (or other similar official) of the Company or the Note Issuer or of any substantial part of its property, or the making by it of an assignment for the benefit for creditors, or the admission by it in writing of its inability to pay its debts generally as they become due and its willingness to be adjudicated a bankrupt, or the taking of corporate action by the Company or the Note Issuer in furtherance of any such action; or (8) except as permitted by the terms hereof and the Securities, the cessation of effectiveness of any Guaranty or the finding by any judicial proceeding that any such Guaranty is unenforceable or invalid or the denial or disaffirmation by any Guarantor of its obligations under its Guaranty. A default under any other indebtedness of the Company or any of its Subsidiaries or joint ventures or the Trust would not constitute an Event of Default under the Securities. .2 Acceleration of Maturity; Rescission and Annulment. As provided in and subject to the provisions of this Indenture, if an Event of Default with respect to the Securities at the time Outstanding occurs and is continuing, then and in every such case the Trustee or the Holders of not less than 25% in aggregate outstanding principal amount of the Outstanding Securities may declare the principal amount of and interest (including Additional Sums and Additional Amounts, if any) on all the Securities to be due and payable immediately, by a notice in writing to the Note Issuer and the Guarantors (and to the Trustee if given by Holders), provided, that if the Trustee or such Holders fail to do so, the Preferred Trustee shall have such right by a notice in writing to the Note Issuer and the Trustee; and upon any such declaration such specified amount of and the accrued interest (including Additional Sums and Additional Amounts, if any) on all the 53 61 Securities shall become immediately due and payable, provided, that the payment of principal and interest (including Additional Sums and Additional Amounts, if any) on such Securities shall remain subordinated to the extent provided in Article XII of the Indenture. At any time after such a declaration of acceleration has been made and before a judgment or decree for payment of the money due has been obtained by the Trustee as hereinafter in this Article provided, the Holders of a majority in aggregate principal amount of the Outstanding Securities, by written notice to the Note Issuer and the Trustee, may rescind and annul such declaration and its consequences if: (1) the Note Issuer or any Guarantor has paid or deposited with the Trustee a sum sufficient to pay: (A) all overdue installments of interest (including Additional Sums and Additional Amounts, if any) on the Securities, (B) the principal of (and premium, if any, on) any Securities which have become due otherwise than by such declaration of acceleration and interest thereon at the rate borne by the Securities, and (C) all sums paid or advanced by the Trustee hereunder and the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel; and (2) all Events of Default, other than the non-payment of the principal of the Securities which have become due solely by such declaration of acceleration, have been cured or waived as provided in Section 5.13. The Holders of a majority in aggregate outstanding principal amount of the Securities affected thereby may, on behalf of the Holders of all the Securities, waive any past default, except a default in the payment of principal, premium, if any, or interest (unless such default has been cured and a sum sufficient to pay all matured installments of interest, premium, if any, and principal due otherwise than by acceleration has been deposited with the Trustee) or a default in respect of a covenant or provision which under this Indenture cannot be modified or amended without the consent of the Holder of each Outstanding Security and, should the Holders of such Securities fail to annul such declaration and waive such default, the holders of a majority in aggregate liquidation amount of the Preferred Securities shall have such right. The Preferred Trustee, as the initial Holder of the Securities, has agreed under the Declaration not to waive an Event of Default with respect to the Securities without the consent of holders of a majority in aggregate liquidation amount of the Preferred Securities then outstanding. No such rescission shall affect any subsequent default or impair any right consequent thereon. Upon receipt by the Trustee of written notice declaring such an acceleration, or rescission and annulment thereof, a record date shall be established for determining Holders of Outstanding Securities entitled to join in such notice, which record date shall be at the close of business on the day the Trustee receives such notice. The Holders on such record date, or their duly designated proxies, and only such Persons, shall be entitled to join in such notice, 54 62 whether or not such Holders remain Holders after such record date; provided, that, unless such declaration of acceleration, or rescission and annulment, as the case may be, shall have become effective by virtue of the requisite percentage having joined in such notice prior to the day which is 90 days after such record date, such notice of declaration of acceleration, or rescission and annulment, as the case may be, shall automatically and without further action by any Holder be canceled and of no further effect. Nothing in this paragraph shall prevent a Holder, or a proxy of a Holder, from giving, after expiration of such 90-day period, a new written notice of declaration of acceleration, or rescission and annulment thereof, as the case may be, that is identical to a written notice which has been canceled pursuant to the proviso to the preceding sentence, in which event a new record date shall be established pursuant to the provisions of this Section 5.2. .3 Collection of Indebtedness and Suits for Enforcement by Trustee.. The Note Issuer covenants that if: (1) default is made in the payment of any installment of interest (including Additional Sums and Additional Amounts, if any) on any Security when such interest becomes due and payable and such default continues for a period of 30 days, or (2) default is made in the payment of the principal of (and premium, if any, on) any Security at the Maturity thereof, the Note Issuer will, upon demand of the Trustee, pay to the Trustee, for the benefit of the Holders of such Securities, the whole amount then due and payable on such Securities for principal (and premium, if any) and interest (including Additional Sums and Additional Amounts, if any); and, in addition thereto, all amounts owing the Trustee under Section 6.7. If the Note Issuer fails to pay such amounts forthwith upon such demand, the Trustee, in its own name and as trustee of an express trust, may institute a judicial proceeding for the collection of the sums so due and unpaid, and may prosecute such proceeding to judgment or final decree, and may enforce the same against the Note Issuer, any Guarantor or any other obligor upon the Securities and collect the moneys adjudged or decreed to be payable in the manner provided by law out of the property of the Note Issuer, any Guarantor or any other obligor upon the Securities, wherever situated. Subject to Section 6.3 hereof, if an Event of Default occurs and is continuing, the Trustee may in its discretion proceed to protect and enforce its rights and the rights of the Holders under this Indenture by such appropriate judicial proceedings as the Trustee shall deem most effectual to protect and enforce any such rights, whether for the specific enforcement of any covenant or agreement in this Indenture or in aid of the exercise of any power granted herein, pursuant to the terms of this Indenture. .4 Trustee May File Proofs of Claim. In case of the pendency of any receivership, insolvency, liquidation, bankruptcy, reorganization, arrangement, adjustment, composition or other judicial proceeding 55 63 relative to the Note Issuer, any Guarantor or any other obligor upon the Securities or the property of the Note Issuer, of any Guarantor or of such other obligor or their creditors, (a) the Trustee (irrespective of whether the principal of the Securities shall then be due and payable as therein expressed or by declaration or otherwise and irrespective of whether the Trustee shall have made any demand on the Note Issuer for the payment of overdue principal (and premium, if any) or interest (including Additional Sums and Additional Amounts, if any)) shall be entitled and empowered, by intervention in such proceeding or otherwise, (i) to file and prove a claim for the whole amount of principal (and premium, if any) and interest (including Additional Sums and Additional Amounts, if any) owing and unpaid in respect to the Securities and to file such other papers or documents as may be necessary or advisable and to take any and all actions as are authorized under the Trust Indenture Act in order to have the claims of the Holders and any predecessor to the Trustee under Section 6.7 and of the Holders allowed in any such judicial proceedings; and, (ii) in particular, the Trustee shall be authorized to collect and receive any moneys or other property payable or deliverable on any such claims and to distribute the same in accordance with Section 5.6; and (b) any custodian, receiver, assignee, trustee, liquidator, sequestrator (or other similar official) in any such judicial proceeding is hereby authorized by each Holder to make such payments to the Trustee for distribution in accordance with Section 5.6, and in the event that the Trustee shall consent to the making of such payments directly to the Holders, to pay to the Trustee any amount due to it and any predecessor Trustee under Section 6.7. Nothing herein contained shall be deemed to authorize the Trustee to authorize or consent to or accept or adopt on behalf of any Holder any plan of reorganization, arrangement, adjustment or composition affecting the Securities or the rights of any Holder thereof, or to authorize the Trustee to vote in respect of the claim of any Holder in any such proceeding; provided, however, that the Trustee may, on behalf of the Holders, vote for the election of a trustee in bankruptcy or similar official and be a member of a creditors' or other similar committee. .5 Trustee May Enforce Claims Without Possession of Securities. All rights of action and claims under this Indenture or the Securities may be prosecuted and enforced by the Trustee without the possession of any of the Securities or the production thereof in any proceeding relating thereto, and any such proceeding instituted by the Trustee shall be brought in its own name as trustee of an express trust, and any recovery of judgment shall, after provision for the payment of all the amounts owing the Trustee and any predecessor Trustee under Section 6.7, its agents and counsel, be for the ratable benefit of the Holders of the Securities in respect of which such judgment has been recovered. .6 Application of Money Collected. Any money or property collected or to be applied by the Trustee with respect to the Securities pursuant to this Article, shall, subject to Articles XII and XIV, be applied in the following order, at the date or dates fixed by the Trustee and, in case of the distribution of 56 64 such money or property on account of principal (or premium, if any) or interest (including any Additional Sums), upon presentation of the Securities and the notation thereon of the payment if only partially paid and upon surrender thereof if fully paid: FIRST: To the payment of all amounts due the Trustee and any predecessor Trustee under Section 6.7; SECOND: To the extent provided in Article XII, to the holders of Senior Indebtedness of the Note Issuer and the Company in accordance with Article XII or if collected from a Guarantor, to the extent provided in Article XIV, to the holders of Senior Indebtedness of the Guarantor in accordance with Article XIV; THIRD: To the payment of the amounts then due and unpaid upon such Securities for principal (and premium, if any) and interest (including Additional Sums and Additional Amounts, if any), in respect of which or for the benefit of which such money has been collected, ratably, without preference or priority of any kind, according to the amounts due and payable on such Securities for principal (and premium, if any) and interest (including any Additional Sums and Additional Amounts), respectively; and FOURTH: The balance, if any, to the Person or Persons lawfully entitled thereto. .7 Limitation on Suits. No Holder of any Security shall have any right to institute any proceeding, judicial or otherwise, with respect to this Indenture or for the appointment of a receiver, assignee, trustee, liquidator, sequestrator (or other similar official) or for any other remedy hereunder, unless: (1) such Holder shall have previously given written notice to the Trustee of a continuing Event of Default; (2) if the Preferred Trustee is not the Holder of the Securities, the Holders of not less than 25% in aggregate principal amount of the Outstanding Securities shall have made written request to the Trustee to institute proceedings in respect of such Event of Default in its own name as Trustee hereunder; (3) such Holder or Holders shall have offered to the Trustee reasonable indemnity against the costs, expenses and liabilities to be incurred in compliance with such request; (4) the Trustee for 60 days after its receipt of such notice, request and offer of indemnity failed to institute any such proceeding; and (5) no direction inconsistent with such written request shall have been given to the Trustee during such 60-day period by the Holders of a majority in aggregate principal amount of the Outstanding Securities; 57 65 it being understood and intended that no one or more Holders shall have any right in any manner whatever by virtue of, or by availing of, any provision of this Indenture to affect, disturb or prejudice the rights of any other Holders, or to obtain or to seek to obtain priority or preference over any other Holders or to enforce any right under this Indenture, except in the manner herein provided and for the equal and ratable benefit of all the Holders. The foregoing limitations shall not apply to a suit instituted by a Holder of a Security for enforcement of payment of the principal of and premium, it any, or interest (including Additional Sums and Additional Amounts, if any) on such Security on or after the respective due dates expressed in such Security. .8 Unconditional Right of Holders to Receive Principal, Premium and Interest. Notwithstanding any other provision in this Indenture, the Holder of any Security shall have the right which is absolute and unconditional to receive payment of the principal of (and premium, if any) and (subject to Section 3.7) interest (including Additional Sums and Additional Amounts, if any) on such Security on the respective Stated Maturities expressed in such Security and to institute suit for the enforcement of any such payment, and such rights shall not be impaired without the consent of such Holder. Except as set forth in the Declaration, the holders of Preferred Securities shall have no right to exercise directly any right or remedy available to the Holders of, or in respect of, the Securities; provided, however, that if the Preferred Trustee or the Special Trustee (as defined in the Declaration) do not enforce such payment obligations, a holder of Preferred Securities shall have the right to bring an action on behalf of the Trust to enforce the Trust's rights under the Securities and the Indenture. .9 Restoration of Rights and Remedies. If the Trustee or any Holder has instituted any proceeding to enforce any right or remedy under this Indenture and such proceeding has been discontinued or abandoned for any reason, or has been determined adversely to the Trustee or to such Holder, then and in every such case the Note Issuer, the Guarantors, the Trustee and the Holders shall, subject to any determination in such proceeding, be restored severally and respectively to their former positions hereunder, and thereafter all rights and remedies of the Trustee and the Holders shall continue as though no such proceeding had been instituted. .10 Rights and Remedies Cumulative. Except as otherwise provided in the last paragraph of Section 3.6, no right or remedy herein conferred upon or reserved to the Trustee or to the Holders is intended to be exclusive of any other right or remedy, and every right and remedy shall, to the extent permitted by law, be cumulative and in addition to every other right and remedy given hereunder or now or hereafter existing at law or in equity or otherwise. The assertion or employment of any right or remedy hereunder, or otherwise, shall not prevent the concurrent assertion or employment of any other appropriate right or remedy. .11 Delay or Omission Not Waiver. Except as otherwise provided in the last paragraph of Section 3.6, no delay or omission of the Trustee or of any Holder of any Security to exercise any right or remedy 58 66 accruing upon any Event of Default shall impair any such right or remedy or constitute a waiver of any such Event of Default or an acquiescence therein. Every right and remedy given by this Article or by law to the Trustee or to the Holders may be exercised from time to time, and as often as may be deemed expedient, by the Trustee or by the Holders, as the case may be. ..12 Control by Holders. The Holders of a majority in aggregate principal amount of the Outstanding Securities shall have the right, subject to Section 6.3 hereof, to direct the time, method and place of conducting any proceeding for any remedy available to the Trustee or exercising any trust or power conferred on the Trustee, with respect to the Securities, provided, that: (1) such direction shall not be in conflict with any rule of law or with this Indenture, (2) the Trustee may take any other action deemed proper by the Trustee which is not inconsistent with such direction, and (3) subject to the provisions of Section 6.1, the Trustee shall have the right to decline to follow such direction if the Trustee in good faith shall, by a Responsible Officer or Officers of the Trustee, determine that the proceeding so directed would be unjustly prejudicial to the Holders not joining in any such direction or would involve the Trustee in personal liability. Upon receipt by the Trustee of any written notice directing the time, method or place of conducting any such proceeding or exercising any such trust or power, a record date shall be established for determining Holders of Outstanding Securities entitled to join in such notice, which record date shall be at the close of business on the day the Trustee receives such notice. The Holders on such record date, or their duly designated proxies, and only such Persons, shall be entitled to join in such notice, whether or not such Holders remain Holders after such record date; provided, that, unless the Holders of a majority in principal amount of the Outstanding Securities shall have joined in such notice prior to the day which is 90 days after such record date, such notice shall automatically and without further action by any Holder be canceled and of no further effect. Nothing in this paragraph shall prevent a Holder, or a proxy of a Holder, from giving, after expiration of such 90-day period, a new notice identical to a notice which has been canceled pursuant to the proviso to the preceding sentence, in which event a new record date shall be established pursuant to the provisions of this Section 5.12. .13 Waiver of Past Defaults. The Holders of a majority in aggregate principal amount of the Outstanding Securities affected thereby may, on behalf of the Holders of all the Securities, waive any past default hereunder and its consequences with respect to the Securities except a default: (1) in the payment of the principal of (or premium, if any) or interest (including Additional Sums and Additional Amounts, if any) on any Security, or 59 67 (2) in respect of a covenant or provision hereof which under Article IX cannot be modified or amended without the consent of the Holder of each Outstanding Security affected. Upon any such waiver, such default shall cease to exist, and any Event of Default arising therefrom shall be deemed to have been cured, for every purpose of this Indenture; but no such waiver shall extend to any subsequent or other default or impair any right consequent thereon. .14 Undertaking for Costs. All parties to this Indenture agree, and each Holder of any Security by his acceptance thereof shall be deemed to have agreed, that any court may in its discretion require, in any suit for the enforcement of any right or remedy under this Indenture, or in any suit against the Trustee for any action taken or omitted by it as Trustee, the filing by any party litigant in such suit of an undertaking to pay the costs of such suit, and that such court may in its discretion assess reasonable costs, including reasonable attorneys' fees, against any party litigant in such suit, having due regard to the merits and good faith of the claims or defenses made by such party litigant; but the provisions of this Section shall not apply to any suit instituted by the Trustee, to any suit instituted by any Holder, or group of Holders, holding in the aggregate more than 10% in principal amount of the Outstanding Securities, or to any suit instituted by any Holder for the enforcement of the payment of the principal of (or premium, if any) or interest (including Additional Sums and Additional Amounts, if any) on any Security on or after the respective Stated Maturities expressed in such Security. .15 Waiver of Usury, Stay or Extension Laws. Each of the Note Issuer and the Guarantors covenants (to the extent that it may lawfully do so) that it will not at any time insist upon, or plead, or in any manner whatsoever claim or take the benefit or advantage of, any usury, stay or extension law wherever enacted, now or at any time hereafter in force, which may affect the covenants or the performance of this Indenture; and each of the Note Issuer and the Guarantors (to the extent that it may lawfully do so) 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. ARTICLE VI. THE TRUSTEE .1 Certain Duties and Responsibilities. (a) Except during the continuance of an Event of Default, (1) the Trustee undertakes to perform such duties and only such duties as are specifically set forth in this Indenture, and no implied covenants or obligations shall be read into this Indenture against the Trustee; and (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 60 68 expressed therein, upon certificates or opinions furnished to the Trustee and conforming to the requirements of this Indenture; but in the case of any such certificates or opinions which by any provisions hereof are specifically required to be furnished to the Trustee, the Trustee shall be under a duty to examine the same to determine whether or not they conform to the requirements of this Indenture. (b) In case 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 their exercise, as a prudent person would exercise or use under the circumstances in the conduct of his own affairs. (c) No provision of this Indenture shall be construed to relieve the Trustee from liability for its own negligent action, its own negligent failure to act, or its own willful misconduct except that (1) this Subsection shall not be construed to limit the effect of Subsection (a) of this Section; (2) the Trustee shall not be liable for any error of judgment made in good faith by a Responsible Officer, unless it shall be proved that the Trustee was negligent in ascertaining the pertinent facts; and (3) the Trustee shall not be liable with respect to any action taken or omitted to be taken by it in good faith in accordance with the direction of Holders pursuant to Section 5.12 relating to the time, method and place of conducting any proceeding for any remedy available to the Trustee, or exercising any trust or power conferred upon the Trustee, under this Indenture with respect to the Securities. (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 there shall be 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 therein expressly so provided, every provision of this Indenture relating to the conduct or affecting the liability of or affording protection to the Trustee shall be subject to the provisions of this Section. .2 Notice of Defaults. Within 90 days after actual knowledge by a Responsible Officer of the Trustee of the occurrence of any default hereunder with respect to the Securities, the Trustee shall transmit by mail to all Holders, as their names and addresses appear in the Securities Register, notice of such default hereunder known to the Trustee, unless such default shall have been cured or waived; provided, however, that, except in the case of a default in the payment of the principal of (or premium, if any) or interest (including Additional Sums and Additional Amounts, if any) on any Security, the Trustee shall be protected in withholding such notice if and so long as the board of directors, the executive committee or a trust committee of 61 69 directors and/or Responsible Officers of the Trustee in good faith determines that the withholding of such notice is in the interests of the Holders; and provided, further, that, in the case of any default of the character specified in Section 5.1(3), no such notice to Holders shall be given until at least 30 days after the occurrence thereof. For the purpose of this Section, the term "default" means any event which is, or after notice or passage of time or both would be, an Event of Default. .3 Certain Rights of Trustee. Subject to the provisions of Section 6.1: (a) the Trustee may rely and shall be protected in acting or refraining from acting upon any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, debenture, note, Security or other evidence of indebtedness, or other paper or document believed by it to be genuine and to have been signed or presented by the proper party or parties; (b) any request or direction of the Note Issuer mentioned herein shall be sufficiently evidenced by a Note Issuer Request or Note Issuer Order and any resolution of the Board of Directors may be sufficiently evidenced by a Board Resolution; (c) whenever in the administration of this Indenture the Trustee shall deem it desirable that a matter be proved or established prior to taking, suffering or omitting any action hereunder, the Trustee (unless other evidence be herein specifically prescribed) may, in the absence of bad faith on its part, rely upon an Officers' Certificate; (d) the Trustee may consult with counsel and the written advice of such counsel or any Opinion of Counsel shall be full and complete authorization and protection in respect of any action taken, suffered or omitted by it hereunder in good faith and in reliance thereon; (e) the Trustee shall be under no obligation to exercise any of the rights or powers vested in it by this Indenture at the request or direction of any of the Holders pursuant to this Indenture, unless such Holders shall have offered to the Trustee reasonable security or indemnity against the costs, expenses and liabilities which might be incurred by it in compliance with such request or direction; (f) the Trustee shall not be bound to make any investigation into the facts or matters stated in any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, debenture, note, Security or other evidence of indebtedness, or other paper or document, but the Trustee in its discretion may make such further inquiry or investigation into such facts or matters as it may see fit, and, if the Trustee shall determine to make such further inquiry or investigation, it shall be entitled to examine the books, records and premises of the Note Issuer or any Guarantor, personally or by agent or attorney; and (g) the Trustee may execute any of the trusts or powers hereunder or perform any duties hereunder either directly or by or through agents or attorneys and the Trustee shall not be responsible for any misconduct or negligence on the part of any agent or attorney appointed with due care by it hereunder. 62 70 .4 Not Responsible for Recitals or Issuance of Securities. The recitals contained herein and in Securities and Guaranties endorsed thereon, except the Trustee's certificates of authentication, shall be taken as the statements of the Note Issuer, or the Guarantors, as the case may be, and the Trustee assumes no responsibility for their correctness. The Trustee makes no representations as to the validity or sufficiency of this Indenture or of the Securities, the value or condition of any Collateral or the priority or perfection of any security interest purportedly granted herein. The Trustee shall not be accountable for the use or application by the Note Issuer of the Securities or the proceeds thereof. .5 May Hold Securities. The Trustee, any Paying Agent, Securities Registrar or any other agent of the Note Issuer or any Guarantor, in its individual or any other capacity, may become the owner or pledgee of Securities and, subject to Sections 6.8 and 6.13, may otherwise deal with the Note Issuer or any Guarantor with the same rights it would have if it were not Trustee, Paying Agent, Securities Registrar or such other agent. .6 Money Held in Trust. Money held by the Trustee in trust hereunder need not be segregated from other funds except to the extent required by law. The Trustee shall be under no liability for interest on any money received by it hereunder except as otherwise agreed in writing with the Note Issuer or any Guarantor, as the case may be. .7 Compensation and Reimbursement. The Company and the Note Issuer agree (1) to pay to the Trustee from time to time reasonable compensation for all services rendered by it hereunder in such amounts as the Note Issuer, the Guarantors and the Trustee shall agree from time to time (which compensation shall not be limited by any provision of law in regard to the compensation of a trustee of an express trust); (2) to reimburse the Trustee upon its request for all reasonable expenses, disbursements and advances incurred or made by the Trustee in accordance with any provision of this Indenture (including the reasonable compensation and the reasonable expenses and disbursements of its agents and counsel), except any such expense, disbursement or advance as may be attributable to its negligence or bad faith; and (3) to indemnify the Trustee for, and to hold it harmless against, any loss, liability or expense (including the reasonable compensation and the reasonable expenses and disbursements of its agents and counsel) incurred without negligence or bad faith on its part, arising out of or in connection with the acceptance or administration of this trust or the performance of its 63 71 duties hereunder, including the costs and expenses of defending itself against any claim or liability in connection with the exercise or performance of any of its powers or duties hereunder. This indemnification shall survive the termination of this Agreement. To secure the Note Issuer's payment obligations in this Section, the Note Issuer and the Holders agree that the Trustee shall have a lien prior to the Securities on all money or property held or collected by the Trustee. Such lien shall survive the satisfaction and discharge of this Indenture. When the Trustee incurs expenses or renders services after an Event of Default specified in Section 5.1(6) or (7) occurs, the expenses and the compensation for the services are intended to constitute expenses of administration under any applicable German or United States Federal or State or other applicable foreign bankruptcy, insolvency or other similar law. .8 Disqualification; Conflicting Interests. The Trustee shall be subject to the provisions of Section 310(b) of the Trust Indenture Act. Nothing herein shall prevent the Trustee from filing with the Commission the application referred to in the second to last paragraph of Section 301(b) of the Trust Indenture Act. .9 Corporate Trustee Required; Eligibility. There shall at all times be a Trustee hereunder which shall be (a) a corporation organized and doing business under the laws of the United States of America or of any State, Territory or the District of Columbia, authorized under such laws to exercise corporate trust powers and subject to supervision or examination by Federal, State, Territorial or District of Columbia authority, or (b) a corporation or other Person organized and doing business under the laws of a foreign government that is permitted to act as Trustee pursuant to a rule, regulation or order of the Commission, authorized under such laws to exercise corporate trust powers, and subject to supervision or examination by authority of such foreign government or a political subdivision thereof substantially equivalent to supervision or examination applicable to United States institutional trustees, in either case having a combined capital and surplus of at least $50 million, subject to supervision or examination by Federal or State authority. If such corporation publishes reports of condition at least annually, pursuant to law or to the requirements of the aforesaid supervising or examining authority, then, for the purposes of this Section, the combined capital and surplus of such corporation shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published. If at any time the Trustee shall cease to be eligible in accordance with the provisions of this Section, it shall resign immediately in the manner and with the effect hereinafter specified in this Article. Neither the Note Issuer nor any Person directly or indirectly controlling, controlled by or under common control with the Note Issuer shall serve as Trustee. 64 72 .10 Resignation and Removal; Appointment of Successor. (a) No resignation or removal of the Trustee and no appointment of a successor Trustee pursuant to this Article shall become effective until the acceptance of appointment by the successor Trustee under Section 6.11. (b) The Trustee may resign at any time by giving written notice thereof to the Note Issuer. If an instrument of acceptance by a successor Trustee shall not have been delivered to the Trustee within 30 days after the giving of such notice of resignation, the resigning Trustee may petition any court of competent jurisdiction for the appointment of a successor Trustee. (c) The Trustee may be removed at any time with respect to the Securities by Act of the Holders of a majority in principal amount of the Outstanding Securities, delivered to the Trustee and to the Note Issuer. (d) If at any time: (1) the Trustee shall fail to comply with Section 6.8 after written request therefor by the Note Issuer or by any Holder who has been a bona fide Holder of a Security for at least six months, or (2) the Trustee shall cease to be eligible under Section 6.9 and shall fail to resign after written request therefor by the Note Issuer or by any such Holder, or (3) the Trustee shall become incapable of acting or shall be adjudged a bankrupt or insolvent or a receiver of the Trustee or of its property shall be appointed or any public officer shall take charge or control of the Trustee or of its property or affairs for the purpose of rehabilitation, conservation or liquidation, then, in any such case, (i) the Note Issuer, acting pursuant to the authority of a Board Resolution, may remove the Trustee, or (ii) subject to Section 5.14, any Holder who has been a bona fide Holder of a Security for at least six months may, on behalf of himself and all others similarly situated, petition any court of competent jurisdiction for the removal of the Trustee and the appointment of a successor Trustee. (e) If the Trustee shall resign, be removed or become incapable of acting, or if a vacancy shall occur in the office of Trustee for any cause, the Note Issuer, by a Board Resolution, shall promptly appoint a successor Trustee. If, within one year after such resignation, removal or incapability, or the occurrence of such vacancy, a successor Trustee shall be appointed by Act of the Holders of a majority in principal amount of the Outstanding Securities delivered to the Note Issuer and the retiring Trustee, the successor Trustee so appointed shall, forthwith upon its acceptance of such appointment, become the successor Trustee and supersede the successor Trustee appointed by the Note Issuer. If no successor Trustee shall have been so appointed by the Note Issuer or the Holders and accepted appointment in the manner hereinafter provided, any Holder who has been a bona fide Holder of a Security for at least six months may, subject to Section 5.14, on behalf of himself and all 65 73 others similarly situated, petition any court of competent jurisdiction for the appointment of a successor Trustee. (f) The Note Issuer shall give notice of each resignation and each removal of the Trustee and each appointment of a successor Trustee by mailing written notice of such event by first-class mail, postage prepaid, to the Holders of Securities as their names and addresses appear in the Securities Register. Each notice shall include the name of the successor Trustee and the address of its Corporate Trust Office. .11 Acceptance of Appointment by Successor. (a) In case of the appointment hereunder of a successor Trustee, every such successor Trustee so appointed shall execute, acknowledge and deliver to the Company, the Note Issuer, and the other Guarantors and to the retiring Trustee an instrument accepting such appointment, and thereupon the resignation or removal of the retiring Trustee shall become effective and such successor Trustee, without any further act, deed or conveyance, shall become vested with all the rights, powers, trusts and duties of the retiring Trustee; but, on the request of the Company, the Note Issuer, any other Guarantor or the successor Trustee, such retiring Trustee shall, upon payment of its charges, execute and deliver an instrument transferring to such successor Trustee all the rights, powers and trusts of the retiring Trustee and shall duly assign, transfer and deliver to such successor Trustee all property and money held by such retiring Trustee hereunder. (b) Upon request of any such successor Trustee, the Company, the Note Issuer and the Guarantors shall execute any and all instruments for more fully and certainly vesting in and confirming to such successor Trustee all rights, powers and trusts referred to in paragraph (a) of this Section. (c) No successor Trustee shall accept its appointment unless at the time of such acceptance such successor Trustee shall be qualified and eligible under this Article. .12 Merger, Conversion, Consolidation or Succession to Business. Any corporation into which the Trustee may be merged or converted or with which it may be consolidated, or any corporation resulting from any merger, conversion or consolidation to which the Trustee shall be a party, or any corporation succeeding to all or substantially all of the corporate trust business of the Trustee, shall be the successor of the Trustee hereunder, provided such corporation shall be otherwise qualified and eligible under this Article, without the execution or filing of any paper or any further act on the part of any of the parties hereto. In case any Securities shall have been authenticated, but not delivered, by the Trustee then in office, any successor by merger, conversion or consolidation to such authenticating Trustee may adopt such authentication and deliver the Securities so authenticated, and in case any Securities shall not have been authenticated, any successor to the Trustee may authenticate such Securities either in the name of any predecessor Trustee or in the name of such successor Trustee, and in all cases the certificate of authentication shall have the full force which it is provided anywhere in the Securities or in this Indenture that the certificate of the Trustee shall have. 66 74 .13 Preferential Collection of Claims Against Note Issuer. If and when the Trustee shall be or become a creditor of the Note Issuer, the Guarantors or any other obligor upon the Securities, the Trustee shall be subject to the provisions of the Trust Indenture Act regarding the collection of claims against the Note Issuer, the Guarantors or any such other obligor. .14 Appointment of Authenticating Agent. The Trustee may appoint an Authenticating Agent or Agents which shall be authorized to act on behalf of the Trustee to authenticate the Securities issued upon original issue and upon exchange, registration of transfer or partial redemption thereof, and the Securities so authenticated shall be entitled to the benefits of this Indenture and shall be valid and obligatory for all purposes as if authenticated by the Trustee hereunder. Wherever reference is made in this Indenture to the authentication and delivery of the Securities by the Trustee or the Trustee's certificate of authentication, such reference shall be deemed to include authentication and delivery on behalf of the Trustee by an Authenticating Agent. Each Authenticating Agent shall be acceptable to the Note Issuer and shall at all times be a corporation organized and doing business under the laws of the United States of America, any State thereof, or any Territory or the District of Columbia, authorized under such laws to act as Authenticating Agent, having a combined capital and surplus of not less than $50 million and subject to supervision or examination by Federal or State authority. If such Authenticating Agent publishes reports of condition at least annually, pursuant to law or to the requirements of said supervising or examining authority, then for the purposes of this Section, the combined capital and surplus of such Authenticating Agent shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published. If at any time an Authenticating Agent shall cease to be eligible in accordance with the provisions of this Section, such Authenticating Agent shall resign immediately in the manner and with the effect specified in this Section. Any corporation into which an Authenticating Agent may be merged or converted or with which it may be consolidated, or any corporation resulting from any merger, conversion or consolidation to which such Authenticating Agent shall be a party, or any corporation succeeding to all or substantially all of the corporate trust business of an Authenticating Agent shall be the successor Authenticating Agent hereunder, provided such corporation shall be otherwise eligible under this Section, without the execution or filing of any paper or any further act on the part of the Trustee or the Authenticating Agent. An Authenticating Agent may resign at any time by giving written notice thereof to the Trustee and to the Note Issuer. The Trustee may at any time terminate the agency of an Authenticating Agent by giving written notice thereof to such Authenticating Agent and to the Note Issuer. Upon receiving such a notice of resignation or upon such a termination, or in case at any time such Authenticating Agent shall cease to be eligible in accordance with the provisions of this Section, the Trustee may appoint a successor Authenticating Agent which shall be acceptable to the Note Issuer and the Guarantors and shall give notice of such appointment in the manner provided in Section 1.6 to all Holders of Securities. Any successor Authenticating Agent upon acceptance of its appointment hereunder shall become vested with all the rights, powers and duties of its predecessor hereunder, with like effect as if originally named as an Authenticating Agent. No successor Authenticating Agent shall be appointed unless eligible under the provision of this Section. 67 75 The Trustee agrees to pay to each Authenticating Agent from time to time reasonable compensation for its services under this Section, and the Trustee shall be entitled to be reimbursed for such payments, subject to the provisions of Section 6.7. If an appointment is made pursuant to this Section, the Securities may have endorsed thereon, in addition to the Trustee's certificate of authentication, an alternative certificate of authentication in the following form: This is one of the Securities with the Guaranties endorsed thereon referred to in the within mentioned Indenture. As Trustee By: ------------------------------------- As Authenticating Agent By: ------------------------------------- Authorized Officer 68 76 ARTICLE VII. HOLDER'S LISTS AND REPORTS BY TRUSTEE AND NOTE ISSUER .1 Note Issuer to Furnish Trustee Names and Addresses of Holders. The Note Issuer will furnish or cause to be furnished to the Trustee: (a) semi-annually, not more than 14 days after each Regular Record Date, a list, in such form as the Trustee may reasonably require, of the names and addresses of the Holders as of such Regular Record Date, (b) at such other times as the Trustee may request in writing, within 30 days after the receipt by the Note Issuer of any such request, a list of similar form and content as of a date not more than 15 days prior to the time such list is furnished; excluding from any such list names and addresses received by the Trustee in its capacity as Securities Registrar. .2 Preservation of Information, Communications to Holders. (a) The Trustee shall preserve, in as current a form as is reasonably practicable, the names and addresses of Holders contained in the most recent list furnished to the Trustee as provided in Section 7.1 and the names and addresses of Holders received by the Trustee in its capacity as Securities Registrar. The Trustee may destroy any list furnished to it as provided in Section 7.1 upon receipt of a new list so furnished. (b) The rights of Holders to communicate with other Holders with respect to their rights under this Indenture or under the Securities, and the corresponding rights, privileges and duties of the Trustee, shall be as provided by the Trust Indenture Act. (c) Every Holder of Securities, by receiving and holding the same, agrees with the Note Issuer, the Guarantors and the Trustee that none of the Note Issuer, the Guarantors, the Trustee and any agent of any of them shall be held accountable by reason of any disclosure of information as to the names and addresses of the Holders made pursuant to the Trust Indenture Act. .3 Reports by Trustee. (a) The Trustee shall transmit to Holders such reports concerning the Trustee and its actions under this Indenture as may be required pursuant to the Trust Indenture Act, at the times and in the manner provided pursuant thereto. (b) Reports so required to be transmitted at stated intervals of not more than 12 months shall be transmitted no later than May 15 in each calendar year, commencing with the first May 15 after the first issuance of Securities under this Indenture. (c) A copy of each such report shall, at the time of such transmission to Holders, be filed by the Trustee with the Commission, and delivered to the Note Issuer and to the Guarantors. 69 77 .4 Reports by Note Issuer. The Company, the Note Issuer and each of the Guarantors shall file with the Trustee and with the Commission, and transmit to Holders, such information, documents and other reports, and such summaries thereof, as may be required pursuant to the Trust Indenture Act at the times and in the manner provided in the Trust Indenture Act; provided, whether or not required by the rules and regulations of the Commission, so long as any Securities are Outstanding, the Company shall provide the Trustee and the Holders with (i) all annual financial information that would be required to be contained in a filing with the Commission on Form 20-F as if the Company were required to file reports on such Form, and (ii) quarterly financial statements as of end for the period from the beginning of each year to the close of each quarterly period (other than the fourth quarter), together with comparable information for the corresponding periods of the preceding year, including, in each case, an "Operating and Financial Review and Prospects" and, with respect to the annual information only, a report thereon from the Company's certified independent public accountants. In addition, whether or not required by the rules and regulations of the Commission, the Company shall file a copy of all such information and reports with the Commission for public availability and make such information and reports available to securities analysts and prospective investors upon request. The Company and the Note Issuer also shall comply with the other provisions of Trust Indenture Act Section 314(a). ARTICLE VIII. CONSOLIDATION, MERGER, CONVEYANCE, TRANSFER OR LEASE .1 Note Issuer May Consolidate, etc., Only on Certain Terms. The Note Issuer shall not consolidate or merge with or into any other Person (whether or not the Note Issuer is the Surviving Person) or sell, assign, transfer, lease, convey or otherwise dispose of all or substantially all of its properties and assets, in one or more related transactions, as an entirety to another Person, unless: (1) the Surviving Person is a corporation, organized and existing under the laws of Germany, the United Kingdom, Luxembourg, the United States of America or any State thereof, the District of Columbia or the jurisdiction of formation of the Note Issuer; (2) the Surviving Person (if other than the Note Issuer) expressly assumes, all the obligations of the Note Issuer under the Securities and the Indenture by an indenture supplemental hereto, executed and delivered to the Trustee, in form satisfactory to the Trustee; (3) at the time of, and immediately after giving effect to, such transaction, no Default or Event of Default, shall have occurred and be continuing; (4) the Note Issuer shall have delivered to the Trustee an Officers' Certificate and an Opinion of Counsel, each stating that such consolidation, merger, conveyance, transfer, assignment, sale, lease or disposition, and any such supplemental indenture complies with this Article and that all conditions precedent herein provided for relating to such transaction have been complied 70 78 with; and the Trustee, subject to Section 6.1, may rely upon such Officers' Certificate and Opinion of Counsel as conclusive evidence that such transaction complies with this Section 8.1; and (5) such consolidation, merger, conveyance, transfer, assignment, lease or disposition is permitted under the Declaration and does not give rise to any breach or violation of the Declaration. .2 Guarantors May Consolidate, etc., Only on Certain Terms. The Company shall not and shall not permit any other Guarantor to consolidate with or merge with or into, or convey, transfer, sell, assign, lease or otherwise dispose of, in one transaction or a series of transactions, all or substantially all of its properties and assets to any Person unless: (1) the Surviving Person (if not the Company or such other Guarantor) shall be a Person organized and existing under the laws of the jurisdiction under which such Guarantor was organized or under the laws of Germany, the United Kingdom, the United States of America, or any state thereof or the District of Columbia or, except in a transaction or series of transactions involving the Company, the jurisdiction of formation of the Note Issuer or, if the Surviving Person is a corporation organized and existing under the laws of any other jurisdiction, the Note Issuer delivers to the Trustee an Opinion of Counsel reasonably acceptable to the Trustee to the effect that the rights of the Holders of the Securities would not be affected adversely as a result of the law of the jurisdiction of organization of the Surviving Person, insofar as such law affects the ability of the Surviving Person to pay and perform its obligations and undertakings in connection with its Guaranty or the ability of the Surviving Person to obligate itself to pay and perform such obligations and undertakings or the ability of the Holders to enforce such obligations and undertakings; (2) the Surviving Person (if other than the Company or such other Guarantor) shall expressly assume, (A) in a transaction or series of transactions involving the Company, by a supplemental indenture in a form satisfactory to the Trustee, all of the obligations of the Company under this Indenture, including its Guaranty hereunder, or (B) in a transaction or series of transactions not involving the Company, by a Guaranty Agreement, in a form satisfactory to the Trustee, all the obligations of such Subsidiary, if any, under its Guaranty; (3) at the time of, and immediately after giving effect to, such transaction or transactions on a pro forma basis (and treating any Indebtedness which becomes an obligation of the resulting, surviving or transferee Person as a result of such transaction as having been issued by such Person at the time of such transaction), no Default shall have occurred and be continuing; and (4) in the case of a transaction or series of transactions involving the Company, (a) the Surviving Person shall have a Consolidated Net Worth (immediately after the transaction) equal to or greater than the Consolidated Net Worth of the Company immediately preceding the transaction, (b) at the 71 79 time of such transaction and after giving pro forma effect thereto, the Surviving Person would be permitted to incur at least $1.00 of additional Indebtedness pursuant to paragraph (a) of Section 10.8 and (c) such consolidation, merger, conveyance, transfer or lease is permitted under the Declaration and the Company Guarantee and does not give rise to any breach or violation of the Declaration or the Company Guarantee; and (5) the Note Issuer and the Company or such other Note Guarantor has delivered to the Trustee an Officers' Certificate and an Opinion of Counsel, each stating that such consolidation, merger, conveyance, transfer, assignment, sale, lease, or other disposition and such supplemental indenture or Guaranty Agreement, if any, comply with the Indenture. .3 Successor Corporation Substituted. Upon any consolidation or merger by the Note Issuer with or into any other Person, or any conveyance, transfer, sale, assignment, lease or other disposition by the Note Issuer, in one or more transactions, of substantially all of its properties and assets as an entirety to any Person in accordance with Section 8.1, the Surviving Person shall succeed to, and be substituted for, and may exercise every right and power of, the Note Issuer under this Indenture with the same effect as if such Surviving Person had been named as the Note Issuer herein, and thereafter the Note Issuer shall be discharged from all obligations and covenants under the Indenture and the Securities. Such Surviving Person may cause to be signed, and may issue either in its own name or in the name of the Note Issuer, any or all of the Securities issuable hereunder which theretofore shall not have been signed by the Note Issuer and delivered to the Trustee; and, upon the order of such Surviving Person instead of the Note Issuer and subject to all the terms, conditions and limitations in this Indenture prescribed, the Trustee shall authenticate and shall deliver any Securities which previously shall have been signed and delivered by the officers of the Note Issuer to the Trustee for authentication pursuant to such provisions and any Securities which such Surviving Person thereafter shall cause to be signed and delivered to the Trustee on its behalf for the purpose pursuant to such provisions. All the Securities so issued shall in all respects have the same legal rank and benefit under this Indenture as the Securities theretofore or thereafter issued in accordance with the terms of this Indenture as though all of such Securities had been issued at the date of the execution hereof. In case of any such consolidation, merger, sale, assignment, transfer, conveyance, lease, or other disposition such changes in phraseology and form may be made in the Securities thereafter to be issued as may be appropriate. Upon any consolidation, or merger of a Guarantor with or into any other Person or any transfer, conveyance, sale, lease, assignment or other disposition of all or substantially all of the properties and assets of such Guarantor as an entirety in accordance with Section 8.2, the Surviving Person shall succeed to, and be substituted for, and may exercise every right and power of, such Guarantor under this Indenture with the same effect as if such Surviving Person had been named as a Guarantor herein, and thereafter the Guarantor shall be relieved of all obligations and covenants under this Indenture and the Securities. 72 80 .4 Successor to Note Issuer. The Company or a Wholly Owned Subsidiary (a "Successor"), may assume the obligations of the Note Issuer under the Securities, by executing and delivering to the Trustee (a) a supplemental indenture which subjects such person to all of the provisions of the Indenture as Note Issuer and (b) an Opinion of Counsel to the effect that such supplemental indenture has been duly authorized and executed by such Person, and constitutes the legal, valid, binding and enforceable obligation of such Person, subject to customary exceptions; provided that (i) the Successor is formed under the laws of the United States of America, or any State thereof or the District of Columbia, Germany, the United Kingdom or any other Member State of the European Union, (ii) no Additional Amounts would be or become payable with respect to the Securities and the time of such assumption, or as a result of any change in the laws of the jurisdiction of formation of such Successor that was reasonably foreseeable at such time, (iii) the assumption of such obligations by the Successor shall not cause the Trust to fail or cease to be classified for U.S. Federal income tax purposes as a grantor trust or another entity which is not subject to U.S. Federal income tax at the entity level and the assets and income of which are treated for U.S. Federal income tax purposes as held and derived directly by holders of interests in such Trust and (iv) if a Wholly Owned Subsidiary is the Successor, the Company shall continue to unconditionally guarantee, on a senior subordinated basis, the obligations assumed by such Successor. The Successor shall succeed to, and be substituted for, and may exercise every right and power of, the Note Issuer under the Indenture with the same effect as if it were the Note Issuer thereunder, and the former Note Issuer shall be discharged from all obligations and covenants under the Indenture and the Securities. ARTICLE IX. SUPPLEMENTAL INDENTURES .1 Supplemental Indentures Without Consent of Holders. Without the consent of any Holders, the Note Issuer, when authorized by a Board Resolution of the Note Issuer, the Company, when authorized by a Board Resolution of the Company, the Guarantors, when authorized by respective Board Resolutions of the Guarantors, and the Trustee, at any time and from time to time, may enter into one or more indentures supplemental hereto, in form satisfactory to the Trustee, for any of the following purposes: (1) to evidence the succession of another Person to the Note Issuer or any Guarantor, and the assumption by any such successor of the covenants of the Note Issuer or such Guarantor herein and in the Securities; or (2) to convey, transfer, assign, mortgage or pledge any property to or with the Trustee or to surrender any right or power herein conferred upon the Note Issuer; or (3) to establish the form or terms of Securities and Guaranties as permitted by Section 2.1; or (4) to add to the covenants of the Note Issuer for the benefit of the Holders or to surrender any right or power herein conferred upon the Note Issuer; or 73 81 (5) to add any additional Events of Default; or (6) to change or eliminate any of the provisions of this Indenture, provided, that any such change or elimination shall become effective only when there is no Security Outstanding created prior to the execution of such supplemental indenture which is entitled to the benefit of such provision; or (7) to cure any ambiguity, to correct or supplement any provision herein which may be inconsistent with any other provision herein, or to make any other provisions with respect to matters or questions arising under this Indenture, provided that such action pursuant to this clause (7) shall not materially adversely affect the interest of the Holders or, for so long as any of the Preferred Securities shall remain outstanding, the holders of such Preferred Securities; or (8) to evidence and provide for the acceptance of appointment hereunder by a successor Trustee with respect to the Securities and to add to or change any of the provisions of this Indenture as shall be necessary to provide for or facilitate the administration of the trusts hereunder by more than one Trustee, pursuant to the requirements of Section 6.11(b); or (9) to comply with the requirements of the Commission in order to effect or maintain the qualification of this Indenture under the Trust Indenture Act; or (10) to add new Guarantors pursuant to Section 13.5. .2 Supplemental Indentures with Consent of Holders. With the consent of the Holders of not less than a majority in principal amount of the Outstanding Securities affected by such supplemental indenture, by Act of said Holders delivered to the Note Issuer, the Guarantors and the Trustee, the Note Issuer, when authorized by a Board Resolution of the Note Issuer, the Guarantors, when authorized by respective Board Resolutions of the Guarantors, and the Trustee may modify the Indenture or enter into an indenture or indentures supplemental hereto for the purpose of adding any provisions to or changing in any manner or eliminating any of the provisions of this Indenture or of modifying in any manner the rights of the Holders under this Indenture; provided, however, that no such supplemental indenture shall, without the consent of the Holder of each Outstanding Security affected thereby, (1) extend the Stated Maturity of the principal of any Security, or reduce the principal amount thereof, or reduce the rate or extend the time of payment of interest thereon, or reduce any premium payable upon the redemption thereof, or change the place of payment where, or the currency of payment of any principal of, or any premium or interest on any Security, or impair the right to institute suit for the enforcement of any such payment on or with respect to a Security (or, in the case of redemption, on or after the date fixed for redemption thereof); or (2) reduce the percentage in principal amount of Securities, the consent of whose Holders is required for any such modification or supplemental indenture, or the consent of whose Holders is required for any waiver (of compliance 74 82 with certain provisions of this Indenture or certain defaults hereunder and their consequences) provided for in this Indenture; or (3) modify any of the provisions of this Section, Section 5.13 or Section 10.18, except to increase any such percentage or to provide that certain other provisions of this Indenture cannot be modified or waived without the consent of the Holder of each Outstanding Security affected thereby; or (4) modify the provisions in this Indenture relating to the subordination of Outstanding Securities in a manner adverse to the Holders. provided, that, so long as any of the Preferred Securities remains outstanding, no such amendment shall be made that adversely affects the holders of such Preferred Securities, and no termination of this Indenture shall occur, and no waiver of any Event of Default or compliance with any covenant under this Indenture shall be effective, without the prior consent of the holders of at least a majority of the aggregate liquidation preference of such Preferred Securities then outstanding unless and until the principal (and premium, if any) of the Securities and all accrued and, subject to Section 3.7, unpaid interest (including Additional Sums and Additional Amounts, if any) thereon have been paid in full; and provided further, that, so long as any of the Preferred Securities remain outstanding, no amendment shall be made to Section 5.8 of this Indenture without the prior consent of the holders of each Preferred Security then outstanding unless and until the principal (and premium, if any) of the Securities and all accrued and (subject to Section 3.7) unpaid interest (including Additional Sums and Additional Amounts, if any) thereon shall have been paid in full. It shall not be necessary for any Act of Holders under this Section to approve the particular form of any proposed supplemental indenture, but it shall be sufficient if such Act shall approve the substance thereof. .3 Execution of Supplemental Indentures. In executing or accepting the additional trusts created by any supplemental indenture permitted by this Article or the modifications thereby of the trusts created by this Indenture, the Trustee shall be entitled to receive, and (subject to Section 6.1) shall be fully protected in relying upon, an Officers' Certificate and an Opinion of Counsel stating that the execution of such supplemental indenture is authorized or permitted by this Indenture, and that all conditions precedent have been complied with. The Trustee may, but shall not be obligated to, enter into any such supplemental indenture which affects the Trustee's own rights, duties or immunities under this Indenture or otherwise. .4 Effect of Supplemental Indentures. Upon the execution of any supplemental indenture under this Article, this Indenture shall be modified in accordance therewith, and such supplemental indenture shall form a part of this Indenture for all purposes; and every Holder of Securities theretofore or thereafter authenticated and delivered hereunder shall be bound thereby. No such supplemental indenture shall directly or indirectly modify the provisions of Article XII, Article XIV, Sections 4.3(b), 5.3 or 5.6 in any manner which might terminate or impair the rights of the Senior Indebtedness pursuant to such subordination provisions. 75 83 .5 Conformity with Trust Indenture Act. Every supplemental indenture executed pursuant to this Article shall conform to any applicable requirements of the Trust Indenture Act as then in effect. .6 Reference in Securities to Supplemental Indentures. Securities authenticated and delivered after the execution of any supplemental indenture pursuant to this Article may, and shall if required by the Note Issuer, bear a notation in form approved by the Note Issuer as to any matter provided for in such supplemental indenture. If the Note Issuer and the Guarantors shall so determine, new Securities so modified as to conform, in the opinion of the Note Issuer and the Guarantors, to any such supplemental indenture may be prepared and executed by the Note Issuer and the Guaranties endorsed thereon may be executed by the Guarantors and authenticated and delivered by the Trustee in exchange for Outstanding Securities. ARTICLE X. COVENANTS .1 Payment of Principal, Premium and Interest. The Note Issuer covenants and agrees for the benefit of each of the Securities that it shall duly and punctually pay the principal of (and premium, if any) and interest on the Securities in accordance with the terms of such Securities and this Indenture. .2 Maintenance of Office or Agency. The Note Issuer shall maintain in the Borough of Manhattan, The City of New York an office or agency where Securities may be presented or surrendered for payment and an office or agency where Securities may be surrendered for registration of transfer or for exchange and where notices and demands to or upon the Note Issuer or any Guarantor in respect of the Securities, any Guaranty endorsed thereon and this Indenture may be served. The Note Issuer and the Guarantors initially appoint the Trustee, acting through its office or agency in the Borough of Manhattan, The City of New York, as its agent for said purposes. The Note Issuer and the Guarantors shall give prompt written notice to the Trustee of any change in the location of any such office or agency. If at any time the Note Issuer or any Guarantor shall fail to maintain such office or agency or shall fail to furnish the Trustee with the address thereof, such presentations, surrenders, notices and demands may be made or served at the Corporate Trust Office of the Trustee, and the Note Issuer and each Guarantor hereby appoints the Trustee as its agent to receive all such presentations, surrenders, notices and demands. The Note Issuer may also from time to time designate one or more other offices or agencies in or outside the Borough of Manhattan, The City of New York where the Securities may be presented or surrendered for any or all of such purposes, and may from time to time rescind such designations; provided, however, that no such designation or rescission shall in any manner relieve the Note Issuer of its obligation to maintain an office or agency in the Borough of Manhattan, The City of New York for such purposes. The Note Issuer shall give prompt written notice to the Trustee of any such designation or rescission and of any change in the location of any such other office or agency. 76 84 .3 Money for Security Payments to be Held in Trust. If the Note Issuer shall at any time act as its own Paying Agent, it shall, on or before each due date of the principal of or interest on any of the Securities, segregate and hold in trust for the benefit of the Persons entitled thereto a sum sufficient to pay the principal (and premium, if any) or interest so becoming due until such sums shall be paid to such Persons or otherwise disposed of as herein provided, and shall promptly notify the Trustee of its action or failure so to act. Whenever the Note Issuer shall have one or more Paying Agents, it shall, prior to 10:00 a.m. New York City time on each due date of the principal of (and premium, if any) or interest on any Securities, deposit with a Paying Agent a sum sufficient to pay the principal, premium, or interest so becoming due, such sum to be held in trust for the benefit of the Persons entitled to such principal, premium or interest, and (unless such Paying Agent is the Trustee) the Note Issuer will promptly notify the Trustee of its action or failure so to act. The Note Issuer shall cause each Paying Agent other than the Trustee to execute and deliver to the Trustee an instrument in which such Paying Agent shall agree with the Trustee, subject to the provisions of this Section, that such Paying Agent shall: (1) hold all sums held by it for the payment of the principal of (and premium, if any) or interest on Securities in trust for the benefit of the Persons entitled thereto until such sums shall be paid to such Persons or otherwise disposed of as herein provided; (2) give the Trustee notice of any default by the Note Issuer (or any other obligor upon the Securities) in the making of any payment of principal (and premium, if any) or interest; (3) at any time during the continuance of any such default, upon the written request of the Trustee, forthwith pay to the Trustee all sums so held in trust by such Paying Agent; and (4) comply with the provisions of the Trust Indenture Act applicable to it as a Paying Agent. The Note Issuer may at any time, for the purpose of obtaining the satisfaction and discharge of this Indenture or for any other purpose, pay, or by Note Issuer Order direct any Paying Agent to pay, to the Trustee all sums held in trust by the Note Issuer or such Paying Agent, such sums to be held by the Trustee upon the same trusts as those upon which such sums were held by the Note Issuer or such Paying Agent; and, upon such payment by the Note Issuer or any Paying Agent to the Trustee, the Note Issuer or such Paying Agent shall be released from all further liability with respect to such money. Any money deposited with the Trustee or any Paying Agent, or then held by the Note Issuer, in trust for the payment of the principal of (and premium, if any) or interest on any Security and remaining unclaimed for two years after such principal (and premium, if any) or interest has become due and payable shall (unless otherwise required by mandatory provision of applicable escheat or abandoned or unclaimed property law) be paid on Note Issuer Request to the Note Issuer, or (if then held by the Note Issuer) shall (unless otherwise 77 85 required by mandatory provision of applicable escheat or abandoned or unclaimed property law) be discharged from such trust; and the Holder of such Security shall thereafter, as an unsecured general creditor, look only to the Note Issuer for payment thereof, and all liability of the Trustee or such Paying Agent with respect to such trust money, and all liability of the Note Issuer as trustee thereof, shall thereupon cease; provided, however, that the Trustee or such Paying Agent, before being required to make any such repayment, may at the expense of the Note Issuer cause to be published once, in a newspaper published in the English language, customarily published on each Business Day and of general circulation in The Borough of Manhattan, The City of New York (which is expected to be The Wall Street Journal.), notice that such money remains unclaimed and that, after a date specified therein, which shall not be less than 30 days from the date of such publication, any unclaimed balance of such money then remaining will be repaid to the Note Issuer. .4 Existence. Subject to Article VIII and the other Sections of this Article X, the Company shall do or cause to be done all things necessary to preserve and keep in full force and effect the existence, rights (charter and statutory) and franchises of the Company, the Note Issuer and each other Guarantor; provided, however, that the Company shall not be required to preserve any such right or franchise if the Board of Directors of the Company in good faith shall determine that the preservation thereof is no longer desirable in the conduct of the business of the Company and that the loss thereof is not disadvantageous in any material respect to the Holders. .5 Maintenance of Properties. Subject to Article VIII and the other Sections of this Article X, the Company shall cause all properties used or useful in the conduct of its business or the business of any Subsidiary of the Company to be maintained and kept in good condition, repair and working order and supplied with all necessary equipment and will cause to be made all necessary repairs, renewals, replacements, betterments and improvements thereof, all as in the judgment of the Company may be necessary so that the business carried on in connection therewith may be properly and advantageously conducted at all times; provided, however, that nothing in this Section shall prevent the Company from discontinuing the operation or maintenance of any of such properties if such discontinuance is, as determined by the Company in good faith, desirable in the conduct of its business or the business of any Subsidiary and not disadvantageous in any material respect to the Holders. .6 Payment of Taxes and Other Claims. The Company will pay or discharge or cause to be paid or discharged, before the same shall become delinquent, (a) all material taxes, assessments and governmental charges levied or imposed upon the Company or any of its Subsidiaries or upon the income, profits or property of the Company or any of its Subsidiaries, and (b) all material lawful claims for labor, materials and supplies which, if unpaid, might by law become a Lien upon the property of the Company 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. 78 86 .7 Maintenance of Insurance. The Company shall, and shall cause its Subsidiaries to, keep at all times all of their properties which are of an insurable nature insured against loss or damage with insurers believed by the Company to be responsible to the extent that property of similar character is usually so insured by corporations similarly situated and owning like properties in accordance with good business practice. The Company shall, and shall cause its Subsidiaries to, use the proceeds from any such insurance policy to repair, replace or otherwise restore the property to which such proceeds relate, except to the extent that a different use of such proceeds is, as determined by the Company, in good faith, desirable in the conduct of its business or the business of any Subsidiary and not disadvantageous in any material respect to the Holders. .8 Limitation on Incurrence of Indebtedness. (a) The Company shall not, and shall not permit any Subsidiary to, Incur, directly or indirectly, any Indebtedness unless, on the date of such Incurrence (and after giving effect thereto), the Consolidated Coverage Ratio exceeds 2.5 to 1. (b) The foregoing limitations contained in paragraph (a) do not apply to the Incurrence of any of the following Indebtedness: (1) Indebtedness under the Credit Agreements; (2) Indebtedness owed to and held by a Wholly Owned Subsidiary; provided, however, that any subsequent issuance or transfer of any Capital Stock that results in any such Wholly Owned Subsidiary ceasing to be a Wholly Owned Subsidiary or any subsequent transfer of such Indebtedness (other than to another Wholly Owned Subsidiary) shall be deemed, in each case, to constitute the Incurrence of such Indebtedness by the Company; (3) Indebtedness in respect of the Securities, up to EURO300 million (or the equivalent amount in other currencies) of additional Senior Subordinated Indebtedness, and the related Guarantees by the Company and the Guarantors of the Securities, up to EURO300 million (or the equivalent amount in other currencies) of additional Senior Subordinated Indebtedness, the 9% Notes, the 7 7/8% Notes and the 7 3/8% Notes; (4) Capital Lease Obligations and Indebtedness Incurred, in each case, to provide all or a portion of the purchase price or cost of construction of an asset or, in the case of a sale/leaseback transaction, to finance the value of such asset owned by the Company or a Subsidiary, in an aggregate principal amount which, together with all other such Capital Lease Obligations and Indebtedness outstanding on the date of such Incurrence (other than Indebtedness permitted by paragraph (a) or clause (2) or (9) of this paragraph (b)), does not exceed $200,000,000; (5) Indebtedness in respect of Receivables Financings in an aggregate principal amount which, together with all other Indebtedness in respect of Receivables Financings outstanding on the date of such Incurrence (other than Indebtedness permitted by paragraph (a) or clause (2) or (9) of this paragraph 79 87 (b)), does not exceed 85% of the sum of (1) the total amount of accounts receivables shown on the Company's most recent consolidated quarterly balance sheet, plus (2) without duplication, the total amount of accounts receivable already subject to a Receivables Financing; (6) Refinancing Indebtedness in respect of Indebtedness Incurred pursuant to paragraph (a) or pursuant to clause (3), (4) or (5) of this paragraph (b); (7) Hedging Obligations permitted under the Senior Credit Agreement as in effect on the Issue Date; (8) customer deposits and advance payments received from customers for goods purchased in the ordinary course of business; and (9) Indebtedness in an aggregate principal amount which, together with all other Indebtedness of the Company and its Subsidiaries outstanding on the date of such Incurrence (other than Indebtedness permitted by paragraph (a) or clauses (1) through (8) of this paragraph (b)), does not exceed $400,000,000. (c) Notwithstanding the foregoing, the Company shall not, and shall not permit any Subsidiary to, Incur, directly or indirectly, any Indebtedness (i) that is subordinate or junior in ranking in right of payment to its Senior Indebtedness unless such Indebtedness is Senior Subordinated Indebtedness or is expressly subordinated in right of payment to Senior Subordinated Indebtedness, or (ii) pursuant to paragraph (b) above if the proceeds thereof are used, directly or indirectly, to Refinance any Subordinate Obligations unless such Indebtedness shall be subordinated to the Securities to at least the same extent as such Subordinated Obligations. (d) For purposes of determining compliance with the foregoing covenant, (i) in the event that an item of Indebtedness meets the criteria of more than one of the types of Indebtedness described above, the Company, in its sole discretion, will classify such item of Indebtedness and only be required to include the amount and type of such Indebtedness in one of the above clauses, and (ii) an item of Indebtedness may be divided and classified in more than one of the types of Indebtedness described above. .9 Limitation on Restricted Payments. (a) The Company shall not, and shall not permit any Subsidiary to, directly or indirectly, make any Restricted Payment if at the time the Company or such Subsidiary makes such Restricted Payment: (1) a Default shall have occurred and be continuing (or would result therefrom); (2) the Company is not able to Incur an additional $1.00 of Indebtedness pursuant to paragraph (a) of Section 10.8; or (3) the aggregate amount of such Restricted Payment and all other Restricted Payments since the Issue Date would exceed the sum of: (A) 50% of the Consolidated Net Income accrued during the period (treated as one 80 88 accounting period) from January 1, 2000 to the end of the Company's most recently ended fiscal quarter for which internal financial statements are available at the time of such Restricted Payment (or, in case such Consolidated Net Income is a deficit, minus 100% of such deficit); (B) the aggregate Net Cash Proceeds received by the Company from the issuance or sale of its Capital Stock (other than Disqualified Stock) subsequent to January 1, 2000 (other than an issuance or sale to a Subsidiary and other than an issuance or sale to an employee stock ownership plan or to a trust established by the Company or any of its Subsidiaries for the benefit of their employees); and (C) the amount by which Indebtedness of the Company is reduced on the Company's balance sheet upon the conversion or exchange (other than by a Subsidiary), subsequent to January 1, 2000, of any Indebtedness of the Company convertible or exchangeable for Capital Stock (other than Disqualified Stock) of the Company (less the amount of any cash, or the fair value of any other property, distributed by the Company upon such conversion or exchange). (b) The provisions of the foregoing paragraph (a) shall not prohibit: (1) any purchase or redemption of Capital Stock or Subordinated Obligations of the Company made by exchange for, or out of the proceeds of the substantially concurrent sale of, Capital Stock of the Company (other than Disqualified Stock and other than Capital Stock issued or sold to a Subsidiary or an employee stock ownership plan or to a trust established by the Company or any of its Subsidiaries for the benefit of their employees); provided, however, that (A) such purchase or redemption shall be excluded in the calculation of the amount of Restricted Payments and (B) the Net Cash Proceeds from such sale shall be excluded from the calculation of amounts under clause (3)(B) of paragraph (a) above; (2) any purchase, repurchase, redemption, defeasance or other acquisition or retirement for value of Subordinated Obligations made by exchange for, or out of the proceeds of the substantially concurrent sale of, Indebtedness of the Company which is permitted to be Incurred pursuant to Section 10.8; provided, however, that such purchase, repurchase, redemption, defeasance or other acquisition or retirement for value shall be excluded in the calculation of the amount of Restricted Payments; or (3) dividends paid within 60 days after the date of declaration thereof if at such date of declaration such dividend would have complied with this covenant and that at the time of payment of such dividend, no other Default shall have occurred and be continuing (or result therefrom); provided that such dividend shall be included in the calculation of the amount of Restricted Payments. .10 Limitation on Restrictions on Distributions from Subsidiaries. The Company shall not, and shall not permit any Subsidiary to, create or otherwise cause or permit to exist or become effective any consensual encumbrance or restriction on the ability of any Subsidiary (a) to pay dividends or make any other distributions on its Capital Stock to the Company or any other Subsidiary or pay any Indebtedness owed to the Company or any other Subsidiary, (b) to make any loans or advances to the Company or 81 89 any other Subsidiary or (c) transfer any of its property or assets to the Company or any other Subsidiary, except: (i) any encumbrance or restriction pursuant to an agreement in effect at or entered into on the Issue Date; (ii) any encumbrance or restriction with respect to a Subsidiary pursuant to an agreement relating to any Indebtedness Incurred by such Subsidiary on or prior to the date on which such Subsidiary was acquired by the Company (other than Indebtedness Incurred as consideration in, or to provide all or any portion of the funds or credit support utilized to consummate the transaction or series of related transactions pursuant to which such Subsidiary became a Subsidiary or was acquired by the Company) and outstanding on such date; (iii) any encumbrance or restriction pursuant to an agreement effecting a Refinancing of Indebtedness Incurred pursuant to an agreement referred to in clause (i) or (ii) above or this clause (iii) or contained in any amendment to an agreement referred to in clause (i) or (ii) above or this clause (iii); provided, however, that the encumbrances and restrictions with respect to such Subsidiary contained in any such refinancing agreement or amendment are no less favorable to the Holders than encumbrances and restrictions with respect to such Subsidiary contained in such agreements; (iv) any such encumbrance or restriction consisting of customary non-assignment provisions in leases governing leasehold interests or in licensing agreements to the extent such provisions restrict the transfer of the lease or the property leased thereunder or the licensing agreement or the rights licensed thereunder; (v) in the case of clause (c) above, restrictions contained in security agreements or mortgages securing Indebtedness of a Subsidiary to the extent such restrictions restrict the transfer of the property subject to such security agreements or mortgages; and (vi) any restriction with respect to a Subsidiary imposed pursuant to an agreement entered into for the sale or disposition of all or substantially all the Capital Stock or assets of such Subsidiary pending the closing of such sale or disposition. .11 Senior Subordinated Indebtedness; Liens. The Company shall not, and shall not permit any Subsidiary to, Incur: (1) any Indebtedness if such Indebtedness is subordinate or junior in ranking in any respect to any Senior Indebtedness, unless such Indebtedness is Senior Subordinated Indebtedness or is expressly subordinated in right of payment to Senior Subordinated Indebtedness; or (2) any Secured Indebtedness that is not Senior Indebtedness, unless (A) contemporaneously therewith effective provision is made to secure the Securities equally and ratably with such Secured Indebtedness for so long as such Secured Indebtedness is secured by a Lien, (B) such Secured Indebtedness is permitted by clause (1), (4), (5) or (7) of paragraph (b) of Section 10.8, (C) such Secured Indebtedness is Incurred by a Subsidiary pursuant to a revolving credit 82 90 agreement as in effect on the Issue Date, or (D) such Secured Indebtedness is Refinancing Indebtedness in respect of Secured Indebtedness Incurred by a Subsidiary pursuant to a revolving credit agreement as in effect on the Issue Date. .12 Limitation on Affiliate Transactions. (a) The Company shall not, and shall not permit any Subsidiary to, enter into any transaction (including the purchase, sale, lease or exchange of any property, employee compensation arrangements or the rendering of any service) with any Affiliate of the Company (an "Affiliate Transaction") unless the terms thereof: (1) are no less favorable to the Company or such Subsidiary than those that could be obtained at the time of such transaction in arm's-length dealings with a Person who is not such an Affiliate; (2) if such Affiliate Transaction involves an amount in excess of $5,000,000, (i) are set forth in writing and (ii) have been approved by a majority of the members of the Board of Directors of the Company or such Subsidiary having no personal stake in such Affiliate Transaction; and (3) if such Affiliate Transaction involves an amount in excess of $15,000,000, have been determined by a nationally recognized investment banking firm or, in appropriate circumstances, an internationally recognized engineering firm, to be fair from a financial standpoint to the Company and its Subsidiaries. (b) The provisions of paragraph (a) above shall not prohibit: (1) any Restricted Payment permitted to be paid pursuant to Section 10.9; (2) transactions or payments pursuant to any employee arrangements or employee or director benefit plans entered into by the Company or any of its Subsidiaries in the ordinary course of business of the Company or such Subsidiary; and (3) any Affiliate Transaction between the Company and a Wholly Owned Subsidiary or between Wholly Owned Subsidiaries. .13 Limitation on Sales of Assets and Subsidiary Stock. (a) The Company shall not, and shall not permit any Subsidiary to, directly or indirectly, consummate any Asset Disposition unless: (1) the Company or such Subsidiary receives consideration at the time of such Asset Disposition at least equal to the fair market value (including as to the value of all non-cash consideration), as determined in good faith by the Board of Directors of the Company or such Subsidiary, as the case may be, of the shares and assets subject to such Asset Disposition and at least 70% of the consideration thereof received by the Company or such Subsidiary is in the form of cash or cash equivalents; and 83 91 (2) an amount equal to 100% of the Net Available Cash from such Asset Disposition is applied by the Company (or such Subsidiary, as the case may be) (A) first, to the extent the Company elects (or is required by the terms of any Senior Indebtedness), to prepay, repay, redeem or purchase Senior Indebtedness or Indebtedness (other than any Disqualified Stock) of a Wholly Owned Subsidiary (in each case other than Indebtedness owed to the Company or an Affiliate of the Company) within one year from the later of the date of such Asset Disposition or the receipt of such Net Available Cash; (B) second, to the extent of the balance of such Net Available Cash after application in accordance with clause (A), to the extent the Company elects, to acquire Additional Assets within one year from the later of the date of such Asset Disposition or the receipt of such Net Available Cash; (C) third, to the extent of the balance of such Net Available Cash after application in accordance with clauses (A) and (B), to cause Luxco to make an offer to the holders of the 9% Notes to purchase the 9% Notes pursuant to and subject to the conditions contained in the 9% Indenture relating thereto; (D) fourth, to the extent of the balance of such Net Available Cash after application in accordance with clauses (A), (B) and (C), to cause Luxco to make an offer to the holders of the 7 7/8% Notes and the 7 3/8% Notes on a pro rata basis (determined in accordance with the respective outstanding principal amounts thereof at the time of such offer, as calculated by reference to an exchange rate of 1.8237 DM per $1.00) to purchase the 7 7/8% Notes and the 7 3/8% Notes pursuant to and subject to the conditions contained in the 7 7/8% Indenture and the 7 3/8% Indenture, respectively; and (E) fifth, to the extent of the balance of such Net Available Cash after application in accordance with clauses (A), (B), (C) and (D), to cause the Note Issuer to make an offer to the holders of the Securities on a pro rata basis to purchase the Securities pursuant to and subject to the conditions contained in the Indenture; provided, however, that in connection with any prepayment, repayment or purchase of Indebtedness pursuant to clause (A), (C), (D) or (E) above, the Company or such Subsidiary shall retire such Indebtedness and shall cause the related loan commitment (if any) to be permanently reduced in an amount equal to the principal amount so prepaid, repaid or purchased. Notwithstanding the provisions of the immediately preceding paragraph, the Company and the Subsidiaries shall not be required to apply any Net Available Cash in accordance with this paragraph except to the extent that the aggregate Net Available Cash from all Asset Dispositions which are not applied in accordance with this paragraph exceeds $20,000,000. Pending application of Net Available Cash pursuant to this covenant, such Net Available Cash shall be invested in Permitted Investments. For the purposes of this covenant, the following are deemed to be cash or cash equivalents: (x) the assumption of Indebtedness of the Company or any Subsidiary and the release of the Company or such Subsidiary from all liability on such Indebtedness in connection with such Asset Disposition; and (y) securities received by the Company or any Subsidiary from the transferee that are promptly converted by the Company or such Subsidiary into cash. 84 92 (b) In the event of an Asset Disposition that requires the purchase of the Securities pursuant to clause (a)(2)(E) above, the Note Issuer shall be required to purchase the Securities tendered pursuant to an offer by the Note Issuer for the Securities at a purchase price of 100% of the principal amount thereof (without premium), plus accrued but unpaid interest, by mailing a notice to each Holder with a copy to the Trustee, within 30 days following the determination by or on behalf of the respective holders of the 9% Notes, the 7 3/8% Notes and the 7 7/8% Notes as to the amount of the 9% Notes, the 7 3/8% Notes and the 7 7/8% to be purchased pursuant to the offer to repurchase the 9% Notes, the 7 3/8% Notes and the 7 7/8% made pursuant to clause (a)(2)(C) above or clause (a)(2)(D) above, as the case may be, stating: (i) that an Asset Disposition that requires the purchase of the Securities pursuant to clause (a)(2)(E) above has occurred and that such Holder has a right to require the Note Issuer to repurchase Securities at a purchase price of 100% of their principal amount (without premium) plus accrued and unpaid interest in an amount not to exceed the balance of Net Available Cash from such Asset Disposition after application in accordance with clauses (A), (B), (C) and (D) of this covenant; (ii) the repurchase date (which shall be no earlier than 30 days not later than 60 days from the date such notice is mailed); (iii) that the tendered Securities shall be repurchased pro rata in the event of oversubscription; provided that the unrepurchased portion of the principal amount of any Security shall be in an authorized denomination (which shall not be less than the minimum authorized denomination) for such Security; (iv) the instructions determined by the Note Issuer, consistent with the covenant described hereunder, that a Holder must follow in order to have its Securities purchased; and (v) that each Security shall be subject to repurchase only in the amount of $1,000 or integral multiples thereof. The Note Issuer shall not be required to make such an offer to purchase Securities pursuant to this covenant if the Net Available Cash available therefor is less than $20,000,000 (which lesser amount shall be carried forward for purposes of determining whether such an offer is required with respect to any subsequent Asset Disposition). Each Security shall be subject to repurchase only in the amount of $1,000 or integral multiples thereof. Upon presentation of any Security repurchased in part only, the Note Issuer shall execute and the Trustee shall authenticate and deliver to the Holder thereof, at the expense of the Note Issuer, a new Security (and the Guarantors shall execute their Guaranties to be endorsed thereon) of authorized denominations, in aggregate principal amount equal to the unredeemed portion of the Security so presented and having the same Issue Date, Stated Maturity and terms. If a Global Security is so surrendered, such new Security shall also be a new Global Security. (c) The Note Issuer shall, and the Company shall cause the Note Issuer to, comply, to the extent applicable, with the requirements of Section 14(e) of the Exchange Act and any other securities laws or regulations in connection with the repurchase of Securities 85 93 pursuant to this covenant. To the extent that the provisions of any securities laws or regulations conflict with provisions of this covenant, the Note Issuer shall, and the Company shall cause the Note Issuer to, comply with the applicable securities laws and regulations and shall not be deemed to have breached its obligations under this clause by virtue thereof. .14 Intentionally Omitted. .15 Change of Control. (a) Upon the occurrence of a Change of Control Triggering Event, each Holder shall have the right to require that the Note Issuer repurchase such Holder's Securities at a purchase price in cash equal to 101% of the principal amount thereof plus accrued and unpaid interest, if any, to the date of purchase (subject to the right of Holders of record on the relevant Regular Record Date to receive interest due on the relevant Interest Payment Date). Each Security shall be subject to repurchase only in the amount of $1,000 or integral multiples thereof. Upon presentation of any Security repurchased in part only, the Note Issuer shall execute and the Trustee shall authenticate and deliver to the Holder thereof, at the expense of the Note Issuer, a new Security (and the Guarantors shall execute their Guaranties to be endorsed thereon) of authorized denominations, in aggregate principal amount equal to the unredeemed portion of the Security so presented and having the same Issue Date, Stated Maturity and terms. If a Global Security is so surrendered, such new Security will also be a new Global Security. (b) Within 30 days following a Change of Control Triggering Event, the Note Issuer shall mail a notice to each Holder with a copy to the Trustee stating: (1) that a Change of Control Triggering Event has occurred and that such Holder has the right to require the Note Issuer to purchase such Holder's Securities at a purchase price in cash equal to 101% of the principal amount thereof plus accrued and unpaid interest, if any, to the date of purchase (subject to the right of Holders of record on the relevant Regular Record Date to receive interest on the relevant Interest Payment Date); (2) the circumstances and relevant facts regarding such Change of Control Triggering Event (including information with respect to pro forma historical income, cash flow and capitalization after giving effect to such Change of Control); (3) the repurchase date (which shall be no earlier than 30 days nor later than 60 days from the date such notice is mailed); (4) that each Security shall be subject to repurchase only in the amount of $1,000 or integral multiples thereof; and (5) the instructions determined by the Note Issuer, consistent with the covenant described hereunder, that a Holder must follow in order to have its Securities purchased. (c) The Note Issuer shall, and the Company shall cause the Note Issuer to, comply, to the extent applicable, with the requirements of Section 14(e) of the Exchange Act and any other securities laws or regulations in connection with the repurchase of the Securities pursuant to this covenant. To the extent that the provisions of any securities laws or regulations conflict with the provisions of this covenant, the Note Issuer shall, and the Company shall cause the Note Issuer, to comply with the applicable securities laws and regulations and shall not be deemed to have breached its obligations under this covenant by virtue thereof. 86 94 .16 Statement as to Compliance and Default. (a) The Note Issuer and the Guarantors shall deliver to the Trustee, within 95 days after the end of each of their respective calendar years ending after the date hereof, a certificate of the principal executive officer, principal financial officer or principal accounting officer covering the preceding calendar year, stating whether or not to the best knowledge of the signers thereof the Note Issuer or the Guarantors, as the case may be, is in default in the performance, observance or fulfillment of or compliance with any of the terms, provisions, covenants and conditions of this Indenture and, if the Note Issuer or the Guarantors, as the case may be, shall be in default, specifying all such defaults and the nature and status thereof of which they may have knowledge. (b) The Note Issuer and each Guarantor shall deliver to the Trustee, as soon as possible and in any event within 10 days after the Note Issuer or any Guarantor becomes aware of the occurrence of an Event of Default or an event which, with notice or the lapse of time or both, would constitute an Event of Default, an Officers' Certificate setting forth the details of such Event of Default or default, and the action which the Note Issuer or any Guarantor proposes to take with respect thereto. .17 Ownership of the Trust and the Note Issuer; Business of the Note Issuer. (a) The Company shall continue (i) to directly or indirectly maintain 100% ownership of the Common Securities of the Trust; provided, however, that any permitted successor of the Company hereunder may succeed to the Company's ownership of such Common Securities; and (ii) to use its reasonable efforts to cause the Trust (x) to remain a statutory business trust, except in connection with the distribution of Securities to the holders of Common Securities and Trust Securities in liquidation of the Trust, the redemption of all of the Common Securities and Trust Securities, or certain mergers, consolidations or amalgamations, each only as permitted by the Declaration, and (y) to otherwise continue to be classified for U.S. Federal income tax purposes as a grantor trust or another entity which is not subject to U.S. Federal income tax at the entity level and the assets and income of which are treated for U.S. Federal income tax purposes as held and derived directly by holders of interests in the entity. (b) The Company shall continue to directly or indirectly maintain 100% ownership of the Capital Stock of the Note Issuer; provided that any permitted successor of the Company pursuant to Article VIII may succeed to the Company's ownership of such Capital Stock. (c) The Company shall cause the Note Issuer to engage only in those activities that are necessary, convenient or incidental to (i) issuing and selling the Securities and any additional Senior Subordinated Indebtedness issued and sold after the date hereof and permitted hereunder, advancing or distributing the proceeds thereof to the Company and the Subsidiaries and performing its obligations relating to the Securities and any such additional Senior Subordinated Indebtedness, pursuant to the terms thereof and of this Indenture and any indenture governing such additional Senior Subordinated Indebtedness, (ii) conducting or participating in the Exchange Offer and issuing the Exchange Securities and conducting or participating in comparable exchange offers and issuing the related exchange securities in respect of additional Senior Subordinated Indebtedness, and (iii) guaranteeing the Senior Credit Agreement. 87 95 .18 Waiver of Certain Covenants. The Company or the Note Issuer, as applicable, may omit in any particular instance to comply with any covenant or condition set forth in Section 8.1 and Sections 10.4 to 10.17, if before or after the time for such compliance the Holders of at least a majority in principal amount of the Outstanding Securities shall, by Act of such Holders, either waive such compliance in such instance or generally waive compliance with such covenant or condition, but no such waiver shall extend to or affect such covenant or condition except to the extent so expressly waived, and, until such waiver shall become effective, the obligations of the Company or the Note Issuer, as applicable, in respect of any such covenant or condition shall remain in full force and effect. .19 Additional Amounts; Additional Interest. (a) All payments made on behalf of the Note Issuer under or with respect to the Securities must be made free and clear of and without withholding or deduction for or on account of Taxes, unless the Note Issuer or any Guarantor is required to withhold or deduct Taxes by law or by the interpretation or administration thereof by the relevant government authority or agency. If the Note Issuer or any Guarantor is so required to withhold or deduct any amount for or on account of Taxes from any payment made under or with respect to the Securities, the Note Issuer or the Guarantors, as the case may be, shall be required to pay such amounts ("Additional Amounts") as may be necessary so that the net amount (including Additional Amounts) received by each Holder after such withholding or deduction will not be less than the amount such Holder would have received if such Taxes had not been withheld or deducted; provided, however, that no Additional Amounts shall be payable with respect to payments made to any Holder in respect of a beneficial owner which is subject to such Taxes by reason of its being connected with the United States, Germany, the United Kingdom or the jurisdiction of formation of the Note Issuer, or any territory thereof otherwise than by the mere holding of Securities or the receipt of payments thereunder. The Note Issuer shall also make such withholding or deduction and remit the full amount deducted or withheld to the relevant authority as and when required in accordance with applicable law. The Note Issuer shall furnish to the Holders within 30 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 Note Issuer. (b) In the event that the Trust would be required to pay any taxes, duties, assessments or governmental charges of whatever nature (other than withholding taxes) imposed by the United States of America, or any other taxing authority, and (iii) the Note Issuer shall not have (1) redeemed the Securities pursuant to Section 11.7 or (2) terminated the Trust pursuant to Section 9.2(f) of the Declaration, then, in any such case, the Note Issuer shall pay to the Trust (and its permitted successors or assigns under the Declaration) for so long as the Trust (or its permitted successors or assigns) is the registered Holder of any Securities, as additional interest ("Additional Interest") such amounts as shall be necessary so that the net amounts received and retained by the Trust after paying any such taxes, duties, assessments or governmental charges will be not less than the amounts the Trust would have received had no such taxes, duties, assessments or governmental charges been imposed. All references herein to Additional Amounts shall be deemed to include Additional Interest. 88 96 (c) Whenever in this Indenture or the Securities there is a reference in any context to the payment of principal of or interest on the Securities, such mention shall be deemed to include mention of the payments of the Additional Amounts provided for in this Section to the extent that, in such context, Additional Amounts are, were or would be payable in respect thereof pursuant to the provisions of this Section and express mention of the payment of Additional Amounts (if applicable) in any provisions hereof shall not be construed as excluding Additional Amounts in those provisions hereof where such express mention is not made. (d) The foregoing obligations shall survive any termination, defeasance or discharge of the Indenture pursuant to Article IV. .20 Suspension of Covenants During Achievement of Investment Grade Status. If during any period the Securities have achieved and continue to maintain Investment Grade Status and no Event of Default has occurred and is continuing (such period is referred to herein as an "Investment Grade Status Period"), then upon notice by the Company to the Trustee by the delivery of an Officers' Certificate that it has achieved Investment Grade Status and that no Event of Default has occurred and is continuing, the covenants set forth in Sections 8.2(4)(b), 10.8, 10.9, 10.10, 10.11(1) and 10.13 shall be suspended and shall not during such period be applicable to the Company and its Subsidiaries. As a result, during any such period, the Securities shall lose the full covenant protection initially provided under this Indenture. No action taken during an Investment Grade Status Period or prior to an Investment Grade Status Period in compliance with the covenants then applicable shall require reversal or constitute a default under the Securities in the event that suspended covenants are subsequently reinstated or suspended, as the case may be. An Investment Grade Status Period will not commence until the Company has delivered the Officers' Certificate referred to above and shall terminate immediately upon the failure of the Securities to maintain Investment Grade Status. The Company shall promptly notify the Trustee in writing of any failure of the Securities to maintain Investment Grade Status. ARTICLE XI. REDEMPTION OF SECURITIES .1 Applicability of This Article. Redemption of Securities as permitted or required by any provision of this Indenture shall be made in accordance with such provision and this Article. .2 Election to Redeem; Notice to Trustee. The election of the Note Issuer to redeem any Securities shall be evidenced by or pursuant to a Board Resolution. In the case of any redemption of Securities prior to the expiration of any restriction on such redemption provided in the terms of such Securities, the Note Issuer shall furnish the Trustee with an Officers' Certificate and an Opinion of Counsel evidencing compliance with such restriction. 89 97 .3 Intentionally Omitted. .4 Notice of Redemption. Notice of redemption shall be given by first-class mail, postage prepaid, mailed not later than the thirtieth day, and not earlier than the sixtieth day, prior to the date fixed for redemption, to each Holder of Securities to be redeemed, at the address of such Holder as it appears in the Securities Register. With respect to the Securities to be redeemed, each notice of redemption shall state: (a) the Redemption Date; (b) the Redemption Price; (c) that on the Redemption Date, the Redemption Price at which such Securities are to be redeemed will become due and payable upon each such Security or portion thereof, and that interest thereon, if any, shall cease to accrue on and after said date; and (d) the place or places where such Securities are to be surrendered for payment of the Redemption Price at which such Securities are to be redeemed. Notice of redemption of Securities to be redeemed at the election of the Note Issuer shall be given by the Note Issuer or, at the Note Issuer's request, by the Trustee in the name and at the expense of the Note Issuer and shall not be irrevocable. The notice if mailed in the manner herein provided shall be conclusively presumed to have been duly given, whether or not the Holder receives such notice. In any case, a failure to give such notice by mail or any defect in the notice to the Holder of any Security designated for redemption as a whole or in part shall not affect the validity of the proceedings for the redemption of any other Security. .5 Deposit of Redemption Price. Prior to 10:00 a.m. New York City time on the Redemption Date specified in the notice of redemption given as provided in Section 11.4, the Note Issuer will deposit with the Trustee or with one or more Paying Agents an amount of money sufficient to redeem on the Redemption Date all the Securities so called for redemption at the applicable Redemption Price. .6 Payment of Securities Called for Redemption. If any notice of redemption has been given as provided in Section 11.4, the Securities with respect to which such notice has been given shall become due and payable on the date and at the place or places stated in such notice at the applicable Redemption Price. On presentation and surrender of such Securities at a place of payment in said notice specified, the said Securities shall be paid and redeemed by the Note Issuer at the applicable Redemption Price. If any Security called for redemption shall not be so paid upon surrender thereof for redemption, the principal of and premium, if any, on such Security shall, until paid, bear interest from the Redemption Date at the rate prescribed therefor in the Security. 90 98 .7 Note Issuer's Right of Redemption in Certain Circumstances. If a Tax Event or an Investment Company Event in respect of the Trust shall occur and be continuing, the Company shall cause the Trustees (as defined in the Declaration) to dissolve the Trust and cause Securities to be distributed to the holders of the Trust Securities in dissolution of the Trust or, in the event of a Tax Event only, may cause the Securities to be redeemed, in each case, subject to and in accordance with the provisions of the Declaration, within 90 days following the occurrence of such Tax Event or Investment Company Event. The Securities may be redeemed, at the option of the Note Issuer, at any time as a whole but not in part, subject to this clause (b) and the other provisions of Article XI, at 100% of the principal amount thereof, plus accrued and unpaid interest (if any) to the date of redemption (subject to the right of Holders of record on the relevant Regular Record Date to receive interest due on the relevant Interest Payment Date), in the event the Note Issuer has become or would become obligated to pay, on the next date on which any amount would be payable with respect to the Securities, any Additional Amounts as a result of a change in or an amendment to the laws (including any regulations promulgated thereunder) of the United States of America, Germany, the United Kingdom or the jurisdiction of formation of the Note Issuer (initially Luxembourg) (or any political subdivision or taxing authority thereof or therein), or any change in or amendment to any official position regarding the application or interpretation of such laws or regulations, which change or amendment is announced or becomes effective on or after the date of the issuance of the Securities other than, in either case, any amendment or change implementing, complying with, or introduced in order to conform to, or otherwise arising as a result of or in connection with, any European Union Directive on the taxation of savings implementing the conclusions of the ECOFIN Council meeting of 26-27 November 2000. ARTICLE XII. SUBORDINATION OF SECURITIES .1 Securities Subordinate to Senior Indebtedness. The Note Issuer covenants and agrees, and each Holder of a Security, by its acceptance thereof, likewise covenants and agrees, that, to the extent and in the manner hereinafter set forth in this Article (subject to Article IV), the payment of the principal of (and premium, if any) and interest (including Additional Sums and Additional Amounts, if any) on each and all of the Securities are hereby expressly made subordinate and subject in right of payment to the prior payment in full of all amounts then due and payable in respect of all Senior Indebtedness of the Note Issuer and the Company. .2 Payment Over of Proceeds Upon Dissolution, etc. In case of the pendency of any receivership, insolvency, liquidation, bankruptcy, reorganization, arrangement, adjustment, composition or other judicial proceeding relative to the Note Issuer or its property (each such event, if any, herein sometimes referred to as a "Proceeding"), the holders of Senior Indebtedness of the Note Issuer shall be entitled to receive payment in full of principal of (and premium, if any) and interest, if any, on such Senior Indebtedness, or provision shall be made for such payment in cash or cash equivalents or otherwise in a manner satisfactory to the holders of Senior Indebtedness, before the Holders of the Securities are entitled to receive or retain any payment or distribution of any kind or character, whether in cash, property or securities (including any payment or distribution which 91 99 may be payable or deliverable by reason of the payment of any other Indebtedness of the Note Issuer (including the Securities) subordinated to the payment of the Securities, such payment or distribution being hereinafter referred to as a "Senior Subordinated Payment"), on account of principal of (or premium, if any) or interest (including Additional Sums and Additional Amounts, if any) on the Securities or on account of the purchase or other acquisition of Securities by the Note Issuer or any Subsidiary, and to that end the holders of Senior Indebtedness shall be entitled to receive, for application to the payment thereof, any payment or distribution of any kind or character, whether in cash, property or securities, including any Senior Subordinated Payment, which may be payable or deliverable in respect of the Securities in any such Proceeding. In the event that, notwithstanding the foregoing provisions of this Section, the Trustee or the Holder of any Security shall have received any payment or distribution of assets of the Note Issuer of any kind or character, whether in cash, property or securities, including any Senior Subordinated Payment, before all Senior Indebtedness of the Note Issuer and the Company is paid in full or payment thereof is provided for in cash or cash equivalents or otherwise in a manner satisfactory to the holders of such Senior Indebtedness, and if such fact shall, at or prior to the time of such payment or distribution, have been made known to the Trustee or, as the case may be, such Holder, then and in such event such payment or distribution shall be paid over or delivered forthwith to the trustee in bankruptcy, receiver, liquidating trustee, custodian, assignee, agent or other Person making payment or distribution of assets of the Note Issuer for application to the payment of all Senior Indebtedness remaining unpaid, to the extent necessary to pay all Senior Indebtedness in full, after giving effect to any concurrent payment or distribution to or for the holders of Senior Indebtedness. For purposes of this Article only, the words "any payment or distribution of any kind or character, whether in cash, property or securities" shall not be deemed to include shares of stock of the Note Issuer as reorganized or readjusted, or securities of the Note Issuer or any other corporation provided for by a plan of reorganization or readjustment which securities are subordinated in right of payment to all then outstanding Senior Indebtedness to substantially the same extent as the Securities are so subordinated as provided in this Article. The consolidation of the Note Issuer with, or the merger of the Note Issuer into, another Person or the liquidation or dissolution of the Note Issuer following the sale of all or substantially all of its properties and assets as an entirety to another Person or the liquidation or dissolution of the Note Issuer following the sale of all or substantially all of its properties and assets as an entirety to another Person upon the terms and conditions set forth in Article VIII shall not be deemed a Proceeding for the purposes of this Section if the Person formed by such consolidation or into which the Note Issuer is merged or the Person which acquires by sale such properties and assets as an entirety, as the case may be, shall, as a part of such consolidation, merger, or sale comply with the conditions set forth in Article VIII. .3 Prior Payment to Senior Indebtedness Upon Acceleration of Securities. In the event that, upon the occurrence of an Event of Default, any Securities are declared due and payable before their Stated Maturity, then (a) the Company, the Note Issuer or the Trustee, at the direction of the Note Issuer, shall promptly notify the holders of Senior Indebtedness of the Note Issuer and the Company or the representative of such holders of the acceleration, and (b) in such event, if any Senior Indebtedness is outstanding, the Note Issuer may not pay the Securities until five Business Days after the representative of all issues 92 100 of Senior Indebtedness receive notice of such acceleration and, thereafter, may pay the Securities only if payment is otherwise permitted hereunder at that time. In the event that, notwithstanding the foregoing, the Note Issuer shall make any payment to the Trustee or the Holder of any Security prohibited by the foregoing provisions of this Section, and if such fact shall, at or prior to the time of such payment, have been made known to the Trustee or, as the case may be, such Holder, then and in such event such payment shall be paid over and delivered forthwith to the Note Issuer. The provisions of this Section shall not apply to any payment with respect to which Section 12.2 would be applicable. .4 No Payment When Senior Indebtedness in Default. (a) The Note Issuer may not pay principal of, or premium (if any) or interest (and Additional Sum and Additional Amounts, if any) on, the Securities, and may not repurchase, redeem or otherwise retire any Securities (collectively "pay the Securities") if (i) any Specified Senior Indebtedness of the Company or the Note Issuer (or any other Senior Indebtedness of the Company or the Note Issuer having an outstanding principal amount at the time of determination in excess of $25 million) is not paid when due or (ii) any other default on Specified Senior Indebtedness of the Company or the Note Issuer occurs and the maturity of such Specified Senior Indebtedness is accelerated in accordance with its terms, unless, in either case, the default has been cured or waived and any such acceleration has been rescinded or such Specified Senior Indebtedness has been paid in full. However, the Note Issuer may pay the Securities without regard to the foregoing if the Company, the Note Issuer and the Trustee receive written notice approving such payment from a representative of the Specified Senior Indebtedness with respect to which either of the events set forth in clause (i) or (ii) of the immediately preceding sentence has occurred and is continuing. (b) During the continuance of any default (other than a default described in clause (i) or (ii) of the preceding paragraph (a)) with respect to any Specified Senior Indebtedness of the Company or the Note Issuer pursuant to which the maturity thereof may be accelerated immediately without further notice (except such notice as may be required to effect such acceleration) or the expiration of any applicable grace periods, the Note Issuer may not pay the Securities to the Holders for a period (a "Payment Blockage Period") commencing upon the receipt by the Trustee (with a copy to the Company and the Note Issuer) of written notice (a "Blockage Notice") of such default from the representative of the holders of such Specified Senior Indebtedness specifying an election to effect a Payment Blockage Period and ending 179 days thereafter (or earlier if such Payment Blockage Period is terminated (i) by written notice to the Trustee, the Company and the Note Issuer from the representative of the holders of such Specified Senior Indebtedness, (ii) because the default giving rise to such Blockage Notice is no longer continuing, as certified to the Trustee by the representative of the holders of such Specified Senior Indebtedness, or (iii) because such Specified Senior Indebtedness has been repaid in full, as certified to the Trustee by the representative of the holders of such Specified Senior Indebtedness). (c) Notwithstanding the preceding paragraph (b), unless the holders of such Specified Senior Indebtedness or the representative of such holders have accelerated the maturity of such Specified Senior Indebtedness (and such Specified Senior Indebtedness remains outstanding), the Note Issuer may resume payments on the Securities after the end of 93 101 such Payment Blockage Period. The Securities shall not be subject to more than one Payment Blockage Period in any consecutive 360-day period, irrespective of the number of defaults with respect to Specified Senior Indebtedness during such period. (d) In the event that, notwithstanding the foregoing, the Note Issuer shall make any payment to the Trustee or the Holder of any Security prohibited by the foregoing provisions of this Section, and if such fact shall, at or prior to the time of such payment, have been made known to the Trustee or, as the case may be, such Holder, then and in such event such payment shall be paid over and delivered forthwith to the Note Issuer. The provisions of this Section shall not apply to any payment with respect to which Section 12.2 would be applicable. .5 Payment Permitted If No Default. Nothing contained in this Article or elsewhere in this Indenture or in any of the Securities shall prevent (a) the Note Issuer, at any time except during the pendency of any Proceeding referred to in Section 12.2 or under the conditions described in Sections 12.3 and 12.4, from making payments at any time of principal of (and premium, if any) or interest on the Securities, or (b) the application by the Trustee of any money or Government Obligations deposited with it hereunder in accordance with the provisions of Section 4.3 to the payment of or on account of the principal of (and premium, if any) or interest (including Additional Sums and Additional Amounts, if any) on the Securities or the retention of such payment by the Holders, if, at the time of such payment or application, as the case may be, by the Note Issuer or the Trustee, as the case may be, the Note Issuer or the Trustee, as the case may be, did not have knowledge that such payment would have been prohibited by the provisions of this Article. .6 Subrogation to Rights of Holders of Senior Indebtedness. Subject to the payment in full of all Senior Indebtedness of the Note Issuer, or the provision for such payment in cash or cash equivalents or otherwise in a manner satisfactory to the holders of Senior Indebtedness of the Note Issuer, the Holders of the Securities shall be subrogated to the extent of the payments or distributions made to the holders of such Senior Indebtedness pursuant to the provisions of this Article (equally and ratably with the holders of all indebtedness of the Note Issuer which by its express terms is subordinated to Senior Indebtedness of the Note Issuer to substantially the same extent as the Securities are subordinated to the Senior Indebtedness and is entitled to like rights of subrogation by reason of any payments or distributions made to holders of such Senior Indebtedness) to the rights of the holders of such Senior Indebtedness to receive payments and distributions of cash, property and securities applicable to the Senior Indebtedness of the Note Issuer until the principal of (and premium, if any) and interest on the Securities shall be paid in full. For purposes of such subrogation or assignment, no payments or distributions to the holders of the Senior Indebtedness of the Note Issuer of any cash, property or securities to which the Holders of the Securities or the Trustee would be entitled except for the provisions of this Article, and no payments over pursuant to the provisions of this Article to the holders of Senior Indebtedness by Holders of the Securities or the Trustee, shall, as among the Note Issuer, its creditors other than holders of Senior Indebtedness, and the Holders of the Securities, be deemed to be a payment or distribution by the Note Issuer to or on account of the Senior Indebtedness. 94 102 .7 Provisions Solely to Define Relative Rights. The provisions of this Article are and are intended solely for the purpose of defining the relative rights of the Holders of the Securities on the one hand and the holders of Senior Indebtedness on the other hand. Nothing contained in this Article or elsewhere in this Indenture or in the Securities is intended to or shall (a) impair, as between the Note Issuer and the Holders of the Securities, the obligations of the Note Issuer, which are absolute and unconditional, to pay to the Holders of the Securities the principal of (and premium, if any) and interest (including Additional Sums and Additional Amounts, if any) on the Securities as and when the same shall become due and payable in accordance with their terms; or (b) affect the relative rights against the Note Issuer of the Holders of the Securities and creditors of the Note Issuer other than their rights in relation to the holders of Senior Indebtedness of the Note Issuer; or (c) prevent the Trustee or the Holder of any Security from exercising all remedies otherwise permitted by applicable law upon default under this Indenture including, without limitation, filing and voting claims in any Proceeding, subject to the rights, if any, under this Article of the holders of Senior Indebtedness to receive cash, property and securities otherwise payable or deliverable to the Trustee or such Holder. .8 Trustee to Effectuate Subordination. Each Holder of a Security by his or her acceptance thereof authorizes and directs the Trustee on his or her behalf to take such action as may be necessary or appropriate to acknowledge or effectuate the subordination provided in this Article and appoints the Trustee his or her attorney-in-fact for any and all such purposes. .9 No Waiver of Subordination Provisions. No right of any present or future holder of any Senior Indebtedness to enforce subordination as herein provided shall at any time in any way be prejudiced or impaired by any act or failure to act on the part of the Note Issuer or by any act or failure to act, in good faith, by any such holder, or by any noncompliance by the Note Issuer with the terms, provisions and covenants of this Indenture, regardless of any knowledge thereof that any such holder may have or be otherwise charged with. .10 Notice to Trustee. The Note Issuer shall give prompt written notice to the Trustee of any fact known to the Note Issuer which would prohibit the making of any payment to or by the Trustee in respect of the Securities. Notwithstanding the provisions of this Article or any other provision of this Indenture, the Trustee shall not be charged with knowledge of the existence of any facts which would prohibit the making of any payment to or by the Trustee in respect of the Securities, unless and until a Responsible Officer of the Trustee shall have received written notice thereof from the Note Issuer or a holder of Senior Indebtedness or from any trustee, agent or representative therefor (whether or not the facts contained in such notice are true); provided, however, that if the Trustee shall not have received the notice provided for in this Section at least two Business Days prior to the date upon which by the terms hereof any monies may become payable for any purpose (including, without limitation, the payment of the principal of (and premium, if any) or interest (including Additional Sums and Additional Amounts, if any) on any Security), then, anything herein contained to the contrary notwithstanding, the Trustee shall have full power and authority to receive such monies and to 95 103 apply the same to the purpose for which they were received and shall not be affected by any notice to the contrary which may be received by it within two Business Days prior to such date. .11 Reliance on Judicial Order or Certificate of Liquidating Agent. Upon any payment or distribution of assets of the Note Issuer referred to in this Article, the Trustee, subject to the provisions of Article VI, and the Holders of the Securities shall be entitled to rely upon any order or decree entered by any court of competent jurisdiction in which such Proceeding is pending, or a certificate of the trustee in bankruptcy, receiver, liquidating trustee, custodian, assignee for the benefit of creditors, agent or other Person making such payment or distribution, delivered to the Trustee or to the Holders of Securities, for the purpose of ascertaining the Persons entitled to participate in such payment or distribution, the holders of the Senior Indebtedness and other indebtedness of the Note Issuer, the amount thereof or payable thereon, the amount or amounts paid or distributed thereon and all other facts pertinent thereto or to this Article. .12 Trustee Not Fiduciary for Holders of Senior Indebtedness. The Trustee, in its capacity as trustee under this Indenture, shall not be deemed to owe any fiduciary duty to the holders of Senior Indebtedness of the Note Issuer and shall not be liable to any such holders if it shall in good faith mistakenly pay over or distribute to Holders of Securities or to the Note Issuer or to any other Person cash, property or securities to which any holders of Senior Indebtedness of the Note Issuer shall be entitled by virtue of this Article or otherwise. .13 Rights of Trustee as Holder of Senior Indebtedness; Preservation of Trustee's Rights. The Trustee in its individual capacity shall be entitled to all the rights set forth in this Article with respect to any Senior Indebtedness of the Note Issuer which may at any time be held by it, to the same extent as any other holder of Senior Indebtedness of the Note Issuer, and nothing in this Indenture shall deprive the Trustee of any of its rights as such holder. .14 Article Applicable to Paying Agents. In case at any time any Paying Agent other than the Trustee shall have been appointed by the Note Issuer and be then acting hereunder, the term "Trustee" as used in this Article shall in such case (unless the context otherwise requires) be construed as extending to and including such Paying Agent within its meaning as fully for all intents and purposes as if such Paying Agent were named in this Article in addition to or in place of the Trustee. .15 Certain Conversions or Exchanges Deemed Payment. For the purposes of this Article only, (a) the issuance and delivery of junior securities upon conversion or exchange of Securities shall not be deemed to constitute a payment or distribution on account of the principal of (or premium, if any) or interest (including Additional Sums and Additional Amounts, if any) on Securities or on account of the purchase or other acquisition of Securities, and (b) the payment, issuance or delivery of cash, 96 104 property or securities (other than Securities, Exchange Securities or junior securities) upon conversion or exchange of a Security shall be deemed to constitute payment on account of the principal of such security. For the purposes of this Section, the term "junior securities" means (i) shares of any stock of any class of the Note Issuer and (ii) securities of the Note Issuer which are subordinated in right of payment to all Senior Indebtedness of the Note Issuer which may be outstanding at the time of issuance or delivery of such securities to substantially the same extent as, or to a greater extent than, the Securities are so subordinated as provided in this Article. ARTICLE XIII. GUARANTY .1 Guaranty. Each of the Guarantors hereby jointly and severally unconditionally Guarantees, on a senior subordinated basis, to each Holder of a Security authenticated and delivered by the Trustee, and to the Trustee on behalf of such Holder, the due and punctual payment of the principal of (and premium, if any) and interest (including Additional Sums and Additional Amounts, if any) on such Security when and as the same shall become due and payable, whether at the Stated Maturity, by acceleration, call for redemption, purchase or otherwise, in accordance with the terms of such Security and of this Indenture. In case of the failure of the Note Issuer punctually to make any such payment, each of the Guarantors hereby jointly and severally agrees to cause such payment to be made punctually when and as the same shall become due and payable, whether at the Stated Maturity or by acceleration, call for redemption, purchase or otherwise, and as if such payment were made by the Note Issuer. The Guarantee extends to the Note Issuer's repurchase obligations arising from an Asset Disposition pursuant to Section 10.13 or a Change of Control pursuant to Section 10.15. Each of the Guarantors hereby jointly and severally agrees that its obligations hereunder shall be unconditional, irrespective of the validity, regularity or enforceability of such Security or this Indenture, the absence of any action to enforce the same, any exchange, release or non-perfection of any Lien on any collateral for, or any release or amendment or waiver of any term of any other Guarantee of, or any consent to departure from any requirement of any other Guarantee of all or any of the Securities, the election by the Trustee or any of the Holders in any proceeding under Chapter 11 of Title 11 of the United States Code (the "Bankruptcy Code") of the application of Section 1111(b)(2) of the Bankruptcy Code, or equivalent provision under applicable law, any borrowing or grant of a security interest by the Note Issuer, as debtor-in-possession, under Section 364 of the Bankruptcy Code, or equivalent provision under applicable law, the disallowance, under Section 502 of the Bankruptcy Code, or other similar applicable law, of all or any portion of the claims of the Trustee or any of the Holders for payment of any of the Securities, any waiver or consent by the Holder of such Security or by the Trustee with respect to any provisions thereof or of this Indenture, the obtaining of any judgment against the Note Issuer or any action to enforce the same or any other circumstances which might otherwise constitute a legal or equitable discharge or defense of a guarantor. Each of the Guarantors hereby waives the benefits of diligence, presentment, demand for payment, any requirement that the Trustee or any of the Holders protect, secure, perfect or insure any security interest in or other Lien on any property subject thereto or exhaust any right or take any action against the Note Issuer or any other Person or any collateral, filing of claims with a court in the event of insolvency or bankruptcy 97 105 of the Note Issuer, any right to require a proceeding first against the Note Issuer, protest or notice with respect to such Security or the Indebtedness evidenced thereby and all demands whatsoever, and covenants that this Guaranty will not be discharged in respect of such Security except by complete performance of the obligations contained in such Security and in this Guaranty. Each of the Guarantors hereby agrees that, in the event of a default in payment of principal (or premium, if any) or interest (including Additional Sums and Additional Amounts, if any) on such Security, whether at their Stated Maturity, by acceleration, call for redemption, purchase or otherwise, legal proceedings may be instituted by the Trustee on behalf of, or by, the Holder of such Security, subject to the terms and conditions set forth in this Indenture, directly against each of the Guarantors to enforce this Guaranty without first proceeding against the Note Issuer. Each Guarantor agrees that, to the extent permitted by law, if, after the occurrence and during the continuance of an Event of Default, the Trustee or any of the Holders are prevented by applicable law from exercising their respective rights to accelerate the maturity of the Securities, to collect interest on the Securities, or to enforce or exercise any other right or remedy with respect to the Securities, or the Trustee or the Holders are prevented from taking any action to realize on any collateral, such Guarantor agrees to pay to the Trustee for the account of the Holders, upon demand therefor, the amount that would otherwise have been due and payable had such rights and remedies been permitted to be exercised by the Trustee or any of the Holders. The indebtedness evidenced by the Guaranties is, to the extent provided in this Indenture, subordinate and subject in right of payment to the prior payment in full of all Senior Indebtedness of each Guarantor, and the Guaranties are issued subject to the provisions of this Indenture with respect thereto. Each Holder of such Security, by accepting the same, (a) agrees to and shall be bound by such provisions, (b) authorizes and directs the Trustee on his behalf to take such action as may be necessary or appropriate to effectuate the subordination so provided and (c) appoints the Trustee his attorney-in-fact for any and all such purposes. Each Guarantor shall be subrogated to all rights of the Holders of the Securities upon which its Guarantee is endorsed against the Note Issuer in respect of any amounts paid by such Guarantor on account of such Security pursuant to the provisions of its Guaranty or this Indenture; provided, however, that no Guarantor shall be entitled to enforce or to receive any payments arising out of, or based upon, such right of subrogation until the principal of (and premium, if any) and interest (including Additional Sums and Additional Amounts, if any) on all Securities issued hereunder shall have been paid in full. Each Guaranty shall remain in full force and effect and continue to be effective should any petition be filed by or against the Note Issuer for liquidation or reorganization or equivalent proceeding under applicable law, should the Note Issuer become insolvent or make an assignment for the benefit of creditors or should a receiver or trustee be appointed for all or any significant part of the Note Issuer's assets, or the equivalent of any of the foregoing under applicable law, and shall, to the fullest extent permitted by law, continue to be effective or be reinstated, as the case may be, if at any time payment and performance of the Securities, is, pursuant to applicable law, rescinded or reduced in amount, or must otherwise be restored or returned by any obligee on the Securities, whether as a voidable preference, fraudulent transfer, or as otherwise provided under similar laws affecting the rights of creditors generally or under applicable laws of the jurisdiction of formation of the Note Issuer, all as though such payment or performance had not been made. In the event that any payment, or any part 98 106 thereof, is rescinded, reduced, restored or returned, the Securities shall, to the fullest extent permitted by law, be reinstated and deemed reduced only by such amount paid and not so rescinded, reduced, restored or returned. The Guarantors shall have the right to seek contribution from any non-paying Guarantor so long as the exercise of such right does not impair the rights of the Holders under this Guaranty. Each Guaranty (other than the Company's Guaranty) will be limited in amount to an amount not to exceed the maximum amount that can be guaranteed by the applicable Guarantor without rendering the Guaranty, as it relates to such Guarantor, voidable under applicable law relating to fraudulent conveyance or fraudulent transfer or similar laws affecting the rights of creditors generally or under applicable law of Germany. In the case of Fresenius Medical Care Deutschland GmbH ("FMCD"), the following provisions apply: A Profit and Loss Pooling Agreement (the "Agreement") Ergebnisabfuhrungsvertrag) dated as of August 21, 1996, between the Company and FMCD was entered into the commercial register as approved by the stockholders of the Company and the shareholders of FMCD with effect from January 1, 1996. FMCD, having a stated capital of DM 80 million, had a capital reserve account of DM 168,302,162 (the "January 1, 1996 Amount") in its balance sheet as of January 1, 1996. Assuming that the January 1, 1996 Amount has not decreased by losses in the business of FMCD since January 1, 1996, at least such amount exceeds the Company's assets protecting its share capital within the meaning of Section 30 of the German GmbH Law. Since January 1, 1996, the January 1, 1996 Amount has not been decreased by the actions of the Company (the sole shareholder of FMCD), e.g. no distributions against the January 1, 1996 Amount have been made. Based thereon, the guaranty obligations of FMCD hereunder and under FMCD's guaranty of the 9% Notes, the 7 3/8% Notes, the 7 7/8% Notes and any other Senior Subordinated Indebtedness, if any, of FMCD to which Section 30 of the German GmbH law may apply are limited to the amount of the capital reserves of FMCD as of the date hereof less its obligations as a guarantor from time to time under the Senior Credit Agreement (the "Minimum Guaranty Amount"). If, in the case of a default under this Indenture, the capital reserves are higher than such Minimum Guaranty Amount, such higher amount (the "Higher Guaranty Amount") shall serve as limitation to the obligations of FMCD, as Guarantor. In case FMCD, as Guarantor, has to sell off assets to fulfill its obligations under this Indenture, after such guaranty obligations have been drawn, and if the proceeds from the sale of such assets exceed the amount of their book value, such excess amounts shall be paid to the Trustee for the benefit of the Holders, subject to the provisions of Article XIV hereof, in addition to the Minimum Guaranty Amount or the Higher Guaranty Amount, respectively. For the determination of the applicable book value, the book value of assets which were included into the balance sheet per January 1, 1996 applies, and for such assets which were not yet included but added to the business of FMCD since that date, the book value on the day of the sale of such assets applies. Should Section 30 of the German GmbH law however require a lower Minimum Guaranty Amount or a lower Higher Guaranty Amount, then such lower amounts required by law shall be applicable. 99 107 FMCD undertakes not to decrease its capital reserves, neither by capital increase from such reserve accounts nor by other kinds of contributions to its shareholders or affiliates without the prior written approval of the Holders of a majority in principal amount of the Outstanding Securities. FMCD undertakes to maintain a profit and loss pooling agreement with the Note Issuer during the term of this Indenture, in particular, to extend the term of such agreement to the term of this Indenture and not to terminate, rescind or amend such agreement without prior notice to the Trustee and the consent of the Holders of a majority in principal amount of the Outstanding Securities thereto. In case of a termination of such profit and loss pooling agreement, FMCD will grant, upon the request of the Holders of a majority in principal amount of the Outstanding Securities, collateral to minimize the legal and financial disadvantages caused by the termination of such agreement, as far as legally available under German law. FMCD undertakes to give notice immediately to the Trustee if it intends to give notice of termination to such agreement or to agree to the termination of such agreement, or if it becomes aware that the Note Issuer intends to terminate such agreement. During the term of the profit and loss pooling agreement, any and all allocations of profit to the Note Issuer and any and all cash distributions to the Note Issuer as a consequence thereof upon the terms and conditions of the profit and loss pooling agreement are permitted and unrestricted, subject to the terms of Section 30 of the German GmbH law as described above. .2 Execution and Delivery of Guaranties. The Guaranties to be endorsed on the Securities shall include the terms of the Guaranty set forth in Section 13.1 and any other terms that may be set forth in the form established pursuant to Section 2.6. Each of the Guarantors hereby agrees to execute its Guaranty, in a form established pursuant to Section 2.6, to be endorsed on each Security authenticated and delivered by the Trustee. The Guaranty shall be executed on behalf of each respective Guarantor by any one of such Guarantor's Chairman of the Board of Directors or two members of the Managing Board, as the case may be, or other person duly authorized by the Board of Directors or Managing Board of such Guarantor. The signature of any or all of these persons on the Guaranty may be manual or facsimile. A Guaranty bearing the manual or facsimile signature of individuals who were at any time the proper officers of a Guarantor shall bind such Guarantor, notwithstanding that such individuals or any of them have ceased to hold such offices prior to the authentication and delivery of the Security on which such Guaranty is endorsed or did not hold such offices at the date of such Guaranty. The delivery of any Security by the Trustee, after the authentication thereof hereunder, shall constitute due delivery of the Guaranty endorsed thereon on behalf of the Guarantors. Each of the Guarantors hereby jointly and severally agrees that its Guaranty set forth in Section 13.1 shall remain in full force and effect notwithstanding any failure to endorse a Guaranty on any Security. 100 108 .3 Guarantors May Consolidate, etc., on Certain Terms. Except as set forth in Section 13.4 and in Articles VIII and X hereof, nothing contained in this Indenture or in any of the Securities shall prevent any consolidation or merger of a Guarantor with or into the Company, the Note Issuer or another Guarantor or shall prevent any sale, transfer, assignment, lease, conveyance or other disposition of the property of a Guarantor as an entirety or substantially as an entirety to the Company, the Note Issuer or another Guarantor. .4 Release of Guarantors. (a) Concurrently with any consolidation or merger of a Guarantor or any sale, transfer, assignment, lease, conveyance or other disposition of the property of a Guarantor as an entirety or substantially as an entirety, in each case as permitted by Section 13.3 hereof, and upon delivery by the Company or the Note Issuer to the Trustee of an Officers' Certificate and an Opinion of Counsel to the effect that such consolidation, merger, sale, transfer, assignment, conveyance or other disposition was made in accordance with Section 13.3 hereof, the Trustee shall execute any documents reasonably required in order to acknowledge the release of such Guarantor from its obligations under its Guaranty endorsed on the Securities and under this Indenture. Any Guarantor not released from its obligations under its Guaranty endorsed on the Securities and under this Indenture shall remain liable for the full amount of principal of (premium, if any) and interest (including Additional Sums and Additional Amounts, if any) on the Securities and for the other obligations of a Guarantor under its Guaranty endorsed on the Securities and under this Indenture. (b) Concurrently with the defeasance of the Securities under Section 4.3 hereof, the Guarantors shall be released from all of their obligations under their Guaranties endorsed on the Securities and under this Indenture, without any action on the part of the Trustee or any Holder of Securities. (c) Upon the sale or other disposition (including by way of merger or consolidation) of any Guarantor or the sale, conveyance, transfer, assignment, lease or other disposition of all or substantially all the assets of a Guarantor (in each case other than to the Company, the Note Issuer or any Affiliate of the Note Issuer) pursuant to Section 8.2 hereof, such Guarantor shall automatically be released from all obligations under its Guaranties endorsed on the Securities and under this Indenture. .5 Additional Guarantors. The Company or the Note Issuer may cause any Subsidiary to become a Guarantor with respect to the Securities by executing and delivering to the Trustee (a) a supplemental indenture, in form and substance satisfactory to the Trustee, which subjects such Person to the provisions (including the representations and warranties) of this Indenture as a Guarantor and (b) an Opinion of Counsel to the effect that such supplemental indenture has been duly authorized and executed by such Person and constitutes the legal, valid, binding and enforceable obligation of such Person (subject to such customary exceptions concerning creditors' rights and equitable principles as may be acceptable to the Trustee in its discretion). 101 109 ARTICLE XIV. SUBORDINATION OF GUARANTIES .1 Guaranties Subordinate to Senior Indebtedness of Guarantors. Each Guarantor covenants and agrees, and each Holder of a Security, by his acceptance thereof, likewise covenants and agrees, that, to the extent and in the manner hereinafter set forth in this Article (subject to the provisions of Article IV), the payment of the principal of (and premium, if any) and interest (including Additional Sums and Additional Amounts, if any) on the Guaranty of each Guarantor in respect of the Securities are hereby expressly made subordinate and subject in right of payment in full of all amounts then due and payable in respect of all Senior Indebtedness of the Note Issuer and such Guarantor. .2 Payment Over of Proceeds Upon Dissolution, etc. In case of the pendency of any receivership, insolvency, liquidation, bankruptcy, reorganization, arrangement, adjustment, composition or other judicial proceeding relative to a Guarantor or its property (each such event, if any, herein sometimes referred to as a "Guarantor Proceeding"), the holders of Senior Indebtedness of the Company and such Guarantor shall be entitled to receive payment in full of principal of (and premium, if any) and interest, if any (including Additional Sums and Additional Amounts, if any), on such Senior Indebtedness, or provision shall be made for such payment in cash or cash equivalents or otherwise in a manner satisfactory to the holders of Senior Indebtedness of the Company and such Guarantor, before the Holders of the Securities are entitled to receive or retain any payment or distribution of any kind or character, whether in cash, property or securities (including any payment or distribution which may be payable or deliverable by reason of the payment of any other Indebtedness of the Company or such Guarantor (including the Securities) subordinated to the payment of the Securities, such payment or distribution being hereinafter referred to as a "Guarantor Senior Subordinated Payment"), on account of principal of (or premium, if any) or interest (including Additional Sums and Additional Amounts, if any) on the Securities or on account of the purchase or other acquisition of Securities by the Company or any Subsidiary, and to that end the holders of Senior Indebtedness of the Company and such Guarantor shall be entitled to receive, for application to the payment thereof, any payment or distribution of any kind or character, whether in cash, property or securities, including any Guarantor Senior Subordinated Payment, which may be payable or deliverable in respect of the Securities in any such Guarantor Proceeding. In the event that, notwithstanding the foregoing provisions of this Section, the Trustee or the Holder of any Security shall have received any payment or distribution of assets of the Company or any Guarantor of any kind or character, whether in cash, property or securities, including any Guarantor Senior Subordinated Payment, before all Senior Indebtedness of the Company and such Guarantor is paid in full or payment thereof is provided for in cash or cash equivalents or otherwise in a manner satisfactory to the holders of such Senior Indebtedness, and if such fact shall, at or prior to the time of such payment or distribution, have been made known to the Trustee or, as the case may be, such Holder, then and in such event such payment or distribution shall be paid over or delivered forthwith to the trustee in bankruptcy, receiver, liquidating trustee, custodian, assignee, agent or other Person making payment or distribution of assets of the Company or such Guarantor for application to the payment of all Senior Indebtedness of the Company and such Guarantor remaining unpaid, to the extent necessary to pay all Senior Indebtedness of the Company and such Guarantor in 102 110 full, after giving effect to any concurrent payment or distribution to or for the holders of Senior Indebtedness of the Company and such Guarantor. For purposes of this Article only, the words "any payment or distribution of any kind or character, whether in cash, property or securities" shall not be deemed to include shares of stock of the Company or any Guarantor as reorganized or readjusted, or securities of the Company or any Guarantor or any other corporation provided for by a plan of reorganization or readjustment which securities are subordinated in right of payment to all then outstanding Senior Indebtedness of the Company and such Guarantor to substantially the same extent as the Securities are so subordinated as provided in this Article. The consolidation of the Company or any Guarantor with, or the merger of the Company or any Guarantor into, another Person or the liquidation or dissolution of the Company or any Guarantor following the sale of all or substantially all of its properties and assets as an entirety to another Person or the liquidation or dissolution of the Company or any Guarantor following the sale of all or substantially all of its properties and assets as an entirety to another Person upon the terms and conditions set forth in Article VIII shall not be deemed a Guarantor Proceeding for the purposes of this Section if the Person formed by such consolidation or into which the Company or such Guarantor is merged or the Person which acquires by sale such properties and assets as an entirety, as the case may be, shall, as a part of such consolidation, merger, or sale comply with the conditions set forth in Article VIII. .3 Prior Payment to Senior Indebtedness of a Guarantor Upon Acceleration of Securities. In the event that, upon the occurrence of an Event of Default, any Securities are declared due and payable before their Stated Maturity, then (a) a Guarantor shall promptly notify the holders of Senior Indebtedness of such Guarantor or the representative of such holders of the acceleration, and (b) in such event, if any Senior Indebtedness of the Company or such Guarantor is outstanding, such Guarantor may not pay the Securities until five Business Days after the representative of all issues of Senior Indebtedness of the Company and such Guarantor receive notice of such acceleration and, thereafter, may pay the Securities only if payment is otherwise permitted hereunder at that time. In the event that, notwithstanding the foregoing, a Guarantor shall make any payment to the Trustee or the Holder of any Security prohibited by the foregoing provisions of this Section, and if such fact shall, at or prior to the time of such payment, have been made known to the Trustee or, as the case may be, such Holder, then and in such event such payment shall be paid over and delivered forthwith to such Guarantor. The provisions of this Section shall not apply to any payment with respect to which Section 14.2 would be applicable. .4 No Payment When Senior Indebtedness of a Guarantor in Default. (a) A Guarantor may not pay principal of, or premium (if any) or interest (including Additional Sums and Additional Amounts, if any) on, the Securities, and may not repurchase, redeem or otherwise retire any Securities (collectively "pay the Securities") if (i) any Specified Senior Indebtedness of the Company or such Guarantor (or any other Senior Indebtedness of the Company or such Guarantor having an outstanding principal amount at the time of determination in excess of $25 million) is not paid when due or (ii) any other 103 111 default on Specified Senior Indebtedness of the Company or such Guarantor occurs and the maturity of such Specified Senior Indebtedness is accelerated in accordance with its terms, unless, in either case, the default has been cured or waived and any such acceleration has been rescinded or such Specified Senior Indebtedness has been paid in full. However, a Guarantor may pay the Securities without regard to the foregoing if the Company such Guarantor and the Trustee receive written notice approving such payment from a representative of Specified Senior Indebtedness of the Company and such Guarantor with respect to which either of the events set forth in clause (i) or (ii) of the immediately preceding sentence has occurred and is continuing. (b) During the continuance of any default (other than a default described in clause (i) or (ii) of the preceding paragraph (a) with respect to any Specified Senior Indebtedness of the Company or any Guarantor pursuant to which the maturity thereof may be accelerated immediately without further notice (except such notice as may be required to effect such acceleration) or the expiration of any applicable grace periods, such Guarantor may not pay the Securities to the Holders for a period (a "Guarantor Payment Blockage Period") commencing upon the receipt by the Trustee (with a copy to such Guarantor) of written notice (a "Guarantor Blockage Notice") of such default from the representative of the holders of such Specified Senior Indebtedness specifying an election to effect a Payment Blockage Period and ending 179 days thereafter (or earlier if such Payment Blockage Period is terminated (i) by written notice to the Trustee and the Guarantor from the representative of the holders of such Specified Senior Indebtedness, (ii) because the default giving rise to such Blockage Notice is no longer continuing, as certified to the Trustee by the representative of the holders of such Specified Senior Indebtedness or (iii) because such Specified Senior Indebtedness has been repaid in full, as certified to the Trustee by the representative of the holders of such Specified Senior Indebtedness). (c) Notwithstanding the preceding paragraph (b), unless the holders of such Specified Senior Indebtedness or the representative of such holders have accelerated the maturity of such Specified Senior Indebtedness (and such Specified Senior Indebtedness remains outstanding), the Guarantor may resume payments on the Securities after the end of such Payment Blockage Period. The Securities shall not be subject to more than one Payment Blockage Period in any consecutive 360-day period, irrespective of the number of defaults with respect to Specified Senior Indebtedness of the Company or such Guarantor during such period. (d) In the event that, notwithstanding the foregoing, the Guarantor shall make any payment to the Trustee or the Holder of any Security prohibited by the foregoing provisions of this Section, and if such fact shall, at or prior to the time of such payment, have been made known to the Trustee or, as the case may be, such Holder, then and in such event such payment shall be paid over and delivered forthwith to such Guarantor. The provisions of this Section shall not apply to any payment with respect to which Section 14.2 would be applicable. .5 Payment Permitted If No Default. Nothing contained in this Article or elsewhere in this Indenture or in any of the Securities shall prevent (a) any Guarantor, at any time except during the pendency of any Proceeding referred to in Section 14.2 or under the conditions described in Sections 14.3 and 104 112 14.4, from making payments at any time of principal of (and premium, if any) or interest on the Securities, or (b) the application by the Trustee of any money or Government Obligations deposited with it hereunder in accordance with the provisions of Section 4.3 to the payment of or on account of the principal of (and premium, if any) or interest (including Additional Sums and Additional Amounts, if any) on the Securities or the retention of such payment by the Holders, if, at the time of such payment or application, as the case may be, by the Company, the Note Issuer or the Trustee, as the case may be, the Note Issuer or the Trustee, as the case may be, did not have knowledge that such payment would have been prohibited by the provisions of this Article. .6 Subrogation to Rights of Holders of Senior Indebtedness of a Guarantor. Subject to the payment in full of all Senior Indebtedness of a Guarantor, or the provision for such payment in cash or cash equivalents or otherwise in a manner satisfactory to the holders of Senior Indebtedness of a Guarantor, the Holders of the Securities shall be subrogated to the extent of the payments or distributions made to the holders of such Senior Indebtedness of a Guarantor pursuant to the provisions of this Article (equally and ratably with the holders of all indebtedness of such Guarantor which by its express terms is subordinated to Senior Indebtedness of such Guarantor to substantially the same extent as the Securities are subordinated to Senior Indebtedness and is entitled to like rights of subrogation by reason of any payments or distributions made to holders of such Senior Indebtedness) to the rights of the holders of such Senior Indebtedness to receive payments and distributions of cash, property and securities applicable to the Senior Indebtedness of such Guarantor until the principal of (and premium, if any) and interest on the Securities shall be paid in full. For purposes of such subrogation or assignment, no payments or distributions to the holders of the Senior Indebtedness of such Guarantor of any cash, property or securities to which the Holders of the Securities or the Trustee would be entitled except for the provisions of this Article, and no payments over pursuant to the provisions of this Article to the holders of Senior Indebtedness of such Guarantor by Holders of the Securities or the Trustee, shall, as among the Guarantors, their creditors other than holders of Senior Indebtedness of the Guarantors, and the Holders of the Securities, be deemed to be a payment or distribution by a Guarantor to or on account of the Senior Indebtedness of such Guarantor. .7 Provisions Solely to Define Relative Rights. The provisions of this Article are and are intended solely for the purpose of defining the relative rights of the Holders of the Securities on the one hand and the holders of Senior Indebtedness of each Guarantor on the other hand. Nothing contained in this Article or elsewhere in this Indenture or in the Securities is intended to or shall (a) impair, as between the Guarantors and the Holders of the Securities, the obligations of each Guarantor, which are absolute and unconditional, to pay to the Holders of the Securities the principal of (and premium, if any) and interest (including Additional Sums and Additional Amounts, if any) on the Securities as and when the same shall become due and payable in accordance with their terms; or (b) affect the relative rights against any Guarantor of the Holders of the Securities and creditors of such Guarantor other than their rights in relation to the holders of Senior Indebtedness of such Guarantor; or (c) prevent the Trustee or the Holder of any Security from exercising all remedies otherwise permitted by applicable law upon default under this Indenture including, without limitation, filing and voting claims in any Guarantor Proceeding, subject to the rights, if any, under this Article of the holders of Senior Indebtedness of a 105 113 Guarantor to receive cash, property and securities otherwise payable or deliverable to the Trustee or such Holder. .8 Trustee to Effectuate Subordination. Each Holder of a Security by his or her acceptance thereof authorizes and directs the Trustee on his or her behalf to take such action as may be necessary or appropriate to acknowledge or effectuate the subordination provided in this Article and appoints the Trustee his or her attorney-in-fact for any and all such purposes. .9 No Waiver of Subordination Provisions. No right of any present or future holder of any Senior Indebtedness of any Guarantor to enforce subordination as herein provided shall at any time in any way be prejudiced or impaired by any act or failure to act on the part of such Guarantor or by any act or failure to act, in good faith, by any such holder, or by any noncompliance by such Guarantor with the terms, provisions and covenants of this Indenture, regardless of any knowledge thereof that any such holder may have or be otherwise charged with. .10 Notice to Trustee. Each Guarantor shall give prompt written notice to the Trustee of any fact known to such Guarantor which would prohibit the making of any payment to or by the Trustee in respect of the Securities. Notwithstanding the provisions of this Article or any other provision of this Indenture, the Trustee shall not be charged with knowledge of the existence of any facts which would prohibit the making of any payment to or by the Trustee in respect of the Securities, unless and until the Trustee shall have received written notice thereof from a Guarantor or a holder of Senior Indebtedness of a Guarantor or from any trustee, agent or representative therefor (whether or not the facts contained in such notice are true); provided, however, that if the Trustee shall not have received the notice provided for in this Section at least two Business Days prior to the date upon which by the terms hereof any monies may become payable for any purpose (including, without limitation, the payment of the principal of (and premium, if any) or interest (including Additional Sums and Additional Amounts, if any) on any Security), then, anything herein contained to the contrary notwithstanding, the Trustee shall have full power and authority to receive such monies and to apply the same to the purpose for which they were received and shall not be affected by any notice to the contrary which may be received by it within two Business Days prior to such date. .11 Reliance on Judicial Order or Certificate of Liquidating Agent. Upon any payment or distribution of assets of the Guarantors referred to in this Article, the Trustee, subject to the provisions of Article VI, and the Holders of the Securities shall be entitled to rely upon any order or decree entered by any court of competent jurisdiction in which such Proceeding is pending, or a certificate of the trustee in bankruptcy, receiver, liquidating trustee, custodian, assignee for the benefit of creditors, agent or other Person making such payment or distribution, delivered to the Trustee or to the Holders of Securities, for the purpose of ascertaining the Persons entitled to participate in such payment or distribution, the holders of the Senior Indebtedness of a Guarantor and other indebtedness of such Guarantor, the amount thereof or payable thereon, the amount or amounts paid or distributed thereon and all other facts pertinent thereto or to this Article. 106 114 .12 Trustee Not Fiduciary for Holders of Senior Indebtedness of the Guarantors. The Trustee, in its capacity as trustee under this Indenture, shall not be deemed to owe any fiduciary duty to the holders of Senior Indebtedness of any Guarantor and shall not be liable to any such holders if it shall in good faith mistakenly pay over or distribute to Holders of Securities or to any Guarantor or to any other Person cash, property or securities to which any holders of Senior Indebtedness of such Guarantor shall be entitled by virtue of this Article or otherwise. .13 Rights of Trustee as Holder of Senior Indebtedness of the Guarantors; Preservation of Trustee's Rights. The Trustee in its individual capacity shall be entitled to all the rights set forth in this Article with respect to any Senior Indebtedness of any Guarantor which may at any time be held by it, to the same extent as any other holder of Senior Indebtedness of such Guarantor, and nothing in this Indenture shall deprive the Trustee of any of its rights as such holder. .14 Article Applicable to Paying Agents. In case at any time any Paying Agent other than the Trustee shall have been appointed by the Note Issuer and be then acting hereunder, the term "Trustee" as used in this Article shall in such case (unless the context otherwise requires) be construed as extending to and including such Paying Agent within its meaning as fully for all intents and purposes as if such Paying Agent were named in this Article in addition to or in place of the Trustee. .15 Certain Conversions or Exchanges Deemed Payment. For the purposes of this Article only, (a) the issuance and delivery of junior securities upon conversion or exchange of Securities shall not be deemed to constitute a payment or distribution on account of the principal of (or premium, if any) or interest (including Additional Sums and Additional Amounts, if any) on Securities or on account of the purchase or other acquisition of Securities, and (b) the payment, issuance or delivery of cash, property or securities (other than Securities, Exchange Securities or junior securities) upon conversion or exchange of a Security shall be deemed to constitute payment on account of the principal of such security. For the purposes of this Section, the term "junior securities" means (i) shares of any stock of any class of any Guarantor and (ii) securities of any Guarantor which are subordinated in right of payment to all Senior Indebtedness of such Guarantor which may be outstanding at the time of issuance or delivery of such securities to substantially the same extent as, or to a greater extent than, the Securities are so subordinated as provided in this Article. 107 115 This instrument may be executed in any number of counterparts, each of which so executed shall be deemed to be an original, but all such counterparts shall together constitute but one and the same instrument. IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be duly executed, all as of the day and year first above written. FMC TRUST FINANCE S.a.r.l. LUXEMBOURG-III By: /s/ Gabriele Dux ------------------------------------ Name: Gabriele Dux Title: Sole Manager FRESENIUS MEDICAL CARE AG By: /s/ Ben Lipps ------------------------------------ Name: Ben Lipps Title: Chief Executive Officer By: /s/ Rainer Runte ------------------------------------ Name: Rainer Runte Title: General Counsel and Sr. VP FRESENIUS MEDICAL CARE DEUTSCHLAND GMBH By: /s/ Emanuele Gatti ------------------------------------ Name: Emanuele Gatti Title: Managing Director By: /s/ Karl-Dieter Schwab ------------------------------------ Name: Karl Dieter Schwab Title: Procurist 108 116 FRESENIUS MEDICAL CARE HOLDINGS, INC. By: /s/ Ben Lipps ------------------------------------ Name: Ben Lipps Title: Chief Executive Officer STATE STREET BANK AND TRUST COMPANY, as Trustee By: /s/ Elizabeth C. Hammer ------------------------------------ Name: Elizabeth C. Hammer Title: Vice President 109 EX-4.47 12 y51284ex4-47.txt SENIOR SUBORDINATED INDENTURE 1 EXHIBIT 4.47 FMC TRUST FINANCE S.a.r.l. LUXEMBOURG-III Issuer STATE STREET BANK AND TRUST COMPANY Trustee FRESENIUS MEDICAL CARE AG Company and a Guarantor FRESENIUS MEDICAL CARE HOLDINGS, INC. AND FRESENIUS MEDICAL CARE DEUTSCHLAND GmbH Guarantors SENIOR SUBORDINATED INDENTURE DATED AS OF JUNE 15, 2001 with respect to the issuance of E300,300,000 IN AGGREGATE PRINCIPAL AMOUNT OF 7 7/8% SENIOR SUBORDINATED NOTES DUE 2011 2 TABLE OF CONTENTS
Page ---- ARTICLE I. DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION..........................2 SECTION 1.1 Definitions...............................................................2 SECTION 1.2 Compliance Certificate and Opinions......................................22 SECTION 1.3 Form of Documents Delivered to Trustee...................................23 SECTION 1.4 Acts of Holders; Record Date.............................................23 SECTION 1.5 Notices, etc., to Trustee, Note Issuer and Guarantors....................24 SECTION 1.6 Notice to Holders; Waiver................................................25 SECTION 1.7 Conflict with Trust Indenture Act........................................25 SECTION 1.8 Effect of Headings and Table of Contents.................................26 SECTION 1.9 Successors and Assigns...................................................26 SECTION 1.10 Separability Clause......................................................26 SECTION 1.11 Benefits of Indenture....................................................26 SECTION 1.12 Governing Law............................................................26 SECTION 1.13 Non-Business Days........................................................26 SECTION 1.14 Duplicate Originals......................................................26 SECTION 1.15 Submission to Jurisdiction...............................................27 ARTICLE II. SECURITY AND GUARANTY FORMS....................................................27 SECTION 2.1 Forms Generally..........................................................27 SECTION 2.2 Form of Face of Security.................................................28 SECTION 2.3 Form of Reverse of Security..............................................30 SECTION 2.4 Additional Provisions Required in Global Security and Initial Security...33 SECTION 2.5 Form of Trustee's Certificate of Authentication..........................34 SECTION 2.6 Form of Guaranty.........................................................35 ARTICLE III. THE SECURITIES................................................................40 SECTION 3.1 Title and Terms..........................................................40 SECTION 3.2 Denominations............................................................41 SECTION 3.3 Execution, Authentication, Delivery and Dating...........................41 SECTION 3.4 Temporary Securities.....................................................42 SECTION 3.5 Registration, Registration of Transfer and Exchange......................32 SECTION 3.6 Mutilated, Destroyed, Lost and Stolen Securities.........................44 SECTION 3.7 Payment of Interest; Interest Rights Preserved...........................45 SECTION 3.8 Persons Deemed Owners....................................................47 SECTION 3.9 Cancellation.............................................................47 SECTION 3.10 Computation of Interest..................................................47 SECTION 3.11 Right of Set-Off.........................................................47 SECTION 3.12 Agreed Tax Treatment.....................................................47 SECTION 3.13 ISIN Numbers.............................................................48 Article IV. SATISFACTION AND DISCHARGE.....................................................48 SECTION 4.1 Satisfaction and Discharge of Indenture..................................48
i 3 SECTION 4.2 Application of Trust Money; Reinstatement................................49 SECTION 4.3 Satisfaction, Discharge and Defeasance of Securities.....................50 ARTICLE V. REMEDIES........................................................................52 SECTION 5.1 Events of Default........................................................52 SECTION 5.2 Acceleration of Maturity; Rescission and Annulment.......................54 SECTION 5.3 Collection of Indebtedness and Suits for Enforcement by Trustee..........55 SECTION 5.4 Trustee May File Proofs of Claim.........................................56 SECTION 5.5 Trustee May Enforce Claims Without Possession of Securities..............56 SECTION 5.6 Application of Money Collected...........................................57 SECTION 5.7 Limitation on Suits......................................................57 SECTION 5.8 Unconditional Right of Holders to Receive Principal, Premium and Interest...............................................................58 SECTION 5.9 Restoration of Rights and Remedies.......................................58 SECTION 5.10 Rights and Remedies Cumulative...........................................59 SECTION 5.11 Delay or Omission Not Waiver.............................................59 SECTION 5.12 Control by Holders.......................................................59 SECTION 5.13 Waiver of Past Defaults..................................................60 SECTION 5.14 Undertaking for Costs....................................................60 SECTION 5.15 Waiver of Usury, Stay or Extension Laws..................................60 ARTICLE VI. THE TRUSTEE....................................................................61 SECTION 6.1 Certain Duties and Responsibilities......................................61 SECTION 6.2 Notice of Defaults.......................................................62 SECTION 6.3 Certain Rights of Trustee................................................62 SECTION 6.4 Not Responsible for Recitals or Issuance of Securities...................62 SECTION 6.5 May Hold Securities......................................................63 SECTION 6.6 Money Held in Trust......................................................63 SECTION 6.7 Compensation and Reimbursement...........................................63 SECTION 6.8 Disqualification; Conflicting Interests..................................63 SECTION 6.9 Corporate Trustee Required; Eligibility..................................64 SECTION 6.10 Resignation and Removal; Appointment of Successor........................64 SECTION 6.11 Acceptance of Appointment by Successor...................................65 SECTION 6.12 Merger, Conversion, Consolidation or Succession to Business..............66 SECTION 6.13 Preferential Collection of Claims Against Note Issuer....................66 SECTION 6.14 Appointment of Authenticating Agent......................................67 ARTICLE VII. HOLDER'S LISTS AND REPORTS BY TRUSTEE AND NOTE ISSUER.........................69 SECTION 7.1 Note Issuer to Furnish Trustee Names and Addresses of Holders............69 SECTION 7.2 Preservation of Information, Communications to Holders...................69 SECTION 7.3 Reports by Trustee.......................................................69 SECTION 7.4 Reports by Note Issuer...................................................70 ARTICLE VIII. CONSOLIDATION, MERGER, CONVEYANCE, TRANSFER OR LEASE.........................70 SECTION 8.1 Note Issuer May Consolidate, etc., Only on Certain Terms.................70 SECTION 8.2 Guarantors May Consolidate, etc., Only on Certain Terms..................71
ii 4 SECTION 8.3 Successor Corporation Substituted........................................72 SECTION 8.4 Successor to Note Issuer.................................................73 ARTICLE IX. SUPPLEMENTAL INDENTURES........................................................73 SECTION 9.1 Supplemental Indentures Without Consent of Holders.......................73 SECTION 9.2 Supplemental Indentures with Consent of Holders..........................74 SECTION 9.3 Execution of Supplemental Indentures.....................................75 SECTION 9.4 Effect of Supplemental Indentures........................................75 SECTION 9.5 Conformity with Trust Indenture Act......................................76 SECTION 9.6 Reference in Securities to Supplemental Indentures.......................76 ARTICLE X. COVENANTS.......................................................................76 SECTION 10.1 Payment of Principal, Premium and Interest...............................76 SECTION 10.2 Maintenance of Office or Agency..........................................76 SECTION 10.3 Money for Security Payments to be Held in Trust..........................77 SECTION 10.4 Existence................................................................78 SECTION 10.5 Maintenance of Properties................................................78 SECTION 10.6 Payment of Taxes and Other Claims........................................78 SECTION 10.7 Maintenance of Insurance.................................................79 SECTION 10.8 Limitation on Incurrence of Indebtedness.................................79 SECTION 10.9 Limitation on Restricted Payments........................................80 SECTION 10.10 Limitation on Restrictions on Distributions from Subsidiaries............81 SECTION 10.11 Senior Subordinated Indebtedness; Liens..................................82 SECTION 10.12 Limitation on Affiliate Transactions.....................................83 SECTION 10.13 Limitation on Sales of Assets and Subsidiary Stock.......................83 SECTION 10.14 Intentionally Omitted....................................................86 SECTION 10.15 Change of Control........................................................86 SECTION 10.16 Statement as to Compliance and Default...................................87 SECTION 10.17 Ownership of the Trust and the Note Issuer; Business of the Note Issuer.................................................................87 SECTION 10.18 Waiver of Certain Covenants..............................................88 SECTION 10.19 Additional Amounts; Additional Interest..................................88 SECTION 10.20 Suspension of Covenants During Achievement of Investment Grade Status....89 ARTICLE XI. REDEMPTION OF SECURITIES.......................................................89 SECTION 11.1 Applicability of This Article............................................89 SECTION 11.2 Election to Redeem; Notice to Trustee....................................89 SECTION 11.3 Intentionally Omitted....................................................90 SECTION 11.4 Notice of Redemption.....................................................90 SECTION 11.5 Deposit of Redemption Price..............................................90 SECTION 11.6 Payment of Securities Called for Redemption..............................90 SECTION 11.7 Note Issuer's Right of Redemption in Certain Circumstances...............91 ARTICLE XII. SUBORDINATION OF SECURITIES...................................................91 SECTION 12.1 Securities Subordinate to Senior Indebtedness............................91 SECTION 12.2 Payment Over of Proceeds Upon Dissolution, etc...........................91 SECTION 12.3 Prior Payment to Senior Indebtedness Upon Acceleration of Securities.....92
iii 5 SECTION 12.4 No Payment When Senior Indebtedness in Default...........................93 SECTION 12.5 Payment Permitted If No Default..........................................94 SECTION 12.6 Subrogation to Rights of Holders of Senior Indebtedness..................94 SECTION 12.7 Provisions Solely to Define Relative Rights..............................95 SECTION 12.8 Trustee to Effectuate Subordination......................................95 SECTION 12.9 No Waiver of Subordination Provisions....................................95 SECTION 12.10 Notice to Trustee........................................................95 SECTION 12.11 Reliance on Judicial Order or Certificate of Liquidating Agent...........96 SECTION 12.12 Trustee Not Fiduciary for Holders of Senior Indebtedness.................96 SECTION 12.13 Rights of Trustee as Holder of Senior Indebtedness; Preservation of Trustee's Rights.......................................................96 SECTION 12.14 Article Applicable to Paying Agents......................................96 SECTION 12.15 Certain Conversions or Exchanges Deemed Payment..........................96 ARTICLE XIII. GUARANTY.....................................................................97 SECTION 13.1 Guaranty.................................................................97 SECTION 13.2 Execution and Delivery of Guaranties....................................100 SECTION 13.3 Guarantors May Consolidate, etc., on Certain Terms......................101 SECTION 13.4 Release of Guarantors...................................................101 SECTION 13.5 Additional Guarantors...................................................101 ARTICLE XIV. SUBORDINATION OF GUARANTIES..................................................102 SECTION 14.1 Guaranties Subordinate to Senior Indebtedness of Guarantors.............102 SECTION 14.2 Payment Over of Proceeds Upon Dissolution, etc..........................102 SECTION 14.3 Prior Payment to Senior Indebtedness of a Guarantor Upon Acceleration of Securities.........................................................103 SECTION 14.4 No Payment When Senior Indebtedness of a Guarantor in Default...........103 SECTION 14.5 Payment Permitted If No Default.........................................104 SECTION 14.6 Subrogation to Rights of Holders of Senior Indebtedness of a Guarantor..105 SECTION 14.7 Provisions Solely to Define Relative Rights.............................105 SECTION 14.8 Trustee to Effectuate Subordination.....................................106 SECTION 14.9 No Waiver of Subordination Provisions...................................106 SECTION 14.10 Notice to Trustee.......................................................106 SECTION 14.11 Reliance on Judicial Order or Certificate of Liquidating Agent..........106 SECTION 14.12 Trustee Not Fiduciary for Holders of Senior Indebtedness of the Guarantors............................................................107 SECTION 14.13 Rights of Trustee as Holder of Senior Indebtedness of the Guarantors; Preservation of Trustee's Rights......................................107 SECTION 14.14 Article Applicable to Paying Agents.....................................107 SECTION 14.15 Certain Conversions or Exchanges Deemed Payment.........................107
EXHIBITS EXHIBIT A Form of Amended and Restated Declaration of Trust of Fresenius Medical Care Capital Trust V iv 6 FMC TRUST FINANCE S.A.R.L. LUXEMBOURG-III Reconciliation and tie between the Trust Indenture Act of 1939 (including cross-references to provisions of Sections 310 to and including 317 which, pursuant to Section 318(c) of the Trust Indenture Act of 1939, as amended by the Trust Reform Act of 1990, are a part of and govern the Indenture upon consummation of the Exchange Offer (as defined in the Indenture) whether or not physically contained therein) and the Senior Subordinated Indenture, dated as of June 15, 2001.
TRUST INDENTURE INDENTURE ACT SECTION SECTION - ----------- ------- Section 310 (a) (1), (2) and (5)....................................6.9 (a) (3).................................................Not Applicable (a) (4).................................................Not Applicable (b).....................................................6.8 ........................................................6.10 (c).....................................................Not Applicable Section 311 (a).....................................................6.13 (b).....................................................6.13 (b) (2).................................................6.13 ........................................................6.13 Section 312 (a).....................................................7.1 ........................................................7.2(a) (b).....................................................7.2(b) (c).....................................................7.2(c) Section 313 (a).....................................................7.3(a) (b).....................................................7.3(a) (c).....................................................7.3(a), 7.3(b) (d).....................................................7.3(c) Section 314 (a) (1), (2) and (3)....................................7.4 (a) (4).................................................10.16 (b).....................................................Not Applicable (c) (1).................................................1.2 (c) (2).................................................1.2 (c) (3).................................................Not Applicable (d).....................................................Not Applicable (e).....................................................1.2 (f).....................................................Not Applicable Section 315 (a).....................................................6.1(a) (b).....................................................6.2 ........................................................7.3(a) (6) (c).....................................................6.1(b) (d).....................................................6.1(c)
v 7 (d) (1).................................................6.1(a) (d) (2).................................................6.1(c) (2) (d) (3).................................................6.1(c) (3) (e).....................................................5.14 Section 316 (a).....................................................1.1 (a) (1) (A).............................................5.12 (a) (1) (B).............................................5.13 (a) (2).................................................Not Applicable (b).....................................................5.8 (c).....................................................1.4(f) Section 317 (a) (1).................................................5.3 (a) (2).................................................5.4 (b).....................................................10.3 Section 318 (a).....................................................1.7
- ---------- Note: This reconciliation and tie shall not, for any purpose, be deemed to be a part of the Senior Subordinated Indenture. iv 8 FMC TRUST FINANCE S.A.R.L. LUXEMBOURG-III SENIOR SUBORDINATED INDENTURE SENIOR SUBORDINATED INDENTURE dated as of June 15, 2001, among FMC TRUST FINANCE S.A.R.L. LUXEMBOURG-III, a private limited company (Societe a responsabilite limitee) organized under the laws of Luxembourg (hereinafter called the "Note Issuer") having its principal office at L-2557 Luxembourg, 7A rue Robert Stumper, as issuer, FRESENIUS MEDICAL CARE AG, a stock corporation (Aktiengesellschaft) organized under the laws of Germany (hereinafter called the "Company"), as the Company and as a Guarantor, each of the other GUARANTORS (as hereinafter defined), and STATE STREET BANK AND TRUST COMPANY, a Massachusetts chartered trust company, trustee (hereinafter called the "Trustee"). RECITALS OF THE NOTE ISSUER AND THE GUARANTORS The Note Issuer has duly authorized the execution and delivery of this Indenture to provide for the issuance of its 7?% Senior Subordinated Notes due June 15, 2011 of substantially the tenor hereinafter provided, including, without limitation, Securities (this term and other capitalized terms used and not defined in these recitals having the respective meanings set forth in Article I hereof) issued to evidence loans made to the Note Issuer of the proceeds from the issuance by Fresenius Medical Care Capital Trust V, a statutory business trust organized under the laws of Delaware (the "Trust"), of preferred trust interests in such Trust (the "Preferred Securities") and common trust interests in such Trust (the "Common Securities" and, collectively with the Preferred Securities, the "Trust Securities"), and to provide the terms and conditions upon which the Securities are to be authenticated, issued and delivered. The Company, directly or indirectly, owns beneficially and of record 100% of the Capital Stock of the Note Issuer and the other Guarantors (other than the preferred stock of Fresenius Medical Care Holdings, Inc.); the Note Issuer and the Guarantors are members of the same consolidated group of companies and are engaged in related businesses; the Guarantors will derive direct and indirect economic benefit from the issuance of the Securities; accordingly, the Guarantors have each duly authorized the execution and delivery of this Indenture to provide for the Guarantee by each of them with respect to the Securities as set forth in this Indenture. All things necessary to make the Securities, when executed by the Note Issuer and authenticated and delivered hereunder and duly issued by the Note Issuer, the valid obligations of the Note Issuer, to make the Guarantees of each of the Guarantors, when executed by the respective Guarantors and endorsed on the Securities, authenticated and delivered hereunder, the valid obligations of the respective Guarantors, and to make this Indenture a valid agreement of the Note Issuer and each of the Guarantors in accordance with its terms, have been done. NOW THEREFORE, THIS INDENTURE WITNESSETH: For and in consideration of the premises and the purchase of the Securities by the Holders thereof, it is mutually covenanted and agreed, for the equal and proportionate benefit of all Holders of the Securities, as follows: 1 9 ARTICLE I. DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION .1 Definitions. For all purposes of this Indenture, except as otherwise expressly provided or unless the context otherwise requires: (1) The terms defined in this Article have the meanings assigned to them in this Article, and include the plural as well as the singular; (2) All other terms used herein which are defined in the Trust Indenture Act, either directly or by reference therein, have the meanings assigned to them therein; (3) All accounting terms not otherwise defined herein have the meanings assigned to them in accordance with generally accepted accounting principles, and the term "generally accepted accounting principles" with respect to any computation required or permitted hereunder shall mean such accounting principles which are generally accepted at the date or time of such computation; provided, that when two or more principles are so generally accepted, it shall mean that set of principles consistent with those in use by the Company; (4) Unless otherwise specifically set forth herein, all calculations or determinations of a Person shall be performed or made on a consolidated basis in accordance with generally accepted accounting principles; and (5) The words "herein," "hereof" and "hereunder" and other words of similar import refer to this Indenture as a whole and not to any particular Article, Section or other subdivision. "Act" when used with respect to any Holder has the meaning specified in Section 1.4. "Additional Amounts" has the meaning specified in Section 10.19(a). "Additional Assets" means (i) any property or assets (other than Indebtedness and Capital Stock) in a Related Business; (ii) the Capital Stock of a Person that becomes a Subsidiary as a result of the acquisition of such Capital Stock by the Company or another Subsidiary; or (iii) Capital Stock constituting a minority interest in any Person that at such time is a Subsidiary; provided, however, that any such Subsidiary described in clauses (ii) or (iii) above is primarily engaged in a Related Business. "Additional Interest" has the meaning specified in Section 10.19(b). "Additional Sums" means the interest (compounded quarterly), if any, that shall accrue on any interest on the Securities in arrears for more than one quarter at the rate per annum specified in this Indenture for the Securities. "Affiliate" of any specified Person means any other Person, directly or indirectly, controlling or controlled by or under direct or indirect common control with such specified 2 10 Person; provided, however, that an Affiliate of the Company shall not be deemed to include the Trust, Fresenius Medical Care Capital Trust, Fresenius Medical Care Capital Trust II, Fresenius Medical Care Capital Trust III or Fresenius Medical Care Capital Trust IV or any business trust organized and operated on such similar terms. For the purposes of this definition, "control" when used with respect to any Person means the power to direct the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise; and the terms "controlling" and "controlled" have meanings correlative to the foregoing. For purposes of Sections 10.9, 10.12 and 10.13 only, Affiliate shall also mean any beneficial owner of Capital Stock representing 5% or more of the total voting power of the Voting Stock (on a fully diluted basis) of the Company or of rights or warrants to purchase such Capital Stock (whether or not currently exercisable) and any Person who would be an Affiliate of any such beneficial owner pursuant to the first sentence hereof. "Affiliate Transaction" has the meaning specified in Section 10.12(a). "Approved Lender" has the meaning specified under the definition of "Temporary Cash Investments." "Asset Disposition" means any sale, lease, transfer or other disposition (or series of related sales, leases, transfers or dispositions) by the Company or any Subsidiary, including any disposition by means of a merger, consolidation or similar transaction (each referred to for the purposes of this definition as a "disposition"), of (i) any shares of Capital Stock of any Subsidiary (other than directors qualifying shares or shares required by applicable law to be held by a Person other than the Company or a Subsidiary), (ii) all or substantially all the assets of any division or line of business of the Company or any Subsidiary or (iii) any other assets of the Company or any Subsidiary outside of the ordinary course of business of the Company or such Subsidiary (other than, in the case of (i), (ii) and (iii) above, (y) a disposition by a Subsidiary to the Company or by the Company or a Subsidiary to a Wholly Owned Subsidiary and (z) for purposes of Section 10.13 only, a disposition that constitutes a Restricted Payment permitted by Section 10.9). "Authenticating Agent" means any Person authorized by the Trustee pursuant to Section 6.14 to act on behalf of the Trustee to authenticate Securities. "Average Life" means, as of the date of determination, with respect to any Indebtedness or Preferred Stock, the quotient obtained by dividing (i) the sum of the products of numbers of years from the date of determination to the dates of each successive scheduled principal payment of such Indebtedness or redemption or similar payment with respect to such Preferred Stock multiplied by the amount of such payment by (ii) the sum of all such payments. "Blockage Notice" has the meaning specified in Section 12.4. "Board of Directors" means, with respect to the Note Issuer, Company or a Subsidiary, as the case may be, the Board of Directors (or other body performing functions similar to any of those performed by a Board of Directors including those performed, in the case of a German corporation, by the Managing Board or the Supervisory Board) of such person or any committee thereof duly authorized to act on behalf of such Board (or other body). 3 11 "Board Resolution" means, with respect to the Note Issuer or a Guarantor, a copy of a resolution certified by the Secretary or an Assistant Secretary or a member of the Managing Board of the Note Issuer or such Guarantor to have been duly adopted by the Board of Directors, or such committee of the Board of Directors or officers of the Note Issuer or such Guarantor to which authority to act on behalf of the Board of Directors has been delegated, and to be in full force and effect on the date of such certification, and delivered to the Trustee. "Business Day" means any day other than (i) a Saturday or Sunday, (ii) a day on which banking institutions in London, New York City, Frankfurt am Main or Luxembourg are authorized or required by law or executive order to remain closed, (iii) a day on which the Trans-European Automated Real-Time Gross-settlement Express Transfer System is authorized or required by law to close, or (iv) a day on which the Corporate Trust Office of the Trustee or, with respect to the Preferred Securities, the Corporate Trust Office of the Preferred Trustee under the Declaration, is closed for business. "Capital Lease Obligations" means an obligation that is required to be classified and accounted for as a capital lease for financial reporting purposes in accordance with GAAP, and the amount of Indebtedness represented by such obligation shall be the capitalized amount of such obligation determined in accordance with GAAP; and the Stated Maturity thereof shall be the date of the last payment of rent or any other amount due under such lease prior to the first date upon which such lease may be terminated by the lessee without payment of a penalty. "Capital Stock" of any Person means any and all shares, interests, rights to purchase, warrants, options, participations or other equivalents of or interests in (however designated) equity of such Person, including any Preferred Stock, but excluding any debt securities convertible into such equity. "Change of Control" means any transaction or series of transactions in which any Person or group (within the meaning of Rule 13d-5 under the Exchange Act and Section 13(d) and 14(d) of the Exchange Act) other than Fresenius Aktiengesellschaft and its Subsidiaries (i) acquires all or substantially all of the Company's assets or (ii) becomes the direct or indirect "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), by way of merger, consolidation, other business combination or otherwise, of greater than 50% of the total voting power (on a fully diluted basis as if all convertible securities had been converted and all options and warrants had been exercised) entitled to vote in the election of directors of the Company or the Surviving Person (if other than the Company). "Change of Control Triggering Event" means the occurrence of both a Change of Control and a Rating Decline. "Commission" means the U.S. Securities and Exchange Commission. "Common Securities" has the meaning specified in the first paragraph of the Recitals to this Indenture. "Company" has the meaning set forth in the first paragraph of this Indenture. "Company Guarantee" means the guarantee by the Company of distributions on the Preferred Securities of the Trust for the benefit of the holders of the Preferred Securities to the 4 12 extent provided in the Guarantee Agreement, executed and delivered by the Company and the Preferred Trustee pursuant to the Declaration, as the same may be amended from time to time. "Consolidated Coverage Ratio" as of any date of determination means the ratio of (i) the aggregate amount of EBITDA for the Company's most recently ended four full fiscal quarters for which internal financial statements are available immediately preceding the date of such determination to (ii) Consolidated Interest Expense for such four fiscal quarters; provided, however, that (1) if the Company or any Subsidiary has Incurred any Indebtedness since the beginning of such period that remains outstanding or if the transaction giving rise to the need to calculate the Consolidated Coverage Ratio is an Incurrence of Indebtedness, or both, EBITDA and Consolidated Interest Expense for such period shall be calculated after giving effect on a pro forma basis to such Indebtedness as if such Indebtedness had been Incurred on the first day of such period and the discharge of any other Indebtedness repaid, repurchased, defeased or otherwise discharged with the proceeds of such new Indebtedness as if such discharge had occurred on the first day of such period, (2) if since the beginning of such period the Company or any Subsidiary shall have made any Asset Disposition, the EBITDA for such period shall be reduced by an amount equal to the EBITDA (if positive) directly attributable to the assets which are the subject of such Asset Disposition for such period, or increased by an amount equal to the EBITDA (if negative), directly attributable thereto for such period and Consolidated Interest Expense for such period shall be reduced by an amount equal to the Consolidated Interest Expense directly attributable to any Indebtedness of the Company or any Subsidiary repaid, repurchased, defeased or otherwise discharged with respect to the Company and its continuing Subsidiaries in connection with such Asset Disposition for such period (or, if the Capital Stock of any Subsidiary is sold, the Consolidated Interest Expense for such period directly attributable to the Indebtedness of such Subsidiary to the extent the Company and its continuing Subsidiaries are no longer liable for such Indebtedness after such sale), (3) if since the beginning of such period the Company or any Subsidiary (by merger or otherwise) shall have made an Investment in any Subsidiary (or any Person which becomes a Subsidiary) or an acquisition of assets, including any acquisition of assets occurring in connection with a transaction requiring a calculation to be made hereunder, which constitutes all or substantially all of an operating unit of a business, EBITDA and Consolidated Interest Expense for such period shall be calculated after giving pro forma effect thereto (including the Incurrence of any Indebtedness) as if such Investment or acquisition occurred on the first day of such period and (4) if since the beginning of such period any Person (that subsequently became a Subsidiary or was merged with or into the Company or any Subsidiary since the beginning of such period) shall have made any Asset Disposition, any Investment or acquisition of assets that would have required an adjustment pursuant to clause (2) or (3) above if made by the Company or a Subsidiary during such period, EBITDA and Consolidated Interest Expense for such period shall be calculated after giving pro forma effect thereto as if such Asset Disposition, Investment or acquisition occurred on the first day of such period. For purposes of this definition, whenever pro forma effect is to be given to an acquisition of assets, the amount of income or earnings relating thereto and the amount of Consolidated Interest Expense associated with any Indebtedness Incurred in connection therewith, the pro forma calculations shall be determined in good faith by a responsible financial or accounting officer of the Company. If any Indebtedness bears a floating rate of interest and is being given pro forma effect, the interest of such Indebtedness shall be calculated as if the rate in effect on the date of determination had been the applicable rate for the entire period (taking into account any Interest Rate Agreement applicable to such Indebtedness if such Interest Rate Agreement has a remaining term in excess of 12 months). 5 13 "Consolidated Interest Expense" means, for any period, the total interest expense of the Company and its consolidated Subsidiaries, plus, to the extent not included in such total interest expense, and to the extent incurred by the Company or its Subsidiaries, (i) interest expense attributable to capital leases, (ii) amortization of debt discount and debt issuance cost, (iii) capitalized interest, (iv) non-cash interest expenses, (v) commissions, discounts and other fees and charges owed with respect to letters of credit and bankers' acceptance financing, (vi) net costs associated with Hedging Obligations (including amortization of fees), (vii) Preferred Stock dividends in respect of all Preferred Stock held by Persons other than the Company or a Wholly Owned Subsidiary, (viii) interest incurred in connection with Investments in discontinued operations, (ix) interest accruing on any Indebtedness of any other Person to the extent such Indebtedness is Guaranteed by the Company or any Subsidiary and (x) the cash contributions to any employee stock ownership plan or similar trust to the extent such contributions are used by such plan or trust to pay interest or fees to any Person (other than the Company) in connection with Indebtedness Incurred by such plan or trust. "Consolidated Net Income" means, for any period, the net income of the Company and its consolidated Subsidiaries; provided, however, that there shall not be included in such Consolidated Net Income: (i) any net income of any Person if such Person is not a Subsidiary, except that (A) subject to the exclusion contained in clause (iv) below, the Company's equity in the net income of any such Person for such period shall be included in such Consolidated Net Income up to the aggregate amount of cash actually distributed by such Person during such period to the Company or a Subsidiary as a dividend or other distribution (subject, in the case of a dividend or other distribution paid to a Subsidiary, to the limitations contained in clause (iii) below) and (B) the Company's equity in a net loss of any such Person for such period shall be included in determining such Consolidated Net Income; (ii) any net income (or loss) of any Person acquired by the Company or a Subsidiary in a pooling of interests transaction for any period prior to the date of such acquisition; (iii) any net income of any Subsidiary that is not a Wholly Owned Subsidiary if such Subsidiary is subject to contractual, governmental or regulatory restrictions, directly or indirectly, on the payment of dividends or the making of distributions by such Subsidiary, directly or indirectly, to the Company, except that (A) subject to the exclusion contained in clause (iv) below, the Company's equity in the net income of any such Subsidiary for such period shall be included in such Consolidated Net Income up to the aggregate amount of cash actually distributed by such Subsidiary during such period to the Company or another Subsidiary as a dividend or other distribution (subject, in the case of a dividend or other distribution paid to another Subsidiary that is not a Wholly Owned Subsidiary, to the limitation contained in this clause) and (B) the Company's equity in a net loss of any such Subsidiary for such period shall be included in determining such Consolidated Net Income; (iv) any gain (but not loss) realized upon the sale or other disposition of any assets of the Company or its consolidated Subsidiaries (including pursuant to any sale and leaseback arrangement) that is not sold or otherwise disposed of in the ordinary course of business and any gain (but not loss) realized upon the sale or other disposition of any Capital Stock of any Person; (v) extraordinary gains or losses; and (vi) the cumulative effect of a change in accounting principles. "Consolidated Net Worth" means the total of the amounts shown on the balance sheet of the Company and its consolidated Subsidiaries, determined on a consolidated basis in accordance with GAAP, as of the end of the Company's most recently ended fiscal quarter for which internal financial statements are available prior to the taking of any action for the purpose of which the determination is being made, as (i) the par or stated value of all 6 14 outstanding Capital Stock of the Company plus (ii) paid-in capital or capital surplus relating to such Capital Stock plus (iii) any retained earnings or earned surplus less (A) any accumulated deficit and (B) any amounts attributable to Disqualified Stock. "Corporate Trust Office" means the principal office of the Trustee in Hartford, Connecticut. "corporation" means a corporation, association, partnership, limited liability company, business trust or other business entity. "Credit Agreements" means the Senior Credit Agreement and the Other Bank Agreements; provided, that the aggregate principal amount of Indebtedness that may be outstanding, at any one time, under such agreements does not exceed $2,500,000,000. "Currency Agreement" means any foreign currency exchange contract, currency swap agreement or other similar agreement or arrangement designed and entered into to protect the Company or any Subsidiary against fluctuations in currency exchange rates. "Declaration" means the Amended and Restated Declaration of Trust substantially in the form attached hereto as Exhibit A, as amended from time to time. "Default" means any event that is, or after notice or passage of time or both would be, an Event of Default. "Defaulted Interest" has the meaning specified in Section 3.7. "Depositary" means, with respect to the Securities issuable or issued in whole or in part in the form of one or more Global Securities, the Person designated as Depositary by the Note Issuer (or any successor thereto). "Disqualified Stock" means, with respect to any Person, any Capital Stock that by its terms (or by the terms of any security into which it is convertible or for which it is exchangeable) or upon the happening of any event (i) matures or is mandatorily redeemable pursuant to a sinking fund obligation or otherwise, (ii) is convertible or exchangeable for Indebtedness or Disqualified Stock or (iii) is redeemable at the option of the holder thereof, in whole or in part, in each case on or prior to the first anniversary of the Stated Maturity of the Securities; provided, however, that any Capital Stock that would not constitute Disqualified Stock but for provisions thereof giving holders thereof the right to require such Person to repurchase or redeem such Capital Stock upon the occurrence of an "asset sale" or "change of control" occurring prior to the first anniversary of the Stated Maturity of the Securities shall not constitute Disqualified Stock if the "asset sale" or "change of control" provisions applicable to such Capital Stock are not more favorable to the holders of such Capital Stock than the provisions of Sections 10.13 and 10.15. "E" or "euro" means the euro, the common currency of the European Monetary Union. "EBITDA" for any period means the sum of Consolidated Net Income, plus Consolidated Interest Expense plus the following to the extent deducted in calculating such Consolidated Net Income: (a) all income tax expense of the Company and its Subsidiaries, (b) 7 15 depreciation expense and (c) amortization expense, in each case for such period. Notwithstanding the foregoing, the provision for taxes based on the income or profits of, and the depreciation and amortization of, a Subsidiary that is not a Wholly Owned Subsidiary shall be added to Consolidated Net Income to compute EBITDA only to the extent (and in the same proportion) that the net income of such Subsidiary was included in calculating Consolidated Net Income and only if a corresponding amount would be permitted at the date of determination to be dividended to the Company by such Subsidiary without prior approval (that has not been obtained), pursuant to the terms of its charter and all agreements, instruments, judgments, decrees, orders, statutes, rules and governmental regulations applicable to such Subsidiary or its stockholders. "Event of Default" has the meaning specified in Article V. "Exchange Act" means the U.S. Securities Exchange Act of 1934, as amended. "Exchange Offer" means the exchange offer contemplated by the Registration Rights Agreement. "Exchange Offer Registration Statement" means a registration statement of the Note Issuer, the Guarantors and the Trust pursuant to the applicable provisions of the Registration Rights Agreement on an appropriate form under the Securities Act, and all amendments and supplements to such registration statement, including post-effective amendments, in each case including the prospectus contained therein, all exhibits and materials included therewith or incorporated by reference therein pursuant to the requirements of the Securities Act or the Exchange Act. "Exchange Preferred Securities" means a series of Preferred Securities of the Trust to be issued under the Declaration in connection with the offer to exchange Preferred Securities for a new series of Preferred Securities pursuant to the Declaration and the Registration Rights Agreement. "Exchange Security" or "Exchange Securities" means any Security or Securities authenticated and delivered under this Indenture in connection with the Exchange Offer, the offer and sale of which has or have been registered under the Securities Act pursuant to the Registration Rights Agreement. "GAAP" means generally accepted accounting principles in the United States of America as in effect as of the Issue Date, including those set forth (i) in the opinions and pronouncements of the Accounting Principles Board of the American Institute of Certified Public Accountants, (ii) statements and pronouncements of the Financial Accounting Standards Board, (iii) in such other statements by such other entity as approved by a significant segment of the accounting profession, and (iv) the rules and regulations of the Commission governing the inclusion of financial statements (including pro forma financial statements) in periodic reports required to be filed pursuant to Section 13 of the Exchange Act, including opinions and pronouncements in staff accounting bulletins and similar written statements from the accounting staff of the Commission. "Global Security" means a Security in the form prescribed in Section 2.4 evidencing all or part of the Securities, issued to the Depositary or its nominee for such series, and registered in the name of such Depositary or its nominee. 8 16 "Government Obligations" means securities which are (A)(i) direct obligations of the United States of America or (ii) obligations of a Person controlled or supervised by and acting as an agency or instrumentality of the United States of America the payment of which is unconditionally guaranteed by the United States of America and which, in either case, are full faith and credit obligations of the United States of America and are not callable or redeemable at the option of the issuer thereof and shall also include a depository receipt issued by a bank (as defined in Section 3(a)(2) of the Securities Act of 1933, as amended) as custodian with respect to any such Government Obligation or a specific payment of interest on or principal of any such Government Obligation held by such custodian for the account of the holder of such depository receipt; provided, that (except as required by law) such custodian is not authorized to make any deduction from the amount payable to the holder of such depository receipt from any amount received by the custodian in respect of the Government Obligation or the specific payment of interest on or principal of the Government Obligation evidenced by such depository receipt; or (B) direct obligations of the Republic of Germany (Bunds or Bundesanleihan) that are full faith and credit obligations of the Republic of Germany and are not callable or redeemable at the option of the issuer thereof. "Guarantee" means any obligation, contingent or otherwise, of any Person directly or indirectly guaranteeing any Indebtedness or other obligation of any Person and any obligation, direct or indirect, contingent or otherwise, of such Person (i) to purchase or pay (or advance or supply funds for the purchase or payment of) such Indebtedness or other obligation of such Person (whether arising by virtue of partnership arrangements, or by agreements to keep-well, to purchase assets, goods, securities or services, to take-or-pay or to maintain financial statement conditions or otherwise) or (ii) entered into for the purpose of assuring in any other manner the obligee of such Indebtedness or other obligation of the payment thereof or to protect such obligee against loss in respect thereof (in whole or in part); provided, however, that the term Guarantee shall not include endorsements for collection or deposit in the ordinary course of business. The term Guarantee used as a verb has a corresponding meaning. "Guarantor Blockage Notice" has the meaning specified in Section 14.4(b). "Guarantor Payment Blockage Period" has the meaning specified in Section 14.4(b). "Guarantor Proceeding" has the meaning specified in Section 14.2. "Guarantor Senior Subordinated Payment" has the meaning specified in Section 14.2. "Guarantors" means the Company, Fresenius Medical Care Holdings, Inc., a New York corporation, and Fresenius Medical Care Deutschland GmbH, a German limited liability company. "Guaranty" means the Guarantee by a Guarantor of the Note Issuer's obligations with respect to the Securities. "Guaranty Agreement" means, in the context of a consolidation, merger or sale of all or substantially all of the assets of a Guarantor, an agreement by which the Surviving Person from such a transaction expressly assumes all of the obligations of such Guarantor under its Guaranty. 9 17 "Hedging Obligations" of any Person means the obligations of such Person pursuant to any Interest Rate Agreement or Currency Agreement. "Holder" means a Person in whose name a Security is registered in the Securities Register. The Preferred Trustee shall be the initial Holder of the Securities. "Incur" means issue, assume, Guarantee, incur or otherwise become liable for; provided, however, that any Indebtedness or Capital Stock of a Person existing at the time such Person becomes a Subsidiary (whether by merger, consolidation, acquisition or otherwise) shall be deemed to be Incurred by such Subsidiary at the time it becomes a Subsidiary. The term "Incurrence" when used as a noun shall have a correlative meaning. The accretion of principal of a non-interest bearing or other discount security shall be deemed the Incurrence of Indebtedness. "Indebtedness" means, with respect to any Person on any date of determination (without duplication), (i) the principal of and premium (if any) in respect of (A) indebtedness of such Person for money borrowed and (B) indebtedness evidenced by notes, debentures, bonds or other similar instruments for the payment of which such Person is responsible or liable; (ii) all Capital Lease Obligations of such Person; (iii) all obligations of such Person issued or assumed as the deferred purchase price of property or services, all conditional sale obligations of such Person and all obligations of such Person under any title retention agreement (other than (x) customary reservations or retentions of title under agreements with suppliers entered into in the ordinary course of business, (y) trade debt incurred in the ordinary course of business and due within six months of the incurrence thereof and (z) obligations incurred under a pension, retirement or deferred compensation program or arrangement regulated under the Employee Retirement Income Security Act of 1974, as amended, or the laws of a foreign government); (iv) all obligations of such Person for the reimbursement of any obligor on any letter of credit, bank guaranty, banker's acceptance or similar credit transaction (other than obligations with respect to letters of credit and bank guaranties (A) not made under the Senior Credit Agreement and (B) securing obligations (other than obligations described in clauses (i) through (iii) above) entered into in the ordinary course of business of such Person to the extent such letters of credit are not drawn upon or, if and to the extent drawn upon, such drawing is reimbursed no later than the tenth Business Day following receipt by such Person of a demand for reimbursement following payment on the letter of credit); (v) the amount of all obligations of such Person with respect to the redemption, repayment or other repurchase of any Disqualified Stock or, with respect to any subsidiary of such Person, any Preferred Stock (but excluding, in each case, any accrued dividends); (vi) all obligations of the type referred to in clauses (i) through (v) of other Persons and all dividends of other Persons for the payment of which, in either case, such Person is responsible or liable, directly or indirectly, as obligor, guarantor or otherwise, including by means of any Guarantee; (vii) all obligations of the type referred to in clauses (i) through (vi) of other Persons secured by any Lien on any property or asset of such Person (whether or not such obligation is assumed by such Person), the amount of such obligation being deemed to be the lesser of the value of such property or assets or the amount of the obligation so secured; and (viii) to the extent not otherwise included in this definition, Hedging Obligations of such Person. The amount of Indebtedness of any Person at any date shall be the outstanding balance at such date of all unconditional obligations as described above and the maximum liability, upon the occurrence of the contingency giving rise to the obligation, of any contingent obligations at such date. 10 18 "Indenture" means this instrument as originally executed or as it may from time to time be supplemented or amended by one or more indentures supplemental hereto entered into pursuant to the applicable provisions hereof, including, for all purposes of this instrument and any such supplemental indenture, the provisions of the Trust Indenture Act that are deemed to be a part of and govern this instrument and any such supplemental indenture, respectively, and shall include the terms of the Securities established as contemplated by Section 3.1. "Initial Security" or "Initial Securities" means any Security or Securities authenticated and delivered under this Indenture and not registered under the Securities Act. "Interest Payment Date" means March 14, June 14, September 14 and December 14 of each year, commencing September 14, 2001. "Interest Rate" means the rate of interest specified or determined as specified as being the rate of interest payable on the Securities. "Interest Rate Agreement" means any interest rate swap agreement, interest rate cap agreement or other financial agreement or arrangement designed and entered into to protect the Company or any Subsidiary against fluctuations in interest rates. "Investment" in any Person means any direct or indirect advance, loan (other than advances to customers in the ordinary course of business that are recorded as accounts receivable on the balance sheet of such Person) or other extensions of credit (including by way of Guarantee or similar arrangement) or capital contribution to (by means of any transfer of cash or other property to others or any payment for property or services for the account or use of others), or any purchase or acquisition of Capital Stock, Indebtedness or other similar instruments issued by such Person. "Investment Company Event" means the receipt by the Company of an Opinion of Counsel, rendered by a law firm having a nationally recognized tax and securities practice, to the effect that, as a result of the occurrence of a change in law or regulation or a change in interpretation or application of law or regulation by any legislative body, court, governmental agency or regulatory authority (a "Change in 1940 Act Law"), the Trust is or will be considered an "investment company" that is required to be registered under the 1940 Act, which Change in 1940 Act Law becomes effective on or after the date of original issuance of the Preferred Securities of the Trust. "Investment Grade" means a rating of BBB- or higher by S&P and Baa3 or higher by Moody's or the equivalent of such ratings by S&P or Moody's and the equivalent in respect of Rating Categories of any Rating Agencies substituted for S&P or Moody's. "Investment Grade Status" exists as of any time if at such time (i) the rating assigned to the Securities by Moody's is at least Baa3 (or the equivalent) or higher and (ii) the rating assigned to the Securities by S&P is at least BBB- (or the equivalent) or higher. "Issue Date" means the date on which the Securities are originally issued. "Lien" means any mortgage, pledge, security interest, encumbrance, lien or charge of any kind (including any conditional sale or other title retention agreement or lease in the nature thereof). 11 19 "Liquidated Damages" means amounts payable to the holders of Preferred Securities as "Liquidated Damages" as defined in and pursuant to the Registration Rights Agreement. "Luxco" means FMC Trust Finance S.a.r.l. Luxembourg, a private limited company (Societe a responsible Limitee) organized under the laws of Luxembourg and a wholly-owned subsidiary of the Company and, solely for purposes of Section 10.13, any successor thereto. "Maturity" when used with respect to any Security means the date on which the principal of such Security becomes due and payable as therein or herein provided, whether at the Stated Maturity or by declaration of acceleration, call for redemption or otherwise. "Moody's" means Moody's Investors Service, Inc. and its successors. "1940 Act" means the Investment Company Act of 1940, as amended. "NMC" means National Medical Care, Inc., a Delaware corporation. "Net Available Cash" from an Asset Disposition means cash payments received therefrom (including any cash payments received by way of deferred payment of principal pursuant to a note or installment receivable or otherwise, but only as and when received, but excluding any other consideration received in the form of assumption by the acquiring Person of Indebtedness or other obligations relating to such properties or assets or received in any other non-cash form) in each case net of (i) all legal, title and recording tax expenses, commissions and other fees and expenses incurred, and all U.S. federal, state, provincial, foreign and local taxes required to be accrued as a liability under GAAP, as a consequence of such Asset Disposition, (ii) all payments made on any Indebtedness which is secured by any assets subject to such Asset Disposition, in accordance with the terms of any Lien upon or other security agreement of any kind with respect to such assets, or which must by its terms, or in order to obtain a necessary consent to such Asset Disposition, or by applicable law be, repaid out of the proceeds from such Asset Disposition, (iii) all distributions and other payments required to be made to minority interest holders in Subsidiaries or joint ventures as a result of such Asset Disposition and (iv) the deduction of appropriate amounts provided by the seller as a reserve, in accordance with GAAP, against any liabilities associated with the property or other assets disposed in such Asset Disposition and retained by the Company or any Subsidiary after such Asset Disposition. "Net Cash Proceeds" with respect to any issuance or sale of Capital Stock, means the cash proceeds of such issuance or sale net of attorneys' fees, accountants' fees, underwriters' or placement agents' fees, discounts or commissions and brokerage, consultant and other fees actually incurred in connection with such issuance or sale and net of taxes paid or payable as a result thereof. "9% Indenture" means the senior subordinated indenture dated as of November 27, 1996, as amended by the supplemental indenture dated as of February 19, 1998 and the second supplemental indenture dated as of November 30, 1998, by and between Luxco, Fleet National Bank (as predecessor to State Street Bank and Trust Company), as trustee, the Company and the subsidiary guarantors named therein with respect to the issuance of the 9% senior subordinated notes of Luxco due December 1, 2006 in the aggregate principal amount of $360,360,000, as supplemented and in effect as of the date hereof, as it may be further amended, modified or otherwise supplemented from time to time. 12 20 "9% Notes" means the 9% senior subordinated notes due December 1, 2006 issued pursuant to the 9% Indenture. "Note Issuer" means the Person named as the "Note Issuer" in the first paragraph of this Indenture until a successor issuer shall have become such pursuant to Article VIII, and thereafter "Note Issuer" shall mean such successor issuer. "Note Issuer Request" and "Note Issuer Order" mean, respectively, the written request or order signed in the name of the Note Issuer by any two members of the Managing Board (if a German corporation) or of the Board of Directors (or any other two officers of the Note Issuer thereunto duly authorized) and delivered to the Trustee. "Officers' Certificate" means a certificate signed by (a) the Chairman and Chief Executive Officer, President or Vice President, and by the Treasurer, an Assistant Treasurer, the Controller, the Secretary or an Assistant Secretary, or (b) any two members of the Managing Board (if a German corporation) or of the Board of Directors, of the Company, the Note Issuer or a Guarantor, as the case may be, and delivered to the appropriate Trustee. "Opinion of Counsel" or "opinion of counsel" means, as to the Company, the Note Issuer or a Guarantor, a written opinion of counsel, who may be counsel for the Company, the Note Issuer or such Guarantor, as the case may be, but, other than in connection with the issuance of the Securities, not an employee of any thereof, and who shall be reasonably acceptable to the Trustee. "Other Bank Agreements" means any credit agreement or other agreement for loans, letters of credit, bank guaranties or other financial accommodations (and any related notes, guarantees, collateral documents, instruments and agreements executed in connection therewith) entered into by the Company or any Subsidiary with any bank; provided that the aggregate principal amount of Indebtedness that may be outstanding thereunder does not exceed $500 million, except to the extent that such additional principal amount of Indebtedness could be incurred pursuant to Section 10.8(b)(9) hereof. "Outstanding" means, when used in reference to any Securities, as of the date of determination, all Securities theretofore authenticated and delivered under this Indenture, except: (i) Securities theretofore canceled by the Trustee or delivered to the Trustee for cancellation; (ii) Securities for whose payment or redemption money in the necessary amount has been theretofore deposited with the Trustee or any Paying Agent in trust for the Holders of such Securities (other than the Note Issuer or any Guarantor) in trust or set aside and segregated in trust by the Note Issuer or a Guarantor (if the Note Issuer or a Guarantor shall act as its own Paying Agent) for the Holders of such Securities; provided, that if such Securities are to be redeemed, notice of such redemption has been duly given pursuant to this Indenture or provision therefor satisfactory to the Trustee has been made; (iii) Securities in substitution for or in lieu of which other Securities have been authenticated and delivered or which have been paid pursuant to Section 13 21 3.6, unless proof satisfactory to the Trustee is presented that any such Securities are held by Holders in whose hands such Securities are valid, binding and legal obligations of the Note Issuer; and (iv) Securities which have been defeased pursuant to Section 4.3 hereof. provided, however, that in determining whether the Holders of the requisite principal amount of Outstanding Securities have given any request, demand, authorization, direction, notice, consent or waiver hereunder, Securities owned by the Note Issuer or any other obligor upon the Securities or any Affiliate of the Note Issuer or such other obligor shall be disregarded and deemed not to be Outstanding, except that, in determining whether the Trustee shall be protected in relying upon any such request, demand, authorization, direction, notice, consent or waiver, only Securities which the Trustee knows to be so owned shall be so disregarded. Securities so owned which have been pledged in good faith may be regarded as Outstanding if the pledgee establishes to the satisfaction of the Trustee the pledgee's right so to act with respect to such Securities and that the pledgee is not the Note Issuer or any other obligor upon the Securities or any Affiliate of the Note Issuer or such other obligor. Upon the written request of the Trustee, the Note Issuer shall furnish to the Trustee promptly an Officers' Certificate listing and identifying all Securities, if any, known by the Note Issuer to be owned or held by or for the account of the Note Issuer, or any other obligor on the Securities or any Affiliate of the Note Issuer or such obligor, and, subject to the provisions of Section 6.1, the Trustee shall be entitled to accept such Officers' Certificate as conclusive evidence of the facts therein set forth and of the fact that all Securities not listed therein are Outstanding for the purpose of any such determination. "Payment Blockage Period" has the meaning specified in Section 12.4(b). "Paying Agent" means the Trustee or any Person authorized by the Note Issuer to pay the principal of or interest on any Securities on behalf of the Note Issuer. "Permitted Investment" means an Investment by the Company or any Subsidiary in (i) a Person that shall, upon the making of such Investment, be or become a Subsidiary; provided, however, that the primary business of such Subsidiary is a Related Business; (ii) a Person if, as a result of such Investment, such other Person is merged or consolidated with or into, or transfers or conveys all or substantially all its assets to, the Company or a Subsidiary; provided, however, that such Person's primary business is a Related Business; (iii) Temporary Cash Investments; (iv) any demand deposit account with an Approved Lender; (v) receivables owing to the Company or any Subsidiary if created or acquired in the ordinary course of business and payable or dischargeable in accordance with customary trade terms; provided, however, that such trade terms may include such concessionary trade terms as the Company or any such Subsidiary deems reasonable under the circumstances; (vi) payroll, travel and similar advances to cover matters that are expected at the time of such advances ultimately to be treated as expenses for accounting purposes and that are made in the ordinary course of business; (vii) loans or advances to employees made in the ordinary course of business consistent with past practices of the Company or such Subsidiary; (viii) stock, obligations or securities received in settlement of debts created in the ordinary course of business and owing to the Company or any Subsidiary or in satisfaction of judgments; (ix) any Person to the extent such Investment represents the non-cash portion of the consideration received for an Asset Disposition as permitted pursuant to Section 10.13; and (x) any Affiliate (the primary business 14 22 of which is a Related Business) that is not a Subsidiary (other than Fresenius Aktiengesellschaft), provided, that the aggregate of all such Investments outstanding at any one time under this clause (x) shall not exceed $125 million. "Person" means any individual, corporation, partnership, joint venture, association, joint-stock company, trust, unincorporated organization, government or any agency, instrumentality or political subdivision thereof, or any other entity. "Predecessor Security" of any particular Security means every previous Security evidencing all or a portion of the same debt as that evidenced by such particular Security; and, for the purposes of this definition, any security authenticated and delivered under Section 3.6 in lieu of a lost, destroyed or stolen Security shall be deemed to evidence the same debt as the lost, destroyed or stolen Security. "Preferred Securities" has the meaning specified in the first paragraph of the Recitals to this Indenture. "Preferred Stock", as applied to the Capital Stock of any corporation, means Capital Stock of any class or classes (however designated) which is preferred as to the payment of dividends, or as to the distribution of assets upon any voluntary or involuntary liquidation or dissolution of such corporation, over shares of Capital Stock of any other class of such corporation. "Preferred Trustee" means State Street Bank and Trust Company, a Massachusetts chartered trust company, solely in its capacity as Preferred Trustee of the Trust and not in its individual capacity, or its successor in interest in such capacity, or any successor Preferred Trustee appointed as provided in the Declaration. "principal" of a Security means the principal of the Security plus the premium, if any, payable on the Security which is due or overdue or is to become due at the relevant time. "Proceeding" has the meaning specified in Section 12.2. "Rating Agencies" means (i) S&P and (ii) Moody's or (iii) if S&P or Moody's or both shall not make rating of the Securities publicly available, a nationally recognized securities rating agency or agencies, as the case may be, selected by the Company, which shall be substituted for S&P or Moody's or both, as the case may be. "Rating Category" means (i) with respect to S&P, any of the following categories: BB, B, CCC, CC, C and D (or equivalent successor categories); (ii) with respect to Moody's, any of the following categories: Ba, B, Caa, Ca, C and D (or equivalent successor categories); and (iii) the equivalent of any such category of S&P or Moody's used by another Rating Agency. In determining whether the rating of the Securities has decreased by one or more gradations, gradations within Rating Categories (+ and - for S&P, 1, 2, and 3 for Moody's; or the equivalent gradations for another Rating Agency) shall be taken into account (e.g., with respect to S&P, a decline in a rating from BB+ to BB, as well as from BB- to B+, will constitute a decrease of one gradation). 15 23 "Rating Date" means the date which is 90 days prior to the earlier of (i) a Change of Control and (ii) public notice of the occurrence of a Change of Control or of the intention by the Company or any Person to effect a Change of Control. "Rating Decline" means the occurrence on or within 90 days after the date of the first public notice of the occurrence of a Change of Control or of the intention by the Company to effect a Change of Control (which period shall be extended so long as the rating of the Securities is under publicly announced consideration for possible downgrade by any of the Rating Agencies) of: (a) in the event the Securities are rated by either Moody's or S&P on the Rating Date as Investment Grade, a decrease in the rating of the Securities by both Rating Agencies to a rating that is below Investment Grade, or (b) in the event the Securities are rated below Investment Grade by both Rating Agencies on the Rating Date, a decrease in the rating of the Securities by either Rating Agency by one or more gradations (including gradations within Rating Categories as well as between Rating Categories). "Receivables Financings" means (i) the accounts receivable financing facility of NMC contemplated by the Receivables Purchase Agreement dated as of August 28, 1997 by and between NMC, as Seller, and NMC Funding Corporation, as Purchaser and the Amended and Restated Transfer and Administration Agreement dated October 26, 2000 among Compass US Acquisition LLC, NMC Funding Corporation, National Medical Care, Inc., Enterprise Funding Corporation, the Bank Investors listed therein, Westdeutsche Landesbank Girozentrale, New York Branch, an administrative agent, and Bank of America N.A., an administrative agent, as each such agreement may be amended or supplemented from time to time, and (ii) any financing transaction or series of financing transactions that have been or may be entered into by the Company or a Subsidiary pursuant to which the Company or a Subsidiary may sell, convey or otherwise transfer to a Subsidiary or Affiliate, or any other Person, or may grant a security interest in, any receivables or interests therein secured by the merchandise or services financed thereby (whether such receivables are then existing or arising in the future) of the Company or such Subsidiary, as the case may be, and any assets related thereto, including without limitation, all security interests in merchandise or services financed thereby, the proceeds of such receivables, and other assets which are customarily sold or in respect of which security interests are customarily granted in connection with securitization transactions involving such assets. "Redemption Date," when used with respect to any Security to be redeemed, means the date fixed for such redemption by or pursuant to this Indenture. "Redemption Price," when used with respect to any Security to be redeemed, means the price at which it is to be redeemed pursuant to this Indenture. "Refinance" means, in respect of any Indebtedness, to refinance, extend, renew, refund, repay, prepay, redeem, defease or retire, or to issue other Indebtedness in exchange or replacement for, such indebtedness. "Refinanced" and "Refinancing" shall have correlative meanings. "Refinancing Indebtedness" means Indebtedness that Refinances any Indebtedness of the Company or any Subsidiary existing on the Issue Date or Incurred in compliance with the Indenture including Indebtedness that Refinances Refinancing Indebtedness; provided, however, that (i) such Refinancing Indebtedness has a Stated Maturity no earlier than the Stated Maturity of the Indebtedness being Refinanced, (ii) such Refinancing Indebtedness has 16 24 an Average Life at the time such Refinancing Indebtedness is Incurred that is equal to or greater than the Average Life of the Indebtedness being Refinanced and (iii) such Refinancing Indebtedness has an aggregate principal amount (or if Incurred with original issue discount, an aggregate issue price) that is equal to or less than the aggregate principal amount (or if Incurred with original issue discount, the aggregate accreted value) then outstanding or committed (plus fees and expenses, including any premium and defeasance costs) under the Indebtedness being Refinanced; provided further, however, that Refinancing Indebtedness shall not include (x) Indebtedness of a Subsidiary that Refinances Indebtedness of the Company or (y) Indebtedness of the Company or a Subsidiary (other than NMC or a subsidiary of NMC) that Refinances Indebtedness of another Subsidiary. "Registration Rights Agreement" means the Registration Rights Agreement dated June [15], 2001, by and among the Company, the Note Issuer, the Guarantors, the Trust and the Persons identified therein as the initial purchasers, as such agreement may be amended, modified or supplemented from time to time, relating to an exchange offer and registration rights for the Preferred Securities, the Company Guarantee, the Securities and the Guaranties. "Regular Record Date" for the interest payable on any Interest Payment Date means the date which is the 14th day immediately preceding such Interest Payment Date (whether or not a Business Day). "Related Business" means any business related, ancillary or complementary to the businesses of the Company and its Subsidiaries on the Issue Date. "Responsible Officer" when used with respect to the Trustee means any officer of the Trustee assigned by the Trustee from time to time to administer its corporate trust matters. "Restricted Payment" with respect to any Person means (i) the declaration or payment of any dividends or any other distributions of any sort in respect of its Capital Stock (including any payment in connection with any merger or consolidation involving such Person) or similar payment to the direct or indirect holders of its Capital Stock (other than dividends or distributions payable solely in its Capital Stock (other than Disqualified Stock) and dividends or distributions payable solely to the Company or a Subsidiary, and other than pro rata dividends or other distributions made by a Subsidiary that is not a Wholly Owned Subsidiary to minority stockholders (or owners of an equivalent interest in the case of a Subsidiary that is an entity other than a corporation)), (ii) the purchase, redemption or other acquisition or retirement for value of any Capital Stock of the Company held by any Person or of any Capital Stock of a Subsidiary held by any Affiliate of the Company (other than a Subsidiary), including the exercise of any option to exchange any Capital Stock (other than into Capital Stock of the Company that is not Disqualified Stock), (iii) the purchase, repurchase, redemption, defeasance or other acquisition or retirement for value, prior to scheduled maturity, scheduled repayment or scheduled sinking fund payment of any Subordinated Obligations (other than the purchase, repurchase or other acquisition of Subordinated Obligations purchased in anticipation of satisfying a sinking fund obligation, principal installment or final maturity, in each case due within one year of the date of acquisition) or (iv) the making of any Investment in any Person (other than a Permitted Investment). "Secured Indebtedness" means any Indebtedness of the Company secured by a Lien. 17 25 "Securities Act" means the U.S. Securities Act of 1933 or any successor statute thereto, in each case as amended from time to time. "Securities" or "Security" means (a) any Initial Securities or Initial Security and (b) any Exchange Security or Exchange Securities. "Securities Register" and "Securities Registrar" have the respective meanings specified in Section 3.5. "Senior Credit Agreement" means the Credit Agreement, dated as of September 27, 1996, among NMC, certain subsidiaries and affiliates thereof, the lenders referred to in such Credit Agreement, NationsBank, N.A., as paying agent, and The Bank of Nova Scotia, The Chase Manhattan Bank, Dresdner Bank AG and NationsBank, N.A., as managing agents, including any related notes, guarantees, collateral documents, instruments and agreements executed in connection with such Credit Agreement, in each case as amended, modified, renewed, refunded, replaced, restated or refinanced from time to time; provided that such amendment, modification, renewal, refunding, replacement, restatement or refinancing (i) does not cause the aggregate principal amount of Indebtedness that may be outstanding under such Credit Agreement to exceed $2.5 billion, except to the extent that such additional principal amount of Indebtedness could be incurred pursuant to Section 10.8(b)(9), and (ii) does not contain, with respect to any Subsidiary, any encumbrances or restrictions of the type contained in clauses (a), (b) and (c) of Section 10.10 that are less favorable to the Holders of Securities than the encumbrances and restrictions with respect to such Subsidiary contained in such Credit Agreement prior thereto. "Senior Indebtedness" means, with respect to the Note Issuer or a Guarantor, as the case may be, (i) Indebtedness of such Person, whether outstanding on the Issue Date or thereafter incurred and (ii) accrued and unpaid interest (including interest accruing on or after the filing of any petition in bankruptcy or for reorganization relating to such Person, whether or not the claim for such interest is allowed as a claim after such filing) in respect of (A) any Indebtedness of such Person under the Senior Credit Agreement, (B) Indebtedness of such Person for money borrowed and (C) Indebtedness evidenced by notes, debentures, bonds or other similar instruments for the payment of which such Person is responsible or liable unless, in the instrument creating or evidencing the same or pursuant to which the same is outstanding, it is provided that such obligations are subordinate in right of payment to the Securities; provided, however, that Senior Indebtedness shall not include (1) any obligation of such Person to any subsidiary or parent of such person, (2) any liability for Federal, state, local or other taxes owed or owing by such person, (3) any accounts payable or other liability to trade creditors arising in the ordinary course of business (including guarantees thereof or instruments evidencing such liabilities), (4) any Indebtedness of such Person (and any accrued and unpaid interest in respect thereof) which is expressly subordinate or junior in any respect to any other Indebtedness or other obligation of such Person, including Senior Subordinated Indebtedness or (5) that portion of any Indebtedness which at the time of incurrence is incurred in violation of the Indenture. "Senior Subordinated Indebtedness" means the 9% Notes, the 2008 7 7/8% Notes, the 2011 7 7/8% Notes, the 2008 7 3/8% Notes, the Securities and any Indebtedness of the Company or the Note Issuer that specifically provides that such Indebtedness is to rank pari passu with the Company's and the Note Issuer's respective obligations with respect to the Securities in right of payment and is not subordinated by its terms in right of payment to any 18 26 Indebtedness or other obligation of the Company or the Note Issuer that is not Senior Indebtedness. "Senior Subordinated Payment" has the meaning specified in Section 12.2. "Shelf Registration Statement" means a shelf registration statement of the Note Issuer, the Guarantors and the Trust pursuant to the provisions of the Registration Rights Agreement on an appropriate form under Rule 415 under the Securities Act, or any similar rule that may be adopted by the Commission, and all amendments and supplements to such registration statement, including post-effective amendments, in each case including the prospectus contained therein, all exhibits and materials included therewith or incorporated by reference therein pursuant to the requirements of the Securities Act or the Exchange Act. "S&P" means Standard & Poor's Corporation and its successors. "Specified Senior Indebtedness" means, with respect to the Company, the Note Issuer or a Guarantor, as the case may be, (i) any Indebtedness of such Person under the Senior Credit Agreement, (ii) any Refinancing Indebtedness of such Person in respect of Indebtedness specified in clause (i) and (iii) after all Indebtedness specified in clause (i) and (ii) above is no longer outstanding, any other Senior Indebtedness of such Person permitted under the Indenture the outstanding principal amount of which is more than $25 million at the time of determination and that has been designated by such Person as "Specified Senior Indebtedness." "Special Record Date" for the payment of any Defaulted Interest means a date fixed by the Trustee pursuant to Section 3.7. "Stated Maturity" means, with respect to any security, the date specified in such security as the fixed date on which the final payment of principal of such security is due and payable, including pursuant to any mandatory redemption provision (but excluding any provision providing for the repurchase of such security at the option of the Holder thereof upon the happening of any contingency unless such contingency has occurred). "Subordinated Obligation" means any Indebtedness of the Note Issuer or the Company (whether outstanding on the Issue Date or thereafter Incurred) that is subordinate or junior in right of payment to the Securities pursuant to a written agreement to that effect. "Subsidiary" means, with respect to any Person, any corporation, limited liability company, association, partnership or other business entity of which more than 50% of the total voting power of shares of Voting Stock is at the time owned or controlled, directly or indirectly, by (i) such Person; (ii) such Person and one or more Subsidiaries of such Person; or (iii) one or more Subsidiaries of such Person. "Surviving Person" means, with respect to any Person involved in any merger, consolidation or other business combination or the sale, assignment, transfer, lease, conveyance or other disposition of all or substantially all of such Person's assets, the Person formed by or surviving such transaction or the Person to which such disposition is made. "Tax Event" means that the Company shall have obtained of an Opinion of Counsel of nationally recognized independent tax counsel to the effect that, as a result of (a) any 19 27 amendment to or change (including any announced prospective change) in the laws (or any regulations promulgated thereunder) of the United States, Germany, the United Kingdom or the jurisdiction of formation of the Note Issuer (or any political subdivision or taxing authority thereof or therein) or (b) any amendment to or change to any official position regarding the application or interpretation of such laws or regulations by any legislative body, court, governmental agency or regulatory authority (including the enactment of any legislation and the publication of any judicial decision or regulatory determination on or after the date of issuance of the Preferred Securities), which amendment or change is effective or which interpretation or pronouncement is announced on or after the date of issuance of the Preferred Securities other than, in either case, any amendment or change implementing, complying with, or introduced in order to conform to, or otherwise arising as a result of or in connection with, any European Union Directive on the taxation of savings implementing the conclusions of the ECOFIN Council meeting of 26-27 November 2000, there is more than an insubstantial risk that (i) the Trust is or will be subject to U.S. Federal or German income tax, or income tax in the jurisdiction of formation of the Note Issuer, in each case with respect to interest received or accrued on the Securities, (ii) interest payable to the Trust on the Securities is not or will not be deductible for U.S. Federal or German income tax purposes or for purposes of any income tax imposed by the jurisdiction of formation of the Note Issuer or (iii) the Trust is or will be subject to more than a de minimis amount of other taxes, duties, assessments or other governmental charges of whatever nature imposed by the United States, Germany, or the jurisdiction of formation of the Note Issuer, or any other taxing authority. "Taxes" means any present or future tax, duty, levy, impost, assessment or other governmental charge (including penalties, interest and other liabilities related thereto) imposed or levied by or on behalf of the United States, Germany, the United Kingdom or the jurisdiction of formation of the Note Issuer or any Guarantor, or of any territory thereof or by an authority or agency therein or thereof having power to tax. "Temporary Cash Investments" means any of the following: (a) securities issued or directly and fully guaranteed or insured by (i) 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) and (ii) the governments of Germany and the United Kingdom, having in each case maturities of not more than twelve months from the date of acquisition, (b) time deposits and certificates of deposit, eurodollar time deposits and eurodollar certificates of deposit of (i) any lender under the Senior Credit Agreement, or (ii) any United States, German, United Kingdom or Swiss commercial bank of recognized standing (y) having capital and surplus in excess of $500,000,000 and (z) 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 (any such bank being an "Approved Lender"), in each case with maturities of not more than 270 days from the date of acquisition, (c) commercial paper and variable or fixed rate notes issued by an Approved Lender (or by the parent company thereof) and maturing within six months of the date of acquisition, (d) repurchase agreements entered into by a Person with a bank or trust company (including any of the lenders under the Senior Credit Agreement) or recognized securities dealer having capital and surplus in excess of $500,000,000 for (i) direct obligations issued by or fully guaranteed by the United States of America, (ii) time deposits or certificates of deposit described under subsection (b) above, or (iii) commercial paper or other notes described under subjection (c) above, in which, in each such case, such bank, trust company or dealer shall have a perfected first priority security interest (subject to no other Liens) and having, on the date of purchase thereof, a fair market value of at least 100% of the 20 28 amount of the repurchase obligations, (e) obligations of any state of the United States or any political subdivision thereof, the interest with respect to which is exempt from federal income taxation under Section 103 of the U.S. Internal Revenue Code, having a long term rating of at least AA- or Aa-3 by S&P or Moody's, respectively, and maturing within three years from the date of acquisition thereof, (f) Investments in municipal auction preferred stock (i) rated AAA (or the equivalent thereof) or better by S&P or Aaa (or the equivalent thereof) or better by Moody's and (ii) with dividends that reset at least once every 365 days and (g) Investments, classified in accordance with GAAP as current assets, in money market investment programs (i) registered under the Investment Company Act of 1940, as amended, or (ii) operated by an investment company in Germany or the United Kingdom and subject to regulations under the laws of such jurisdiction, in each case which are administered by reputable financial institutions having capital of at least $100,000,000 and the portfolios of which are limited to Investments of the character described in clauses (a), (b), (c), (e) and (f) above. "Trust" has the meaning specified in the first paragraph of the Recitals to this Indenture. "Trustee" means the Person named as the "Trustee" in the first paragraph of this Indenture until a successor Trustee shall have become such pursuant to the applicable provisions of this Indenture, and thereafter "Trustee" shall mean or include each Person who is then a Trustee hereunder. "Trust Indenture Act" means the U.S. Trust Indenture Act of 1939 as amended and as in force at the date as of which this Indenture was executed, except as provided in Section 9.5; provided, however, that in the event the Trust Indenture Act of 1939 is amended after such date, "Trust Indenture Act" means, to the extent required by any such amendment, the Trust Indenture Act of 1939 as so amended. "Trust Securities" has the meaning specified in the first paragraph of the Recitals to this Indenture. "2008 7 3/8% Indenture" means the Senior Subordinated Indenture dated as of February 19, 1998, by and among Luxco, State Street Bank and Trust Company as Trustee, the Company and the other Guarantors with respect to the issuance of 7 3/8% Senior Subordinated Notes of Luxco due February 1, 2008 in the aggregate principal amount of DM 300,300,000, as it may be amended, supplemented or otherwise modified from time to time. "2008 7 3/8% Notes" means the 7 3/8% Senior Subordinated Notes of Luxco due February 1, 2008 issued pursuant to the 2008 7 3/8% Indenture. "2008 7 7/8% Indenture" means the Senior Subordinated Indenture dated as of February 19, 1998, by and among Luxco, State Street Bank and Trust Company, as Trustee, the Company and the other guarantors with respect to the issuance of 7 7/8% Senior Subordinated Notes of Luxco due February 1, 2008 in the aggregate principal amount of $450,450,000, as it may be amended, supplemented or otherwise modified from time to time. "2008 7 7/8% Notes" means the 7 7/8% Senior Subordinated Notes of Luxco due February 1, 2008 issued pursuant to the 2008 7 7/8% Indenture. 21 29 "2011 7 7/8% Indenture" means the Senior Subordinated Indenture dated as of June 6, 2001 by and among the Note Issuer, State Street Bank and Trust Company as Trustee, the Company and the other Guarantors with respect to the issuance of 7 7/8% Senior Subordinated Notes of the Note Issuer due June 15, 2011 in the aggregate principal amount of $225,225,000, as it may be amended, supplemented or otherwise modified from time to time. "2011 7 7/8% Notes" means the 7 7/8% Senior Subordinated Notes due June 15, 2011 issued pursuant to the 2011 7 7/8% Indenture. "Vice President" when used with respect to the Company, the Note Issuer, a Guarantor or the Trustee means any duly appointed vice president, whether or not designated by a number or a word or words added before or after the title "vice president." "Voting Stock" of a Person means all classes of Capital Stock or other interests (including partnership interests) of such Person then outstanding and normally entitled (without regard to the occurrence of any contingency) to vote in the election of directors, managers or trustees thereof. "Wholly Owned Subsidiary" means a Subsidiary all the Capital Stock of which (other than (i) directors' qualifying shares and shares held by other Persons to the extent such shares are required by applicable law to be held by a Person other than the Company or a Subsidiary and (ii) shares of Preferred Stock of Fresenius Medical Care Holdings, Inc.) is owned by the Company or by one or more Wholly Owned Subsidiaries, or by the Company and one or more Wholly Owned Subsidiaries. .2 Compliance Certificate and Opinions. Upon any application or request by the Company, the Note Issuer or any other Guarantor to the Trustee to take any action under any provision of this Indenture, the Company, the Note Issuer or such Guarantor shall furnish to the Trustee an Officers' Certificate stating that all conditions precedent (including covenants, compliance with which constitutes a condition precedent), if any, provided for in this Indenture relating to the proposed action have been complied with and an Opinion of Counsel stating that in the opinion of such counsel all such conditions precedent, if any, have been complied with, except that in the case of any such application or request as to which the furnishing of such documents is specifically required by any provision of this Indenture relating to such particular application or request, no additional certificate or opinion need be furnished. Every certificate or opinion with respect to compliance with a condition precedent or covenant provided for in this Indenture (other than the certificates provided pursuant to Section 10.16) shall include: (1) a statement that each individual signing such certificate or opinion has read such covenant or condition and the definitions herein relating thereto; (2) a brief statement as to the nature and scope of the examination or investigation upon which the statements or opinions contained in such certificate or opinion are based; 22 30 (3) a statement that, in the opinion of each such individual, he has made such examination or investigation as is necessary to enable him to express an informed opinion as to whether or not such covenant or condition has been complied with; and (4) a statement as to whether, in the opinion of each such individual, such condition or covenant has been complied with. .3 Form of Documents Delivered to Trustee In any case where several matters are required to be certified by, or covered by an opinion of, any specified Person, it is not necessary that all such matters be certified by, or covered by the opinion of, only one such Person, or that they be so certified or covered by only one document, but one such Person may certify or give an opinion with respect to some matters and one or more other such Persons as to other matters, and any such Person may certify or give an opinion as to such matters in one or several documents. Any certificate or opinion of an officer of the Note Issuer, the Company or another Guarantor may be based, insofar as it relates to legal matters, upon a certificate or opinion of, or representations by, counsel, unless such officer knows, or in the exercise of reasonable care should know, that the certificate or opinion or representations with respect to the matters upon which his certificate or opinion is based are erroneous. Any such certificate or Opinion of Counsel may be based, insofar as it relates to factual matters, upon a certificate or opinion of, or representations by, an officer or officers of the Note Issuer, the Company or another Guarantor stating that the information with respect to such factual matters is in the possession of the Note Issuer, the Company or another Guarantor, unless the individual attorneys actively engaged in the transaction which is the subject matter of such opinion in the office of such counsel have actual knowledge that the certificate or opinion or representations with respect to such matters are erroneous. Where any Person is required to make, give or execute two or more applications, requests, consents, certificates, statements, opinions or other instruments under this Indenture, they may, but need not, be consolidated and form one instrument. .4 Acts of Holders; Record Date. (a) Any request, demand, authorization, direction, notice, consent, waiver or other action provided by this Indenture to be given to or taken by Holders may be embodied in and evidenced by one or more instruments of substantially similar tenor signed by such Holders in person or by an agent duly appointed in writing; and, except as herein otherwise expressly provided, such action shall become effective when such instrument or instruments is or are delivered to the Trustee, and, where it is hereby expressly required, to the Note Issuer or the Company, as applicable. Such instrument or instruments (and the action embodied therein and evidenced thereby) are herein sometimes referred to as the "Act" of the Holders signing such instrument or instruments. Proof of execution of any such instrument or of a writing appointing any such agent shall be sufficient for any purpose of this Indenture and (subject to Section 6.1) conclusive in favor of the Trustee and the Note Issuer or the Company, as applicable, if made in the manner provided in this Section 1.4. 23 31 (b) The fact and date of the execution by any Person of any such instrument or writing may be proved by the affidavit of a witness of such execution or by the certificate of a notary public or other officer authorized by law to take acknowledgments of deeds, certifying that the individual signing such instrument or writing acknowledged to him the execution thereof. Where such execution is by a Person acting in other than his individual capacity, such certificate or affidavit shall also constitute sufficient proof of his authority. (c) The fact and date of the execution by any Person of any such instrument or writing, or the authority of the Person executing the same, may also be proved in any other manner which the Trustee deems sufficient and in accordance with such reasonable rules as the Trustee may determine. (d) The ownership of Securities shall be proved by the Securities Register. (e) Any request, demand, authorization, direction, notice, consent, waiver or other Act of the Holder of any Security shall bind every future Holder of the same Security and the Holder of every Security issued upon the registration of transfer thereof or in exchange therefor or in lieu thereof in respect of anything done, omitted or suffered to be done by the Trustee, the Note Issuer, or the Company in reliance thereon, whether or not notation of such action is made upon such Security. (f) The Note Issuer may, but shall not be obligated to, fix a record date for the purpose of determining the Holders entitled to take any action under this Indenture by vote or consent. Except as otherwise provided herein, such record date shall be the later of 30 days prior to the first solicitation of such consent or vote or the date of the most recent list of Securityholders furnished to the Trustee pursuant to Section 7.1 prior to such solicitation. If a record date is fixed, those Persons who were Securityholders at such record date (or their duly designated proxies), and only those Persons, shall be entitled to take such action by vote or consent or to revoke any vote or consent previously given, whether or not such persons continue to be Holders after such record date, provided, however, that unless such vote or consent is obtained from the Holders (or their duly designated proxies) of the requisite principal amount of Outstanding Securities prior to the date which is the 90th day after such record date, any such vote or consent previously given shall automatically and without further action by any Holder be cancelled and of no further effect. .5 Notices, etc., to Trustee, Note Issuer and Guarantors. Any request, demand, authorization, direction, notice, consent, waiver or Act of Holders or other document provided or permitted by this Indenture to be made upon, given or furnished to, or filed with, (1) the Trustee by any Holder or by the Note Issuer or any Guarantor shall be sufficient for every purpose hereunder if made, given, furnished or filed in writing to or with the Trustee at its Corporate Trust office, or (2) the Note Issuer or any Guarantor by the Trustee or by any Holder shall be sufficient for every purpose (except as otherwise provided in Sections 5.1 and 5.2 hereof) hereunder if in writing and mailed, first class, postage prepaid, in the case of the Note Issuer to it at the address of the Note Issuer's principal office specified in the first paragraph of this Indenture or at any other address 24 32 previously furnished in writing to the Trustee by the Note Issuer and, in the case of any Guarantor, to it at its principal office at Else-Kroner Str. 1, 61346 Bad Homburg v.d.H., Germany or at any other address previously furnished in writing to the Trustee by such Guarantor; provided, however, that all notices sent to the Note Issuer and any Guarantor pursuant to this Indenture shall be sent in copy to O'Melveny & Myers LLP (Citicorp Center, 153 East 53rd Street, New York, NY 10022-4611, Attn: Dr. Ulrich Wagner) and shall be effective five Business Days after such mailing. .6 Notice to Holders; Waiver. Where this Indenture provides for notice to Holders of any event, such notice shall be sufficiently given (unless otherwise herein expressly provided) if in writing and mailed, first class postage prepaid, to each Holder affected by such event, at the address of such Holder as it appears in the Securities Register, not later than the latest date (if any), and not earlier than the earliest date (if any), prescribed for the giving of such notice. In any case where notice to Holders is given by mail, neither the failure to mail such notice, nor any defect in any notice so mailed, to any particular Holder shall affect the sufficiency of such notice with respect to other Holders. Where this Indenture provides for notice in any manner, such notice may be waived in writing by the Person entitled to receive such notice, either before or after the event, and such waiver shall be the equivalent of such notice. Waivers of notice by Holders shall be filed with the Trustee, but such filing shall not be a condition precedent to the validity of any action taken in reliance upon such waiver. In case by reason of the suspension of regular mail service or by reason of any other cause it shall be impracticable to give such notice by mail, then such notification as shall be made with the approval of the Trustee shall constitute a sufficient notification for every purpose hereunder. Additionally, at any time that the Securities are listed on the Luxembourg Stock Exchange all notices regarding the Securities including, without limitation, notices pursuant to Sections 3.7, 6.2, 6.10(f), 6.14, 10.13(b), 10.15(b) and 11.4 hereof, shall be published in the Luxemburger Wort or in such other publication as required by the rules of the Luxembourg Stock Exchange. Any such notice will become effective for all purposes on the date of its publication. There may (provided that, in the case of Securities listed on the Luxembourg Stock Exchange, the rules of the Luxembourg Stock Exchange so permit), be substituted for such publication in such newspaper the delivery of the relevant notice to the applicable clearing system for communication by it to the Holders. Any such notice shall be deemed to have been given to the Holders on the seventh day after the day on which the said notice was given to all applicable clearing systems. The Note Issuer shall be responsible for compliance with this paragraph and shall provide directions to the Trustee in connection therewith. .7 Conflict with Trust Indenture Act. Upon consummation of the Exchange Offer, the Trust Indenture Act shall apply to this Indenture and if any provision hereof limits, qualifies or conflicts with a provision of the Trust Indenture Act that is required or deemed under the Trust Indenture Act to be part of and govern this Indenture, the latter provision shall control. If any provision of this Indenture modifies or excludes any provision of the Trust Indenture Act that may be so 25 33 modified or excluded, the latter provision shall be deemed to apply to this Indenture as so modified or to be excluded, as the case may be. .8 Effect of Headings and Table of Contents. The Article and Section headings herein and the Table of Contents are for convenience only and shall not affect the construction hereof. .9 Successors and Assigns. All covenants and agreements in this Indenture by the Note Issuer, the Company or any other Guarantor shall bind its respective successors and assigns, whether so expressed or not. .10 Separability Clause. In case any provision in this Indenture or in the Securities shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby. .11 Benefits of Indenture. Nothing in this Indenture or in the Securities, express or implied, shall give to any Person, other than (i) the parties hereto, (ii) any Paying Agent and their successors and assigns, (iii) the holders of Senior Indebtedness (subject to Articles XII and XIV hereof), and (iv) the Holders of the Securities, any benefit or any legal or equitable right, remedy or claim under this Indenture. .12 Governing Law. THIS INDENTURE, THE SECURITIES AND THE GUARANTIES ENDORSED THEREON SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT GIVING EFFECT TO PRINCIPLES OF CONFLICT OF LAWS. .13 Non-Business Days. In any case where any Interest Payment Date, Redemption Date or Stated Maturity of any Security shall not be a Business Day, then (notwithstanding any other provision of this Indenture or the Securities) payment of interest or principal (and premium, if any) shall be made on the immediately preceding Business Day (and interest shall accrue for the period from and after such immediately preceding Business Day through such Interest Payment Date, Redemption Date or Stated Maturity, as the case may be, (in each case with the same force and effect as if made on the Interest Payment Date or Redemption Date or at the Stated Maturity)). .14 Duplicate Originals. The parties may sign any number of copies of this Indenture. Each signed copy shall be an original, but all of them together represent the same agreement. 26 34 .15 Submission to Jurisdiction. Fresenius Medical Care Holdings, Inc. hereby appoints CT Corporation System through its office at 1633 Broadway, New York, New York 10019 as its authorized agent and each of the Company, the Note Issuer and each other Guarantor hereby irrevocably appoints, Fresenius Medical Care Holdings, Inc. c/o CT Corporation System through its office at 1633 Broadway, New York, New York 10019 as its authorized agent upon which process may be served in any legal action or proceeding against it with respect to its obligations under this Indenture or the Securities instituted in any federal or state court in the Borough of Manhattan, The City of New York, by the Trustee or the Holder of any Securities and agrees that service of process upon such authorized agents, together with written notice of said service to the Company by the person serving the same, addressed as provided in Section 1.5, shall be deemed in every respect effective service of process upon the Company, the Note Issuer and each other Guarantor, as the case may be, in any such legal action or proceeding, and each of the Company, the Note Issuer and each other Guarantor hereby irrevocably submits to the non-exclusive jurisdiction of any such court in respect of any such legal action or proceeding. Such appointment shall be irrevocable until this Indenture has been satisfied and discharged in accordance with Article 4 hereof. Notwithstanding the foregoing, each of the Company, the Note Issuer and each other Guarantor reserves the right to appoint another Person located or with an office in the Borough of Manhattan, The City of New York, selected in its discretion, as a successor authorized agent, and upon acceptance of such appointment by such a successor the appointment of the prior authorized agent shall terminate. If for any reason CT Corporation System or Fresenius Medical Care Holdings, Inc., as the case may be, ceases to be able to act as an authorized agent or to have an address in the Borough of Manhattan, The City of New York, each of the Company, the Note Issuer and each other Guarantor, as the case may be, will appoint a successor authorized agent in accordance with the preceding sentence. Each of the Company, the Note Issuer and each other Guarantor further agrees to take any and all action, including the filing of any and all documents and instruments as may be necessary to continue such designation and appointment of such agent in full force and effect until this Indenture has been satisfied and discharged in accordance with Article 4 hereof. Service of process upon each authorized agent addressed to it at the respective addresses set forth above, as such addresses may be each changed within the Borough of Manhattan, The City of New York by notice given by each authorized agent to the Trustees, together with written notice of such service mailed or delivered to the Company shall be deemed, in every respect, effective service of process on the Company, the Note Issuer and each other Guarantor, as the case may be. ARTICLE II. SECURITY AND GUARANTY FORMS .1 Forms Generally. The Securities, the Guaranties to be endorsed thereon and the Trustee's certificate of authentication shall be in substantially the forms set forth in this Article, or in such other form or forms as shall be established by or pursuant to a Board Resolution or in one or more indentures supplemental hereto, in each case with such appropriate insertions, omissions, substitutions and other variations as are required or permitted by this Indenture and may have such letters, numbers or other marks of identification and such legends or endorsements placed thereon as may be required to comply with applicable tax laws or the 27 35 rules of any securities exchange or as may, consistently herewith, be determined by the officers executing such Securities or Guaranties, as the case may be, as evidenced by their execution of the Securities or Guaranties, as the case may be. If the form of Securities or Guaranties is established by action taken pursuant to a Board Resolution, such Board Resolution to be delivered to the Trustee at or prior to the delivery of the Note Issuer Order contemplated by Section 3.3 with respect to the authentication and delivery of such Securities. The Trustee's certificates of authentication shall be substantially in the form set forth in this Article. The definitive Securities and Guaranties to be endorsed thereon shall be printed, lithographed or engraved or produced by any combination of these methods, if required by any securities exchange on which the Securities may be listed, on a steel engraved border or steel engraved borders or may be produced in any other manner permitted by the rules of any securities exchange on which the Securities may be listed, all as determined by the officers executing such Securities or Guaranties, as the case may be, as evidenced by their execution of such Securities or Guaranties, as the case may be. .2 Form of Face of Security. FMC TRUST FINANCE S.A.R.L. LUXEMBOURG-III 7 3/8% SENIOR SUBORDINATED NOTES DUE JUNE 15, 2011 GUARANTEED AS TO PAYMENT OF PRINCIPAL, PREMIUM, IF ANY, AND INTEREST BY FRESENIUS MEDICAL CARE AG AND CERTAIN OF ITS SUBSIDIARIES NO. E 300,300,000 FMC TRUST FINANCE S.A.R.L. LUXEMBOURG-III, a private limited company (Societe a responsabilite limitee) organized and existing under the laws of Luxembourg (hereinafter called the "Note Issuer", which term includes any successor corporation under the Indenture hereinafter referred to), for value received, hereby promises to pay to STATE STREET BANK AND TRUST COMPANY, as Preferred Trustee for Fresenius Medical Care Capital Trust V or registered assigns, the principal sum of three hundred million three hundred thousand euro on June 15, 2011. The Note Issuer further promises to pay interest on said principal sum quarterly in arrears on March 14, June 14, September 14 and December 14 of each year, commencing September 14, 2001, (each such date, an "Interest Payment Date") (provided, however, that interest paid on such Interest Payment Dates will accrue through March 15, June 15, September 15, and December 15, respectively) at the rate of 7 3/8% per annum, (plus Additional Amounts and Additional Sums, if any) until the principal hereof is paid or duly provided for or made available for payment and on any overdue principal and (without duplication and to the extent that payment of such interest is enforceable under applicable law) on any interest which is in arrears more than a quarter at the rate of 7 3/8% per annum, compounded quarterly. The amount of interest payable for any period shall be computed on the basis of twelve 30-day months and a 360-day year. The amount of interest payable for any partial period shall be computed on the basis 28 36 of the number of days elapsed in a 360-day year of twelve 30-day months. In the event that any date on which interest is payable on this Security is not a Business Day, then a payment of the interest payable on such date will be made on the immediately preceding Business Day (and interest shall accrue for the period from and after such immediately preceding Business Day through such Interest Payment Date, Redemption Date or Stated Maturity, as the case may be, (in each case with the same force and effect as if made on the Interest Payment Date or Redemption Date or at the Stated Maturity)). A "Business Day" shall mean any day other than (i) a Saturday or Sunday, (ii) a day on which banking institutions in London, New York City, Frankfurt am Main or Luxembourg are authorized or required by law or executive order to remain closed, (iii) a day on which the Trans-European Automated Real-Time Gross-settlement Express Transfer System is authorized or required by law to close, or (iv) a day on which the Corporate Trust Office of the Trustee, or, with respect to the Preferred Securities, the principal office of the Preferred Trustee under the Declaration hereinafter referred to for Fresenius Medical Care Capital Trust V, is closed for business. The interest so payable, and punctually paid or duly provided for, on any Interest Payment Date will, as provided in the Indenture, be paid to the Person in whose name this Security (or one or more Predecessor Securities, as defined in the Indenture) is registered at the close of business on the Regular Record Date for such interest, which shall be the date which is the fourteenth day immediately preceding such Interest Payment Date (whether or not a Business Day). Any interest not so punctually paid or duly provided for shall forthwith cease to be payable to the Holder on such Regular Record Date and may either be paid to the Person in whose name this Security (or one or more Predecessor Securities) is registered at the close of business on a Special Record Date for the payment of such Defaulted Interest to be fixed by the Trustee, notice whereof shall be given to Holders not less than 10 days prior to such Special Record Date, or be paid in any other lawful manner not inconsistent with the requirements of any securities exchange on which the Securities may be listed, and upon such notice as may be required by such exchange, all as more fully provided in said Indenture. [IF THE SECURITY IS AN INITIAL SECURITY, INSERT - Under the terms and conditions of, and in the circumstances set forth in, the Registration Rights Agreement, additional payments in the form of Liquidated Damages may be payable in respect of this Security.] Payments on this Security issued as a Global Security shall be made in immediately available funds to the Depositary. In the event that this Security is issued in certificated form, the principal of (and premium, if any) and interest (including Additional Sums and Additional Amounts, if any) on the Security will be payable at the office maintained by the Note Issuer under the Indenture; provided, that unless the Security is held by the Trust or any permissible successor entity as provided under the Declaration in the event of a merger, consolidation or amalgamation of the Trust, payment of interest may be made at the option of the Note Issuer by check mailed to the address of the person entitled thereto, as such address shall appear in the Register. 29 37 The indebtedness evidenced by this Security is, to the extent provided in the Indenture, subordinate and subject in right of payment to the prior payment in full of all Senior Indebtedness, and this Security is issued subject to the provisions of the Indenture with respect thereto. Each Holder of this Security, by accepting the same, (a) agrees to and shall be bound by such provisions, (b) authorizes and directs the Trustee on his behalf to take such actions as may be necessary or appropriate to effectuate the subordination so provided and (c) appoints the Trustee his attorney-in-fact for any and all such purposes. Each Holder hereof, by his acceptance hereof, waives all notice of the acceptance of the subordination provisions contained herein and in the Indenture by each holder of Senior Indebtedness, whether now outstanding or hereafter incurred, and waives reliance by each such holder upon said provisions. Reference is hereby made to the further provisions of this Security set forth on the reverse hereof, which further provisions shall for all purposes have the same effect as if set forth at this place. Unless the certificate of authentication hereon has been executed by the Trustee referred to on the reverse hereof by manual signature, this Security shall not be entitled to any benefit under the Indenture or be valid or obligatory for any purpose. IN WITNESS WHEREOF, the Note Issuer has caused this instrument to be duly executed. Dated: June 15, 2001 FMC TRUST FINANCE S.a.r.l. LUXEMBOURG-III By: --------------------- Name: --------------------- .3 Form of Reverse of Security. This Security is one of a duly authorized issue of securities of the Note Issuer (herein called the "Securities"), issued under a Senior Subordinated Indenture, dated as of June 15, 2001 (the "Indenture"), between the Note Issuer, as Issuer, and State Street Bank and Trust Company, as Trustee (herein called the "Trustee", which term includes any successor trustee under the Indenture), Fresenius Medical Care AG (herein called the "Company"), as the Company and as a Guarantor, Fresenius Medical Care Holdings, Inc. and Fresenius Medical Care Deutschland GmbH, as Guarantors to which Indenture and all indentures supplemental thereto reference is hereby made for a statement of the respective rights, limitations of rights, duties and immunities thereunder of the Trustee, the Note Issuer, the Company and the Holders of the Securities, and 30 38 of the terms upon which the Securities are, and are to be, authenticated and delivered. All terms used in this Security that are defined in the Indenture and in the Amended and Restated Declaration of Trust dated as of June 15, 2001, (the "Declaration"), for Fresenius Medical Care Capital Trust V, shall have the meanings assigned to them in the Indenture or the Declaration, as the case may be. If a Tax Event or an Investment Company Event in respect of the Trust shall occur and be continuing, the Company shall cause the Trustees (as defined in the Declaration) to dissolve the Trust and cause Securities to be distributed to the holders of the Trust Securities in dissolution of the Trust or, in the event of a Tax Event only, may cause the Securities to be redeemed, in each case, subject to and in accordance with the provisions of the Declaration, within 90 days following the occurrence of such Tax Event or Investment Company Event. The Securities may be redeemed, at the option of the Note Issuer, subject to the provisions of Article XI of the Indenture, at any time as a whole but not in part, at 100% of the principal amount thereof, plus accrued and unpaid interest (if any) to the date of redemption (subject to the right of Holders of record on the relevant Regular Record Date to receive interest due on the relevant Interest Payment Date), in the event the Note Issuer has become or would become obligated to pay, on the next date on which any amount would be payable with respect to the Securities, any Additional Amounts as a result of a change in or an amendment to the laws (including any regulations promulgated thereunder) of the United States, Germany, the United Kingdom, or the jurisdiction of formation of the Note Issuer (initially, Luxembourg) (or any political subdivision or taxing authority thereof or therein), or any change in or amendment to any official position regarding the application or interpretation of such laws or regulations, which change or amendment is announced or becomes effective on or after the date of the issuance of the Securities (other than, in either case, any amendment or change implementing, complying with, or introduced in order to conform to, or otherwise arising as a result of or in connection with, any European Union Directive on the taxation of savings implementing the conclusions of the ECOFIN Council meeting of 26-27 November 2000). The Securities do not have the benefit of any sinking fund obligations. If an Event of Default shall occur and be continuing, the principal of all the Securities may be declared due and payable in the manner, with the effect and subject to the conditions provided in the Indenture. As provided in the Indenture and subject to certain limitations therein set forth, the obligations of the Note Issuer under the Indenture and this Security are Guaranteed on a senior subordinated basis pursuant to Guaranties endorsed hereon. The Indenture provides that a Guarantor shall be released from its Guaranty upon compliance with certain conditions. 31 39 The Indenture contains provisions for satisfaction, discharge and defeasance at any time of the entire indebtedness of this Security upon compliance by the Note Issuer with certain conditions set forth in the Indenture. The Indenture permits, with certain exceptions as therein provided, the Note Issuer, the Guarantors and the Trustee at any time to enter into a supplemental indenture or indentures for the purpose of modifying in any manner the rights and obligations of the Note Issuer, the Guarantors and of the Holders of the Securities, with the consent of the Holders of not less than a majority in principal amount of the Outstanding Securities to be affected by such supplemental indenture. The Indenture also contains provisions permitting Holders of specified percentages in aggregate outstanding principal amount of the Outstanding Securities affected thereby, on behalf of the Holders of all the Securities, to waive compliance by the Note Issuer or the Guarantors with certain provisions of the Indenture and certain past defaults under the Indenture and their consequences. Any such consent or waiver by the Holder of this Security shall be conclusive and binding upon such Holder and upon all future Holders of this Security and of any Security issued upon the registration of transfer hereof or in exchange herefor or in lieu hereof, whether or not notation of such consent or waiver is made upon this Security. As provided in and subject to the provisions of the Indenture, if an Event of Default with respect to the Securities at the time Outstanding occurs and is continuing, then and in every such case the Trustee or the Holders of not less than 25% in aggregate outstanding principal amount of the Outstanding Securities may declare the principal amount of and interest (including Additional Sums and Additional Amounts, if any) on all the Securities to be due and payable immediately, by a notice in writing to the Note Issuer and the Guarantors (and to the Trustee if given by Holders), provided, that if the Trustee or such Holders fail to do so, the Preferred Trustee shall have such right by a notice in writing to the Note Issuer and the Trustee; and upon any such declaration such specified amount of and the accrued interest (including Additional Sums and Additional Amounts, if any) on all the Securities shall become immediately due and payable, provided, that the payment of principal and interest (including Additional Sums and Additional Amounts, if any) on such Securities shall remain subordinated to the extent provided in Article XII of the Indenture. No reference herein to the Indenture and no provision of this Security or of the Indenture shall alter or impair the obligation of the Note Issuer, which is absolute and unconditional, to pay the principal of (and premium, if any) and interest on this Security at the times, place and rate, and in the coin or currency, herein prescribed. As provided in the Indenture and subject to certain limitations therein set forth, the transfer of this Security is registrable in the Securities Register, upon surrender of this Security for registration of transfer at the office or agency of the Note Issuer maintained under Section 10.2 of the Indenture duly endorsed by, or accompanied by a written instrument of transfer in form satisfactory to 32 40 the Note Issuer and the Securities Registrar duly executed by, the Holder hereof or his attorney duly authorized in writing, and thereupon one or more new Securities, of authorized denominations and for the same aggregate principal amount, will be issued to the designated transferee or transferees. No service charge shall be made for any such registration of transfer or exchange, but the Note Issuer may require payment of a sum sufficient to cover any tax or other governmental charge payable in connection therewith. Prior to due presentment of this Security for registration of transfer, the Note Issuer, the Guarantors, the Trustee and any agent of the Note Issuer, the Guarantors or the Trustee may treat the Person in whose name this Security is registered as the owner hereof, for all purposes (subject to certain limitations set forth in the Indenture), whether or not this Security be overdue, and neither the Note Issuer, the Guarantors, the Trustee nor any such agent shall be affected by notice to the contrary. The Securities are issuable only in registered form without coupons in denominations of Euro 1,000 and any integral multiple thereof. As provided in the Indenture and subject to certain limitations therein set forth, the Securities are exchangeable for a like aggregate principal amount of Securities of a different authorized denomination, as requested by the Holder surrendering the same. The Note Issuer and, by its acceptance of this Security or a beneficial interest therein, the Holder of, and any Person that acquires a beneficial interest in, this Security agree that for German and U.S. Federal, state and local tax purposes and for purposes of any tax imposed by the jurisdiction of formation of the Note Issuer or any political subdivision or taxing authority thereof or therein, it is intended that this Security constitute indebtedness. All terms used in this Security which are defined in the Indenture shall have the meanings assigned to them in the Indenture. THE INDENTURE AND THIS SECURITY SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO CONFLICT OF LAWS PRINCIPLES THEREOF. .4 Additional Provisions Required in Global Security and Initial Security. (a) Any Global Security issued hereunder shall, in addition to the provisions contained in Sections 2.2 and 2.3, bear a legend in substantially the following form or in such other form as may be required by the Depositary to appear on the Global Security to be issued to the Depositary: This Security is a Global Security within the meaning of the Indenture hereinafter referred to and is registered in the name of BT Globenet Nominees Limited , a nominee of Deutsche Bank AG London (the "Depositary"), or another nominee of the Depositary. This Security is exchangeable for Securities registered in the name of a Person other than the Depositary or its nominee only in the limited circumstances described in the Indenture and no 33 41 transfer of this Security (other than a transfer of this Security as a whole by the Depositary to a nominee of the Depositary or by a nominee of the Depositary to the Depositary or another nominee of the Depositary) may be registered except in limited circumstances. (b) Any Initial Security issued hereunder shall, in addition to the provisions contained in Sections 2.2 and 2.3, bear a legend in substantially the following form: "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, SOLD, PLEDGED, OR OTHERWISE TRANSFERRED WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S. PERSONS, EXCEPT AS SET FORTH IN THE SECOND SENTENCE HEREOF. BY ITS ACQUISITION HEREOF OR OF A BENEFICIAL INTEREST HEREIN, THE HOLDER (1) REPRESENTS THAT (A) IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) ("QIB") OR (B) IT IS ACQUIRING THIS SECURITY IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH REGULATION S UNDER THE SECURITIES ACT, (2) AGREES THAT IT WILL NOT RESELL OR OTHERWISE TRANSFER THIS SECURITY EXCEPT (A) TO THE ISSUER OR ANY OF ITS SUBSIDIARIES, (B) TO A PERSON WHOM THE SELLER REASONABLY BELIEVES IS A QIB PURCHASING FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QIB IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, (C) IN AN OFFSHORE TRANSACTION MEETING THE REQUIREMENTS OF RULE 903 OR 904 OF THE SECURITIES ACT, (D) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144 UNDER THE SECURITIES ACT, (E) IN ACCORDANCE WITH ANOTHER EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT (AND BASED UPON AN OPINION OF COUNSEL ACCEPTABLE TO THE NOTE ISSUER) OR (F) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT AND, IN EACH CASE, IN ACCORDANCE WITH THE APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR ANY OTHER APPLICABLE JURISDICTION AND (3) AGREES THAT IT WILL DELIVER TO EACH PERSON TO WHOM THIS SECURITY OR AN INTEREST HEREIN IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. AS USED HEREIN, THE TERM "OFFSHORE TRANSACTION" AND "UNITED STATES" HAVE THE MEANINGS GIVEN TO THEM BY RULE 902 OF REGULATION S UNDER THE SECURITIES ACT. UNTIL THIS SECURITY IS REGISTERED PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT FILED UNDER THE SECURITIES ACT, THIS SECURITY MAY ONLY BE TRANSFERRED IN MINIMUM BLOCKS OF Euro 100,000 AGGREGATE PRINCIPAL AMOUNT." .5 Form of Trustee's Certificate of Authentication. This is one of the Securities with the Guaranties endorsed thereon referred to in the within mentioned Indenture. 34 42 STATE STREET BANK AND TRUST COMPANY Trustee By: ----------------------------------- Authorized officer .6 Form of Guaranty. GUARANTY For value received, each of the Guarantors hereby jointly and severally unconditionally Guarantees, on a senior subordinated basis, to each Holder of a Security authenticated and delivered by the Trustee, and to the Trustee on behalf of such Holder, the due and punctual payment of the principal of (and premium, if any) and interest (including Additional Sums and Additional Amounts, if any) on such Security when and as the same shall become due and payable, whether at the Stated Maturity, by acceleration, call for redemption, purchase or otherwise, in accordance with the terms of such Security and of this Indenture. In case of the failure of the Note Issuer punctually to make any such payment, each of the Guarantors hereby jointly and severally agrees to cause such payment to be made punctually when and as the same shall become due and payable, whether at the Stated Maturity or by acceleration, call for redemption, purchase or otherwise, and as if such payment were made by the Note Issuer. The Guarantee extends to the Note Issuer's repurchase obligations arising from a Change of Control or an Asset Disposition pursuant to the Indenture. Each of the Guarantors hereby jointly and severally agrees that its obligations hereunder shall be unconditional, irrespective of the validity, regularity or enforceability of such Security or this Indenture, the absence of any action to enforce the same, any exchange, release or non-perfection of any Lien on any collateral for, or any release or amendment or waiver of any term of any other Guarantee of, or any consent to departure from any requirement of any other Guarantee of all or any of the Securities, the election by the Trustee or any of the Holders in any proceeding under Chapter 11 of Title 11 of the United States Code (the "Bankruptcy Code") of the application of Section 1111(b)(2) of the Bankruptcy Code, or equivalent provision under applicable law, any borrowing or grant of a security interest by the Note Issuer, as debtor-in-possession, under Section 364 of the Bankruptcy Code, or equivalent provision under applicable law, the disallowance, under Section 502 of the Bankruptcy Code, or other similar applicable law, of all or any portion of the claims of the Trustee or any of the Holders for payment of any of the Securities, any waiver or consent by the Holder of such Security or by the Trustee with respect to any provisions thereof or of the Indenture, the obtaining of any judgment against the Note Issuer or any action to enforce the same or any other circumstances which might otherwise constitute a legal or equitable discharge or defense of a guarantor. Each of the Guarantors hereby waives the benefits of diligence, presentment, demand for payment, any requirement that the Trustee or any of the Holders protect, secure, perfect or insure any security interest in or other 35 43 Lien on any property subject thereto or exhaust any right or take any action against the Note Issuer or any other Person or any collateral, filing of claims with a court in the event of insolvency or bankruptcy of the Note Issuer, any right to require a proceeding first against the Note Issuer, protest or notice with respect to such Security or the Indebtedness evidenced thereby and all demands whatsoever, and covenants that this Guaranty will not be discharged in respect of such Security except by complete performance of the obligations contained in such Security and in this Guaranty. Each of the Guarantors hereby agrees that, in the event of a default in payment of principal (or premium, if any) or interest (including Additional Sums and Additional Amounts, if any) on such Security, whether at their Stated Maturity, by acceleration, call for redemption, purchase or otherwise, legal proceedings may be instituted by the Trustee on behalf of, or by, the Holder of such Security, subject to the terms and conditions set forth in the Indenture, directly against each of the Guarantors to enforce this Guaranty without first proceeding against the Note Issuer. Each Guarantor agrees that, to the extent permitted by law, if, after the occurrence and during the continuance of an Event of Default, the Trustee or any of the Holders are prevented by applicable law from exercising their respective rights to accelerate the maturity of the Securities, to collect interest on the Securities, or to enforce or exercise any other right or remedy with respect to the Securities, or the Trustee or the Holders are prevented from taking any action to realize on any collateral, such Guarantor agrees to pay to the Trustee for the account of the Holders, upon demand therefor, the amount that would otherwise have been due and payable had such rights and remedies been permitted to be exercised by the Trustee or any of the Holders. The indebtedness of each Guarantor evidenced by this Guaranty is, to the extent provided in the Indenture, subordinate and subject in right of payment to the prior payment in full of all Senior Indebtedness of such Guarantor, and this Guaranty is issued subject to the provisions of the Indenture with respect thereto. Each Holder of this Security, by accepting the same, (a) agrees to and shall be bound by such provisions, (b) authorizes and directs the Trustee on his behalf to take such action as may be necessary or appropriate to effectuate the subordination so provided and (c) appoints the Trustee his attorney-in-fact for any and all such purposes. No reference herein to the Indenture and no provision of this Guaranty or of the Indenture shall alter or impair the Guaranty of any Guarantor, which is absolute and unconditional, of the due and punctual payment of the principal (and premium, if any) and interest (including Additional Sums and Additional Amounts, if any) on the Security upon which this Guaranty is endorsed. Each Guarantor shall be subrogated to all rights of the Holder of this Security against the Note Issuer in respect of any amounts paid by such Guarantor on account of this Security pursuant to the provisions of its Guaranty or the Indenture; provided, however, that such Guarantor shall not be entitled to enforce or to receive any payments arising out of, or based upon, such right of subrogation until the principal of (and premium, if any) and interest on this 36 44 Security and all other Securities issued under the Indenture shall have been paid in full. This Guaranty shall remain in full force and effect and continue to be effective should any petition be filed by or against the Note Issuer for liquidation or reorganization, or equivalent proceeding under applicable law, should the Note Issuer become insolvent or make an assignment for the benefit of creditors or should a receiver or trustee be appointed for all or any significant part of the Note Issuer's assets, or the equivalent of any of the foregoing under applicable law, and shall, to the fullest extent permitted by applicable law, continue to be effective or be reinstated, as the case may be, if at any time payment and performance of the Securities is, pursuant to applicable law, rescinded or reduced in amount, or must otherwise be restored or returned by any obligee on the Securities whether as a voidable preference, fraudulent transfer, or as otherwise provided under similar laws affecting the rights of creditors generally or under applicable laws of the jurisdiction of formation of the Note Issuer, all as though such payment or performance had not been made. In the event that any payment, or any part thereof, is rescinded, reduced, restored or returned, the Securities shall, to the fullest extent permitted by applicable law, be reinstated and deemed reduced only by such amount paid and not so rescinded, reduced, restored or returned. The Guarantors shall have the right to seek contribution from any non-paying Guarantor so long as the exercise of such right does not impair the rights of the Holders under this Guaranty. The Guarantors or any particular Guarantor shall be released from this Guaranty upon the terms and subject to certain conditions provided in the Indenture. By delivery of a supplemental indenture to the Trustee in accordance with the terms of the Indenture or the execution of a Guaranty Agreement, each Person that becomes, or assumes the obligations of, a Guarantor after the date of the Indenture will be deemed to have executed and delivered this Guaranty for the benefit of the Holder of this Security with the same effect as if such Guarantor was named below. All terms used in this Guaranty which are defined in the Indenture referred to in the Security upon which this Guaranty is endorsed shall have the meanings assigned to them in such Indenture. This Guaranty shall not be valid or obligatory for any purpose until the certificate of authentication on the Security upon which this Guaranty is endorsed shall have been executed by the Trustee under the Indenture by manual signature. Each Guaranty (other than the Company Guaranty) will be limited in amount to an amount not to exceed the maximum amount that can be guaranteed by the applicable Guarantor without rendering the Guaranty, as it relates to such Guarantor, voidable under applicable law relating to fraudulent conveyance or 37 45 fraudulent transfer or similar laws affecting the rights of creditors generally or under applicable law of Germany. In the case of Fresenius Medical Care Deutschland GmbH ("FMCD"), the following provisions apply: A Profit and Loss Pooling Agreement (the "Agreement") (Ergebnisabfuhrungsvertrag) between the Company and FMCD dated as of August 21, 1996 was entered into the commercial register with effect from January 1, 1996. FMCD, having a stated capital of DM 80 million, had a capital reserve account of DM 168,302,162 (the "January 1, 1996 Amount") in its balance sheet as of January 1, 1996. Assuming that the January 1, 1996 Amount has not decreased by losses in the business of FMCD since January 1, 1996, at least such amount exceeds the Company's assets protecting its share capital within the meaning of Section 30 of the German GmbH Law. Since January 1, 1996, the January 1, 1996 Amount has not been decreased by the actions of the Company (the sole shareholder of FMCD), e.g. no distributions against the January 1, 1996 Amount have been made. Based thereon, the guaranty obligations of FMCD hereunder and under FMCD's guaranty of the 9% Notes, the 2008 7 3/8% Notes, the 2008 7 7/8% Notes, the 2011 7 7/8% Notes and any other Senior Subordinated Indebtedness, if any, of FMCD to which Section 30 of the German GmbH law may apply are limited to the amount of the capital reserves of FMCD as of the date hereof less its obligations as a guarantor from time to time under the Senior Credit Agreement (the "Minimum Guaranty Amount"). If, in the case of a default under the Indenture, the capital reserves are higher than such Minimum Guaranty Amount, such higher amount (the "Higher Guaranty Amount") shall serve as limitation to the obligations of FMCD, as Guarantor. In case FMCD, as Guarantor, has to sell off assets to fulfill its obligations under the Indenture, after such guaranty obligations have been drawn, and if the proceeds from the sale of such assets exceed the amount of their book value, such excess amounts shall be paid to the Trustee for the benefit of the Holders, subject to the provisions of Article XIV hereof, in addition to the Minimum Guaranty Amount or the Higher Guaranty Amount, respectively. For the determination of the applicable book value, the book value of assets which were included into the balance sheet per January 1, 1996 applies, and for such assets which were not yet included but added to the business of FMCD since that date, the book value on the day of the sale of such assets applies. Should Section 30 of the German GmbH law however require a lower Minimum Guaranty Amount or a lower Higher Guaranty Amount, then such lower amounts required by law shall be applicable. FMCD undertakes not to decrease its capital reserves, neither by capital increase from such reserve accounts nor by other kinds of contributions to its shareholders or affiliates without the prior written approval of the Holders of a majority in principal amount of the Outstanding Securities. FMCD undertakes to maintain a profit and loss pooling agreement with the Company during the term of the Indenture, in particular, to extend the term of 38 46 such agreement to the term of the Indenture and not to terminate, rescind or amend such agreement without prior notice to the Trustee and the consent of the Holders of a majority in principal amount of the Outstanding Securities thereto. In case of a termination of such profit and loss pooling agreement, FMCD will grant, upon the request of the Holders of a majority in principal amount of the Outstanding Securities, collateral to minimize the legal and financial disadvantages caused by the termination of such agreement, as far as legally available under German law. FMCD undertakes to give notice immediately to the Trustee if it intends to give notice of termination to such agreement or to agree to the termination of such agreement, or if it becomes aware that the Company intends to terminate such agreement. During the term of the profit and loss pooling agreement, any and all allocations of profit to the Company and any and all cash distributions to the Company as a consequence thereof upon the terms and conditions of the profit and loss pooling agreement are permitted and unrestricted, subject to the terms of Section 30 of the German GmbH law as described above. Reference is made to Article XIII and Article XIV of the Indenture for further provisions with respect to this Guaranty. THIS GUARANTY SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT GIVING EFFECT TO PRINCIPLES OF CONFLICT OF LAWS. IN WITNESS WHEREOF, each of the Guarantors has caused this Guaranty to be duly executed. FRESENIUS MEDICAL CARE AG, as Guarantor By: ----------------------------------------- Member of the Managing Board By: ----------------------------------------- Member of the Managing Board FRESENIUS MEDICAL CARE HOLDINGS, INC., as Guarantor By: ----------------------------------------- Authorized Officer 39 47 FRESENIUS MEDICAL CARE DEUTSCHLAND GmbH, as Guarantor By: ----------------------------------------- Member of the Managing Board By: ----------------------------------------- Member of the Managing Board ARTICLE III. THE SECURITIES .1 Title and Terms. The aggregate principal amount of the Securities which may be authenticated and delivered under this Indenture is limited to Euro 300,300,000 except for Securities authenticated and delivered upon registration of transfer of, or in exchange for, or in lieu of, other Securities pursuant to Section 3.4, 3.5, 3.6, 9.6 or 11.6. The Note Issuer may issue Exchange Securities from time to time pursuant to an Exchange Offer pursuant to a Board Resolution included in an Officers' Certificate delivered to the Trustee, in authorized denominations in exchange for a like principal amount of Initial Securities. Upon any such exchange the Initial Securities shall be cancelled in accordance with Section 3.9 and shall no longer be deemed Outstanding for any purpose. In no event shall the aggregate principal amount of Initial Securities and Exchange Securities Outstanding exceed Euro 300,300,000, except in accordance with Section 3.6. The Securities shall be known and designated as the "7 3/8% Senior Subordinated Notes due June 15, 2011" of the Note Issuer. Their Stated Maturity shall be June 15, 2011, at which time the Securities will become due and payable together with any accrued and unpaid interest thereon (including Additional Sums and Additional Amounts, if any) and they shall bear interest at the rate of 7 3/8% per annum, from the Issue Date, payable quarterly in arrears on each Interest Payment Date, to the Persons in whose name the Securities are registered at the close of business on the Regular Record Date. Interest on the Securities will accrue from the most recent date on which interest has been paid or, if no interest has been paid, from the Issue Date. Interest in arrears for more than one quarter (and interest thereon) will accrue interest (compounded quarterly) at the same rate. Payments on the Securities issued as a Global Security shall be made in immediately available funds to the Depositary. In the event that Securities are issued in certificated form, the principal of (and premium, if any) and interest (including Additional Sums and Additional Amounts, if any) on the Securities shall be payable at the office maintained by the Note Issuer pursuant to Section 10.2; provided, that unless the Securities are held by the Trust or any permissible successor entity as provided under the Declaration in 40 48 the event of a merger, consolidation or amalgamation of the Trust, payment of interest may be made at the option of the Note Issuer by check mailed to the address of the persons entitled thereto, as such address shall appear in the Register. The Securities shall be redeemable as provided in Article XI. The Securities shall be subordinated in right of payment to Senior Indebtedness of the Company and the Note Issuer as provided in Article XII. The Securities shall be Guaranteed by the Guarantors as provided in Article XIII. The Guaranties shall be subordinated in right of payment to Senior Indebtedness of the Guarantors as provided in Article XIV. The Securities shall be subject to defeasance at the option of the Note Issuer as provided in Section 4.3. Unless the context otherwise requires, the Initial Securities and the Exchange Securities shall constitute one series for all purposes under this Indenture. .2 Denominations. The Securities shall be issuable only in registered form without coupons and only in denominations of Euro 1,000 and any integral multiple thereof. The Initial Securities may only be issued and transferred in principal amounts of Euro 100,000 or more. .3 Execution, Authentication, Delivery and Dating. The Securities shall be executed on behalf of the Note Issuer by any officer or officers of the Note Issuer thereunder duly authorized. The signature of any of these officers on the Securities may be manual or facsimile. Securities bearing the manual or facsimile signatures of individuals who were at any time the proper officers of the Note Issuer shall bind the Note Issuer, notwithstanding that such individuals or any of them have ceased to hold such offices prior to the authentication and delivery of such Securities or did not hold such offices at the date of such Securities. At any time and from time to time after the execution and delivery of this Indenture, the Note Issuer may deliver Securities executed by the Note Issuer and having endorsed thereon the Guaranties executed pursuant to Section 13.2 by the Guarantors to the Trustee for authentication, together with a Note Issuer Order for the authentication and delivery of such Securities with the Guaranties of the Guarantors endorsed thereon; and the Trustee in accordance with such Note Issuer Order shall authenticate and deliver such Securities with the Guaranties of the Guarantors endorsed thereon as provided in this Indenture and not otherwise. At any time and from time to time after the execution and delivery of this Indenture and after the effectiveness of a registration statement under the Securities Act with respect thereto, the Note Issuer may deliver Exchange Securities executed by the Note Issuer to the Trustee for authentication, together with a Note Issuer Order for the authentication and 41 49 delivery of such Exchange Securities and a like principal amount of Initial Securities for cancellation in accordance with Section 3.9, and the Trustee in accordance with the Note Issuer Order shall authenticate and deliver such Securities. In authenticating such Exchange Securities, and accepting the additional responsibilities under this Indenture in relation to such Securities, the Trustee shall be entitled to receive, and (subject to Section 6.1) shall be fully protected in relying upon, an Opinion of Counsel substantially to the effect that: (i) the Exchange Securities have been duly authorized and, when executed and authenticated in accordance with the provisions of the Indenture and delivered in exchange for the Initial Securities in accordance with the Indenture and the Exchange Offer, will be entitled to the benefits of the Indenture and will be legally valid and binding obligations of the Note Issuer, enforceable in accordance with their terms subject to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar laws of general applicability relating to or affecting creditors' rights and to general equity principles; and (ii) when the Exchange Securities are executed and authenticated in accordance with the provisions of the Indenture and delivered in exchange for the Initial Securities in accordance with the Indenture and the Exchange Offer, the Guaranties endorsed thereon will be the legally valid and binding obligations of the Guarantors, enforceable in accordance with their terms subject to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar laws of general applicability, relating to or affecting creditors' rights and to general equity principles. If terms have been so established, the Trustee shall not be required to authenticate such Exchange Securities if the issue of such Exchange Securities pursuant to this Indenture will affect the Trustee's own rights, duties or immunities under the Exchange Securities and this Indenture or otherwise in a manner which is not reasonably acceptable to the Trustee. Each Security shall be dated the date of its authentication. No Security or Guaranty endorsed thereon shall be entitled to any benefit under this Indenture or be valid or obligatory for any purpose, unless there appears on such Security a certificate of authentication substantially in the form provided for herein executed by the Trustee by the manual signature of one of its authorized officers, and such certificate upon any Security shall be conclusive evidence, and the only evidence, that such Security and the Guaranty endorsed thereon have been duly authenticated and delivered hereunder. .4 Temporary Securities. Pending the preparation of definitive Securities, the Note Issuer may execute, and upon Note Issuer Order the Trustee shall authenticate and deliver, temporary Securities which are printed, lithographed, typewritten, mimeographed or otherwise produced, in any authorized denomination, substantially of the tenor of the definitive Securities in lieu of which they are issued and having endorsed thereon the Guaranties substantially of the tenor of the definitive Guaranties in lieu of which they are issued duly executed by the Guarantors and with such appropriate insertions, omissions, substitutions and other variations as the officers executing such Securities and Guaranties, as the case may be, may determine, as evidenced by their execution of such Securities and Guaranties, as the case may be. If temporary Securities are issued, the Note Issuer will cause definitive Securities to be prepared without unreasonable delay. After the preparation of definitive Securities, the temporary Securities shall be exchangeable for definitive Securities upon 42 50 surrender of the temporary Securities at the office or agency of the Note Issuer designated for that purpose without charge to the Holder. Upon surrender for cancellation of any one or more temporary Securities, the Note Issuer shall execute and the Trustee shall authenticate and deliver in exchange therefor a like principal amount of definitive Securities of authorized denominations having the same Issue Date and Stated Maturity, having the same terms and like tenor, and having endorsed thereon the Guaranties executed by the Guarantors. Until so exchanged, the temporary Securities shall in all respects be entitled to the same benefits under this Indenture as definitive Securities. .5 Registration, Registration of Transfer and Exchange. The Note Issuer shall cause to be kept at the Corporate Trust Office of the Trustee, a register in which, subject to such reasonable regulations as it may prescribe, the Note Issuer shall provide for the registration of Securities and of transfers of Securities. Such register is herein sometimes referred to as the "Securities Register." The Trustee is hereby appointed "Securities Registrar" for the purpose of registering Securities and transfers of the Securities as herein provided. Upon surrender for registration of transfer of any Security at the office or agency of the Note Issuer designated for that purpose the Note Issuer shall execute, and the Trustee shall authenticate and deliver, in the name of the designated transferee or transferees, one or more new Securities of any authorized denominations, of a like aggregate principal amount, of the same Issue Date and Stated Maturity, having the same terms and like tenor, and having endorsed thereon the Guaranties executed by the Guarantors; provided that Initial Securities may only be transferred in principal amounts of Euro 100,000 or more. At the option of the Holder, Securities may be exchanged for other Securities of any authorized denominations, of a like aggregate principal amount, of the same Issue Date and Stated Maturity and having the same terms and like tenor, and having endorsed thereon the Guaranties executed by the Guarantors, upon surrender of the Securities to be exchanged at such office or agency. Whenever any Securities are so surrendered for exchange, the Note Issuer shall execute, the Guarantors shall execute the Guaranties endorsed on and the Trustee shall authenticate and deliver, the Securities which the Holder making the exchange is entitled to receive. All Securities and the Guaranties endorsed thereon issued upon any registration of transfer or exchange of Securities shall be the valid obligations of the Note Issuer and the respective Guarantors, evidencing the same debt and Guaranties, and entitled to the same benefits under this Indenture, as the Securities and Guaranties surrendered upon such registration of transfer or exchange. Every Security presented or surrendered for registration of transfer or for exchange shall (if so required by the Note Issuer or the Trustee) be duly endorsed, or be accompanied by a written instrument of transfer in form satisfactory to the Note Issuer and the Securities Registrar, duly executed by the Holder thereof or his attorney duly authorized in writing. No service charge shall be made to a Holder for any registration of transfer or exchange of Securities, but the Note Issuer may require payment of a sum sufficient to cover 43 51 any tax or other governmental charge that may be imposed in connection with any registration of transfer or exchange of Securities. Notwithstanding any of the foregoing, any Global Security shall be exchangeable pursuant to this Section 3.5 for Securities registered in the names of Persons other than the Depositary for such Global Security or its nominee only if (i) such Depositary notifies the Note Issuer that it is unwilling or unable to continue as Depositary for such Global Security or if at any time such Depositary ceases to be a clearing agency registered under the Exchange Act, as amended, (ii) the Note Issuer executes and delivers to the Trustee a Note Issuer Order that such Global Security shall be so exchangeable or (iii) there shall have occurred and be continuing an Event of Default with respect to the Securities and the Holders of a majority in aggregate principal amount of this outstanding securities shall have so requested. Any Global Security that is exchangeable pursuant to the preceding sentence shall be exchangeable for Securities registered in such names as such Depositary shall direct. Notwithstanding any other provision in this Indenture, a Global Security may not be transferred except as a whole by the Depositary with respect to such Global Security to a nominee of such Depositary or by a nominee of such Depositary to such Depositary or another nominee of such Depositary. Neither the Note Issuer nor the Trustee shall be required to, pursuant to the provisions of this Section, (a) issue, register the transfer of or exchange any Security during a period beginning at the opening of business 15 days before any selection for redemption of Securities pursuant to Article XI and ending at the close of business on the earliest date on which the relevant notice of redemption is deemed to have been given to all Holders of Securities to be so redeemed, and (b) register the transfer of or exchange any Security so selected for redemption, in whole or in part, except, in the case of any Security to be redeemed in part, any portion thereof not to be redeemed. All Initial Securities initially issued hereunder shall, upon issuance, bear the legend specified in Section 2.4 to be applied to such a Security and such required legend shall not be removed unless the Note Issuer shall have delivered to the Trustee (and the Securities Registrar, if other than the Trustee) a Note Issuer Order which states that the Security may be issued without such legend thereon. If such legend required for an Initial Security has been removed from a Security as provided above, no other Security issued in exchange for all or any part of such Security shall bear such legend, unless the Note Issuer has reasonable cause to believe that such other Security is a "restricted security" within the meaning of Rule 144 of the Securities Act and instructs the Trustee to cause a legend to appear thereon. .6 Mutilated, Destroyed, Lost and Stolen Securities. If any mutilated Security is surrendered to the Trustee together with such security or indemnity as may be required by the Note Issuer or the Trustee to save each of them harmless, the Note Issuer shall execute, the Guarantors shall execute the Guaranties endorsed on and the Trustee shall authenticate and deliver in exchange therefor, a new Security of like tenor and principal amount, having the same Issue Date and Stated Maturity and bearing the same Interest Rate as such mutilated Security, and bearing a number not contemporaneously outstanding. 44 52 If there shall be delivered to the Note Issuer and to the Trustee (i) evidence to their satisfaction of the destruction, loss or theft of any Security, and (ii) such security or indemnity as may be required by each of them to save each of them, each Guarantor and any agent of either of them harmless, then, in the absence of notice to the Note Issuer or the Trustee that such Security has been acquired by a bona fide purchaser, the Note Issuer shall execute and upon its request the Trustee shall authenticate and deliver, in lieu of any such destroyed, lost or stolen Security, a new Security of like tenor and principal amount, having endorsed thereon the Guaranties executed by the Guarantors, having the same Issue Date and Stated Maturity and bearing the same Interest Rate as such destroyed, lost or stolen Security, and bearing a number not contemporaneously outstanding. In case any such mutilated, destroyed, lost or stolen Security has become due and payable, the Note Issuer in its discretion may, instead of issuing a new Security, pay such Security. Upon the issuance of any new Security under this Section, the Note Issuer may require the payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in relation thereto and any other expenses (including the fees and expenses of the Trustee) connected therewith. Every new Security issued pursuant to this Section in lieu of any destroyed, lost or stolen Security, and the Guaranties endorsed thereon, shall constitute an original additional contractual obligation of the Note Issuer and the respective Guarantors, whether or not the destroyed, lost or stolen Security, and the Guaranties endorsed thereon, shall be at any time enforceable by anyone, and shall be entitled to all the benefits of this Indenture equally and proportionately with any and all other Securities duly issued hereunder. The provisions of this Section are exclusive and shall preclude (to the extent lawful) all other rights and remedies with respect to the replacement or payment of mutilated, destroyed, lost or stolen Securities. .7 Payment of Interest; Interest Rights Preserved. Interest on any Security which is payable, and is punctually paid or duly provided for, on any Interest Payment Date, shall be paid to the Person in whose name that Security (or one or more Predecessor Securities) is registered at the close of business on the Regular Record Date for such interest, except that interest payable on the Stated Maturity of a Security shall be paid to the Person to whom principal is paid. Any interest on any Security which is payable, but is not punctually paid or duly provided for, on any Interest Payment Date (herein called "Defaulted Interest"), shall forthwith cease to be payable to the Holder on the relevant Regular Record Date by virtue of having been such Holder, and such Defaulted Interest may be paid by the Note Issuer, at its election in each case, as provided in Clause (1) or (2) below: (1) The Note Issuer may elect to make payment of any Defaulted Interest to the Persons in whose names the Securities (or their respective Predecessor Securities) are registered at the close of business on a Special Record Date for the payment of such Defaulted Interest, which shall be fixed in the following manner. The Note Issuer shall notify the Trustee in writing of the amount of 45 53 Defaulted Interest proposed to be paid on each Security and the date of the proposed payment, and at the same time the Note Issuer shall deposit with the Trustee an amount of money equal to the aggregate amount proposed to be paid in respect of such Defaulted Interest or shall make arrangements satisfactory to the Trustee for such deposit prior to the date of the proposed payment, such money when deposited to be held in trust for the benefit of the Persons entitled to such Defaulted Interest as in this Clause provided. Thereupon the Trustee shall fix a Special Record Date for the payment of such Defaulted Interest which shall be not more than 15 days and not less than 10 days prior to the date of the proposed payment and not less than 10 days after the receipt by the Trustee of the notice of the proposed payment. The Trustee shall promptly notify the Note Issuer of such Special Record Date and, in the name and at the expense of the Note Issuer, shall cause notice of the proposed payment of such Defaulted Interest and the Special Record Date therefor to be mailed, first-class, postage prepaid, to each Holder at the address of such Holder as it appears in the Securities Register not less than 10 days prior to such Special Record Date. The Trustee may, in its discretion, in the name and at the expense of the Note Issuer, cause a similar notice to be published at least once in a newspaper, customarily published in the English language on each Business Day and of general circulation in the Borough of Manhattan, The City of New York, but such publication shall not be a condition precedent to the establishment of such Special Record Date. Notice of the proposed payment of such Defaulted Interest and the Special Record Date therefor having been mailed as aforesaid, such Defaulted Interest shall be paid to the Persons in whose names the Securities (or their respective Predecessor Securities) are registered at the close of business on such Special Record Date and shall no longer be payable pursuant to the following Clause (2). (2) The Note Issuer may make payment of any Defaulted Interest in any other lawful manner not inconsistent with the requirements of any securities exchange on which the Securities may be listed, upon such notice as may be required by such exchange (or by the Trustee if the Securities are not listed), if, after notice given by the Note Issuer to the Trustee of the proposed payment pursuant to this Clause, such manner of payment shall be deemed practicable by the Trustee. Subject to the foregoing provisions of this Section, each Security delivered under this Indenture upon registration of transfer of or in exchange for or in lieu of any other Security shall carry the rights to interest accrued and unpaid, and to accrue, which were carried by such other Security. Under the Registration Rights Agreement, in the event that (i) an Exchange Offer Registration Statement or a Shelf Registration Statement is not filed on or prior to the applicable deadline set forth in the Registration Rights Agreement, (ii) an Exchange Offer Registration Statement or a Shelf Registration Statement is not declared effective on or prior to the applicable deadline set forth in the Registration Rights Agreement, or (iii) the Exchange Offer has not been "Consummated" (as defined in the Registration Rights Agreement) or upon the occurrence of certain other conditions, then additional payments in the form of Liquidated Damages shall accrue on the principal amount of the Securities at the rate per Euro 1,000 46 54 liquidation amount of Preferred Securities set forth in the Registration Rights Agreement. Upon filing or effectiveness of the Exchange Offer Registration Statement or the Shelf Registration Statement, Consummation of the Exchange Offer or upon cessation of any such other conditions, as the case may be, the obligation to pay such Liquidated Damages with respect to the event in question shall cease. .8 Persons Deemed Owners. Prior to the presentment of a Security for registration of transfer, the Note Issuer, the Guarantors, the Trustee and any agent of the Note Issuer, the Guarantors or the Trustee may treat the Person in whose name such Security is registered as the owner of such Security for the purpose of receiving payment of principal (and premium, if any) of and (subject to Section 3.7) interest on such Security and for all other purposes whatsoever, whether or not such Security be overdue, and neither the Note Issuer, the Guarantors, the Trustee nor any agent of the Note Issuer, the Guarantors or the Trustee shall be affected by notice to the contrary. .9 Cancellation. All Securities surrendered for payment, redemption, registration of transfer or exchange shall, if surrendered to any Person other than the Trustee, be delivered to the Trustee, and any such Securities surrendered directly to the Trustee for any such purpose shall be promptly canceled by it. The Note Issuer may at any time deliver to the Trustee for cancellation any Securities previously authenticated and delivered hereunder which the Note Issuer may have acquired in any manner whatsoever, and all Securities so delivered shall be promptly canceled by the Trustee. No Securities shall be authenticated in lieu of or in exchange for any Securities canceled as provided in this Section, except as expressly permitted by this Indenture. All canceled Securities shall be destroyed by the Trustee and the Trustee shall deliver to the Note Issuer a certificate of such destruction. .10 Computation of Interest. Interest on the Securities shall be computed on the basis of a 360-day year of twelve 30-day months and, for any partial period, on the basis of the number of days elapsed in a 360-day year of twelve 30-day months. .11 Right of Set-Off. Notwithstanding anything to the contrary in this Indenture, the Note Issuer shall have the right to set-off any payment it or the Company is otherwise required to make hereunder in respect of any Security to the extent the Note Issuer or the Company has theretofore made, or is concurrently on the date of such payment making, a payment under the Company Guarantee relating to such Security or under Section 5.8 of this Indenture. .12 Agreed Tax Treatment. Each Security issued hereunder shall provide that the Note Issuer and, by its acceptance of a Security or a beneficial interest therein, the Holder of, and any Person that acquires a beneficial interest in, such Security agree that for German and U.S. Federal, state and local tax purposes and for purposes of any tax imposed by the jurisdiction of formation of 47 55 the Note Issuer (or any political subdivision or taxing authority thereof or therein) it is intended that such Security constitute indebtedness. .13 ISIN Numbers. The Note Issuer in issuing the Securities may use ISIN and Common Code numbers (if then generally in use), and, if so, the Trustee shall use ISIN and Common Code numbers in notices of redemption as a convenience to Holders; provided, that any such notice may state that no representation is made as to the correctness of such numbers either as printed on the Securities or as contained in any notice of a redemption and that reliance may be placed only on the other identification numbers printed on the Securities, and any such redemption shall not be affected by any defect in or omission of such numbers. ARTICLE IV. SATISFACTION AND DISCHARGE .1 Satisfaction and Discharge of Indenture. This Indenture shall cease to be of further effect (except as to (i) any surviving rights of registration of transfer, substitution and exchange of Securities, (ii) rights hereunder of Holders to receive payments of principal of (and premium, if any) and interest (including Additional Sums and Additional Amounts, if any) on the Securities and other rights, duties and obligations of the Holders as beneficiaries hereof with respect to the amounts, if any, deposited with the Trustee pursuant to this Article IV and (iii) the rights and obligations of the Trustee hereunder), and the Trustee, on demand of and at the expense of the Note Issuer, shall execute proper instruments acknowledging satisfaction and discharge of this Indenture, when (1) either: (A) all Securities theretofore authenticated and delivered (other than (i) Securities which have been destroyed, lost or stolen and which have been replaced or paid as provided in Section 3.6 and (ii) Securities for whose payment money has theretofore been deposited in trust or segregated and held in trust by the Note Issuer and thereafter repaid to the Note Issuer or discharged from such trust, as provided in Section 10.3) have been delivered to the Trustee for cancellation; or (B) all such Securities not theretofore delivered to the Trustee for cancellation (i) have become due and payable, or (ii) will become due and payable at their Stated Maturity within one year of the date of deposit, and the Note Issuer or a Guarantor, in the case of Clause (B) (i) or (B) (ii) above, has deposited or caused to be deposited with the Trustee as trust funds in trust for such purpose an amount in the currency or currencies in which the Securities are payable sufficient (without reinvestment) to pay and discharge the entire indebtedness on such Securities not theretofore delivered to the Trustee for cancellation, for principal (and 48 56 premium, if any) and interest (including Additional Sums and Additional Amounts, if any) to the date of such deposit (in the case of Securities which have become due and payable) or to their Stated Maturity; (2) the Note Issuer or a Guarantor has paid or caused to be paid all other sums payable hereunder by the Note Issuer and the Guarantors; and (3) the Note Issuer has delivered to the Trustee an Opinion of Counsel to the effect that the Holders of the Outstanding Securities will not recognize gain or loss for German and U.S. Federal income tax purposes and for purposes of any income tax imposed by the jurisdiction of formation of the Note Issuer as a result of the application of this Section 4.1 and will be subject to German and U.S. Federal income tax and any income tax imposed by the jurisdiction of formation of the Note Issuer, if any, on the same amount as would have been the case if such satisfaction and discharge of the Indenture had not occurred; and (4) the application of this Section 4.1 shall not cause the Trustee to have a conflicting interest as defined in Section 6.8 hereof and for purposes of the Trust Indenture Act with respect to any securities of the Note Issuer; and (5) the funds deposited with the Trustee pursuant to Clause (1)(B) above shall not be deemed an "investment company" as defined in the 1940 Act, or such trust shall be qualified under the 1940 Act or exempt from regulation thereunder; and (6) the Note Issuer has delivered to the Trustee an Officers' Certificate and an Opinion of Counsel, each stating that all conditions precedent provided for in this subsection 4.1 relating to the satisfaction and discharge of this Indenture have been complied with. Notwithstanding the satisfaction and discharge of this Indenture pursuant to this Article IV, the obligations of the Note Issuer to the Trustee under Section 6.7 and, if money shall have been deposited with the Trustee pursuant to subclause (B) of Clause (1) of this Section, the obligations of the Trustee under Section 4.2 and the last paragraph of Section 10.3, shall survive. .2 Application of Trust Money; Reinstatement. Subject to the provisions of the last paragraph of Section 10.3, all money deposited with the Trustee pursuant to Section 4.1 or money or Government Obligations deposited with the Trustee pursuant to Section 4.3, or received by the Trustee in respect of Government Obligations deposited with the Trustee pursuant to Section 4.3, shall be held in trust and applied by the Trustee, in accordance with the provisions of the Securities and this Indenture, to the payment, either directly or through any Paying Agent (including the Note Issuer acting as its own Paying Agent) as the Trustee may determine, to the Persons entitled thereto, of the principal (and premium, if any) and interest (including Additional Sums and Additional Amounts, if any) for the payment of which such money or Government Obligations have been deposited with or received by the Trustee; provided, however, such moneys need not be segregated from other funds held in trust except to the extent required by law. Money so held in trust shall not be subject to the provisions of Article XII or Article XIV. 49 57 The Note Issuer shall pay and indemnify the Trustee against any tax, fee or other charge imposed on or assessed against the Government Obligations deposited pursuant to Section 4.3 or the principal and interest received in respect thereof other than any such tax, fee or other charge which by law is for the account of the Holders of the Outstanding Securities. If the Trustee or the Paying Agent is unable to apply any money in accordance with Section 4.1 or 4.3 by reason of any order or judgment of any court or governmental authority enjoining, restraining or otherwise prohibiting such application, then the obligations of the Note Issuer and the Guarantors under this Indenture, the Securities and the Guaranties shall be revived and reinstated as though no deposit had occurred pursuant to this Article IV until such time as the Trustee or Paying Agent is permitted to apply all such money in accordance with Section 4.1 or 4.3; provided, however, that if the Note Issuer or any Guarantor makes any payment of principal of (and premium, if any) or interest (including Additional Sums and Additional Amounts, if any) on any Security following the reinstatement of its obligations, the Note Issuer or such Guarantor shall be subrogated to the rights of the Holders of such Securities to receive such payment from the money held by the Trustee or the Paying Agent. .3 Satisfaction, Discharge and Defeasance of Securities. The Note Issuer shall be deemed to have paid and discharged the entire indebtedness on all the Outstanding Securities, the Guarantors shall each be released from their respective Guaranties, and the Trustee, at the expense of the Note Issuer, shall execute proper instruments acknowledging satisfaction and discharge of such indebtedness and Guaranties, when (1) with respect to all Outstanding Securities, (A) the Note Issuer has irrevocably deposited or caused to be irrevocably deposited with the Trustee as trust funds in trust for such purpose an amount sufficient to pay and discharge the entire indebtedness on all Outstanding Securities for principal (and premium, if any) and interest (including Additional Sums and Additional Amounts, if any) to the Stated Maturity or to any Redemption Date as contemplated by the penultimate paragraph of this Section 4.3, as the case may be; or (B) the Note Issuer has irrevocably deposited or caused to be irrevocably deposited with the Trustee as obligations in trust for such purpose an amount of Government Obligations as will, in the written opinion of independent public accountants delivered to the Trustee, together with predetermined and certain income to accrue thereon, without consideration of any reinvestment thereof, be sufficient to pay and discharge when due the entire indebtedness on all Outstanding Securities for principal (and premium, if any) and interest (including Additional Sums and Additional Amounts, if any) to the Stated Maturity or any Redemption Date as contemplated by the penultimate paragraph of this Section 4.3, as the case may be; and (2) the Note Issuer has paid or caused to be paid all other sums payable with respect to the Outstanding Securities; and 50 58 (3) the Note Issuer has delivered to the Trustee an Opinion of Counsel to the effect that the Holders of the Outstanding Securities will not recognize gain or loss for German and U.S. Federal income tax purposes or for the purposes of any income tax imposed by the jurisdiction of formation of the Note Issuer as a result of the application of this Section 4.3 and will be subject to German and U.S. Federal income tax and any income tax imposed by the jurisdiction of formation of the Note Issuer, if any, on the same amount, in the same manner as would have been the case if such satisfaction, discharge and defeasance of the Securities had not occurred; and (4) the Note Issuer has delivered to the Trustee an Officers' Certificate to the effect that the Securities, if then listed on any securities exchange, will not be delisted as a result of the deposit pursuant to Clause (1) above; and (5) the application of this Section 4.3 shall not cause the Trustee to have a conflicting interest as defined in Section 6.8 hereof and for purposes of the Trust Indenture Act with respect to any securities of the Note Issuer; and (6) at the time of the deposit pursuant to Clause (1) above: (A) no default in the payment of all or a portion of principal of (or premium, if any) or interest on any Senior Indebtedness of the Note Issuer or any Guarantor shall have occurred and be continuing, and no event of default with respect to any such Senior Indebtedness shall have occurred and be continuing and shall have resulted in such Senior Indebtedness becoming or being declared due and payable prior to the date on which it would otherwise have become due and payable and (B) no other event of default with respect to any Senior Indebtedness of the Note Issuer or any Guarantor shall have occurred and be continuing permitting (after notice or the lapse of time, or both) the holders of such Senior Indebtedness (or a representative on behalf of the holders thereof) to declare such Senior Indebtedness due and payable prior to the date on which it would otherwise have become due and payable, or, in the case of either Clause (A) or Clause (B) above, each such default or event of default shall have been cured or waived or shall have ceased to exist; and (7) no Event of Default or event which with notice or lapse of time or both would become an Event of Default shall have occurred and be continuing on the date of such deposit; and (8) the funds deposited with the Trustee pursuant to Clause (1) above shall not be deemed an "investment company" as defined in the 1940 Act or such trust shall be qualified under the 1940 Act or exempt from regulation thereunder; and (9) the Note Issuer has delivered to the Trustee an Officers' Certificate and an Opinion of Counsel, each stating that all conditions precedent herein provided for relating to the satisfaction and discharge of the entire indebtedness on all Outstanding Securities have been complied with. Any deposits with the Trustee referred to in Section 4.3(1) above shall be irrevocable and shall be made under the terms of an escrow trust agreement in form and 51 59 substance reasonably satisfactory to the Trustee. If any Outstanding Securities are to be redeemed prior to their Stated Maturity, whether pursuant to any optional or mandatory redemption provisions, the applicable escrow trust agreement shall provide therefor and the Note Issuer shall make such arrangements as are satisfactory to the Trustee for the giving of notice of redemption by the Trustee in the name, and at the expense, of the Note Issuer. If the Securities are not to become due and payable at their Stated Maturity or upon call for redemption within one year of the date of deposit, then the Note Issuer shall give, not later than the date of such deposit, notice of such deposit to the Holders. Upon the satisfaction of the conditions set forth in this Section 4.3 with respect to all the Outstanding Securities, the terms and conditions of the Securities and Guaranties, including the terms and conditions with respect thereto set forth in this Indenture, shall no longer be binding upon, or applicable to, the Note Issuer and the Guarantors; provided, that the Note Issuer and the Guarantors shall not be discharged from any payment obligations in respect of Securities which are deemed not to be Outstanding under clause (iii) of the definition thereof if such obligations continue to be valid obligations of the Note Issuer and the Guarantors under applicable law. ARTICLE V. REMEDIES .1 Events of Default. "Event of Default," wherever used herein means any one of the following events (whatever the reason for such Event of Default and whether it shall be voluntary or involuntary or be effected by operation of law or pursuant to any judgment, decree or order of any court or any order, rule or regulation of any administrative or governmental body): (1) default in the payment of any interest upon any Security, including any Additional Sums and Additional Amounts in respect thereof, when it becomes due and payable, and continuance of such default for a period of 30 days; or (2) default in the payment of the principal of (or premium, if any, on) any Security whether at Maturity, upon redemption, by declaration or otherwise; or (3) default in the performance, or breach, in any material respect, of any covenant or warranty of the Company or the Note Issuer in this Indenture (other than a covenant or warranty a default in the performance of which or the breach of which is elsewhere in this Section specifically dealt with), and continuance of such default or breach for a period of 90 days after there has been given, by registered or certified mail, to the Note Issuer by the Trustee or to the Note Issuer and the Trustee by the Holders of at least 25% in principal amount of the Outstanding Securities a written notice specifying such default or breach and requiring it to be remedied; or (4) default under any mortgage, indenture or instrument under which there may be issued or by which there may be secured or evidenced any Indebtedness for money borrowed by the Company or any Subsidiary (or the payment of which is guaranteed by the Company or any Subsidiary), whether such Indebtedness or Guarantee now exists or is incurred after the Issue Date, if (A) 52 60 such default results in the acceleration of such Indebtedness prior to its express maturity or shall constitute a default in the payment of such Indebtedness and (B) the principal amount of any such Indebtedness that has been accelerated or not paid at maturity, when added to the aggregate principal amount of all other such Indebtedness, at such time, that has been accelerated or not paid at maturity, exceeds $25 million; or (5) the dissolution, winding up or termination of the Trust, except in connection with the distribution of Securities to the holders of Preferred Securities in dissolution of the Trust and in connection with such mergers, consolidations or amalgamations as are permitted by the Declaration; or (6) the entry of a decree or order by a court having jurisdiction in the premises adjudging the Company or the Note Issuer a bankrupt or insolvent, or approving as properly filed a petition seeking reorganization, arrangement, adjustment or composition of or in respect of the Company or the Note Issuer under any applicable German or U.S. Federal or State or other applicable foreign bankruptcy, insolvency, reorganization or other similar law, or appointing a receiver, liquidator, assignee, trustee, sequestrator (or other similar official) of the Company or the Note Issuer or of any substantial part of its property or ordering the winding up or liquidation of its affairs, and the continuance of any such decree or order unstayed and in effect for a period of 60 consecutive days; or (7) the institution by the Company or the Note Issuer of proceedings to be adjudicated a bankrupt or insolvent, or the consent by it to the institution of bankruptcy or insolvency proceedings against it, or the filing by it of a petition or answer or consent seeking reorganization or relief under any applicable German or United States Federal or State or other applicable foreign bankruptcy, insolvency, reorganization or other similar law, or the consent by it to the filing of any such petition or to the appointment of a receiver, liquidator, assignee, trustee, sequestrator (or other similar official) of the Company or the Note Issuer or of any substantial part of its property, or the making by it of an assignment for the benefit for creditors, or the admission by it in writing of its inability to pay its debts generally as they become due and its willingness to be adjudicated a bankrupt, or the taking of corporate action by the Company or the Note Issuer in furtherance of any such action; or (8) except as permitted by the terms hereof and the Securities, the cessation of effectiveness of any Guaranty or the finding by any judicial proceeding that any such Guaranty is unenforceable or invalid or the denial or disaffirmation by any Guarantor of its obligations under its Guaranty. A default under any other indebtedness of the Company or any of its Subsidiaries or joint ventures or the Trust would not constitute an Event of Default under the Securities. 53 61 .2 Acceleration of Maturity; Rescission and Annulment. As provided in and subject to the provisions of this Indenture, if an Event of Default with respect to the Securities at the time Outstanding occurs and is continuing, then and in every such case the Trustee or the Holders of not less than 25% in aggregate outstanding principal amount of the Outstanding Securities may declare the principal amount of and interest (including Additional Sums and Additional Amounts, if any) on all the Securities to be due and payable immediately, by a notice in writing to the Note Issuer and the Guarantors (and to the Trustee if given by Holders), provided, that if the Trustee or such Holders fail to do so, the Preferred Trustee shall have such right by a notice in writing to the Note Issuer and the Trustee; and upon any such declaration such specified amount of and the accrued interest (including Additional Sums and Additional Amounts, if any) on all the Securities shall become immediately due and payable, provided, that the payment of principal and interest (including Additional Sums and Additional Amounts, if any) on such Securities shall remain subordinated to the extent provided in Article XII of the Indenture. At any time after such a declaration of acceleration has been made and before a judgment or decree for payment of the money due has been obtained by the Trustee as hereinafter in this Article provided, the Holders of a majority in aggregate principal amount of the Outstanding Securities, by written notice to the Note Issuer and the Trustee, may rescind and annul such declaration and its consequences if: (1) the Note Issuer or any Guarantor has paid or deposited with the Trustee a sum sufficient to pay: (A) all overdue installments of interest (including Additional Sums and Additional Amounts, if any) on the Securities, (B) the principal of (and premium, if any, on) any Securities which have become due otherwise than by such declaration of acceleration and interest thereon at the rate borne by the Securities, and (C) all sums paid or advanced by the Trustee hereunder and the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel; and (2) all Events of Default, other than the non-payment of the principal of the Securities which have become due solely by such declaration of acceleration, have been cured or waived as provided in Section 5.13. The Holders of a majority in aggregate outstanding principal amount of the Securities affected thereby may, on behalf of the Holders of all the Securities, waive any past default, except a default in the payment of principal, premium, if any, or interest (unless such default has been cured and a sum sufficient to pay all matured installments of interest, premium, if any, and principal due otherwise than by acceleration has been deposited with the Trustee) or a default in respect of a covenant or provision which under this Indenture cannot be modified or amended without the consent of the Holder of each Outstanding Security and, should the Holders of such Securities fail to annul such declaration and waive such default, the holders of a majority in aggregate liquidation amount of the Preferred Securities shall have such right. The Preferred Trustee, as the initial Holder of the Securities, has agreed under the 54 62 Declaration not to waive an Event of Default with respect to the Securities without the consent of holders of a majority in aggregate liquidation amount of the Preferred Securities then outstanding. No such rescission shall affect any subsequent default or impair any right consequent thereon. Upon receipt by the Trustee of written notice declaring such an acceleration, or rescission and annulment thereof, a record date shall be established for determining Holders of Outstanding Securities entitled to join in such notice, which record date shall be at the close of business on the day the Trustee receives such notice. The Holders on such record date, or their duly designated proxies, and only such Persons, shall be entitled to join in such notice, whether or not such Holders remain Holders after such record date; provided, that, unless such declaration of acceleration, or rescission and annulment, as the case may be, shall have become effective by virtue of the requisite percentage having joined in such notice prior to the day which is 90 days after such record date, such notice of declaration of acceleration, or rescission and annulment, as the case may be, shall automatically and without further action by any Holder be canceled and of no further effect. Nothing in this paragraph shall prevent a Holder, or a proxy of a Holder, from giving, after expiration of such 90-day period, a new written notice of declaration of acceleration, or rescission and annulment thereof, as the case may be, that is identical to a written notice which has been canceled pursuant to the proviso to the preceding sentence, in which event a new record date shall be established pursuant to the provisions of this Section 5.2. .3 Collection of Indebtedness and Suits for Enforcement by Trustee.. The Note Issuer covenants that if: (1) default is made in the payment of any installment of interest (including Additional Sums and Additional Amounts, if any) on any Security when such interest becomes due and payable and such default continues for a period of 30 days, or (2) default is made in the payment of the principal of (and premium, if any, on) any Security at the Maturity thereof, the Note Issuer will, upon demand of the Trustee, pay to the Trustee, for the benefit of the Holders of such Securities, the whole amount then due and payable on such Securities for principal (and premium, if any) and interest (including Additional Sums and Additional Amounts, if any); and, in addition thereto, all amounts owing the Trustee under Section 6.7. If the Note Issuer fails to pay such amounts forthwith upon such demand, the Trustee, in its own name and as trustee of an express trust, may institute a judicial proceeding for the collection of the sums so due and unpaid, and may prosecute such proceeding to judgment or final decree, and may enforce the same against the Note Issuer, any Guarantor or any other obligor upon the Securities and collect the moneys adjudged or decreed to be payable in the manner provided by law out of the property of the Note Issuer, any Guarantor or any other obligor upon the Securities, wherever situated. 55 63 Subject to Section 6.3 hereof, if an Event of Default occurs and is continuing, the Trustee may in its discretion proceed to protect and enforce its rights and the rights of the Holders under this Indenture by such appropriate judicial proceedings as the Trustee shall deem most effectual to protect and enforce any such rights, whether for the specific enforcement of any covenant or agreement in this Indenture or in aid of the exercise of any power granted herein, pursuant to the terms of this Indenture. .4 Trustee May File Proofs of Claim. In case of the pendency of any receivership, insolvency, liquidation, bankruptcy, reorganization, arrangement, adjustment, composition or other judicial proceeding relative to the Note Issuer, any Guarantor or any other obligor upon the Securities or the property of the Note Issuer, of any Guarantor or of such other obligor or their creditors, (a) the Trustee (irrespective of whether the principal of the Securities shall then be due and payable as therein expressed or by declaration or otherwise and irrespective of whether the Trustee shall have made any demand on the Note Issuer for the payment of overdue principal (and premium, if any) or interest (including Additional Sums and Additional Amounts, if any)) shall be entitled and empowered, by intervention in such proceeding or otherwise, (i) to file and prove a claim for the whole amount of principal (and premium, if any) and interest (including Additional Sums and Additional Amounts, if any) owing and unpaid in respect to the Securities and to file such other papers or documents as may be necessary or advisable and to take any and all actions as are authorized under the Trust Indenture Act in order to have the claims of the Holders and any predecessor to the Trustee under Section 6.7 and of the Holders allowed in any such judicial proceedings; and, (ii) in particular, the Trustee shall be authorized to collect and receive any moneys or other property payable or deliverable on any such claims and to distribute the same in accordance with Section 5.6; and (b) any custodian, receiver, assignee, trustee, liquidator, sequestrator (or other similar official) in any such judicial proceeding is hereby authorized by each Holder to make such payments to the Trustee for distribution in accordance with Section 5.6, and in the event that the Trustee shall consent to the making of such payments directly to the Holders, to pay to the Trustee any amount due to it and any predecessor Trustee under Section 6.7. Nothing herein contained shall be deemed to authorize the Trustee to authorize or consent to or accept or adopt on behalf of any Holder any plan of reorganization, arrangement, adjustment or composition affecting the Securities or the rights of any Holder thereof, or to authorize the Trustee to vote in respect of the claim of any Holder in any such proceeding; provided, however, that the Trustee may, on behalf of the Holders, vote for the election of a trustee in bankruptcy or similar official and be a member of a creditors' or other similar committee. .5 Trustee May Enforce Claims Without Possession of Securities. All rights of action and claims under this Indenture or the Securities may be prosecuted and enforced by the Trustee without the possession of any of the Securities or the 56 64 production thereof in any proceeding relating thereto, and any such proceeding instituted by the Trustee shall be brought in its own name as trustee of an express trust, and any recovery of judgment shall, after provision for the payment of all the amounts owing the Trustee and any predecessor Trustee under Section 6.7, its agents and counsel, be for the ratable benefit of the Holders of the Securities in respect of which such judgment has been recovered. .6 Application of Money Collected. Any money or property collected or to be applied by the Trustee with respect to the Securities pursuant to this Article, shall, subject to Articles XII and XIV, be applied in the following order, at the date or dates fixed by the Trustee and, in case of the distribution of such money or property on account of principal (or premium, if any) or interest (including any Additional Sums), upon presentation of the Securities and the notation thereon of the payment if only partially paid and upon surrender thereof if fully paid: FIRST: To the payment of all amounts due the Trustee and any predecessor Trustee under Section 6.7; SECOND: To the extent provided in Article XII, to the holders of Senior Indebtedness of the Note Issuer and the Company in accordance with Article XII or if collected from a Guarantor, to the extent provided in Article XIV, to the holders of Senior Indebtedness of the Guarantor in accordance with Article XIV; THIRD: To the payment of the amounts then due and unpaid upon such Securities for principal (and premium, if any) and interest (including Additional Sums and Additional Amounts, if any), in respect of which or for the benefit of which such money has been collected, ratably, without preference or priority of any kind, according to the amounts due and payable on such Securities for principal (and premium, if any) and interest (including any Additional Sums and Additional Amounts), respectively; and FOURTH: The balance, if any, to the Person or Persons lawfully entitled thereto. .7 Limitation on Suits. No Holder of any Security shall have any right to institute any proceeding, judicial or otherwise, with respect to this Indenture or for the appointment of a receiver, assignee, trustee, liquidator, sequestrator (or other similar official) or for any other remedy hereunder, unless: (1) such Holder shall have previously given written notice to the Trustee of a continuing Event of Default; (2) if the Preferred Trustee is not the Holder of the Securities, the Holders of not less than 25% in aggregate principal amount of the Outstanding Securities shall have made written request to the Trustee to institute proceedings in respect of such Event of Default in its own name as Trustee hereunder; 57 65 (3) such Holder or Holders shall have offered to the Trustee reasonable indemnity against the costs, expenses and liabilities to be incurred in compliance with such request; (4) the Trustee for 60 days after its receipt of such notice, request and offer of indemnity failed to institute any such proceeding; and (5) no direction inconsistent with such written request shall have been given to the Trustee during such 60-day period by the Holders of a majority in aggregate principal amount of the Outstanding Securities; it being understood and intended that no one or more Holders shall have any right in any manner whatever by virtue of, or by availing of, any provision of this Indenture to affect, disturb or prejudice the rights of any other Holders, or to obtain or to seek to obtain priority or preference over any other Holders or to enforce any right under this Indenture, except in the manner herein provided and for the equal and ratable benefit of all the Holders. The foregoing limitations shall not apply to a suit instituted by a Holder of a Security for enforcement of payment of the principal of and premium, it any, or interest (including Additional Sums and Additional Amounts, if any) on such Security on or after the respective due dates expressed in such Security. .8 Unconditional Right of Holders to Receive Principal, Premium and Interest. Notwithstanding any other provision in this Indenture, the Holder of any Security shall have the right which is absolute and unconditional to receive payment of the principal of (and premium, if any) and (subject to Section 3.7) interest (including Additional Sums and Additional Amounts, if any) on such Security on the respective Stated Maturities expressed in such Security and to institute suit for the enforcement of any such payment, and such rights shall not be impaired without the consent of such Holder. Except as set forth in the Declaration, the holders of Preferred Securities shall have no right to exercise directly any right or remedy available to the Holders of, or in respect of, the Securities; provided, however, that if the Preferred Trustee or the Special Trustee (as defined in the Declaration) do not enforce such payment obligations, a holder of Preferred Securities shall have the right to bring an action on behalf of the Trust to enforce the Trust's rights under the Securities and the Indenture. .9 Restoration of Rights and Remedies. If the Trustee or any Holder has instituted any proceeding to enforce any right or remedy under this Indenture and such proceeding has been discontinued or abandoned for any reason, or has been determined adversely to the Trustee or to such Holder, then and in every such case the Note Issuer, the Guarantors, the Trustee and the Holders shall, subject to any determination in such proceeding, be restored severally and respectively to their former positions hereunder, and thereafter all rights and remedies of the Trustee and the Holders shall continue as though no such proceeding had been instituted. 58 66 .10 Rights and Remedies Cumulative. Except as otherwise provided in the last paragraph of Section 3.6, no right or remedy herein conferred upon or reserved to the Trustee or to the Holders is intended to be exclusive of any other right or remedy, and every right and remedy shall, to the extent permitted by law, be cumulative and in addition to every other right and remedy given hereunder or now or hereafter existing at law or in equity or otherwise. The assertion or employment of any right or remedy hereunder, or otherwise, shall not prevent the concurrent assertion or employment of any other appropriate right or remedy. .11 Delay or Omission Not Waiver. Except as otherwise provided in the last paragraph of Section 3.6, no delay or omission of the Trustee or of any Holder of any Security to exercise any right or remedy accruing upon any Event of Default shall impair any such right or remedy or constitute a waiver of any such Event of Default or an acquiescence therein. Every right and remedy given by this Article or by law to the Trustee or to the Holders may be exercised from time to time, and as often as may be deemed expedient, by the Trustee or by the Holders, as the case may be. .12 Control by Holders. The Holders of a majority in aggregate principal amount of the Outstanding Securities shall have the right, subject to Section 6.3 hereof, to direct the time, method and place of conducting any proceeding for any remedy available to the Trustee or exercising any trust or power conferred on the Trustee, with respect to the Securities, provided, that: (1) such direction shall not be in conflict with any rule of law or with this Indenture, (2) the Trustee may take any other action deemed proper by the Trustee which is not inconsistent with such direction, and (3) subject to the provisions of Section 6.1, the Trustee shall have the right to decline to follow such direction if the Trustee in good faith shall, by a Responsible Officer or Officers of the Trustee, determine that the proceeding so directed would be unjustly prejudicial to the Holders not joining in any such direction or would involve the Trustee in personal liability. Upon receipt by the Trustee of any written notice directing the time, method or place of conducting any such proceeding or exercising any such trust or power, a record date shall be established for determining Holders of Outstanding Securities entitled to join in such notice, which record date shall be at the close of business on the day the Trustee receives such notice. The Holders on such record date, or their duly designated proxies, and only such Persons, shall be entitled to join in such notice, whether or not such Holders remain Holders after such record date; provided, that, unless the Holders of a majority in principal amount of the Outstanding Securities shall have joined in such notice prior to the day which is 90 days after such record date, such notice shall automatically and without further action by any Holder be canceled and of no further effect. Nothing in this paragraph shall prevent a Holder, 59 67 or a proxy of a Holder, from giving, after expiration of such 90-day period, a new notice identical to a notice which has been canceled pursuant to the proviso to the preceding sentence, in which event a new record date shall be established pursuant to the provisions of this Section 5.12. .13 Waiver of Past Defaults. The Holders of a majority in aggregate principal amount of the Outstanding Securities affected thereby may, on behalf of the Holders of all the Securities, waive any past default hereunder and its consequences with respect to the Securities except a default: (1) in the payment of the principal of (or premium, if any) or interest (including Additional Sums and Additional Amounts, if any) on any Security, or (2) in respect of a covenant or provision hereof which under Article IX cannot be modified or amended without the consent of the Holder of each Outstanding Security affected. Upon any such waiver, such default shall cease to exist, and any Event of Default arising therefrom shall be deemed to have been cured, for every purpose of this Indenture; but no such waiver shall extend to any subsequent or other default or impair any right consequent thereon. .14 Undertaking for Costs. All parties to this Indenture agree, and each Holder of any Security by his acceptance thereof shall be deemed to have agreed, that any court may in its discretion require, in any suit for the enforcement of any right or remedy under this Indenture, or in any suit against the Trustee for any action taken or omitted by it as Trustee, the filing by any party litigant in such suit of an undertaking to pay the costs of such suit, and that such court may in its discretion assess reasonable costs, including reasonable attorneys' fees, against any party litigant in such suit, having due regard to the merits and good faith of the claims or defenses made by such party litigant; but the provisions of this Section shall not apply to any suit instituted by the Trustee, to any suit instituted by any Holder, or group of Holders, holding in the aggregate more than 10% in principal amount of the Outstanding Securities, or to any suit instituted by any Holder for the enforcement of the payment of the principal of (or premium, if any) or interest (including Additional Sums and Additional Amounts, if any) on any Security on or after the respective Stated Maturities expressed in such Security. .15 Waiver of Usury, Stay or Extension Laws. Each of the Note Issuer and the Guarantors covenants (to the extent that it may lawfully do so) that it will not at any time insist upon, or plead, or in any manner whatsoever claim or take the benefit or advantage of, any usury, stay or extension law wherever enacted, now or at any time hereafter in force, which may affect the covenants or the performance of this Indenture; and each of the Note Issuer and the Guarantors (to the extent that it may lawfully do so) 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 60 68 the Trustee, but will suffer and permit the execution of every such power as though no such law had been enacted. ARTICLE VI. THE TRUSTEE .1 Certain Duties and Responsibilities. (a) Except during the continuance of an Event of Default, (1) the Trustee undertakes to perform such duties and only such duties as are specifically set forth in this Indenture, and no implied covenants or obligations shall be read into this Indenture against the Trustee; and (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; but in the case of any such certificates or opinions which by any provisions hereof are specifically required to be furnished to the Trustee, the Trustee shall be under a duty to examine the same to determine whether or not they conform to the requirements of this Indenture. (b) In case 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 their exercise, as a prudent person would exercise or use under the circumstances in the conduct of his own affairs. (c) No provision of this Indenture shall be construed to relieve the Trustee from liability for its own negligent action, its own negligent failure to act, or its own willful misconduct except that (1) this Subsection shall not be construed to limit the effect of Subsection (a) of this Section; (2) the Trustee shall not be liable for any error of judgment made in good faith by a Responsible Officer, unless it shall be proved that the Trustee was negligent in ascertaining the pertinent facts; and (3) the Trustee shall not be liable with respect to any action taken or omitted to be taken by it in good faith in accordance with the direction of Holders pursuant to Section 5.12 relating to the time, method and place of conducting any proceeding for any remedy available to the Trustee, or exercising any trust or power conferred upon the Trustee, under this Indenture with respect to the Securities. (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 there shall be reasonable 61 69 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 therein expressly so provided, every provision of this Indenture relating to the conduct or affecting the liability of or affording protection to the Trustee shall be subject to the provisions of this Section. .2 Notice of Defaults. Within 90 days after actual knowledge by a Responsible Officer of the Trustee of the occurrence of any default hereunder with respect to the Securities, the Trustee shall transmit by mail to all Holders, as their names and addresses appear in the Securities Register, notice of such default hereunder known to the Trustee, unless such default shall have been cured or waived; provided, however, that, except in the case of a default in the payment of the principal of (or premium, if any) or interest (including Additional Sums and Additional Amounts, if any) on any Security, the Trustee shall be protected in withholding such notice if and so long as the board of directors, the executive committee or a trust committee of directors and/or Responsible Officers of the Trustee in good faith determines that the withholding of such notice is in the interests of the Holders; and provided, further, that, in the case of any default of the character specified in Section 5.1(3), no such notice to Holders shall be given until at least 30 days after the occurrence thereof. For the purpose of this Section, the term "default" means any event which is, or after notice or passage of time or both would be, an Event of Default. .3 Certain Rights of Trustee. Subject to the provisions of Section 6.1: (a) the Trustee may rely and shall be protected in acting or refraining from acting upon any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, debenture, note, Security or other evidence of indebtedness, or other paper or document believed by it to be genuine and to have been signed or presented by the proper party or parties; (b) any request or direction of the Note Issuer mentioned herein shall be sufficiently evidenced by a Note Issuer Request or Note Issuer Order and any resolution of the Board of Directors may be sufficiently evidenced by a Board Resolution; (c) whenever in the administration of this Indenture the Trustee shall deem it desirable that a matter be proved or established prior to taking, suffering or omitting any action hereunder, the Trustee (unless other evidence be herein specifically prescribed) may, in the absence of bad faith on its part, rely upon an Officers' Certificate; (d) the Trustee may consult with counsel and the written advice of such counsel or any Opinion of Counsel shall be full and complete authorization and protection in respect of any action taken, suffered or omitted by it hereunder in good faith and in reliance thereon; (e) the Trustee shall be under no obligation to exercise any of the rights or powers vested in it by this Indenture at the request or direction of any of the Holders pursuant 62 70 to this Indenture, unless such Holders shall have offered to the Trustee reasonable security or indemnity against the costs, expenses and liabilities which might be incurred by it in compliance with such request or direction; (f) the Trustee shall not be bound to make any investigation into the facts or matters stated in any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, debenture, note, Security or other evidence of indebtedness, or other paper or document, but the Trustee in its discretion may make such further inquiry or investigation into such facts or matters as it may see fit, and, if the Trustee shall determine to make such further inquiry or investigation, it shall be entitled to examine the books, records and premises of the Note Issuer or any Guarantor, personally or by agent or attorney; and (g) the Trustee may execute any of the trusts or powers hereunder or perform any duties hereunder either directly or by or through agents or attorneys and the Trustee shall not be responsible for any misconduct or negligence on the part of any agent or attorney appointed with due care by it hereunder. .4 Not Responsible for Recitals or Issuance of Securities. The recitals contained herein and in Securities and Guaranties endorsed thereon, except the Trustee's certificates of authentication, shall be taken as the statements of the Note Issuer, or the Guarantors, as the case may be, and the Trustee assumes no responsibility for their correctness. The Trustee makes no representations as to the validity or sufficiency of this Indenture or of the Securities, the value or condition of any Collateral or the priority or perfection of any security interest purportedly granted herein. The Trustee shall not be accountable for the use or application by the Note Issuer of the Securities or the proceeds thereof. .5 May Hold Securities. The Trustee, any Paying Agent, Securities Registrar or any other agent of the Note Issuer or any Guarantor, in its individual or any other capacity, may become the owner or pledgee of Securities and, subject to Sections 6.8 and 6.13, may otherwise deal with the Note Issuer or any Guarantor with the same rights it would have if it were not Trustee, Paying Agent, Securities Registrar or such other agent. .6 Money Held in Trust. Money held by the Trustee in trust hereunder need not be segregated from other funds except to the extent required by law. The Trustee shall be under no liability for interest on any money received by it hereunder except as otherwise agreed in writing with the Note Issuer or any Guarantor, as the case may be. .7 Compensation and Reimbursement. The Company and the Note Issuer agree (1) to pay to the Trustee from time to time reasonable compensation for all services rendered by it hereunder in such amounts as the Note Issuer, the 63 71 Guarantors and the Trustee shall agree from time to time (which compensation shall not be limited by any provision of law in regard to the compensation of a trustee of an express trust); (2) to reimburse the Trustee upon its request for all reasonable expenses, disbursements and advances incurred or made by the Trustee in accordance with any provision of this Indenture (including the reasonable compensation and the reasonable expenses and disbursements of its agents and counsel), except any such expense, disbursement or advance as may be attributable to its negligence or bad faith; and (3) to indemnify the Trustee for, and to hold it harmless against, any loss, liability or expense (including the reasonable compensation and the reasonable expenses and disbursements of its agents and counsel) incurred without negligence or bad faith on its part, arising out of or in connection with the acceptance or administration of this trust or the performance of its duties hereunder, including the costs and expenses of defending itself against any claim or liability in connection with the exercise or performance of any of its powers or duties hereunder. This indemnification shall survive the termination of this Agreement. To secure the Note Issuer's payment obligations in this Section, the Note Issuer and the Holders agree that the Trustee shall have a lien prior to the Securities on all money or property held or collected by the Trustee. Such lien shall survive the satisfaction and discharge of this Indenture. When the Trustee incurs expenses or renders services after an Event of Default specified in Section 5.1(6) or (7) occurs, the expenses and the compensation for the services are intended to constitute expenses of administration under any applicable German or United States Federal or State or other applicable foreign bankruptcy, insolvency or other similar law. .8 Disqualification; Conflicting Interests. The Trustee shall be subject to the provisions of Section 310(b) of the Trust Indenture Act. Nothing herein shall prevent the Trustee from filing with the Commission the application referred to in the second to last paragraph of Section 301(b) of the Trust Indenture Act. .9 Corporate Trustee Required; Eligibility. There shall at all times be a Trustee hereunder which shall be (a) a corporation organized and doing business under the laws of the United States of America or of any State, Territory or the District of Columbia, authorized under such laws to exercise corporate trust powers and subject to supervision or examination by Federal, State, Territorial or District of Columbia authority, or (b) a corporation or other Person organized and doing business under the laws of a foreign government that is permitted to act as Trustee pursuant to a rule, regulation or order of the Commission, authorized under such laws to exercise corporate trust powers, 64 72 and subject to supervision or examination by authority of such foreign government or a political subdivision thereof substantially equivalent to supervision or examination applicable to United States institutional trustees, in either case having a combined capital and surplus of at least $50 million, subject to supervision or examination by Federal or State authority. If such corporation publishes reports of condition at least annually, pursuant to law or to the requirements of the aforesaid supervising or examining authority, then, for the purposes of this Section, the combined capital and surplus of such corporation shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published. If at any time the Trustee shall cease to be eligible in accordance with the provisions of this Section, it shall resign immediately in the manner and with the effect hereinafter specified in this Article. Neither the Note Issuer nor any Person directly or indirectly controlling, controlled by or under common control with the Note Issuer shall serve as Trustee. .10 Resignation and Removal; Appointment of Successor. (a) No resignation or removal of the Trustee and no appointment of a successor Trustee pursuant to this Article shall become effective until the acceptance of appointment by the successor Trustee under Section 6.11. (b) The Trustee may resign at any time by giving written notice thereof to the Note Issuer. If an instrument of acceptance by a successor Trustee shall not have been delivered to the Trustee within 30 days after the giving of such notice of resignation, the resigning Trustee may petition any court of competent jurisdiction for the appointment of a successor Trustee. (c) The Trustee may be removed at any time with respect to the Securities by Act of the Holders of a majority in principal amount of the Outstanding Securities, delivered to the Trustee and to the Note Issuer. (d) If at any time: (1) the Trustee shall fail to comply with Section 6.8 after written request therefor by the Note Issuer or by any Holder who has been a bona fide Holder of a Security for at least six months, or (2) the Trustee shall cease to be eligible under Section 6.9 and shall fail to resign after written request therefor by the Note Issuer or by any such Holder, or (3) the Trustee shall become incapable of acting or shall be adjudged a bankrupt or insolvent or a receiver of the Trustee or of its property shall be appointed or any public officer shall take charge or control of the Trustee or of its property or affairs for the purpose of rehabilitation, conservation or liquidation, then, in any such case, (i) the Note Issuer, acting pursuant to the authority of a Board Resolution, may remove the Trustee, or (ii) subject to Section 5.14, any Holder who has been a bona fide Holder of a Security for at least six months may, on behalf of himself and all others 65 73 similarly situated, petition any court of competent jurisdiction for the removal of the Trustee and the appointment of a successor Trustee. (e) If the Trustee shall resign, be removed or become incapable of acting, or if a vacancy shall occur in the office of Trustee for any cause, the Note Issuer, by a Board Resolution, shall promptly appoint a successor Trustee. If, within one year after such resignation, removal or incapability, or the occurrence of such vacancy, a successor Trustee shall be appointed by Act of the Holders of a majority in principal amount of the Outstanding Securities delivered to the Note Issuer and the retiring Trustee, the successor Trustee so appointed shall, forthwith upon its acceptance of such appointment, become the successor Trustee and supersede the successor Trustee appointed by the Note Issuer. If no successor Trustee shall have been so appointed by the Note Issuer or the Holders and accepted appointment in the manner hereinafter provided, any Holder who has been a bona fide Holder of a Security for at least six months may, subject to Section 5.14, on behalf of himself and all others similarly situated, petition any court of competent jurisdiction for the appointment of a successor Trustee. (f) The Note Issuer shall give notice of each resignation and each removal of the Trustee and each appointment of a successor Trustee by mailing written notice of such event by first-class mail, postage prepaid, to the Holders of Securities as their names and addresses appear in the Securities Register. Each notice shall include the name of the successor Trustee and the address of its Corporate Trust Office. .11 Acceptance of Appointment by Successor. (a) In case of the appointment hereunder of a successor Trustee, every such successor Trustee so appointed shall execute, acknowledge and deliver to the Company, the Note Issuer, and the other Guarantors and to the retiring Trustee an instrument accepting such appointment, and thereupon the resignation or removal of the retiring Trustee shall become effective and such successor Trustee, without any further act, deed or conveyance, shall become vested with all the rights, powers, trusts and duties of the retiring Trustee; but, on the request of the Company, the Note Issuer, any other Guarantor or the successor Trustee, such retiring Trustee shall, upon payment of its charges, execute and deliver an instrument transferring to such successor Trustee all the rights, powers and trusts of the retiring Trustee and shall duly assign, transfer and deliver to such successor Trustee all property and money held by such retiring Trustee hereunder. (b) Upon request of any such successor Trustee, the Company, the Note Issuer and the Guarantors shall execute any and all instruments for more fully and certainly vesting in and confirming to such successor Trustee all rights, powers and trusts referred to in paragraph (a) of this Section. (c) No successor Trustee shall accept its appointment unless at the time of such acceptance such successor Trustee shall be qualified and eligible under this Article. .12 Merger, Conversion, Consolidation or Succession to Business. Any corporation into which the Trustee may be merged or converted or with which it may be consolidated, or any corporation resulting from any merger, conversion or consolidation to which the Trustee shall be a party, or any corporation succeeding to all or 66 74 substantially all of the corporate trust business of the Trustee, shall be the successor of the Trustee hereunder, provided such corporation shall be otherwise qualified and eligible under this Article, without the execution or filing of any paper or any further act on the part of any of the parties hereto. In case any Securities shall have been authenticated, but not delivered, by the Trustee then in office, any successor by merger, conversion or consolidation to such authenticating Trustee may adopt such authentication and deliver the Securities so authenticated, and in case any Securities shall not have been authenticated, any successor to the Trustee may authenticate such Securities either in the name of any predecessor Trustee or in the name of such successor Trustee, and in all cases the certificate of authentication shall have the full force which it is provided anywhere in the Securities or in this Indenture that the certificate of the Trustee shall have. .13 Preferential Collection of Claims Against Note Issuer. If and when the Trustee shall be or become a creditor of the Note Issuer, the Guarantors or any other obligor upon the Securities, the Trustee shall be subject to the provisions of the Trust Indenture Act regarding the collection of claims against the Note Issuer, the Guarantors or any such other obligor. .14 Appointment of Authenticating Agent. The Trustee may appoint an Authenticating Agent or Agents which shall be authorized to act on behalf of the Trustee to authenticate the Securities issued upon original issue and upon exchange, registration of transfer or partial redemption thereof, and the Securities so authenticated shall be entitled to the benefits of this Indenture and shall be valid and obligatory for all purposes as if authenticated by the Trustee hereunder. Wherever reference is made in this Indenture to the authentication and delivery of the Securities by the Trustee or the Trustee's certificate of authentication, such reference shall be deemed to include authentication and delivery on behalf of the Trustee by an Authenticating Agent. Each Authenticating Agent shall be acceptable to the Note Issuer and shall at all times be a corporation organized and doing business under the laws of the United States of America, any State thereof, or any Territory or the District of Columbia, authorized under such laws to act as Authenticating Agent, having a combined capital and surplus of not less than $50 million and subject to supervision or examination by Federal or State authority. If such Authenticating Agent publishes reports of condition at least annually, pursuant to law or to the requirements of said supervising or examining authority, then for the purposes of this Section, the combined capital and surplus of such Authenticating Agent shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published. If at any time an Authenticating Agent shall cease to be eligible in accordance with the provisions of this Section, such Authenticating Agent shall resign immediately in the manner and with the effect specified in this Section. Any corporation into which an Authenticating Agent may be merged or converted or with which it may be consolidated, or any corporation resulting from any merger, conversion or consolidation to which such Authenticating Agent shall be a party, or any corporation succeeding to all or substantially all of the corporate trust business of an Authenticating Agent shall be the successor Authenticating Agent hereunder, provided such corporation shall be otherwise eligible under this Section, without the execution or filing of any paper or any further act on the part of the Trustee or the Authenticating Agent. 67 75 An Authenticating Agent may resign at any time by giving written notice thereof to the Trustee and to the Note Issuer. The Trustee may at any time terminate the agency of an Authenticating Agent by giving written notice thereof to such Authenticating Agent and to the Note Issuer. Upon receiving such a notice of resignation or upon such a termination, or in case at any time such Authenticating Agent shall cease to be eligible in accordance with the provisions of this Section, the Trustee may appoint a successor Authenticating Agent which shall be acceptable to the Note Issuer and the Guarantors and shall give notice of such appointment in the manner provided in Section 1.6 to all Holders of Securities. Any successor Authenticating Agent upon acceptance of its appointment hereunder shall become vested with all the rights, powers and duties of its predecessor hereunder, with like effect as if originally named as an Authenticating Agent. No successor Authenticating Agent shall be appointed unless eligible under the provision of this Section. The Trustee agrees to pay to each Authenticating Agent from time to time reasonable compensation for its services under this Section, and the Trustee shall be entitled to be reimbursed for such payments, subject to the provisions of Section 6.7. If an appointment is made pursuant to this Section, the Securities may have endorsed thereon, in addition to the Trustee's certificate of authentication, an alternative certificate of authentication in the following form: This is one of the Securities with the Guaranties endorsed thereon referred to in the within mentioned Indenture. As Trustee By: --------------------------------------- As Authenticating Agent By: --------------------------------------- Authorized Officer 68 76 ARTICLE VII. HOLDER'S LISTS AND REPORTS BY TRUSTEE AND NOTE ISSUER .1 Note Issuer to Furnish Trustee Names and Addresses of Holders. The Note Issuer will furnish or cause to be furnished to the Trustee: (a) semi-annually, not more than 14 days after each Regular Record Date, a list, in such form as the Trustee may reasonably require, of the names and addresses of the Holders as of such Regular Record Date, (b) at such other times as the Trustee may request in writing, within 30 days after the receipt by the Note Issuer of any such request, a list of similar form and content as of a date not more than 15 days prior to the time such list is furnished; excluding from any such list names and addresses received by the Trustee in its capacity as Securities Registrar. .2 Preservation of Information, Communications to Holders. (a) The Trustee shall preserve, in as current a form as is reasonably practicable, the names and addresses of Holders contained in the most recent list furnished to the Trustee as provided in Section 7.1 and the names and addresses of Holders received by the Trustee in its capacity as Securities Registrar. The Trustee may destroy any list furnished to it as provided in Section 7.1 upon receipt of a new list so furnished. (b) The rights of Holders to communicate with other Holders with respect to their rights under this Indenture or under the Securities, and the corresponding rights, privileges and duties of the Trustee, shall be as provided by the Trust Indenture Act. (c) Every Holder of Securities, by receiving and holding the same, agrees with the Note Issuer, the Guarantors and the Trustee that none of the Note Issuer, the Guarantors, the Trustee and any agent of any of them shall be held accountable by reason of any disclosure of information as to the names and addresses of the Holders made pursuant to the Trust Indenture Act. .3 Reports by Trustee. (a) The Trustee shall transmit to Holders such reports concerning the Trustee and its actions under this Indenture as may be required pursuant to the Trust Indenture Act, at the times and in the manner provided pursuant thereto. (b) Reports so required to be transmitted at stated intervals of not more than 12 months shall be transmitted no later than May 15 in each calendar year, commencing with the first May 15 after the first issuance of Securities under this Indenture. (c) A copy of each such report shall, at the time of such transmission to Holders, be filed by the Trustee with the Commission, and delivered to the Note Issuer and to the Guarantors. 69 77 .4 Reports by Note Issuer. The Company, the Note Issuer and each of the Guarantors shall file with the Trustee and with the Commission, and transmit to Holders, such information, documents and other reports, and such summaries thereof, as may be required pursuant to the Trust Indenture Act at the times and in the manner provided in the Trust Indenture Act; provided, whether or not required by the rules and regulations of the Commission, so long as any Securities are Outstanding, the Company shall provide the Trustee and the Holders with (i) all annual financial information that would be required to be contained in a filing with the Commission on Form 20-F as if the Company were required to file reports on such Form, and (ii) quarterly financial statements as of end for the period from the beginning of each year to the close of each quarterly period (other than the fourth quarter), together with comparable information for the corresponding periods of the preceding year, including, in each case, an "Operating and Financial Review and Prospects" and, with respect to the annual information only, a report thereon from the Company's certified independent public accountants. In addition, whether or not required by the rules and regulations of the Commission, the Company shall file a copy of all such information and reports with the Commission for public availability and make such information and reports available to securities analysts and prospective investors upon request. The Company and the Note Issuer also shall comply with the other provisions of Trust Indenture Act Section 314(a). ARTICLE VIII. CONSOLIDATION, MERGER, CONVEYANCE, TRANSFER OR LEASE .1 Note Issuer May Consolidate, etc., Only on Certain Terms. The Note Issuer shall not consolidate or merge with or into any other Person (whether or not the Note Issuer is the Surviving Person) or sell, assign, transfer, lease, convey or otherwise dispose of all or substantially all of its properties and assets, in one or more related transactions, as an entirety to another Person, unless: (1) the Surviving Person is a corporation organized and existing under the laws of a member state of the European Union (other than Greece or Portugal), Switzerland, the United States of America or any State thereof or the District of Columbia or the jurisdiction of formation of the Note Issuer; (2) the Surviving Person (if other than the Note Issuer) expressly assumes, all the obligations of the Note Issuer under the Securities and the Indenture by an indenture supplemental hereto, executed and delivered to the Trustee, in form satisfactory to the Trustee; (3) at the time of, and immediately after giving effect to, such transaction, no Default or Event of Default, shall have occurred and be continuing; (4) the Note Issuer shall have delivered to the Trustee an Officers' Certificate and an Opinion of Counsel, each stating that such consolidation, merger, conveyance, transfer, assignment, sale, lease or disposition, and any such supplemental indenture complies with this Article and that all conditions precedent herein provided for relating to such transaction have been complied 70 78 with; and the Trustee, subject to Section 6.1, may rely upon such Officers' Certificate and Opinion of Counsel as conclusive evidence that such transaction complies with this Section 8.1; and (5) such consolidation, merger, conveyance, transfer, assignment, lease or disposition is permitted under the Declaration and does not give rise to any breach or violation of the Declaration. .2 Guarantors May Consolidate, etc., Only on Certain Terms. The Company shall not and shall not permit any other Guarantor to consolidate with or merge with or into, or convey, transfer, sell, assign, lease or otherwise dispose of, in one transaction or a series of transactions, all or substantially all of its properties and assets to any Person unless: (1) the Surviving Person (if not the Company or such other Guarantor) shall be a Person organized and existing under the laws of the jurisdiction under which such Guarantor was organized or under the laws of Germany, the United Kingdom, the United States of America, or any state thereof or the District of Columbia or, except in a transaction or series of transactions involving the Company, the jurisdiction of formation of the Note Issuer or, if the Surviving Person is a corporation organized and existing under the laws of any other jurisdiction, the Note Issuer delivers to the Trustee an Opinion of Counsel reasonably acceptable to the Trustee to the effect that the rights of the Holders of the Securities would not be affected adversely as a result of the law of the jurisdiction of organization of the Surviving Person, insofar as such law affects the ability of the Surviving Person to pay and perform its obligations and undertakings in connection with its Guaranty or the ability of the Surviving Person to obligate itself to pay and perform such obligations and undertakings or the ability of the Holders to enforce such obligations and undertakings; (2) the Surviving Person (if other than the Company or such other Guarantor) shall expressly assume, (A) in a transaction or series of transactions involving the Company, by a supplemental indenture in a form satisfactory to the Trustee, all of the obligations of the Company under this Indenture, including its Guaranty hereunder, or (B) in a transaction or series of transactions not involving the Company, by a Guaranty Agreement, in a form satisfactory to the Trustee, all the obligations of such Subsidiary, if any, under its Guaranty; (3) at the time of, and immediately after giving effect to, such transaction or transactions on a pro forma basis (and treating any Indebtedness which becomes an obligation of the resulting, surviving or transferee Person as a result of such transaction as having been issued by such Person at the time of such transaction), no Default shall have occurred and be continuing; and (4) in the case of a transaction or series of transactions involving the Company, (a) the Surviving Person shall have a Consolidated Net Worth (immediately after the transaction) equal to or greater than the Consolidated Net Worth of the Company immediately preceding the transaction, (b) at the 71 79 time of such transaction and after giving pro forma effect thereto, the Surviving Person would be permitted to incur at least $1.00 of additional Indebtedness pursuant to paragraph (a) of Section 10.8 and (c) such consolidation, merger, conveyance, transfer or lease is permitted under the Declaration and the Company Guarantee and does not give rise to any breach or violation of the Declaration or the Company Guarantee; and (5) the Note Issuer and the Company or such other Note Guarantor has delivered to the Trustee an Officers' Certificate and an Opinion of Counsel, each stating that such consolidation, merger, conveyance, transfer, assignment, sale, lease, or other disposition and such supplemental indenture or Guaranty Agreement, if any, comply with the Indenture. .3 Successor Corporation Substituted. Upon any consolidation or merger by the Note Issuer with or into any other Person, or any conveyance, transfer, sale, assignment, lease or other disposition by the Note Issuer, in one or more transactions, of substantially all of its properties and assets as an entirety to any Person in accordance with Section 8.1, the Surviving Person shall succeed to, and be substituted for, and may exercise every right and power of, the Note Issuer under this Indenture with the same effect as if such Surviving Person had been named as the Note Issuer herein, and thereafter the Note Issuer shall be discharged from all obligations and covenants under the Indenture and the Securities. Such Surviving Person may cause to be signed, and may issue either in its own name or in the name of the Note Issuer, any or all of the Securities issuable hereunder which theretofore shall not have been signed by the Note Issuer and delivered to the Trustee; and, upon the order of such Surviving Person instead of the Note Issuer and subject to all the terms, conditions and limitations in this Indenture prescribed, the Trustee shall authenticate and shall deliver any Securities which previously shall have been signed and delivered by the officers of the Note Issuer to the Trustee for authentication pursuant to such provisions and any Securities which such Surviving Person thereafter shall cause to be signed and delivered to the Trustee on its behalf for the purpose pursuant to such provisions. All the Securities so issued shall in all respects have the same legal rank and benefit under this Indenture as the Securities theretofore or thereafter issued in accordance with the terms of this Indenture as though all of such Securities had been issued at the date of the execution hereof. In case of any such consolidation, merger, sale, assignment, transfer, conveyance, lease, or other disposition such changes in phraseology and form may be made in the Securities thereafter to be issued as may be appropriate. Upon any consolidation, or merger of a Guarantor with or into any other Person or any transfer, conveyance, sale, lease, assignment or other disposition of all or substantially all of the properties and assets of such Guarantor as an entirety in accordance with Section 8.2, the Surviving Person shall succeed to, and be substituted for, and may exercise every right and power of, such Guarantor under this Indenture with the same effect as if such Surviving Person had been named as a Guarantor herein, and thereafter the Guarantor shall be relieved of all obligations and covenants under this Indenture and the Securities. 72 80 .4 Successor to Note Issuer. The Company or a Wholly Owned Subsidiary (a "Successor"), may assume the obligations of the Note Issuer under the Securities, by executing and delivering to the Trustee (a) a supplemental indenture which subjects such person to all of the provisions of the Indenture as Note Issuer and (b) an Opinion of Counsel to the effect that such supplemental indenture has been duly authorized and executed by such Person, and constitutes the legal, valid, binding and enforceable obligation of such Person, subject to customary exceptions; provided that (i) the Successor is formed under the laws of any member state of the European Union (except Greece or Portugal), Switzerland, the United States of America, or any State thereof or the District of Columbia or the jurisdiction of the formation of the Note Issuer; (ii) no Additional Amounts would be or become payable with respect to the Securities and the time of such assumption, or as a result of any change in the laws of the jurisdiction of formation of such Successor that was reasonably foreseeable at such time, (iii) the assumption of such obligations by the Successor shall not cause the Trust to fail or cease to be classified for U.S. Federal income tax purposes as a grantor trust or another entity which is not subject to U.S. Federal income tax at the entity level and the assets and income of which are treated for U.S. Federal income tax purposes as held and derived directly by holders of interests in such Trust and (iv) if a Wholly Owned Subsidiary is the Successor, the Company shall continue to unconditionally guarantee, on a senior subordinated basis, the obligations assumed by such Successor. The Successor shall succeed to, and be substituted for, and may exercise every right and power of, the Note Issuer under the Indenture with the same effect as if it were the Note Issuer thereunder, and the former Note Issuer shall be discharged from all obligations and covenants under the Indenture and the Securities. ARTICLE IX. SUPPLEMENTAL INDENTURES .1 Supplemental Indentures Without Consent of Holders. Without the consent of any Holders, the Note Issuer, when authorized by a Board Resolution of the Note Issuer, the Company, when authorized by a Board Resolution of the Company, the Guarantors, when authorized by respective Board Resolutions of the Guarantors, and the Trustee, at any time and from time to time, may enter into one or more indentures supplemental hereto, in form satisfactory to the Trustee, for any of the following purposes: (1) to evidence the succession of another Person to the Note Issuer or any Guarantor, and the assumption by any such successor of the covenants of the Note Issuer or such Guarantor herein and in the Securities; or (2) to convey, transfer, assign, mortgage or pledge any property to or with the Trustee or to surrender any right or power herein conferred upon the Note Issuer; or (3) to establish the form or terms of Securities and Guaranties as permitted by Section 2.1; or (4) to add to the covenants of the Note Issuer for the benefit of the Holders or to surrender any right or power herein conferred upon the Note Issuer; or 73 81 (5) to add any additional Events of Default; or (6) to change or eliminate any of the provisions of this Indenture, provided, that any such change or elimination shall become effective only when there is no Security Outstanding created prior to the execution of such supplemental indenture which is entitled to the benefit of such provision; or (7) to cure any ambiguity, to correct or supplement any provision herein which may be inconsistent with any other provision herein, or to make any other provisions with respect to matters or questions arising under this Indenture, provided that such action pursuant to this clause (7) shall not materially adversely affect the interest of the Holders or, for so long as any of the Preferred Securities shall remain outstanding, the holders of such Preferred Securities; or (8) to evidence and provide for the acceptance of appointment hereunder by a successor Trustee with respect to the Securities and to add to or change any of the provisions of this Indenture as shall be necessary to provide for or facilitate the administration of the trusts hereunder by more than one Trustee, pursuant to the requirements of Section 6.11(b); or (9) to comply with the requirements of the Commission in order to effect or maintain the qualification of this Indenture under the Trust Indenture Act; or (10) to add new Guarantors pursuant to Section 13.5. .2 Supplemental Indentures with Consent of Holders. With the consent of the Holders of not less than a majority in principal amount of the Outstanding Securities affected by such supplemental indenture, by Act of said Holders delivered to the Note Issuer, the Guarantors and the Trustee, the Note Issuer, when authorized by a Board Resolution of the Note Issuer, the Guarantors, when authorized by respective Board Resolutions of the Guarantors, and the Trustee may modify the Indenture or enter into an indenture or indentures supplemental hereto for the purpose of adding any provisions to or changing in any manner or eliminating any of the provisions of this Indenture or of modifying in any manner the rights of the Holders under this Indenture; provided, however, that no such supplemental indenture shall, without the consent of the Holder of each Outstanding Security affected thereby, (1) extend the Stated Maturity of the principal of any Security, or reduce the principal amount thereof, or reduce the rate or extend the time of payment of interest thereon, or reduce any premium payable upon the redemption thereof, or change the place of payment where, or the currency of payment of any principal of, or any premium or interest on any Security, or impair the right to institute suit for the enforcement of any such payment on or with respect to a Security (or, in the case of redemption, on or after the date fixed for redemption thereof); or (2) reduce the percentage in principal amount of Securities, the consent of whose Holders is required for any such modification or supplemental indenture, or the consent of whose Holders is required for any waiver (of compliance 74 82 with certain provisions of this Indenture or certain defaults hereunder and their consequences) provided for in this Indenture; or (3) modify any of the provisions of this Section, Section 5.13 or Section 10.18, except to increase any such percentage or to provide that certain other provisions of this Indenture cannot be modified or waived without the consent of the Holder of each Outstanding Security affected thereby; or (4) modify the provisions in this Indenture relating to the subordination of Outstanding Securities in a manner adverse to the Holders. provided, that, so long as any of the Preferred Securities remains outstanding, no such amendment shall be made that adversely affects the holders of such Preferred Securities, and no termination of this Indenture shall occur, and no waiver of any Event of Default or compliance with any covenant under this Indenture shall be effective, without the prior consent of the holders of at least a majority of the aggregate liquidation preference of such Preferred Securities then outstanding unless and until the principal (and premium, if any) of the Securities and all accrued and, subject to Section 3.7, unpaid interest (including Additional Sums and Additional Amounts, if any) thereon have been paid in full; and provided further, that, so long as any of the Preferred Securities remain outstanding, no amendment shall be made to Section 5.8 of this Indenture without the prior consent of the holders of each Preferred Security then outstanding unless and until the principal (and premium, if any) of the Securities and all accrued and (subject to Section 3.7) unpaid interest (including Additional Sums and Additional Amounts, if any) thereon shall have been paid in full. It shall not be necessary for any Act of Holders under this Section to approve the particular form of any proposed supplemental indenture, but it shall be sufficient if such Act shall approve the substance thereof. .3 Execution of Supplemental Indentures. In executing or accepting the additional trusts created by any supplemental indenture permitted by this Article or the modifications thereby of the trusts created by this Indenture, the Trustee shall be entitled to receive, and (subject to Section 6.1) shall be fully protected in relying upon, an Officers' Certificate and an Opinion of Counsel stating that the execution of such supplemental indenture is authorized or permitted by this Indenture, and that all conditions precedent have been complied with. The Trustee may, but shall not be obligated to, enter into any such supplemental indenture which affects the Trustee's own rights, duties or immunities under this Indenture or otherwise. .4 Effect of Supplemental Indentures. Upon the execution of any supplemental indenture under this Article, this Indenture shall be modified in accordance therewith, and such supplemental indenture shall form a part of this Indenture for all purposes; and every Holder of Securities theretofore or thereafter authenticated and delivered hereunder shall be bound thereby. No such supplemental indenture shall directly or indirectly modify the provisions of Article XII, Article XIV, Sections 4.3(b), 5.3 or 5.6 in any manner which might terminate or impair the rights of the Senior Indebtedness pursuant to such subordination provisions. 75 83 .5 Conformity with Trust Indenture Act. Every supplemental indenture executed pursuant to this Article shall conform to any applicable requirements of the Trust Indenture Act as then in effect. .6 Reference in Securities to Supplemental Indentures. Securities authenticated and delivered after the execution of any supplemental indenture pursuant to this Article may, and shall if required by the Note Issuer, bear a notation in form approved by the Note Issuer as to any matter provided for in such supplemental indenture. If the Note Issuer and the Guarantors shall so determine, new Securities so modified as to conform, in the opinion of the Note Issuer and the Guarantors, to any such supplemental indenture may be prepared and executed by the Note Issuer and the Guaranties endorsed thereon may be executed by the Guarantors and authenticated and delivered by the Trustee in exchange for Outstanding Securities. ARTICLE X. COVENANTS .1 Payment of Principal, Premium and Interest. The Note Issuer covenants and agrees for the benefit of each of the Securities that it shall duly and punctually pay the principal of (and premium, if any) and interest on the Securities in accordance with the terms of such Securities and this Indenture. .2 Maintenance of Office or Agency. The Note Issuer shall maintain in the Borough of Manhattan, The City of New York an office or agency where Securities may be presented or surrendered for payment and an office or agency where Securities may be surrendered for registration of transfer or for exchange and where notices and demands to or upon the Note Issuer or any Guarantor in respect of the Securities, any Guaranty endorsed thereon and this Indenture may be served. The Note Issuer and the Guarantors initially appoint the Trustee, acting through its office or agency in the Borough of Manhattan, The City of New York, as its agent for said purposes. The Note Issuer and the Guarantors shall give prompt written notice to the Trustee of any change in the location of any such office or agency. If at any time the Note Issuer or any Guarantor shall fail to maintain such office or agency or shall fail to furnish the Trustee with the address thereof, such presentations, surrenders, notices and demands may be made or served at the Corporate Trust Office of the Trustee, and the Note Issuer and each Guarantor hereby appoints the Trustee as its agent to receive all such presentations, surrenders, notices and demands. The Note Issuer may also from time to time designate one or more other offices or agencies in or outside the Borough of Manhattan, The City of New York where the Securities may be presented or surrendered for any or all of such purposes, and may from time to time rescind such designations; provided, however, that no such designation or rescission shall in any manner relieve the Note Issuer of its obligation to maintain an office or agency in the Borough of Manhattan, The City of New York for such purposes. The Note Issuer shall give prompt written notice to the Trustee of any such designation or rescission and of any change in the location of any such other office or agency. 76 84 .3 Money for Security Payments to be Held in Trust. If the Note Issuer shall at any time act as its own Paying Agent, it shall, on or before each due date of the principal of or interest on any of the Securities, segregate and hold in trust for the benefit of the Persons entitled thereto a sum sufficient to pay the principal (and premium, if any) or interest so becoming due until such sums shall be paid to such Persons or otherwise disposed of as herein provided, and shall promptly notify the Trustee of its action or failure so to act. Whenever the Note Issuer shall have one or more Paying Agents, it shall, prior to 10:00 a.m. London time on the due date of interest on any Securities, and prior to 10:00 a.m. London time on the Business Day immediately prior to the due date of the principal of (and premium, if any on) any Securities, deposit with a Paying Agent a sum sufficient to pay the principal, premium, or interest so becoming due, such sum to be held in trust for the benefit of the Persons entitled to such principal, premium or interest, and (unless such Paying Agent is the Trustee) the Note Issuer will promptly notify the Trustee of its action or failure so to act. The Note Issuer shall cause each Paying Agent to execute and deliver to the Trustee an instrument in which such Paying Agent shall agree with the Trustee, subject to the provisions of this Section, that such Paying Agent shall: (1) hold all sums held by it for the payment of the principal of (and premium, if any) or interest on Securities in trust for the benefit of the Persons entitled thereto until such sums shall be paid to such Persons or otherwise disposed of as herein provided; (2) give the Trustee notice of any default by the Note Issuer (or any other obligor upon the Securities) in the making of any payment of principal (and premium, if any) or interest; (3) at any time during the continuance of any such default, upon the written request of the Trustee, forthwith pay to the Trustee all sums so held in trust by such Paying Agent; and (4) comply with the provisions of the Trust Indenture Act applicable to it as a Paying Agent. The Note Issuer may at any time, for the purpose of obtaining the satisfaction and discharge of this Indenture or for any other purpose, pay, or by Note Issuer Order direct any Paying Agent to pay, to the Trustee all sums held in trust by the Note Issuer or such Paying Agent, such sums to be held by the Trustee upon the same trusts as those upon which such sums were held by the Note Issuer or such Paying Agent; and, upon such payment by the Note Issuer or any Paying Agent to the Trustee, the Note Issuer or such Paying Agent shall be released from all further liability with respect to such money. Any money deposited with the Trustee or any Paying Agent, or then held by the Note Issuer, in trust for the payment of the principal of (and premium, if any) or interest on any Security and remaining unclaimed for two years after such principal (and premium, if any) or interest has become due and payable shall (unless otherwise required by mandatory 77 85 provision of applicable escheat or abandoned or unclaimed property law) be paid on Note Issuer Request to the Note Issuer, or (if then held by the Note Issuer) shall (unless otherwise required by mandatory provision of applicable escheat or abandoned or unclaimed property law) be discharged from such trust; and the Holder of such Security shall thereafter, as an unsecured general creditor, look only to the Note Issuer for payment thereof, and all liability of the Trustee or such Paying Agent with respect to such trust money, and all liability of the Note Issuer as trustee thereof, shall thereupon cease; provided, however, that the Trustee or such Paying Agent, before being required to make any such repayment, may at the expense of the Note Issuer cause to be published once, in a newspaper published in the English language, customarily published on each Business Day and of general circulation in The Borough of Manhattan, The City of New York (which is expected to be The Wall Street Journal) and in a country that is a member of the European Union (which is expected to be The Financial Times, published in London, England), notice that such money remains unclaimed and that, after a date specified therein, which shall not be less than 30 days from the date of such publication, any unclaimed balance of such money then remaining will be repaid to the Note Issuer. .4 Existence. Subject to Article VIII and the other Sections of this Article X, the Company shall do or cause to be done all things necessary to preserve and keep in full force and effect the existence, rights (charter and statutory) and franchises of the Company, the Note Issuer and each other Guarantor; provided, however, that the Company shall not be required to preserve any such right or franchise if the Board of Directors of the Company in good faith shall determine that the preservation thereof is no longer desirable in the conduct of the business of the Company and that the loss thereof is not disadvantageous in any material respect to the Holders. .5 Maintenance of Properties. Subject to Article VIII and the other Sections of this Article X, the Company shall cause all properties used or useful in the conduct of its business or the business of any Subsidiary of the Company to be maintained and kept in good condition, repair and working order and supplied with all necessary equipment and will cause to be made all necessary repairs, renewals, replacements, betterments and improvements thereof, all as in the judgment of the Company may be necessary so that the business carried on in connection therewith may be properly and advantageously conducted at all times; provided, however, that nothing in this Section shall prevent the Company from discontinuing the operation or maintenance of any of such properties if such discontinuance is, as determined by the Company in good faith, desirable in the conduct of its business or the business of any Subsidiary and not disadvantageous in any material respect to the Holders. .6 Payment of Taxes and Other Claims. The Company will pay or discharge or cause to be paid or discharged, before the same shall become delinquent, (a) all material taxes, assessments and governmental charges levied or imposed upon the Company or any of its Subsidiaries or upon the income, profits or property of the Company or any of its Subsidiaries, and (b) all material lawful claims for labor, materials and supplies which, if unpaid, might by law become a Lien upon the property of the Company or any of its Subsidiaries; provided, however, that the Company shall 78 86 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. .7 Maintenance of Insurance. The Company shall, and shall cause its Subsidiaries to, keep at all times all of their properties which are of an insurable nature insured against loss or damage with insurers believed by the Company to be responsible to the extent that property of similar character is usually so insured by corporations similarly situated and owning like properties in accordance with good business practice. The Company shall, and shall cause its Subsidiaries to, use the proceeds from any such insurance policy to repair, replace or otherwise restore the property to which such proceeds relate, except to the extent that a different use of such proceeds is, as determined by the Company, in good faith, desirable in the conduct of its business or the business of any Subsidiary and not disadvantageous in any material respect to the Holders. .8 Limitation on Incurrence of Indebtedness. (a) The Company shall not, and shall not permit any Subsidiary to, Incur, directly or indirectly, any Indebtedness unless, on the date of such Incurrence (and after giving effect thereto), the Consolidated Coverage Ratio exceeds 2.5 to 1. (b) The foregoing limitations contained in paragraph (a) do not apply to the Incurrence of any of the following Indebtedness: (1) Indebtedness under the Credit Agreements; (2) Indebtedness owed to and held by a Wholly Owned Subsidiary; provided, however, that any subsequent issuance or transfer of any Capital Stock that results in any such Wholly Owned Subsidiary ceasing to be a Wholly Owned Subsidiary or any subsequent transfer of such Indebtedness (other than to another Wholly Owned Subsidiary) shall be deemed, in each case, to constitute the Incurrence of such Indebtedness by the Company; (3) Indebtedness in respect of the Securities, and the 2011 7 7/8% Notes and the related Guarantees by the Company and the Guarantors of the Securities, the 9% Notes, the 2008 7 7/8% Notes, the 2008 7 3/8% Notes, and the 2011 7 7/8% Notes; (4) Capital Lease Obligations and Indebtedness Incurred, in each case, to provide all or a portion of the purchase price or cost of construction of an asset or, in the case of a sale/leaseback transaction, to finance the value of such asset owned by the Company or a Subsidiary, in an aggregate principal amount which, together with all other such Capital Lease Obligations and Indebtedness outstanding on the date of such Incurrence (other than Indebtedness permitted by paragraph (a) or clause (2) or (9) of this paragraph (b)), does not exceed $200,000,000; (5) Indebtedness in respect of Receivables Financings in an aggregate principal amount which, together with all other Indebtedness in respect of 79 87 Receivables Financings outstanding on the date of such Incurrence (other than Indebtedness permitted by paragraph (a) or clause (2) or (9) of this paragraph (b)), does not exceed 85% of the sum of (1) the total amount of accounts receivables shown on the Company's most recent consolidated quarterly balance sheet, plus (2) without duplication, the total amount of accounts receivable already subject to a Receivables Financing; (6) Refinancing Indebtedness in respect of Indebtedness Incurred pursuant to paragraph (a) or pursuant to clause (3), (4) or (5) of this paragraph (b); (7) Hedging Obligations permitted under the Senior Credit Agreement as in effect on the Issue Date; (8) customer deposits and advance payments received from customers for goods purchased in the ordinary course of business; and (9) Indebtedness in an aggregate principal amount which, together with all other Indebtedness of the Company and its Subsidiaries outstanding on the date of such Incurrence (other than Indebtedness permitted by paragraph (a) or clauses (1) through (8) of this paragraph (b)), does not exceed $400,000,000. (c) Notwithstanding the foregoing, the Company shall not, and shall not permit any Subsidiary to, Incur, directly or indirectly, any Indebtedness (i) that is subordinate or junior in ranking in right of payment to its Senior Indebtedness unless such Indebtedness is Senior Subordinated Indebtedness or is expressly subordinated in right of payment to Senior Subordinated Indebtedness, or (ii) pursuant to paragraph (b) above if the proceeds thereof are used, directly or indirectly, to Refinance any Subordinate Obligations unless such Indebtedness shall be subordinated to the Securities to at least the same extent as such Subordinated Obligations. (d) For purposes of determining compliance with the foregoing covenant, (i) in the event that an item of Indebtedness meets the criteria of more than one of the types of Indebtedness described above, the Company, in its sole discretion, will classify such item of Indebtedness and only be required to include the amount and type of such Indebtedness in one of the above clauses, and (ii) an item of Indebtedness may be divided and classified in more than one of the types of Indebtedness described above. .9 Limitation on Restricted Payments. (a) The Company shall not, and shall not permit any Subsidiary to, directly or indirectly, make any Restricted Payment if at the time the Company or such Subsidiary makes such Restricted Payment: (1) a Default shall have occurred and be continuing (or would result therefrom); (2) the Company is not able to Incur an additional $1.00 of Indebtedness pursuant to paragraph (a) of Section 10.8; or 80 88 (3) the aggregate amount of such Restricted Payment and all other Restricted Payments since the Issue Date would exceed the sum of: (A) 50% of the Consolidated Net Income accrued during the period (treated as one accounting period) from January 1, 2000 to the end of the Company's most recently ended fiscal quarter for which internal financial statements are available at the time of such Restricted Payment (or, in case such Consolidated Net Income is a deficit, minus 100% of such deficit); (B) the aggregate Net Cash Proceeds received by the Company from the issuance or sale of its Capital Stock (other than Disqualified Stock) subsequent to January 1, 2000 (other than an issuance or sale to a Subsidiary and other than an issuance or sale to an employee stock ownership plan or to a trust established by the Company or any of its Subsidiaries for the benefit of their employees); and (C) the amount by which Indebtedness of the Company is reduced on the Company's balance sheet upon the conversion or exchange (other than by a Subsidiary), subsequent to January 1, 2000, of any Indebtedness of the Company convertible or exchangeable for Capital Stock (other than Disqualified Stock) of the Company (less the amount of any cash, or the fair value of any other property, distributed by the Company upon such conversion or exchange). (b) The provisions of the foregoing paragraph (a) shall not prohibit: (1) any purchase or redemption of Capital Stock or Subordinated Obligations of the Company made by exchange for, or out of the proceeds of the substantially concurrent sale of, Capital Stock of the Company (other than Disqualified Stock and other than Capital Stock issued or sold to a Subsidiary or an employee stock ownership plan or to a trust established by the Company or any of its Subsidiaries for the benefit of their employees); provided, however, that (A) such purchase or redemption shall be excluded in the calculation of the amount of Restricted Payments and (B) the Net Cash Proceeds from such sale shall be excluded from the calculation of amounts under clause (3)(B) of paragraph (a) above; (2) any purchase, repurchase, redemption, defeasance or other acquisition or retirement for value of Subordinated Obligations made by exchange for, or out of the proceeds of the substantially concurrent sale of, Indebtedness of the Company which is permitted to be Incurred pursuant to Section 10.8; provided, however, that such purchase, repurchase, redemption, defeasance or other acquisition or retirement for value shall be excluded in the calculation of the amount of Restricted Payments; or (3) dividends paid within 60 days after the date of declaration thereof if at such date of declaration such dividend would have complied with this covenant and that at the time of payment of such dividend, no other Default shall have occurred and be continuing (or result therefrom); provided that such dividend shall be included in the calculation of the amount of Restricted Payments. .10 Limitation on Restrictions on Distributions from Subsidiaries. The Company shall not, and shall not permit any Subsidiary to, create or otherwise cause or permit to exist or become effective any consensual encumbrance or 81 89 restriction on the ability of any Subsidiary (a) to pay dividends or make any other distributions on its Capital Stock to the Company or any other Subsidiary or pay any Indebtedness owed to the Company or any other Subsidiary, (b) to make any loans or advances to the Company or any other Subsidiary or (c) transfer any of its property or assets to the Company or any other Subsidiary, except: (i) any encumbrance or restriction pursuant to an agreement in effect at or entered into on the Issue Date; (ii) any encumbrance or restriction with respect to a Subsidiary pursuant to an agreement relating to any Indebtedness Incurred by such Subsidiary on or prior to the date on which such Subsidiary was acquired by the Company (other than Indebtedness Incurred as consideration in, or to provide all or any portion of the funds or credit support utilized to consummate the transaction or series of related transactions pursuant to which such Subsidiary became a Subsidiary or was acquired by the Company) and outstanding on such date; (iii) any encumbrance or restriction pursuant to an agreement effecting a Refinancing of Indebtedness Incurred pursuant to an agreement referred to in clause (i) or (ii) above or this clause (iii) or contained in any amendment to an agreement referred to in clause (i) or (ii) above or this clause (iii); provided, however, that the encumbrances and restrictions with respect to such Subsidiary contained in any such refinancing agreement or amendment are no less favorable to the Holders than encumbrances and restrictions with respect to such Subsidiary contained in such agreements; (iv) any such encumbrance or restriction consisting of customary non-assignment provisions in leases governing leasehold interests or in licensing agreements to the extent such provisions restrict the transfer of the lease or the property leased thereunder or the licensing agreement or the rights licensed thereunder; (v) in the case of clause (c) above, restrictions contained in security agreements or mortgages securing Indebtedness of a Subsidiary to the extent such restrictions restrict the transfer of the property subject to such security agreements or mortgages; and (vi) any restriction with respect to a Subsidiary imposed pursuant to an agreement entered into for the sale or disposition of all or substantially all the Capital Stock or assets of such Subsidiary pending the closing of such sale or disposition. .11 Senior Subordinated Indebtedness; Liens. The Company shall not, and shall not permit any Subsidiary to, Incur: (1) any Indebtedness if such Indebtedness is subordinate or junior in ranking in any respect to any Senior Indebtedness, unless such Indebtedness is Senior Subordinated Indebtedness or is expressly subordinated in right of payment to Senior Subordinated Indebtedness; or (2) any Secured Indebtedness that is not Senior Indebtedness, unless (A) contemporaneously therewith effective provision is made to secure the Securities equally and ratably with such 82 90 Secured Indebtedness for so long as such Secured Indebtedness is secured by a Lien, (B) such Secured Indebtedness is permitted by clause (1), (4), (5) or (7) of paragraph (b) of Section 10.8, (C) such Secured Indebtedness is Incurred by a Subsidiary pursuant to a revolving credit agreement as in effect on the Issue Date, or (D) such Secured Indebtedness is Refinancing Indebtedness in respect of Secured Indebtedness Incurred by a Subsidiary pursuant to a revolving credit agreement as in effect on the Issue Date. .12 Limitation on Affiliate Transactions. (a) The Company shall not, and shall not permit any Subsidiary to, enter into any transaction (including the purchase, sale, lease or exchange of any property, employee compensation arrangements or the rendering of any service) with any Affiliate of the Company (an "Affiliate Transaction") unless the terms thereof: (1) are no less favorable to the Company or such Subsidiary than those that could be obtained at the time of such transaction in arm's-length dealings with a Person who is not such an Affiliate; (2) if such Affiliate Transaction involves an amount in excess of $5,000,000, (i) are set forth in writing and (ii) have been approved by a majority of the members of the Board of Directors of the Company or such Subsidiary having no personal stake in such Affiliate Transaction; and (3) if such Affiliate Transaction involves an amount in excess of $15,000,000, have been determined by a nationally recognized investment banking firm or, in appropriate circumstances, an internationally recognized engineering firm, to be fair from a financial standpoint to the Company and its Subsidiaries. (b) The provisions of paragraph (a) above shall not prohibit: (1) any Restricted Payment permitted to be paid pursuant to Section 10.9; (2) transactions or payments pursuant to any employee arrangements or employee or director benefit plans entered into by the Company or any of its Subsidiaries in the ordinary course of business of the Company or such Subsidiary; and (3) any Affiliate Transaction between the Company and a Wholly Owned Subsidiary or between Wholly Owned Subsidiaries. .13 Limitation on Sales of Assets and Subsidiary Stock. (a) The Company shall not, and shall not permit any Subsidiary to, directly or indirectly, consummate any Asset Disposition unless: (1) the Company or such Subsidiary receives consideration at the time of such Asset Disposition at least equal to the fair market value (including as to the value of all non-cash consideration), as determined in good faith by the Board of Directors of the Company or such Subsidiary, as the case may be, of the shares and assets subject to such Asset Disposition and at least 70% of the 83 91 consideration thereof received by the Company or such Subsidiary is in the form of cash or cash equivalents; and (2) an amount equal to 100% of the Net Available Cash from such Asset Disposition is applied by the Company (or such Subsidiary, as the case may be) (A) first, to the extent the Company elects (or is required by the terms of any Senior Indebtedness), to prepay, repay, redeem or purchase Senior Indebtedness or Indebtedness (other than any Disqualified Stock) of a Wholly Owned Subsidiary (in each case other than Indebtedness owed to the Company or an Affiliate of the Company) within one year from the later of the date of such Asset Disposition or the receipt of such Net Available Cash; (B) second, to the extent of the balance of such Net Available Cash after application in accordance with clause (A), to the extent the Company elects, to acquire Additional Assets within one year from the later of the date of such Asset Disposition or the receipt of such Net Available Cash; (C) third, to the extent of the balance of such Net Available Cash after application in accordance with clauses (A) and (B), to cause Luxco to make an offer to the holders of the 9% Notes to purchase the 9% Notes pursuant to and subject to the conditions contained in the 9% Indenture relating thereto; (D) fourth, to the extent of the balance of such Net Available Cash after application in accordance with clauses (A), (B) and (C), to cause Luxco to make an offer to the holders of the 2008 7 7/8% Notes, or the 7 3/8% Notes, as the case may be, on a pro rata basis (determined in accordance with the respective outstanding principal amounts thereof at the time of such offer, as calculated by reference to an exchange rate of DM 1.8237 per $1.00) to purchase the 2008 7 7/8% Notes and the 7 3/8% Notes pursuant to and subject to the conditions contained in the 2008 7 7/8% Indenture and the 7 3/8% Indenture, respectively; (E) fifth, to the extent of the balance of such Net Available Cash after application in accordance with clauses (A), (B), (C), and (D), to cause the Note Issuer to make an offer to the holders of the 2011 7 7/8% Notes to purchase 2011 7 7/8% Notes pursuant to and subject to the conditions contained in the 2011 7 7/8% Indenture; and (F) sixth, to the extent of the balance of such Net Available Cash after application in accordance with clauses (A), (B), (C), (D) and (E) to cause the Note Issuer to make an offer to the holders of the Securities on a pro rata basis to purchase the Securities; provided, however, that in connection with any prepayment, repayment or purchase of Indebtedness pursuant to clause (A), (C), (D), (E) or (F) above, the Company or such Subsidiary shall retire such Indebtedness and shall cause the related loan commitment (if any) to be permanently reduced in an amount equal to the principal amount so prepaid, repaid or purchased. Notwithstanding the provisions of the immediately preceding paragraph, the Company and the Subsidiaries shall not be required to apply any Net Available Cash in accordance with this paragraph except to the extent that the aggregate Net Available Cash from all Asset Dispositions which are not applied in accordance with this paragraph exceeds $20,000,000. Pending application of Net Available Cash pursuant to this covenant, such Net Available Cash shall be invested in Permitted Investments. 84 92 For the purposes of this covenant, the following are deemed to be cash or cash equivalents: (x) the assumption of Indebtedness of the Company or any Subsidiary and the release of the Company or such Subsidiary from all liability on such Indebtedness in connection with such Asset Disposition; and (y) securities received by the Company or any Subsidiary from the transferee that are promptly converted by the Company or such Subsidiary into cash. (b) In the event of an Asset Disposition that requires the purchase of the Securities pursuant to clause (a)(2)(F) above, the Note Issuer shall be required to purchase the Securities tendered pursuant to an offer by the Note Issuer for the Securities at a purchase price of 100% of the principal amount thereof (without premium), plus accrued but unpaid interest, by mailing a notice to each Holder with a copy to the Trustee, within 30 days following the determination by or on behalf of the respective holders of the 9% Notes, the 2008 7 3/8% Notes, the 2008 7 7/8% Notes and the 2011 7 7/8% Notes as to the amount of the 9% Notes, the 7 3/8% Notes, the 2008 7 7/8% Notes and the 2011 7 7/8 Notes to be purchased pursuant to the offer to repurchase the 9% Notes, the 2008 7 3/8% Notes, the 2008 7 7/8% Notes and the 2011 7 7/8 Notes made pursuant to clause (a)(2)(C) above or clause (a)(2)(D) above, or clause (a)(2)(E) above as the case may be, stating: (i) that an Asset Disposition that requires the purchase of the Securities pursuant to clause (a)(2)(F) above has occurred and that such Holder has a right to require the Note Issuer to repurchase Securities at a purchase price of 100% of their principal amount (without premium) plus accrued and unpaid interest in an amount not to exceed the balance of Net Available Cash from such Asset Disposition after application in accordance with clauses (A), (B), (C), (D), and (E) of this covenant; (ii) the repurchase date (which shall be no earlier than 30 days not later than 60 days from the date such notice is mailed); (iii) that the tendered Securities shall be repurchased pro rata in the event of oversubscription; provided that the unrepurchased portion of the principal amount of any Security shall be in an authorized denomination (which shall not be less than the minimum authorized denomination) for such Security; (iv) the instructions determined by the Note Issuer, consistent with the covenant described hereunder, that a Holder must follow in order to have its Securities purchased; and (v) that each Security shall be subject to repurchase only in the amount of Euro 1,000 or integral multiples thereof. The Note Issuer shall not be required to make such an offer to purchase Securities pursuant to this covenant if the Net Available Cash available therefor is less than $20,000,000 (which lesser amount shall be carried forward for purposes of determining whether such an offer is required with respect to any subsequent Asset Disposition). Each Security shall be subject to repurchase only in the amount of Euro 1,000 or integral multiples thereof. Upon presentation of any Security repurchased in part only, the Note Issuer shall execute and the Trustee shall authenticate and deliver to the Holder thereof, at the expense of the Note Issuer, a new Security (and the Guarantors shall execute their Guaranties to be endorsed thereon) of authorized denominations, in aggregate principal amount equal to the 85 93 unredeemed portion of the Security so presented and having the same Issue Date, Stated Maturity and terms. If a Global Security is so surrendered, such new Security shall also be a new Global Security. (c) The Note Issuer shall, and the Company shall cause the Note Issuer to, comply, to the extent applicable, with the requirements of Section 14(e) of the Exchange Act and any other securities laws or regulations in connection with the repurchase of Securities pursuant to this covenant. To the extent that the provisions of any securities laws or regulations conflict with provisions of this covenant, the Note Issuer shall, and the Company shall cause the Note Issuer to, comply with the applicable securities laws and regulations and shall not be deemed to have breached its obligations under this clause by virtue thereof. .14 Intentionally Omitted. .15 Change of Control. (a) Upon the occurrence of a Change of Control Triggering Event, each Holder shall have the right to require that the Note Issuer repurchase such Holder's Securities at a purchase price in cash equal to 101% of the principal amount thereof plus accrued and unpaid interest, if any, to the date of purchase (subject to the right of Holders of record on the relevant Regular Record Date to receive interest due on the relevant Interest Payment Date). Each Security shall be subject to repurchase only in the amount of Euro 1,000 or integral multiples thereof. Upon presentation of any Security repurchased in part only, the Note Issuer shall execute and the Trustee shall authenticate and deliver to the Holder thereof, at the expense of the Note Issuer, a new Security (and the Guarantors shall execute their Guaranties to be endorsed thereon) of authorized denominations, in aggregate principal amount equal to the unredeemed portion of the Security so presented and having the same Issue Date, Stated Maturity and terms. If a Global Security is so surrendered, such new Security will also be a new Global Security. (b) Within 30 days following a Change of Control Triggering Event, the Note Issuer shall mail a notice to each Holder with a copy to the Trustee stating: (1) that a Change of Control Triggering Event has occurred and that such Holder has the right to require the Note Issuer to purchase such Holder's Securities at a purchase price in cash equal to 101% of the principal amount thereof plus accrued and unpaid interest, if any, to the date of purchase (subject to the right of Holders of record on the relevant Regular Record Date to receive interest on the relevant Interest Payment Date); (2) the circumstances and relevant facts regarding such Change of Control Triggering Event (including information with respect to pro forma historical income, cash flow and capitalization after giving effect to such Change of Control); (3) the repurchase date (which shall be no earlier than 30 days nor later than 60 days from the date such notice is mailed); (4) that each Security shall be subject to repurchase only in the amount of Euro 1,000 or integral multiples thereof; and (5) the instructions determined by the Note Issuer, consistent with the covenant described hereunder, that a Holder must follow in order to have its Securities purchased. (c) The Note Issuer shall, and the Company shall cause the Note Issuer to, comply, to the extent applicable, with the requirements of Section 14(e) of the Exchange Act and any other securities laws or regulations in connection with the repurchase of the Securities pursuant to this covenant. To the extent that the provisions of any securities laws or regulations conflict with the provisions of this covenant, the Note Issuer shall, and the 86 94 Company shall cause the Note Issuer, to comply with the applicable securities laws and regulations and shall not be deemed to have breached its obligations under this covenant by virtue thereof. .16 Statement as to Compliance and Default. (a) The Note Issuer and the Guarantors shall deliver to the Trustee, within 95 days after the end of each of their respective calendar years ending after the date hereof, a certificate of the principal executive officer, principal financial officer or principal accounting officer covering the preceding calendar year, stating whether or not to the best knowledge of the signers thereof the Note Issuer or the Guarantors, as the case may be, is in default in the performance, observance or fulfillment of or compliance with any of the terms, provisions, covenants and conditions of this Indenture and, if the Note Issuer or the Guarantors, as the case may be, shall be in default, specifying all such defaults and the nature and status thereof of which they may have knowledge. (b) The Note Issuer and each Guarantor shall deliver to the Trustee, as soon as possible and in any event within 10 days after the Note Issuer or any Guarantor becomes aware of the occurrence of an Event of Default or an event which, with notice or the lapse of time or both, would constitute an Event of Default, an Officers' Certificate setting forth the details of such Event of Default or default, and the action which the Note Issuer or any Guarantor proposes to take with respect thereto. .17 Ownership of the Trust and the Note Issuer; Business of the Note Issuer. (a) The Company shall continue (i) to directly or indirectly maintain 100% ownership of the Common Securities of the Trust; provided, however, that any permitted successor of the Company hereunder may succeed to the Company's ownership of such Common Securities; and (ii) to use its reasonable efforts to cause the Trust (x) to remain a statutory business trust, except in connection with the distribution of Securities to the holders of Common Securities and Trust Securities in liquidation of the Trust, the redemption of all of the Common Securities and Trust Securities, or certain mergers, consolidations or amalgamations, each only as permitted by the Declaration, and (y) to otherwise continue to be classified for U.S. Federal income tax purposes as a grantor trust or another entity which is not subject to U.S. Federal income tax at the entity level and the assets and income of which are treated for U.S. Federal income tax purposes as held and derived directly by holders of interests in the entity. (b) The Company shall continue to directly or indirectly maintain 100% ownership of the Capital Stock of the Note Issuer; provided that any permitted successor of the Company pursuant to Article VIII may succeed to the Company's ownership of such Capital Stock. (c) The Company shall cause the Note Issuer to engage only in those activities that are necessary, convenient or incidental to (i) issuing and selling the Securities and any additional Senior Subordinated Indebtedness issued and sold after the date hereof and permitted hereunder, advancing or distributing the proceeds thereof to the Company and the Subsidiaries and performing its obligations relating to the Securities and any such additional Senior Subordinated Indebtedness, pursuant to the terms thereof and of this Indenture and any indenture governing such additional Senior Subordinated Indebtedness, (ii) conducting or 87 95 participating in the Exchange Offer and issuing the Exchange Securities and conducting or participating in comparable exchange offers and issuing the related exchange securities in respect of additional Senior Subordinated Indebtedness, and (iii) guaranteeing the Senior Credit Agreement. .18 Waiver of Certain Covenants. The Company or the Note Issuer, as applicable, may omit in any particular instance to comply with any covenant or condition set forth in Section 8.1 and Sections 10.4 to 10.17, if before or after the time for such compliance the Holders of at least a majority in principal amount of the Outstanding Securities shall, by Act of such Holders, either waive such compliance in such instance or generally waive compliance with such covenant or condition, but no such waiver shall extend to or affect such covenant or condition except to the extent so expressly waived, and, until such waiver shall become effective, the obligations of the Company or the Note Issuer, as applicable, in respect of any such covenant or condition shall remain in full force and effect. .19 Additional Amounts; Additional Interest. (a) All payments made on behalf of the Note Issuer under or with respect to the Securities must be made free and clear of and without withholding or deduction for or on account of Taxes, unless the Note Issuer or any Guarantor is required to withhold or deduct Taxes by law or by the interpretation or administration thereof by the relevant government authority or agency. If the Note Issuer or any Guarantor is so required to withhold or deduct any amount for or on account of Taxes from any payment made under or with respect to the Securities, the Note Issuer or the Guarantors, as the case may be, shall be required to pay such amounts ("Additional Amounts") as may be necessary so that the net amount (including Additional Amounts) received by each Holder after such withholding or deduction will not be less than the amount such Holder would have received if such Taxes had not been withheld or deducted; provided, however, that no Additional Amounts shall be payable with respect to payments made to any Holder in respect of a beneficial owner which is subject to such Taxes by reason of its being connected with the United States, Germany, the United Kingdom or the jurisdiction of formation of the Note Issuer, or any territory thereof otherwise than by the mere holding of Securities or the receipt of payments thereunder. The Note Issuer shall also make such withholding or deduction and remit the full amount deducted or withheld to the relevant authority as and when required in accordance with applicable law. The Note Issuer shall furnish to the Holders within 30 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 Note Issuer. (b) In the event that the Trust would be required to pay any taxes, duties, assessments or governmental charges of whatever nature (other than withholding taxes) imposed by the United States of America, or any other taxing authority, and (iii) the Note Issuer shall not have (1) redeemed the Securities pursuant to Section 11.7 or (2) terminated the Trust pursuant to Section 9.2(f) of the Declaration, then, in any such case, the Note Issuer shall pay to the Trust (and its permitted successors or assigns under the Declaration) for so long as the Trust (or its permitted successors or assigns) is the registered Holder of any Securities, as additional interest ("Additional Interest") such amounts as shall be necessary so that the net amounts received and retained by the Trust after paying any such taxes, duties, assessments or governmental charges will be not less than the amounts the Trust would have 88 96 received had no such taxes, duties, assessments or governmental charges been imposed. All references herein to Additional Amounts shall be deemed to include Additional Interest. (c) Whenever in this Indenture or the Securities there is a reference in any context to the payment of principal of or interest on the Securities, such mention shall be deemed to include mention of the payments of the Additional Amounts provided for in this Section to the extent that, in such context, Additional Amounts are, were or would be payable in respect thereof pursuant to the provisions of this Section and express mention of the payment of Additional Amounts (if applicable) in any provisions hereof shall not be construed as excluding Additional Amounts in those provisions hereof where such express mention is not made. (d) The foregoing obligations shall survive any termination, defeasance or discharge of the Indenture pursuant to Article IV. .20 Suspension of Covenants During Achievement of Investment Grade Status. If during any period the Securities have achieved and continue to maintain Investment Grade Status and no Event of Default has occurred and is continuing (such period is referred to herein as an "Investment Grade Status Period"), then upon notice by the Company to the Trustee by the delivery of an Officers' Certificate that it has achieved Investment Grade Status and that no Event of Default has occurred and is continuing, the covenants set forth in Sections 8.2(4)(b), 10.8, 10.9, 10.10, 10.11(1) and 10.13 shall be suspended and shall not during such period be applicable to the Company and its Subsidiaries. As a result, during any such period, the Securities shall lose the full covenant protection initially provided under this Indenture. No action taken during an Investment Grade Status Period or prior to an Investment Grade Status Period in compliance with the covenants then applicable shall require reversal or constitute a default under the Securities in the event that suspended covenants are subsequently reinstated or suspended, as the case may be. An Investment Grade Status Period will not commence until the Company has delivered the Officers' Certificate referred to above and shall terminate immediately upon the failure of the Securities to maintain Investment Grade Status. The Company shall promptly notify the Trustee in writing of any failure of the Securities to maintain Investment Grade Status. ARTICLE XI. REDEMPTION OF SECURITIES .1 Applicability of This Article. Redemption of Securities as permitted or required by any provision of this Indenture shall be made in accordance with such provision and this Article. .2 Election to Redeem; Notice to Trustee. The election of the Note Issuer to redeem any Securities shall be evidenced by or pursuant to a Board Resolution. In the case of any redemption of Securities prior to the expiration of any restriction on such redemption provided in the terms of such Securities, the Note Issuer shall furnish the Trustee with an Officers' Certificate and an Opinion of Counsel evidencing compliance with such restriction. 89 97 .3 Intentionally Omitted. .4 Notice of Redemption. Notice of redemption shall be given by first-class mail, postage prepaid, mailed not later than the thirtieth day, and not earlier than the sixtieth day, prior to the date fixed for redemption, to each Holder of Securities to be redeemed, at the address of such Holder as it appears in the Securities Register. With respect to the Securities to be redeemed, each notice of redemption shall state: (a) the Redemption Date; (b) the Redemption Price; (c) that on the Redemption Date, the Redemption Price at which such Securities are to be redeemed will become due and payable upon each such Security or portion thereof, and that interest thereon, if any, shall cease to accrue on and after said date; and (d) the place or places where such Securities are to be surrendered for payment of the Redemption Price at which such Securities are to be redeemed. Notice of redemption of Securities to be redeemed at the election of the Note Issuer shall be given by the Note Issuer or, at the Note Issuer's request, by the Trustee in the name and at the expense of the Note Issuer and shall not be irrevocable. The notice if mailed in the manner herein provided shall be conclusively presumed to have been duly given, whether or not the Holder receives such notice. In any case, a failure to give such notice by mail or any defect in the notice to the Holder of any Security designated for redemption as a whole or in part shall not affect the validity of the proceedings for the redemption of any other Security. .5 Deposit of Redemption Price. Prior to 10:00 a.m. London time on the Business Day prior to the Redemption Date specified in the notice of redemption given as provided in Section 11.4, the Note Issuer will deposit with the Trustee or with one or more Paying Agents an amount of money sufficient to redeem on the Redemption Date all the Securities so called for redemption at the applicable Redemption Price. .6 Payment of Securities Called for Redemption. If any notice of redemption has been given as provided in Section 11.4, the Securities with respect to which such notice has been given shall become due and payable on the date and at the place or places stated in such notice at the applicable Redemption Price. On presentation and surrender of such Securities at a place of payment in said notice specified, the said Securities shall be paid and redeemed by the Note Issuer at the applicable Redemption Price. If any Security called for redemption shall not be so paid upon surrender thereof for redemption, the principal of and premium, if any, on such Security shall, until paid, bear interest from the Redemption Date at the rate prescribed therefor in the Security. 90 98 .7 Note Issuer's Right of Redemption in Certain Circumstances. If a Tax Event or an Investment Company Event in respect of the Trust shall occur and be continuing, the Company shall cause the Trustees (as defined in the Declaration) to dissolve the Trust and cause Securities to be distributed to the holders of the Trust Securities in dissolution of the Trust or, in the event of a Tax Event only, may cause the Securities to be redeemed, in each case, subject to and in accordance with the provisions of the Declaration, within 90 days following the occurrence of such Tax Event or Investment Company Event. The Securities may be redeemed, at the option of the Note Issuer, at any time as a whole but not in part, subject to this clause (b) and the other provisions of Article XI, at 100% of the principal amount thereof, plus accrued and unpaid interest (if any) to the date of redemption (subject to the right of Holders of record on the relevant Regular Record Date to receive interest due on the relevant Interest Payment Date), in the event the Note Issuer has become or would become obligated to pay, on the next date on which any amount would be payable with respect to the Securities, any Additional Amounts as a result of a change in or an amendment to the laws (including any regulations promulgated thereunder) of the United States of America, Germany, the United Kingdom or the jurisdiction of formation of the Note Issuer (initially Luxembourg) (or any political subdivision or taxing authority thereof or therein), or any change in or amendment to any official position regarding the application or interpretation of such laws or regulations, which change or amendment is announced or becomes effective on or after the date of the issuance of the Securities other than, in either case, any amendment or change implementing, complying with, or introduced in order to conform to, or otherwise arising as a result of or in connection with, any European Union Directive on the taxation of savings implementing the conclusions of the ECOFIN Council meeting of 26-27 November 2000. ARTICLE XII. SUBORDINATION OF SECURITIES .1 Securities Subordinate to Senior Indebtedness. The Note Issuer covenants and agrees, and each Holder of a Security, by its acceptance thereof, likewise covenants and agrees, that, to the extent and in the manner hereinafter set forth in this Article (subject to Article IV), the payment of the principal of (and premium, if any) and interest (including Additional Sums and Additional Amounts, if any) on each and all of the Securities are hereby expressly made subordinate and subject in right of payment to the prior payment in full of all amounts then due and payable in respect of all Senior Indebtedness of the Note Issuer and the Company. .2 Payment Over of Proceeds Upon Dissolution, etc. In case of the pendency of any receivership, insolvency, liquidation, bankruptcy, reorganization, arrangement, adjustment, composition or other judicial proceeding relative to the Note Issuer or its property (each such event, if any, herein sometimes referred to as a "Proceeding"), the holders of Senior Indebtedness of the Note Issuer shall be entitled to receive payment in full of principal of (and premium, if any) and interest, if any, on such Senior Indebtedness, or provision shall be made for such payment in cash or cash equivalents or otherwise in a manner satisfactory to the holders of Senior Indebtedness, before the Holders of the Securities are entitled to receive or retain any payment or distribution of any kind or character, whether in cash, property or securities (including any payment or distribution which 91 99 may be payable or deliverable by reason of the payment of any other Indebtedness of the Note Issuer (including the Securities) subordinated to the payment of the Securities, such payment or distribution being hereinafter referred to as a "Senior Subordinated Payment"), on account of principal of (or premium, if any) or interest (including Additional Sums and Additional Amounts, if any) on the Securities or on account of the purchase or other acquisition of Securities by the Note Issuer or any Subsidiary, and to that end the holders of Senior Indebtedness shall be entitled to receive, for application to the payment thereof, any payment or distribution of any kind or character, whether in cash, property or securities, including any Senior Subordinated Payment, which may be payable or deliverable in respect of the Securities in any such Proceeding. In the event that, notwithstanding the foregoing provisions of this Section, the Trustee or the Holder of any Security shall have received any payment or distribution of assets of the Note Issuer of any kind or character, whether in cash, property or securities, including any Senior Subordinated Payment, before all Senior Indebtedness of the Note Issuer and the Company is paid in full or payment thereof is provided for in cash or cash equivalents or otherwise in a manner satisfactory to the holders of such Senior Indebtedness, and if such fact shall, at or prior to the time of such payment or distribution, have been made known to the Trustee or, as the case may be, such Holder, then and in such event such payment or distribution shall be paid over or delivered forthwith to the trustee in bankruptcy, receiver, liquidating trustee, custodian, assignee, agent or other Person making payment or distribution of assets of the Note Issuer for application to the payment of all Senior Indebtedness remaining unpaid, to the extent necessary to pay all Senior Indebtedness in full, after giving effect to any concurrent payment or distribution to or for the holders of Senior Indebtedness. For purposes of this Article only, the words "any payment or distribution of any kind or character, whether in cash, property or securities" shall not be deemed to include shares of stock of the Note Issuer as reorganized or readjusted, or securities of the Note Issuer or any other corporation provided for by a plan of reorganization or readjustment which securities are subordinated in right of payment to all then outstanding Senior Indebtedness to substantially the same extent as the Securities are so subordinated as provided in this Article. The consolidation of the Note Issuer with, or the merger of the Note Issuer into, another Person or the liquidation or dissolution of the Note Issuer following the sale of all or substantially all of its properties and assets as an entirety to another Person or the liquidation or dissolution of the Note Issuer following the sale of all or substantially all of its properties and assets as an entirety to another Person upon the terms and conditions set forth in Article VIII shall not be deemed a Proceeding for the purposes of this Section if the Person formed by such consolidation or into which the Note Issuer is merged or the Person which acquires by sale such properties and assets as an entirety, as the case may be, shall, as a part of such consolidation, merger, or sale comply with the conditions set forth in Article VIII. .3 Prior Payment to Senior Indebtedness Upon Acceleration of Securities. In the event that, upon the occurrence of an Event of Default, any Securities are declared due and payable before their Stated Maturity, then (a) the Company, the Note Issuer or the Trustee, at the direction of the Note Issuer, shall promptly notify the holders of Senior Indebtedness of the Note Issuer and the Company or the representative of such holders of the acceleration, and (b) in such event, if any Senior Indebtedness is outstanding, the Note Issuer may not pay the Securities until five Business Days after the representative of all issues 92 100 of Senior Indebtedness receive notice of such acceleration and, thereafter, may pay the Securities only if payment is otherwise permitted hereunder at that time. In the event that, notwithstanding the foregoing, the Note Issuer shall make any payment to the Trustee or the Holder of any Security prohibited by the foregoing provisions of this Section, and if such fact shall, at or prior to the time of such payment, have been made known to the Trustee or, as the case may be, such Holder, then and in such event such payment shall be paid over and delivered forthwith to the Note Issuer. The provisions of this Section shall not apply to any payment with respect to which Section 12.2 would be applicable. .4 No Payment When Senior Indebtedness in Default. (a) The Note Issuer may not pay principal of, or premium (if any) or interest (and Additional Sum and Additional Amounts, if any) on, the Securities, and may not repurchase, redeem or otherwise retire any Securities (collectively "pay the Securities") if (i) any Specified Senior Indebtedness of the Company or the Note Issuer (or any other Senior Indebtedness of the Company or the Note Issuer having an outstanding principal amount at the time of determination in excess of $25 million) is not paid when due or (ii) any other default on Specified Senior Indebtedness of the Company or the Note Issuer occurs and the maturity of such Specified Senior Indebtedness is accelerated in accordance with its terms, unless, in either case, the default has been cured or waived and any such acceleration has been rescinded or such Specified Senior Indebtedness has been paid in full. However, the Note Issuer may pay the Securities without regard to the foregoing if the Company, the Note Issuer and the Trustee receive written notice approving such payment from a representative of the Specified Senior Indebtedness with respect to which either of the events set forth in clause (i) or (ii) of the immediately preceding sentence has occurred and is continuing. (b) During the continuance of any default (other than a default described in clause (i) or (ii) of the preceding paragraph (a)) with respect to any Specified Senior Indebtedness of the Company or the Note Issuer pursuant to which the maturity thereof may be accelerated immediately without further notice (except such notice as may be required to effect such acceleration) or the expiration of any applicable grace periods, the Note Issuer may not pay the Securities to the Holders for a period (a "Payment Blockage Period") commencing upon the receipt by the Trustee (with a copy to the Company and the Note Issuer) of written notice (a "Blockage Notice") of such default from the representative of the holders of such Specified Senior Indebtedness specifying an election to effect a Payment Blockage Period and ending 179 days thereafter (or earlier if such Payment Blockage Period is terminated (i) by written notice to the Trustee, the Company and the Note Issuer from the representative of the holders of such Specified Senior Indebtedness, (ii) because the default giving rise to such Blockage Notice is no longer continuing, as certified to the Trustee by the representative of the holders of such Specified Senior Indebtedness, or (iii) because such Specified Senior Indebtedness has been repaid in full, as certified to the Trustee by the representative of the holders of such Specified Senior Indebtedness). (c) Notwithstanding the preceding paragraph (b), unless the holders of such Specified Senior Indebtedness or the representative of such holders have accelerated the maturity of such Specified Senior Indebtedness (and such Specified Senior Indebtedness remains outstanding), the Note Issuer may resume payments on the Securities after the end of 93 101 such Payment Blockage Period. The Securities shall not be subject to more than one Payment Blockage Period in any consecutive 360-day period, irrespective of the number of defaults with respect to Specified Senior Indebtedness during such period. (d) In the event that, notwithstanding the foregoing, the Note Issuer shall make any payment to the Trustee or the Holder of any Security prohibited by the foregoing provisions of this Section, and if such fact shall, at or prior to the time of such payment, have been made known to the Trustee or, as the case may be, such Holder, then and in such event such payment shall be paid over and delivered forthwith to the Note Issuer. The provisions of this Section shall not apply to any payment with respect to which Section 12.2 would be applicable. .5 Payment Permitted If No Default. Nothing contained in this Article or elsewhere in this Indenture or in any of the Securities shall prevent (a) the Note Issuer, at any time except during the pendency of any Proceeding referred to in Section 12.2 or under the conditions described in Sections 12.3 and 12.4, from making payments at any time of principal of (and premium, if any) or interest on the Securities, or (b) the application by the Trustee of any money or Government Obligations deposited with it hereunder in accordance with the provisions of Section 4.3 to the payment of or on account of the principal of (and premium, if any) or interest (including Additional Sums and Additional Amounts, if any) on the Securities or the retention of such payment by the Holders, if, at the time of such payment or application, as the case may be, by the Note Issuer or the Trustee, as the case may be, the Note Issuer or the Trustee, as the case may be, did not have knowledge that such payment would have been prohibited by the provisions of this Article. .6 Subrogation to Rights of Holders of Senior Indebtedness. Subject to the payment in full of all Senior Indebtedness of the Note Issuer, or the provision for such payment in cash or cash equivalents or otherwise in a manner satisfactory to the holders of Senior Indebtedness of the Note Issuer, the Holders of the Securities shall be subrogated to the extent of the payments or distributions made to the holders of such Senior Indebtedness pursuant to the provisions of this Article (equally and ratably with the holders of all indebtedness of the Note Issuer which by its express terms is subordinated to Senior Indebtedness of the Note Issuer to substantially the same extent as the Securities are subordinated to the Senior Indebtedness and is entitled to like rights of subrogation by reason of any payments or distributions made to holders of such Senior Indebtedness) to the rights of the holders of such Senior Indebtedness to receive payments and distributions of cash, property and securities applicable to the Senior Indebtedness of the Note Issuer until the principal of (and premium, if any) and interest on the Securities shall be paid in full. For purposes of such subrogation or assignment, no payments or distributions to the holders of the Senior Indebtedness of the Note Issuer of any cash, property or securities to which the Holders of the Securities or the Trustee would be entitled except for the provisions of this Article, and no payments over pursuant to the provisions of this Article to the holders of Senior Indebtedness by Holders of the Securities or the Trustee, shall, as among the Note Issuer, its creditors other than holders of Senior Indebtedness, and the Holders of the Securities, be deemed to be a payment or distribution by the Note Issuer to or on account of the Senior Indebtedness. 94 102 .7 Provisions Solely to Define Relative Rights. The provisions of this Article are and are intended solely for the purpose of defining the relative rights of the Holders of the Securities on the one hand and the holders of Senior Indebtedness on the other hand. Nothing contained in this Article or elsewhere in this Indenture or in the Securities is intended to or shall (a) impair, as between the Note Issuer and the Holders of the Securities, the obligations of the Note Issuer, which are absolute and unconditional, to pay to the Holders of the Securities the principal of (and premium, if any) and interest (including Additional Sums and Additional Amounts, if any) on the Securities as and when the same shall become due and payable in accordance with their terms; or (b) affect the relative rights against the Note Issuer of the Holders of the Securities and creditors of the Note Issuer other than their rights in relation to the holders of Senior Indebtedness of the Note Issuer; or (c) prevent the Trustee or the Holder of any Security from exercising all remedies otherwise permitted by applicable law upon default under this Indenture including, without limitation, filing and voting claims in any Proceeding, subject to the rights, if any, under this Article of the holders of Senior Indebtedness to receive cash, property and securities otherwise payable or deliverable to the Trustee or such Holder. .8 Trustee to Effectuate Subordination. Each Holder of a Security by his or her acceptance thereof authorizes and directs the Trustee on his or her behalf to take such action as may be necessary or appropriate to acknowledge or effectuate the subordination provided in this Article and appoints the Trustee his or her attorney-in-fact for any and all such purposes. .9 No Waiver of Subordination Provisions. No right of any present or future holder of any Senior Indebtedness to enforce subordination as herein provided shall at any time in any way be prejudiced or impaired by any act or failure to act on the part of the Note Issuer or by any act or failure to act, in good faith, by any such holder, or by any noncompliance by the Note Issuer with the terms, provisions and covenants of this Indenture, regardless of any knowledge thereof that any such holder may have or be otherwise charged with. .10 Notice to Trustee. The Note Issuer shall give prompt written notice to the Trustee of any fact known to the Note Issuer which would prohibit the making of any payment to or by the Trustee in respect of the Securities. Notwithstanding the provisions of this Article or any other provision of this Indenture, the Trustee shall not be charged with knowledge of the existence of any facts which would prohibit the making of any payment to or by the Trustee in respect of the Securities, unless and until a Responsible Officer of the Trustee shall have received written notice thereof from the Note Issuer or a holder of Senior Indebtedness or from any trustee, agent or representative therefor (whether or not the facts contained in such notice are true); provided, however, that if the Trustee shall not have received the notice provided for in this Section at least two Business Days prior to the date upon which by the terms hereof any monies may become payable for any purpose (including, without limitation, the payment of the principal of (and premium, if any) or interest (including Additional Sums and Additional Amounts, if any) on any Security), then, anything herein contained to the contrary notwithstanding, the Trustee shall have full power and authority to receive such monies and to 95 103 apply the same to the purpose for which they were received and shall not be affected by any notice to the contrary which may be received by it within two Business Days prior to such date. .11 Reliance on Judicial Order or Certificate of Liquidating Agent. Upon any payment or distribution of assets of the Note Issuer referred to in this Article, the Trustee, subject to the provisions of Article VI, and the Holders of the Securities shall be entitled to rely upon any order or decree entered by any court of competent jurisdiction in which such Proceeding is pending, or a certificate of the trustee in bankruptcy, receiver, liquidating trustee, custodian, assignee for the benefit of creditors, agent or other Person making such payment or distribution, delivered to the Trustee or to the Holders of Securities, for the purpose of ascertaining the Persons entitled to participate in such payment or distribution, the holders of the Senior Indebtedness and other indebtedness of the Note Issuer, the amount thereof or payable thereon, the amount or amounts paid or distributed thereon and all other facts pertinent thereto or to this Article. .12 Trustee Not Fiduciary for Holders of Senior Indebtedness. The Trustee, in its capacity as trustee under this Indenture, shall not be deemed to owe any fiduciary duty to the holders of Senior Indebtedness of the Note Issuer and shall not be liable to any such holders if it shall in good faith mistakenly pay over or distribute to Holders of Securities or to the Note Issuer or to any other Person cash, property or securities to which any holders of Senior Indebtedness of the Note Issuer shall be entitled by virtue of this Article or otherwise. .13 Rights of Trustee as Holder of Senior Indebtedness; Preservation of Trustee's Rights. The Trustee in its individual capacity shall be entitled to all the rights set forth in this Article with respect to any Senior Indebtedness of the Note Issuer which may at any time be held by it, to the same extent as any other holder of Senior Indebtedness of the Note Issuer, and nothing in this Indenture shall deprive the Trustee of any of its rights as such holder. .14 Article Applicable to Paying Agents. In case at any time any Paying Agent other than the Trustee shall have been appointed by the Note Issuer and be then acting hereunder, the term "Trustee" as used in this Article shall in such case (unless the context otherwise requires) be construed as extending to and including such Paying Agent within its meaning as fully for all intents and purposes as if such Paying Agent were named in this Article in addition to or in place of the Trustee. .15 Certain Conversions or Exchanges Deemed Payment. For the purposes of this Article only, (a) the issuance and delivery of junior securities upon conversion or exchange of Securities shall not be deemed to constitute a payment or distribution on account of the principal of (or premium, if any) or interest (including Additional Sums and Additional Amounts, if any) on Securities or on account of the purchase or other acquisition of Securities, and (b) the payment, issuance or delivery of cash, 96 104 property or securities (other than Securities, Exchange Securities or junior securities) upon conversion or exchange of a Security shall be deemed to constitute payment on account of the principal of such security. For the purposes of this Section, the term "junior securities" means (i) shares of any stock of any class of the Note Issuer and (ii) securities of the Note Issuer which are subordinated in right of payment to all Senior Indebtedness of the Note Issuer which may be outstanding at the time of issuance or delivery of such securities to substantially the same extent as, or to a greater extent than, the Securities are so subordinated as provided in this Article. ARTICLE XIII. GUARANTY .1 Guaranty. Each of the Guarantors hereby jointly and severally unconditionally Guarantees, on a senior subordinated basis, to each Holder of a Security authenticated and delivered by the Trustee, and to the Trustee on behalf of such Holder, the due and punctual payment of the principal of (and premium, if any) and interest (including Additional Sums and Additional Amounts, if any) on such Security when and as the same shall become due and payable, whether at the Stated Maturity, by acceleration, call for redemption, purchase or otherwise, in accordance with the terms of such Security and of this Indenture. In case of the failure of the Note Issuer punctually to make any such payment, each of the Guarantors hereby jointly and severally agrees to cause such payment to be made punctually when and as the same shall become due and payable, whether at the Stated Maturity or by acceleration, call for redemption, purchase or otherwise, and as if such payment were made by the Note Issuer. The Guarantee extends to the Note Issuer's repurchase obligations arising from an Asset Disposition pursuant to Section 10.13 or a Change of Control pursuant to Section 10.15. Each of the Guarantors hereby jointly and severally agrees that its obligations hereunder shall be unconditional, irrespective of the validity, regularity or enforceability of such Security or this Indenture, the absence of any action to enforce the same, any exchange, release or non-perfection of any Lien on any collateral for, or any release or amendment or waiver of any term of any other Guarantee of, or any consent to departure from any requirement of any other Guarantee of all or any of the Securities, the election by the Trustee or any of the Holders in any proceeding under Chapter 11 of Title 11 of the United States Code (the "Bankruptcy Code") of the application of Section 1111(b)(2) of the Bankruptcy Code, or equivalent provision under applicable law, any borrowing or grant of a security interest by the Note Issuer, as debtor-in-possession, under Section 364 of the Bankruptcy Code, or equivalent provision under applicable law, the disallowance, under Section 502 of the Bankruptcy Code, or other similar applicable law, of all or any portion of the claims of the Trustee or any of the Holders for payment of any of the Securities, any waiver or consent by the Holder of such Security or by the Trustee with respect to any provisions thereof or of this Indenture, the obtaining of any judgment against the Note Issuer or any action to enforce the same or any other circumstances which might otherwise constitute a legal or equitable discharge or defense of a guarantor. Each of the Guarantors hereby waives the benefits of diligence, presentment, demand for payment, any requirement that the Trustee or any of the Holders protect, secure, perfect or insure any security interest in or other Lien on any property subject thereto or exhaust any right or take any action against the Note Issuer or any other Person or any collateral, filing of claims with a court in the event of insolvency or bankruptcy 97 105 of the Note Issuer, any right to require a proceeding first against the Note Issuer, protest or notice with respect to such Security or the Indebtedness evidenced thereby and all demands whatsoever, and covenants that this Guaranty will not be discharged in respect of such Security except by complete performance of the obligations contained in such Security and in this Guaranty. Each of the Guarantors hereby agrees that, in the event of a default in payment of principal (or premium, if any) or interest (including Additional Sums and Additional Amounts, if any) on such Security, whether at their Stated Maturity, by acceleration, call for redemption, purchase or otherwise, legal proceedings may be instituted by the Trustee on behalf of, or by, the Holder of such Security, subject to the terms and conditions set forth in this Indenture, directly against each of the Guarantors to enforce this Guaranty without first proceeding against the Note Issuer. Each Guarantor agrees that, to the extent permitted by law, if, after the occurrence and during the continuance of an Event of Default, the Trustee or any of the Holders are prevented by applicable law from exercising their respective rights to accelerate the maturity of the Securities, to collect interest on the Securities, or to enforce or exercise any other right or remedy with respect to the Securities, or the Trustee or the Holders are prevented from taking any action to realize on any collateral, such Guarantor agrees to pay to the Trustee for the account of the Holders, upon demand therefor, the amount that would otherwise have been due and payable had such rights and remedies been permitted to be exercised by the Trustee or any of the Holders. The indebtedness evidenced by the Guaranties is, to the extent provided in this Indenture, subordinate and subject in right of payment to the prior payment in full of all Senior Indebtedness of each Guarantor, and the Guaranties are issued subject to the provisions of this Indenture with respect thereto. Each Holder of such Security, by accepting the same, (a) agrees to and shall be bound by such provisions, (b) authorizes and directs the Trustee on his behalf to take such action as may be necessary or appropriate to effectuate the subordination so provided and (c) appoints the Trustee his attorney-in-fact for any and all such purposes. Each Guarantor shall be subrogated to all rights of the Holders of the Securities upon which its Guarantee is endorsed against the Note Issuer in respect of any amounts paid by such Guarantor on account of such Security pursuant to the provisions of its Guaranty or this Indenture; provided, however, that no Guarantor shall be entitled to enforce or to receive any payments arising out of, or based upon, such right of subrogation until the principal of (and premium, if any) and interest (including Additional Sums and Additional Amounts, if any) on all Securities issued hereunder shall have been paid in full. Each Guaranty shall remain in full force and effect and continue to be effective should any petition be filed by or against the Note Issuer for liquidation or reorganization or equivalent proceeding under applicable law, should the Note Issuer become insolvent or make an assignment for the benefit of creditors or should a receiver or trustee be appointed for all or any significant part of the Note Issuer's assets, or the equivalent of any of the foregoing under applicable law, and shall, to the fullest extent permitted by law, continue to be effective or be reinstated, as the case may be, if at any time payment and performance of the Securities, is, pursuant to applicable law, rescinded or reduced in amount, or must otherwise be restored or returned by any obligee on the Securities, whether as a voidable preference, fraudulent transfer, or as otherwise provided under similar laws affecting the rights of creditors generally or under applicable laws of the jurisdiction of formation of the Note Issuer, all as though such payment or performance had not been made. In the event that any payment, or any part 98 106 thereof, is rescinded, reduced, restored or returned, the Securities shall, to the fullest extent permitted by law, be reinstated and deemed reduced only by such amount paid and not so rescinded, reduced, restored or returned. The Guarantors shall have the right to seek contribution from any non-paying Guarantor so long as the exercise of such right does not impair the rights of the Holders under this Guaranty. Each Guaranty (other than the Company's Guaranty) will be limited in amount to an amount not to exceed the maximum amount that can be guaranteed by the applicable Guarantor without rendering the Guaranty, as it relates to such Guarantor, voidable under applicable law relating to fraudulent conveyance or fraudulent transfer or similar laws affecting the rights of creditors generally or under applicable law of Germany. In the case of Fresenius Medical Care Deutschland GmbH ("FMCD"), the following provisions apply: A Profit and Loss Pooling Agreement (the "Agreement") (Ergebnisabfuhrungsvertrag) dated as of August 21, 1996, between the Company and FMCD was entered into the commercial register as approved by the stockholders of the Company and the shareholders of FMCD with effect from January 1, 1996. FMCD, having a stated capital of DM 80 million, had a capital reserve account of DM 168,302,162 (the "January 1, 1996 Amount") in its balance sheet as of January 1, 1996. Assuming that the January 1, 1996 Amount has not decreased by losses in the business of FMCD since January 1, 1996, at least such amount exceeds the Company's assets protecting its share capital within the meaning of Section 30 of the German GmbH Law. Since January 1, 1996, the January 1, 1996 Amount has not been decreased by the actions of the Company (the sole shareholder of FMCD), e.g. no distributions against the January 1, 1996 Amount have been made. Based thereon, the guaranty obligations of FMCD hereunder and under FMCD's guaranty of the 9% Notes, the 2008 7 3/8% Notes, the 2008 7 7/8% Notes and the 2011 7 7/8% Notes and any other Senior Subordinated Indebtedness, if any, of FMCD to which Section 30 of the German GmbH law may apply are limited to the amount of the capital reserves of FMCD as of the date hereof less its obligations as a guarantor from time to time under the Senior Credit Agreement (the "Minimum Guaranty Amount"). If, in the case of a default under this Indenture, the capital reserves are higher than such Minimum Guaranty Amount, such higher amount (the "Higher Guaranty Amount") shall serve as limitation to the obligations of FMCD, as Guarantor. In case FMCD, as Guarantor, has to sell off assets to fulfill its obligations under this Indenture, after such guaranty obligations have been drawn, and if the proceeds from the sale of such assets exceed the amount of their book value, such excess amounts shall be paid to the Trustee for the benefit of the Holders, subject to the provisions of Article XIV hereof, in addition to the Minimum Guaranty Amount or the Higher Guaranty Amount, respectively. For the determination of the applicable book value, the book value of assets which were included into the balance sheet per January 1, 1996 applies, and for such assets which were not yet included but added to the business of FMCD since that date, the book value on the day of the sale of such assets applies. Should Section 30 of the German GmbH law however require a lower Minimum Guaranty Amount or a lower Higher Guaranty Amount, then such lower amounts required by law shall be applicable. 99 107 FMCD undertakes not to decrease its capital reserves, neither by capital increase from such reserve accounts nor by other kinds of contributions to its shareholders or affiliates without the prior written approval of the Holders of a majority in principal amount of the Outstanding Securities. FMCD undertakes to maintain a profit and loss pooling agreement with the Note Issuer during the term of this Indenture, in particular, to extend the term of such agreement to the term of this Indenture and not to terminate, rescind or amend such agreement without prior notice to the Trustee and the consent of the Holders of a majority in principal amount of the Outstanding Securities thereto. In case of a termination of such profit and loss pooling agreement, FMCD will grant, upon the request of the Holders of a majority in principal amount of the Outstanding Securities, collateral to minimize the legal and financial disadvantages caused by the termination of such agreement, as far as legally available under German law. FMCD undertakes to give notice immediately to the Trustee if it intends to give notice of termination to such agreement or to agree to the termination of such agreement, or if it becomes aware that the Note Issuer intends to terminate such agreement. During the term of the profit and loss pooling agreement, any and all allocations of profit to the Note Issuer and any and all cash distributions to the Note Issuer as a consequence thereof upon the terms and conditions of the profit and loss pooling agreement are permitted and unrestricted, subject to the terms of Section 30 of the German GmbH law as described above. .2 Execution and Delivery of Guaranties. The Guaranties to be endorsed on the Securities shall include the terms of the Guaranty set forth in Section 13.1 and any other terms that may be set forth in the form established pursuant to Section 2.6. Each of the Guarantors hereby agrees to execute its Guaranty, in a form established pursuant to Section 2.6, to be endorsed on each Security authenticated and delivered by the Trustee. The Guaranty shall be executed on behalf of each respective Guarantor by any one of such Guarantor's Chairman of the Board of Directors or two members of the Managing Board, as the case may be, or other person duly authorized by the Board of Directors or Managing Board of such Guarantor. The signature of any or all of these persons on the Guaranty may be manual or facsimile. A Guaranty bearing the manual or facsimile signature of individuals who were at any time the proper officers of a Guarantor shall bind such Guarantor, notwithstanding that such individuals or any of them have ceased to hold such offices prior to the authentication and delivery of the Security on which such Guaranty is endorsed or did not hold such offices at the date of such Guaranty. The delivery of any Security by the Trustee, after the authentication thereof hereunder, shall constitute due delivery of the Guaranty endorsed thereon on behalf of the Guarantors. Each of the Guarantors hereby jointly and severally agrees that its Guaranty set forth in Section 13.1 shall remain in full force and effect notwithstanding any failure to endorse a Guaranty on any Security. 100 108 .3 Guarantors May Consolidate, etc., on Certain Terms. Except as set forth in Section 13.4 and in Articles VIII and X hereof, nothing contained in this Indenture or in any of the Securities shall prevent any consolidation or merger of a Guarantor with or into the Company, the Note Issuer or another Guarantor or shall prevent any sale, transfer, assignment, lease, conveyance or other disposition of the property of a Guarantor as an entirety or substantially as an entirety to the Company, the Note Issuer or another Guarantor. .4 Release of Guarantors. (a) Concurrently with any consolidation or merger of a Guarantor or any sale, transfer, assignment, lease, conveyance or other disposition of the property of a Guarantor as an entirety or substantially as an entirety, in each case as permitted by Section 13.3 hereof, and upon delivery by the Company or the Note Issuer to the Trustee of an Officers' Certificate and an Opinion of Counsel to the effect that such consolidation, merger, sale, transfer, assignment, conveyance or other disposition was made in accordance with Section 13.3 hereof, the Trustee shall execute any documents reasonably required in order to acknowledge the release of such Guarantor from its obligations under its Guaranty endorsed on the Securities and under this Indenture. Any Guarantor not released from its obligations under its Guaranty endorsed on the Securities and under this Indenture shall remain liable for the full amount of principal of (premium, if any) and interest (including Additional Sums and Additional Amounts, if any) on the Securities and for the other obligations of a Guarantor under its Guaranty endorsed on the Securities and under this Indenture. (b) Concurrently with the defeasance of the Securities under Section 4.3 hereof, the Guarantors shall be released from all of their obligations under their Guaranties endorsed on the Securities and under this Indenture, without any action on the part of the Trustee or any Holder of Securities. (c) Upon the sale or other disposition (including by way of merger or consolidation) of any Guarantor or the sale, conveyance, transfer, assignment, lease or other disposition of all or substantially all the assets of a Guarantor (in each case other than to the Company, the Note Issuer or any Affiliate of the Note Issuer) pursuant to Section 8.2 hereof, such Guarantor shall automatically be released from all obligations under its Guaranties endorsed on the Securities and under this Indenture. .5 Additional Guarantors. The Company or the Note Issuer may cause any Subsidiary to become a Guarantor with respect to the Securities by executing and delivering to the Trustee (a) a supplemental indenture, in form and substance satisfactory to the Trustee, which subjects such Person to the provisions (including the representations and warranties) of this Indenture as a Guarantor and (b) an Opinion of Counsel to the effect that such supplemental indenture has been duly authorized and executed by such Person and constitutes the legal, valid, binding and enforceable obligation of such Person (subject to such customary exceptions concerning creditors' rights and equitable principles as may be acceptable to the Trustee in its discretion). 101 109 ARTICLE XIV. SUBORDINATION OF GUARANTIES .1 Guaranties Subordinate to Senior Indebtedness of Guarantors. Each Guarantor covenants and agrees, and each Holder of a Security, by his acceptance thereof, likewise covenants and agrees, that, to the extent and in the manner hereinafter set forth in this Article (subject to the provisions of Article IV), the payment of the principal of (and premium, if any) and interest (including Additional Sums and Additional Amounts, if any) on the Guaranty of each Guarantor in respect of the Securities are hereby expressly made subordinate and subject in right of payment in full of all amounts then due and payable in respect of all Senior Indebtedness of the Note Issuer and such Guarantor. .2 Payment Over of Proceeds Upon Dissolution, etc. In case of the pendency of any receivership, insolvency, liquidation, bankruptcy, reorganization, arrangement, adjustment, composition or other judicial proceeding relative to a Guarantor or its property (each such event, if any, herein sometimes referred to as a "Guarantor Proceeding"), the holders of Senior Indebtedness of the Company and such Guarantor shall be entitled to receive payment in full of principal of (and premium, if any) and interest, if any (including Additional Sums and Additional Amounts, if any), on such Senior Indebtedness, or provision shall be made for such payment in cash or cash equivalents or otherwise in a manner satisfactory to the holders of Senior Indebtedness of the Company and such Guarantor, before the Holders of the Securities are entitled to receive or retain any payment or distribution of any kind or character, whether in cash, property or securities (including any payment or distribution which may be payable or deliverable by reason of the payment of any other Indebtedness of the Company or such Guarantor (including the Securities) subordinated to the payment of the Securities, such payment or distribution being hereinafter referred to as a "Guarantor Senior Subordinated Payment"), on account of principal of (or premium, if any) or interest (including Additional Sums and Additional Amounts, if any) on the Securities or on account of the purchase or other acquisition of Securities by the Company or any Subsidiary, and to that end the holders of Senior Indebtedness of the Company and such Guarantor shall be entitled to receive, for application to the payment thereof, any payment or distribution of any kind or character, whether in cash, property or securities, including any Guarantor Senior Subordinated Payment, which may be payable or deliverable in respect of the Securities in any such Guarantor Proceeding. In the event that, notwithstanding the foregoing provisions of this Section, the Trustee or the Holder of any Security shall have received any payment or distribution of assets of the Company or any Guarantor of any kind or character, whether in cash, property or securities, including any Guarantor Senior Subordinated Payment, before all Senior Indebtedness of the Company and such Guarantor is paid in full or payment thereof is provided for in cash or cash equivalents or otherwise in a manner satisfactory to the holders of such Senior Indebtedness, and if such fact shall, at or prior to the time of such payment or distribution, have been made known to the Trustee or, as the case may be, such Holder, then and in such event such payment or distribution shall be paid over or delivered forthwith to the trustee in bankruptcy, receiver, liquidating trustee, custodian, assignee, agent or other Person making payment or distribution of assets of the Company or such Guarantor for application to the payment of all Senior Indebtedness of the Company and such Guarantor remaining unpaid, to the extent necessary to pay all Senior Indebtedness of the Company and such Guarantor in 102 110 full, after giving effect to any concurrent payment or distribution to or for the holders of Senior Indebtedness of the Company and such Guarantor. For purposes of this Article only, the words "any payment or distribution of any kind or character, whether in cash, property or securities" shall not be deemed to include shares of stock of the Company or any Guarantor as reorganized or readjusted, or securities of the Company or any Guarantor or any other corporation provided for by a plan of reorganization or readjustment which securities are subordinated in right of payment to all then outstanding Senior Indebtedness of the Company and such Guarantor to substantially the same extent as the Securities are so subordinated as provided in this Article. The consolidation of the Company or any Guarantor with, or the merger of the Company or any Guarantor into, another Person or the liquidation or dissolution of the Company or any Guarantor following the sale of all or substantially all of its properties and assets as an entirety to another Person or the liquidation or dissolution of the Company or any Guarantor following the sale of all or substantially all of its properties and assets as an entirety to another Person upon the terms and conditions set forth in Article VIII shall not be deemed a Guarantor Proceeding for the purposes of this Section if the Person formed by such consolidation or into which the Company or such Guarantor is merged or the Person which acquires by sale such properties and assets as an entirety, as the case may be, shall, as a part of such consolidation, merger, or sale comply with the conditions set forth in Article VIII. .3 Prior Payment to Senior Indebtedness of a Guarantor Upon Acceleration of Securities. In the event that, upon the occurrence of an Event of Default, any Securities are declared due and payable before their Stated Maturity, then (a) a Guarantor shall promptly notify the holders of Senior Indebtedness of such Guarantor or the representative of such holders of the acceleration, and (b) in such event, if any Senior Indebtedness of the Company or such Guarantor is outstanding, such Guarantor may not pay the Securities until five Business Days after the representative of all issues of Senior Indebtedness of the Company and such Guarantor receive notice of such acceleration and, thereafter, may pay the Securities only if payment is otherwise permitted hereunder at that time. In the event that, notwithstanding the foregoing, a Guarantor shall make any payment to the Trustee or the Holder of any Security prohibited by the foregoing provisions of this Section, and if such fact shall, at or prior to the time of such payment, have been made known to the Trustee or, as the case may be, such Holder, then and in such event such payment shall be paid over and delivered forthwith to such Guarantor. The provisions of this Section shall not apply to any payment with respect to which Section 14.2 would be applicable. .4 No Payment When Senior Indebtedness of a Guarantor in Default. (a) A Guarantor may not pay principal of, or premium (if any) or interest (including Additional Sums and Additional Amounts, if any) on, the Securities, and may not repurchase, redeem or otherwise retire any Securities (collectively "pay the Securities") if (i) any Specified Senior Indebtedness of the Company or such Guarantor (or any other Senior Indebtedness of the Company or such Guarantor having an outstanding principal amount at the time of determination in excess of $25 million) is not paid when due or (ii) any other 103 111 default on Specified Senior Indebtedness of the Company or such Guarantor occurs and the maturity of such Specified Senior Indebtedness is accelerated in accordance with its terms, unless, in either case, the default has been cured or waived and any such acceleration has been rescinded or such Specified Senior Indebtedness has been paid in full. However, a Guarantor may pay the Securities without regard to the foregoing if the Company such Guarantor and the Trustee receive written notice approving such payment from a representative of Specified Senior Indebtedness of the Company and such Guarantor with respect to which either of the events set forth in clause (i) or (ii) of the immediately preceding sentence has occurred and is continuing. (b) During the continuance of any default (other than a default described in clause (i) or (ii) of the preceding paragraph (a) with respect to any Specified Senior Indebtedness of the Company or any Guarantor pursuant to which the maturity thereof may be accelerated immediately without further notice (except such notice as may be required to effect such acceleration) or the expiration of any applicable grace periods, such Guarantor may not pay the Securities to the Holders for a period (a "Guarantor Payment Blockage Period") commencing upon the receipt by the Trustee (with a copy to such Guarantor) of written notice (a "Guarantor Blockage Notice") of such default from the representative of the holders of such Specified Senior Indebtedness specifying an election to effect a Payment Blockage Period and ending 179 days thereafter (or earlier if such Payment Blockage Period is terminated (i) by written notice to the Trustee and the Guarantor from the representative of the holders of such Specified Senior Indebtedness, (ii) because the default giving rise to such Blockage Notice is no longer continuing, as certified to the Trustee by the representative of the holders of such Specified Senior Indebtedness or (iii) because such Specified Senior Indebtedness has been repaid in full, as certified to the Trustee by the representative of the holders of such Specified Senior Indebtedness). (c) Notwithstanding the preceding paragraph (b), unless the holders of such Specified Senior Indebtedness or the representative of such holders have accelerated the maturity of such Specified Senior Indebtedness (and such Specified Senior Indebtedness remains outstanding), the Guarantor may resume payments on the Securities after the end of such Payment Blockage Period. The Securities shall not be subject to more than one Payment Blockage Period in any consecutive 360-day period, irrespective of the number of defaults with respect to Specified Senior Indebtedness of the Company or such Guarantor during such period. (d) In the event that, notwithstanding the foregoing, the Guarantor shall make any payment to the Trustee or the Holder of any Security prohibited by the foregoing provisions of this Section, and if such fact shall, at or prior to the time of such payment, have been made known to the Trustee or, as the case may be, such Holder, then and in such event such payment shall be paid over and delivered forthwith to such Guarantor. The provisions of this Section shall not apply to any payment with respect to which Section 14.2 would be applicable. .5 Payment Permitted If No Default. Nothing contained in this Article or elsewhere in this Indenture or in any of the Securities shall prevent (a) any Guarantor, at any time except during the pendency of any Proceeding referred to in Section 14.2 or under the conditions described in Sections 14.3 and 104 112 14.4, from making payments at any time of principal of (and premium, if any) or interest on the Securities, or (b) the application by the Trustee of any money or Government Obligations deposited with it hereunder in accordance with the provisions of Section 4.3 to the payment of or on account of the principal of (and premium, if any) or interest (including Additional Sums and Additional Amounts, if any) on the Securities or the retention of such payment by the Holders, if, at the time of such payment or application, as the case may be, by the Company, the Note Issuer or the Trustee, as the case may be, the Note Issuer or the Trustee, as the case may be, did not have knowledge that such payment would have been prohibited by the provisions of this Article. .6 Subrogation to Rights of Holders of Senior Indebtedness of a Guarantor. Subject to the payment in full of all Senior Indebtedness of a Guarantor, or the provision for such payment in cash or cash equivalents or otherwise in a manner satisfactory to the holders of Senior Indebtedness of a Guarantor, the Holders of the Securities shall be subrogated to the extent of the payments or distributions made to the holders of such Senior Indebtedness of a Guarantor pursuant to the provisions of this Article (equally and ratably with the holders of all indebtedness of such Guarantor which by its express terms is subordinated to Senior Indebtedness of such Guarantor to substantially the same extent as the Securities are subordinated to Senior Indebtedness and is entitled to like rights of subrogation by reason of any payments or distributions made to holders of such Senior Indebtedness) to the rights of the holders of such Senior Indebtedness to receive payments and distributions of cash, property and securities applicable to the Senior Indebtedness of such Guarantor until the principal of (and premium, if any) and interest on the Securities shall be paid in full. For purposes of such subrogation or assignment, no payments or distributions to the holders of the Senior Indebtedness of such Guarantor of any cash, property or securities to which the Holders of the Securities or the Trustee would be entitled except for the provisions of this Article, and no payments over pursuant to the provisions of this Article to the holders of Senior Indebtedness of such Guarantor by Holders of the Securities or the Trustee, shall, as among the Guarantors, their creditors other than holders of Senior Indebtedness of the Guarantors, and the Holders of the Securities, be deemed to be a payment or distribution by a Guarantor to or on account of the Senior Indebtedness of such Guarantor. .7 Provisions Solely to Define Relative Rights. The provisions of this Article are and are intended solely for the purpose of defining the relative rights of the Holders of the Securities on the one hand and the holders of Senior Indebtedness of each Guarantor on the other hand. Nothing contained in this Article or elsewhere in this Indenture or in the Securities is intended to or shall (a) impair, as between the Guarantors and the Holders of the Securities, the obligations of each Guarantor, which are absolute and unconditional, to pay to the Holders of the Securities the principal of (and premium, if any) and interest (including Additional Sums and Additional Amounts, if any) on the Securities as and when the same shall become due and payable in accordance with their terms; or (b) affect the relative rights against any Guarantor of the Holders of the Securities and creditors of such Guarantor other than their rights in relation to the holders of Senior Indebtedness of such Guarantor; or (c) prevent the Trustee or the Holder of any Security from exercising all remedies otherwise permitted by applicable law upon default under this Indenture including, without limitation, filing and voting claims in any Guarantor Proceeding, subject to the rights, if any, under this Article of the holders of Senior Indebtedness of a 105 113 Guarantor to receive cash, property and securities otherwise payable or deliverable to the Trustee or such Holder. .8 Trustee to Effectuate Subordination. Each Holder of a Security by his or her acceptance thereof authorizes and directs the Trustee on his or her behalf to take such action as may be necessary or appropriate to acknowledge or effectuate the subordination provided in this Article and appoints the Trustee his or her attorney-in-fact for any and all such purposes. .9 No Waiver of Subordination Provisions. No right of any present or future holder of any Senior Indebtedness of any Guarantor to enforce subordination as herein provided shall at any time in any way be prejudiced or impaired by any act or failure to act on the part of such Guarantor or by any act or failure to act, in good faith, by any such holder, or by any noncompliance by such Guarantor with the terms, provisions and covenants of this Indenture, regardless of any knowledge thereof that any such holder may have or be otherwise charged with. .10 Notice to Trustee. Each Guarantor shall give prompt written notice to the Trustee of any fact known to such Guarantor which would prohibit the making of any payment to or by the Trustee in respect of the Securities. Notwithstanding the provisions of this Article or any other provision of this Indenture, the Trustee shall not be charged with knowledge of the existence of any facts which would prohibit the making of any payment to or by the Trustee in respect of the Securities, unless and until the Trustee shall have received written notice thereof from a Guarantor or a holder of Senior Indebtedness of a Guarantor or from any trustee, agent or representative therefor (whether or not the facts contained in such notice are true); provided, however, that if the Trustee shall not have received the notice provided for in this Section at least two Business Days prior to the date upon which by the terms hereof any monies may become payable for any purpose (including, without limitation, the payment of the principal of (and premium, if any) or interest (including Additional Sums and Additional Amounts, if any) on any Security), then, anything herein contained to the contrary notwithstanding, the Trustee shall have full power and authority to receive such monies and to apply the same to the purpose for which they were received and shall not be affected by any notice to the contrary which may be received by it within two Business Days prior to such date. .11 Reliance on Judicial Order or Certificate of Liquidating Agent. Upon any payment or distribution of assets of the Guarantors referred to in this Article, the Trustee, subject to the provisions of Article VI, and the Holders of the Securities shall be entitled to rely upon any order or decree entered by any court of competent jurisdiction in which such Proceeding is pending, or a certificate of the trustee in bankruptcy, receiver, liquidating trustee, custodian, assignee for the benefit of creditors, agent or other Person making such payment or distribution, delivered to the Trustee or to the Holders of Securities, for the purpose of ascertaining the Persons entitled to participate in such payment or distribution, the holders of the Senior Indebtedness of a Guarantor and other indebtedness of such Guarantor, the amount thereof or payable thereon, the amount or amounts paid or distributed thereon and all other facts pertinent thereto or to this Article. 106 114 .12 Trustee Not Fiduciary for Holders of Senior Indebtedness of the Guarantors. The Trustee, in its capacity as trustee under this Indenture, shall not be deemed to owe any fiduciary duty to the holders of Senior Indebtedness of any Guarantor and shall not be liable to any such holders if it shall in good faith mistakenly pay over or distribute to Holders of Securities or to any Guarantor or to any other Person cash, property or securities to which any holders of Senior Indebtedness of such Guarantor shall be entitled by virtue of this Article or otherwise. .13 Rights of Trustee as Holder of Senior Indebtedness of the Guarantors; Preservation of Trustee's Rights. The Trustee in its individual capacity shall be entitled to all the rights set forth in this Article with respect to any Senior Indebtedness of any Guarantor which may at any time be held by it, to the same extent as any other holder of Senior Indebtedness of such Guarantor, and nothing in this Indenture shall deprive the Trustee of any of its rights as such holder. .14 Article Applicable to Paying Agents. In case at any time any Paying Agent other than the Trustee shall have been appointed by the Note Issuer and be then acting hereunder, the term "Trustee" as used in this Article shall in such case (unless the context otherwise requires) be construed as extending to and including such Paying Agent within its meaning as fully for all intents and purposes as if such Paying Agent were named in this Article in addition to or in place of the Trustee. .15 Certain Conversions or Exchanges Deemed Payment. For the purposes of this Article only, (a) the issuance and delivery of junior securities upon conversion or exchange of Securities shall not be deemed to constitute a payment or distribution on account of the principal of (or premium, if any) or interest (including Additional Sums and Additional Amounts, if any) on Securities or on account of the purchase or other acquisition of Securities, and (b) the payment, issuance or delivery of cash, property or securities (other than Securities, Exchange Securities or junior securities) upon conversion or exchange of a Security shall be deemed to constitute payment on account of the principal of such security. For the purposes of this Section, the term "junior securities" means (i) shares of any stock of any class of any Guarantor and (ii) securities of any Guarantor which are subordinated in right of payment to all Senior Indebtedness of such Guarantor which may be outstanding at the time of issuance or delivery of such securities to substantially the same extent as, or to a greater extent than, the Securities are so subordinated as provided in this Article. 107 115 This instrument may be executed in any number of counterparts, each of which so executed shall be deemed to be an original, but all such counterparts shall together constitute but one and the same instrument. IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be duly executed, all as of the day and year first above written. FMC TRUST FINANCE S.A.R.L. LUXEMBOURG-III By: /s/ Gabriele Dux ---------------------------------- Name: Gabriele Dux Title: Sole Manager FRESENIUS MEDICAL CARE AG By: /s/ Ben Lipps ---------------------------------- Name: Ben Lipps Title: Chief Executive Officer By: /s/ Rainer Runte ---------------------------------- Name: Rainer Runte Title: General Counsel and Sr. VP FRESENIUS MEDICAL CARE DEUTSCHLAND GMBH By: /s/ Emanuele Gatti ---------------------------------- Name: Emanuele Gatti Title: Managing Director By: /s/ Karl-Dieter Schwab ---------------------------------- Name: Karl-Dieter Schwab Title: Procurist 108 116 FRESENIUS MEDICAL CARE HOLDINGS, INC. By: /s/ Ronald J.Kuerbitz ---------------------------------- Name: Ronald J. Kuerbitz Title: Senior VP and Secretary STATE STREET BANK AND TRUST COMPANY, as Trustee By: /s/ Elizabeth C. Hammer ---------------------------------- Name: Elizabeth C. Hammer Title: Vice President 109 EX-4.48 13 y51284ex4-48.txt GUARANTEE AGREEMENT 1 EXHIBIT 4.48 ================================================================================ GUARANTEE AGREEMENT Between FRESENIUS MEDICAL CARE AG (as Guarantor) AND STATE STREET BANK AND TRUST COMPANY (as Trustee) dated as of June 6, 2001 ================================================================================ 2 CROSS-REFERENCE TABLE*
SECTION OF SECTION OF TRUST INDENTURE ACT GUARANTEE OF 1939. AS AMENDED AGREEMENT ------------------- ---------- 310(a)............................................... 4.1(a) 310(b) .............................................. 4.1(c),2.8 310(c) .............................................. Inapplicable 311 (a) ............................................. 2.2(b) 311 (b) ............................................. 2.2(b) 311 (c) ............................................. Inapplicable 312(a) .............................................. 2.2(a) 312(b) .............................................. 2.2(b) 313 ................................................. 2.3 314(a) .............................................. 2.4 314(b) .............................................. Inapplicable 314(c) .............................................. 2.5 314(d) .............................................. Inapplicable 314(e) .............................................. 1.1, 2.5, 3.2 314(f)............................................... 2.1, 3.2 315(a) .............................................. 3.1(d) 315 (b) ............................................. 2.7 315 (c) ............................................. 3.1 315(d) .............................................. 3.1 (d) 316(a) .............................................. 1.1, 2.6, 5.4 316(b) .............................................. 5.3 316(c) .............................................. 8.2 317(a) .............................................. Inapplicable 317(b) .............................................. Inapplicable 318(a) .............................................. 2.1(b) 318(b) .............................................. 2.1 318(c) .............................................. 2.1(a)
- ------------ * This Cross-Reference Table does not constitute part of the Guarantee Agreement and shall not affect the interpretation of any of its terms or provisions. i 3
ARTICLE I DEFINITIONS Section 1.1 Definitions.............................................................1 ARTICLE II TRUST INDENTURE ACT Section 2.1 Trust Indenture Act, Application........................................4 Section 2.2 List of Holders.........................................................4 Section 2.3 Reports by the Guarantee Trustee........................................5 Section 2.4 Periodic Reports to the Guarantee Trustee...............................5 Section 2.5 Evidence of Compliance with Conditions Precedent........................5 Section 2.6 Events of Default; Waiver...............................................5 Section 2.7 Event of Default; Notice................................................5 Section 2.8 Conflicting Interests...................................................6 ARTICLE III POWERS, DUTIES AND RIGHTS OF THE GUARANTEE TRUSTEE Section 3.1 Powers and Duties of the Guarantee Trustee..............................6 Section 3.2 Certain Rights of Guarantee Trustee.....................................7 Section 3.3 Compensation, Indemnity, Fees...........................................9 ARTICLE IV GUARANTEE TRUSTEE Section 4.1 Guarantee Trustee: Eligibility..........................................9 Section 4.2 Appointment, Removal and Resignation of the Guarantee Trustee..........10 ARTICLE V GUARANTEE Section 5.1 Guarantee..............................................................10 Section 5.2 Waiver of Notice and Demand............................................11 Section 5.3 Obligations Not Affected...............................................11 Section 5.4 Rights of Holders......................................................12 Section 5.5 Guarantee of Payment...................................................12 Section 5.6 Subrogation............................................................12 Section 5.7 Independent Obligations................................................12
ii 4
ARTICLE VI SUBORDINATION Section 6.1 Subordination..........................................................13 ARTICLE VII TERMINATION Section 7.1 Termination............................................................14 ARTICLE VIII MISCELLANEOUS Section 8.1 Successors and Assigns.................................................14 Section 8.2 Amendments.............................................................14 Section 8.3 Notices................................................................15 Section 8.4 Benefit................................................................16 Section 8.5 Interpretation.........................................................16 Section 8.6 Governing Law..........................................................16 Section 8.7 Consent to Jurisdiction................................................17 Section 8.8 Counterparts...........................................................17 EXHIBIT A -Form of Guarantee Agreement with respect to the Common Securities
iii 5 GUARANTEE AGREEMENT This GUARANTEE AGREEMENT, dated as of June 6, 2001, is executed and delivered by FRESENIUS MEDICAL CARE AG, a stock corporation (Aktiengesellschaft) organized under the laws of the Federal Republic of Germany (the "Guarantor"), having its principal office at Else-Kroner Strasse 1, 61346 Bad Homburg v.d.H., Germany, and STATE STREET BANK AND TRUST COMPANY, a Massachusetts chartered trust company, as trustee (the "Guarantee Trustee"), for the benefit of the Holders (as defined herein) from time to time of the Preferred Securities (as defined herein) of Fresenius Medical Care Capital Trust IV, a Delaware business trust (the "Trust"). WHEREAS, pursuant to a Declaration of Trust dated as of February 12, 1998 (as amended and restated, the "Declaration"), the Trust is issuing $225,000,000 aggregate liquidation amount of its 7 7/8% Trust Preferred Securities, liquidation amount $1,000 per preferred security (the "Preferred Securities") representing preferred undivided beneficial interests in the assets of the Trust and having the terms set forth in the Declaration; WHEREAS, the Preferred Securities will be issued by the Trust and the proceeds thereof, together with the proceeds from the issuance of the Trust's Common Securities (as defined below), will be used to purchase the Notes (as defined in the Declaration) of the Issuer (as defined in the Declaration) which will be held by State Street Bank and Trust Company, as Preferred Trustee under the Declaration, as trust assets; WHEREAS, the Guarantor has agreed to separately guarantee the obligations of the Trust with respect to the Common Securities (as herein defined) (Exhibit A); and WHEREAS, as incentive for the Holders to purchase Preferred Securities the Guarantor desires irrevocably and unconditionally to guarantee, to the extent set forth herein, payment to the Holders of the Preferred Securities of the Guarantee Payments (as defined herein) and to make certain other payments on the terms and conditions set forth herein. NOW, THEREFORE, in consideration of the purchase by each Holder of Preferred Securities, which purchase the Guarantor hereby agrees shall benefit the Guarantor, the Guarantor executes and delivers this Guarantee Agreement for the benefit of the Holders from time to time of the Preferred Securities. ARTICLE I DEFINITIONS .1 Definitions. As used in this Guarantee Agreement, the terms set forth below shall, unless the context otherwise requires, have the following meanings. Capitalized or otherwise defined terms used but not otherwise defined herein shall have the meanings assigned to such terms in the Declaration as in effect on the date hereof. "Affiliate" of any specified Person means any other Person directly or indirectly 1 6 controlling or controlled by or under direct or indirect common control with such specified Person, provided, however, that an Affiliate of the Guarantor shall not be deemed to include the Trust, Fresenius Medical Care Capital Trust, a Delaware business trust, Fresenius Medical Care Capital Trust II, a Delaware business trust, Fresenius Medical Care Capital Trust III, a Delaware business trust, or any business trust organized and operated on such similar terms. For the purposes of this definition, "control" when used with respect to any specified Person means the power to direct the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise; and the terms "controlling" and "controlled" have meanings correlative to the foregoing. "Common Security" means an undivided beneficial interest in the assets of the Trust, having a Liquidation Amount (as defined in the Declaration) of $1,000 and having the rights provided therefor in the Declaration, including the right to receive Distributions and a Liquidation Distribution as provided therein. "Event of Default" means a default by the Guarantor on any of its payment obligations under this Guarantee Agreement; provided, however, that, except with respect to a default in payment of any Guarantee Payments, the Guarantor shall have received notice of default and shall not have cured such default within 60 days after receipt of such notice. "Exchange Guarantee Agreement" means the guarantee agreement, as amended, modified or supplemented from time to time, to be executed and delivered by the Guarantor and the Guarantee Trustee as contemplated by the Registration Rights Agreement. "Guarantee Agreement" means the Initial Guarantee Agreement, and when and if issued, the Exchange Guarantee Agreement. "Guarantee Payments" means the following payments or distributions, without duplication, with respect to the Preferred Securities, to the extent not paid or made by or on behalf of the Trust; (i) any accumulated and unpaid Distributions (as defined in the Declaration) required to be paid on the Preferred Securities, to the extent the Trust shall have funds on hand legally available therefor at such time, (ii) the Redemption Price (as defined in the Declaration) with respect to the Preferred Securities called for redemption by the Trust, to the extent the Trust shall have funds on hand legally available therefor at such time, and (iii) upon a voluntary or involuntary dissolution, winding up or liquidation of the Trust, unless Notes are distributed to the Holders, the lesser of (a) the aggregate of the liquidation amount of $1,000 per Preferred Security plus accrued and unpaid Distributions on the Preferred Securities to the date of payment, to the extent the Trust shall have funds on hand legally available to make such payment at such time and (b) the amount of assets of the Trust remaining legally available for distribution to Holders upon liquidation of the Trust (in either case, the "Liquidation Distribution"). "Guarantee Trustee" means State Street Bank and Trust Company, until a Successor Guarantee Trustee has been appointed and has accepted such appointment pursuant to the terms of this Guarantee Agreement and thereafter means each such Successor Guarantee Trustee. "Holder" means any Holder (as defined in the Declaration) of any Preferred Securities; 2 7 provided, however, that in determining whether the holders of the requisite percentage of Preferred Securities have given any request, demand, authorization, direction, notice, consent or waiver hereunder, "Holder" shall not include the Guarantor, any Trustee (other than the Guarantee Trustee acting in a capacity other than its individual capacity or its capacity as Guarantee Trustee), or any Affiliate of the Guarantor or of any Trustee (other than the Guarantee Trustee acting in a capacity other than its individual capacity or its capacity as Guarantee Trustee). "Indenture" means the Senior Subordinated Indenture dated as of June 6, 2001, among the Issuer of the Notes, as issuer, State Street Bank and Trust Company, as trustee, and the Guarantors, as amended or supplemented from time to time. "Initial Guarantee Agreement" means this Guarantee Agreement, dated as of June 6, 2001 between the Guarantor and the Guarantee Trustee, on behalf of and for the benefit of the Holders of the Initial Preferred Securities, as may be modified, amended or supplemented and in effect from time to time. "Initial Preferred Security" means an undivided beneficial preferred interest in the assets of the Trust, having a Liquidation Amount of $1,000 and having the rights provided therefor in the Declaration, including the right to receive Distributions and a Liquidation Distribution, a s provided therein. "List of Holders" has the meaning specified in Section 2.2(a). "Majority in liquidation amount of the Securities" means, except as provided by the Trust Indenture Act, a vote by the Holders of more than 50% of the aggregate Liquidation Amount of all Preferred Securities then Outstanding. "Officers' Certificate" means, a certificate signed by the Chief Executive Officer and/or Chief Financial Officer and a Member of the Managing Board of the Guarantor, and delivered to the appropriate Trustee. Any Officers' Certificate delivered with respect to compliance with a condition or covenant provided for in this Guarantee Agreement shall include: (a) a statement that each officer signing the Officers' Certificate has read the covenant or condition and the definitions relating thereto; (b) a brief statement of the nature and scope of the examination or investigation undertaken by each officer in rendering the Officers' Certificate; (c) a statement that each officer has made such examination or investigation as, in such officer's opinion, is necessary to enable such officer to express an informed opinion as to whether or not such covenant or condition has been complied with; and (d) a statement as to whether, in the opinion of each officer, such condition or covenant has been complied with. "Person" means any individual, corporation, partnership, joint venture, association, joint- 3 8 stock company, trust, unincorporated organization, government or any agency, instrumentality or political subdivision thereof, or any other entity. "Responsible Officer" means, with respect to the Guarantee Trustee, any Senior Vice President, any Vice President, any Assistant Vice President, the Secretary, any Assistant Secretary, the Treasurer, any Assistant Treasurer, any Trust Officer or Assistant Trust Officer or any other officer of the Corporate Trust Department of the above-designated officers and also means, with respect to a particular corporate trust matter, any other officer to whom such matter is referred because of that officer's knowledge of and familiarity with the particular subject. "Senior Indebtedness" has the meaning specified in the Indenture. "Successor Guarantee Trustee" means a successor Guarantee Trustee possessing the qualifications to act as Guarantee Trustee under Section 4.1. "Trust Indenture Act" means the Trust Indenture Act of 1939 as in force at the date as of which this instrument was executed; provided, however, that in the event the Trust Indenture Act of 1939 is amended after such date, "Trust Indenture Act" means, to the extent required by any such amendment, the Trust Indenture Act of 1939 as so amended. ARTICLE II TRUST INDENTURE ACT .1 Trust Indenture Act, Application. (a) This Guarantee Agreement shall be subject to and be governed by the Trust Indenture Act upon the consummation of the Exchange Offer pursuant to the Registration Rights Agreement. Until such Exchange Offer, the Trust Indenture Act shall not apply to this Guarantee Agreement, except to the extent otherwise expressly provided herein. (b) Except as otherwise expressly provided herein, if and to the extent that any provision of this Guarantee Agreement limits, qualifies or conflicts with the duties imposed by Sections 310 to 317, inclusive, of the Trust Indenture Act, such imposed duties shall control. .2 List of Holders. (a) The Guarantor shall furnish or cause to be furnished to the Guarantee Trustee (a) semiannually, on or before January 15 and July 15 of each year, a list, in such form as the Guarantee Trustee may reasonably require, of the names and addresses of the Holders ("List of Holders") as of a date not more than 15 days prior to the delivery thereof, and (b) at such other times as the Guarantee Trustee may request in writing, within 30 days after the receipt by the Guarantor of any such request, a List of Holders as of a date not more than 15 days prior to the time such list is furnished, in each case to the extent such information is in the possession or control of the Guarantor and is not identical to a previously supplied list of Holders or has not otherwise been received by the Guarantee Trustee in its capacity as such. The Guarantee Trustee may destroy any List of Holders previously given to it on receipt of a new List of Holders. 4 9 (b) The Guarantee Trustee shall comply with its obligations under Section 311(a), Section 311(b) and Section 312(b) of the Trust Indenture Act. .3 Reports by the Guarantee Trustee. Not later than July 15 of each year, commencing July 15, 2002, the Guarantee Trustee shall provide to the Holders such reports as are required by Section 313 of the Trust Indenture Act (in the case of the initial report, with respect to the period beginning on the Closing Date), if any, in the form and in the manner provided by Section 313 of the Trust Indenture Act. The Guarantee Trustee shall also comply with the requirements of Section 31 3(d) of the Trust Indenture Act. .4 Periodic Reports to the Guarantee Trustee. The Guarantor shall provide to the Guarantee Trustee, the Securities and Exchange Commission and the Holders such documents, reports and information, if any, as required by Section 314 of the Trust Indenture Act and the compliance certificate required by Section 314 of the Trust Indenture Act, in the form, in the manner and at the times required by Section 314 of the Trust Indenture Act. .5 Evidence of Compliance with Conditions Precedent. The Guarantor shall provide to the Guarantee Trustee such evidence of compliance with such conditions precedent, if any, provided for in this Guarantee Agreement that relate to any of the matters set forth in Section 314(c) of the Trust Indenture Act. Any certificate or opinion required to be given by an officer pursuant to Section 314(c)(1) may be given in the form of an Officers' Certificate. .6 Events of Default; Waiver. The Holders of a Majority in liquidation amount of the Preferred Securities may, by vote, on behalf of the Holders, waive any past Event of Default and its consequences. Upon such waiver, any such Event of Default shall cease to exist, and any Event of Default arising therefrom shall be deemed to have been cured, for every purpose of this Guarantee Agreement, but no such waiver shall extend to any subsequent or other default or Event of Default or impair any right consequent therefrom. .7 Event of Default; Notice. (a) The Guarantee Trustee shall, within 90 days after the occurrence of an Event of Default, transmit by mail, first class postage prepaid, to the Holders, notices of all Events of Default known to the Guarantee Trustee, unless such defaults have been cured before the giving of such notice, provided, that, except in the case of a default in the payment of a Guarantee Payment, the Guarantee Trustee shall be protected in withholding such notice if and so long as the board of directors, the executive committee or a trust committee of directors and/or Responsible Officers of the Guarantee Trustee in good faith determines that the withholding of such notice is in the interests of the Holders. 5 10 (b) The Guarantee Trustee shall not be deemed to have knowledge of any Event of Default unless the Guarantee Trustee shall have received written notice, or a Responsible Officer charged with the administration of the Declaration shall have obtained written notice, of such Event of Default. .8 Conflicting Interests. The Declaration and the Indenture as well as the Guarantee Agreements, Declarations and Indentures relating to the 9% Trust Preferred Securities due 2006 of Fresenius Medical Capital Trust, the 7?% USD Trust Preferred Securities due 2008 of Fresenius Medical Care Capital Trust II and the 7?% DM Trust Preferred Securities due 2008 of Fresenius Medical Care Capital Trust III shall be deemed to be specifically described in this Guarantee Agreement for the purposes of clause (i) of the first proviso contained in Section 310(b) of the Trust Indenture Act. ARTICLE III POWERS, DUTIES AND RIGHTS OF THE GUARANTEE TRUSTEE .1 Powers and Duties of the Guarantee Trustee. (a) This Guarantee Agreement shall be held by the Guarantee Trustee for the benefit of the Holders, and the Guarantee Trustee shall not transfer this Guarantee Agreement to any Person except a Holder exercising his or her rights pursuant to Section 5.4(iv) or to a Successor Guarantee Trustee on acceptance by such Successor Guarantee Trustee of its appointment to act as Successor Guarantee Trustee. The right, title and interest of the Guarantee Trustee shall automatically vest in any Successor Guarantee Trustee, upon acceptance by such Successor Guarantee Trustee of its appointment hereunder, and such vesting and cessation of title shall be effective whether or not conveyancing documents have been executed and delivered pursuant to the appointment of such Successor Guarantee Trustee. (b) If an Event of Default has occurred and is continuing, the Guarantee Trustee shall enforce this Guarantee Agreement for the benefit of the Holders. (c) The Guarantee Trustee, before the occurrence of any Event of Default and after the curing of all Events of Default that may have occurred, shall undertake to perform only such duties as are specifically set forth in this Guarantee Agreement, and no implied covenants shall be read into this Guarantee Agreement against the Guarantee Trustee. In case an Event of Default has occurred (that has not been cured or waived pursuant to Section 2.6), the Guarantee Trustee shall exercise such of the rights and powers vested in it by this Guarantee Agreement, 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 or her own affairs. (d) No provision of this Guarantee Agreement shall be construed to relieve the Guarantee Trustee from liability for its own negligent action its own negligent failure to act or its own willful misconduct, except that: (i) prior to the occurrence of any Event of Default and after the curing or waiving of all such Events of Default that may have occurred: 6 11 (A) the duties and obligations of the Guarantee Trustee shall be determined solely by the express provisions of this Guarantee Agreement (including pursuant to Section 2.1), and the Guarantee Trustee shall not be liable except for the performance of such duties and obligations as are specifically set forth in this Guarantee Agreement; and (B) in the absence of bad faith on the part of the Guarantee Trustee, the Guarantee Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon any certificates or opinions furnished to the Guarantee Trustee and conforming to the requirements of this Guarantee Agreement; but in the case of any such certificates or opinions that by any provision hereof or of the Trust Indenture Act are specifically required to be furnished to the Guarantee Trustee, the Guarantee Trustee shall be under a duty to examine the same to determine whether or not they conform to the requirements of this Guarantee Agreement; (ii) the Guarantee Trustee shall not be liable for any error of judgment made in good faith by a Responsible Officer of the Guarantee Trustee, unless it shall be proved that the Guarantee Trustee was negligent in ascertaining the pertinent facts upon which such judgment was made; (iii) the Guarantee Trustee shall not be liable with respect to any action taken or omitted to be taken by it in good faith in accordance with the direction of the Holders of not less than a Majority in liquidation amount of the Preferred Securities relating to the time, method and place of conducting any proceeding for any remedy available to the Guarantee Trustee, or exercising any trust or power conferred upon the Guarantee Trustee under this Guarantee Agreement; and (iv) no provision of this Guarantee Agreement shall require the Guarantee Trustee to expend or risk its own funds or otherwise incur personal financial liability in the performance of any of its duties or in the exercise of any of its rights or powers, if the Guarantee Trustee shall have reasonable grounds for believing that the repayment of such funds or liability is not reasonably assured to it under the terms of this Guarantee Agreement or adequate indemnity against such risk or liability is not reasonably assured to it. .2 Certain Rights of Guarantee Trustee. (a) Subject to the provisions of Section 3.1: (i) The Guarantee 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, debenture, note, other evidence of indebtedness or other paper or document reasonably believed by it to be genuine and to have been signed, sent or presented by the proper party or parties. 7 12 (ii) Any direction or act of the Guarantor contemplated by this Guarantee Agreement shall be sufficiently evidenced by an Officers' Certificate unless otherwise prescribed herein. (iii) Whenever, in the administration of this Guarantee Agreement, the Guarantee Trustee shall deem it desirable that a matter be proved or established before taking, suffering or omitting to take any action hereunder, the Guarantee Trustee (unless other evidence is herein specifically prescribed) may, in the absence of bad faith on its part, request and rely upon an Officers' Certificate which, upon receipt of such request from the Guarantee Trustee, shall be promptly delivered by the Guarantor. (iv) The Guarantee Trustee may consult with legal counsel, and the written advice or opinion of such legal counsel with respect to legal matters shall be full and complete authorization and protection in respect of any action taken, suffered or omitted to betaken by it hereunder in good faith and in accordance with such advice or opinion. Such legal counsel may be legal counsel to the Guarantor or any of its Affiliates and may be one of its employees. The Guarantee Trustee shall have the right at any time to seek instructions concerning the administration of this Guarantee Agreement from any court of competent jurisdiction subject to Section 8.7 hereof. (v) The Guarantee Trustee shall be under no obligation to exercise any of the rights or powers vested in it by this Guarantee Agreement at the request or direction of any Holder, unless such Holder shall have provided to the Guarantee Trustee such adequate security and indemnity as would satisfy a reasonable person in the position of the Guarantee Trustee, against the costs, expenses (including attorneys' fees and expenses) and liabilities that might be incurred by it in complying with such request or direction, including such reasonable advances as may be requested by the Guarantee Trustee; provided that, nothing contained in this Section 3.2(a)(v) shall be taken to relieve the Guarantee Trustee, upon the occurrence of an Event of Default, of its obligation to exercise the rights and powers vested in it by this Guarantee Agreement. (vi) The Guarantee Trustee shall not be bound to make any investigation into the facts or matters stated in any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, debenture, note, other evidence of indebtedness or other paper or document, but the Guarantee Trustee, in its discretion, may make such further inquiry or investigation into such facts or matters as it may see fit. (vii) The Guarantee Trustee may execute any of the trusts or powers hereunder or perform any duties hereunder either directly or by or through its agents or attorneys, and the Guarantee Trustee shall not be responsible for any misconduct or negligence on the part of any such agent or attorney appointed with due care by it hereunder. (viii) Whenever in the administration of this Guarantee Agreement the Guarantee Trustee shall deem it desirable to receive instructions with respect to enforcing 8 13 any remedy or right or taking any other action hereunder, the Guarantee Trustee (A) may request instructions from the Holders, (B) may refrain from enforcing such remedy or right or taking such other action until such instructions are received, and (C) shall be protected in acting in accordance with such instructions. (b) No provision of this Guarantee Agreement shall be deemed to impose any duty or obligation on the Guarantee Trustee to perform any act or acts or exercise any right, power, duty or obligation conferred or imposed on it in any jurisdiction in which it shall be illegal, or in which the Guarantee Trustee shall be unqualified or incompetent in accordance with applicable law, to perform any such act or acts or to exercise any such right, power, duty or obligation. No permissive power or authority available to the Guarantee Trustee shall be construed to be a duty to act in accordance with such power and authority. .3 Compensation, Indemnity, Fees. The Guarantor agrees: (i) to pay to the Guarantee Trustee from time to time reasonable compensation for all services rendered by it hereunder (which compensation shall not be limited by any provisions of law in regard to the compensation of a trustee of an express trust); (ii) except as otherwise expressly provided herein, to reimburse the Guarantee Trustee upon request for all reasonable expenses, disbursements and advances incurred or made by the Guarantee Trustee in accordance with any provision of this Guarantee Agreement (including the reasonable compensation and the expenses and disbursements of its agents and counsel), except any such expense, disbursement or advance as may be attributable to its negligence or bad faith; and (iii) to indemnify the Guarantee Trustee for, and to hold it harmless against, any loss, liability or expense incurred without negligence or bad faith on the part of the Guarantee Trustee, arising out of or in connection with the acceptance or administration of this Guarantee Agreement, including the costs and expenses of defending itself against any claim or liability in connection with the exercise or performance of any of its powers or duties hereunder. The Guarantee Trustee will not claim or exact any lien or charge on any Guarantee Payments as a result of any amount due to it under this Guarantee Agreement. The provisions of this Section 3.3 shall survive the termination of this Guarantee Agreement or the resignation or removal of the Guarantee Trustee. ARTICLE IV GUARANTEE TRUSTEE .1 Guarantee Trustee: Eligibility. (a) There shall at all times be a Guarantee Trustee which shall: 9 14 (i) not be an Affiliate of the Guarantor; and (ii) be a Person that is eligible pursuant to the Trust Indenture Act to act as such and has a combined capital and surplus of at least $50,000,000,and shall be a corporation meeting the requirements of Section 310(c) of the Trust Indenture Act. If such corporation publishes reports of condition at least annually, pursuant to law or to the requirements of the supervising or examining authority, then, for the purposes of this Section 4.1 and to the extent permitted by the Trust Indenture Act, the combined capital and surplus of such corporation shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published. (b) If at any time the Guarantee Trustee shall cease to be eligible to so act under Section 4.1(a), the Guarantee Trustee shall immediately resign in the manner and with the effect set out in Section 4.2. (c) If the Guarantee Trustee has or shall acquire any "conflicting interest" within the meaning of Section 310(b) of the Trust Indenture Act, the Guarantee Trustee and Guarantor shall in all respects comply with the provisions of Section 310(b) of the Trust Indenture Act. .2 Appointment, Removal and Resignation of the Guarantee Trustee. (a) Subject to Section 4.2(b), the Guarantee Trustee may be appointed or removed without cause at any time a by the Guarantor. (b) The Guarantee Trustee shall not be removed until a Successor Guarantee Trustee has been appointed and has accepted such appointment by written instrument executed by such Successor Guarantee Trustee and delivered to the Guarantor. (c) The Guarantee Trustee appointed hereunder shall hold office until a Successor Guarantee Trustee shall have been appointed or until its removal or resignation. The Guarantee Trustee may resign from office (without need for prior or subsequent accounting) by an instrument in writing executed by the Guarantee Trustee and delivered to the Guarantor, which resignation shall not take effect until a Successor Guarantee Trustee has been appointed and has accepted such appointment by instrument in writing executed by such Successor Guarantee trustee and delivered to the Guarantor and the resigning Guarantee Trustee. (d) If no Successor Guarantee Trustee shall have been appointed and accepted appointment as provided in this Section 4.2 within 60 days after delivery to the Guarantor of an instrument of resignation, the resigning Guarantee Trustee may petition, at the expense of the Guarantor, any court of competent jurisdiction for appointment of a Successor Guarantee Trustee. Such court may thereupon, after prescribing such notice, if any, as it may deem proper, appoint a Successor Guarantee Trustee. ARTICLE V GUARANTEE .1 Guarantee. 10 15 The Guarantor irrevocably and unconditionally agrees to pay in full on a senior subordinated basis, to the extent set forth herein, to the Holders the Guarantee Payments (without duplication of amounts theretofore paid by or on behalf of the Trust), as and when due regardless of any defense, right of set-off or counterclaim which the Trust may have or assert, other than the defense of payment. The Guarantor's obligation to make a Guarantee Payment may be satisfied by direct payment of the required amounts by the Guarantor to the Holders or by causing the Trust to pay such amounts to the Holders. .2 Waiver of Notice and Demand. The Guarantor hereby waives notice of acceptance of the Guarantee Agreement and of any liability to which it applies or may apply, presentment, demand for payment, any right to require a proceeding first against the Guarantee Trustee, the Trust or any other Person before proceeding against the Guarantor, protest, notice of nonpayment, notice of dishonor, notice of redemption and all other notices and demands. .3 Obligations Not Affected. The obligations, covenants, agreements and duties of the Guarantor under this Guarantee Agreement shall in no way be affected or impaired by reason of the happening from time to time of any of the following: (a) the release or waiver, by operation of law or otherwise, of the performance or observance by the Trust of any express or implied agreement, covenant, term or condition relating to the Preferred Securities to be performed or observed by the Trust; (b) the extension of time for the payment by the Trust of all or any portion of the Distributions, Redemption Price, Liquidation Distribution or any other sums payable under the terms of the Preferred Securities or the extension of time for the performance of any other obligation under, arising out of, or in connection with, the Preferred Securities; (c) any failure, omission, delay or lack of diligence on the part of the Holders to enforce, assert or exercise any right, privilege, power or remedy conferred on the Holders pursuant to the terms of the Preferred Securities, or any action on the part of the Trust granting indulgence or extension of any kind; (d) the voluntary or involuntary liquidation, dissolution, sale of any collateral, receivership, insolvency, bankruptcy, assignment for the benefit of creditors, reorganization, arrangement, composition or readjustment of debt of, or other similar proceedings affecting, the Trust or any of the assets of the Trust; (e) any invalidity of, or defect or deficiency in, the Preferred Securities; (f) the settlement or compromise of any obligation guaranteed hereby or hereby incurred; or 11 16 (g) any other circumstance whatsoever that might otherwise constitute a legal or equitable discharge or defense of a guarantor, it being the intent of this Section 5.3 that the obligations of the Guarantor hereunder shall be absolute and unconditional under any and all circumstances. There shall be no obligation of the Holders to give notice to, or obtain the consent of, the Guarantor with respect to the happening of any of the foregoing. .4 Rights of Holders. The Guarantor expressly acknowledges that: (i) this Guarantee Agreement will be deposited with the Guarantee Trustee to be held for the benefit of the Holders; (ii) the Guarantee Trustee has the right to enforce this Guarantee Agreement on behalf of the Holders; (iii) the Holders of a Majority in liquidation amount of the Preferred Securities have the right to direct the time, method and place of conducting any proceeding for any remedy available to the Guarantee Trustee in respect of this Guarantee Agreement or exercising any trust or power conferred upon the Guarantee Trustee under this Guarantee Agreement; and (iv) upon the occurrence of an Event of Default, any Holder may institute a legal proceeding directly against the Guarantor to enforce its rights under this Guarantee Agreement, without first instituting a legal proceeding against the Guarantee Trustee, the Trust or any other Person. .5 Guarantee of Payment. This Guarantee Agreement creates a guarantee of payment and not of collection. This Guarantee Agreement will not be discharged except by payment of the Guarantee Payments in full (without duplication of amounts theretofore paid by the Trust out of funds legally available therefor) or upon distribution of Notes to Holders as provided in the Declaration. .6 Subrogation. The Guarantor shall be subrogated to all (if any) rights of the Holders against the Trust in respect of any amounts paid to the Holders by the Guarantor under this Guarantee Agreement and shall have the right to waive payment by the Trust pursuant to Section 5.1; provided, however, that the Guarantor shall not (except to the extent required by mandatory provisions of law) be entitled to enforce or exercise any rights which it may acquire by way of subrogation or any indemnity, reimbursement or other agreement, in all cases as a result of payment under this Guarantee Agreement, if at the time of any such payment, any amounts are due and unpaid under this Guarantee Agreement. If any amount shall be paid to the Guarantor in violation of the preceding sentence, the Guarantor agrees to hold such amount in trust for the Holders and to pay over such amount to the Holders. .7 Independent Obligations. The Guarantor acknowledges that its obligations hereunder are independent of the obligations of the Trust with respect to the Preferred Securities and that the Guarantor shall be liable as principal and as debtor hereunder to make Guarantee Payments pursuant to the terms of this Guarantee Agreement notwithstanding the occurrence of any event referred to in subsections 12 17 (a) through (g), inclusive, of Section 5.3 hereof. ARTICLE VI SUBORDINATION .1 Subordination. (a) This Guarantee Agreement will constitute an unsecured obligation of the Guarantor and will rank subordinate and junior in right of payment to all Senior Indebtedness of the Guarantor and the Issuer. (b) The Guarantor may not make a Guarantee Payment to the Holders if (i) any Specified Senior Indebtedness (as defined in the Indenture) of the Guarantor or any other Senior Indebtedness (as defined in the Indenture) of the Guarantor having an outstanding principal amount at the time of determination in excess of $25,000,000) is not paid when due or (ii) any other default on Specified Senior Indebtedness of the Guarantor occurs and the maturity of such Specified Senior Indebtedness is accelerated in accordance with its terms, unless, in either case, the default has been cured or waived and any such acceleration has been rescinded or such Specified Senior Indebtedness has been paid in full. However, the Guarantor may make a Guarantee Payment without regard to the foregoing if the Guarantor and the Guarantee Trustee receive written notice approving such payment from a representative of the Specified Senior Indebtedness with respect to which either of the events set forth in clause (i) or (ii) of the immediately preceding sentence has occurred and is continuing. During the continuance of any default (other than a default described in clause (i) or (ii) of the second preceding sentence) with respect to any Specified Senior Indebtedness of the Guarantor pursuant to which the maturity thereof may be accelerated immediately without further notice (except such notice as may be required to effect such acceleration) or the expiration of any applicable grace periods, the Guarantor may not make a Guarantee Payment to the Holders for a period (a "Payment Blockage Period," as defined in the Indenture) commencing upon the receipt by the Guarantee Trustee (with a copy to the Guarantor) of written notice (a "Blockage Notice," as defined in the Indenture) of such default from the representative of the holders of such Specified Senior Indebtedness specifying an election to effect a Payment Blockage Period and ending 179 days thereafter (or earlier if such Payment Blockage Period is terminated (i) by written notice to the Guarantee Trustee, the Guarantor from the representative of the holders of such Specified Senior Indebtedness, (ii) because the default giving rise to such Blockage Notice is no longer continuing, as certified to the Guarantee Trustee by the representative of the holders of such Specified Senior Indebtedness or (iii) because such Specified Senior Indebtedness has been repaid in full, as certified to the Guarantee Trustee by the representative of the holders of such Specified Senior Indebtedness). Notwithstanding the provisions described in the immediately preceding sentence, unless the holders of such Specified Senior Indebtedness or the representative of such holders have accelerated the maturity of such Specified Senior Indebtedness (and such Specified Senior Indebtedness remains outstanding), the Guarantor may resume Guarantee Payments after the end of such Payment Blockage Period. The Guarantee Agreement shall not be subject to more than one Payment Blockage Period in any consecutive 360-day period, irrespective of the number of defaults with respect to Specified Senior Indebtedness during such period. 13 18 (c) Upon any payment or distribution of the assets of the Guarantor upon a total or partial liquidation or dissolution or reorganization of or similar proceeding relating to the Guarantor or its property, the holders of Senior Indebtedness of the Guarantor will be entitled to receive payment in full of such Senior Indebtedness before the Holders are entitled to receive any Guarantee Payment, and until the Senior Indebtedness of the Guarantor is paid in full, any payment or distribution to which the Holders would be entitled but for this Section 6.1 will be made to holders of such Senior Indebtedness as their interests may appear. If a Distribution is made to the Holders that, due to this Section 6.1, should not have been made to them, such Holders are required to hold it in trust for the holders of Senior Indebtedness of the Guarantor and pay it over to them as their interests may appear. (d) If a Guarantee Payment is to be made by the Guarantor to the Holders, the Guarantor or the Guarantee Trustee shall promptly notify the holders of Senior Indebtedness of the Guarantor or the representative of such holders of such Guarantee Payment. If any Senior Indebtedness of the Guarantor is outstanding, the Guarantor may not pay such Guarantee Payment until five Business Days after the representatives of all the issues of Senior Indebtedness of the Guarantor receive notice of such Guarantee Payment and, thereafter, may pay such Guarantee Payment only if the Guarantee Agreement otherwise permits payment at that time. ARTICLE VII TERMINATION .1 Termination. This Guarantee Agreement shall terminate and be of no further force and effect upon (i) full payment of the Redemption Price of all Preferred Securities, (ii) the distribution of Notes to the Holders in exchange for all of the Preferred Securities or (iii) full payment of the amounts payable in accordance with the Declaration upon liquidation of the Trust. Notwithstanding the foregoing, this Guarantee Agreement will continue to be effective or will be reinstated, as the case may be, if at any time any Holder must restore payment of any sums paid with respect to Preferred Securities or this Guarantee Agreement. ARTICLE VIII MISCELLANEOUS .1 Successors and Assigns. All guarantees and agreements contained in this Guarantee Agreement shall bind the successors, assigns, receivers, trustees and representatives of the Guarantor and shall inure to the benefit of the Holders of the Preferred Securities then outstanding. Except in connection with a consolidation, merger or sale involving the Guarantor that is permitted under Article VIII of the Indenture and pursuant to which the assignee agrees in writing to perform the Guarantor's obligations hereunder, the Guarantor shall not assign its obligations hereunder and any purported assignment other than in accordance with this provision shall be void. .2 Amendments. 14 19 Except with respect to any changes which do not adversely affect the rights of the Holders in any material respect (in which case no consent of the Holders will be required), this Guarantee Agreement may only be amended with the prior approval of the Holders of not less than a Majority in liquidation amount of all the outstanding Preferred Securities. The provisions of Article VI of the Declaration concerning meetings of the Holders shall apply to the giving of such approval. No amendment shall be made to the definition of Guarantee Payments or to Article V1 hereof without the consent of the requisite lenders under the Bank Credit Agreement. In executing any amendment permitted by this Section, the Guarantee Trustee shall be entitled to receive, and (subject to Section 3.1) shall be fully protected in relying upon, an Officers' Certificate and an Opinion of Counsel stating that the execution of such amendment is authorized or permitted by this Guarantee Agreement, and that all conditions precedent herein provided for relating to such action have been complied with. .3 Notices. Any notice, request or other communication required or permitted to be given hereunder shall be in writing, duly signed by the party giving such notice, and delivered, telecopied or mailed by first class mail as follows: (a) if given to the Guarantor, to the address set forth below or such other address, facsimile number or to the attention of such other Person as the Guarantor may give notice to the Holders: Fresenius Medical Care AG Else-Kroner Strasse 1 61346 Bad Homburg v.d.H. Germany Facsimile No.: 011-49-6172-609-2103 Attention: Chief Executive Officer (b) if given to the Trust, in care of the Guarantee Trustee, at the Trust's (and the Guarantee Trustee's) address set forth below or such other address as the Guarantee Trustee on behalf of the Trust may give notice to the Holders: Fresenius Medical Care Capital Trust IV c/o Fresenius Medical Care Holdings, Inc. Two Ledgemont Center 95 Hayden Avenue Lexington, Massachusetts 02173 Facsimile No.: 781-402-9714 Attention: Legal Department with a copy to: State Street Bank and Trust Company 225 Asylum Street 15 20 Hartford, Connecticut 06103 Facsimile No.: 860-244-1889 Attention: Corporate Trust Administration (c) if given to any Holder, at the address set forth on the books and records of the Trust. All notices hereunder shall be deemed to have been given when received in person, telecopied with receipt confirmed, or mailed by first class mail, postage prepaid, except that if a notice or other document is refused delivery or cannot be delivered because of a changed address of which no notice was given, such notice or other document shall be deemed to have been delivered on the date of such refusal or inability to deliver. .4 Benefit. This Guarantee Agreement is solely for the benefit of the Holders and is not separately transferable from the Preferred Securities. .5 Interpretation. In this Guarantee Agreement, unless the context otherwise requires: (a) capitalized terms used in this Guarantee Agreement but not defined in the preamble hereto have the respective meanings assigned to them in Section 1.1; (b) a term defined anywhere in this Guarantee Agreement has the same meaning throughout; (c) all references to "the Guarantee Agreement" or "this Guarantee Agreement" are to this Guarantee Agreement as modified, supplemented or amended from time to time; (d) all references in this Guarantee Agreement to Articles and Sections are to Articles and Sections of this Guarantee Agreement unless otherwise specified; (e) a term defined in the Trust Indenture Act has the same meaning when used in this Guarantee Agreement unless otherwise defined in this Guarantee Agreement or unless the context otherwise requires; (f) a reference to the singular includes the plural and vice versa; and (g) the masculine, feminine or neuter genders used herein shall include the masculine, feminine and neuter genders. .6 Governing Law. THIS GUARANTEE AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO THE CONFLICT OF LAW PRINCIPLES 16 21 THEREOF. .7 Consent to Jurisdiction. The Guarantor hereby irrevocably submits to the non-exclusive jurisdiction of any state or federal court in the Borough of Manhattan, The City of New York, for the purpose of any suit, action, proceeding or judgment relating to or arising out of this Guarantee Agreement. The Guarantor hereby appoints Fresenius Medical Care Holdings, Inc., c/o CT Corporation System, with offices on the date hereof at 1633 Broadway, New York, New York 10019, as its authorized agent on whom process may be served in any action which may be instituted against it by any Holder or the Guarantee Trustee in any state or federal court in The City of New York, the Borough of Manhattan, arising out of or relating to this Guarantee Agreement. Service of process upon such authorized agent and written notice of such service to the Guarantor shall be deemed in every respect effective service of process upon the Guarantor, and the Guarantor hereby irrevocably consents to the jurisdiction of any such court in any such action and to the laying of venue in the Borough of Manhattan, The City of New York. The Guarantor hereby waives, to the fullest extent permitted by applicable law, any objection to the laying of venue of any such suit, action or proceeding brought in the aforesaid courts and hereby irrevocably waives any claim that any such suit, action or proceeding brought in any such court has been brought in an inconvenient forum. Notwithstanding the foregoing, nothing herein shall in any way affect the right of the Holders of the Guarantee Trustee to bring any action arising out of or relating to this Guarantee Agreement in any competent court elsewhere having jurisdiction over the Guarantor and its property. .8 Counterparts. This instrument may be executed in any number of counterparts, each of which so executed shall be deemed to be an original, but all such counterparts shall together constitute but one and the same instrument. 17 22 THIS GUARANTEE AGREEMENT is executed as of the day and year first above written. FRESENIUS MEDICAL CARE AG By:/s/ Ben Lipps --------------------------------------------- Name: Ben Lipps Title Chief Executive Officer By:/s/ Rainer Runte --------------------------------------------- Name: Rainer Runte Title: General Counsel and Sr. Vice President STATE STREET BANK AND TRUST COMPANY as Guarantee Trustee By:/s/ Elizabeth C. Hammer --------------------------------------------- Name: Elizabeth C. Hammer Title: Vice President Acknowledged: FMC TRUST FINANCE S.A.R.L. LUXEMBOURG - III By:/s/ Gabriele Dux ----------------------------------------- Name: Gabriele Dux Title Sole Manager 18 23 EXHIBIT A GUARANTEE AGREEMENT WITH RESPECT TO THE COMMON SECURITIES This AGREEMENT, dated as of June 6, 2001, is executed and delivered by FRESENIUS MEDICAL CARE AG, a stock corporation (Aktiengesellschaft) organized under the laws of the Federal Republic of Germany ("Guarantor"), having its principal office at Else-Kroner Strasse 1, 61346 Bad Homburg v.d.H., Germany, for the benefit of the holders from time to time (the "Holders") of Common Securities (as defined in the Guarantee Agreement) of Fresenius Medical Care Capital Trust IV, a Delaware statutory business trust (the "Trust"). WHEREAS, pursuant to the Guarantee Agreement, dated as of June 6, 2001, between Fresenius Medical Care AG, as Guarantor, and State Street Bank and Trust Company, as Trustee (the "Guarantee Agreement"), the Guarantor has irrevocably and unconditionally agreed to pay in full to the holders of Preferred Securities (as defined therein) the Guarantee Payments (as defined therein). WHEREAS, in order to facilitate the classification of the Trust for United States Federal income tax purposes as a grantor trust, the benefit of the guarantee provided by the Guarantor pursuant to the Guarantee Agreement must inure, to the extent set forth herein, also to the benefit of the Holders. NOW, THEREFORE, it is hereby agreed that SECTION 1.0 Definitions. Capitalized or otherwise defined terms used but not otherwise defined herein shall have the meanings assigned to such terms in the Guarantee Agreement as in effect on the date hereof. SECTION 2.0. Guarantee. The Guarantor irrevocably and unconditionally agrees to pay in full to the Holders Guarantee Payments to the same extent as the guarantee provided to the holders of Preferred Securities under the Guarantee Agreement; provided, however, that upon the occurrence and during the continuation of a Declaration Event of Default (as defined in the Declaration), holders of Preferred Securities shall have priority over the Holders with respect to the Guarantee Payments. SECTION 3.0. Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO THE CONFLICT OF LAW PRINCIPLES THEREOF. SECTION 4.0. Counterparts. This instrument may be executed in any number of counterparts, each of which so executed shall be deemed to be an original, but all such counterparts shall together constitute but 24 one and the same instrument. 25 THIS AGREEMENT is executed as of the day and year first above written. FRESENIUS MEDICAL CARE AG By: --------------------------------------------- Name: Title: By: --------------------------------------------- Name: Title: S-1 26 FMC TRUST FINANCE S. A.R.L. LUXEMBOURG - III By: --------------------------------------------- Name: Title: S-2 EX-4.49 14 y51284ex4-49.txt GUARANTEE AGREEMENT 1 EXHIBIT 4.49 EXECUTION COPY ================================================================================ GUARANTEE AGREEMENT Between FRESENIUS MEDICAL CARE AG (as Guarantor) AND STATE STREET BANK AND TRUST COMPANY (as Trustee) dated as of June 15, 2001 ================================================================================ 2 CROSS-REFERENCE TABLE*
SECTION OF SECTION OF TRUST INDENTURE ACT GUARANTEE OF 1939. AS AMENDED AGREEMENT ------------------- ---------- 310(a)............................................... 4.1(a) 310(b) .............................................. 4.1(c),2.8 310(c) .............................................. Inapplicable 311 (a) ............................................. 2.2(b) 311 (b) ............................................. 2.2(b) 311 (c) ............................................. Inapplicable 312(a) .............................................. 2.2(a) 312(b) .............................................. 2.2(b) 313 ................................................. 2.3 314(a) .............................................. 2.4 314(b) .............................................. Inapplicable 314(c) .............................................. 2.5 314(d) .............................................. Inapplicable 314(e) .............................................. 1.1, 2.5, 3.2 314(f)............................................... 2.1, 3.2 315(a) .............................................. 3.1(d) 315 (b) ............................................. 2.7 315 (c) ............................................. 3.1 315(d) .............................................. 3.1 (d) 316(a) .............................................. 1.1, 2.6, 5.4 316(b) .............................................. 5.3 316(c) .............................................. 8.2 317(a) .............................................. Inapplicable 317(b) .............................................. Inapplicable 318(a) .............................................. 2.1(b) 318(b) .............................................. 2.1 318(c) .............................................. 2.1(a)
- ------------ * This Cross-Reference Table does not constitute part of the Guarantee Agreement and shall not affect the interpretation of any of its terms or provisions. i 3
ARTICLE I DEFINITIONS Section 1.1 Definitions..........................................................1 ARTICLE II TRUST INDENTURE ACT Section 2.1 Trust Indenture Act, Application.....................................4 Section 2.2 List of Holders......................................................4 Section 2.3 Reports by the Guarantee Trustee.....................................5 Section 2.4 Periodic Reports to the Guarantee Trustee............................5 Section 2.5 Evidence of Compliance with Conditions Precedent.....................5 Section 2.6 Events of Default; Waiver............................................5 Section 2.7 Event of Default; Notice.............................................5 Section 2.8 Conflicting Interests................................................6 ARTICLE III POWERS, DUTIES AND RIGHTS OF THE GUARANTEE TRUSTEE Section 3.1 Powers and Duties of the Guarantee Trustee...........................6 Section 3.2 Certain Rights of Guarantee Trustee..................................7 Section 3.3 Compensation, Indemnity, Fees........................................9 ARTICLE IV GUARANTEE TRUSTEE Section 4.1 Guarantee Trustee: Eligibility.......................................9 Section 4.2 Appointment, Removal and Resignation of the Guarantee Trustee.......10 ARTICLE V GUARANTEE Section 5.1 Guarantee...........................................................10 Section 5.2 Waiver of Notice and Demand.........................................11 Section 5.3 Obligations Not Affected............................................11 Section 5.4 Rights of Holders...................................................12 Section 5.5 Guarantee of Payment................................................12 Section 5.6 Subrogation.........................................................12 Section 5.7 Independent Obligations.............................................12
ii 4
ARTICLE VI SUBORDINATION Section 6.1 Subordination.......................................................13 ARTICLE VII TERMINATION Section 7.1 Termination.........................................................14 ARTICLE VIII MISCELLANEOUS Section 8.1 Successors and Assigns..............................................14 Section 8.2 Amendments..........................................................14 Section 8.3 Notices.............................................................15 Section 8.4 Benefit.............................................................16 Section 8.5 Interpretation......................................................16 Section 8.6 Governing Law.......................................................16 Section 8.7 Consent to Jurisdiction.............................................17 Section 8.8 Counterparts........................................................17 EXHIBIT A -Form of Guarantee Agreement with respect to the Common Securities
iii 5 GUARANTEE AGREEMENT This GUARANTEE AGREEMENT, dated as of June 15, 2001, is executed and delivered by FRESENIUS MEDICAL CARE AG, a stock corporation (Aktiengesellschaft) organized under the laws of the Federal Republic of Germany (the "Guarantor"), having its principal office at Else-Kroner Strasse 1, 61346 Bad Homburg v.d.H., Germany, and STATE STREET BANK AND TRUST COMPANY, a Massachusetts chartered trust company, as trustee (the "Guarantee Trustee"), for the benefit of the Holders (as defined herein) from time to time of the Preferred Securities (as defined herein) of Fresenius Medical Care Capital Trust V, a Delaware business trust (the "Trust"). WHEREAS, pursuant to a Declaration of Trust dated as of June 1, 2001 (as amended and restated, the "Declaration"), the Trust is issuing Euro 300,000,000 aggregate liquidation amount of its 7 3/8% Trust Preferred Securities, liquidation amount Euro 1,000 per preferred security (the "Preferred Securities") representing preferred undivided beneficial interests in the assets of the Trust and having the terms set forth in the Declaration; WHEREAS, the Preferred Securities will be issued by the Trust and the proceeds thereof, together with the proceeds from the issuance of the Trust's Common Securities (as defined below), will be used to purchase the Notes (as defined in the Declaration) of the Issuer (as defined in the Declaration) which will be held by State Street Bank and Trust Company, as Preferred Trustee under the Declaration, as trust assets; WHEREAS, the Guarantor has agreed to separately guarantee the obligations of the Trust with respect to the Common Securities (as herein defined) (Exhibit A); and WHEREAS, as incentive for the Holders to purchase Preferred Securities the Guarantor desires irrevocably and unconditionally to guarantee, to the extent set forth herein, payment to the Holders of the Preferred Securities of the Guarantee Payments (as defined herein) and to make certain other payments on the terms and conditions set forth herein. NOW, THEREFORE, in consideration of the purchase by each Holder of Preferred Securities, which purchase the Guarantor hereby agrees shall benefit the Guarantor, the Guarantor executes and delivers this Guarantee Agreement for the benefit of the Holders from time to time of the Preferred Securities. ARTICLE I DEFINITIONS .1 Definitions. As used in this Guarantee Agreement, the terms set forth below shall, unless the context otherwise requires, have the following meanings. Capitalized or otherwise defined terms used but not otherwise defined herein shall have the meanings assigned to such terms in the Declaration as in effect on the date hereof. "Affiliate" of any specified Person means any other Person directly or indirectly 1 6 controlling or controlled by or under direct or indirect common control with such specified Person, provided, however, that an Affiliate of the Guarantor shall not be deemed to include the Trust, Fresenius Medical Care Capital Trust, a Delaware business trust, Fresenius Medical Care Capital Trust II, a Delaware business trust, Fresenius Medical Care Capital Trust III, a Delaware business trust, Fresenius Medical Care Capital Trust IV, a Delaware business trust, or any business trust organized and operated on such similar terms. For the purposes of this definition, "control" when used with respect to any specified Person means the power to direct the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise; and the terms "controlling" and "controlled" have meanings correlative to the foregoing. "Common Security" means an undivided beneficial interest in the assets of the Trust, having a Liquidation Amount (as defined in the Declaration) of (pounds sterling)1,000 and having the rights provided therefor in the Declaration, including the right to receive Distributions and a Liquidation Distribution as provided therein. "Event of Default" means a default by the Guarantor on any of its payment obligations under this Guarantee Agreement; provided, however, that, except with respect to a default in payment of any Guarantee Payments, the Guarantor shall have received notice of default and shall not have cured such default within 60 days after receipt of such notice. "Exchange Guarantee Agreement" means the guarantee agreement, as amended, modified or supplemented from time to time, to be executed and delivered by the Guarantor and the Guarantee Trustee as contemplated by the Registration Rights Agreement. "Guarantee Agreement" means the Initial Guarantee Agreement, and when and if issued, the Exchange Guarantee Agreement. "Guarantee Payments" means the following payments or distributions, without duplication, with respect to the Preferred Securities, to the extent not paid or made by or on behalf of the Trust; (i) any accumulated and unpaid Distributions (as defined in the Declaration) required to be paid on the Preferred Securities, to the extent the Trust shall have funds on hand legally available therefor at such time, (ii) the Redemption Price (as defined in the Declaration) with respect to the Preferred Securities called for redemption by the Trust, to the extent the Trust shall have funds on hand legally available therefor at such time, and (iii) upon a voluntary or involuntary dissolution, winding up or liquidation of the Trust, unless Notes are distributed to the Holders, the lesser of (a) the aggregate of the liquidation amount of (pounds sterling)1,000 per Preferred Security plus accrued and unpaid Distributions on the Preferred Securities to the date of payment, to the extent the Trust shall have funds on hand legally available to make such payment at such time and (b) the amount of assets of the Trust remaining legally available for distribution to Holders upon liquidation of the Trust (in either case, the "Liquidation Distribution"). "Guarantee Trustee" means State Street Bank and Trust Company, until a Successor Guarantee Trustee has been appointed and has accepted such appointment pursuant to the terms of this Guarantee Agreement and thereafter means each such Successor Guarantee Trustee. 2 7 "Holder" means any Holder (as defined in the Declaration) of any Preferred Securities; provided, however, that in determining whether the holders of the requisite percentage of Preferred Securities have given any request, demand, authorization, direction, notice, consent or waiver hereunder, "Holder" shall not include the Guarantor, any Trustee (other than the Guarantee Trustee acting in a capacity other than its individual capacity or its capacity as Guarantee Trustee), or any Affiliate of the Guarantor or of any Trustee (other than the Guarantee Trustee acting in a capacity other than its individual capacity or its capacity as Guarantee Trustee). "Indenture" means the Senior Subordinated Indenture dated as of June 15, 2001, among the Issuer of the Notes, as issuer, State Street Bank and Trust Company, as trustee, and the Guarantors, as amended or supplemented from time to time. "Initial Guarantee Agreement" means this Guarantee Agreement, dated as of June 15, 2001 between the Guarantor and the Guarantee Trustee, on behalf of and for the benefit of the Holders of the Initial Preferred Securities, as may be modified, amended or supplemented and in effect from time to time. "Initial Preferred Security" means an undivided beneficial preferred interest in the assets of the Trust, having a Liquidation Amount of (pounds sterling)1,000 and having the rights provided therefor in the Declaration, including the right to receive Distributions and a Liquidation Distribution, as provided therein. "List of Holders" has the meaning specified in Section 2.2(a). "Majority in liquidation amount of the Securities" means, except as provided by the Trust Indenture Act, a vote by the Holders of more than 50% of the aggregate Liquidation Amount of all Preferred Securities then Outstanding. "Officers' Certificate" means, a certificate signed by the Chief Executive Officer and/or Chief Financial Officer and a Member of the Managing Board of the Guarantor, and delivered to the appropriate Trustee. Any Officers' Certificate delivered with respect to compliance with a condition or covenant provided for in this Guarantee Agreement shall include: (a) a statement that each officer signing the Officers' Certificate has read the covenant or condition and the definitions relating thereto; (b) a brief statement of the nature and scope of the examination or investigation undertaken by each officer in rendering the Officers' Certificate; (c) a statement that each officer has made such examination or investigation as, in such officer's opinion, is necessary to enable such officer to express an informed opinion as to whether or not such covenant or condition has been complied with; and (d) a statement as to whether, in the opinion of each officer, such condition or covenant has been complied with. 3 8 "Person" means any individual, corporation, partnership, joint venture, association, joint-stock company, trust, unincorporated organization, government or any agency, instrumentality or political subdivision thereof, or any other entity. "Responsible Officer" means, with respect to the Guarantee Trustee, any Senior Vice President, any Vice President, any Assistant Vice President, the Secretary, any Assistant Secretary, the Treasurer, any Assistant Treasurer, any Trust Officer or Assistant Trust Officer or any other officer of the Corporate Trust Department of the above-designated officers and also means, with respect to a particular corporate trust matter, any other officer to whom such matter is referred because of that officer's knowledge of and familiarity with the particular subject. "Senior Indebtedness" has the meaning specified in the Indenture. "Successor Guarantee Trustee" means a successor Guarantee Trustee possessing the qualifications to act as Guarantee Trustee under Section 4.1. "Trust Indenture Act" means the Trust Indenture Act of 1939 as in force at the date as of which this instrument was executed; provided, however, that in the event the Trust Indenture Act of 1939 is amended after such date, "Trust Indenture Act" means, to the extent required by any such amendment, the Trust Indenture Act of 1939 as so amended. ARTICLE II TRUST INDENTURE ACT .1 Trust Indenture Act, Application. (a) This Guarantee Agreement shall be subject to and be governed by the Trust Indenture Act upon the consummation of the Exchange Offer pursuant to the Registration Rights Agreement. Until such Exchange Offer, the Trust Indenture Act shall not apply to this Guarantee Agreement, except to the extent otherwise expressly provided herein. (b) Except as otherwise expressly provided herein, if and to the extent that any provision of this Guarantee Agreement limits, qualifies or conflicts with the duties imposed by Sections 310 to 317, inclusive, of the Trust Indenture Act, such imposed duties shall control. .2 List of Holders. (a) The Guarantor shall furnish or cause to be furnished to the Guarantee Trustee (a) semiannually, on or before January 15 and July 15 of each year, a list, in such form as the Guarantee Trustee may reasonably require, of the names and addresses of the Holders ("List of Holders") as of a date not more than 15 days prior to the delivery thereof, and (b) at such other times as the Guarantee Trustee may request in writing, within 30 days after the receipt by the Guarantor of any such request, a List of Holders as of a date not more than 15 days prior to the time such list is furnished, in each case to the extent such information is in the possession or control of the Guarantor and is not identical to a previously supplied list of Holders or has not otherwise been received by the Guarantee Trustee in its capacity as such. The Guarantee Trustee may destroy any List of Holders previously given to it on receipt of a new List of Holders. 4 9 (b) The Guarantee Trustee shall comply with its obligations under Section 311(a), Section 311(b) and Section 312(b) of the Trust Indenture Act. .3 Reports by the Guarantee Trustee. Not later than July 15 of each year, commencing July 15, 2002, the Guarantee Trustee shall provide to the Holders such reports as are required by Section 313 of the Trust Indenture Act (in the case of the initial report, with respect to the period beginning on the Closing Date), if any, in the form and in the manner provided by Section 313 of the Trust Indenture Act. The Guarantee Trustee shall also comply with the requirements of Section 31 3(d) of the Trust Indenture Act. .4 Periodic Reports to the Guarantee Trustee. The Guarantor shall provide to the Guarantee Trustee, the Securities and Exchange Commission and the Holders such documents, reports and information, if any, as required by Section 314 of the Trust Indenture Act and the compliance certificate required by Section 314 of the Trust Indenture Act, in the form, in the manner and at the times required by Section 314 of the Trust Indenture Act. .5 Evidence of Compliance with Conditions Precedent. The Guarantor shall provide to the Guarantee Trustee such evidence of compliance with such conditions precedent, if any, provided for in this Guarantee Agreement that relate to any of the matters set forth in Section 314(c) of the Trust Indenture Act. Any certificate or opinion required to be given by an officer pursuant to Section 314(c)(1) may be given in the form of an Officers' Certificate. .6 Events of Default; Waiver. The Holders of a Majority in liquidation amount of the Preferred Securities may, by vote, on behalf of the Holders, waive any past Event of Default and its consequences. Upon such waiver, any such Event of Default shall cease to exist, and any Event of Default arising therefrom shall be deemed to have been cured, for every purpose of this Guarantee Agreement, but no such waiver shall extend to any subsequent or other default or Event of Default or impair any right consequent therefrom. .7 Event of Default; Notice. (a) The Guarantee Trustee shall, within 90 days after the occurrence of an Event of Default, transmit by mail, first class postage prepaid, to the Holders, notices of all Events of Default known to the Guarantee Trustee, unless such defaults have been cured before the giving of such notice, provided, that, except in the case of a default in the payment of a Guarantee Payment, the Guarantee Trustee shall be protected in withholding such notice if and so long as the board of directors, the executive committee or a trust committee of directors and/or Responsible Officers of the Guarantee Trustee in good faith determines that the withholding of such notice is in the interests of the Holders. 5 10 (b) The Guarantee Trustee shall not be deemed to have knowledge of any Event of Default unless the Guarantee Trustee shall have received written notice, or a Responsible Officer charged with the administration of the Declaration shall have obtained written notice, of such Event of Default. .8 Conflicting Interests. The Declaration and the Indenture as well as the Guarantee Agreements, Declarations and Indentures relating to the 9% Trust Preferred Securities due 2006 of Fresenius Medical Capital Trust, the 7 7/8% USD Trust Preferred Securities due 2008 of Fresenius Medical Care Capital Trust II, the 7 3/8% DM Trust Preferred Securities due 2008 of Fresenius Medical Care Capital Trust III and the 7 7/8% USD Trust Preferred Securities due 2011 of Fresenius Medical Care Capital Trust IV shall be deemed to be specifically described in this Guarantee Agreement for the purposes of clause (i) of the first proviso contained in Section 310(b) of the Trust Indenture Act. ARTICLE III POWERS, DUTIES AND RIGHTS OF THE GUARANTEE TRUSTEE .1 Powers and Duties of the Guarantee Trustee. (a) This Guarantee Agreement shall be held by the Guarantee Trustee for the benefit of the Holders, and the Guarantee Trustee shall not transfer this Guarantee Agreement to any Person except a Holder exercising his or her rights pursuant to Section 5.4(iv) or to a Successor Guarantee Trustee on acceptance by such Successor Guarantee Trustee of its appointment to act as Successor Guarantee Trustee. The right, title and interest of the Guarantee Trustee shall automatically vest in any Successor Guarantee Trustee, upon acceptance by such Successor Guarantee Trustee of its appointment hereunder, and such vesting and cessation of title shall be effective whether or not conveyancing documents have been executed and delivered pursuant to the appointment of such Successor Guarantee Trustee. (b) If an Event of Default has occurred and is continuing, the Guarantee Trustee shall enforce this Guarantee Agreement for the benefit of the Holders. (c) The Guarantee Trustee, before the occurrence of any Event of Default and after the curing of all Events of Default that may have occurred, shall undertake to perform only such duties as are specifically set forth in this Guarantee Agreement, and no implied covenants shall be read into this Guarantee Agreement against the Guarantee Trustee. In case an Event of Default has occurred (that has not been cured or waived pursuant to Section 2.6), the Guarantee Trustee shall exercise such of the rights and powers vested in it by this Guarantee Agreement, 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 or her own affairs. (d) No provision of this Guarantee Agreement shall be construed to relieve the Guarantee Trustee from liability for its own negligent action its own negligent failure to act or its own willful misconduct, except that: 6 11 (i) prior to the occurrence of any Event of Default and after the curing or waiving of all such Events of Default that may have occurred: (A) the duties and obligations of the Guarantee Trustee shall be determined solely by the express provisions of this Guarantee Agreement (including pursuant to Section 2.1), and the Guarantee Trustee shall not be liable except for the performance of such duties and obligations as are specifically set forth in this Guarantee Agreement; and (B) in the absence of bad faith on the part of the Guarantee Trustee, the Guarantee Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon any certificates or opinions furnished to the Guarantee Trustee and conforming to the requirements of this Guarantee Agreement; but in the case of any such certificates or opinions that by any provision hereof or of the Trust Indenture Act are specifically required to be furnished to the Guarantee Trustee, the Guarantee Trustee shall be under a duty to examine the same to determine whether or not they conform to the requirements of this Guarantee Agreement; (ii) the Guarantee Trustee shall not be liable for any error of judgment made in good faith by a Responsible Officer of the Guarantee Trustee, unless it shall be proved that the Guarantee Trustee was negligent in ascertaining the pertinent facts upon which such judgment was made; (iii) the Guarantee Trustee shall not be liable with respect to any action taken or omitted to be taken by it in good faith in accordance with the direction of the Holders of not less than a Majority in liquidation amount of the Preferred Securities relating to the time, method and place of conducting any proceeding for any remedy available to the Guarantee Trustee, or exercising any trust or power conferred upon the Guarantee Trustee under this Guarantee Agreement; and (iv) no provision of this Guarantee Agreement shall require the Guarantee Trustee to expend or risk its own funds or otherwise incur personal financial liability in the performance of any of its duties or in the exercise of any of its rights or powers, if the Guarantee Trustee shall have reasonable grounds for believing that the repayment of such funds or liability is not reasonably assured to it under the terms of this Guarantee Agreement or adequate indemnity against such risk or liability is not reasonably assured to it. .2 Certain Rights of Guarantee Trustee. (a) Subject to the provisions of Section 3.1: (i) The Guarantee 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, debenture, note, other evidence of 7 12 indebtedness or other paper or document reasonably believed by it to be genuine and to have been signed, sent or presented by the proper party or parties. (ii) Any direction or act of the Guarantor contemplated by this Guarantee Agreement shall be sufficiently evidenced by an Officers' Certificate unless otherwise prescribed herein. (iii) Whenever, in the administration of this Guarantee Agreement, the Guarantee Trustee shall deem it desirable that a matter be proved or established before taking, suffering or omitting to take any action hereunder, the Guarantee Trustee (unless other evidence is herein specifically prescribed) may, in the absence of bad faith on its part, request and rely upon an Officers' Certificate which, upon receipt of such request from the Guarantee Trustee, shall be promptly delivered by the Guarantor. (iv) The Guarantee Trustee may consult with legal counsel, and the written advice or opinion of such legal counsel with respect to legal matters shall be full and complete authorization and protection in respect of any action taken, suffered or omitted to betaken by it hereunder in good faith and in accordance with such advice or opinion. Such legal counsel may be legal counsel to the Guarantor or any of its Affiliates and may be one of its employees. The Guarantee Trustee shall have the right at any time to seek instructions concerning the administration of this Guarantee Agreement from any court of competent jurisdiction subject to Section 8.7 hereof. (v) The Guarantee Trustee shall be under no obligation to exercise any of the rights or powers vested in it by this Guarantee Agreement at the request or direction of any Holder, unless such Holder shall have provided to the Guarantee Trustee such adequate security and indemnity as would satisfy a reasonable person in the position of the Guarantee Trustee, against the costs, expenses (including attorneys' fees and expenses) and liabilities that might be incurred by it in complying with such request or direction, including such reasonable advances as may be requested by the Guarantee Trustee; provided that, nothing contained in this Section 3.2(a)(v) shall be taken to relieve the Guarantee Trustee, upon the occurrence of an Event of Default, of its obligation to exercise the rights and powers vested in it by this Guarantee Agreement. (vi) The Guarantee Trustee shall not be bound to make any investigation into the facts or matters stated in any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, debenture, note, other evidence of indebtedness or other paper or document, but the Guarantee Trustee, in its discretion, may make such further inquiry or investigation into such facts or matters as it may see fit. (vii) The Guarantee Trustee may execute any of the trusts or powers hereunder or perform any duties hereunder either directly or by or through its agents or attorneys, and the Guarantee Trustee shall not be responsible for any misconduct or negligence on the part of any such agent or attorney appointed with due care by it hereunder. 8 13 (viii) Whenever in the administration of this Guarantee Agreement the Guarantee Trustee shall deem it desirable to receive instructions with respect to enforcing any remedy or right or taking any other action hereunder, the Guarantee Trustee (A) may request instructions from the Holders, (B) may refrain from enforcing such remedy or right or taking such other action until such instructions are received, and (C) shall be protected in acting in accordance with such instructions. (b) No provision of this Guarantee Agreement shall be deemed to impose any duty or obligation on the Guarantee Trustee to perform any act or acts or exercise any right, power, duty or obligation conferred or imposed on it in any jurisdiction in which it shall be illegal, or in which the Guarantee Trustee shall be unqualified or incompetent in accordance with applicable law, to perform any such act or acts or to exercise any such right, power, duty or obligation. No permissive power or authority available to the Guarantee Trustee shall be construed to be a duty to act in accordance with such power and authority. .3 Compensation, Indemnity, Fees. The Guarantor agrees: (i) to pay to the Guarantee Trustee from time to time reasonable compensation for all services rendered by it hereunder (which compensation shall not be limited by any provisions of law in regard to the compensation of a trustee of an express trust); (ii) except as otherwise expressly provided herein, to reimburse the Guarantee Trustee upon request for all reasonable expenses, disbursements and advances incurred or made by the Guarantee Trustee in accordance with any provision of this Guarantee Agreement (including the reasonable compensation and the expenses and disbursements of its agents and counsel), except any such expense, disbursement or advance as may be attributable to its negligence or bad faith; and (iii) to indemnify the Guarantee Trustee for, and to hold it harmless against, any loss, liability or expense incurred without negligence or bad faith on the part of the Guarantee Trustee, arising out of or in connection with the acceptance or administration of this Guarantee Agreement, including the costs and expenses of defending itself against any claim or liability in connection with the exercise or performance of any of its powers or duties hereunder. The Guarantee Trustee will not claim or exact any lien or charge on any Guarantee Payments as a result of any amount due to it under this Guarantee Agreement. The provisions of this Section 3.3 shall survive the termination of this Guarantee Agreement or the resignation or removal of the Guarantee Trustee. ARTICLE IV GUARANTEE TRUSTEE .1 Guarantee Trustee: Eligibility. 9 14 (a) There shall at all times be a Guarantee Trustee which shall: (i) not be an Affiliate of the Guarantor; and (ii) be a Person that is eligible pursuant to the Trust Indenture Act to act as such and has a combined capital and surplus of at least $50,000,000,and shall be a corporation meeting the requirements of Section 310(c) of the Trust Indenture Act. If such corporation publishes reports of condition at least annually, pursuant to law or to the requirements of the supervising or examining authority, then, for the purposes of this Section 4.1 and to the extent permitted by the Trust Indenture Act, the combined capital and surplus of such corporation shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published. (b) If at any time the Guarantee Trustee shall cease to be eligible to so act under Section 4.1(a), the Guarantee Trustee shall immediately resign in the manner and with the effect set out in Section 4.2. (c) If the Guarantee Trustee has or shall acquire any "conflicting interest" within the meaning of Section 310(b) of the Trust Indenture Act, the Guarantee Trustee and Guarantor shall in all respects comply with the provisions of Section 310(b) of the Trust Indenture Act. .2 Appointment, Removal and Resignation of the Guarantee Trustee. (a) Subject to Section 4.2(b), the Guarantee Trustee may be appointed or removed without cause at any time a by the Guarantor. (b) The Guarantee Trustee shall not be removed until a Successor Guarantee Trustee has been appointed and has accepted such appointment by written instrument executed by such Successor Guarantee Trustee and delivered to the Guarantor. (c) The Guarantee Trustee appointed hereunder shall hold office until a Successor Guarantee Trustee shall have been appointed or until its removal or resignation. The Guarantee Trustee may resign from office (without need for prior or subsequent accounting) by an instrument in writing executed by the Guarantee Trustee and delivered to the Guarantor, which resignation shall not take effect until a Successor Guarantee Trustee has been appointed and has accepted such appointment by instrument in writing executed by such Successor Guarantee trustee and delivered to the Guarantor and the resigning Guarantee Trustee. (d) If no Successor Guarantee Trustee shall have been appointed and accepted appointment as provided in this Section 4.2 within 60 days after delivery to the Guarantor of an instrument of resignation, the resigning Guarantee Trustee may petition, at the expense of the Guarantor, any court of competent jurisdiction for appointment of a Successor Guarantee Trustee. Such court may thereupon, after prescribing such notice, if any, as it may deem proper, appoint a Successor Guarantee Trustee. ARTICLE V GUARANTEE 10 15 .1 Guarantee. The Guarantor irrevocably and unconditionally agrees to pay in full on a senior subordinated basis, to the extent set forth herein, to the Holders the Guarantee Payments (without duplication of amounts theretofore paid by or on behalf of the Trust), as and when due regardless of any defense, right of set-off or counterclaim which the Trust may have or assert, other than the defense of payment. The Guarantor's obligation to make a Guarantee Payment may be satisfied by direct payment of the required amounts by the Guarantor to the Holders or by causing the Trust to pay such amounts to the Holders. .2 Waiver of Notice and Demand. The Guarantor hereby waives notice of acceptance of the Guarantee Agreement and of any liability to which it applies or may apply, presentment, demand for payment, any right to require a proceeding first against the Guarantee Trustee, the Trust or any other Person before proceeding against the Guarantor, protest, notice of nonpayment, notice of dishonor, notice of redemption and all other notices and demands. .3 Obligations Not Affected. The obligations, covenants, agreements and duties of the Guarantor under this Guarantee Agreement shall in no way be affected or impaired by reason of the happening from time to time of any of the following: (a) the release or waiver, by operation of law or otherwise, of the performance or observance by the Trust of any express or implied agreement, covenant, term or condition relating to the Preferred Securities to be performed or observed by the Trust; (b) the extension of time for the payment by the Trust of all or any portion of the Distributions, Redemption Price, Liquidation Distribution or any other sums payable under the terms of the Preferred Securities or the extension of time for the performance of any other obligation under, arising out of, or in connection with, the Preferred Securities; (c) any failure, omission, delay or lack of diligence on the part of the Holders to enforce, assert or exercise any right, privilege, power or remedy conferred on the Holders pursuant to the terms of the Preferred Securities, or any action on the part of the Trust granting indulgence or extension of any kind; (d) the voluntary or involuntary liquidation, dissolution, sale of any collateral, receivership, insolvency, bankruptcy, assignment for the benefit of creditors, reorganization, arrangement, composition or readjustment of debt of, or other similar proceedings affecting, the Trust or any of the assets of the Trust; (e) any invalidity of, or defect or deficiency in, the Preferred Securities; (f) the settlement or compromise of any obligation guaranteed hereby or hereby incurred; or 11 16 (g) any other circumstance whatsoever that might otherwise constitute a legal or equitable discharge or defense of a guarantor, it being the intent of this Section 5.3 that the obligations of the Guarantor hereunder shall be absolute and unconditional under any and all circumstances. There shall be no obligation of the Holders to give notice to, or obtain the consent of, the Guarantor with respect to the happening of any of the foregoing. .4 Rights of Holders. The Guarantor expressly acknowledges that: (i) this Guarantee Agreement will be deposited with the Guarantee Trustee to be held for the benefit of the Holders; (ii) the Guarantee Trustee has the right to enforce this Guarantee Agreement on behalf of the Holders; (iii) the Holders of a Majority in liquidation amount of the Preferred Securities have the right to direct the time, method and place of conducting any proceeding for any remedy available to the Guarantee Trustee in respect of this Guarantee Agreement or exercising any trust or power conferred upon the Guarantee Trustee under this Guarantee Agreement; and (iv) upon the occurrence of an Event of Default, any Holder may institute a legal proceeding directly against the Guarantor to enforce its rights under this Guarantee Agreement, without first instituting a legal proceeding against the Guarantee Trustee, the Trust or any other Person. .5 Guarantee of Payment. This Guarantee Agreement creates a guarantee of payment and not of collection. This Guarantee Agreement will not be discharged except by payment of the Guarantee Payments in full (without duplication of amounts theretofore paid by the Trust out of funds legally available therefor) or upon distribution of Notes to Holders as provided in the Declaration. .6 Subrogation. The Guarantor shall be subrogated to all (if any) rights of the Holders against the Trust in respect of any amounts paid to the Holders by the Guarantor under this Guarantee Agreement and shall have the right to waive payment by the Trust pursuant to Section 5.1; provided, however, that the Guarantor shall not (except to the extent required by mandatory provisions of law) be entitled to enforce or exercise any rights which it may acquire by way of subrogation or any indemnity, reimbursement or other agreement, in all cases as a result of payment under this Guarantee Agreement, if at the time of any such payment, any amounts are due and unpaid under this Guarantee Agreement. If any amount shall be paid to the Guarantor in violation of the preceding sentence, the Guarantor agrees to hold such amount in trust for the Holders and to pay over such amount to the Holders. .7 Independent Obligations. The Guarantor acknowledges that its obligations hereunder are independent of the obligations of the Trust with respect to the Preferred Securities and that the Guarantor shall be liable as principal and as debtor hereunder to make Guarantee Payments pursuant to the terms of this Guarantee Agreement notwithstanding the occurrence of any event referred to in subsections 12 17 (a) through (g), inclusive, of Section 5.3 hereof. ARTICLE VI SUBORDINATION .1 Subordination. (a) This Guarantee Agreement will constitute an unsecured obligation of the Guarantor and will rank subordinate and junior in right of payment to all Senior Indebtedness of the Guarantor and the Issuer. (b) The Guarantor may not make a Guarantee Payment to the Holders if (i) any Specified Senior Indebtedness (as defined in the Indenture) of the Guarantor or any other Senior Indebtedness (as defined in the Indenture) of the Guarantor having an outstanding principal amount at the time of determination in excess of $25,000,000) is not paid when due or (ii) any other default on Specified Senior Indebtedness of the Guarantor occurs and the maturity of such Specified Senior Indebtedness is accelerated in accordance with its terms, unless, in either case, the default has been cured or waived and any such acceleration has been rescinded or such Specified Senior Indebtedness has been paid in full. However, the Guarantor may make a Guarantee Payment without regard to the foregoing if the Guarantor and the Guarantee Trustee receive written notice approving such payment from a representative of the Specified Senior Indebtedness with respect to which either of the events set forth in clause (i) or (ii) of the immediately preceding sentence has occurred and is continuing. During the continuance of any default (other than a default described in clause (i) or (ii) of the second preceding sentence) with respect to any Specified Senior Indebtedness of the Guarantor pursuant to which the maturity thereof may be accelerated immediately without further notice (except such notice as may be required to effect such acceleration) or the expiration of any applicable grace periods, the Guarantor may not make a Guarantee Payment to the Holders for a period (a "Payment Blockage Period," as defined in the Indenture) commencing upon the receipt by the Guarantee Trustee (with a copy to the Guarantor) of written notice (a "Blockage Notice," as defined in the Indenture) of such default from the representative of the holders of such Specified Senior Indebtedness specifying an election to effect a Payment Blockage Period and ending 179 days thereafter (or earlier if such Payment Blockage Period is terminated (i) by written notice to the Guarantee Trustee, the Guarantor from the representative of the holders of such Specified Senior Indebtedness, (ii) because the default giving rise to such Blockage Notice is no longer continuing, as certified to the Guarantee Trustee by the representative of the holders of such Specified Senior Indebtedness or (iii) because such Specified Senior Indebtedness has been repaid in full, as certified to the Guarantee Trustee by the representative of the holders of such Specified Senior Indebtedness). Notwithstanding the provisions described in the immediately preceding sentence, unless the holders of such Specified Senior Indebtedness or the representative of such holders have accelerated the maturity of such Specified Senior Indebtedness (and such Specified Senior Indebtedness remains outstanding), the Guarantor may resume Guarantee Payments after the end of such Payment Blockage Period. The Guarantee Agreement shall not be subject to more than one Payment Blockage Period in any consecutive 360-day period, irrespective of the number of defaults with respect to Specified Senior Indebtedness during such period. 13 18 (c) Upon any payment or distribution of the assets of the Guarantor upon a total or partial liquidation or dissolution or reorganization of or similar proceeding relating to the Guarantor or its property, the holders of Senior Indebtedness of the Guarantor will be entitled to receive payment in full of such Senior Indebtedness before the Holders are entitled to receive any Guarantee Payment, and until the Senior Indebtedness of the Guarantor is paid in full, any payment or distribution to which the Holders would be entitled but for this Section 6.1 will be made to holders of such Senior Indebtedness as their interests may appear. If a Distribution is made to the Holders that, due to this Section 6.1, should not have been made to them, such Holders are required to hold it in trust for the holders of Senior Indebtedness of the Guarantor and pay it over to them as their interests may appear. (d) If a Guarantee Payment is to be made by the Guarantor to the Holders, the Guarantor or the Guarantee Trustee shall promptly notify the holders of Senior Indebtedness of the Guarantor or the representative of such holders of such Guarantee Payment. If any Senior Indebtedness of the Guarantor is outstanding, the Guarantor may not pay such Guarantee Payment until five Business Days after the representatives of all the issues of Senior Indebtedness of the Guarantor receive notice of such Guarantee Payment and, thereafter, may pay such Guarantee Payment only if the Guarantee Agreement otherwise permits payment at that time. ARTICLE VII TERMINATION .1 Termination. This Guarantee Agreement shall terminate and be of no further force and effect upon (i) full payment of the Redemption Price of all Preferred Securities, (ii) the distribution of Notes to the Holders in exchange for all of the Preferred Securities or (iii) full payment of the amounts payable in accordance with the Declaration upon liquidation of the Trust. Notwithstanding the foregoing, this Guarantee Agreement will continue to be effective or will be reinstated, as the case may be, if at any time any Holder must restore payment of any sums paid with respect to Preferred Securities or this Guarantee Agreement. ARTICLE VIII MISCELLANEOUS .1 Successors and Assigns. All guarantees and agreements contained in this Guarantee Agreement shall bind the successors, assigns, receivers, trustees and representatives of the Guarantor and shall inure to the benefit of the Holders of the Preferred Securities then outstanding. Except in connection with a consolidation, merger or sale involving the Guarantor that is permitted under Article VIII of the Indenture and pursuant to which the assignee agrees in writing to perform the Guarantor's obligations hereunder, the Guarantor shall not assign its obligations hereunder and any purported assignment other than in accordance with this provision shall be void. .2 Amendments. 14 19 Except with respect to any changes which do not adversely affect the rights of the Holders in any material respect (in which case no consent of the Holders will be required), this Guarantee Agreement may only be amended with the prior approval of the Holders of not less than a Majority in liquidation amount of all the outstanding Preferred Securities. The provisions of Article VI of the Declaration concerning meetings of the Holders shall apply to the giving of such approval. No amendment shall be made to the definition of Guarantee Payments or to Article V1 hereof without the consent of the requisite lenders under the Bank Credit Agreement. In executing any amendment permitted by this Section, the Guarantee Trustee shall be entitled to receive, and (subject to Section 3.1) shall be fully protected in relying upon, an Officers' Certificate and an Opinion of Counsel stating that the execution of such amendment is authorized or permitted by this Guarantee Agreement, and that all conditions precedent herein provided for relating to such action have been complied with. .3 Notices. Any notice, request or other communication required or permitted to be given hereunder shall be in writing, duly signed by the party giving such notice, and delivered, telecopied or mailed by first class mail as follows: (a) if given to the Guarantor, to the address set forth below or such other address, facsimile number or to the attention of such other Person as the Guarantor may give notice to the Holders: Fresenius Medical Care AG Else-Kroner Strasse 1 61346 Bad Homburg v.d.H. Germany Facsimile No.: 011-49-6172-609-2103 Attention: Chief Executive Officer (b) if given to the Trust, in care of the Guarantee Trustee, at the Trust's (and the Guarantee Trustee's) address set forth below or such other address as the Guarantee Trustee on behalf of the Trust may give notice to the Holders: Fresenius Medical Care Capital Trust V c/o Fresenius Medical Care Holdings, Inc. Two Ledgemont Center 95 Hayden Avenue Lexington, Massachusetts 02173 Facsimile No.: 781-402-9714 Attention: Legal Department with a copy to: State Street Bank and Trust Company 225 Asylum Street 15 20 Hartford, Connecticut 06103 Facsimile No.: 860-244-1889 Attention: Corporate Trust Administration (c) if given to any Holder, at the address set forth on the books and records of the Trust. All notices hereunder shall be deemed to have been given when received in person, telecopied with receipt confirmed, or mailed by first class mail, postage prepaid, except that if a notice or other document is refused delivery or cannot be delivered because of a changed address of which no notice was given, such notice or other document shall be deemed to have been delivered on the date of such refusal or inability to deliver. .4 Benefit. This Guarantee Agreement is solely for the benefit of the Holders and is not separately transferable from the Preferred Securities. .5 Interpretation. In this Guarantee Agreement, unless the context otherwise requires: (a) capitalized terms used in this Guarantee Agreement but not defined in the preamble hereto have the respective meanings assigned to them in Section 1.1; (b) a term defined anywhere in this Guarantee Agreement has the same meaning throughout; (c) all references to "the Guarantee Agreement" or "this Guarantee Agreement" are to this Guarantee Agreement as modified, supplemented or amended from time to time; (d) all references in this Guarantee Agreement to Articles and Sections are to Articles and Sections of this Guarantee Agreement unless otherwise specified; (e) a term defined in the Trust Indenture Act has the same meaning when used in this Guarantee Agreement unless otherwise defined in this Guarantee Agreement or unless the context otherwise requires; (f) a reference to the singular includes the plural and vice versa; and (g) the masculine, feminine or neuter genders used herein shall include the masculine, feminine and neuter genders. .6 Governing Law. THIS GUARANTEE AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO THE CONFLICT OF LAW PRINCIPLES 16 21 THEREOF. .7 Consent to Jurisdiction. The Guarantor hereby irrevocably submits to the non-exclusive jurisdiction of any state or federal court in the Borough of Manhattan, The City of New York, for the purpose of any suit, action, proceeding or judgment relating to or arising out of this Guarantee Agreement. The Guarantor hereby appoints Fresenius Medical Care Holdings, Inc., c/o CT Corporation System, with offices on the date hereof at 1633 Broadway, New York, New York 10019, as its authorized agent on whom process may be served in any action which may be instituted against it by any Holder or the Guarantee Trustee in any state or federal court in The City of New York, the Borough of Manhattan, arising out of or relating to this Guarantee Agreement. Service of process upon such authorized agent and written notice of such service to the Guarantor shall be deemed in every respect effective service of process upon the Guarantor, and the Guarantor hereby irrevocably consents to the jurisdiction of any such court in any such action and to the laying of venue in the Borough of Manhattan, The City of New York. The Guarantor hereby waives, to the fullest extent permitted by applicable law, any objection to the laying of venue of any such suit, action or proceeding brought in the aforesaid courts and hereby irrevocably waives any claim that any such suit, action or proceeding brought in any such court has been brought in an inconvenient forum. Notwithstanding the foregoing, nothing herein shall in any way affect the right of the Holders of the Guarantee Trustee to bring any action arising out of or relating to this Guarantee Agreement in any competent court elsewhere having jurisdiction over the Guarantor and its property. .8 Counterparts. This instrument may be executed in any number of counterparts, each of which so executed shall be deemed to be an original, but all such counterparts shall together constitute but one and the same instrument. 17 22 THIS GUARANTEE AGREEMENT is executed as of the day and year first above written. FRESENIUS MEDICAL CARE AG By:/s/ Ben Lipps --------------------------------------------- Name: Ben Lipps Title Chief Executive Officer By:/s/ Rainer Runte --------------------------------------------- Name: Rainer Runte Title: General Counsel and Sr. Vice President STATE STREET BANK AND TRUST COMPANY as Guarantee Trustee By:/s/ Elizabeth C. Hammer --------------------------------------------- Name: Elizabeth C. Hammer Title: Vice President Acknowledged: FMC TRUST FINANCE S.A.R.L. LUXEMBOURG - III By:/s/ Gabriele Dux ----------------------------------------- Name: Gabriele Dux Title Sole Manager 18 23 EXHIBIT A GUARANTEE AGREEMENT WITH RESPECT TO THE COMMON SECURITIES This AGREEMENT, dated as of June 15, 2001, is executed and delivered by FRESENIUS MEDICAL CARE AG, a stock corporation (Aktiengesellschaft) organized under the laws of the Federal Republic of Germany ("Guarantor"), having its principal office at Else-Kroner Strasse 1, 61346 Bad Homburg v.d.H., Germany, for the benefit of the holders from time to time (the "Holders") of Common Securities (as defined in the Guarantee Agreement) of Fresenius Medical Care Capital Trust IV, a Delaware statutory business trust (the "Trust"). WHEREAS, pursuant to the Guarantee Agreement, dated as of June 15, 2001, between Fresenius Medical Care AG, as Guarantor, and State Street Bank and Trust Company, as Trustee (the "Guarantee Agreement"), the Guarantor has irrevocably and unconditionally agreed to pay in full to the holders of Preferred Securities (as defined therein) the Guarantee Payments (as defined therein). WHEREAS, in order to facilitate the classification of the Trust for United States Federal income tax purposes as a grantor trust, the benefit of the guarantee provided by the Guarantor pursuant to the Guarantee Agreement must inure, to the extent set forth herein, also to the benefit of the Holders. NOW, THEREFORE, it is hereby agreed that SECTION 1.0 Definitions. Capitalized or otherwise defined terms used but not otherwise defined herein shall have the meanings assigned to such terms in the Guarantee Agreement as in effect on the date hereof. SECTION 2.0. Guarantee. The Guarantor irrevocably and unconditionally agrees to pay in full to the Holders Guarantee Payments to the same extent as the guarantee provided to the holders of Preferred Securities under the Guarantee Agreement; provided, however, that upon the occurrence and during the continuation of a Declaration Event of Default (as defined in the Declaration), holders of Preferred Securities shall have priority over the Holders with respect to the Guarantee Payments. SECTION 3.0. Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO THE CONFLICT OF LAW PRINCIPLES THEREOF. SECTION 4.0. Counterparts. This instrument may be executed in any number of counterparts, each of which so executed shall be deemed to be an original, but all such counterparts shall together constitute but 24 one and the same instrument. 25 THIS AGREEMENT is executed as of the day and year first above written. FRESENIUS MEDICAL CARE AG By: --------------------------------------------- Name: Title: By: --------------------------------------------- Name: Title: 26 FMC TRUST FINANCE S. A.R.L. LUXEMBOURG - III By: --------------------------------------------- Name: Title: S-2 EX-4.50 15 y51284ex4-50.txt GUARANTEE AGREEMENT 1 EXHIBIT 4.50 AGREEMENT AS TO EXPENSES AND LIABILITIES AGREEMENT dated as of June 6, 2001, between Fresenius Medical Care AG, a corporation organized under the laws of Germany (the "Company"), and Fresenius Medical Care Capital Trust IV, a Delaware business trust (the "Trust"). WHEREAS, the Trust intends to issue its Common Securities (the "Common Securities") to the Company and receive 7 7/8% Senior Subordinated Notes ("Notes"; such term, for the purposes of this Agreement shall include, where applicable the Exchange Securities as such term is defined in the Indenture) from FMC Trust Finance S.a.r.l. Luxembourg-III (the "Issuer") and to issue and sell 7 7/8% Preferred Securities (the "Preferred Securities"; such term, for the purposes of this Agreement, shall include, when applicable, the Exchange Preferred Securities) with such powers, preferences and special rights and restrictions as are set forth in the Amended and Restated Declaration of Trust dated as of June 6, 2001 as the same may be amended from time to time (the "Declaration"); WHEREAS, the Company will directly or indirectly own all of the Common Securities of the Trust and all of the Capital Stock (as defined in the Indenture) of the Issuer, which will issue the Notes; WHEREAS, capitalized terms used but not defined herein have the meanings set forth in the Declaration. Now, THEREFORE, in consideration of the purchase by each Holder of the Preferred Securities, which purchase the Company hereby agrees shall benefit the Company and which purchase the Company acknowledges will be made in reliance upon the execution and delivery of this Agreement, the Company and Trust hereby agree as follows: ARTICLE I SECTION 1. Guarantee by the Company. Subject to the terms and conditions hereof, the Company hereby irrevocably and unconditionally guarantees, on a senior subordinated basis (to the extent and in the manner set forth in the Indenture with respect to the Notes), to each person or entity to whom the Trust is now or hereafter becomes indebted or liable (the "Beneficiaries") the full payment, when and as due, of any and all Obligations (as hereinafter defined) to such Beneficiaries. As used herein, "Obligations" means any costs, expenses or liabilities of the Trust (including, without limitation, any and all taxes, costs and expenses, such as underwriting discounts and commissions, payable with respect to the issuance of the Preferred Securities), other than obligations of the Trust to pay to holders of any Preferred Securities or other similar interests in the Trust the amounts due such holders pursuant to the terms of the Preferred Securities or such other similar interests, as the case may be, and United States withholding taxes. This Agreement is intended to be for the benefit of, and to be enforceable by, all such Beneficiaries, whether or not such Beneficiaries have received notice hereof. 2 SECTION 1.2. Term of Agreement. This Agreement shall terminate and be of no further force and effect upon the later of (a) the date on which full payment has been made of all amounts payable to all Holders of all the Preferred Securities (whether upon redemption, liquidation, exchange or otherwise) and (b) the date on which there are no Beneficiaries remaining; provided, however, that this Agreement shall continue to be effective or shall be reinstated, as the case may be, if at any time any Holder of the Preferred Securities or any Beneficiary must restore payment of any sums paid under the Preferred Securities, under any Obligation, under the Guarantee Agreement dated the date hereof by the Company and State Street Bank and Trust Company as guarantee trustee or under this Agreement for any reason whatsoever. This Agreement is continuing, irrevocable, unconditional and absolute. SECTION 1.3. Waiver of Notice. The Company hereby waives notice of acceptance of this Agreement and of any Obligation to which it applies or may apply, and the Company hereby waives presentment, demand for payment, protest, notice of nonpayment, notice of dishonor, notice of redemption and all other notices and demands. SECTION 1.4. No Impairment. The obligations, covenants, agreements and duties of the Company under this Agreement shall in no way be affected or impaired by reason of the happening from time to time of any of the following: (a) the extension of time for the payment by the Trust of all or any portion of the Obligations or for the performance of any other obligation under, arising out of, or in connection with, the Obligations; (b) any failure, omission, delay or lack of diligence on the part of the Beneficiaries to enforce, assert or exercise any right, privilege, power or remedy conferred on the Beneficiaries with respect to the Obligations or any action on the part of the Trust granting indulgence or extension of any kind; or (c) the voluntary or involuntary liquidation, dissolution, sale of any collateral, receivership, insolvency, bankruptcy, assignment for the benefit of creditors, reorganization, arrangement, composition or readjustment of debt of, or other similar proceedings affecting, the Trust or any of the assets of the Trust. There shall be no obligation of the Beneficiaries to give notice to, or obtain the consent of, the Company with respect to the happening of any of the foregoing. SECTION 1.5. Enforcement. A Beneficiary may enforce this Agreement directly against the Company and the 3 Company waives any right or remedy to require that any action be brought against the Trust or any other person or entity before proceeding against the Company. SECTION 1.6. Subrogation. The Company shall be subrogated to all (if any) rights of the Trust in respect of any amounts paid to the Beneficiaries by the Company under this Agreement; provided, however, that the Company shall not (except to the extent required by mandatory provisions of law) be entitled to enforce or exercise any rights which it may acquire by way of subrogation or any indemnity, reimbursement or other agreement, in all cases as a result of payment under this Agreement, if, at the time of any such payment, any amounts are due and unpaid under this Agreement. ARTICLE II SECTION 2.1. Assignment. Except in connection with a consolidation, merger or sale involving the Company that is permitted under Article VIII of the Indenture, this Agreement may not be assigned by either party hereto without the consent of the other, and any purported assignment without such consent shall be void. SECTION 2.2. Binding Effect. All guarantees and agreements contained in this Agreement shall bind the successors, assigns, receivers, trustees and representatives of the Company and shall inure to the benefit of the Beneficiaries. SECTION 2.3. Amendment. So long as there remains any Beneficiary or any Preferred Securities are outstanding, this Agreement shall not be modified or amended in any manner adverse to such Beneficiary or to the Holders of the Preferred Securities without the consent of a Majority in Liquidation Amount of the holders of Preferred Securities. SECTION 2.4. Notices. Any notice, request or other communication required or permitted to be given hereunder shall be given in writing by delivering the same against receipt therefor by facsimile transmission (confirmed by mail), telex or by registered or certified mail, addressed as follows (and if so given, shall be deemed given when mailed or upon receipt of an answer-back, if sent by telex): Fresenius Medical Care Capital Trust IV c/o State Street Bank and Trust Company 225 Asylum Street Hartford, Connecticut 06103 Facsimile No.: 860-244-1889 Attention: Corporate Trust Administration 4 Fresenius Medical Care AG Else-Kroner Str. 1, 61346 Bad Homburg v.d.H., Germany Facsimile No.: 011-49-6172-609-2103 Attention: Chief Financial Officer SECTION 2.5. Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT GIVING EFFECT TO PRINCIPLES OF CONFLICT OF LAWS. SECTION 2.6. Submission to Jurisdiction. The Company hereby appoints Fresenius Medical Care Holdings, Inc. ("FMCH") c/o CT Corporation System acting through its office at 1633 Broadway, New York, New York 10019 as its authorized agent (the "Authorized Agent") upon which process may be served in any legal action or proceeding against it with respect to its obligations under this Agreement instituted in any federal or state court in the Borough of Manhattan, The City of New York, by the Trust or a Beneficiary and agrees that service of process upon such authorized agent, together with written notice of said service to the Company by the person serving the same, addressed as provided in Section 2.4, shall be deemed in every respect effective service of process upon the Company in any such legal action or proceeding, and the Company hereby irrevocably submits to the non-exclusive jurisdiction of any such court in respect of any such legal action or proceeding. Such appointment shall be irrevocable until this Agreement has been terminated in accordance with Section 1.3 hereof. Notwithstanding the foregoing, the Company reserves the right to appoint another Person located or with an office in the Borough of Manhattan, The City of New York, selected in its discretion, as a successor Authorized Agent, and upon acceptance of such appointment by such a successor the appointment of the prior Authorized Agent shall terminate. If for any reason FMCH or CT Corporation System ceases to be able to act as the Authorized Agent or to have an address in the Borough of Manhattan, The City of New York, the Company will appoint a successor Authorized Agent in accordance with the preceding sentence. The Company further agrees to take any and all action, including the filing of any and all documents and instruments as may be necessary to continue such designation and appointment of such agent in full force and effect until this Agreement has been terminated in accordance with Section 1.3 hereof. Service of process upon the Authorized Agent addressed to it at the address set forth above, as such address may be changed within the Borough of Manhattan, The City of New York by notice given by the Authorized Agent to the Trustees, together with written notice of such service mailed or delivered to the Company shall be deemed, in every respect, effective service of process on the Company. 5 THIS AGREEMENT is executed as of the day and year first above written. FRESENIUS MEDICAL CARE AG By:/s/ Ben Lipps --------------------------------------------- Name: Ben Lipps Title: Chief Executive Officer By:/s/ Rainer Runte --------------------------------------------- Name: Rainer Runte Title: General Counsel and Senior Vice President FRESENIUS MEDICAL CARE CAPITAL TRUST IV By:/s/ Josef Dinger --------------------------------------------- Name: Josef Dinger Company Trustee EX-4.51 16 y51284ex4-51.txt AGREEMENT AS TO EXPENSES AND LIABILITIES 1 EXHIBIT 4.51 AGREEMENT AS TO EXPENSES AND LIABILITIES AGREEMENT dated as of June 15, 2001, between Fresenius Medical Care AG, a corporation organized under the laws of Germany (the "Company"), and Fresenius Medical Care Capital Trust V, a Delaware business trust (the "Trust"). WHEREAS, the Trust intends to issue its Common Securities (the "Common Securities") to the Company and receive 7 3/8% Senior Subordinated Notes ("Notes"; such term, for the purposes of this Agreement shall include, where applicable the Exchange Securities as such term is defined in the Indenture) from FMC Trust Finance S.a.r.l. Luxembourg-III (the "Issuer") and to issue and sell 7 3/8% Preferred Securities (the "Preferred Securities"; such term, for the purposes of this Agreement, shall include, when applicable, the Exchange Preferred Securities) with such powers, preferences and special rights and restrictions as are set forth in the Amended and Restated Declaration of Trust dated as of June 15, 2001 as the same may be amended from time to time (the "Declaration"); WHEREAS, the Company will directly or indirectly own all of the Common Securities of the Trust and all of the Capital Stock (as defined in the Indenture) of the Issuer, which will issue the Notes; WHEREAS, capitalized terms used but not defined herein have the meanings set forth in the Declaration. Now, THEREFORE, in consideration of the purchase by each Holder of the Preferred Securities, which purchase the Company hereby agrees shall benefit the Company and which purchase the Company acknowledges will be made in reliance upon the execution and delivery of this Agreement, the Company and Trust hereby agree as follows: ARTICLE I SECTION 1. Guarantee by the Company. Subject to the terms and conditions hereof, the Company hereby irrevocably and unconditionally guarantees, on a senior subordinated basis (to the extent and in the manner set forth in the Indenture with respect to the Notes), to each person or entity to whom the Trust is now or hereafter becomes indebted or liable (the "Beneficiaries") the full payment, when and as due, of any and all Obligations (as hereinafter defined) to such Beneficiaries. As used herein, "Obligations" means any costs, expenses or liabilities of the Trust (including, without limitation, any and all taxes, costs and expenses, such as underwriting discounts and commissions, payable with respect to the issuance of the Preferred Securities), other than obligations of the Trust to pay to holders of any Preferred Securities or other similar interests in the Trust the amounts due such holders pursuant to the terms of the Preferred Securities or such other similar interests, as the case may be, and United States withholding taxes. This Agreement is intended to be for the benefit of, and to be enforceable by, all such Beneficiaries, whether or not such Beneficiaries have received notice hereof. 2 SECTION 1.2. Term of Agreement. This Agreement shall terminate and be of no further force and effect upon the later of (a) the date on which full payment has been made of all amounts payable to all Holders of all the Preferred Securities (whether upon redemption, liquidation, exchange or otherwise) and (b) the date on which there are no Beneficiaries remaining; provided, however, that this Agreement shall continue to be effective or shall be reinstated, as the case may be, if at any time any Holder of the Preferred Securities or any Beneficiary must restore payment of any sums paid under the Preferred Securities, under any Obligation, under the Guarantee Agreement dated the date hereof by the Company and State Street Bank and Trust Company as guarantee trustee or under this Agreement for any reason whatsoever. This Agreement is continuing, irrevocable, unconditional and absolute. SECTION 1.3. Waiver of Notice. The Company hereby waives notice of acceptance of this Agreement and of any Obligation to which it applies or may apply, and the Company hereby waives presentment, demand for payment, protest, notice of nonpayment, notice of dishonor, notice of redemption and all other notices and demands. SECTION 1.4. No Impairment. The obligations, covenants, agreements and duties of the Company under this Agreement shall in no way be affected or impaired by reason of the happening from time to time of any of the following: (a) the extension of time for the payment by the Trust of all or any portion of the Obligations or for the performance of any other obligation under, arising out of, or in connection with, the Obligations; (b) any failure, omission, delay or lack of diligence on the part of the Beneficiaries to enforce, assert or exercise any right, privilege, power or remedy conferred on the Beneficiaries with respect to the Obligations or any action on the part of the Trust granting indulgence or extension of any kind; or (c) the voluntary or involuntary liquidation, dissolution, sale of any collateral, receivership, insolvency, bankruptcy, assignment for the benefit of creditors, reorganization, arrangement, composition or readjustment of debt of, or other similar proceedings affecting, the Trust or any of the assets of the Trust. There shall be no obligation of the Beneficiaries to give notice to, or obtain the consent of, the Company with respect to the happening of any of the foregoing. SECTION 1.5. Enforcement. A Beneficiary may enforce this Agreement directly against the Company and the Company waives any right or remedy to require that any action be brought against the Trust or 3 any other person or entity before proceeding against the Company. SECTION 1.6. Subrogation. The Company shall be subrogated to all (if any) rights of the Trust in respect of any amounts paid to the Beneficiaries by the Company under this Agreement; provided, however, that the Company shall not (except to the extent required by mandatory provisions of law) be entitled to enforce or exercise any rights which it may acquire by way of subrogation or any indemnity, reimbursement or other agreement, in all cases as a result of payment under this Agreement, if, at the time of any such payment, any amounts are due and unpaid under this Agreement. ARTICLE II SECTION 2.1. Assignment. Except in connection with a consolidation, merger or sale involving the Company that is permitted under Article VIII of the Indenture, this Agreement may not be assigned by either party hereto without the consent of the other, and any purported assignment without such consent shall be void. SECTION 2.2. Binding Effect. All guarantees and agreements contained in this Agreement shall bind the successors, assigns, receivers, trustees and representatives of the Company and shall inure to the benefit of the Beneficiaries. SECTION 2.3. Amendment. So long as there remains any Beneficiary or any Preferred Securities are outstanding, this Agreement shall not be modified or amended in any manner adverse to such Beneficiary or to the Holders of the Preferred Securities without the consent of a Majority in Liquidation Amount of the holders of Preferred Securities. SECTION 2.4. Notices. Any notice, request or other communication required or permitted to be given hereunder shall be given in writing by delivering the same against receipt therefor by facsimile transmission (confirmed by mail), telex or by registered or certified mail, addressed as follows (and if so given, shall be deemed given when mailed or upon receipt of an answer-back, if sent by telex): Fresenius Medical Care Capital Trust V c/o State Street Bank and Trust Company 225 Asylum Street Hartford, Connecticut 06103 Facsimile No.: 860-244-1889 Attention: Corporate Trust Administration Fresenius Medical Care AG Else-Kroner Str. 1, 61346 Bad Homburg v.d.H., Germany 4 Facsimile No.: 011-49-6172-609-2103 Attention: Chief Financial Officer SECTION 2.5. Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT GIVING EFFECT TO PRINCIPLES OF CONFLICT OF LAWS. SECTION 2.6. Submission to Jurisdiction. The Company hereby appoints Fresenius Medical Care Holdings, Inc. ("FMCH") c/o CT Corporation System acting through its office at 1633 Broadway, New York, New York 10019 as its authorized agent (the "Authorized Agent") upon which process may be served in any legal action or proceeding against it with respect to its obligations under this Agreement instituted in any federal or state court in the Borough of Manhattan, The City of New York, by the Trust or a Beneficiary and agrees that service of process upon such authorized agent, together with written notice of said service to the Company by the person serving the same, addressed as provided in Section 2.4, shall be deemed in every respect effective service of process upon the Company in any such legal action or proceeding, and the Company hereby irrevocably submits to the non-exclusive jurisdiction of any such court in respect of any such legal action or proceeding. Such appointment shall be irrevocable until this Agreement has been terminated in accordance with Section 1.3 hereof. Notwithstanding the foregoing, the Company reserves the right to appoint another Person located or with an office in the Borough of Manhattan, The City of New York, selected in its discretion, as a successor Authorized Agent, and upon acceptance of such appointment by such a successor the appointment of the prior Authorized Agent shall terminate. If for any reason FMCH or CT Corporation System ceases to be able to act as the Authorized Agent or to have an address in the Borough of Manhattan, The City of New York, the Company will appoint a successor Authorized Agent in accordance with the preceding sentence. The Company further agrees to take any and all action, including the filing of any and all documents and instruments as may be necessary to continue such designation and appointment of such agent in full force and effect until this Agreement has been terminated in accordance with Section 1.3 hereof. Service of process upon the Authorized Agent addressed to it at the address set forth above, as such address may be changed within the Borough of Manhattan, The City of New York by notice given by the Authorized Agent to the Trustees, together with written notice of such service mailed or delivered to the Company shall be deemed, in every respect, effective service of process on the Company. 5 THIS AGREEMENT is executed as of the day and year first above written. FRESENIUS MEDICAL CARE AG By:/s/ Ben Lipps ------------------------------------- Name: Ben Lipps Title: Chief Executive Officer By:/s/ Rainer Runte ------------------------------------- Name: Rainer Runte Title: General Counsel and Sr. Vice President FRESENIUS MEDICAL CARE CAPITAL TRUST V By:/s/ Ben Lipps ------------------------------------- Name: Ben Lipps Company Trustee EX-5.1 17 y51284ex5-1.txt OPINION OF RICHARDS, LAYTON & FINGER P.A. 1 Exhibit 5.1 [LETTERHEAD OF RICHARDS, LAYTON & FINGER, P.A.] August 1, 2001 Fresenius Medical Care AG Else-Kroner Str. 1 61346 Bad Homurg v.d.H. Germany FMC Trust Finance S.a.r.l. Luxembourg-III 7A rue Stumper L-2557 Luxembourg Re: Fresenius Medical Care Capital Trust IV and Fresenius Medical Care Capital Trust V Ladies and Gentlemen: We have acted as special Delaware counsel for Fresenius Medical Care AG, a corporation organized and existing under the laws of Germany (the "Company"), Fresenius Medical Care Capital Trust IV, a Delaware business trust ("Trust IV") and Fresenius Medical Care Capital Trust V, a Delaware business trust ("Trust V") (Trust IV and Trust V are hereinafter collectively referred to as the "Trusts" and sometimes hereinafter individually referred to as a "Trust"), in connection with the matters set forth herein. At your request, this opinion is being furnished to you. For purposes of giving the opinions hereinafter set forth, our examination of documents has been limited to the examination of originals or copies of the following: (a) The Certificate of Trust of Trust IV (the "Certificate of Trust"), as filed with the office of the Secretary of State of the State of Delaware (the "Secretary of State") on February 12, 1998; (b) the Certificate of Trust of Trust V, as filed with the office of the Secretary of State on June 1, 2001; (c) the Declaration of Trust of Trust IV, dated as of February 12, 1998; (d) the First Amendment to the Declaration of Trust of Trust IV, dated as of June 5, 2001; (e) the Amended and Restated Declaration of Trust of Trust IV, dated as of June 6, 2001; (f) the Declaration of Trust of Trust V, dated as of June 1, 2001; 2 Fresenius Medical Care AG FMC Trust Finance S.a.r.l. Luxembourg-III August 1, 2001 Page 2 (g) the Amended and Restated Declaration of Trust of Trust V, dated as of June 15, 2001 (the documents listed in (c) through (g) above are collectively referred to herein as the "Trust Agreements"); (h) the Registration Statement (the "Registration Statement") on Form F-4, including a preliminary prospectus with respect to the Trusts, filed by the Company with the Securities and Exchange Commission on or about the date of this opinion (the "Prospectus"), relating to the Preferred Securities of the Trusts representing preferred undivided beneficial interests in the assets of the Trusts (each, a Preferred Security" and collectively, the "Preferred Securities" to be issued in exchange for certain outstanding preferred securities of the Trusts); and (i) a Certificate of Good Standing for each of the Trusts, dated August 1, 2001, obtained from the Secretary of State. Initially capitalized terms used herein and not otherwise defined are used as defined in the Trust Agreements. For purposes of this opinion, we have not reviewed any documents other than the documents listed in paragraphs (a) through (i) above. In particular, we have not reviewed any document (other than the documents listed in paragraphs (a) through (i) above) that is referred to in or incorporated by reference into the documents reviewed by us. We have assumed that there exists no provision in any document that we have not reviewed that is inconsistent with the opinions stated herein. We have conducted no independent factual investigation of our own but rather have relied solely upon the foregoing documents, the statements and information set forth therein and the additional matters recited or assumed herein, all of which we have assumed to be true, complete and accurate in all material respects. With respect to all documents examined by us, we have assumed (i) the authenticity of all documents submitted to us as authentic originals, (ii) the conformity with the originals of all documents submitted to us as copies or forms, and (iii) the genuineness of all signatures. For purposes of this opinion, we have assumed (i) that each of the Trust Agreements will constitute the entire agreement among the parties thereto with respect to the subject matter thereof, including with respect to the creation, operation and termination of the applicable Trust, and that the Trust Agreements and the Certificates of Trust will be in full force and effect and will not be amended, (ii) except to the extent provided in paragraph 1 below, the due organization or due formation, as the case may be, and valid existence in good standing of each party to the documents examined by us under the laws of the jurisdiction governing its organization or formation, (iii) the legal capacity of natural persons who are parties to the documents examined by us, (iv) that each of the parties to the documents examined by us has the power and authority to execute and deliver, and to perform its obligations under, such documents, (v) the due authorization, execution and delivery by all parties thereto of all documents examined by us, (vi) the receipt by each Person to whom a Preferred Security is to be issued by the Trusts (collectively, the "Preferred Security Holders") of a Preferred Security Certificate for such Preferred Security and the payment for such Preferred Security, in accordance with the Trust Agreements and the Registration Statement, and (vii) that the Preferred Securities are authenticated, issued and sold to the Security Holders in accordance with the Trust Agreements and the Registration Statement. We have not participated in the preparation of the Registration Statement or the Prospectus and assume no responsibility for their contents. This opinion is limited to the laws of the State of Delaware (excluding the securities laws of the State of Delaware), and we have not considered and express no opinion on the laws of any other 3 Fresenius Medical Care AG FMC Trust Finance S.a.r.l. Luxembourg-III August 1, 2001 Page 3 jurisdiction, including federal laws and rules and regulations relating thereto. Our opinions are rendered only with respect to Delaware laws and rules, regulations and orders thereunder which are currently in effect. Based upon the foregoing, and upon our examination of such questions of law and statutes of the State of Delaware as we have considered necessary or appropriate, and subject to the assumptions, qualifications, limitations and exceptions set forth herein, we are of the opinion that: 1. Each of the Trusts has been duly created and is validly existing in good standing as a business trust under the Business Trust Act. 2. The Preferred Securities of each Trust will represent valid and, subject to the qualifications set forth in paragraph 3 below, legally issued, fully paid and nonassessable undivided beneficial interests in the assets of the applicable Trust. 3. The Preferred Security Holders, as beneficial owners of the applicable Trust, will be entitled to the same limitation of personal liability extended to stockholders of private corporations for profit organized under the General Corporation Law of the State of Delaware. We note that the Preferred Security Holders may be obligated to make payments as set forth in the Trust Agreement. We consent to the filing of this opinion with the Securities and Exchange Commission as an exhibit to the Registration Statement. We hereby consent to the use of our name under the heading "Legal Opinions" in the Prospectus. In giving the foregoing consents, we do not thereby admit that we come within the category of persons whose consent is required under Section 7 of the Securities Act of 1933, as amended, or the rules and regulations of the Securities and Exchange Commission thereunder. Except as stated above, without our prior written consent, this opinion may not be furnished or quoted to, or relied upon by, any other person for any purpose. Very truly yours, /s/ Richards, Layton & Finger, P.A. GCK/gmh EX-5.2 18 y51284ex5-2.txt OPINION OF O'MELVENY & MYERS LLP 1 Exhibit 5.2 [O' MELVENY LOGO] CITIGROUP CENTER LOS ANGELES 153 EAST 53RD STREET TYSONS CORNER NEW YORK, NEW YORK 10022-4611 CENTURY CITY WASHINGTON, D.C. TELEPHONE (212) 326-2000 IRVINE SPECTRUM FACSIMILE (212) 326-2061 HONG KONG INTERNET: www.omm.com MENLO PARK LONDON NEWPORT BEACH SHANGHAI SAN FRANCISCO TOKYO August 2, 2001 OUR FILE NUMBER 285,846-055 Fresenius Medical Care AG Fresenius Medical Care Capital Trust IV Fresenius Medical Care Capital Trust V Else-Kroner Str. 1 61346 Bad Homburg v.d.H. Germany RE: REGISTRATION STATEMENT ON FORM F-4 Ladies and Gentlemen: At your request, we have examined the Registration Statement on Form F-4 (the "Registration Statement") to be filed by Fresenius Medical Care AG, a German stock corporation (the "Company"), FMC Trust Finance S.a.r.l Luxembourg-III, a Luxembourg private limited company (the "Note Issuer"), Fresenius Medical Care Capital Trust IV, a Delaware statutory business trust ("Trust IV"), Fresenius Medical Care Capital Trust V, a Delaware statutory business trust ("Trust V") and the other Note Guarantors (as defined below), relating to the public offer and sale of: 1. $225,000,000 aggregate liquidation amount of U.S. Dollar denominated 7-7/8% Trust Preferred Securities (the "USD Trust Preferred Securities") to be issued by Trust IV in exchange for a like amount of "Old USD Trust Preferred Securities" pursuant to the "USD Exchange Offer" (as such terms are defined in the Registration Statement), and guaranteed by the Company; 2. E300,000,000 aggregate liquidation amount of Euro denominated 7-3/8% Trust Preferred Securities (the "Euro Trust Preferred Securities" and, collectively with the USD Trust Preferred Securities, the "Trust Preferred Securities"), to be issued by Trust V in exchange for a like amount of "Old Euro Trust Preferred Securities" pursuant to the "Euro Exchange Offer" (as such terms defined in the Registration Statement) and guaranteed by the Company; 2 O' MELVENY & MYERS LLP Fresenius Medical Care AG et al, August 2, 2001 -Page 2 3. the Company's guarantees (the "Company Guarantees") of the Trust Preferred Securities; 4. $225,000,000 aggregate principal amount of the Note Issuer's U.S. Dollar denominated 7-7/8% Senior Subordinated Notes due 2011 (the "USD Notes") to be issued by the Note Issuer in exchange for a like amount of "Old USD Notes" (as defined in the Registration Statement) pursuant to the USD Exchange Offer and guaranteed by the Note Guarantors; 5. E300,000,000 aggregate principal amount of the Note Issuer's Euro denominated 7-3/8% Senior Subordinated Notes due 2011 (the "Euro Notes" and, collectively with the USD Notes, the "Senior Subordinated Notes") to be issued by the Note Issuer in exchange for a like amount of "Old Euro Notes" (as defined in the Registration Statement) pursuant to the Euro Exchange Offer and guaranteed by the Note Guarantors; 6. Guaranties (individually, a "Note Guaranty" and, collectively, the "Note Guaranties") of the Senior Subordinated Notes by the Company, Fresenius Medical Care Deutschland GmbH, a German company ("D-GmbH") and Fresenius Medical Care Holdings, Inc., a New York corporation ("FMCH") (individually, a "Note Guarantor" and, collectively, the "Note Guarantors"). The Trust Preferred Securities, the Company Guarantees, the Senior Subordinated Notes and the Note Guaranties are hereinafter referred to collectively as the "Registered Securities." We have also examined (i) the Amended and Restated Declaration of Trust dated as of June 6, 2001 among the Company, the Note Issuer, State Street Bank and Trust Company ("State Street"), as Preferred Trustee, First Union Trust Company, N.A. ("First Union") as Delaware Trustee and the Company Trustees named therein under which the USD Trust Preferred Securities are to be issued, (ii) the Amended and Restated Declaration of Trust dated as of June 15, 2001, among the Company, the Note Issuer, State Street as Preferred Trustee, First Union as Delaware Trustee and the Company Trustees named therein under which the Euro Trust Preferred Securities are to be issued, (iii) the Guarantee Agreement dated as of June 6, 2001 between the Company and State Street, as Guarantee Trustee, under which the Company Guarantees of the USD Trust Preferred Securities are to be issued, (iv) the Guarantee Agreement dated as of June 15, 2001 between the Company and State Street, as Guarantee Trustee, under which the Company Guarantees of the Euro Trust Preferred Securities are to be issued, (v) the Trust Indenture dated as of June 6, 2001 among the Company, the Note Issuer, the Note Guarantors and State Street, as Trustee, under which the USD Notes and the Note Guaranties of the USD Notes will be issued, and (vi) the Trust Indenture dated as of June 15, 2001 among the Company, the Note Issuer, the Note Guarantors and State Street, as Trustee, under which the Euro Notes and the Note Guaranties of the Euro Notes will be issued. 3 O' MELVENY & MYERS LLP Fresenius Medical Care AG et al, August 2, 2001 -Page 3 We have assumed that (i) all corporate proceedings taken and to be taken by the Note Issuer in connection with the authorization, registration, issuance and sale of the Senior Subordinated Notes have been and will be duly taken by the Note Issuer, (ii) all corporate proceedings taken and to be taken by the Company in connection with the authorization, registration, issuance and sale of the Company Guarantees and the Company's Note Guaranties have been and will be duly taken by the Company, and (iii) all corporate proceedings taken and to be taken by D-GmbH in connection with the authorization, registration, issuance and sale by D-GmbH of its Note Guaranties have been and will be duly taken by D-GmbH. We are familiar with the proceedings taken and proposed to be taken by FMCH in connection with the authorization, registration, issuance and sale of its Note Guaranties. It is our opinion that, subject to (i) the assumptions set forth above, and (ii) the proceedings referred to in the last sentence of the preceding paragraph being duly taken and completed by FMCH as now contemplated by us as its counsel prior to issuance of the Registered Securities, upon the issuance and sale of the Registered Securities in the manner referred to in the Registration Statement: (1) The Notes will be binding obligations of the Note Issuer, enforceable in accordance with their terms, except as may be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws relating to or affecting creditors' rights generally (including, without limitation, fraudulent conveyance laws), and by general principles of equity including, without limitation, concepts of materiality, reasonableness, good faith and fair dealing and the possible unavailability of specific performance or injunctive relief, regardless of whether considered in a proceeding in equity or at law. (2) The Company Guarantees will be the binding obligations of the Company, enforceable in accordance with their terms, except as may be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws relating to or affecting creditors' rights generally (including, without limitation, fraudulent conveyance laws), and by general principles of equity including, without limitation, concepts of materiality, reasonableness, good faith and fair dealing and the possible unavailability of specific performance or injunctive relief, regardless of whether considered in a proceeding in equity or at law. (3) The Note Guaranties of FMCH will be validly issued by FMCH. (4) The Note Guaranties will be the binding obligations of the respective Note Guarantors, enforceable in accordance with their respective terms, except as may be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws relating to or affecting creditors' rights generally (including, without limitation, fraudulent conveyance laws), and by general principles of equity including, without limitation, concepts of materiality, reasonableness, good faith and fair dealing and the possible unavailability of specific performance or injunctive relief, regardless of whether considered in a proceeding in equity or at law. 4 O' MELVENY & MYERS LLP Fresenius Medical Care AG et al, August 2, 2001 -Page 4 The law covered by this opinion is limited to the present federal law of the United States and the present law of the State of New York. We express no opinion as to the laws of any other jurisdiction and no opinion regarding the statutes, administrative decisions, rules, regulations or requirements of any county, municipality, subdivision or local authority of any jurisdiction. We consent to the filing of this opinion as an exhibit to the Registration Statement and to the reference to our firm under the caption "Validity of Securities" in the Prospectus forming a part thereof. Respectfully submitted, /s/ O'MELVENY & MYERS LLP EX-5.3 19 y51284ex5-3.txt OPINION OF NORR, STIEFENHOFER & LUTZ 1 Exhibit 5.3 Fresenius Medical Care AG Else-Kroner-Strasse 1 61352 Bad Homburg RE: EXCHANGE OFFER FOR 7 7/8 % TRUST PREFERRED SECURITIES (LIQUIDATION AMOUNT $1,000 PER TRUST PREFERRED SECURITY) ISSUED BY FRESENIUS MEDICAL CARE CAPITAL TRUST IV AND FOR 7 3/8 % TRUST PREFERRED SECURITIES (LIQUIDATION AMOUNT E1,000 PER TRUST PREFERRED SECURITY) ISSUED BY FRESENIUS MEDICAL CARE CAPITAL TRUST V August 1, 2001 Ladies and Gentlemen: We have acted as special German counsel to Fresenius Medical Care AG, a German stock corporation ("Fresenius Medical Care") in connection with the exchange offer (the "Exchange Offer") for the 7 7/8 % trust preferred securities (liquidation amount $1,000 per trust preferred security) issued by Fresenius Medical Care Capital Trust IV on June 6, 2001, and for the 7 3/8 % trust preferred securities (liquidation amount E1,000 per trust preferred security) issued by Fresenius Medical Care Capital Trust V on June 15, 2001 (such 7 7/8 % trust preferred securities and 7 3/8 % trust preferred securities, collectively the "Trust Preferred Securities"). In the course of the Exchange Offer, the Trust Preferred Securities shall be exchanged for new trust preferred securities (the "New Trust Preferred Securities"), and the senior subordinated notes, the trust guaranties and the note guaranties issued by certain group companies of Fresenius Medical Care (including its German subsidiary Fresenius Medical Care Deutschland GmbH) in connection with the issuance of the Trust Preferred Securities shall be ex- 2 NORR STIEFENHOFER LUTZ 2 changed for new senior subordinated notes (the "New Senior Subordinated Notes"), new trust guaranties (the "New Trust Guaranties") and new note guaranties (the "New Note Guaranties", and collectively with the New Trust Preferred Securities, the New Senior Subordinated Notes and the New Trust Guaranties, the "New Securities"). Each of the New Securities shall be registered with the Securities and Exchange Commission on the basis of a registration statement on Form F-4 (the "Registration Statement"), being filed by Fresenius Medical Care with the Securities and Exchange Commission on or about the date of this opinion under the Securities Act of 1933, as amended (the "Securities Act"), and the rules and regulations promulgated thereunder (the "Rules"). In connection with this matter, we are familiar with the proceedings taken by Fresenius Medical Care in connection with the issuance of the New Securities. We assume that each of the New Securities to be executed by Fresenius Medical Care or Fresenius Medical Care Deutschland GmbH will be signed either by two members of the management board of the respective company or by one member of the management board together with a director being authorized thereto (Prokurist). In our capacity as such counsel, we have examined originals or copies, certified or otherwise identified to our satisfaction, of (i) the Registration Statement, (ii) the Articles of Association of each of Fresenius Medical Care and Fresenius Medical Care Deutschland GmbH, (iii) an excerpt from the commercial register with respect to each of Fresenius Medical Care and Fresenius Medical Care Deutschland GmbH, (iv) a draft of each of the New Trust Guaranties and the New Note Guaranties, (v) and such other records and documents we considered appropriate. In rendering this opinion, we have assumed, without independent investigation, the genuineness of all signatures, the authority and power of attorney of the persons signing the aforesaid documents and agreements, the authenticity of all documents submitted to us a originals and the conformity with originals of all documents submitted to us as certified copies or photocopies. As to relevant factual matters, we have relied upon, among other things, factual representations of officers and other representatives of Fresenius Medical Care and Fresenius Medical Care Deutschland GmbH. In addition, we have obtained and relied upon those certificates of public officials we considered appropriate. On the basis of such examination, our reliance upon the assumptions in this opinion and our consideration of those questions of law we considered relevant, and subject to the limitations and qualifications in this opinion, we are of the opinion that: 3 NORR STIEFENHOFER LUTZ 3 (i) Fresenius Medical Care is a stock corporation (Aktiengesellschaft) duly registered with the commercial register at the local court Hof an der Saale, Germany, and validly existing under the laws of the Federal Republic of Germany; (ii) Fresenius Medical Care Deutschland GmbH is a private limited company (Gesellschaft mit beschrankter Haftung) duly registered with the commercial register at the local court Bad Homburg, Germany, and validly existing under the laws of the Federal Republic of Germany; and (iii) under the laws of the Federal Republic of Germany, when executed in accordance with the procedure described above and issued in the manner described in the Registration Statement, the New Trust Guaranties will be duly authorized by all necessary corporate action of, and validly issued by, Fresenius Medical Care, and the New Note Guaranties will be duly authorized by all necessary corporate action of, and validly issued by, each of Fresenius Medical Care and Fresenius Medical Care Deutschland GmbH. The law covered by this opinion is limited to the present law of the Federal Republic of Germany. We express no opinion as to the laws of any other jurisdiction. We consent to the filing of this opinion as an exhibit to the Registration Statement and to the reference to our firm under the captions "Enforcing Civil Liabilities" and "Legal Matters" of the prospectus contained in part 1 of the Registration Statement. In giving this consent, we do not admit that we are in the category of persons whose consent is required under Section 7 of the Securities Act or the Rules. This opinion is furnished by us as special counsel to Fresenius Medical Care and may be relied upon by you only in connection with the Registration Statement. It may not be used or relied upon by you for any other purpose or by any other person, nor may copies be delivered to any other person, without in each instance our prior written consent. Sincerely yours, NORR STIEFENHOFER LUTZ /s/Konstantin Technau EX-5.4 20 y51284ex5-4.txt OPINION OF WILDGEN & PARTNERS 1 Exhibit 5.4 FMC Trust Finance Sarl Luxembourg III 7A, rue Robert Stumper L-2557 Luxembourg Fresenius Medical Care AG Else-Kroner-Str. 1 D-61346 Bad Homburg v.d.H. Luxembourg, August 1, 2001 BX/QU2/FS Re.: Registration Statement on Form F-4 Ladies and Gentlemen: At your request, we have examined the Registration Statement on Form F-4 (the "Registration Statement") to be filed by Fresenius Medical Care AG, a German stock corporation (the "Company"), FMC Trust Finance Sarl Luxembourg III, a Luxembourg private limited company (the "Note Issuer"), Fresenius Medical Care Capital Trust IV, a Delaware statutory business trust ("Trust IV"), Fresenius Medical Care Capital Trust V, a Delaware statutory business trust ("Trust V") and the other Note Guarantors (as defined below) relating to the issue and exchange of: 1. $225,000,000 aggregate principal amount of the Note Issuer's US Dollar denominated 7 7/8% Senior Subordinated Notes due 2011 (the "USD Notes") to be issued by the Note Issuer to Trust IV in exchange for a like amount of "Old USD Notes" pursuant to the "Exchange Offer" (as such terms are defined in the Registration Statement) and guaranteed by the Note Guarantors; 2 WILDGEN & PARTNERS 2 2. E300,000,000 aggregate principal amount of the Note Issuer's Euro denominated 7 3/8% Senior Subordinated Notes due 2011 (the "Euro Notes") to be issued by the Note Issuer to Trust V in exchange for a like amount of "Old Euro Notes" (as defined in the Registration Statement) pursuant to the Exchange Offer and guaranteed by the Note Guarantors; and, collectively with the USD Notes, the "Senior Subordinated Notes"; 3. Guarantees (individually, a "Note Guarantee" and, collectively, the "Note Guarantees") of the Senior Subordinated Notes by the Company, Fresenius Medical Care Deutschland GmbH, a German company ("D-GmbH") and Fresenius Medical Care Holdings, Inc., a New York corporation ("FMCH") (individually, a "Note Guarantor" and, collectively, the "Note Guarantors"); 4. $ 225,000,000 aggregate liquidation amount of US Dollar denominated 7 7/8% Trust Preferred Securities (the "USD Trust Preferred Securities") to be issued by Trust IV in exchange for a like amount of "Old USD Trust Preferred Securities" (as defined in the Registration Statement) pursuant to the Exchange Offer and guaranteed by the Company; 5. E 300,000,000 aggregate liquidation amount of Euro denominated 7 3/8% Trust Preferred Securities (the "Euro Trust Preferred Securities"), to be issued by Trust V in exchange for a like amount of "Old Euro Trust Preferred Securities" (as defined in the Registration Statement) pursuant to the Exchange Offer and guaranteed by the Company; and, collectively with the USD Preferred Securities, the "Trust Preferred Securities"; and 3 WILDGEN & PARTNERS 3 6. The Trust guarantees (the "Trust Guarantees ") of the Trust Preferred Securities. The Senior Subordinated Notes, the Trust Preferred Securities, the Note Guarantees and the Trust Guarantees are hereinafter referred to collectively as the "Registered Securities". We have examined such certificates, documents and records on the date hereof and have made such examination of the law, as we have deemed necessary to enable us to render the opinion expressed below, especially (i) the Indenture dated as of June 6, 2001 among the Company, the Note Issuer, the Note Guarantors and State Street Bank and Trust Company, as Trustee, under which the USD Notes and the Note Guarantees of the USD Notes will be issued, and (ii) the Indenture dated as of June 15, 2001 among the Company, the Note Issuer, the Note Guarantors and State Street Bank and Trust Company, as Trustee, under which the Euro Notes and the Note Guarantees of the Euro Notes will be issued. We have knowledge of the proceedings taken and proposed to be taken by the Note Issuer in connection with the authorization, registration, issuance and exchange of the Senior Subordinated Notes to Trust IV and V. The opinion expressed below is limited to the laws of the Grand Duchy of Luxembourg currently in effect. We have made no investigation of the laws of any jurisdiction outside Luxembourg as a basis for this opinion and do not express or imply any opinion with respect to the matters governed by or to be determined on the basis of any such laws outside Luxembourg. We do not issue an opinion on tax matters. The undersigned is admitted to the District Court of Luxembourg. In our examination of the above documents, we have made the following 4 WILDGEN & PARTNERS 4 assumptions: i) The originals submitted to us are genuine. ii) The copies submitted to us conform to the originals. iii) Any and all authorizations and consents of any public authority of any state or country, which may be required with respect to the Registration Statement, have been or will be obtained. iv) Any and all registration, notarisation and other formality required in any country have been complied with. v) The Senior Subordinated Notes will be acquired by Trust IV and Trust V in exchange for the Old USD Notes and Old Euro Notes, as applicable. Based on the foregoing, it is our opinion that, subject to said proceedings being duly taken and completed by the Note Issuer as now contemplated by us as their special Luxembourg counsel prior to issuance of the Registered Securities, upon the issuance and sale of the Registered Securities in the Exchange Offer in the manner referred to in the Registration Statement: (1) The USD Notes will be duly authorized and validly issued by the Note Issuer. (2) The Euro Notes will be duly authorized and validly issued by the Note Issuer. The law covered by this opinion is limited to the present law of the Grand Duchy of Luxembourg. We express no opinion as to the laws of any other jurisdiction. 5 WILDGEN & PARTNERS 5 We consent to the filing of this opinion as an exhibit to the Registration Statement and to the reference to our firm under the caption "Validity of Securities" in the Prospectus forming a part thereof. The enforceability of the Note Issuer's obligations included in the Trust indentures set forth here above is subject to all applicable bankruptcy, insolvency or similar laws. Any liability arising out of or in connection with this Legal Opinion shall be limited to and under no condition exceed an amount of 100,000,000 Luxembourg Francs. Very truly yours /s/ Albert WILDGEN EX-8.1 21 y51284ex8-1.txt OPINION OF O'MELVENY & MEYERS LLP 1 Exhibit 8.1 August 2, 2001 OUR FILE NUMBER 285,846-055 NY1-815328.1 Fresenius Medical Care AG FMC Trust Finance S.a.r.l. Luxembourg- III WRITER'S DIRECT DIAL Fresenius Medical Care Capital Trust IV 212-326-2003 Fresenius Medical Care Capital Trust V Else-Kroner Strasse 1 WRITER'S E-MAIL ADDRESS 61346 Bad Hamburg v.d. H jgiannola@omm.com Germany RE: FRESENIUS MEDICAL CARE CAPITAL TRUST IV FRESENIUS MEDICAL CARE CAPITAL TRUST V Ladies and Gentlemen: You have requested our opinion as to whether Fresenius Medical Care Capital Trust IV ("Trust IV") and Fresenius Medical Care Capital Trust V ("Trust V", and together, the "Trusts") will continue to qualify as grantor trusts for United States federal income tax purposes after the exchange of trust preferred securities, as described below. Each of the Trusts is a statutory business trust formed under the laws of the State of Delaware pursuant the declarations of trust, as amended (individually, the "Amended Declaration" and collectively, the "Amended Declarations") entered into between FMC Trust Finance S.a.r.l. Luxembourg- III (the "Company"), Fresenius Medical Care AG ("FMC AG"), a stock corporation (Aktiengesellschaft) organized under the laws of the Federal Republic of Germany) and sole shareholder of the Company, State Street Bank and Trust Company, as Preferred trustee, First Union Trust Company National Association, as Delaware trustee, the Company trustees and the holders from time to time. At the time of formation of each of the Trusts and the initial issuance of the trust preferred securities, the Company and each of the Trusts agreed, pursuant to the Registration Rights Agreements dated as of June 6, 2001, in the case of Trust IV and dated as of June 15, 2001, in the case of Trust V, to file and use their best efforts to cause a registration statement to become effective with respect to the exchange of new trust preferred securities for old trust preferred securities, in each case with identical terms in all material respects. The Company and the Trusts are now registering new trust preferred securities for each of the Trusts. 2 August 2, 2001 - Page 2 In rendering our opinion, we have examined the Registration Statement on Form F-4 in the form filed with the SEC on August 2, 2001 (the "Registration Statement") and the preliminary prospectus (the "Prospectus") included therein, and such other documents as we have deemed necessary or appropriate for purposes of our opinion. For purposes of such examination, we have assumed the genuineness of all signatures, the legal capacity of natural persons, and the authenticity of all documents submitted to us as relevant to this opinion and, as to matters of fact, we have relied upon the agreements, instruments, certificates and documents referred to above. We have also assumed (a) that all parties have the corporate power and authority to enter into and perform all obligations thereunder; (b) the due authorization by all requisite corporate actions, the due execution and delivery and the validity, binding effect and enforceability of such documents; and (c) that each of the Trusts is organized, is operating and will continue to be operated in accordance with the Delaware Business Trust Act and the terms and conditions of its respective Amended Declaration. Finally, we have assumed that the form of documents reviewed for this opinion will be executed in the form in which we reviewed them in all material respects. Capitalized terms used herein shall have the meanings ascribed to them in the Registration Statement unless otherwise indicated. Trust IV is offering to exchange up to US$225 million aggregate liquidation amount of new U.S. dollar-denominated 7-7/8% trust preferred securities ("New USD Trust Preferred Securities") that have been registered with the Securities and Exchange Commission for a like aggregate liquidation amount of old U.S. dollar-denominated 7-7/8% trust preferred securities ("Old USD Trust Preferred Securities"). To the extent that this exchange offer (the "USD Exchange Offer") is accepted, the Company will also exchange its new U.S. dollar-denominated 7-7/8% Senior Subordinated Notes (the "New USD Notes") for a like principal amount of old U.S. dollar-denominated 7-7/8% Senior Subordinated Notes (the "Old USD Notes"). Trust V is offering to exchange up to E300 million aggregate liquidation amount of new Euro-denominated 7-3/8% trust preferred securities ("New Euro Trust Preferred Securities" and collectively with the New USD Trust Preferred Securities, the "New Trust Preferred Securities") that have been registered with the Securities and Exchange Commission for a like aggregate liquidation amount of old Euro-denominated 7-3/8% trust preferred securities ("Old Euro Trust Preferred Securities", and collectively with the Old USD Trust Preferred Securities, the "Old Trust Preferred Securities"). To the extent that this exchange offer (the "Euro Exchange Offer," and collectively with the USD Exchange Offer, the "Exchange Offers") is accepted, the Company will also exchange its new Euro denominated 7-3/8% Senior Subordinated Notes (the "New Euro Notes" and collectively with the New USD Notes, the "New Notes") for a like principal amount of Euro-denominated 7-3/8% Senior Subordinated Notes (the "Old Euro Notes" and collectively with the Old USD Notes, the "Old Notes"). Finally, the guarantees of FMC AG with respect to the New Trust Preferred Securities will be exchanged for like guarantees with respect to the Old Trust Preferred Securities. The Note Guarantors will also exchange their guarantees with respect to the New Notes for like guarantees with respect to the Old Notes. 3 August 2, 2001 - Page 3 The New USD Trust Preferred Securities are identical to the Old USD Trust Preferred Securities that they replace, and the New Euro Trust Preferred Securities are identical to the Old Euro Trust Preferred Securities that they replace, except that, in each case (i) the new Trust Preferred Securities have been registered and, therefore, will not be subject to certain restrictions on transfer, and (ii) the New Trust Preferred Securities will not contain the minimum liquidation amount transfer restrictions and will not provide for any increase in the distribution rate thereon. In addition, the terms of the New Notes are the same in all material respects as the terms of the Old Notes that they replace, except that, in each case (a) the New Notes will not contain the minimum principal amount transfer restrictions, and (b) the New Notes will not provide for any increase in the interest rate thereon. In connection with the Exchange Offers, we are advised that (a) there will be no change in the amount of the Common Securities for each Trust , which will continue to be owned by FMC AG, and (b) the Trust Preferred Securities and Common Securities of each Trust will continue to represent all of the beneficial interests in the assets of each Trust. In addition, the only assets of each Trust will continue to be either the Old Notes with respect to that Trust and/or the New Notes with respect to that Trust, and the Trustees of each Trust will continue to be prohibited from varying those assets. The Common Securities of each Trust will continue to rank pari passu with the Old Trust Preferred Securities and/or the New Trust Preferred Securities of that Trust, except that, with respect to each Trust, upon the occurrence and during the continuance of a Declaration Event of Default for that Trust (as defined in each Amended Declaration), the rights of the Company as holder of that Trust's Common Securities to payment in respect of distributions and payments upon liquidation, redemption and otherwise will be subordinated to the rights of the holders of that Trust's Trust Preferred Securities. In addition, upon the occurrence and during the continuance of a Declaration Event of Default, the rights of the Common Securities holder under the separate payment guarantee of FMC AG will continue to be subordinated to the rights of the holders of the Old Trust Preferred Securities and the New Trust Preferred Securities of that Trust with respect to distributions from that Trust. Finally, the voting rights of the holders of the Old Trust Preferred Securities, the New Trust Preferred Securities and the Common Securities of each Trust remain the same. Our opinion set forth herein is based on existing provisions of the Internal Revenue Code of 1986, as amended (the "Code"), Treasury Department Regulations promulgated thereunder (the "Regulations"), administrative interpretations of the Internal Revenue Service (the "IRS") and judicial decisions. The opinion expressed herein deals only with United States federal income taxation and only with respect to the matters addressed herein and not with state or local taxation or the matters of any other taxing jurisdiction. In addition, changes in the law, facts, or representations relied upon could possibly adversely affect the conclusions reached in this opinion. Consequently, future events may result in federal income tax treatment of a Trust and its beneficial owners that is materially and adversely different from that described herein. 4 August 2, 2001 - Page 4 Under Section 301.7701-4(c)(1) of the Regulations, an investment trust will not be classified as a trust if there is a power under the trust agreement to vary the investment of the trust certificate holders. The exchange of the New Trust Preferred Securities for the Old Preferred Securities, and of the New Notes for the Old Notes, with respect to each Trust is being made pursuant to the provisions of the Rights Agreements entered into at the time the Old Trust Preferred Securities were issued. In addition, except for the provisions noted above (which are no longer applicable to the registered securities), the terms of the New Trust Preferred Securities are identical to the terms of the Old Preferred Securities and the terms of the New Notes are identical to the terms of the Old Notes with respect to each Trust. Accordingly, the exchange of a Trust's trust preferred securities and notes will not cause a Trust to fail to qualify as a trust under the Regulations as a result of any investment powers conferred on the Trustees by an Amended Declaration. In addition, since the terms of the Common Securities has not changed and since the terms of the New Trust Preferred Securities are in all material respects the same as the terms of the Old Trust Preferred Securities with respect to a Trust, the existence of multiple classes of securities in a Trust should continue to be treated as merely incidental to facilitating direct investment in the Old Notes and/or the New Notes with respect to that Trust. Regulations Section 301.7701-4(c)(1). The subordination of certain payment rights of the Common Securities holders to the trust preferred securities holders, as well as the subordination feature of the Common Securities holder's guarantee, which will only apply upon the occurrence and during the continuance of a Declaration Event of Default, should also be treated, under the Regulations, as incidental to each Trust's purpose of facilitating direct investment in its respective Old Notes and/or New Notes. See Example 2 of Regulations Section 301.7701-4(c); see also Priv. Ltr. Rul. 9132027 (May 8, 1991) (a trust certificate holder's guarantee of trust distributions to other certificate holders, and the subordination of the guarantor's right to distributions in favor of the other certificate holders upon default of the underlying loans, was incidental to the trust's purpose of facilitating direct investment in the trust assets); Priv. Ltr. Rul. 9244036 (August 5, 1992) (a limited guarantee by one class of trust certificate holders in favor of another class is incidental to facilitating direct investment in trust assets); and Priv. Ltr. Rul. 9140076 (July 9, 1991) (to the same effect). While these private rulings may not be relied upon by taxpayers other that the taxpayer to whom the ruling is addressed, they do indicate the IRS's thinking on this issue. While it is still not clear that the existence of the limited voting rights of the Common Securities holder, and of the trust preferred securities holders under various circumstances, would cause a Trust to be viewed, under the Regulations, as having two classes of ownership interest, even if it did, in our view any such limited voting rights would also be deemed to be "incidental" under the Regulations. Based on the foregoing, it is our opinion that, for federal income tax purposes, each Trust will continue to be classified as a grantor trust, and not as an association taxable as a corporation. 5 August 2, 2001 - Page 5 We hereby confirm the tax consequences set forth in the Registration Statement under the heading "Tax Considerations - United States", and we consent to the filing of this opinion as an exhibit to the Registration Statement and to the reference to our firm under the heading "Tax Considerations - United States" in the in prospectus forming a part thereof. Respectfully submitted, /s/ O'MELVENY & MYERS LLP JGG:ml EX-8.2 22 y51284ex8-2.txt OPINION OF KPMG-LUXEMBOURG 1 Exhibit 8.2 1 August 2001 Ladies and Gentlemen, FMC TRUST FINANCE S.A.R.L. LUXEMBOURG-III FRESENIUS MEDICAL CARE CAPITAL TRUST IV FRESENIUS MEDICAL CARE CAPITAL TRUST V You have requested our opinion regarding certain Luxembourg tax considerations with respect to the exchange of - - (A) USD 225.000.000, aggregate principal amount of 7 7/8 % Senior Subordinated Notes (the "Old 7 7/8 % Notes") that FMC Trust Finance S.a.r.l. Luxembourg ("the Company") issued to Fresenius Medical Care Capital Trust IV ("Trust IV") for a like principal amount of 7 7/8 % Senior Subordinated Notes (the "New 7 7/8 % Notes"), and - - (B) EUR 300.000.000, aggregate principal amount of 7 3/8 % Senior Subordinated Notes (the "Old 7 3/8 % Notes", the "Old 7 7/8 % Notes" and the "Old 7 3/8 % Notes" are collectively referred to herein as the "Old Notes") that the Company issued to Fresenius Medical Care Capital Trust V (collectively with Trust IV, the "Trusts"), for a like principal amount of 7 3/8 % Senior Subordinated Notes (the "New 7 3/8 % Notes", the New 7 7/8 % Notes and the New 7 3/8 % Notes are collectively referred to herein as the "New Notes"). Each of the Trusts is a statutory business trust formed under the laws of the State of Delaware pursuant the declaration of trust, as amended (collectively, the "Amended Declarations") entered into between the Company, a private limited company organized under the laws of Luxembourg (and a wholly-owned subsidiary of Fresenius Medical Care AG (Aktiengesellschaft) ("FMC AG"), a stock corporation organized under the laws of the Federal Republic of Germany), FMC AG and the trustees of the Trusts. The terms of the New Notes are identical in all material respects to the respective terms of the Old Notes, except that (i) the New Notes will not contain the minimum principal amount transfer restrictions, and (ii) the New Notes will not provide for any increase in the interest rate thereon. In connection with rendering our opinion, we have examined the Registration Statement on Form F-4 as proposed to be filed with the SEC (the "Registration Statement") and the form of Preliminary Prospectus as at July 31, 2001 included therein (the "Prospectus"). 2 FMC Trust Finance S.a.r.l. Luxembourg Fresenius Medical Care Capital Trust IV Fresenius Medical Care Capital Trust V August 1, 2001 In addition, we have assumed that all parties have the requisite power and authority to enter into and perform all obligations thereunder. We have also assumed that the New Notes will not differ, in any material aspect, from the description thereof set forth in the Prospectus. Our opinion is based on existing Luxembourg tax law, all of which is subject to change. Any such change could affect the validity of our opinion. On June 20, 2001, the Luxembourg taxing authorities confirmed that the Old 7 7/8 % Notes and the Old 7 3/8 % Notes qualified as debt for Luxembourg tax purposes. As the terms of the New Notes are - except for the changes stated above - identical to the respective Old Notes, we are of the opinion that the New Notes qualify in the same way as debt as the Old Notes. Therefore we hereby confirm the tax consequences set forth in the Chapter "Tax consideration" of the Prospectus under the headings "Luxembourg" and "Proposed EU Information Reporting/Withholding Tax Directive", which are the following, are accurate in all material respects: "PROPOSED EU INFORMATION REPORTING/WITHHOLDING TAX DIRECTIVE The European Union is currently considering proposals for a new directive regarding the taxation of savings income. A new draft directive has been promulgated on July 18, 2001. Subject to a number of important conditions being met, it is proposed that member states will be required to provide to the tax authorities of another member state details of payments of interest or other similar income paid by a person within its jurisdiction to an individual resident, as well as to other forms of organizations such as partnerships and trusts, in that other member state, subject to the right of certain member states to opt instead for a withholding system for a transitional period in relation to such payments. Luxembourg has opted to adopt a withholding system for a period of seven years for payments made to individual beneficial owners of securities (which may include, for example, individuals who hold interests through forms of organizations such as partnerships and trusts, among others) who are resident in a member state of the European Union that is different from the member state of the issuer of the securities or the member state of any paying agent (which could, for these purposes, include a person making payment in respect of the securities on behalf of the issuer or on behalf of the holder). Thus, if the directive is adopted, payments made at the latest on or after January 1, 2004 by a Luxembourg issuer of securities or through a Luxembourg paying agent in respect of instruments issued after March 1, 2001 could be subject to withholding tax under the directive. There can be no assurance that the directive will be adopted as proposed or as to the final terms of such directive. LUXEMBOURG The note issuer intends to treat the notes as debt for all Luxembourg tax purposes and will report payments made on the notes in a manner consistent with such characterization. Under existing Luxembourg law, all payments of interest under the notes to a holder of the notes who is not currently, and has never been, a Luxembourg citizen or resident, will be free of withholding tax or any similar taxes of whatsoever nature. No income tax and capital tax will be due on interest received or profits realized upon disposition of any notes by a holder, provided such holder is not currently, and has never been, a Luxembourg citizen or resident, and such holder has no permanent establishment in Luxembourg and the notes are not effectively connected with such permanent establishment. No net wealth tax will be due in respect of the notes and no estate or inheritance taxes will arise in Luxembourg on the transfer of any notes by way of gift, or on death of a holder, provided such holder is not currently, and has never been, a Luxembourg citizen or resident, and such holder has no permanent establishment in Luxembourg. THE LUXEMBOURG TAX DISCUSSION SET FORTH ABOVE IS INCLUDED FOR GENERAL INFORMATION ONLY AND MAY NOT BE APPLICABLE DEPENDING UPON A HOLDER'S PARTICULAR SITUATION. HOLDERS SHOULD CONSULT THEIR TAX ADVISORS WITH RESPECT TO THE TAX CONSEQUENCES TO THEM OF THE PURCHASE, OWNERSHIP AND DISPOSITION OF THE TRUST PREFERRED SECURITIES, INCLUDING THE TAX CONSEQUENCES UNDER STATE, LOCAL, FOREIGN AND OTHER TAX LAWS AND THE POSSIBLE EFFECTS OF CHANGES IN LUXEMBOURG OR OTHER TAX LAWS." This opinion does not address other possible accounting and tax implications for FMC Trust Finance S.a.r.l. Luxembourg-III resulting from the aforementioned exchange of financial instruments. This opinion and all future work concerning this file has been, and will be prepared on the basis of the law, publicly available jurisprudence and the current practice in Luxembourg. The opinions will not be updated, unless a written request received from you. The opinions cannot be communicated to third parties without the express written permission of KPMG. Our maximum liability arising for any reason in relation to the services rendered under this opinion, will be limited to ten times the amount invoiced by KPMG for these services. Any legal dispute in relation to the above would fall exclusively under the competence of the Luxembourg Courts. We consent to the filing of this opinion as an exhibit to the Registration of Statement and to the reference to our firm under the caption "Luxembourg" and "Proposed EU Information Reporting/Withholding Tax Directive" in the Chapter "Tax consideration" of the Prospectus forming a part thereof. Yours sincerely, /s/ Birgit Hoefer /s/ Roger Molitor Partner - KPMG Tax Advisers Luxembourg Partner - KPMG Tax Advisers Luxembourg EX-10.17 23 y51284ex10-17.txt 2001 INTERNATIONAL STOCK INCENTIVE PLAN 1 EXHIBIT 10.17 NORR STIEFENHOFER LUTZ FRESENIUS MEDICAL CARE AKTIENGESELLSCHAFT 2001 INTERNATIONAL STOCK INCENTIVE PLAN 2 2
TABLE OF CONTENTS 1. PREAMBLE AND PURPOSE 4 2. TERM OF THE PLAN 4 3. CONVERTIBLE BOND 4 4. PARTICIPANTS 6 5. GRANTING OF THE CONVERTIBLE BONDS 7 6. EMPLOYEE LOAN 9 7. TRANSFERABILITY 9 8. CONVERSION 9 8.1 Vesting Period 9 8.2. Conversion Periods 10 8.3. General Prerequisites for Conversion 10 8.4. Success Target 10 8.5. Conversion Price 11 8.6. Declaration of the Conversion 11 8.7 Conversion Day 12 8.8. Conversion Office 12 8.9 Black-out Periods 12 8.10 Additional Requirements 13 9. CONVERSION RIGHT IN SPECIAL CASES 13 9.1. Retirement by Age 13 9.2. Termination without Good Cause 13 9.3. Death 14 9.4. Termination with Good Cause 14 9.5. Employment with the Fresenius Group 14 9.6. Effect of Change of Subsidiary Status 14 9.7. Individual Cases 15 10. ADJUSTMENT OF CONVERSION PRICE 15 11. REPAYMENT OF THE CONVERTIBLE BOND 16 12. ALTERNATIVE SATISFACTION OF THE CONVERSION RIGHT 16
3 3 13. TAX AND COSTS 17 13.1. General 17 13.2 US-Citizens or US-Residents 17 13.3. Costs 18 14. ADMINISTRATION, TERMINATION AND ADJUSTMENT OF PLAN 18 15. OTHER PROVISIONS 19 16. DEFINITIONS 20
4 4 1. PREAMBLE AND PURPOSE 1.1 On May 23, 2001, the shareholders' meeting of Fresenius Medical Care Aktiengesellschaft (the "Company") resolved (i) to create conditional capital in the amount of Euro 10,240,000.00 through issuance of 4,000,000.00 non-voting bearer preference shares (the "Share"), and (ii) to issue to the members of the Managing Board and to other employees of the Company and the Affiliated Companies within the FMC-Group convertible bonds, having a par value of Euro 2.56 each, entitling the holders to subscribe to a maximum of 4,000,000 Shares (the ,,Convertible Bonds"). This Fresenius Medical Care AG 2001 International Stock Incentive Plan (the "Plan") sets forth the requirements, condition and procedures for the grant and conversion of Convertible Bonds and has been adopted by the Managing Board with the consent of the Supervisory Board and, to the extent that members of the Managing Board are Participants under the Plan, by the Supervisory Board. 1.2 The purpose of this Plan is to promote the success of the Company by providing an additional means through the grant of Convertible Bonds to attract, motivate, retain and reward key management and executive employees of the FMC-Group, including members of the Managing Board, with awards and incentives for high levels of individual performance and improved financial performance of the FMC-Group. 2. TERM OF THE PLAN 2.1 The term of the Plan shall commence on the first day of the calendar month following the day of entry of the conditional capital as mentioned in sec. 1.1 in the Commercial Register of the Company. 2.2 According to the shareholders' resolution on May 23, 2001, the Managing Board and the Supervisory Board shall be authorized to issue up to May 22, 2006 up to twenty percent (20%) of the total number of Convertible Bonds available shall be 5 5 granted to the Participants each year. The Plan shall be valid up to the last Convertible Bond issued under this Plan is terminated or converted. 3. CONVERTIBLE BONDS 3.1 For purposes of this Plan, Convertible Bonds are Wandelschuldverschreibungen within the meaning of Sec. 192 para. 2 and Sec. 221 para. 1 AktG [German Stock Corporation Act]. 3.2 Each Convertible Bond has a par value of Euro 2.56. Each Convertible Bond shall bear interest at the rate of 5.5% per annum, payable in arrears. The term of each Convertible Bond shall be 10 years from the Grant Date. During the applicable term, each Convertible Bond provides an entitlement, in accordance with the requirements established under this Plan and the resolution of the shareholders' of the Company on May 23, 2001, for the subscription of one Share. 3.3 On the basis of this Plan, a maximum of 4,000,000 Convertible Bonds entitling the holders to subscribe to 4,000,000 Shares may be issued during the term of this Plan. During the term of this Plan, a maximum of 500,000 Convertible Bonds may be issued to the members of the Managing Board; a maximum of 3,500,000 Convertible Bonds may be issued to the other Participants (excluding the members of the Managing Board). The maximum number of Shares subject to Convertible Bonds that may be granted in any calendar year to any Participant shall be limited to 200,000 Shares. If a Convertible bond is re-deemed, canceled, forfeited or otherwise terminated (i.e. no longer subject to conversion into Shares) the Shares that were subject to such Convertible Bond shall be available to be used as the subject of new grants, subject to the limitations under the Plan. 3.4 The individual Convertible Bonds will be represented by one global certificate for each Grant Date; no individual certificates will be issued to Participants. The Managing Board shall arrange to have any bank or custodian it may choose in its sole discretion, hold all of the Convertible Bonds on behalf of the Participants 6 6 (excluding the members of the Managing Board). The Supervisory Board shall arrange to have any bank or custodian it may choose in its sole discretion, hold all of the Convertible Bonds on behalf of the members of the Managing Board. 3.5 Each Convertible Bond shall be convertible into one Share authorized as conditional capital with respect to the Convertible Bonds, and no special or separate reserve, fund or deposit shall be made to assure conversion of such Convertible Bonds. Sec. 12 shall remain unaffected. No Participant or other person shall have any right, title or interest in any funds or in any specific asset of the Company (including Shares) except as expressly otherwise provided. Neither the provisions of this Plan (or of any related documents), nor the creation or adoption of this Plan, nor any action taken pursuant to the provisions of this Plan shall create, or be construed to create, a trust of any kind or a fiduciary relationship between the Company (including its Affiliated Companies within the FMC-Group) and any Participant or other person. To the extent that a Participant or other person acquires a right to subscribe Shares or receive payment pursuant to any Convertible Bonds hereunder, such right shall be no greater than the right of any unsecured general creditor of the Company. 4. PARTICIPANTS 4.1 Convertible Bonds may be issued only to the following groups of persons (the,,Participants"): a) members of the Managing Board of the Company; b) members of the management of the Affiliated Companies within the FMC-Group; c) managerial staff members ("leitende Angestellte" within the meaning of the classification by the Company) in the Company and in Affiliated Companies within the FMC-Group; 7 7 d) other employees in the Company outside Germany and in Affiliated Companies within the FMC-Group outside Germany. 4.2. The Managing Board shall determine the entitlement of the individual Participants (excluding members of the Managing Board), to receive Convertible Bonds. The Supervisory Board shall determine the entitlement of the individual members of the Managing Board to receive Convertible Bonds. 4.3. The number of Convertible Bonds granted to a Participant shall be determined on the basis of the Participant's individual performance and responsibility for the FMC-Group. Such determination shall be made by the Managing Board for the Participants (excluding the members of the Managing Board) and by the Supervisory Board for the members of the Managing Board. The Managing Board shall, with the consent of the Supervisory Board, determine a maximum number of Convertible Bonds which may be granted to the Participants (excluding the members of the Managing Board). Such maximum number may vary depending, inter alia, on the degree of responsibility. The Supervisory Board may determine a maximum number of Convertible Bonds which may be granted to the members of the Managing Board. Such maximum number may vary depending on the degree of responsibility. 4.4. No claim for the grant of Convertible Bonds on the basis of this Plan shall be legally permissive. The status or possible status of an employee as a Participant or the granting of Convertible Bonds to any Participant in the past shall not be construed as a commitment that Convertible Bonds will be granted under this Plan to such employee or to any possible Participant generally or in the future. 5. GRANTING OF THE CONVERTIBLE BONDS 5.1. The Convertible Bonds shall, in each case, be granted to the Participants on the last Monday in July and/or on the first Monday in December (the "Grant Date"). 8 8 5.2. Immediately after the Grant Date, the Managing Board or Supervisory Board (with respect to grants to members of the Managing Board) may offer to the Participants the choice between the two types of Convertible Bonds. Each offer to a Participant, shall state the number of the Convertible Bonds to be issued to the Participant if the Participant chooses Convertible Bonds with a Success Target, the number to be issued if the Participant chooses Convertible Bonds without a Success Target, the Conversion Price and the Stock Exchange Price on the Grant Date. The number of Convertible Bonds offered without a Success Target shall in each case be fifteen percent (15%) less than the number of Convertible Bonds offered with a Success Target, rounded down to the nearest whole number. 5.3. If a Participant is offered Convertible Bonds, he must accept one of the two available types and amounts of the Convertible Bonds (an "Allotment") within six (6) weeks from receipt of the offer within the meaning of 5.2 (the "Acceptance Period"). An Allotment may only be accepted in total. Acceptance of an Allotment of the Convertible Bonds shall be in the form of written notice to a responsible person designated by the Managing Board in its offer to Participants (excluding the members of the Managing Board) or to the Supervisory Board for the members of the Managing Board. The Participant shall declare in the acceptance which of the two Allotments should be granted. Receipt by the responsible person, designated by the Managing Board or the Supervisory Board, as appropriate, shall be decisive for establishing observance of the acceptance period. 5.4. If the Participant has accepted the offer within the Acceptance Period the chosen type of Convertible Bonds in the respective number are granted to the Participant with effect to the Grant Date. If the Participant does not choose the type of the Convertible Bonds, the Convertible Bonds with a Success Target in its respective number shall be granted with effect to the Grant Date to the Participant. Any acceptance received after the expiration of the Acceptance Period shall be void. 5.5 Immediately after the granting of the Convertible Bonds the Participant shall pay the par value of the granted Convertible Bond to the Company unless otherwise paid as provided in sec. 6. If the Participant has paid the par value of the Convertible Bonds within one week after the acceptance, the Company shall deliver to 9 9 the Participant legal documents evidencing the grant of Convertible Bonds. If the Participant fails to pay the par value of the Convertible Bonds within one week after the acceptance, the grant of the Convertible Bonds shall be void. 6. EMPLOYEE LOAN 6.1. The Company and/or Affiliated Companies within the FMC-Group may offer to each Participant an employee loan in the amount equal to the par value of the granted Convertible Bonds (the "Employee Loan"). Interest shall accrue on the principal amount of the Employee Loan at a rate of 5.5% per annum, payable in arrears. The Employee Loan shall be denominated in Euro. 6.2. The term of the Employee Loan is ten (10) year. If the Convertible Bond should be converted into Shares the Employee Loan shall be paid back to the Company and/or Affiliated Companies within the FMC-Group. If and when the conversion right of Convertible Bonds expires the Employee Loan shall be paid back to the Company and/or Affiliated Companies within the FMC-Group. 7. TRANSFERABILITY The Convertible Bonds are not transferable by legal transaction inter vivos, except pursuant to a QDRO. The designation of a Beneficiary or Personal Representative hereunder shall not constitute a transfer prohibited by the foregoing provision. 8. CONVERSION 8.1 Vesting Period Subject to the other terms and conditions of the Plan, a Participant may exercise the corresponding conversion right of the Convertible Bond for one third of the 10 10 Convertible Bonds on and after the second anniversary of the relevant Grant Date. The corresponding conversion right for a further third of the Convertible Bonds may be exercised on and after the third anniversary of the relevant Grant Date and for the remaining third of the Convertible Bonds on and after the fourth anniversary of the relevant Grant Date. If the number of Convertible Bonds issued to a Participant on any one Grant Date is not divisible by three (3), the number of Convertible Bonds exercisable after two (2) and three (3) years shall be calculated on the basis of the next lowest number divisible by three (3). 8.2. Conversion Periods Subject to the other terms and conditions of the Plan, exercise of the conversion right is permitted only within (i) 15 Working Days after the ordinary general meeting of shareholders of the Company and (ii) 15 Working Days after publication of the full financial statements of the Company for the past calendar quarter according to the regulations of the German Securities Trading Act (WpHG) if and when such publication occurs after the ordinary general meeting but before the end of the calendar year ("Conversion Period"). 8.3. General Prerequisites for Conversion In addition to the other terms and conditions of the Plan, conversion right of the Convertible Bonds may be exercised only as long as the Participant is in the employment or service of the Company or an Affiliated Company within the FMC-Group, for which notice of termination or dismissal has not been given, except as provided in Sec. 9. 8.4. Success Target In addition to the other terms and conditions of the Plan, in the case of Convertible Bonds which are subject to a Success Target, exercise of the conversion right will be contingent on achievement of the following Success Target: The Success Target shall be deemed to have been met if the increase in the rate of the Share exceeds the Stock Exchange Rate on the Grant Date of the respective Convertible Bond ("Initial Value") by 25% or more for at least one day, prior to conversion of 11 11 the relevant Convertible Bond. The Initial Value shall be the average Stock Exchange Rate during the last 30 Trading Days prior the Grant Date of the relevant Convertible Bond. 8.5. Conversion Price 8.5.1. The Conversion Price of a Convertible Bond without a Success Target shall correspond to the average Stock Exchange Rate during the last 30 Trading Days prior the Grant Date of the relevant Convertible Bond, less the par value of the converted Convertible Bond. 8.5.2. The Conversion Price for Convertible Bonds with a Success Target shall correspond to the Stock Exchange Rate at the time the Success Target is achieved for the first time, less the par value of the converted Convertible Bond. 8.5.3. Prior to the Conversion or at the latest on the Conversion Day, the Conversion Price of the Convertible Bonds to be converted shall be paid in Euro to the Company and/or to the Conversion Office if a Conversion Office has been designated. If the Participant is granted an Employee Loan he/she shall also pay the amount of the Employee Loan to the Company and/or to the Conversion Office if a Conversion Office has been designated. 8.6. Declaration of the Conversion 8.6.1. Within a Conversion Period and subject to the other terms and conditions of the Plan, a Participant may declare the conversion of the Participant's Convertible Bond, in whole or in part. 8.6.2. Conversion of the Convertible Bonds must be declared in writing to the Company and/or to the Conversion Office if a Conversion Office has been designated (the ,,Declaration of Conversion"). The Declaration of Conversion must be received within the Conversion Period and indicate the number of Convertible Bonds of the Participant that are converted. Any Declaration of Conversion received after the Conversion Period shall be null and void. 12 12 8.6.3. The Participant must indicate in the Declaration of Conversion to which securities account the Shares resulting from the conversion of the Participant's Convertible Bonds shall be transferred. The Participant may request in the Declaration of Conversion that American Depositary Receipts representing Shares be issued to the Participant's securities account in lieu of Shares. 8.6.4. The Company may provide that the Declaration of Conversion and the other necessary declarations of the Participant may be made only on a form issued for this purpose. 8.7 Conversion Day The conversion of the Convertible Bonds shall take effect on the day of receipt by the Company of the Declaration of Conversion, and/or by the Conversion Office if a Conversion Office has been designated, if and when such declaration is received by 10.00 a.m. (time zone of the respective Conversion Office) at the latest, otherwise it shall take effect on the next following Trading Day ("Conversion Day"). However, prior to the beginning of any Conversion Period, the Managing Board, with the consent of the Supervisory Board, may provide with respect to the Convertible Bonds for the Participants (excluding the members of the Managing Board), and the Supervisory Board may provide with respect to the Convertible Bonds for the members of the Managing Board, that the conversion of such Convertible Bonds takes effect uniformly only after expiration of not more than five (5) Trading Days after the end of the Conversion Period if this is necessary for handling reasons. 8.8. Conversion Office The Managing Board may entrust banks and/or employees of the Company or its Affiliated Companies with the duties of a Conversion Office for the technical handling of the grant, administration and conversion of the Convertible Bonds. 8.9 Black-out Periods The Management Board, with the consent of the Supervisory Board, may impose from time to time a black-out period during which some or all Participants would 13 13 be prohibited from converting Convertible Bonds and/or trading in Shares or other Company securities due to the existence of material non-public information concerning the Company and/or affiliated companies within the FMC-Group. 8.10 Additional Requirements The Managing Board may establish additional requirements to ensure the legal and proper conversion of the Convertible Bonds. 9. CONVERSION RIGHT IN SPECIAL CASES 9.1. Retirement by Age If and when the Participant retires by age from an employment or service relationship, with respect to which no notice of termination has been given to the Participant, with the Company and/or an Affiliated Company within the FMC-Group, the conversion rights of the Convertible Bonds which have already been granted shall remain unaffected. Disability, vocational disability and early retirement shall be equivalent to retirement. 9.2. Termination without Good Cause If an employment or service relationship between the Participant and Company and/or an Affiliated Company within the FMC-Group exists, but such relationship has been terminated by one of the parties, the Participant may convert the Convertible Bonds convertible pursuant to sec. 8.1 (Vesting Period) and, if applicable, sec. 8.4 (Success Target) during the next Conversion Period that is not subject to a black-out by operation of the authority granted in sec 8.9, after the receipt of the notice of termination. Any conversion right of Convertible Bonds not converted after expiration of this Conversion Period shall lapse without substitution regardless of whether or not the Vesting Period pursuant to sec. 8.1 has expired or the further conditions have been fulfilled. Sec. 9.4 shall remain unaffected. 14 14 9.3. Death In case of death of a Participant, the rights under the Convertible Bonds which have already been granted shall remain unaffected. These rights may be exercised by the heirs of the Participant. Sec. 9.4 shall remain unaffected. 9.4. Termination with Good Cause The conversion right of the Convertible Bonds pursuant to sec. 9.2 does not exist if and when the Participant terminated employment on the basis of a notice of immediate termination given by the Company and/or an Affiliated Company within the FMC-Group or, at the time of withdrawal, there existed good cause for the Company and/or an affiliated company within the FMC-Group to give notice of immediate termination. The right to exercise the Options pursuant to sec. 9.3 does not exist if and when, at the time of death of the Participant, their existed good cause for Company and/or an Affiliated Company within the FMC-Group to give notice of immediate termination. 9.5. Employment with the Fresenius Group The conversion rights of the Convertible Bonds shall not be affected by the change of a Participant from employment with the Company and/or an Affiliated Company within the FMC-Group to employment with Fresenius AG or with companies affiliated with Fresenius AG other than via the Company. 9.6. Effect of Change of Subsidiary Status For purposes of this Plan and any Convertible Bond hereunder, if an entity ceases to be an Affiliated Company within the FMC-Group, a termination of employment under sec. 9.2 shall be deemed to have occurred with respect to each employee of such subsidiary who does not continue as an employee of the Company or another Affiliated Company within the FMC-Group. 15 15 9.7. Individual Cases In individual cases, the Managing Board may with respect to Convertible Bonds for Participants (excluding the members of the Managing Board), and the Supervisory Board may with respect to Convertible Bonds for the members of the Managing Board, waive or modify the restrictions set forth in sec. 9.1 through 9.4 10. ADJUSTMENT OF CONVERSION PRICE 10.1. If and to the extent that, during the term of any Convertible Bond, the Company, grants a direct or indirect subscription right to its shareholder and increases its capital stock through issuing new shares, the Conversion Price shall be reduced by an amount which is calculated on the basis of the average price of the shareholders' subscription right on all days on which the subscription right is traded on the Frankfurt Stock Exchange - rounded up to full Euro 0.05. No such reduction shall apply if the Participants are granted a subscription right which corresponds to the subscription right of the shareholders. In addition, the Managing Board may, with the consent of the Supervisory Board, provide for an adjustment of the Conversion Price with respect to the Convertible Bonds of the Participants (excluding the members of the Managing Board) in case of a share split and/or a capital reduction. In addition, the Supervisory Board may provide for an adjustment of the Conversion Price with respect to the Convertible Bonds of the members of the Managing Board in case of a share split and/or a capital reduction. 10.2. In the event of a capital increase out of Company funds, the conditional capital shall be increased in the same proportion as the capital stock pursuant to Sec. 218 AktG, in lieu of reducing the Conversion Price. The right of the Participants to subscribe to Shares upon conversion of the Convertible Bonds shall be increased in the same proportion. Fractions of Shares arising from a capital increase out of Company funds shall not be made available upon conversion of the Convertible Bonds and no payment shall be due with respect to such fractional Shares if permissible by law. 16 16 10.3. Sec. 10.1 shall not apply if and when subscription rights are granted to employees of the Company or of Affiliated Companies within the framework of a stock option or similar plan and/or with a comparable objective. 11. REPAYMENT OF THE CONVERTIBLE BOND 11.1 At the end of the term of any Convertible Bond (sec. 3.2) that has not been converted, the Company shall pay the par value of the Convertible Bond to the Participant. If an Employee Loan has been granted to the Participant the par value of the Convertible Bond shall be set off against the Employee Loan. 11.2. If and when the conversion right of Convertible Bonds expires the Company shall pay the par value of the Convertible Bond to the Participant. If an Employee Loan has been granted to the Participant the par value of the Convertible Bond shall be set off with the Employee Loan. 12. ALTERNATIVE SATISFACTION OF THE CONVERSION RIGHT 12.1 Instead of issuing new Shares to the Participant upon the conversion of a Convertible Bond, with the consent of the Supervisory Board the Managing Board may resolve, and the Supervisory Board may resolve insofar as members of the Managing Board are concerned, that the Company may issue Shares which the Company acquires or holds as treasury shares. 12.2 Acquisition of treasury Shares for the purpose of alternative satisfaction of the conversion right shall take place according to German statutory regulations. 17 17 13. TAX AND COSTS 13.1. General Any and all taxes accruing in connection with the Convertible Bonds and/or the Employee Loan and/or the conversion of the Convertible Bonds shall be borne by the Participants themselves. The duty of the Company and/or of the affiliates of the Company to pay wage tax and other taxes and/or duties for the Participants shall remain unaffected. The Company or the Affiliated Companies are entitled to deduct the necessary amounts for this purpose from the salaries of the Participants, until the amounts of taxes and contributions are fully repaid. The Company may, as the case may be, make the conversion of the Convertible Bonds by the Participants dependent on proof of payment (of taxes, contributions) or on the provision of adequate security therefor by those entitled. Attention is drawn to the provisions of sec. 38 para. 4 German Income Tax Act (EStG) in this regard. 13.2 US-Citizens or US-Residents 13.2.1 Upon the grant of a Convertible Bond to a Participant (excluding members of the Management Board) who is a United States citizen or resident, the Management Board may require, as a condition to receiving the Convertible Bonds, the Participant to file, at that time or at some future time, with the Company and/or an Affiliated Company within the FMC-Group a protective Form 1001 or its equivalent under German law so as to elect United States - German Tax Treaty benefits in the event German taxing authorities take the position that interest payable on the Convertible Bonds would be subject to German withholding taxes. 13.2.2 Upon the conversion of any Convertible Bond by a Participant (excluding members of the Managing Board) who is a United States citizen or resident, the Managing Board may require, as a condition to receiving the Shares, the Participant to pay or provide for payment the amount of any U.S federal, state or local income and payroll taxes that the Company or its Subsidiaries may be required to withhold with respect to such conversion on account of the Participant being (or having been) subject to U.S federal, state or local income or payroll taxes. 18 18 13.2.3. If the Managing Board, in its sole discretion, determines that the limitations on deductions under Section 162(m) of the U.S. Internal Revenue Code may apply to a Convertible Bond granted to a Participant (excluding the members of the Managing Board), the Managing Board may, but shall not be required to, seek to have the grant made by the unanimous consent of the Supervisory Board. 13.3. Costs The Participants shall themselves bear and/or reimburse the Company for any and all costs accruing in connection with the conversion of the Convertible Bonds. 14. ADMINISTRATION, TERMINATION AND ADJUSTMENT OF PLAN 14.1. Except as otherwise provided in the Plan, the Plan shall be administered, and all Convertible Bonds granted to Participants (excluding the members of the Managing Board) shall be authorized, by the Managing Board. Except as otherwise provided in the Plan, the Plan shall be administered, and all Convertible Bonds granted to the members of the Managing Board) shall be authorized, by the Supervisory Board. Action of the Managing Board or the Supervisory Board with respect to the administration of this Plan shall be taken pursuant to the German Law, the Articles of the Company and the respective rules of procedure. 14.2. The Managing Board, with the consent of the Supervisory Board, shall be entitled to terminate the Plan with respect to all Participants at any time. Convertible Bonds and Employee Loans already granted to Participants shall remain unaffected. 14.3. This Plan, the granting, issuance and conversion of Convertible Bonds under this Plan and the issuance and delivery of Shares hereunder are subject to compliance with German law and all applicable foreign laws, rules and regulations and to such approvals by any listing, regulatory or governmental authority as may, in the opinion of counsel for the Company, be necessary or advisable in connection therewith. Any securities delivered under this Plan shall be subject to such re- 19 19 strictions, and the person acquiring such securities shall, if requested by the Company, provide such assurances and representations as the Company may deem necessary or desirable to assure compliance with all applicable legal requirements. 14.3. The Managing Board, with the consent of the Supervisory Board, and/or the Supervisory Board where rights of the members of the Managing Board are concerned, shall be entitled to adjust the Plan at any time. This applies also to the handling of Convertible Bonds which have already been granted provided that this does not influence the commercial value of the Convertible Bonds and/or a respective commercial compensation will be granted. 15. OTHER PROVISIONS 15.1. Any and all provisions of this Plan are subject to the condition that the underlying resolution of the shareholders' meeting is effective and that the statutory outline conditions are fulfilled. 15.2. Nothing contained in this Plan (or in any other documents related to this Plan or to any Convertible Bond) shall confer upon any Participant or possible Participant any right to continue in the employ or other service of the Company or its Affiliated Companies within the FMC-Group or constitute any contract or agreement of employment or other service, nor shall it interfere in any way with the right of the Company or its Affiliated Companies within the FMC-Group to change such person's compensation or other benefits or to terminate the employment of such person, with or without cause; provided, however, that nothing contained in this Plan or any document related thereto shall adversely affect any independent contractual right of such person. 15.3. If any provision of this Plan is or will be invalid for reasons other than those referred to in sec. 16.1, this shall not affect the validity of the remaining provisions of this Plan. The same applies if it turns out that the Plan contains a gap. In such case, this paragraph shall apply mutatis mutandis with the provision that, in lieu of 20 20 the invalid or unenforceable provision and/or to fill the gap, such provision shall apply as most nearly achieves the intended purpose of this Plan. 15.3. This Plan shall be governed exclusively by German law. The German version of the Plan shall control in all cases. 15.4. Captions and headings are given to the sections and subsections of this Plan solely as a convenience to facilitate reference. Such headings shall not be deemed in any way material or relevant to the construction or interpretation of the Plan or any provision thereof. 15.5. Nothing in this Plan shall limit or be deemed to limit the authority of the Managing Board or the Supervisory Board to grant Convertible Bonds or stock options or authorize any other compensation, with or without reference to Shares, under any other Plan, plan or authority. 16. DEFINITIONS 16.1 "Acceptance Period" shall have the meaning as defined in sec. 5.3. 16.2. "Affiliated Company" shall mean any German or foreign subsidiary (verbundene Unternehmen) of the Company in the meaning of sec. 15 et seq. AktG [German Stock Corporation Act]. 16.3. "Allotments" shall have the meaning as defined in sec. 5.3. 16.4 "Beneficiary" shall mean the person, persons, trust or trusts designated by a Participant or, in the absence of a designation, entitled by will or the laws of descent and distribution, to receive the benefits of the Convertible Bonds and under this Plan in the event of a Participant's death, and shall mean the Participant's executor or administrator if no other Beneficiary is designated and able to act under the circumstances. 21 21 16.5. "Company" shall mean Fresenius Medical Care Aktiengesellschaft, Hof/Saale, Germany. 16.6. "Conversion Day" shall have the meaning as defined in sec. 8.7. 16.7. "Conversion Office" shall mean the bank which is entrusted by the Managing Board with the technical handing of the conversion of the Convertible Bonds. 16.8. "Conversion Period" shall have the meaning as defined in sec. 8.2. 16.9. "Conversion Price" shall have the meaning as defined in sec. 8.5. 16.10. "Convertible Bond" shall mean convertible bonds (Wandelschuldverschreibungen) within the meaning of Sec. 192 para. 2 and Sec. 221 para. 1 AktG [German Stock Corporation Act] as defined in sec. 1.1. 1611. "Declaration of Conversion" shall have the meaning as defined in sec. 8.6.2. 16.12. "Employee Loan" shall mean the employee loan as defined in sec. 6. 16.13. "FMC-Group" shall mean the Company and its Affiliated Companies with the exception of Fresenius Aktiengesellschaft and the companies affiliated with Fresenius Aktiengesellschaft in a manner other than via the Company 16.14. "Grant Date" shall mean the date of granting the Convertible Bonds to the Participants as defined in sec. 5.1. 16.15. "Initial Value" shall have the meaning as defined in sec. 8.4. 16.16 "Managing Board" shall mean the managing board (Vorstand) of the Company. 16.17. "Participants" shall mean the persons to which Convertible Bonds may be granted as defined in sec. 4. 16.18. "Personal Representative" shall mean the person or persons who, upon the disability or incompetence of a Participant, shall have acquired on behalf of the Participant, by legal proceeding or otherwise, the power to exercise the rights or re- 22 22 ceive benefits under this Plan and who shall have become the legal representative of the Participant. 16.19. "Plan" shall mean this Fresenius Medical Care AG 2001 International Stock Incentive Plan as amended from time to time. 16.20. "Share" shall mean non-voting bearer preference shares in the Company. 16.21. "Stock Exchange Price" shall mean the closing price of the Shares in electronic "Xetra" trading of the Deutsche Borse AG in Frankfurt am Main. Should a closing price not be established in "Xetra" electronic trading, then with the consent of the Supervisory Board the Managing Board shall be entitled to agree on an appropriate way to substitute a closing price established by way of "Xetra" electronic trading. 16.21. "Success Target" shall have the meaning as defined in sec. 8.4. 16.22. "Supervisory Board" shall mean the supervisory board (Aufsichtsrat) of the Company. 16.23. "Trading Day" shall mean any day on which the Shares are traded in electronic "Xetra" trading of the Deutsche Borse AG in Frankfurt am Main 16.24. "QDRO" shall mean a qualified domestic relations order as defined in Section 414(p) of the US-Internal Revenue Code of 1986, as amended from time to time, or Title I, Section 206(d)(3) of US-Employee Retirement Income Security Act, as amended from time to time, (to the same extent as if this Plan were subject thereto), or the applicable rules thereunder. 16.25. "Working Days" shall mean any day excepts Saturday and Sundays which are not public holidays in Frankfurt am Main. EX-10.38 24 y51284ex10-38.txt REGISTRATION RIGHTS AGREEMENT 1 EXHIBIT 10.38 A/B EXCHANGE REGISTRATION RIGHTS AGREEMENT DATED AS OF JUNE 6, 2001 BY AND AMONG FRESENIUS MEDICAL CARE CAPITAL TRUST IV FRESENIUS MEDICAL CARE AG FMC TRUST FINANCE S.A.R.L. LUXEMBOURG-III FRESENIUS MEDICAL CARE HOLDINGS, INC. FRESENIUS MEDICAL CARE DEUTSCHLAND GMBH AND BANC OF AMERICA SECURITIES LLC DRESDNER KLEINWORT WASSERSTEIN - GRANTCHESTER, INC. DEUTSCHE BANK ALEX BROWN INC. MORGAN STANLEY & CO. INCORPORATED 2 This Registration Rights Agreement (this "Agreement") is made and entered into as of June 6, 2001 by and among Fresenius Medical Care Capital Trust IV, a statutory business trust created under the laws of the State of Delaware (the "Trust"), Fresenius Medical Care AG, a German corporation (the "Guarantor"), FMC Trust Finance S.a.r.l. Luxembourg-III, a private limited company organized under the laws of Luxembourg, Fresenius Medical Care Holdings, Inc., a corporation organized under the laws of the State of New York, Fresenius Medical Care Deutschland GmbH, a limited liability company formed under the laws of Germany (collectively, the "Issuers"), and Banc of America Securities LLC, Dresdner Kleinwort Wasserstein - Grantchester, Inc., Deutsche Bank Alex Brown Inc. and Morgan Stanley & Co. Incorporated (each an "Initial Purchaser" and collectively, the "Initial Purchasers"), each of whom has agreed, severally and not jointly, to purchase the Trust's 7 7/8% Trust Preferred Securities, liquidation amount $1,000 per Trust Preferred Security (the "Securities") pursuant to the Purchase Agreement (as defined below). This Agreement is made pursuant to the Purchase Agreement, dated May 28, 2001, as amended May 30, 2001 (the "Purchase Agreement"), by and among the Issuers and the Initial Purchasers. In order to induce the Initial Purchasers to purchase the Securities, the Issuers have agreed to provide the registration rights set forth in this Agreement. The execution and delivery of this Agreement is a condition to the obligations of the Initial Purchasers set forth in Section 2 of the Purchase Agreement. Capitalized terms used herein and not otherwise defined shall have the meanings assigned to them in the Amended and Restated Declaration of Trust, dated as of June 6, 2001 (the "Declaration"), among the Trust, the Guarantor and State Street Bank and Trust Company, as Trustee, relating to the Securities and the Exchange Securities. The parties hereby agree as follows: SECTION 1. DEFINITIONS As used in this Agreement, the following capitalized terms shall have the following meanings: Affiliate: As defined in Rule 144 of the Securities Act. Broker-Dealer: Any broker or dealer registered under the Exchange Act. Certificated Securities: Definitive Securities, as defined in the Declaration. Closing Date: The date hereof. Commission: The U.S. Securities and Exchange Commission. Consummate: An Exchange Offer shall be deemed "Consummated" for purposes of this Agreement upon the occurrence of (a) the filing and effectiveness under the Securities Act of the Exchange Offer Registration Statement relating to the Exchange Securities to be issued in the Exchange Offer, the Exchange Trust Guarantees, the Exchange Senior Subordinated Notes and the Exchange Note Guaranties (the Exchange Securities, the Exchange Trust Guarantees, the Exchange Senior Subordinated Notes and the Exchange Senior Subordinated Notes, collectively, 1 3 the "Exchange Instruments"), (b) the maintenance of such Exchange Offer Registration Statement continuously effective and the keeping of the Exchange Offer open for a period not less than the period required pursuant to Section 3(b) hereof and (c) the delivery by the Trust to the Registrar under the Declaration of Exchange Securities in the same aggregate liquidation amount as the aggregate liquidation amount of Securities tendered by Holders thereof pursuant to the Exchange Offer. Consummation Deadline: As defined in Section 3(b) hereof. Effectiveness Deadline: As defined in Sections 3(a) and 4(a) hereof. Exchange Act: The U.S. Securities Exchange Act of 1934, as amended. Exchange Offer: The exchange and issuance by the Trust of an aggregate liquidation amount of Exchange Securities (which shall be registered pursuant to the Exchange Offer Registration Statement) equal to the outstanding liquidation amount of Securities that are tendered by such Holders in connection with such exchange and issuance. Exchange Offer Registration Statement: The Registration Statement relating to the Exchange Offer, including the related Prospectus. Exempt Resales: The transactions in which the Initial Purchasers propose to sell the Securities to certain "qualified institutional buyers," as such term is defined in Rule 144A under the Securities Act, and pursuant to Regulation S under the Securities Act. Exchange Securities: The Trust's 7 7/8% Trust Preferred Securities (Liquidation Amount $1,000 per Trust Preferred Security) to be issued pursuant to the Declaration: (i) in the Exchange Offer or (ii) as contemplated by Section 4 hereof. Filing Deadline: As defined in Sections 3(a) and 4(a) hereof. Holders: As defined in Section 2 hereof. Prospectus: The prospectus included in a Registration Statement at the time such Registration Statement is declared effective, as amended or supplemented by any prospectus supplement and by all other amendments thereto, including post-effective amendments, and all material incorporated by reference into such Prospectus. Recommencement Date: As defined in Section 6(d) hereof. Registration Default: As defined in Section 5 hereof. Registration Statement: Any registration statement of the Issuers relating to (a) an offering of Exchange Securities pursuant to an Exchange Offer or (b) the registration for resale of Transfer Restricted Securities pursuant to the Shelf Registration Statement, in each case, (i) that is filed pursuant to the provisions of this Agreement and (ii) including the Prospectus included 2 4 therein, all amendments and supplements thereto (including post-effective amendments) and all exhibits and material incorporated by reference therein. Regulation S: Regulation S promulgated under the Securities Act. Rule 144: Rule 144 promulgated under the Securities Act. Securities Act: The U.S. Securities Act of 1933, as amended. Shelf Registration Statement: As defined in Section 4 hereof. Suspension Notice: As defined in Section 6(d) hereof. TIA: The Trust Declaration Act of 1939 (15 U.S.C. Section 77aaa-77bbbb) as in effect on the date of the Declaration. Transfer Restricted Securities: Each Security, until the earliest to occur of (a) the date on which such Security is exchanged in the Exchange Offer for an Exchange Security which is entitled to be resold to the public by the Holder thereof without complying with the prospectus delivery requirements of the Securities Act, (b) the date on which such Security has been disposed of in accordance with a Shelf Registration Statement (and the purchasers thereof have been issued Exchange Securities) or (c) the date on which such Security is distributed to the public pursuant to Rule 144 under the Securities Act (and purchasers thereof have been issued Exchange Securities) and each Exchange Security until the date on which such Exchange Security is disposed of by a Broker-Dealer pursuant to the "Plan of Distribution" contemplated by the Exchange Offer Registration Statement (including the delivery of the Prospectus contained therein). SECTION 2. HOLDERS A Person is deemed to be a holder of Transfer Restricted Securities (each, a "Holder") whenever such Person owns Transfer Restricted Securities. SECTION 3. REGISTERED EXCHANGE OFFER (a) Unless the Exchange Offer shall not be permitted by applicable federal law (after the procedures set forth in Section 6(a)(i) below have been complied with), the Issuers shall (i) cause the Exchange Offer Registration Statement to be filed with the Commission as soon as practicable after the Closing Date, but in no event later than 150 days after the Closing Date (such 150th day being the "Filing Deadline"), (ii) use their commercially reasonable best efforts to cause such Exchange Offer Registration Statement to become effective at the earliest possible time, but in no event later than 210 days after the Closing Date (such 210th day being the "Effectiveness Deadline"), (iii) in connection with the foregoing, (A) file all pre-effective amendments to such Exchange Offer Registration Statement as may be necessary in order to cause it to become effective, (B) file, if applicable, a post-effective amendment to such Exchange Offer Registration Statement pursuant to Rule 430A under the Securities Act and (C) cause all necessary filings, if any, in connection with the registration and qualification of the Exchange Securities to be made 3 5 under the Blue Sky laws of such jurisdictions as are necessary to permit Consummation of the Exchange Offer, and (iv) upon the effectiveness of such Exchange Offer Registration Statement, commence and Consummate the Exchange Offer. The Exchange Offer shall be on the appropriate form permitting (i) registration of the Exchange Securities to be offered in exchange for the Securities that are Transfer Restricted Securities and (ii) resales of Exchange Securities by Broker-Dealers that tendered into the Exchange Offer Securities that such Broker-Dealer acquired for its own account as a result of market making activities or other trading activities (other than Securities acquired directly from the Trust or any of its Affiliates) as contemplated by Section 3(c) below. (b) The Trust and the Guarantor shall use their respective commercially reasonable best efforts to cause the Exchange Offer Registration Statement to be effective continuously, and shall keep the Exchange Offer open for a period of not less than the minimum period required under applicable federal and state securities laws to Consummate the Exchange Offer; provided, however, that in no event shall such period be less than 20 business days. The Trust and the Guarantor shall cause the Exchange Offer to comply with all applicable federal and state securities laws. No securities other than the Exchange Securities shall be included in the Exchange Offer Registration Statement. The Trust and the Guarantor shall use their respective commercially reasonable best efforts to cause the Exchange Offer to be Consummated on the earliest practicable date after the Exchange Offer Registration Statement has become effective, but in no event later than 45 business days thereafter (such 45th day being the "Consummation Deadline"). (c) The Trust shall include a "Plan of Distribution" section in the Prospectus contained in the Exchange Offer Registration Statement and indicate therein that any Broker-Dealer who holds Transfer Restricted Securities that were acquired for the account of such Broker-Dealer as a result of market-making activities or other trading activities (other than Securities acquired directly from the Trust or any Affiliate of the Trust), may exchange such Transfer Restricted Securities pursuant to the Exchange Offer. Such "Plan of Distribution" section shall also contain all other information with respect to such sales by such Broker-Dealers that the Commission may require in order to permit such sales pursuant thereto, but such "Plan of Distribution" shall not name any such Broker-Dealer or disclose the amount of Transfer Restricted Securities held by any such Broker-Dealer, except to the extent required by the Commission as a result of a change in policy, rules or regulations after the date of this Agreement. See the Shearman & Sterling no-action letter (available July 2, 1993). Because such Broker-Dealer may be deemed to be an "underwriter" within the meaning of the Securities Act and must, therefore, deliver a prospectus meeting the requirements of the Securities Act in connection with its initial sale of any Exchange Securities received by such Broker-Dealer in the Exchange Offer, the Trust and Guarantor shall permit the use of the Prospectus contained in the Exchange Offer Registration Statement by such Broker-Dealer to satisfy such prospectus delivery requirement. To the extent necessary to ensure that the prospectus contained in the Exchange Offer Registration Statement is available for sales of Exchange Securities by Broker-Dealers, the Trust and the Guarantor agree to use their respective commercially reasonable best efforts to keep the Exchange Offer Registration Statement continuously effective, supplemented, amended and current as required by and subject to the 4 6 provisions of Section 6(a) and (c) hereof and in conformity with the requirements of this Agreement, the Securities Act and the policies, rules and regulations of the Commission as announced from time to time, for a period of one year from the Consummation Deadline or such shorter period as will terminate when all Transfer Restricted Securities covered by such Registration Statement have been sold pursuant thereto. The Trust and the Guarantor shall provide sufficient copies of the latest version of such Prospectus to such Broker-Dealers, promptly upon request, and in no event later than one day after such request, at any time during such period. SECTION 4. SHELF REGISTRATION (a) Shelf Registration. If (i) the Exchange Offer is not permitted by applicable law (after the Trust and the Guarantor have complied with the procedures set forth in Section 6(a)(i) below) or (ii) if any Holder of Transfer Restricted Securities shall notify the Trust within 20 business days following the Consummation Deadline that (A) such Holder was prohibited by law or Commission policy from participating in the Exchange Offer or (B) such Holder may not resell the Exchange Securities acquired by it in the Exchange Offer to the public without delivering a prospectus and the Prospectus contained in the Exchange Offer Registration Statement is not appropriate or available for such resales by such Holder or (C) such Holder is a Broker-Dealer and holds Securities acquired directly from the Trust or any of its Affiliates, then the Trust and the Guarantor shall: (x) cause to be filed, on or prior to 30 days after the earlier of (i) the date on which the Trust determines that the Exchange Offer Registration Statement cannot be filed as a result of clause (a)(i) above and (ii) the date on which the Trust receives the notice specified in clause (a)(ii) above, (such earlier date, the "Filing Deadline"), a shelf registration statement pursuant to Rule 415 under the Securities Act (which may be an amendment to the Exchange Offer Registration Statement (the "Shelf Registration Statement")), relating to all Transfer Restricted Securities, and (y) shall use their respective commercially reasonable best efforts to cause such Shelf Registration Statement to become effective on or prior to 60 days after the Filing Deadline for the Shelf Registration Statement (such 60th day the "Effectiveness Deadline"). If, after the Trust has filed an Exchange Offer Registration Statement that satisfies the requirements of Section 3(a) above, the Trust is required to file and make effective a Shelf Registration Statement solely because the Exchange Offer is not permitted under applicable federal law (i.e., clause (a)(i) above), then the filing of the Exchange Offer Registration Statement shall be deemed to satisfy the requirements of clause (x) above; provided that, in such event, the Trust shall remain obligated to meet the Effectiveness Deadline set forth in clause (y). To the extent necessary to ensure that the Shelf Registration Statement is available for sales of Transfer Restricted Securities by the Holders thereof entitled to the benefit of this Section 4(a) and the other securities required to be registered therein pursuant to Section 6(b)(ii) hereof, the Trust and the Guarantor shall use their respective best efforts to keep any Shelf 5 7 Registration Statement required by this Section 4(a) continuously effective, supplemented, amended and current as required by and subject to the provisions of Sections 6(b) and (c) hereof and in conformity with the requirements of this Agreement, the Securities Act and the policies, rules and regulations of the Commission as announced from time to time, for a period of at least two years (as extended pursuant to Section 6(c)(i)) following the Closing Date, or such shorter period as will terminate when all Transfer Restricted Securities covered by such Shelf Registration Statement have been sold pursuant thereto. (b) Provision by Holders of Certain Information in Connection with the Shelf Registration Statement. No Holder of Transfer Restricted Securities may include any of its Transfer Restricted Securities in any Shelf Registration Statement pursuant to this Agreement unless and until such Holder furnishes to the Trust in writing, within 20 days after receipt of a request therefor, the information specified in Item 507 or 508 of Regulation S-K, as applicable, of the Securities Act for use in connection with any Shelf Registration Statement or Prospectus or preliminary Prospectus included therein. No Holder of Transfer Restricted Securities shall be entitled to liquidated damages pursuant to Section 5 hereof unless and until such Holder shall have provided all such information. Each selling Holder agrees to promptly furnish additional information required to be disclosed in order to make the information previously furnished to the Issuers by such Holder not materially misleading. SECTION 5. LIQUIDATED DAMAGES If (i) any Registration Statement required by this Agreement is not filed with the Commission on or prior to the applicable Filing Deadline, (ii) any such Registration Statement has not been declared effective by the Commission on or prior to the applicable Effectiveness Deadline, (iii) the Exchange Offer has not been Consummated on or prior to the Consummation Deadline or (iv) any Registration Statement required by this Agreement is filed and declared effective but shall thereafter cease to be effective or fail to be usable for its intended purpose without being succeeded immediately by a post-effective amendment to such Registration Statement that cures such failure and that is itself declared effective immediately (each such event referred to in clauses (i) through (iv), a "Registration Default"), then the Issuers hereby jointly and severally agree to pay to each Holder of Transfer Restricted Securities affected thereby liquidated damages in an amount equal to $.05 per week per $1,000 in liquidation amount of Transfer Restricted Securities held by such Holder for each week or portion thereof that the Registration Default continues for the first 90-day period immediately following the occurrence of such Registration Default. The amount of the liquidated damages shall increase by an additional $.05 per week per $1,000 in liquidation amount of Transfer Restricted Securities with respect to each subsequent 90-day period until all Registration Defaults have been cured, up to a maximum amount of liquidated damages of $.25 per week per $1,000 in liquidation amount of Transfer Restricted Securities; provided that the Issuers shall in no event be required to pay liquidated damages for more than one Registration Default at any given time. Notwithstanding anything to the contrary set forth herein, (1) upon filing of the Exchange Offer Registration Statement (and/or, if applicable, the Shelf Registration Statement), in the case of (i) above, (2) upon the effectiveness of the Exchange Offer Registration Statement (and/or, if applicable, the Shelf Registration Statement), in the case of (ii) above, (3) upon Consummation of the Exchange Offer, in the case of (iii) above, or (4) upon the filing of a post-effective amendment to the Registration 6 8 Statement or an additional Registration Statement that causes the Exchange Offer Registration Statement (and/or, if applicable, the Shelf Registration Statement) to again be declared effective or made usable in the case of (iv) above, the liquidated damages payable with respect to the Transfer Restricted Securities as a result of such clause (i), (ii), (iii) or (iv), as applicable, shall cease. All accrued liquidated damages shall be paid to the Holders entitled thereto, in the manner provided for the payment of distributions in the Declaration, on each Distribution Date, as more fully set forth in the Declaration and the Securities. Notwithstanding the fact that any Securities for which liquidated damages are due cease to be Transfer Restricted Securities, all obligations of the Issuers to pay liquidated damages with respect to Securities shall survive until such time as such obligations with respect to such Securities shall have been satisfied in full. SECTION 6. REGISTRATION PROCEDURES (a) Exchange Offer Registration Statement. In connection with the Exchange Offer, the Trust and the Guarantor shall (x) comply with all applicable provisions of Section 6(c) below, (y) use their respective commercially reasonable best efforts to effect such exchange and to permit the resale of Exchange Securities by Broker-Dealers that tendered in the Exchange Offer Securities that such Broker-Dealer acquired for its own account as a result of its market making activities or other trading activities (other than Securities acquired directly from the Trust or any of its Affiliates) being sold in accordance with the intended method or methods of distribution thereof, and (z) comply with all of the following provisions: (i) If, following the date hereof there has been announced a change in Commission policy with respect to exchange offers such as the Exchange Offer that, in the reasonable opinion of counsel to the Trust raises a substantial question as to whether the Exchange Offer is permitted by applicable federal law, the Issuers hereby agree to seek a no-action letter or other favorable decision from the Commission allowing the Issuers to Consummate an Exchange Offer for such Transfer Restricted Securities. The Issuers hereby agree to pursue the issuance of such a decision to the Commission staff level. In connection with the foregoing, the Trust and the Guarantor hereby agree to take all such other actions as may be requested by the Commission or otherwise required in connection with the issuance of such decision, including without limitation (A) participating in telephonic conferences with the Commission, (B) delivering to the Commission staff an analysis prepared by counsel to the Trust setting forth the legal bases, if any, upon which such counsel has concluded that such an Exchange Offer should be permitted and (C) diligently pursuing a resolution (which need not be favorable) by the Commission staff. (ii) As a condition to its participation in the Exchange Offer, each Holder of Transfer Restricted Securities (including, without limitation, any Holder who is a Broker Dealer) shall furnish, upon the request of the Trust, prior to the Consummation of the Exchange Offer, a written representation to the Issuers (which may be contained in the letter of transmittal contemplated by the Exchange Offer Registration Statement) to the effect that (A) it is not an Affiliate of the Trust, (B) it is not engaged in, and does not intend to engage in, and has no arrangement or understanding with any person to 7 9 participate in, a distribution of the Exchange Securities to be issued in the Exchange Offer and (C) it is acquiring the Exchange Securities in its ordinary course of business. As a condition to its participation in the Exchange Offer, each Holder using the Exchange Offer to participate in a distribution of the Exchange Securities shall acknowledge and agree that, if the resales are of Exchange Securities obtained by such Holder in exchange for Securities acquired directly from the Trust or an Affiliate thereof, it (1) could not, under Commission policy as in effect on the date of this Agreement, rely on the position of the Commission enunciated in Morgan Stanley and Co., Inc. (available June 5, 1991) and Exxon Capital Holdings Corporation (available May 13, 1988), as interpreted in the Commission's letter to Shearman & Sterling dated July 2, 1993, and similar no-action letters (including, if applicable, any no-action letter obtained pursuant to clause (i) above), and (2) must comply with the registration and prospectus delivery requirements of the Securities Act in connection with a secondary resale transaction and that such a secondary resale transaction must be covered by an effective registration statement containing the selling security holder information required by Item 507 or 508, as applicable, of Regulation S-K. (iii) Prior to effectiveness of the Exchange Offer Registration Statement, the Issuers shall provide a supplemental letter to the Commission (A) stating that the Issuers are registering the Exchange Offer in reliance on the position of the Commission enunciated in Exxon Capital Holdings Corporation (available May 13, 1988), Morgan Stanley and Co., Inc. (available June 5, 1991) as interpreted in the Commission's letter to Shearman & Sterling dated July 2, 1993, and, if applicable, any no-action letter obtained pursuant to clause (i) above, (B) including a representation that none of the Issuers has entered into any arrangement or understanding with any Person to distribute the Exchange Securities to be received in the Exchange Offer and that, to the best of the Issuer's information and belief, each Holder participating in the Exchange Offer is acquiring the Exchange Securities in its ordinary course of business and has no arrangement or understanding with any Person to participate in the distribution of the Exchange Securities received in the Exchange Offer and (C) any other undertaking or representation required by the Commission as set forth in any no-action letter obtained pursuant to clause (i) above, if applicable. (b) Shelf Registration Statement. In connection with the Shelf Registration Statement, the Issuers shall: (i) comply with all the provisions of Section 6(c) below and use their respective commercially reasonable best efforts to effect such registration to permit the sale of the Transfer Restricted Securities being sold in accordance with the intended method or methods of distribution thereof (as indicated in the information furnished to the Issuers pursuant to Section 4(b) hereof), and pursuant thereto the Issuers shall prepare and file with the Commission a Registration Statement relating to the registration on any appropriate form under the Securities Act, which form shall be available for the sale of the Transfer Restricted Securities in accordance with the intended method or methods of distribution thereof within the time periods and otherwise in accordance with the provisions hereof. 8 10 (ii) issue, upon the request of any Holder or purchaser of Securities covered by any Shelf Registration Statement contemplated by this Agreement, Exchange Securities having an aggregate liquidation amount equal to the aggregate liquidation amount of Securities sold pursuant to the Shelf Registration Statement and surrendered to the Trust for cancellation; the Trust shall register Exchange Securities on the Shelf Registration Statement for this purpose and issue the Exchange Securities to the purchaser(s) of securities subject to the Shelf Registration Statement in the names as such purchaser(s) shall designate. (iii) make available, at reasonable times, for inspection by each Holder eligible to include Securities in the Shelf Registration Statement and any attorney or accountant retained by such Holders, all financial and other records, pertinent corporate documents of the Issuers and cause the respective Issuers' officers, directors and employees to supply all information reasonably requested by any such Holder, attorney or accountant in connection with such Registration Statement or any post-effective amendment thereto subsequent to the filing thereof and prior to its effectiveness; (iv) if requested by any Holders eligible to include Securities in the Shelf Registration Statement in connection with a sale or any Affiliated Market Maker, promptly include in any Registration Statement or Prospectus, pursuant to a supplement or post-effective amendment if necessary, such information as such Holders may reasonably request to have included therein, including, without limitation, information relating to the "Plan of Distribution" of the Transfer Restricted Securities; and make all required filings of such Prospectus supplement or post-effective amendment as soon as practicable after the Issuers are notified of the matters to be included in such Prospectus supplement or post-effective amendment. (c) General Provisions. In connection with any Registration Statement and any related Prospectus required by this Agreement, the Issuers shall: (i) use their respective commercially reasonable best efforts to keep such Registration Statement continuously effective and provide all requisite financial statements for the period specified in Sections 3 or 4 of this Agreement, as applicable. Upon the occurrence of any event that would cause any such Registration Statement or the Prospectus contained therein (A) to contain an untrue statement of material fact or omit to state any material fact necessary to make the statements therein not misleading or (B) not to be effective and usable for the exchange or resale of Transfer Restricted Securities during the period required by this Agreement, the Issuers shall file promptly an appropriate amendment to such Registration Statement curing such defect, and, if Commission review is required, use their respective best efforts to cause such amendment to be declared effective as soon as practicable; (ii) prepare and file with the Commission such amendments and post-effective amendments to the applicable Registration Statement as may be necessary to keep such Registration Statement effective for the applicable period set forth in Sections 3 or 4 hereof, as the case may be; cause the Prospectus to be supplemented by any required 9 11 Prospectus supplement, and as so supplemented to be filed pursuant to Rule 424 under the Securities Act, and to comply fully with Rules 424, 430A and 462, as applicable, under the Securities Act in a timely manner; and comply with the provisions of the Securities Act with respect to the disposition of all securities, instruments or exchange instruments, as the case may be, covered by such Registration Statement during the applicable period in accordance with the intended method or methods of distribution by the sellers thereof set forth in such Registration Statement or supplement to the Prospectus; (iii) advise each Holder promptly and, if requested by such Holder, confirm such advice in writing, (A) when the Prospectus or any Prospectus supplement or post-effective amendment has been filed, and, with respect to any applicable Registration Statement or any post-effective amendment thereto, when the same has become effective, (which advice shall be furnished by the issuance of a press release or similar public announcement and through the Depository Trust Corporation or any successor clearing agent), (B) of any request by the Commission for amendments to the Registration Statement or amendments or supplements to the Prospectus or for additional information relating thereto, (C) of the issuance by the Commission of any stop order suspending the effectiveness of the Registration Statement under the Securities Act or of the suspension by any state securities commission of the qualification of the Exchange Securities or the Transfer Restricted Securities for offering or sale in any jurisdiction, or the initiation of any proceeding for any of the preceding purposes, (D) of the existence of any fact or the happening of any event that makes any statement of a material fact made in the Registration Statement, the Prospectus, any amendment or supplement thereto or any document incorporated by reference therein untrue, or that requires the making of any additions to or changes in the Registration Statement in order to make the statements therein not misleading, or that requires the making of any additions to or changes in the Prospectus in order to make the statements therein, in the light of the circumstances under which they were made, not misleading. If at any time the Commission shall issue any stop order suspending the effectiveness of the Registration Statement, or any state securities commission or other regulatory authority shall issue an order suspending the qualification or exemption from qualification of the Exchange Securities or the Transfer Restricted Securities under state securities or Blue Sky laws, the Issuers shall use their respective best efforts to obtain the withdrawal or lifting of such order at the earliest possible time; (iv) subject to Section 6(c)(i), if any fact or event contemplated by Section 6(c)(iii)(D) above shall exist or have occurred, prepare a supplement or post-effective amendment to the Registration Statement or related Prospectus or any document incorporated therein by reference or file any other required document so that, as thereafter delivered to the purchasers of Exchange Securities or Transfer Restricted Securities, the Prospectus will not contain an untrue statement of a material fact or omit to state any material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading; (v) furnish to each Holder in connection with such exchange or sale, if any, before filing with the Commission, copies of any Registration Statement or any Prospectus included therein or any amendments or supplements to any such Registration Statement or 10 12 Prospectus (including all documents incorporated by reference after the initial filing of such Registration Statement), which documents will be subject to the review and comment of such Holders in connection with such sale, if any, for a period of at least five Business Days, and the Trust will not file any such Registration Statement or Prospectus or any amendment or supplement to any such Registration Statement or Prospectus (including all such documents incorporated by reference) to which such Holders shall reasonably object within five Business Days after the receipt thereof. A Holder shall be deemed to have reasonably objected to such filing if such Registration Statement, amendment, Prospectus or supplement, as applicable, as proposed to be filed, contains an untrue statement of a material fact or omit to state any material fact necessary to make the statements therein not misleading or fails to comply with the applicable requirements of the Securities Act; (vi) promptly prior to the filing of any document that is to be incorporated by reference into a Registration Statement or Prospectus, provide copies of such document to each Holder in connection with such exchange or sale, if any, make the respective Issuers' representatives available for discussion of such document and other customary due diligence matters, and include such information in such document prior to the filing thereof as such Holders may reasonably request; (vii) furnish to each Holder in connection with such exchange or sale, without charge, at least one copy of the Registration Statement, as first filed with the Commission, and of each amendment thereto, including all documents incorporated by reference therein and all exhibits (including exhibits incorporated therein by reference); (viii) deliver to each Holder without charge, as many copies of the Prospectus (including each preliminary prospectus) and any amendment or supplement thereto as such Persons reasonably may request; the Issuers hereby consent to the use (in accordance with law) of the Prospectus and any amendment or supplement thereto by each selling Holder in connection with the offering and the sale of the Exchange Securities or the Transfer Restricted Securities covered by the Prospectus or any amendment or supplement thereto; (ix) upon the request of any Holder, enter into such agreements (including underwriting agreements) and make such representations and warranties and take all such other actions in connection therewith in order to expedite or facilitate the disposition of the Transfer Restricted Securities pursuant to any applicable Registration Statement contemplated by this Agreement as may be reasonably requested by any Holder in connection with any sale or resale pursuant to any applicable Registration Statement. In such connection, the Issuers shall: (A) upon request of any Holder, furnish (or in the case of paragraphs (2) and (3), use their commercially reasonable best efforts to cause to be furnished) to each Holder, upon Consummation of the Exchange Offer or upon the effectiveness of the Shelf Registration Statement, as the case may be: (1) a certificate, dated such date, signed on behalf of the Issuers by (x) the President or any Vice President, or in the case of the Guarantor and 11 13 DGmbH (as defined in the Purchase Agreement) members of the board (Vorstand or Geschaftsfuhrung), as the case may be, and (y) a principal financial or accounting officer of such Issuer, confirming, as of the date thereof, the matters set forth in Sections 6(y)(iv), 9(a) and 9(b) of the Purchase Agreement and such other similar matters as such Holders may reasonably request; (2) an opinion, dated the date of Consummation of the Exchange Offer or the date of effectiveness of the Shelf Registration Statement, as the case may be, of counsel for the Issuers covering matters similar to those set forth in paragraph (f) of Section 9 of the Purchase Agreement and as to the effectiveness of the Registration Statement, the absence of stop orders with respect thereto and compliance of the Registration Statement as to form with the requirements of the Securities Act and the TIA and in any event including a statement substantially to the effect that such counsel has participated in conferences with officers and other representatives of the Issuers, representatives of the independent public accountants for the Guarantor regarding the Registration Statement and the Prospectus contained therein and have considered the matters required to be stated therein and the statements contained therein, although such counsel has not independently verified the accuracy, completeness or fairness of such statements; and that such counsel advises that, on the basis of the foregoing (relying as to materiality to the extent such counsel deems appropriate upon the statements of officers and other representatives of the Trust and the Guarantor) and without independent check or verification), no facts came to such counsel's attention that caused such counsel to believe that the applicable Registration Statement, at the time such Registration Statement or any post-effective amendment thereto became effective and, in the case of the Exchange Offer Registration Statement, as of the date of Consummation of the Exchange Offer, 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 therein not misleading, or that the Prospectus contained in such Registration Statement as of its date and, in the case of the opinion dated the date of Consummation of the Exchange Offer, as of the date of Consummation, contained an untrue statement of a material fact or omitted to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading. Without limiting the foregoing, such counsel may state further that such counsel assumes no responsibility for, and has not independently verified, the accuracy, completeness or fairness of the financial statements, notes and schedules and other financial data included in any Registration Statement contemplated by this Agreement or the related Prospectus; and (3) a customary comfort letter, dated the date of Consummation of the Exchange Offer, or as of the date of effectiveness of the Shelf 12 14 Registration Statement, as the case may be, from the Guarantor's independent accountants, in the customary form and covering matters of the type customarily covered in comfort letters to underwriters in connection with underwritten offerings, and affirming the matters set forth in the comfort letters delivered pursuant to Section 9(e) of the Purchase Agreement. (B) deliver such other documents and certificates as may be reasonably requested by the selling Holders to such Persons to evidence compliance with the matters covered in clause (A) above and with any customary conditions contained in the any agreement entered into by the Issuers pursuant to this clause (ix); (x) prior to any public offering of Exchange Securities or Transfer Restricted Securities, cooperate with the selling Holders and their counsel in connection with the registration and qualification of the Exchange Securities or Transfer Restricted Securities under the state securities or Blue Sky laws of such jurisdictions within the United States as the selling Holders may request and do any and all other acts or things necessary or advisable to enable the disposition in such jurisdictions of the Exchange Securities or Transfer Restricted Securities covered by the applicable Registration Statement; provided, however, that none of the Issuers shall be required to register or qualify as a foreign corporation where it is not now so qualified or to take any action that would subject it to the service of process in suits or to taxation, other than as to matters and transactions relating to the Registration Statement, in any jurisdiction where it is not now so subject; (xi) in connection with any sale of Transfer Restricted Securities that will result in such securities no longer being Transfer Restricted Securities, cooperate with the Holders to facilitate the timely preparation and delivery of global certificates representing Transfer Restricted Securities to be sold and not bearing any restrictive legends; and to register such Transfer Restricted Securities in such denominations and such names as the selling Holders may request at least two Business Days prior to such sale of Transfer Restricted Securities; (xii) use their respective commercially reasonable best efforts to cause the disposition of the Transfer Restricted Securities 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 seller or sellers thereof to consummate the disposition of such Transfer Restricted Securities, subject to the proviso contained in clause (x) above; (xiii) provide a CUSIP number for all Exchange Securities or Transfer Restricted Securities, as the case may be, not later than the effective date of a Registration Statement covering such Transfer Restricted Securities and provide the Trustee under the Declaration with printed certificates for the Transfer Restricted Securities which are in a form eligible for deposit with the Depository Trust Company; (xiv) otherwise use their respective commercially reasonable best efforts to comply with all applicable rules and regulations of the Commission, and make generally 13 15 available to its security holders with regard to any applicable Registration Statement, as soon as practicable, a consolidated earnings statement meeting the requirements of Rule 158 to the Securities Act (which need not be audited) covering a twelve-month period beginning after the effective date of the Registration Statement (as such term is defined in paragraph (c) of Rule 158 under the Securities Act); (xv) cause the Declaration and the Indenture to be qualified under the TIA not later than the effective date of the first Registration Statement required by this Agreement and, in connection therewith, cooperate with the Trustee and the Holders to effect such changes to the Declaration and the Indenture as may be required for such Declaration or Indenture to be so qualified in accordance with the terms of the TIA; and execute and use their best efforts to cause the Trustee to execute, all documents that may be required to effect such changes and other forms and documents required to be filed with the Commission to enable such Declaration or Indenture to be so qualified in a timely manner; (xvi) provide promptly to each Holder, upon request, each document filed with the Commission pursuant to the requirements of Section 13 or Section 15(d) of the Exchange Act; and (xvii) to use their commercially reasonable best efforts to cause the Exchange Securities to be listed on the Luxembourg Stock Exchange. (d) Restrictions on Holders. Each Holder agrees by acquisition of a Transfer Restricted Security that, upon receipt of the notice referred to in Section 6(c)(iii)(C) or any notice from the Trust of the existence of any fact of the kind described in Section 6(c)(iii)(D) hereof (in each case, a "Suspension Notice"), such Holder will forthwith discontinue disposition of Transfer Restricted Securities pursuant to the applicable Registration Statement until (i) such Holder has received copies of the supplemented or amended Prospectus contemplated by Section 6(c)(iv) hereof, or (ii) such Holder is advised in writing by the Trust that the use of the Prospectus may be resumed, and has received copies of any additional or supplemental filings that are incorporated by reference in the Prospectus (in each case, the "Recommencement Date"). Each Holder receiving a Suspension Notice hereby agrees that it will either (i) destroy any Prospectuses, other than permanent file copies, then in such Holder's possession which have been replaced by the Trust with more recently dated Prospectuses or (ii) deliver to the Trust (at the Trust's expense) all copies, other than permanent file copies, then in such Holder's possession of the Prospectus covering such Transfer Restricted Securities that was current at the time of receipt of the Suspension Notice. The time period regarding the effectiveness of such Registration Statement set forth in Sections 3 or 4 hereof, as applicable, shall be extended by a number of days equal to the number of days in the period from and including the date of delivery of the Suspension Notice to the date of delivery of the Recommencement Date. SECTION 7. REGISTRATION EXPENSES (a) All expenses incident to the Issuers' performance of or compliance with this Agreement will be borne by the Guarantor, regardless of whether a Registration Statement becomes effective, including without limitation: (i) all registration and filing fees and expenses; 14 16 (ii) all fees and expenses of compliance with federal securities and state Blue Sky or securities laws; (iii) all expenses of printing (including printing certificates for the Exchange Securities to be issued in the Exchange Offer and printing of Prospectuses, messenger and delivery services and telephone; (iv) all fees and disbursements of counsel for the Issuers; (v) all application and filing fees in connection with a listing of the Exchange Securities on the Luxembourg Stock Exchange; and (vi) all fees and disbursements of independent certified public accountants of the Trust and the Guarantor (including the expenses of any special audit and comfort letters required by or incident to such performance). The Trust will, in any event, bear its and the Guarantor's internal expenses (including, without limitation, all salaries and expenses of its officers and employees performing legal or accounting duties), the expenses of any annual audit and the fees and expenses of any Person, including special experts, retained by the Trust or the Guarantor. (b) In connection with any Registration Statement required by this Agreement (including, without limitation, the Exchange Offer Registration Statement and the Shelf Registration Statement), the Guarantor will reimburse the Initial Purchasers and the Holders of Transfer Restricted Securities who are tendering Securities into the Exchange Offer and/or selling or reselling Securities or Exchange Securities pursuant to the "Plan of Distribution" contained in the Exchange Offer Registration Statement or the Shelf Registration Statement, as applicable, for the reasonable fees and disbursements of not more than one counsel, who shall be Shearman & Sterling, 9 Appold Street, London EC2A 2AP, unless another firm shall be chosen by the Holders of a majority in liquidation amount of the Transfer Restricted Securities for whose benefit such Registration Statement is being prepared. SECTION 8. INDEMNIFICATION (a) The Issuers agree, jointly and severally, to indemnify and hold harmless each Holder, its directors, officers and each Person, if any, who controls such Holder (within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act), from and against any and all losses, claims, damages, liabilities, judgments, (including without limitation, any legal or other expenses incurred in connection with investigating or defending any matter, including any action that could give rise to any such losses, claims, damages, liabilities or judgments) caused by any untrue statement or alleged untrue statement of a material fact contained in any Registration Statement, preliminary prospectus or Prospectus (or any amendment or supplement thereto) provided by the Trust to any Holder or any prospective purchaser of Exchange Securities or registered Securities, or caused by any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, except insofar as such losses, claims, damages, liabilities or judgments are caused by an untrue statement or omission or alleged untrue statement or omission that is based upon information relating to any of the Holders furnished in writing so the Trust by any of the Holders. (b) Each Holder of Transfer Restricted agrees, severally and not jointly, to indemnify and hold harmless the Issuers, and their respective directors and officers, and each person, if any, who controls (within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act) any Issuer, to the same extent as the foregoing indemnity from the Issuers 15 17 set forth in section (a) above, but only with reference to information relating to such Holder furnished in writing to the Trust by such Holder expressly for use in any Registration Statement. In no event shall any Holder, its directors, officers or any Person who controls such Holder be liable or responsible for any amount in excess of the amount by which the total amount received by such Holder with respect to its sale of Transfer Restricted Securities pursuant to a Registration Statement exceeds (i) the amount paid by such Holder for such Transfer Restricted Securities and (ii) the amount of any damages that such Holder, its directors, officers or any Person who controls such Holder has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission. (c) In case any action shall be commenced involving any person in respect of which indemnity may be sought pursuant to Section 8(a) or 8(b) (the "indemnified party"), the indemnified party shall promptly notify the person against whom such indemnity may be sought (the "indemnifying person") in writing and the indemnifying party shall assume the defense of such action, including the employment of counsel reasonably satisfactory to the indemnified party and, the payment of all fees and expenses of such counsel, as incurred (except that in the case of any action in respect of which indemnity may be sought pursuant to both Sections 8(a) and 8(b), a Holder shall not be required to assume the defense of such action pursuant to this Section 8(c), but may employ separate counsel and participate in the defense thereof, but the fees and expenses of such counsel, except as provided below, shall be at the expense of the Holder). Any indemnified party shall have the right to employ separate counsel in any such action and participate in the defense thereof, but the fees and expenses of such counsel shall be the expense of the indemnified party unless (i) the employment of such counsel shall have been specifically authorized in writing by the indemnifying party, (ii) the indemnifying party shall have failed to assume the defense of such action or employ counsel reasonably satisfactory to the indemnified party or (iii) the named parties to any such action (including any impleaded parties) include both the indemnified party and the indemnifying party, and the indemnified party shall have been advised by such counsel that there may be one or more legal defenses available to it which are different from or additional to those available to the indemnifying party (in which case the indemnifying party shall not have the right to assume the defense of such action on behalf of the indemnified party). In any such case, the indemnifying party shall not, in connection with any one action or separate but substantially similar or related actions in the same jurisdiction arising out of the same general allegations or circumstances, be liable for the fees and expenses of more than one separate firm of attorneys (in addition to any local counsel) for all indemnified parties and all such fees and expenses shall be reimbursed as they are incurred. Such firm shall be designated in writing by a majority of the Holders, in the case of the parties indemnified pursuant to Section 8(a), and by the Guarantor, in the case of parties indemnified pursuant to Section 8(b). The indemnifying party shall indemnify and hold harmless the indemnified party from and against any and all losses, claims, damages, liabilities and judgments by reason of any settlement of any action (i) effected with the indemnifying party's written consent or (ii) effected without the indemnifying party's written consent if the settlement is entered into more than twenty business days after the indemnifying party shall have received a request from the indemnified party for reimbursement for the fees and expenses of counsel (in any case where such fees and expenses are at the expense of the indemnifying party) and, prior to the date of such settlement, the indemnifying party shall have failed to comply with such reimbursement request. No indemnifying party shall, without the prior 16 18 written consent of the indemnified party, effect any settlement or compromise of, or consent to the entry of judgment with respect to, any pending or threatened action in respect of which the indemnified party is or could have been a party and indemnity or contribution may be or could have been sought hereunder by the indemnified party, unless such settlement, compromise or judgment (i) includes an unconditional release of the indemnified party from all liability on claims that are or could have been the subject matter of such action and (ii) does not include a statement as to or an admission of fault, culpability or a failure to act, by or on behalf of the indemnified party. (d) To the extent that the indemnification provided for in this Section 8 is unavailable to an indemnified party in respect of any losses, claims, damages, liabilities or judgments referred to therein, then each indemnifying party, in lieu of indemnifying such indemnified party, shall contribute to the amount paid or payable by such indemnified party as a result of such losses, claims, damages, liabilities or judgments (i) in such proportion as is appropriate to reflect the relative benefits received by the Issuers, on the one hand, and the Holders, on the other hand, from their sale of Transfer Restricted Securities or (ii) if the allocation provided by clause 8(d)(i) is not permitted by applicable law, in such proportion as is appropriate to reflect not only the relative benefits referred to in clause 8(d)(i) above but also the relative fault of the Issuers, on the one hand, and of the Holder, on the other hand, in connection with the statements or omissions which resulted in such losses, claims, damages, liabilities or judgments, as well as any other relevant equitable considerations. The relative fault of the Issuers, on the one hand, and of the Holder, on the other hand, shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the Issuers, on the one hand, or by the Holder, on the other hand, and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. The Issuers and each Holder agree that it would not be just and equitable if contribution pursuant to this Section 8(d) were determined by pro rata allocation (even if the Holders were treated as one entity for such purpose) or by any other method of allocation which does not take account of the equitable considerations referred to in the immediately preceding paragraph. The amount paid or payable by an indemnified party as a result of the losses, claims, damages, liabilities or judgments referred to in the immediately preceding paragraph shall be deemed to include, subject to the limitations set forth above, any legal or other expenses reasonably incurred by such indemnified party in connection with investigating or defending any matter, including any action that could have given rise to such losses, claims, damages, liabilities or judgments. Notwithstanding the provisions of this Section 8, no Holder, its directors, its officers or any Person, if any, who controls such Holder shall be required to contribute, in the aggregate, any amount in excess of the amount by which the total received by such Holder with respect to the sale of Transfer Restricted Securities pursuant to a Registration Statement exceeds (i) the amount paid by such Holder for such Transfer Restricted Securities and (ii) the amount of any damages which such Holder has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. The Holders' obligations to contribute pursuant to this Section 8(d) are several in proportion to the 17 19 respective liquidation amount of Transfer Restricted Securities held by each Holder hereunder and not joint. SECTION 9. RULE 144A AND RULE 144 The Issuers agree with each Holder, for so long as any Transfer Restricted Securities remain outstanding and during any period in which the Guarantor (i) is not subject to Section 13 or 15(d) of the Exchange Act, to make available, upon request of any Holder, to such Holder or beneficial owner of Transfer Restricted Securities in connection with any sale thereof and any prospective purchaser of such Transfer Restricted Securities designated by such Holder or beneficial owner, the information required by Rule 144A(d)(4) under the Securities Act in order to permit resales of such Transfer Restricted Securities pursuant to Rule 144A, and (ii) is subject to Section 13 or 15(d) of the Exchange Act, to make all filings required thereby in a timely manner in order to permit resales of such Transfer Restricted Securities pursuant to Rule 144. SECTION 10. MISCELLANEOUS (a) Remedies. The Issuers acknowledge and agree that any failure by the Issuers to comply with their respective obligations under Sections 3 and 4 hereof may result in material irreparable injury to the Initial Purchasers or the Holders for which there is no adequate remedy at law, that it will not be possible to measure damages for such injuries precisely and that, in the event of any such failure, the Initial Purchasers or any Holder may obtain such relief as may be required to specifically enforce the Issuers' obligations under Sections 3 and 4 hereof. The Issuers further agree to waive the defense in any action for specific performance that a remedy at law would be adequate. (b) No Inconsistent Agreements. None of the Issuers will, on or after the date of this Agreement, enter into any agreement with respect to its securities that is inconsistent with the rights granted to the Holders in this Agreement or otherwise conflicts with the provisions hereof. Nothing in this Agreement shall preclude or limit the Issuers from (i) conducting the Exchange Offer pursuant to a single registration statement relating to both (A) the Exchange Offer and (B) a substantially identical exchange offer relating to up to Euro 300 million of euro-denominated trust preferred securities (and related trust guarantees, senior subordinated notes and note guaranties) having substantially identical terms to the Securities (other than this currency, their price in the initial offering, their coupon and the identity of the issuer-trust) ("Euro Exchange Offer") or (ii) preparing and filing a single shelf registration statement with respect to both the Preferred Securities and the additional trust preferred securities described in the preceding clause (i)(B), and no actions taken pursuant to or as contemplated by this sentence will be deemed inconsistent with the rights granted to the Holders in this Agreement, it being understood that in the event that it is impracticable to conduct the Exchange Offer and the Euro Exchange Offer pursuant to a single registration statement, each of the Exchange Offer and Euro Exchange Offer will proceed separately. Except for the agreement dated as of March 2, 2000 between the Guarantor and Persons who acquired non-voting Preference shares of the Guarantor in the "Franconia" transaction, none of the Issuers is a party to any agreement granting any registration rights with respect to its securities to any person. The rights granted to the Holders hereunder do not in any 18 20 way conflict with and are not inconsistent with the rights granted to the holders of the Issuer's securities of the Issuers under any agreement in effect on the date hereof. (c) Amendments and Waivers. The provisions of this Agreement may not be amended, modified or supplemented, and waivers or consents to or departures from the provisions hereof may not be given unless (i) in the case of Section 5 hereof and this Section 10(c)(i), the Trust has obtained the written consent of Holders of all outstanding Transfer Restricted Securities and (ii) in the case of all other provisions hereof, the Trust has obtained the written consent of Holders of a majority of the outstanding principal amount of Transfer Restricted Securities (excluding Transfer Restricted Securities held by the Trust or its Affiliates). Notwithstanding the foregoing, a waiver or consent to departure from the provisions hereof that relates exclusively to the rights of Holders whose Transfer Restricted Securities are being tendered pursuant to the Exchange Offer, and that does not affect directly or indirectly the rights of other Holders whose Transfer Restricted Securities are not being tendered pursuant to such Exchange Offer, may be given by the Holders of a majority of the outstanding principal amount of Transfer Restricted Securities subject to such Exchange Offer. (d) Third Party Beneficiary. The Holders shall be third party beneficiaries to the agreements made hereunder between the Issuers, on the one hand, and the Initial Purchasers, on the other hand, and shall have the right to enforce such agreements directly to the extent they may deem such enforcement necessary or advisable to protect its rights or the rights of Holders hereunder. (e) Notices. All notices and other communications provided for or permitted hereunder shall be made in writing by hand-delivery, first-class mail (registered or certified, return receipt requested), telex, telecopier, or air courier guaranteeing overnight delivery; (i) if to a Holder, at the address set forth on the records of the Registrar under the Declaration, with a copy to the Registrar under the Declaration; and (ii) if to the Issuers: Fresenius Medical Care Capital Trust IV, c/o Fresenius Medical Care Holdings, Inc. 95 Hayden Avenue, Lexington, MA 02173 with a copy to: Fresenius Medical Care AG, Else-Kroner Str 1, 61346 Bad Homburg v.d. H, Telefax: (011-49-6172-609-2422), Attention: Law Department and to: 19 21 O'Melveny & Myers LLP 133 East 53rd Street New York NY 1022-4611 Fax: 212 326 2061 Ulrich Wagner, Esq. All such notices and communications shall be deemed to have been duly given: at the time delivered by hand, if personally delivered; five Business Days after being deposited in the mail, postage prepaid, if mailed; when receipt acknowledged, if telecopied; and on the next business day, if timely delivered to an air courier guaranteeing overnight delivery. 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 specified in the Declaration. (f) Successors and Assigns. This Agreement shall inure to the benefit of and be binding upon the successors and assigns of each of the parties, including without limitation and without the need for an express assignment, subsequent Holders; provided, that nothing herein shall be deemed to permit any assignment, transfer or other disposition of Transfer Restricted Securities in violation of the terms hereof or of the Purchase Agreement, the Declaration or applicable law. If any transferee of any Holder shall acquire Transfer Restricted Securities in any manner, whether by operation of law or otherwise, such Transfer Restricted Securities shall be held subject to all of the terms of this Agreement, and by taking and holding such Transfer Restricted Securities such Person shall be conclusively deemed to have agreed to be bound by and to perform all of the terms and provisions of this Agreement, including the restrictions on resale set forth in this Agreement and, if applicable, the Purchase Agreement, and such Person shall be entitled to receive the benefits hereof. (g) 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. (h) Headings. The headings in this Agreement are for convenience of reference only and shall not limit or otherwise affect the meaning hereof. (i) Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO THE CONFLICT OF LAW RULES THEREOF. (j) Severability. In the event that any one or more of the provisions contained herein, or the application thereof in any circumstance, is held invalid, illegal or unenforceable, the validity, legality and enforceability of any such provision in every other respect and of the remaining provisions contained herein shall not be affected or impaired thereby. 20 22 (k) Entire Agreement. This Agreement is intended by the parties as a final expression of their agreement and intended to be a complete and exclusive statement of the agreement and understanding of the parties hereto in respect of the subject matter contained herein. There are no restrictions, promises, warranties or undertakings, other than those set forth or referred to herein with respect to the registration rights granted with respect to the Transfer Restricted Securities. This Agreement supersedes all prior agreements and understandings between the parties with respect to such subject matter. 21 23 FRESENIUS MEDICAL CARE CAPITAL TRUST IV By: /s/Ben Lipps ------------------------------------ Name: Ben Lipps Title: Company Trustee By: /s/Karl-Dieter Schwab ------------------------------------ Name: Karl-Dieter Schwab Title: Company Trustee By: /s/Josef Dinger ------------------------------------ Name: Josef Dinger Title: Company Trustee FRESENIUS MEDICAL CARE AG By: /s/Emanuele Gatti ------------------------------------ Name: Emanuele Gatti Title: Member of the Management Board By: /s/Rainer Runte ------------------------------------ Name: Rainer Runte Title: General Counsel and Sr. Vice Pres. FMC TRUST FINANCE S.a.r.l. LUXEMBOURG-III By: /s/Gabriele Dux ------------------------------------ Name: Gabriele Dux Title: Director 24 FRESENIUS MEDICAL CARE DEUTSCHLAND GMBH By: /s/Emanuele Gatti ------------------------------------ Name: Emanuele Gatti Title: Managing Director By: /s/Karl-Dieter Schwab ------------------------------------ Name: Karl-Dieter Schwab Title: Procurist FRESENIUS MEDICAL CARE HOLDINGS, INC. By: /s/Ben Lipps ------------------------------------------- Name: Ben Lipps Title: Chief Executive Officer 25 BANC OF AMERICA SECURITIES LLC By:/s/Raymond A. Cubero --------------------------------------- Raymond A. Cubero Managing Director DRESDNER KLEINWORT WASSERSTEIN-GRANTCHESTER, INC. By/s/James C. Kingsberg ---------------------------------------- James C. Kingsberg Acting on behalf of themselves and the several Initial Purchasers 26 EXHIBIT A NOTICE OF FILING OF EXCHANGE OFFER REGISTRATION STATEMENT To: Banc of America LLC 9 West 57th Street New York NY 10019 Attention: Fax: From: Fresenius Medical Care Capital Trust IV Re: 7 7/8% Trust Preferred Securities due 2001 Date: ______, 200_ For your information only (NO ACTION REQUIRED): Today, _________, 200__, we filed [an Exchange Registration Statement/a Shelf Registration Statement] with the Securities and Exchange Commission. We currently expect this registration statement to be declared effective within ___ business days of the date hereof. EX-10.39 25 y51284ex10-39.txt REGISTRATION RIGHTS AGREEMENT 1 EXHIBIT 10.39 A/B EXCHANGE REGISTRATION RIGHTS AGREEMENT DATED AS OF JUNE 15, 2001 BY AND AMONG FRESENIUS MEDICAL CARE CAPITAL TRUST V FRESENIUS MEDICAL CARE AG FMC TRUST FINANCE S.A.R.L. LUXEMBOURG-III FRESENIUS MEDICAL CARE HOLDINGS, INC. FRESENIUS MEDICAL CARE DEUTSCHLAND GMBH AND CREDIT SUISSE FIRST BOSTON (EUROPE) LIMITED DEUTSCHE BANK AG LONDON DRESDNER BANK AG LONDON BRANCH J.P. MORGAN SECURITIES LTD. BANC OF AMERICA SECURITIES LLC SCOTIA CAPITAL (USA) INC WESTLB PANMURE LIMITED 2 This Registration Rights Agreement (this "Agreement") is made and entered into as of June 15, 2001 by and among Fresenius Medical Care Capital Trust V, a statutory business trust created under the laws of the State of Delaware (the "Trust"), Fresenius Medical Care AG, a German corporation (the "Guarantor"), FMC Trust Finance S.a.r.l. Luxembourg-III, a private limited company organized under the laws of Luxembourg, Fresenius Medical Care Holdings, Inc., a corporation organized under the laws of the State of New York, Fresenius Medical Care Deutschland GmbH, a limited liability company formed under the laws of Germany (collectively, the "Issuers"), and Credit Suisse First Boston (Europe) Limited, Deutsche Bank AG London, Dresdner Bank AG London Branch, J.P. Morgan Securities Ltd., Banc of America Securities LLC, Scotia Capital (USA) Inc and WestLB Panmure Limited (each an "Initial Purchaser" and collectively, the "Initial Purchasers"), each of whom has agreed, severally and not jointly, to purchase the Trust's 7 3/8% Trust Preferred Securities, liquidation amount Euro 1,000 per Trust Preferred Security (the "Securities") pursuant to the Purchase Agreement (as defined below). This Agreement is made pursuant to the Purchase Agreement, dated June 12, 2001 (the "Purchase Agreement"), by and among the Issuers and the Initial Purchasers. In order to induce the Initial Purchasers to purchase the Securities, the Issuers have agreed to provide the registration rights set forth in this Agreement. The execution and delivery of this Agreement is a condition to the obligations of the Initial Purchasers set forth in Section 2 of the Purchase Agreement. Capitalized terms used herein and not otherwise defined shall have the meanings assigned to them in the Amended and Restated Declaration of Trust, dated as of June 15, 2001 (the "Declaration"), among the Trust, the Guarantor and State Street Bank and Trust Company, as Trustee, relating to the Securities and the Exchange Securities. The parties hereby agree as follows: SECTION 1. DEFINITIONS As used in this Agreement, the following capitalized terms shall have the following meanings: Affiliate: As defined in Rule 144 of the Securities Act. Broker-Dealer: Any broker or dealer registered under the Exchange Act. Certificated Securities: Definitive Securities, as defined in the Declaration. Closing Date: The date hereof. Commission: The U.S. Securities and Exchange Commission. Consummate: An Exchange Offer shall be deemed "Consummated" for purposes of this Agreement upon the occurrence of (a) the filing and effectiveness under the Securities Act of the Exchange Offer Registration Statement relating to the Exchange Securities to be issued in the Exchange Offer, the Exchange Trust Guarantees, the Exchange Senior Subordinated Notes and the Exchange Note Guaranties (the Exchange Securities, the Exchange Trust Guarantees, the Exchange Senior Subordinated Notes and the Exchange Senior Subordinated Notes, collectively, 1 3 the "Exchange Instruments"), (b) the maintenance of such Exchange Offer Registration Statement continuously effective and the keeping of the Exchange Offer open for a period not less than the period required pursuant to Section 3(b) hereof and (c) the delivery by the Trust to the Registrar under the Declaration of Exchange Securities in the same aggregate liquidation amount as the aggregate liquidation amount of Securities tendered by Holders thereof pursuant to the Exchange Offer. Consummation Deadline: As defined in Section 3(b) hereof. Effectiveness Deadline: As defined in Sections 3(a) and 4(a) hereof. Exchange Act: The U.S. Securities Exchange Act of 1934, as amended. Exchange Offer: The exchange and issuance by the Trust of an aggregate liquidation amount of Exchange Securities (which shall be registered pursuant to the Exchange Offer Registration Statement) equal to the outstanding liquidation amount of Securities that are tendered by such Holders in connection with such exchange and issuance. Exchange Offer Registration Statement: The Registration Statement relating to the Exchange Offer, including the related Prospectus. Exempt Resales: The transactions in which the Initial Purchasers propose to sell the Securities to certain "qualified institutional buyers," as such term is defined in Rule 144A under the Securities Act, and pursuant to Regulation S under the Securities Act. Exchange Securities: The Trust's 7?% Trust Preferred Securities (Liquidation Amount Euro 1,000 per Trust Preferred Security) to be issued pursuant to the Declaration: (i) in the Exchange Offer or (ii) as contemplated by Section 4 hereof. Filing Deadline: As defined in Sections 3(a) and 4(a) hereof. Holders: As defined in Section 2 hereof. Prospectus: The prospectus included in a Registration Statement at the time such Registration Statement is declared effective, as amended or supplemented by any prospectus supplement and by all other amendments thereto, including post-effective amendments, and all material incorporated by reference into such Prospectus. Recommencement Date: As defined in Section 6(d) hereof. Registration Default: As defined in Section 5 hereof. Registration Statement: Any registration statement of the Issuers relating to (a) an offering of Exchange Securities pursuant to an Exchange Offer or (b) the registration for resale of Transfer Restricted Securities pursuant to the Shelf Registration Statement, in each case, (i) that is filed pursuant to the provisions of this Agreement and (ii) including the Prospectus included 2 4 therein, all amendments and supplements thereto (including post-effective amendments) and all exhibits and material incorporated by reference therein. Regulation S: Regulation S promulgated under the Securities Act. Rule 144: Rule 144 promulgated under the Securities Act. Securities Act: The U.S. Securities Act of 1933, as amended. Shelf Registration Statement: As defined in Section 4 hereof. Suspension Notice: As defined in Section 6(d) hereof. TIA: The Trust Declaration Act of 1939 (15 U.S.C. Section 77aaa-77bbbb) as in effect on the date of the Declaration. Transfer Restricted Securities: Each Security, until the earliest to occur of (a) the date on which such Security is exchanged in the Exchange Offer for an Exchange Security which is entitled to be resold to the public by the Holder thereof without complying with the prospectus delivery requirements of the Securities Act, (b) the date on which such Security has been disposed of in accordance with a Shelf Registration Statement (and the purchasers thereof have been issued Exchange Securities) or (c) the date on which such Security is distributed to the public pursuant to Rule 144 under the Securities Act (and purchasers thereof have been issued Exchange Securities) and each Exchange Security until the date on which such Exchange Security is disposed of by a Broker-Dealer pursuant to the "Plan of Distribution" contemplated by the Exchange Offer Registration Statement (including the delivery of the Prospectus contained therein). SECTION 2. HOLDERS A Person is deemed to be a holder of Transfer Restricted Securities (each, a "Holder") whenever such Person owns Transfer Restricted Securities. SECTION 3. REGISTERED EXCHANGE OFFER (a) Unless the Exchange Offer shall not be permitted by applicable federal law (after the procedures set forth in Section 6(a)(i) below have been complied with), the Issuers shall (i) cause the Exchange Offer Registration Statement to be filed with the Commission as soon as practicable after the Closing Date, but in no event later than 150 days after the Closing Date (such 150th day being the "Filing Deadline"), (ii) use their commercially reasonable best efforts to cause such Exchange Offer Registration Statement to become effective at the earliest possible time, but in no event later than 210 days after the Closing Date (such 210th day being the "Effectiveness Deadline"), (iii) in connection with the foregoing, (A) file all pre-effective amendments to such Exchange Offer Registration Statement as may be necessary in order to cause it to become effective, (B) file, if applicable, a post-effective amendment to such Exchange Offer Registration Statement pursuant to Rule 430A under the Securities Act and (C) cause all necessary filings, if any, in connection with the registration and qualification of the Exchange Securities to be made 3 5 under the Blue Sky laws of such jurisdictions as are necessary to permit Consummation of the Exchange Offer, and (iv) upon the effectiveness of such Exchange Offer Registration Statement, commence and Consummate the Exchange Offer. The Exchange Offer shall be on the appropriate form permitting (i) registration of the Exchange Securities to be offered in exchange for the Securities that are Transfer Restricted Securities and (ii) resales of Exchange Securities by Broker-Dealers that tendered into the Exchange Offer Securities that such Broker-Dealer acquired for its own account as a result of market making activities or other trading activities (other than Securities acquired directly from the Trust or any of its Affiliates) as contemplated by Section 3(c) below. (b) The Trust and the Guarantor shall use their respective commercially reasonable best efforts to cause the Exchange Offer Registration Statement to be effective continuously, and shall keep the Exchange Offer open for a period of not less than the minimum period required under applicable federal and state securities laws to Consummate the Exchange Offer; provided, however, that in no event shall such period be less than 20 business days. The Trust and the Guarantor shall cause the Exchange Offer to comply with all applicable federal and state securities laws. No securities other than the Exchange Securities shall be included in the Exchange Offer Registration Statement. The Trust and the Guarantor shall use their respective commercially reasonable best efforts to cause the Exchange Offer to be Consummated on the earliest practicable date after the Exchange Offer Registration Statement has become effective, but in no event later than 45 business days thereafter (such 45th day being the "Consummation Deadline"). (c) The Trust shall include a "Plan of Distribution" section in the Prospectus contained in the Exchange Offer Registration Statement and indicate therein that any Broker-Dealer who holds Transfer Restricted Securities that were acquired for the account of such Broker-Dealer as a result of market-making activities or other trading activities (other than Securities acquired directly from the Trust or any Affiliate of the Trust), may exchange such Transfer Restricted Securities pursuant to the Exchange Offer. Such "Plan of Distribution" section shall also contain all other information with respect to such sales by such Broker-Dealers that the Commission may require in order to permit such sales pursuant thereto, but such "Plan of Distribution" shall not name any such Broker-Dealer or disclose the amount of Transfer Restricted Securities held by any such Broker-Dealer, except to the extent required by the Commission as a result of a change in policy, rules or regulations after the date of this Agreement. See the Shearman & Sterling no-action letter (available July 2, 1993). Because such Broker-Dealer may be deemed to be an "underwriter" within the meaning of the Securities Act and must, therefore, deliver a prospectus meeting the requirements of the Securities Act in connection with its initial sale of any Exchange Securities received by such Broker-Dealer in the Exchange Offer, the Trust and Guarantor shall permit the use of the Prospectus contained in the Exchange Offer Registration Statement by such Broker-Dealer to satisfy such prospectus delivery requirement. To the extent necessary to ensure that the prospectus contained in the Exchange Offer Registration Statement is available for sales of Exchange Securities by Broker-Dealers, the Trust and the Guarantor agree to use their respective commercially reasonable best efforts to keep the Exchange Offer Registration Statement continuously effective, supplemented, amended and current as required by and subject to the 4 6 provisions of Section 6(a) and (c) hereof and in conformity with the requirements of this Agreement, the Securities Act and the policies, rules and regulations of the Commission as announced from time to time, for a period of one year from the Consummation Deadline or such shorter period as will terminate when all Transfer Restricted Securities covered by such Registration Statement have been sold pursuant thereto. The Trust and the Guarantor shall provide sufficient copies of the latest version of such Prospectus to such Broker-Dealers, promptly upon request, and in no event later than one day after such request, at any time during such period. SECTION 4. SHELF REGISTRATION (a) Shelf Registration. If (i) the Exchange Offer is not permitted by applicable law (after the Trust and the Guarantor have complied with the procedures set forth in Section 6(a)(i) below) or (ii) if any Holder of Transfer Restricted Securities shall notify the Trust within 20 business days following the Consummation Deadline that (A) such Holder was prohibited by law or Commission policy from participating in the Exchange Offer or (B) such Holder may not resell the Exchange Securities acquired by it in the Exchange Offer to the public without delivering a prospectus and the Prospectus contained in the Exchange Offer Registration Statement is not appropriate or available for such resales by such Holder or (C) such Holder is a Broker-Dealer and holds Securities acquired directly from the Trust or any of its Affiliates, then the Trust and the Guarantor shall: (x) cause to be filed, on or prior to 30 days after the earlier of (i) the date on which the Trust determines that the Exchange Offer Registration Statement cannot be filed as a result of clause (a)(i) above and (ii) the date on which the Trust receives the notice specified in clause (a)(ii) above, (such earlier date, the "Filing Deadline"), a shelf registration statement pursuant to Rule 415 under the Securities Act (which may be an amendment to the Exchange Offer Registration Statement (the "Shelf Registration Statement")), relating to all Transfer Restricted Securities, and (y) shall use their respective commercially reasonable best efforts to cause such Shelf Registration Statement to become effective on or prior to 60 days after the Filing Deadline for the Shelf Registration Statement (such 60th day the "Effectiveness Deadline"). If, after the Trust has filed an Exchange Offer Registration Statement that satisfies the requirements of Section 3(a) above, the Trust is required to file and make effective a Shelf Registration Statement solely because the Exchange Offer is not permitted under applicable federal law (i.e., clause (a)(i) above), then the filing of the Exchange Offer Registration Statement shall be deemed to satisfy the requirements of clause (x) above; provided that, in such event, the Trust shall remain obligated to meet the Effectiveness Deadline set forth in clause (y). To the extent necessary to ensure that the Shelf Registration Statement is available for sales of Transfer Restricted Securities by the Holders thereof entitled to the benefit of this Section 4(a) and the other securities required to be registered therein pursuant to Section 6(b)(ii) hereof, the Trust and the Guarantor shall use their respective best efforts to keep any Shelf 5 7 Registration Statement required by this Section 4(a) continuously effective, supplemented, amended and current as required by and subject to the provisions of Sections 6(b) and (c) hereof and in conformity with the requirements of this Agreement, the Securities Act and the policies, rules and regulations of the Commission as announced from time to time, for a period of at least two years (as extended pursuant to Section 6(c)(i)) following the Closing Date, or such shorter period as will terminate when all Transfer Restricted Securities covered by such Shelf Registration Statement have been sold pursuant thereto. (b) Provision by Holders of Certain Information in Connection with the Shelf Registration Statement. No Holder of Transfer Restricted Securities may include any of its Transfer Restricted Securities in any Shelf Registration Statement pursuant to this Agreement unless and until such Holder furnishes to the Trust in writing, within 20 days after receipt of a request therefor, the information specified in Item 507 or 508 of Regulation S-K, as applicable, of the Securities Act for use in connection with any Shelf Registration Statement or Prospectus or preliminary Prospectus included therein. No Holder of Transfer Restricted Securities shall be entitled to liquidated damages pursuant to Section 5 hereof unless and until such Holder shall have provided all such information. Each selling Holder agrees to promptly furnish additional information required to be disclosed in order to make the information previously furnished to the Issuers by such Holder not materially misleading. SECTION 5. LIQUIDATED DAMAGES If (i) any Registration Statement required by this Agreement is not filed with the Commission on or prior to the applicable Filing Deadline, (ii) any such Registration Statement has not been declared effective by the Commission on or prior to the applicable Effectiveness Deadline, (iii) the Exchange Offer has not been Consummated on or prior to the Consummation Deadline or (iv) any Registration Statement required by this Agreement is filed and declared effective but shall thereafter cease to be effective or fail to be usable for its intended purpose without being succeeded immediately by a post-effective amendment to such Registration Statement that cures such failure and that is itself declared effective immediately (each such event referred to in clauses (i) through (iv), a "Registration Default"), then the Issuers hereby jointly and severally agree to pay to each Holder of Transfer Restricted Securities affected thereby liquidated damages in an amount equal to Euro .05 per week per Euro 1,000 in liquidation amount of Transfer Restricted Securities held by such Holder for each week or portion thereof that the Registration Default continues for the first 90-day period immediately following the occurrence of such Registration Default. The amount of the liquidated damages shall increase by an additional Euro .05 per week per Euro 1,000 in liquidation amount of Transfer Restricted Securities with respect to each subsequent 90-day period until all Registration Defaults have been cured, up to a maximum amount of liquidated damages of Euro .25 per week per Euro 1,000 in liquidation amount of Transfer Restricted Securities; provided that the Issuers shall in no event be required to pay liquidated damages for more than one Registration Default at any given time. Notwithstanding anything to the contrary set forth herein, (1) upon filing of the Exchange Offer Registration Statement (and/or, if applicable, the Shelf Registration Statement), in the case of (i) above, (2) upon the effectiveness of the Exchange Offer Registration Statement (and/or, if applicable, the Shelf Registration Statement), in the case of (ii) above, (3) upon Consummation of the Exchange Offer, in the case of (iii) above, or (4) upon the filing of a post-effective amendment to the Registration 6 8 Statement or an additional Registration Statement that causes the Exchange Offer Registration Statement (and/or, if applicable, the Shelf Registration Statement) to again be declared effective or made usable in the case of (iv) above, the liquidated damages payable with respect to the Transfer Restricted Securities as a result of such clause (i), (ii), (iii) or (iv), as applicable, shall cease. All accrued liquidated damages shall be paid to the Holders entitled thereto, in the manner provided for the payment of distributions in the Declaration, on each Distribution Date, as more fully set forth in the Declaration and the Securities. Notwithstanding the fact that any Securities for which liquidated damages are due cease to be Transfer Restricted Securities, all obligations of the Issuers to pay liquidated damages with respect to Securities shall survive until such time as such obligations with respect to such Securities shall have been satisfied in full. SECTION 6. REGISTRATION PROCEDURES (a) Exchange Offer Registration Statement. In connection with the Exchange Offer, the Trust and the Guarantor shall (x) comply with all applicable provisions of Section 6(c) below, (y) use their respective commercially reasonable best efforts to effect such exchange and to permit the resale of Exchange Securities by Broker-Dealers that tendered in the Exchange Offer Securities that such Broker-Dealer acquired for its own account as a result of its market making activities or other trading activities (other than Securities acquired directly from the Trust or any of its Affiliates) being sold in accordance with the intended method or methods of distribution thereof, and (z) comply with all of the following provisions: (i) If, following the date hereof there has been announced a change in Commission policy with respect to exchange offers such as the Exchange Offer that, in the reasonable opinion of counsel to the Trust raises a substantial question as to whether the Exchange Offer is permitted by applicable federal law, the Issuers hereby agree to seek a no-action letter or other favorable decision from the Commission allowing the Issuers to Consummate an Exchange Offer for such Transfer Restricted Securities. The Issuers hereby agree to pursue the issuance of such a decision to the Commission staff level. In connection with the foregoing, the Trust and the Guarantor hereby agree to take all such other actions as may be requested by the Commission or otherwise required in connection with the issuance of such decision, including without limitation (A) participating in telephonic conferences with the Commission, (B) delivering to the Commission staff an analysis prepared by counsel to the Trust setting forth the legal bases, if any, upon which such counsel has concluded that such an Exchange Offer should be permitted and (C) diligently pursuing a resolution (which need not be favorable) by the Commission staff. (ii) As a condition to its participation in the Exchange Offer, each Holder of Transfer Restricted Securities (including, without limitation, any Holder who is a Broker Dealer) shall furnish, upon the request of the Trust, prior to the Consummation of the Exchange Offer, a written representation to the Issuers (which may be contained in the letter of transmittal contemplated by the Exchange Offer Registration Statement) to the effect that (A) it is not an Affiliate of the Trust, (B) it is not engaged in, and does not intend to engage in, and has no arrangement or understanding with any person to 7 9 participate in, a distribution of the Exchange Securities to be issued in the Exchange Offer and (C) it is acquiring the Exchange Securities in its ordinary course of business. As a condition to its participation in the Exchange Offer, each Holder using the Exchange Offer to participate in a distribution of the Exchange Securities shall acknowledge and agree that, if the resales are of Exchange Securities obtained by such Holder in exchange for Securities acquired directly from the Trust or an Affiliate thereof, it (1) could not, under Commission policy as in effect on the date of this Agreement, rely on the position of the Commission enunciated in Morgan Stanley and Co., Inc. (available June 5, 1991) and Exxon Capital Holdings Corporation (available May 13, 1988), as interpreted in the Commission'sletter to Shearman & Sterling dated July 2, 1993, and similar no-action letters (including, if applicable, any no-action letter obtained pursuant to clause (i) above), and (2) must comply with the registration and prospectus delivery requirements of the Securities Act in connection with a secondary resale transaction and that such a secondary resale transaction must be covered by an effective registration statement containing the selling security holder information required by Item 507 or 508, as applicable, of Regulation S-K. (iii) Prior to effectiveness of the Exchange Offer Registration Statement, the Issuers shall provide a supplemental letter to the Commission (A) stating that the Issuers are registering the Exchange Offer in reliance on the position of the Commission enunciated in Exxon Capital Holdings Corporation (available May 13, 1988), Morgan Stanley and Co., Inc. (available June 5, 1991) as interpreted in the Commission's letter to Shearman & Sterling dated July 2, 1993, and, if applicable, any no-action letter obtained pursuant to clause (i) above, (B) including a representation that none of the Issuers has entered into any arrangement or understanding with any Person to distribute the Exchange Securities to be received in the Exchange Offer and that, to the best of the Issuer's information and belief, each Holder participating in the Exchange Offer is acquiring the Exchange Securities in its ordinary course of business and has no arrangement or understanding with any Person to participate in the distribution of the Exchange Securities received in the Exchange Offer and (C) any other undertaking or representation required by the Commission as set forth in any no-action letter obtained pursuant to clause (i) above, if applicable. (b) Shelf Registration Statement. In connection with the Shelf Registration Statement, the Issuers shall: (i) comply with all the provisions of Section 6(c) below and use their respective commercially reasonable best efforts to effect such registration to permit the sale of the Transfer Restricted Securities being sold in accordance with the intended method or methods of distribution thereof (as indicated in the information furnished to the Issuers pursuant to Section 4(b) hereof), and pursuant thereto the Issuers shall prepare and file with the Commission a Registration Statement relating to the registration on any appropriate form under the Securities Act, which form shall be available for the sale of the Transfer Restricted Securities in accordance with the intended method or methods of distribution thereof within the time periods and otherwise in accordance with the provisions hereof. 8 10 (ii) issue, upon the request of any Holder or purchaser of Securities covered by any Shelf Registration Statement contemplated by this Agreement, Exchange Securities having an aggregate liquidation amount equal to the aggregate liquidation amount of Securities sold pursuant to the Shelf Registration Statement and surrendered to the Trust for cancellation; the Trust shall register Exchange Securities on the Shelf Registration Statement for this purpose and issue the Exchange Securities to the purchaser(s) of securities subject to the Shelf Registration Statement in the names as such purchaser(s) shall designate. (iii) make available, at reasonable times, for inspection by each Holder eligible to include Securities in the Shelf Registration Statement and any attorney or accountant retained by such Holders, all financial and other records, pertinent corporate documents of the Issuers and cause the respective Issuers' officers, directors and employees to supply all information reasonably requested by any such Holder, attorney or accountant in connection with such Registration Statement or any post-effective amendment thereto subsequent to the filing thereof and prior to its effectiveness; (iv) if requested by any Holders eligible to include Securities in the Shelf Registration Statement in connection with a sale or any Affiliated Market Maker, promptly include in any Registration Statement or Prospectus, pursuant to a supplement or post-effective amendment if necessary, such information as such Holders may reasonably request to have included therein, including, without limitation, information relating to the "Plan of Distribution" of the Transfer Restricted Securities; and make all required filings of such Prospectus supplement or post-effective amendment as soon as practicable after the Issuers are notified of the matters to be included in such Prospectus supplement or post-effective amendment. (c) General Provisions. In connection with any Registration Statement and any related Prospectus required by this Agreement, the Issuers shall: (i) use their respective commercially reasonable best efforts to keep such Registration Statement continuously effective and provide all requisite financial statements for the period specified in Sections 3 or 4 of this Agreement, as applicable. Upon the occurrence of any event that would cause any such Registration Statement or the Prospectus contained therein (A) to contain an untrue statement of material fact or omit to state any material fact necessary to make the statements therein not misleading or (B) not to be effective and usable for the exchange or resale of Transfer Restricted Securities during the period required by this Agreement, the Issuers shall file promptly an appropriate amendment to such Registration Statement curing such defect, and, if Commission review is required, use their respective best efforts to cause such amendment to be declared effective as soon as practicable; (ii) prepare and file with the Commission such amendments and post-effective amendments to the applicable Registration Statement as may be necessary to keep such Registration Statement effective for the applicable period set forth in Sections 3 or 4 hereof, as the case may be; cause the Prospectus to be supplemented by any required 9 11 Prospectus supplement, and as so supplemented to be filed pursuant to Rule 424 under the Securities Act, and to comply fully with Rules 424, 430A and 462, as applicable, under the Securities Act in a timely manner; and comply with the provisions of the Securities Act with respect to the disposition of all securities, instruments or exchange instruments, as the case may be, covered by such Registration Statement during the applicable period in accordance with the intended method or methods of distribution by the sellers thereof set forth in such Registration Statement or supplement to the Prospectus; (iii) advise each Holder promptly and, if requested by such Holder, confirm such advice in writing, (A) when the Prospectus or any Prospectus supplement or post-effective amendment has been filed, and, with respect to any applicable Registration Statement or any post-effective amendment thereto, when the same has become effective, (which advice shall be furnished by the issuance of a press release or similar public announcement and through the Depository Trust Corporation or any successor clearing agent), (B) of any request by the Commission for amendments to the Registration Statement or amendments or supplements to the Prospectus or for additional information relating thereto, (C) of the issuance by the Commission of any stop order suspending the effectiveness of the Registration Statement under the Securities Act or of the suspension by any state securities commission of the qualification of the Exchange Securities or the Transfer Restricted Securities for offering or sale in any jurisdiction, or the initiation of any proceeding for any of the preceding purposes, (D) of the existence of any fact or the happening of any event that makes any statement of a material fact made in the Registration Statement, the Prospectus, any amendment or supplement thereto or any document incorporated by reference therein untrue, or that requires the making of any additions to or changes in the Registration Statement in order to make the statements therein not misleading, or that requires the making of any additions to or changes in the Prospectus in order to make the statements therein, in the light of the circumstances under which they were made, not misleading. If at any time the Commission shall issue any stop order suspending the effectiveness of the Registration Statement, or any state securities commission or other regulatory authority shall issue an order suspending the qualification or exemption from qualification of the Exchange Securities or the Transfer Restricted Securities under state securities or Blue Sky laws, the Issuers shall use their respective best efforts to obtain the withdrawal or lifting of such order at the earliest possible time; (iv) subject to Section 6(c)(i), if any fact or event contemplated by Section 6(c)(iii)(D) above shall exist or have occurred, prepare a supplement or post-effective amendment to the Registration Statement or related Prospectus or any document incorporated therein by reference or file any other required document so that, as thereafter delivered to the purchasers of Exchange Securities or Transfer Restricted Securities, the Prospectus will not contain an untrue statement of a material fact or omit to state any material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading; (v) furnish to each Holder in connection with such exchange or sale, if any, before filing with the Commission, copies of any Registration Statement or any Prospectus included therein or any amendments or supplements to any such Registration Statement or Prospectus (including all documents incorporated by reference after the initial filing of such Registration Statement), which documents will be subject to the review and comment of such Holders in connection with such sale, if any, for a period of at least five Business Days, and the Trust will not file any such Registration Statement or 10 12 Prospectus or any amendment or supplement to any such Registration Statement or Prospectus (including all such documents incorporated by reference) to which such Holders shall reasonably object within five Business Days after the receipt thereof. A Holder shall be deemed to have reasonably objected to such filing if such Registration Statement, amendment, Prospectus or supplement, as applicable, as proposed to be filed, contains an untrue statement of a material fact or omit to state any material fact necessary to make the statements therein not misleading or fails to comply with the applicable requirements of the Securities Act; (vi) promptly prior to the filing of any document that is to be incorporated by reference into a Registration Statement or Prospectus, provide copies of such document to each Holder in connection with such exchange or sale, if any, make the respective Issuers' representatives available for discussion of such document and other customary due diligence matters, and include such information in such document prior to the filing thereof as such Holders may reasonably request; (vii) furnish to each Holder in connection with such exchange or sale, without charge, at least one copy of the Registration Statement, as first filed with the Commission, and of each amendment thereto, including all documents incorporated by reference therein and all exhibits (including exhibits incorporated therein by reference); (viii) deliver to each Holder without charge, as many copies of the Prospectus (including each preliminary prospectus) and any amendment or supplement thereto as such Persons reasonably may request; the Issuers hereby consent to the use (in accordance with law) of the Prospectus and any amendment or supplement thereto by each selling Holder in connection with the offering and the sale of the Exchange Securities or the Transfer Restricted Securities covered by the Prospectus or any amendment or supplement thereto; (ix) upon the request of any Holder, enter into such agreements (including underwriting agreements) and make such representations and warranties and take all such other actions in connection therewith in order to expedite or facilitate the disposition of the Transfer Restricted Securities pursuant to any applicable Registration Statement contemplated by this Agreement as may be reasonably requested by any Holder in connection with any sale or resale pursuant to any applicable Registration Statement. In such connection, the Issuers shall: (A) upon request of any Holder, furnish (or in the case of paragraphs (2) and (3), use their commercially reasonable best efforts to cause to be furnished) to each Holder, upon Consummation of the Exchange Offer or upon the effectiveness of the Shelf Registration Statement, as the case may be: (1) a certificate, dated such date, signed on behalf of the Issuers by (x) the President or any Vice President, or in the case of the Guarantor and 11 13 DGmbH (as defined in the Purchase Agreement) members of the board (Vorstand or Geschaftsfuhrung), as the case may be, and (y) a principal financial or accounting officer of such Issuer, confirming, as of the date thereof, the matters set forth in Sections 6(y)(iv), 9(a) and 9(b) of the Purchase Agreement and such other similar matters as such Holders may reasonably request; (2) an opinion, dated the date of Consummation of the Exchange Offer or the date of effectiveness of the Shelf Registration Statement, as the case may be, of counsel for the Issuers covering matters similar to those set forth in paragraph (f) of Section 9 of the Purchase Agreement and as to the effectiveness of the Registration Statement, the absence of stop orders with respect thereto and compliance of the Registration Statement as to form with the requirements of the Securities Act and the TIA and in any event including a statement substantially to the effect that such counsel has participated in conferences with officers and other representatives of the Issuers, representatives of the independent public accountants for the Guarantor regarding the Registration Statement and the Prospectus contained therein and have considered the matters required to be stated therein and the statements contained therein, although such counsel has not independently verified the accuracy, completeness or fairness of such statements; and that such counsel advises that, on the basis of the foregoing (relying as to materiality to the extent such counsel deems appropriate upon the statements of officers and other representatives of the Trust and the Guarantor) and without independent check or verification), no facts came to such counsel's attention that caused such counsel to believe that the applicable Registration Statement, at the time such Registration Statement or any post-effective amendment thereto became effective and, in the case of the Exchange Offer Registration Statement, as of the date of Consummation of the Exchange Offer, 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 therein not misleading, or that the Prospectus contained in such Registration Statement as of its date and, in the case of the opinion dated the date of Consummation of the Exchange Offer, as of the date of Consummation, contained an untrue statement of a material fact or omitted to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading. Without limiting the foregoing, such counsel may state further that such counsel assumes no responsibility for, and has not independently verified, the accuracy, completeness or fairness of the financial statements, notes and schedules and other financial data included in any Registration Statement contemplated by this Agreement or the related Prospectus; and (3) a customary comfort letter, dated the date of Consummation of the Exchange Offer, or as of the date of effectiveness of the Shelf 12 14 Registration Statement, as the case may be, from the Guarantor's independent accountants, in the customary form and covering matters of the type customarily covered in comfort letters to underwriters in connection with underwritten offerings, and affirming the matters set forth in the comfort letters delivered pursuant to Section 9(e) of the Purchase Agreement. (B) deliver such other documents and certificates as may be reasonably requested by the selling Holders to such Persons to evidence compliance with the matters covered in clause (A) above and with any customary conditions contained in the any agreement entered into by the Issuers pursuant to this clause (ix); (x) prior to any public offering of Exchange Securities or Transfer Restricted Securities, cooperate with the selling Holders and their counsel in connection with the registration and qualification of the Exchange Securities or Transfer Restricted Securities under the state securities or Blue Sky laws of such jurisdictions within the United States as the selling Holders may request and do any and all other acts or things necessary or advisable to enable the disposition in such jurisdictions of the Exchange Securities or Transfer Restricted Securities covered by the applicable Registration Statement; provided, however, that none of the Issuers shall be required to register or qualify as a foreign corporation where it is not now so qualified or to take any action that would subject it to the service of process in suits or to taxation, other than as to matters and transactions relating to the Registration Statement, in any jurisdiction where it is not now so subject; (xi) in connection with any sale of Transfer Restricted Securities that will result in such securities no longer being Transfer Restricted Securities, cooperate with the Holders to facilitate the timely preparation and delivery of global certificates representing Transfer Restricted Securities to be sold and not bearing any restrictive legends; and to register such Transfer Restricted Securities in such denominations and such names as the selling Holders may request at least two Business Days prior to such sale of Transfer Restricted Securities; (xii) use their respective commercially reasonable best efforts to cause the disposition of the Transfer Restricted Securities 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 seller or sellers thereof to consummate the disposition of such Transfer Restricted Securities, subject to the proviso contained in clause (x) above; (xiii) provide a CUSIP number for all Exchange Securities or Transfer Restricted Securities, as the case may be, not later than the effective date of a Registration Statement covering such Transfer Restricted Securities and provide the Trustee under the Declaration with printed certificates for the Transfer Restricted Securities which are in a form eligible for deposit with the Depository Trust Company; (xiv) otherwise use their respective commercially reasonable best efforts to comply with all applicable rules and regulations of the Commission, and make generally 13 15 available to its security holders with regard to any applicable Registration Statement, as soon as practicable, a consolidated earnings statement meeting the requirements of Rule 158 to the Securities Act (which need not be audited) covering a twelve-month period beginning after the effective date of the Registration Statement (as such term is defined in paragraph (c) of Rule 158 under the Securities Act); (xv) cause the Declaration and the Indenture to be qualified under the TIA not later than the effective date of the first Registration Statement required by this Agreement and, in connection therewith, cooperate with the Trustee and the Holders to effect such changes to the Declaration and the Indenture as may be required for such Declaration or Indenture to be so qualified in accordance with the terms of the TIA; and execute and use their best efforts to cause the Trustee to execute, all documents that may be required to effect such changes and other forms and documents required to be filed with the Commission to enable such Declaration or Indenture to be so qualified in a timely manner; (xvi) provide promptly to each Holder, upon request, each document filed with the Commission pursuant to the requirements of Section 13 or Section 15(d) of the Exchange Act; and (xvii) to use their commercially reasonable best efforts to cause the Exchange Securities to be listed on the Luxembourg Stock Exchange. (d) Restrictions on Holders. Each Holder agrees by acquisition of a Transfer Restricted Security that, upon receipt of the notice referred to in Section 6(c)(iii)(C) or any notice from the Trust of the existence of any fact of the kind described in Section 6(c)(iii)(D) hereof (in each case, a "Suspension Notice"), such Holder will forthwith discontinue disposition of Transfer Restricted Securities pursuant to the applicable Registration Statement until (i) such Holder has received copies of the supplemented or amended Prospectus contemplated by Section 6(c)(iv) hereof, or (ii) such Holder is advised in writing by the Trust that the use of the Prospectus may be resumed, and has received copies of any additional or supplemental filings that are incorporated by reference in the Prospectus (in each case, the "Recommencement Date"). Each Holder receiving a Suspension Notice hereby agrees that it will either (i) destroy any Prospectuses, other than permanent file copies, then in such Holder's possession which have been replaced by the Trust with more recently dated Prospectuses or (ii) deliver to the Trust (at the Trust's expense) all copies, other than permanent file copies, then in such Holder's possession of the Prospectus covering such Transfer Restricted Securities that was current at the time of receipt of the Suspension Notice. The time period regarding the effectiveness of such Registration Statement set forth in Sections 3 or 4 hereof, as applicable, shall be extended by a number of days equal to the number of days in the period from and including the date of delivery of the Suspension Notice to the date of delivery of the Recommencement Date. SECTION 7. REGISTRATION EXPENSES (a) All expenses incident to the Issuers' performance of or compliance with this Agreement will be borne by the Guarantor, regardless of whether a Registration Statement becomes effective, including without limitation: (i) all registration and filing fees and expenses; 14 16 (ii) all fees and expenses of compliance with federal securities and state Blue Sky or securities laws; (iii) all expenses of printing (including printing certificates for the Exchange Securities to be issued in the Exchange Offer and printing of Prospectuses, messenger and delivery services and telephone; (iv) all fees and disbursements of counsel for the Issuers; (v) all application and filing fees in connection with a listing of the Exchange Securities on the Luxembourg Stock Exchange; and (vi) all fees and disbursements of independent certified public accountants of the Trust and the Guarantor (including the expenses of any special audit and comfort letters required by or incident to such performance). The Trust will, in any event, bear its and the Guarantor's internal expenses (including, without limitation, all salaries and expenses of its officers and employees performing legal or accounting duties), the expenses of any annual audit and the fees and expenses of any Person, including special experts, retained by the Trust or the Guarantor. (b) In connection with any Registration Statement required by this Agreement (including, without limitation, the Exchange Offer Registration Statement and the Shelf Registration Statement), the Guarantor will reimburse the Initial Purchasers and the Holders of Transfer Restricted Securities who are tendering Securities into the Exchange Offer and/or selling or reselling Securities or Exchange Securities pursuant to the "Plan of Distribution" contained in the Exchange Offer Registration Statement or the Shelf Registration Statement, as applicable, for the reasonable fees and disbursements of not more than one counsel, who shall be Shearman & Sterling, 9 Appold Street, London EC2A 2AP, unless another firm shall be chosen by the Holders of a majority in liquidation amount of the Transfer Restricted Securities for whose benefit such Registration Statement is being prepared. SECTION 8. INDEMNIFICATION (a) The Issuers agree, jointly and severally, to indemnify and hold harmless each Holder, its directors, officers and each Person, if any, who controls such Holder (within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act), from and against any and all losses, claims, damages, liabilities, judgments, (including without limitation, any legal or other expenses incurred in connection with investigating or defending any matter, including any action that could give rise to any such losses, claims, damages, liabilities or judgments) caused by any untrue statement or alleged untrue statement of a material fact contained in any Registration Statement, preliminary prospectus or Prospectus (or any amendment or supplement thereto) provided by the Trust to any Holder or any prospective purchaser of Exchange Securities or registered Securities, or caused by any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, except insofar as such losses, claims, damages, liabilities or judgments are caused by an untrue statement or omission or alleged untrue statement or omission that is based upon information relating to any of the Holders furnished in writing so the Trust by any of the Holders. (b) Each Holder of Transfer Restricted agrees, severally and not jointly, to indemnify and hold harmless the Issuers, and their respective directors and officers, and each person, if any, who controls (within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act) any Issuer, to the same extent as the foregoing indemnity from the Issuers 15 17 set forth in section (a) above, but only with reference to information relating to such Holder furnished in writing to the Trust by such Holder expressly for use in any Registration Statement. In no event shall any Holder, its directors, officers or any Person who controls such Holder be liable or responsible for any amount in excess of the amount by which the total amount received by such Holder with respect to its sale of Transfer Restricted Securities pursuant to a Registration Statement exceeds (i) the amount paid by such Holder for such Transfer Restricted Securities and (ii) the amount of any damages that such Holder, its directors, officers or any Person who controls such Holder has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission. (c) In case any action shall be commenced involving any person in respect of which indemnity may be sought pursuant to Section 8(a) or 8(b) (the "indemnified party"), the indemnified party shall promptly notify the person against whom such indemnity may be sought (the "indemnifying person") in writing and the indemnifying party shall assume the defense of such action, including the employment of counsel reasonably satisfactory to the indemnified party and, the payment of all fees and expenses of such counsel, as incurred (except that in the case of any action in respect of which indemnity may be sought pursuant to both Sections 8(a) and 8(b), a Holder shall not be required to assume the defense of such action pursuant to this Section 8(c), but may employ separate counsel and participate in the defense thereof, but the fees and expenses of such counsel, except as provided below, shall be at the expense of the Holder). Any indemnified party shall have the right to employ separate counsel in any such action and participate in the defense thereof, but the fees and expenses of such counsel shall be the expense of the indemnified party unless (i) the employment of such counsel shall have been specifically authorized in writing by the indemnifying party, (ii) the indemnifying party shall have failed to assume the defense of such action or employ counsel reasonably satisfactory to the indemnified party or (iii) the named parties to any such action (including any impleaded parties) include both the indemnified party and the indemnifying party, and the indemnified party shall have been advised by such counsel that there may be one or more legal defenses available to it which are different from or additional to those available to the indemnifying party (in which case the indemnifying party shall not have the right to assume the defense of such action on behalf of the indemnified party). In any such case, the indemnifying party shall not, in connection with any one action or separate but substantially similar or related actions in the same jurisdiction arising out of the same general allegations or circumstances, be liable for the fees and expenses of more than one separate firm of attorneys (in addition to any local counsel) for all indemnified parties and all such fees and expenses shall be reimbursed as they are incurred. Such firm shall be designated in writing by a majority of the Holders, in the case of the parties indemnified pursuant to Section 8(a), and by the Guarantor, in the case of parties indemnified pursuant to Section 8(b). The indemnifying party shall indemnify and hold harmless the indemnified party from and against any and all losses, claims, damages, liabilities and judgments by reason of any settlement of any action (i) effected with the indemnifying party's written consent or (ii) effected without the indemnifying party's written consent if the settlement is entered into more than twenty business days after the indemnifying party shall have received a request from the indemnified party for reimbursement for the fees and expenses of counsel (in any case where such fees and expenses are at the expense of the indemnifying party) and, prior to the date of such settlement, the indemnifying party shall have failed to comply with such reimbursement request. No indemnifying party shall, without the prior 16 18 written consent of the indemnified party, effect any settlement or compromise of, or consent to the entry of judgment with respect to, any pending or threatened action in respect of which the indemnified party is or could have been a party and indemnity or contribution may be or could have been sought hereunder by the indemnified party, unless such settlement, compromise or judgment (i) includes an unconditional release of the indemnified party from all liability on claims that are or could have been the subject matter of such action and (ii) does not include a statement as to or an admission of fault, culpability or a failure to act, by or on behalf of the indemnified party. (d) To the extent that the indemnification provided for in this Section 8 is unavailable to an indemnified party in respect of any losses, claims, damages, liabilities or judgments referred to therein, then each indemnifying party, in lieu of indemnifying such indemnified party, shall contribute to the amount paid or payable by such indemnified party as a result of such losses, claims, damages, liabilities or judgments (i) in such proportion as is appropriate to reflect the relative benefits received by the Issuers, on the one hand, and the Holders, on the other hand, from their sale of Transfer Restricted Securities or (ii) if the allocation provided by clause 8(d)(i) is not permitted by applicable law, in such proportion as is appropriate to reflect not only the relative benefits referred to in clause 8(d)(i) above but also the relative fault of the Issuers, on the one hand, and of the Holder, on the other hand, in connection with the statements or omissions which resulted in such losses, claims, damages, liabilities or judgments, as well as any other relevant equitable considerations. The relative fault of the Issuers, on the one hand, and of the Holder, on the other hand, shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the Issuers, on the one hand, or by the Holder, on the other hand, and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. The Issuers and each Holder agree that it would not be just and equitable if contribution pursuant to this Section 8(d) were determined by pro rata allocation (even if the Holders were treated as one entity for such purpose) or by any other method of allocation which does not take account of the equitable considerations referred to in the immediately preceding paragraph. The amount paid or payable by an indemnified party as a result of the losses, claims, damages, liabilities or judgments referred to in the immediately preceding paragraph shall be deemed to include, subject to the limitations set forth above, any legal or other expenses reasonably incurred by such indemnified party in connection with investigating or defending any matter, including any action that could have given rise to such losses, claims, damages, liabilities or judgments. Notwithstanding the provisions of this Section 8, no Holder, its directors, its officers or any Person, if any, who controls such Holder shall be required to contribute, in the aggregate, any amount in excess of the amount by which the total received by such Holder with respect to the sale of Transfer Restricted Securities pursuant to a Registration Statement exceeds (i) the amount paid by such Holder for such Transfer Restricted Securities and (ii) the amount of any damages which such Holder has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. The Holders' obligations to contribute pursuant to this Section 8(d) are several in proportion to the 17 19 respective liquidation amount of Transfer Restricted Securities held by each Holder hereunder and not joint. SECTION 9. RULE 144A AND RULE 144 The Issuers agree with each Holder, for so long as any Transfer Restricted Securities remain outstanding and during any period in which the Guarantor (i) is not subject to Section 13 or 15(d) of the Exchange Act, to make available, upon request of any Holder, to such Holder or beneficial owner of Transfer Restricted Securities in connection with any sale thereof and any prospective purchaser of such Transfer Restricted Securities designated by such Holder or beneficial owner, the information required by Rule 144A(d)(4) under the Securities Act in order to permit resales of such Transfer Restricted Securities pursuant to Rule 144A, and (ii) is subject to Section 13 or 15(d) of the Exchange Act, to make all filings required thereby in a timely manner in order to permit resales of such Transfer Restricted Securities pursuant to Rule 144. SECTION 10. MISCELLANEOUS (a) Remedies. The Issuers acknowledge and agree that any failure by the Issuers to comply with their respective obligations under Sections 3 and 4 hereof may result in material irreparable injury to the Initial Purchasers or the Holders for which there is no adequate remedy at law, that it will not be possible to measure damages for such injuries precisely and that, in the event of any such failure, the Initial Purchasers or any Holder may obtain such relief as may be required to specifically enforce the Issuers' obligations under Sections 3 and 4 hereof. The Issuers further agree to waive the defense in any action for specific performance that a remedy at law would be adequate. (b) No Inconsistent Agreements. None of the Issuers will, on or after the date of this Agreement, enter into any agreement with respect to its securities that is inconsistent with the rights granted to the Holders in this Agreement or otherwise conflicts with the provisions hereof. Nothing in this Agreement shall preclude or limit the Issuers from (i) conducting the Exchange Offer pursuant to a single registration statement relating to both (A) the Exchange Offer and (B) a substantially identical exchange offer relating to $225 million of United States dollar-denominated trust preferred securities (and related trust guarantees, senior subordinated notes and note guaranties) having substantially identical terms to the Securities (other than their currency, their price in the initial offering, their coupon and the identity of the issuer-trust) ("Dollar Exchange Offer") or (ii) preparing and filing a single shelf registration statement with respect to both the Preferred Securities and the additional trust preferred securities described in the preceding clause (i)(B), and no actions taken pursuant to or as contemplated by this sentence will be deemed inconsistent with the rights granted to the Holders in this Agreement, it being understood that in the event that it is impracticable to conduct the Exchange Offer and the Dollar Exchange Offer pursuant to a single registration statement, each of the Exchange Offer and Dollar Exchange Offer will proceed separately. Except for the agreement dated as of March 2, 2000 between the Guarantor and Persons who acquired non-voting Preference shares of the Guarantor in the "Franconia" transaction and the A/B registration rights agreement dated as of June 6, 2001 relating to the Dollar Exchange Offer, none of the Issuers is a party to any agreement granting any registration rights with respect to its securities to any person. The rights granted to the Holders 18 20 hereunder do not in any way conflict with and are not inconsistent with the rights granted to the holders of the Issuer's securities of the Issuers under any agreement in effect on the date hereof. (c) Amendments and Waivers. The provisions of this Agreement may not be amended, modified or supplemented, and waivers or consents to or departures from the provisions hereof may not be given unless (i) in the case of Section 5 hereof and this Section 10(c)(i), the Trust has obtained the written consent of Holders of all outstanding Transfer Restricted Securities and (ii) in the case of all other provisions hereof, the Trust has obtained the written consent of Holders of a majority of the outstanding principal amount of Transfer Restricted Securities (excluding Transfer Restricted Securities held by the Trust or its Affiliates). Notwithstanding the foregoing, a waiver or consent to departure from the provisions hereof that relates exclusively to the rights of Holders whose Transfer Restricted Securities are being tendered pursuant to the Exchange Offer, and that does not affect directly or indirectly the rights of other Holders whose Transfer Restricted Securities are not being tendered pursuant to such Exchange Offer, may be given by the Holders of a majority of the outstanding principal amount of Transfer Restricted Securities subject to such Exchange Offer. (d) Third Party Beneficiary. The Holders shall be third party beneficiaries to the agreements made hereunder between the Issuers, on the one hand, and the Initial Purchasers, on the other hand, and shall have the right to enforce such agreements directly to the extent they may deem such enforcement necessary or advisable to protect its rights or the rights of Holders hereunder. (e) Notices. All notices and other communications provided for or permitted hereunder shall be made in writing by hand-delivery, first-class mail (registered or certified, return receipt requested), telex, telecopier, or air courier guaranteeing overnight delivery; (i) if to a Holder, at the address set forth on the records of the Registrar under the Declaration, with a copy to the Registrar under the Declaration; and (ii) if to the Issuers: Fresenius Medical Care Capital Trust V, c/o Fresenius Medical Care Holdings, Inc. 95 Hayden Avenue, Lexington, MA 02173 with a copy to: Fresenius Medical Care AG, Else-Kroner Str 1, 61346 Bad Homburg v.d. H, Telefax: (011-49-6172-609-2422), Attention: Law Department and to: 19 21 O'Melveny & Myers LLP 133 East 53rd Street New York NY 1022-4611 Fax: 212 326 2061 Ulrich Wagner, Esq. All such notices and communications shall be deemed to have been duly given: at the time delivered by hand, if personally delivered; five Business Days after being deposited in the mail, postage prepaid, if mailed; when receipt acknowledged, if telecopied; and on the next business day, if timely delivered to an air courier guaranteeing overnight delivery. 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 specified in the Declaration. (f) Successors and Assigns. This Agreement shall inure to the benefit of and be binding upon the successors and assigns of each of the parties, including without limitation and without the need for an express assignment, subsequent Holders; provided, that nothing herein shall be deemed to permit any assignment, transfer or other disposition of Transfer Restricted Securities in violation of the terms hereof or of the Purchase Agreement, the Declaration or applicable law. If any transferee of any Holder shall acquire Transfer Restricted Securities in any manner, whether by operation of law or otherwise, such Transfer Restricted Securities shall be held subject to all of the terms of this Agreement, and by taking and holding such Transfer Restricted Securities such Person shall be conclusively deemed to have agreed to be bound by and to perform all of the terms and provisions of this Agreement, including the restrictions on resale set forth in this Agreement and, if applicable, the Purchase Agreement, and such Person shall be entitled to receive the benefits hereof. (g) 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. (h) Headings. The headings in this Agreement are for convenience of reference only and shall not limit or otherwise affect the meaning hereof. (i) Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO THE CONFLICT OF LAW RULES THEREOF. (j) Severability. In the event that any one or more of the provisions contained herein, or the application thereof in any circumstance, is held invalid, illegal or unenforceable, the validity, legality and enforceability of any such provision in every other respect and of the remaining provisions contained herein shall not be affected or impaired thereby. 20 22 (k) Entire Agreement. This Agreement is intended by the parties as a final expression of their agreement and intended to be a complete and exclusive statement of the agreement and understanding of the parties hereto in respect of the subject matter contained herein. There are no restrictions, promises, warranties or undertakings, other than those set forth or referred to herein with respect to the registration rights granted with respect to the Transfer Restricted Securities. This Agreement supersedes all prior agreements and understandings between the parties with respect to such subject matter. 21 23 FRESENIUS MEDICAL CARE CAPITAL TRUST V By: /s/ Ben Lipps ------------------------------------ Name: Ben J. Lipps Title: Company Trustee By: /s/Karl-Dieter Schwab ------------------------------------ Name: Karl-Dieter Schwab Title: Company Trustee By: /s/Josef Dinger ------------------------------------ Name: Josef Dinger Title: Company Trustee FRESENIUS MEDICAL CARE AG By: /s/ Ben Lipps ------------------------------------ Name: Ben Lipps Title: CEO By: /s/ Rainer Runte ------------------------------------ Name: Rainer Runte Title: Senior Vice President and General Counsel FMC TRUST FINANCE S.a.r.l. LUXEMBOURG - III By: /s/Gabriele Dux ------------------------------------ Name: Gabriele Dux Title: Manager 24 FRESENIUS MEDICAL CARE DEUTSCHLAND GMBH By: /s/Emanuele Gatti ------------------------------------ Name: Emanuele Gatti Title: Managing Director By: /s/Karl-Dieter Schwab ------------------------------------ Name: Karl-Dieter Schwab Title: Procurist FRESENIUS MEDICAL CARE HOLDINGS, INC. By: /s/Ben Lipps ------------------------------------ Name: Ben Lipps Title: President 25 The foregoing Registration Rights Agreement is hereby confirmed and accepted as of the date first above written CREDIT SUISSE FIRST BOSTON (EUROPE) LIMITED By: /s/James L. Amina ------------------------------------ Name: James L. Amina Title: Managing Director By: /s/Steven Rattner ------------------------------------ Name: Steven Rattner Title: Managing Director DEUTSCHE BANK AG LONDON DRESDNER BANK AG LONDON BRANCH J.P. MORGAN SECURITIES LTD. BANC OF AMERICA SECURITIES LLC SCOTIA CAPITAL (USA) INC. WESTLB PANMURE LIMITED Each by its duly authorized attorney-in-fact: By: /s/Mark D. Walsh ------------------------------------ Name: Mark D. Walsh Title: Attorney-in-fact 26 EXHIBIT A NOTICE OF FILING OF EXCHANGE OFFER REGISTRATION STATEMENT To: Credit Suisse First Boston (Europe) Limited One Cabot Square London E14 4QJ England Attention: James Amine Fax: (44) 20-7888-9681 From: Fresenius Medical Care Capital Trust V Re: 7 3/8% Trust Preferred Securities due 2001 Date: ______, 200_ For your information only (NO ACTION REQUIRED): Today, _________, 200__, we filed [an Exchange Registration Statement/a Shelf Registration Statement] with the Securities and Exchange Commission. We currently expect this registration statement to be declared effective within ___ business days of the date hereof. EX-12.1 26 y51284ex12-1.txt STATEMENT RE COMPUTATION OF RATIOS 1 Exhibit 12.1 Fresenius Medical Care AG (US dollars in thousands) Ratio of combined fixed charges and Preference share dividends to earnings
3 Months 3 Months December 31, 3/31/01 3/31/00 2000 1999 1998 1997 1996 ------- ------- ------- ------- ------- ------- ------- Earnings EBT 104,526 89,995 404,708 (258,910) 269,437 207,388 144,702 Fixed Charges 59,236 61,567 238,843 236,626 236,795 200,895 64,750 Adjustments (438) (438) (1,752) (771) (1,265) (1,069) (851) TOTAL EARNINGS 163,324 151,124 641,799 (23,055) 504,967 407,214 208,601 Fixed Charges Interest expense 55,618 58,429 225,516 226,218 228,182 193,860 61,475 Capitalized interest 301 301 1,205 224 221 51 638 Portion of rent expense- interest factor (6%) 3,180 2,700 11,575 9,637 7,348 5,966 2,424 Other 137 137 547 547 1,044 1,018 213 TOTAL FIXED CHARGES 59,236 61,567 238,843 236,626 236,795 200,895 64,750 Preferred stock dividend requirements -- -- -- -- 11,958 10,771 974 COMBINED FIXED CHARGES AND PREFERENCE SHARE DIVIDENDS 59,236 61,567 238,843 236,626 248,753 211,666 65,724 RATIO FIXED CHARGES 0.4 0.4 0.4 (Note 1) 0.5 0.5 0.3
(Note 1)- Earnings were deficient in covering fixed charges by $260 million for the year ended 1999. EX-12.2 27 y51284ex12-2.txt STATEMENT RE COMPUTATION OF RATIOS 1 Exhibit 12.2 FRESENIUS MEDICAL CARE - NORTH AMERICA Ratio of Fixed Charges to Earnings calculation $ Millions
THREE MONTHS Nine Months Ended March 31, Year Ended December 31, Ended Sept 30 ---------------- ----------------------------------------------------- ------------- 2001 2000 2000 1999 1998 1997 1996 (a) 1996(b) ---- ---- ---- ---- ---- ---- -------- ------------- Fixed Charges Interest Expense including amortization of financing fees 51 53 207 202 209 178 43 16 add: one third of rental expense under operating leases 15 12 52 44 35 27 7 22 --- --- --- ---- --- --- -- --- Total Fixed Charges 66 65 259 246 244 205 50 38 === === === ==== === === == === Earnings Earnings Before Taxes 44 45 203 (408) 126 80 16 129 add: Fixed Charges 66 65 259 246 244 205 50 38 --- --- --- ---- --- --- -- --- Total Earnings 110 110 462 (162) 370 285 66 167 === === === ==== === === == === Ratio of Fixed Charges to Earnings 0.6 0.6 0.6 NA 0.7 0.7 0.8 0.2
(a) includes the results of FMCH for the period subsequent to September 30, 1996. (b) represents the predecessor results of NMC for the nine months ended September 30, 1996. EX-23.1 28 y51284ex23-1.txt CONSENT OF KPMG 1 Exhibit 23.1 The Supervisory Board Fresenius Medical Care Corporation Else-Kroner-Strasse 1 D - 61352 Bad Homburg Germany Frankfurt, Germany August 1, 2001 We consent to the use of our report included herein and to the reference to our firm under the heading "Experts" in the prospectus. /s/KPMG Deutsche Treuhand-Gesellechaft Aktiengesellschaft Wirtschaftsprufungsgesellschaft - --------------------------------------------------------- EX-23.2 29 y51284ex23-2.txt CONSENT OF KPMG LLP 1 Exhibit 23.2 To the Board of Directors and Stockholders of Fresenius Medical Care Holdings, Inc. We consent to the use of our reports included herein and to the reference to our firm under the heading "Experts" in the Registration Statement. KPMG LLP /S/KPMG LLP Boston, Massachusetts August 1, 2001 EX-25.1 30 y51284ex25-1.txt STATEMENT OF ELIGIBILITY OF TRUSTEE 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) STATE STREET BANK AND TRUST COMPANY (Exact name of trustee as specified in its charter) Massachusetts 04-1867445 (Jurisdiction of incorporation or (I.R.S. Employer organization if not a U.S. national bank) Identification No.) 225 Franklin Street, Boston, Massachusetts 02110 (Address of principal executive offices) (Zip Code) Maureen Scannell Bateman, Esq. Executive Vice President and General Counsel 225 Franklin Street, Boston, Massachusetts 02110 (617) 654-3253 (Name, address and telephone number of agent for service) FRESENIUS MEDICAL CARE CAPITAL TRUST IV (Exact name of obligor as specified in its charter) DELAWARE TO BE APPLIED FOR (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) C/O FRESENIUS MEDICAL CARE HOLDINGS, INC. 95 HAYDEN AVENUE LEXINGTON, MASSACHUSETTS 02173 (Address of principal executive offices) (Zip Code) 7 7/8% USD Trust Preferred Securities (Title of indenture securities) 2 GENERAL ITEM 1. GENERAL INFORMATION. FURNISH THE FOLLOWING INFORMATION AS TO THE TRUSTEE: (A) NAME AND ADDRESS OF EACH EXAMINING OR SUPERVISORY AUTHORITY TO WHICH IT IS SUBJECT. Department of Banking and Insurance of The Commonwealth of Massachusetts, 100 Cambridge Street, Boston, Massachusetts. Board of Governors of the Federal Reserve System, Washington, D.C., Federal Deposit Insurance Corporation, Washington, D.C. (B) WHETHER IT IS AUTHORIZED TO EXERCISE CORPORATE TRUST POWERS. Trustee is authorized to exercise corporate trust powers. ITEM 2. AFFILIATIONS WITH OBLIGOR. IF THE OBLIGOR IS AN AFFILIATE OF THE TRUSTEE, DESCRIBE EACH SUCH AFFILIATION. The obligor is not an affiliate of the trustee or of its parent, State Street Corporation. (See note on page 2.) ITEM 3. THROUGH ITEM 15. NOT APPLICABLE. ITEM 16. LIST OF EXHIBITS. LIST BELOW ALL EXHIBITS FILED AS PART OF THIS STATEMENT OF ELIGIBILITY. 1. A COPY OF THE ARTICLES OF ASSOCIATION OF THE TRUSTEE AS NOW IN EFFECT. A copy of the Articles of Association of the trustee, as now in effect, is on file with the Securities and Exchange Commission as Exhibit 1 to Amendment No. 1 to the Statement of Eligibility and Qualification of Trustee (Form T-1) filed with the Registration Statement of Morse Shoe, Inc. (File No. 22-17940) and is incorporated herein by reference thereto. 2. A COPY OF THE CERTIFICATE OF AUTHORITY OF THE TRUSTEE TO COMMENCE BUSINESS, IF NOT CONTAINED IN THE ARTICLES OF ASSOCIATION. A copy of a Statement from the Commissioner of Banks of Massachusetts that no certificate of authority for the trustee to commence business was necessary or issued is on file with the Securities and Exchange Commission as Exhibit 2 to Amendment No. 1 to the Statement of Eligibility and Qualification of Trustee (Form T-1) filed with the Registration Statement of Morse Shoe, Inc. (File No. 22-17940) and is incorporated herein by reference thereto. 3. A COPY OF THE AUTHORIZATION OF THE TRUSTEE TO EXERCISE CORPORATE TRUST POWERS, IF SUCH AUTHORIZATION IS NOT CONTAINED IN THE DOCUMENTS SPECIFIED IN PARAGRAPH (1) OR (2), ABOVE. A copy of the authorization of the trustee to exercise corporate trust powers is on file with the Securities and Exchange Commission as Exhibit 3 to Amendment No. 1 to the Statement of Eligibility and Qualification of Trustee (Form T-1) filed with the Registration Statement of Morse Shoe, Inc. (File No. 22-17940) and is incorporated herein by reference thereto. 4. A COPY OF THE EXISTING BY-LAWS OF THE TRUSTEE, OR INSTRUMENTS CORRESPONDING THERETO. A copy of the by-laws of the trustee, as now in effect, is on file with the Securities and Exchange Commission as Exhibit 4 to the Statement of Eligibility and Qualification of Trustee (Form T-1) filed with the Registration Statement of Eastern Edison Company (File No. 33-37823) and is incorporated herein by reference thereto. 2 3 5. A COPY OF EACH INDENTURE REFERRED TO IN ITEM 4. IF THE OBLIGOR IS IN DEFAULT. Not applicable. 6. THE CONSENTS OF UNITED STATES INSTITUTIONAL TRUSTEES REQUIRED BY SECTION 321(B) OF THE ACT. The consent of the trustee required by Section 321(b) of the Act is annexed hereto as Exhibit 6 and made a part hereof. 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. A copy of the latest report of condition of the trustee published pursuant to law or the requirements of its supervising or examining authority is annexed hereto as Exhibit 7 and made a part hereof. NOTES In answering any item of this Statement of Eligibility which relates to matters peculiarly within the knowledge of the obligor or any underwriter for the obligor, the trustee has relied upon information furnished to it by the obligor and the underwriters, and the trustee disclaims responsibility for the accuracy or completeness of such information. The answer furnished to Item 2. of this statement will be amended, if necessary, to reflect any facts which differ from those stated and which would have been required to be stated if known at the date hereof. SIGNATURE Pursuant to the requirements of the Trust Indenture Act of 1939, as amended, the trustee, State Street Bank and Trust Company, a corporation organized and existing under the laws of The Commonwealth of Massachusetts, has duly caused this statement of eligibility to be signed on its behalf by the undersigned, thereunto duly authorized, all in the City of Hartford and the State of Connecticut, on the 27th of July 2001. STATE STREET BANK AND TRUST COMPANY By: /s/ Elizabeth C. Hammer ----------------------- NAME: ELIZABETH C. HAMMER TITLE: VICE PRESIDENT 4 EXHIBIT 6 CONSENT OF THE TRUSTEE Pursuant to the requirements of Section 321(b) of the Trust Indenture Act of 1939, as amended, in connection with the proposed issuance by FRESENIUS MEDICAL CARE CAPITAL TRUST IV of its USD TRUST PREFERRED SECURITIES, we hereby consent that reports of examination by Federal, State, Territorial or District authorities may be furnished by such authorities to the Securities and Exchange Commission upon request therefor. STATE STREET BANK AND TRUST COMPANY By: /s/ Elizabeth C. Hammer ----------------------- NAME: ELIZABETH C. HAMMER TITLE: VICE PRESIDENT DATED: August 1, 2001 5 EXHIBIT 7 Consolidated Report of Condition of State Street Bank and Trust Company, Massachusetts and foreign and domestic subsidiaries, a state banking institution organized and operating under the banking laws of this commonwealth and a member of the Federal Reserve System, at the close of business March 31, 2001 published in accordance with a call made by the Federal Reserve Bank of this District pursuant to the provisions of the Federal Reserve Act and in accordance with a call made by the Commissioner of Banks under General Laws, Chapter 172, Section 22(a).
Thousands of ASSETS Dollars Cash and balances due from depository institutions: Noninterest-bearing balances and currency and coin ........................ 897,105 Interest-bearing balances ................................................. 17,983,011 Securities ............................................................................ 16,720,906 Federal funds sold and securities purchased under agreements to resell in domestic offices of the bank and its Edge subsidiary ....................................... 15,060,119 Loans and lease financing receivables: Loans and leases, net of unearned income ............. 6,262,440 Allowance for loan and lease losses .................. 57,674 Allocated transfer risk reserve ...................... 0 Loans and leases, net of unearned income and allowances ................... 6,204,766 Assets held in trading accounts ....................................................... 3,067,581 Premises and fixed assets ............................................................. 570,144 Other real estate owned ............................................................... 0 Investments in unconsolidated subsidiaries ............................................ 22,733 Customers' liability to this bank on acceptances outstanding .......................... 167,024 Intangible assets ..................................................................... 456,769 Other assets .......................................................................... 1,512,531 ---------- Total assets .......................................................................... 62,662,689 ---------- LIABILITIES Deposits: In domestic offices .................................. 12,418,125 Noninterest-bearing ...................... 7,272,865 Interest-bearing ......................... 5,145,260 In foreign offices and Edge subsidiary .................................... 25,631,712 Noninterest-bearing ...................... 96,103 Interest-bearing ......................... 25,535,609 Federal funds purchased and securities sold under agreements to repurchase in domestic offices of the bank and of its Edge subsidiary ....................................... 16,541,928 Demand notes issued to the U.S. Treasury .............................................. 0 Trading liabilities ................................................................... 2,336,011 Other borrowed money .................................................................. 184,267 Subordinated notes and debentures ..................................................... 0 Bank's liability on acceptances executed and outstanding .............................. 167,024 Other liabilities ..................................................................... 1,566,844 Total liabilities ..................................................................... 58,845,911 ---------- Minority interest in consolidated subsidiaries ........................................ 49,273 EQUITY CAPITAL Perpetual preferred stock and related surplus ......................................... 0 Common stock .......................................................................... 29,931 Surplus ............................................................................... 567,089 Retained Earnings ..................................................................... 3,140,648 Accumulated other comprehensive income ............................... 29,837 Other equity capital components ....................................................... 0 Undivided profits and capital reserves/Net unrealized holding gains (losses) .......... 0 Net unrealized holding gains (losses) on available-for-sale securities 0 Cumulative foreign currency translation adjustments ................................... 0 Total equity capital .................................................................. 3,767,505 ---------- Total liabilities, minority interest and equity capital ............................... 62,662,689 ----------
6 I, Frederick P. Baughman, Senior Vice President and Comptroller of the above named bank do hereby declare that this Report of Condition has been prepared in conformance with the instructions issued by the Board of Governors of the Federal Reserve System and is true to the best of my knowledge and belief. Frederick P. Baughman We, the undersigned directors, attest to the correctness of this Report of Condition and declare that it has been examined by us and to the best of our knowledge and belief has been prepared in conformance with the instructions issued by the Board of Governors of the Federal Reserve System and is true and correct. Ronald E. Logue David A. Spina Truman S. Casner EX-25.2 31 y51284ex25-2.txt STATEMENT OF ELIGIBILITY OF TRUSTEE 1 Exhibit 25.2 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) STATE STREET BANK AND TRUST COMPANY (Exact name of trustee as specified in its charter) Massachusetts 04-1867445 (Jurisdiction of incorporation or (I.R.S. Employer organization if not a U.S. national bank) Identification No.) 225 Franklin Street, Boston, Massachusetts 02110 (Address of principal executive offices) (Zip Code) Maureen Scannell Bateman, Esq. Executive Vice President and General Counsel 225 Franklin Street, Boston, Massachusetts 02110 (617) 654-3253 (Name, address and telephone number of agent for service) FRESENIUS MEDICAL CARE CAPITAL TRUST V (Exact name of obligor as specified in its charter) DELAWARE TO BE APPLIED FOR (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) C/O FRESENIUS MEDICAL CARE HOLDINGS, INC. 95 HAYDEN AVENUE LEXINGTON, MASSACHUSETTS 02173 (Address of principal executive offices) (Zip Code) 7 3/8% EURO Trust Preferred Securities (Title of indenture securities) 2 GENERAL ITEM 1. GENERAL INFORMATION. FURNISH THE FOLLOWING INFORMATION AS TO THE TRUSTEE: (a) NAME AND ADDRESS OF EACH EXAMINING OR SUPERVISORY AUTHORITY TO WHICH IT IS SUBJECT. Department of Banking and Insurance of The Commonwealth of Massachusetts, 100 Cambridge Street, Boston, Massachusetts. Board of Governors of the Federal Reserve System, Washington, D.C., Federal Deposit Insurance Corporation, Washington, D.C. (b) WHETHER IT IS AUTHORIZED TO EXERCISE CORPORATE TRUST POWERS. Trustee is authorized to exercise corporate trust powers. ITEM 2. AFFILIATIONS WITH OBLIGOR. IF THE OBLIGOR IS AN AFFILIATE OF THE TRUSTEE, DESCRIBE EACH SUCH AFFILIATION. The obligor is not an affiliate of the trustee or of its parent, State Street Corporation. (See note on page 2.) ITEM 3. THROUGH ITEM 15. NOT APPLICABLE. ITEM 16. LIST OF EXHIBITS. LIST BELOW ALL EXHIBITS FILED AS PART OF THIS STATEMENT OF ELIGIBILITY. 1. A COPY OF THE ARTICLES OF ASSOCIATION OF THE TRUSTEE AS NOW IN EFFECT. A copy of the Articles of Association of the trustee, as now in effect, is on file with the Securities and Exchange Commission as Exhibit 1 to Amendment No. 1 to the Statement of Eligibility and Qualification of Trustee (Form T-1) filed with the Registration Statement of Morse Shoe, Inc. (File No. 22-17940) and is incorporated herein by reference thereto. 2. A COPY OF THE CERTIFICATE OF AUTHORITY OF THE TRUSTEE TO COMMENCE BUSINESS, IF NOT CONTAINED IN THE ARTICLES OF ASSOCIATION. A copy of a Statement from the Commissioner of Banks of Massachusetts that no certificate of authority for the trustee to commence business was necessary or issued is on file with the Securities and Exchange Commission as Exhibit 2 to Amendment No. 1 to the Statement of Eligibility and Qualification of Trustee (Form T-1) filed with the Registration Statement of Morse Shoe, Inc. (File No. 22-17940) and is incorporated herein by reference thereto. 3. A COPY OF THE AUTHORIZATION OF THE TRUSTEE TO EXERCISE CORPORATE TRUST POWERS, IF SUCH AUTHORIZATION IS NOT CONTAINED IN THE DOCUMENTS SPECIFIED IN PARAGRAPH (1) OR (2), ABOVE. A copy of the authorization of the trustee to exercise corporate trust powers is on file with the Securities and Exchange Commission as Exhibit 3 to Amendment No. 1 to the Statement of Eligibility and Qualification of Trustee (Form T-1) filed with the Registration Statement of Morse Shoe, Inc. (File No. 22-17940) and is incorporated herein by reference thereto. 4. A COPY OF THE EXISTING BY-LAWS OF THE TRUSTEE, OR INSTRUMENTS CORRESPONDING THERETO. A copy of the by-laws of the trustee, as now in effect, is on file with the Securities and Exchange Commission as Exhibit 4 to the Statement of Eligibility and Qualification of Trustee (Form T-1) filed with the Registration Statement of Eastern Edison Company (File No. 33-37823) and is incorporated herein by reference thereto. 2 3 5. A COPY OF EACH INDENTURE REFERRED TO IN ITEM 4. IF THE OBLIGOR IS IN DEFAULT. Not applicable. 6. THE CONSENTS OF UNITED STATES INSTITUTIONAL TRUSTEES REQUIRED BY SECTION 321(b) OF THE ACT. The consent of the trustee required by Section 321(b) of the Act is annexed hereto as Exhibit 6 and made a part hereof. 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. A copy of the latest report of condition of the trustee published pursuant to law or the requirements of its supervising or examining authority is annexed hereto as Exhibit 7 and made a part hereof. NOTES In answering any item of this Statement of Eligibility which relates to matters peculiarly within the knowledge of the obligor or any underwriter for the obligor, the trustee has relied upon information furnished to it by the obligor and the underwriters, and the trustee disclaims responsibility for the accuracy or completeness of such information. The answer furnished to Item 2. of this statement will be amended, if necessary, to reflect any facts which differ from those stated and which would have been required to be stated if known at the date hereof. SIGNATURE Pursuant to the requirements of the Trust Indenture Act of 1939, as amended, the trustee, State Street Bank and Trust Company, a corporation organized and existing under the laws of The Commonwealth of Massachusetts, has duly caused this statement of eligibility to be signed on its behalf by the undersigned, thereunto duly authorized, all in the City of Hartford and the State of Connecticut, on the 1st of August 2001. STATE STREET BANK AND TRUST COMPANY By: /s/ Elizabeth C. Hammer ----------------------- NAME: ELIZABETH C. HAMMER TITLE: VICE PRESIDENT 4 EXHIBIT 6 CONSENT OF THE TRUSTEE Pursuant to the requirements of Section 321(b) of the Trust Indenture Act of 1939, as amended, in connection with the proposed issuance by FRESENIUS MEDICAL CARE CAPITAL TRUST V of its EURO TRUST PREFERRED SECURITIES, we hereby consent that reports of examination by Federal, State, Territorial or District authorities may be furnished by such authorities to the Securities and Exchange Commission upon request therefor. STATE STREET BANK AND TRUST COMPANY By: /s/ Elizabeth C. Hammer ----------------------- NAME: ELIZABETH C. HAMMER TITLE: VICE PRESIDENT DATED: August 1, 2001 5 EXHIBIT 7 Consolidated Report of Condition of State Street Bank and Trust Company, Massachusetts and foreign and domestic subsidiaries, a state banking institution organized and operating under the banking laws of this commonwealth and a member of the Federal Reserve System, at the close of business March 31, 2001 published in accordance with a call made by the Federal Reserve Bank of this District pursuant to the provisions of the Federal Reserve Act and in accordance with a call made by the Commissioner of Banks under General Laws, Chapter 172, Section 22(a).
Thousands of ASSETS Dollars Cash and balances due from depository institutions: Noninterest-bearing balances and currency and coin ........................ 897,105 Interest-bearing balances ................................................. 17,983,011 Securities ............................................................................ 16,720,906 Federal funds sold and securities purchased under agreements to resell in domestic offices of the bank and its Edge subsidiary ....................................... 15,060,119 Loans and lease financing receivables: Loans and leases, net of unearned income ...................... 6,262,440 Allowance for loan and lease losses ........................... 57,674 Allocated transfer risk reserve ............................... 0 Loans and leases, net of unearned income and allowances ................... 6,204,766 Assets held in trading accounts ....................................................... 3,067,581 Premises and fixed assets ............................................................. 570,144 Other real estate owned ............................................................... 0 Investments in unconsolidated subsidiaries ............................................ 22,733 Customers' liability to this bank on acceptances outstanding .......................... 167,024 Intangible assets ..................................................................... 456,769 Other assets .......................................................................... 1,512,531 ---------- Total assets .......................................................................... 62,662,689 ---------- LIABILITIES Deposits: In domestic offices ....................................................... 12,418,125 Noninterest-bearing ............................... 7,272,865 Interest-bearing .................................. 5,145,260 In foreign offices and Edge subsidiary .................................... 25,631,712 Noninterest-bearing ............................... 96,103 Interest-bearing .................................. 25,535,609 Federal funds purchased and securities sold under agreements to repurchase in domestic offices of the bank and of its Edge subsidiary ....................................... 16,541,928 Demand notes issued to the U.S. Treasury .............................................. 0 Trading liabilities ................................................................... 2,336,011 Other borrowed money .................................................................. 184,267 Subordinated notes and debentures ..................................................... 0 Bank's liability on acceptances executed and outstanding .............................. 167,024 Other liabilities ..................................................................... 1,566,844 Total liabilities ..................................................................... 58,845,911 ---------- Minority interest in consolidated subsidiaries ........................................ 49,273 EQUITY CAPITAL Perpetual preferred stock and related surplus ......................................... 0 Common stock .......................................................................... 29,931 Surplus ............................................................................... 567,089 Retained Earnings ..................................................................... 3,140,648 Accumulated other comprehensive income ............................... 29,837 Other equity capital components ....................................................... 0 Undivided profits and capital reserves/Net unrealized holding gains (losses) .......... 0 Net unrealized holding gains (losses) on available-for-sale securities 0 Cumulative foreign currency translation adjustments ................................... 0 Total equity capital .................................................................. 3,767,505 ---------- Total liabilities, minority interest and equity capital ............................... 62,662,689 ----------
6 I, Frederick P. Baughman, Senior Vice President and Comptroller of the above named bank do hereby declare that this Report of Condition has been prepared in conformance with the instructions issued by the Board of Governors of the Federal Reserve System and is true to the best of my knowledge and belief. Frederick P. Baughman We, the undersigned directors, attest to the correctness of this Report of Condition and declare that it has been examined by us and to the best of our knowledge and belief has been prepared in conformance with the instructions issued by the Board of Governors of the Federal Reserve System and is true and correct. Ronald E. Logue David A. Spina Truman S. Casner EX-25.3 32 y51284ex25-3.txt STATEMENT OF ELIGIBILITY OF TRUSTEE 1 Exhibit 25.3 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) STATE STREET BANK AND TRUST COMPANY (Exact name of trustee as specified in its charter) Massachusetts 04-1867445 (Jurisdiction of incorporation or (I.R.S. Employer organization if not a U.S. national bank) Identification No.) 225 Franklin Street, Boston, Massachusetts 02110 (Address of principal executive offices) (Zip Code) Maureen Scannell Bateman, Esq. Executive Vice President and General Counsel 225 Franklin Street, Boston, Massachusetts 02110 (617) 654-3253 (Name, address and telephone number of agent for service) FRESENIUS MEDICAL CARE AKTIENGESELLSCHAFT (Exact name of obligor as specified in its charter) GERMANY N/A (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) ELSE-KRONER STR. 1 61346 BAD HOMBURG v.d.H., GERMANY (Address of principal executive offices) (Zip Code) Company Guarantee of 7 7/8% USD Trust Preferred Securities (Title of indenture securities) 2 GENERAL ITEM 1. GENERAL INFORMATION. FURNISH THE FOLLOWING INFORMATION AS TO THE TRUSTEE: (A) NAME AND ADDRESS OF EACH EXAMINING OR SUPERVISORY AUTHORITY TO WHICH IT IS SUBJECT. Department of Banking and Insurance of The Commonwealth of Massachusetts, 100 Cambridge Street, Boston, Massachusetts. Board of Governors of the Federal Reserve System, Washington, D.C., Federal Deposit Insurance Corporation, Washington, D.C. (B) WHETHER IT IS AUTHORIZED TO EXERCISE CORPORATE TRUST POWERS. Trustee is authorized to exercise corporate trust powers. ITEM 2. AFFILIATIONS WITH OBLIGOR. IF THE OBLIGOR IS AN AFFILIATE OF THE TRUSTEE, DESCRIBE EACH SUCH AFFILIATION. The obligor is not an affiliate of the trustee or of its parent, State Street Corporation. (See note on page 2.) ITEM 3. THROUGH ITEM 15. NOT APPLICABLE. ITEM 16. LIST OF EXHIBITS. LIST BELOW ALL EXHIBITS FILED AS PART OF THIS STATEMENT OF ELIGIBILITY. 1. A COPY OF THE ARTICLES OF ASSOCIATION OF THE TRUSTEE AS NOW IN EFFECT. A copy of the Articles of Association of the trustee, as now in effect, is on file with the Securities and Exchange Commission as Exhibit 1 to Amendment No. 1 to the Statement of Eligibility and Qualification of Trustee (Form T-1) filed with the Registration Statement of Morse Shoe, Inc. (File No. 22-17940) and is incorporated herein by reference thereto. 2. A COPY OF THE CERTIFICATE OF AUTHORITY OF THE TRUSTEE TO COMMENCE BUSINESS, IF NOT CONTAINED IN THE ARTICLES OF ASSOCIATION. A copy of a Statement from the Commissioner of Banks of Massachusetts that no certificate of authority for the trustee to commence business was necessary or issued is on file with the Securities and Exchange Commission as Exhibit 2 to Amendment No. 1 to the Statement of Eligibility and Qualification of Trustee (Form T-1) filed with the Registration Statement of Morse Shoe, Inc. (File No. 22-17940) and is incorporated herein by reference thereto. 3. A COPY OF THE AUTHORIZATION OF THE TRUSTEE TO EXERCISE CORPORATE TRUST POWERS, IF SUCH AUTHORIZATION IS NOT CONTAINED IN THE DOCUMENTS SPECIFIED IN PARAGRAPH (1) OR (2), ABOVE. A copy of the authorization of the trustee to exercise corporate trust powers is on file with the Securities and Exchange Commission as Exhibit 3 to Amendment No. 1 to the Statement of Eligibility and Qualification of Trustee (Form T-1) filed with the Registration Statement of Morse Shoe, Inc. (File No. 22-17940) and is incorporated herein by reference thereto. 4. A COPY OF THE EXISTING BY-LAWS OF THE TRUSTEE, OR INSTRUMENTS CORRESPONDING THERETO. A copy of the by-laws of the trustee, as now in effect, is on file with the Securities and Exchange Commission as Exhibit 4 to the Statement of Eligibility and Qualification of Trustee (Form T-1) filed with the Registration Statement of Eastern Edison Company (File No. 33-37823) and is incorporated herein by reference thereto. 2 3 5. A COPY OF EACH INDENTURE REFERRED TO IN ITEM 4. IF THE OBLIGOR IS IN DEFAULT. Not applicable. 6. THE CONSENTS OF UNITED STATES INSTITUTIONAL TRUSTEES REQUIRED BY SECTION 321(B) OF THE ACT. The consent of the trustee required by Section 321(b) of the Act is annexed hereto as Exhibit 6 and made a part hereof. 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. A copy of the latest report of condition of the trustee published pursuant to law or the requirements of its supervising or examining authority is annexed hereto as Exhibit 7 and made a part hereof. NOTES In answering any item of this Statement of Eligibility which relates to matters peculiarly within the knowledge of the obligor or any underwriter for the obligor, the trustee has relied upon information furnished to it by the obligor and the underwriters, and the trustee disclaims responsibility for the accuracy or completeness of such information. The answer furnished to Item 2. of this statement will be amended, if necessary, to reflect any facts which differ from those stated and which would have been required to be stated if known at the date hereof. SIGNATURE Pursuant to the requirements of the Trust Indenture Act of 1939, as amended, the trustee, State Street Bank and Trust Company, a corporation organized and existing under the laws of The Commonwealth of Massachusetts, has duly caused this statement of eligibility to be signed on its behalf by the undersigned, thereunto duly authorized, all in the City of Hartford and the State of Connecticut, on the 1st of August 2001. STATE STREET BANK AND TRUST COMPANY By: /s/ Elizabeth C. Hammer -------------------------------- NAME: ELIZABETH C. HAMMER TITLE: VICE PRESIDENT 4 EXHIBIT 6 CONSENT OF THE TRUSTEE Pursuant to the requirements of Section 321(b) of the Trust Indenture Act of 1939, as amended, in connection with the proposed issuance by FRESENIUS MEDICAL CARE AKTIENGESELLSCHAFT of its COMPANY GUARANTEE OF 7 7/8% USD TRUST PREFERRED SECURITIES, we hereby consent that reports of examination by Federal, State, Territorial or District authorities may be furnished by such authorities to the Securities and Exchange Commission upon request therefor. STATE STREET BANK AND TRUST COMPANY By: /s/ Elizabeth C. Hammer -------------------------------- NAME: ELIZABETH C. HAMMER TITLE: VICE PRESIDENT DATED: August 1, 2001 5 EXHIBIT 7 Consolidated Report of Condition of State Street Bank and Trust Company, Massachusetts and foreign and domestic subsidiaries, a state banking institution organized and operating under the banking laws of this commonwealth and a member of the Federal Reserve System, at the close of business March 31, 2001 published in accordance with a call made by the Federal Reserve Bank of this District pursuant to the provisions of the Federal Reserve Act and in accordance with a call made by the Commissioner of Banks under General Laws, Chapter 172, Section 22(a).
Thousands of ASSETS Dollars Cash and balances due from depository institutions: Noninterest-bearing balances and currency and coin ........................... 897,105 Interest-bearing balances .................................................... 17,983,011 Securities ............................................................................ 16,720,906 Federal funds sold and securities purchased under agreements to resell in domestic offices of the bank and its Edge subsidiary .......................................... 15,060,119 Loans and lease financing receivables: Loans and leases, net of unearned income ............. 6,262,440 Allowance for loan and lease losses .................. 57,674 Allocated transfer risk reserve ...................... 0 Loans and leases, net of unearned income and allowances ...................... 6,204,766 Assets held in trading accounts ....................................................... 3,067,581 Premises and fixed assets ............................................................. 570,144 Other real estate owned ............................................................... 0 Investments in unconsolidated subsidiaries ............................................ 22,733 Customers' liability to this bank on acceptances outstanding .......................... 167,024 Intangible assets ..................................................................... 456,769 Other assets .......................................................................... 1,512,531 ---------- Total assets .......................................................................... 62,662,689 ---------- LIABILITIES Deposits: In domestic offices .......................................................... 12,418,125 Noninterest-bearing ......................... 7,272,865 Interest-bearing ............................ 5,145,260 In foreign offices and Edge subsidiary ....................................... 25,631,712 Noninterest-bearing ......................... 96,103 Interest-bearing ............................ 25,535,609 Federal funds purchased and securities sold under agreements to repurchase in domestic offices of the bank and of its Edge subsidiary .......................................... 16,541,928 Demand notes issued to the U.S. Treasury .............................................. 0 Trading liabilities ................................................................... 2,336,011 Other borrowed money .................................................................. 184,267 Subordinated notes and debentures ..................................................... 0 Bank's liability on acceptances executed and outstanding .............................. 167,024 Other liabilities ..................................................................... 1,566,844 Total liabilities ..................................................................... 58,845,911 ---------- Minority interest in consolidated subsidiaries ........................................ 49,273 EQUITY CAPITAL Perpetual preferred stock and related surplus ......................................... 0 Common stock .......................................................................... 29,931 Surplus ............................................................................... 567,089 Retained Earnings ..................................................................... 3,140,648 Accumulated other comprehensive income ............................... 29,837 Other equity capital components ....................................................... 0 Undivided profits and capital reserves/Net unrealized holding gains (losses) .......... 0 Net unrealized holding gains (losses) on available-for-sale securities 0 Cumulative foreign currency translation adjustments ................................... 0 Total equity capital .................................................................. 3,767,505 ---------- Total liabilities, minority interest and equity capital ............................... 62,662,689 ----------
6 I, Frederick P. Baughman, Senior Vice President and Comptroller of the above named bank do hereby declare that this Report of Condition has been prepared in conformance with the instructions issued by the Board of Governors of the Federal Reserve System and is true to the best of my knowledge and belief. Frederick P. Baughman We, the undersigned directors, attest to the correctness of this Report of Condition and declare that it has been examined by us and to the best of our knowledge and belief has been prepared in conformance with the instructions issued by the Board of Governors of the Federal Reserve System and is true and correct. Ronald E. Logue David A. Spina Truman S. Casner EX-25.4 33 y51284ex25-4.txt STATEMENT OF ELIGIBILITY OF TRUSTEE 1 Exhibit 25.4 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) STATE STREET BANK AND TRUST COMPANY (Exact name of trustee as specified in its charter) Massachusetts 04-1867445 (Jurisdiction of incorporation or (I.R.S. Employer organization if not a U.S. national bank) Identification No.) 225 Franklin Street, Boston, Massachusetts 02110 (Address of principal executive offices) (Zip Code) Maureen Scannell Bateman, Esq. Executive Vice President and General Counsel 225 Franklin Street, Boston, Massachusetts 02110 (617) 654-3253 (Name, address and telephone number of agent for service) FRESENIUS MEDICAL CARE AKTIENGESELLSCHAFT (Exact name of obligor as specified in its charter) GERMANY N/A (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) ELSE-KRONER STR. 1 61346 BAD HOMBURG V.D.H., GERMANY (Address of principal executive offices) (Zip Code) Company Guarantee of 7 3/8% EURO Trust Preferred Securities (Title of indenture securities) 2 GENERAL ITEM 1. GENERAL INFORMATION. FURNISH THE FOLLOWING INFORMATION AS TO THE TRUSTEE: (a) NAME AND ADDRESS OF EACH EXAMINING OR SUPERVISORY AUTHORITY TO WHICH IT IS SUBJECT. Department of Banking and Insurance of The Commonwealth of Massachusetts, 100 Cambridge Street, Boston, Massachusetts. Board of Governors of the Federal Reserve System, Washington, D.C., Federal Deposit Insurance Corporation, Washington, D.C. (b) WHETHER IT IS AUTHORIZED TO EXERCISE CORPORATE TRUST POWERS. Trustee is authorized to exercise corporate trust powers. ITEM 2. AFFILIATIONS WITH OBLIGOR. IF THE OBLIGOR IS AN AFFILIATE OF THE TRUSTEE, DESCRIBE EACH SUCH AFFILIATION. The obligor is not an affiliate of the trustee or of its parent, State Street Corporation. (See note on page 2.) ITEM 3. THROUGH ITEM 15. NOT APPLICABLE. ITEM 16. LIST OF EXHIBITS. LIST BELOW ALL EXHIBITS FILED AS PART OF THIS STATEMENT OF ELIGIBILITY. 1. A COPY OF THE ARTICLES OF ASSOCIATION OF THE TRUSTEE AS NOW IN EFFECT. A copy of the Articles of Association of the trustee, as now in effect, is on file with the Securities and Exchange Commission as Exhibit 1 to Amendment No. 1 to the Statement of Eligibility and Qualification of Trustee (Form T-1) filed with the Registration Statement of Morse Shoe, Inc. (File No. 22-17940) and is incorporated herein by reference thereto. 2. A COPY OF THE CERTIFICATE OF AUTHORITY OF THE TRUSTEE TO COMMENCE BUSINESS, IF NOT CONTAINED IN THE ARTICLES OF ASSOCIATION. A copy of a Statement from the Commissioner of Banks of Massachusetts that no certificate of authority for the trustee to commence business was necessary or issued is on file with the Securities and Exchange Commission as Exhibit 2 to Amendment No. 1 to the Statement of Eligibility and Qualification of Trustee (Form T-1) filed with the Registration Statement of Morse Shoe, Inc. (File No. 22-17940) and is incorporated herein by reference thereto. 3. A COPY OF THE AUTHORIZATION OF THE TRUSTEE TO EXERCISE CORPORATE TRUST POWERS, IF SUCH AUTHORIZATION IS NOT CONTAINED IN THE DOCUMENTS SPECIFIED IN PARAGRAPH (1) OR (2), ABOVE. A copy of the authorization of the trustee to exercise corporate trust powers is on file with the Securities and Exchange Commission as Exhibit 3 to Amendment No. 1 to the Statement of Eligibility and Qualification of Trustee (Form T-1) filed with the Registration Statement of Morse Shoe, Inc. (File No. 22-17940) and is incorporated herein by reference thereto. 4. A COPY OF THE EXISTING BY-LAWS OF THE TRUSTEE, OR INSTRUMENTS CORRESPONDING THERETO. A copy of the by-laws of the trustee, as now in effect, is on file with the Securities and Exchange Commission as Exhibit 4 to the Statement of Eligibility and Qualification of Trustee (Form T-1) filed with the Registration Statement of Eastern Edison Company (File No. 33-37823) and is incorporated herein by reference thereto. 2 3 5. A COPY OF EACH INDENTURE REFERRED TO IN ITEM 4. IF THE OBLIGOR IS IN DEFAULT. Not applicable. 6. THE CONSENTS OF UNITED STATES INSTITUTIONAL TRUSTEES REQUIRED BY SECTION 321(b) OF THE ACT. The consent of the trustee required by Section 321(b) of the Act is annexed hereto as Exhibit 6 and made a part hereof. 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. A copy of the latest report of condition of the trustee published pursuant to law or the requirements of its supervising or examining authority is annexed hereto as Exhibit 7 and made a part hereof. NOTES In answering any item of this Statement of Eligibility which relates to matters peculiarly within the knowledge of the obligor or any underwriter for the obligor, the trustee has relied upon information furnished to it by the obligor and the underwriters, and the trustee disclaims responsibility for the accuracy or completeness of such information. The answer furnished to Item 2. of this statement will be amended, if necessary, to reflect any facts which differ from those stated and which would have been required to be stated if known at the date hereof. SIGNATURE Pursuant to the requirements of the Trust Indenture Act of 1939, as amended, the trustee, State Street Bank and Trust Company, a corporation organized and existing under the laws of The Commonwealth of Massachusetts, has duly caused this statement of eligibility to be signed on its behalf by the undersigned, thereunto duly authorized, all in the City of Hartford and the State of Connecticut, on the 1st of August 2001. STATE STREET BANK AND TRUST COMPANY By: /s/ Elizabeth C. Hammer ________________________________ NAME: ELIZABETH C. HAMMER TITLE: VICE PRESIDENT 4 EXHIBIT 6 CONSENT OF THE TRUSTEE Pursuant to the requirements of Section 321(b) of the Trust Indenture Act of 1939, as amended, in connection with the proposed issuance by FRESENIUS MEDICAL CARE AKTIENGESELLSCHAFT of its COMPANY GUARANTEE OF 7 3/8% EURO TRUST PREFERRED SECURITIES, we hereby consent that reports of examination by Federal, State, Territorial or District authorities may be furnished by such authorities to the Securities and Exchange Commission upon request therefor. STATE STREET BANK AND TRUST COMPANY By: /s/ Elizabeth C. Hammer __________________________________ NAME: ELIZABETH C. HAMMER TITLE: VICE PRESIDENT DATED: AUGUST 1, 2001 5 EXHIBIT 7 Consolidated Report of Condition of State Street Bank and Trust Company, Massachusetts and foreign and domestic subsidiaries, a state banking institution organized and operating under the banking laws of this commonwealth and a member of the Federal Reserve System, at the close of business March 31, 2001 published in accordance with a call made by the Federal Reserve Bank of this District pursuant to the provisions of the Federal Reserve Act and in accordance with a call made by the Commissioner of Banks under General Laws, Chapter 172, Section 22(a).
Thousands of ASSETS Dollars Cash and balances due from depository institutions: Noninterest-bearing balances and currency and coin ............. 897,105 Interest-bearing balances ...................................... 17,983,011 Securities .............................................................. 16,720,906 Federal funds sold and securities purchased under agreements to resell in domestic offices of the bank and its Edge subsidiary ............................ 15,060,119 Loans and lease financing receivables: Loans and leases, net of unearned income .. 6,262,440 Allowance for loan and lease losses ....... 57,674 Allocated transfer risk reserve............ 0 Loans and leases, net of unearned income and allowances ........ 6,204,766 Assets held in trading accounts ......................................... 3,067,581 Premises and fixed assets................................................ 570,144 Other real estate owned ................................................. 0 Investments in unconsolidated subsidiaries .............................. 22,733 Customers' liability to this bank on acceptances outstanding ............ 167,024 Intangible assets........................................................ 456,769 Other assets............................................................. 1,512,531 ---------- Total assets............................................................. 62,662,689 ---------- LIABILITIES Deposits: In domestic offices............................................. 12,418,125 Noninterest-bearing ............ 7,272,865 Interest-bearing ............... 5,145,260 In foreign offices and Edge subsidiary ......................... 25,631,712 Noninterest-bearing ............ 96,103 Interest-bearing ............... 25,535,609 Federal funds purchased and securities sold under agreements to repurchase in domestic offices of the bank and of its Edge subsidiary ............................ 16,541,928 Demand notes issued to the U.S. Treasury.......................... ...... 0 Trading liabilities...................................................... 2,336,011 Other borrowed money..................................................... 184,267 Subordinated notes and debentures............................ ........... 0 Bank's liability on acceptances executed and outstanding ................ 167,024 Other liabilities ....................................................... 1,566,844 Total liabilities........................................................ 58,845,911 ---------- Minority interest in consolidated subsidiaries............................ 49,273 EQUITY CAPITAL Perpetual preferred stock and related surplus................................................................... 0 Common stock ............................................................. 29,931 Surplus................................................................. . 567,089 Retained Earnings......................................................... 3,140,648 Accumulated other comprehensive income............................ 29,837 Other equity capital components........................................... 0 Undivided profits and capital reserves/Net unrealized holding gains(losses) 0 Net unrealized holding gains (losses) on available-for-sale securities 0 Cumulative foreign currency translation adjustments................... ... 0 Total equity capital...................................................... 3,767,505 ---------- Total liabilities, minority interest and equity capital................... 62,662,689 ----------
6 I, Frederick P. Baughman, Senior Vice President and Comptroller of the above named bank do hereby declare that this Report of Condition has been prepared in conformance with the instructions issued by the Board of Governors of the Federal Reserve System and is true to the best of my knowledge and belief. Frederick P. Baughman We, the undersigned directors, attest to the correctness of this Report of Condition and declare that it has been examined by us and to the best of our knowledge and belief has been prepared in conformance with the instructions issued by the Board of Governors of the Federal Reserve System and is true and correct. Ronald E. Logue David A. Spina Truman S. Casner EX-25.5 34 y51284ex25-5.txt STATEMENT OF ELIGIBILITY OF TRUSTEE 1 Exhibit 25.5 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) STATE STREET BANK AND TRUST COMPANY (Exact name of trustee as specified in its charter) Massachusetts 04-1867445 (Jurisdiction of incorporation or (I.R.S. Employer organization if not a U.S. national bank) Identification No.) 225 Franklin Street, Boston, Massachusetts 02110 (Address of principal executive offices) (Zip Code)
Maureen Scannell Bateman, Esq. Executive Vice President and General Counsel 225 Franklin Street, Boston, Massachusetts 02110 (617) 654-3253 (Name, address and telephone number of agent for service) FMC TRUST FINANCE S.A.R.L. LUXEMBOURG-III FRESENIUS MEDICAL CARE AKTIENGESELLSCHAFT FRESENIUS MEDICAL CARE HOLDINGS, INC. FRESENIUS MEDICAL CARE DEUTSCHLAND GMBH (Exact name of obligor as specified in its charter) LUXEMBOURG N/A GERMANY N/A NEW YORK 13-3461988 GERMANY N/A (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.)
L-2557 LUXEMBOURG, 7A RUE ROBERT STUMPER ELSE-KRONER STR. 1, 61356 BAD HOMBURG V.D.H., GERMANY 95 HAYDEN AVENUE, LEXINGTON, MA 02173 ELSE-KRONER STR. 1, 61356 BAD HOMBURG V.D.H., GERMANY (Address of principal executive offices) (Zip Code) 7 7/8% SENIOR SUBORDINATED NOTES (Title of indenture securities) 2 GENERAL ITEM 1. GENERAL INFORMATION. FURNISH THE FOLLOWING INFORMATION AS TO THE TRUSTEE: (a) NAME AND ADDRESS OF EACH EXAMINING OR SUPERVISORY AUTHORITY TO WHICH IT IS SUBJECT. Department of Banking and Insurance of The Commonwealth of Massachusetts, 100 Cambridge Street, Boston, Massachusetts. Board of Governors of the Federal Reserve System, Washington, D.C., Federal Deposit Insurance Corporation, Washington, D.C. (b) WHETHER IT IS AUTHORIZED TO EXERCISE CORPORATE TRUST POWERS. Trustee is authorized to exercise corporate trust powers. ITEM 2. AFFILIATIONS WITH OBLIGOR. IF THE OBLIGOR IS AN AFFILIATE OF THE TRUSTEE, DESCRIBE EACH SUCH AFFILIATION. The obligor is not an affiliate of the trustee or of its parent, State Street Corporation. (See note on page 2.) ITEM 3. THROUGH ITEM 15. NOT APPLICABLE. ITEM 16. LIST OF EXHIBITS. LIST BELOW ALL EXHIBITS FILED AS PART OF THIS STATEMENT OF ELIGIBILITY. 1. A COPY OF THE ARTICLES OF ASSOCIATION OF THE TRUSTEE AS NOW IN EFFECT. A copy of the Articles of Association of the trustee, as now in effect, is on file with the Securities and Exchange Commission as Exhibit 1 to Amendment No. 1 to the Statement of Eligibility and Qualification of Trustee (Form T-1) filed with the Registration Statement of Morse Shoe, Inc. (File No. 22-17940) and is incorporated herein by reference thereto. 2. A COPY OF THE CERTIFICATE OF AUTHORITY OF THE TRUSTEE TO COMMENCE BUSINESS, IF NOT CONTAINED IN THE ARTICLES OF ASSOCIATION. A copy of a Statement from the Commissioner of Banks of Massachusetts that no certificate of authority for the trustee to commence business was necessary or issued is on file with the Securities and Exchange Commission as Exhibit 2 to Amendment No. 1 to the Statement of Eligibility and Qualification of Trustee (Form T-1) filed with the Registration Statement of Morse Shoe, Inc. (File No. 22-17940) and is incorporated herein by reference thereto. 3. A COPY OF THE AUTHORIZATION OF THE TRUSTEE TO EXERCISE CORPORATE TRUST POWERS, IF SUCH AUTHORIZATION IS NOT CONTAINED IN THE DOCUMENTS SPECIFIED IN PARAGRAPH (1) OR (2), ABOVE. A copy of the authorization of the trustee to exercise corporate trust powers is on file with the Securities and Exchange Commission as Exhibit 3 to Amendment No. 1 to the Statement of Eligibility and Qualification of Trustee (Form T-1) filed with the Registration Statement of Morse Shoe, Inc. (File No. 22-17940) and is incorporated herein by reference thereto. 4. A COPY OF THE EXISTING BY-LAWS OF THE TRUSTEE, OR INSTRUMENTS CORRESPONDING THERETO. A copy of the by-laws of the trustee, as now in effect, is on file with the Securities and Exchange Commission as Exhibit 4 to the Statement of Eligibility and Qualification of Trustee (Form T-1) filed with the Registration Statement of Eastern Edison Company (File No. 33-37823) and is incorporated herein by reference thereto. 2 3 5. A COPY OF EACH INDENTURE REFERRED TO IN ITEM 4. IF THE OBLIGOR IS IN DEFAULT. Not applicable. 6. THE CONSENTS OF UNITED STATES INSTITUTIONAL TRUSTEES REQUIRED BY SECTION 321(b) OF THE ACT. The consent of the trustee required by Section 321(b) of the Act is annexed hereto as Exhibit 6 and made a part hereof. 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. A copy of the latest report of condition of the trustee published pursuant to law or the requirements of its supervising or examining authority is annexed hereto as Exhibit 7 and made a part hereof. NOTES In answering any item of this Statement of Eligibility which relates to matters peculiarly within the knowledge of the obligor or any underwriter for the obligor, the trustee has relied upon information furnished to it by the obligor and the underwriters, and the trustee disclaims responsibility for the accuracy or completeness of such information. The answer furnished to Item 2. of this statement will be amended, if necessary, to reflect any facts which differ from those stated and which would have been required to be stated if known at the date hereof. SIGNATURE Pursuant to the requirements of the Trust Indenture Act of 1939, as amended, the trustee, State Street Bank and Trust Company, a corporation organized and existing under the laws of The Commonwealth of Massachusetts, has duly caused this statement of eligibility to be signed on its behalf by the undersigned, thereunto duly authorized, all in the City of Hartford and the State of Connecticut, on the 1st of August 2001. STATE STREET BANK AND TRUST COMPANY By: /s/ Elizabeth C. Hammer ------------------------------ NAME: ELIZABETH C. HAMMER TITLE: VICE PRESIDENT 4 EXHIBIT 6 CONSENT OF THE TRUSTEE Pursuant to the requirements of Section 321(b) of the Trust Indenture Act of 1939, as amended, in connection with the proposed issuance by FMC TRUST FINANCE S.A.R.L LUXEMBOURG-III of its 7 7/8% SENIOR SUBORDINATED NOTES we hereby consent that reports of examination by Federal, State, Territorial or District authorities may be furnished by such authorities to the Securities and Exchange Commission upon request therefor. STATE STREET BANK AND TRUST COMPANY By: /s/ Elizabeth C. Hammer ------------------------------- NAME: ELIZABETH C. HAMMER TITLE: VICE PRESIDENT DATED: AUGUST 1, 2001 5 EXHIBIT 7 Consolidated Report of Condition of State Street Bank and Trust Company, Massachusetts and foreign and domestic subsidiaries, a state banking institution organized and operating under the banking laws of this commonwealth and a member of the Federal Reserve System, at the close of business March 31, 2001 published in accordance with a call made by the Federal Reserve Bank of this District pursuant to the provisions of the Federal Reserve Act and in accordance with a call made by the Commissioner of Banks under General Laws, Chapter 172, Section 22(a).
Thousands of ASSETS Dollars Cash and balances due from depository institutions: Noninterest-bearing balances and currency and coin............................. 897,105 Interest-bearing balances...................................................... 17,983,011 Securities.............................................................................. 16,720,906 Federal funds sold and securities purchased under agreements to resell in domestic offices of the bank and its Edge subsidiary............................................ 15,060,119 Loans and lease financing receivables: Loans and leases, net of unearned income....................................... 6,262,440 Allowance for loan and lease losses............................................ 57,674 Allocated transfer risk reserve................................................ 0 Loans and leases, net of unearned income and allowances........................ 6,204,766 Assets held in trading accounts......................................................... 3,067,581 Premises and fixed assets............................................................... 570,144 Other real estate owned................................................................. 0 Investments in unconsolidated subsidiaries.............................................. 22,733 Customers' liability to this bank on acceptances outstanding............................ 167,024 Intangible assets....................................................................... 456,769 Other assets............................................................................ 1,512,531 ---------- Total assets............................................................................ 62,662,689 ---------- LIABILITIES Deposits: In domestic offices............................................................. 12,418,125 Noninterest-bearing.................................................... 7,272,865 Interest-bearing....................................................... 5,145,260 In foreign offices and Edge subsidiary.......................................... 25,631,712 Noninterest-bearing.................................................... 96,103 Interest-bearing....................................................... 25,535,609 Federal funds purchased and securities sold under agreements to repurchase in domestic offices of the bank and of its Edge subsidiary............................................. 16,541,928 Demand notes issued to the U.S. Treasury................................................. 0 Trading liabilities...................................................................... 2,336,011 Other borrowed money..................................................................... 184,267 Subordinated notes and debentures........................................................ 0 Bank's liability on acceptances executed and outstanding................................. 167,024 Other liabilities........................................................................ 1,566,844 Total liabilities........................................................................ 58,845,911 ---------- Minority interest in consolidated subsidiaries........................................... 49,273 EQUITY CAPITAL Perpetual preferred stock and related surplus............................................ 0 Common stock............................................................................. 29,931 Surplus.................................................................................. 567,089 Retained Earnings........................................................................ 3,140,648 Accumulated other comprehensive income.................................. 29,837 Other equity capital components.......................................................... 0 Undivided profits and capital reserves/Net unrealized holding gains (losses)............. 0 Net unrealized holding gains (losses) on available-for-sale securities.. 0 Cumulative foreign currency translation adjustments...................................... 0 Total equity capital..................................................................... 3,767,505 ---------- Total liabilities, minority interest and equity capital.................................. 62,662,689 ----------
6 I, Frederick P. Baughman, Senior Vice President and Comptroller of the above named bank do hereby declare that this Report of Condition has been prepared in conformance with the instructions issued by the Board of Governors of the Federal Reserve System and is true to the best of my knowledge and belief. Frederick P. Baughman We, the undersigned directors, attest to the correctness of this Report of Condition and declare that it has been examined by us and to the best of our knowledge and belief has been prepared in conformance with the instructions issued by the Board of Governors of the Federal Reserve System and is true and correct. Ronald E. Logue David A. Spina Truman S. Casner EX-25.6 35 y51284ex25-6.txt STATEMENT OF ELIGIBILITY OF TRUSTEE 1 Exhibit 25.6 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) STATE STREET BANK AND TRUST COMPANY (Exact name of trustee as specified in its charter) Massachusetts 04-1867445 (Jurisdiction of incorporation or (I.R.S. Employer organization if not a U.S. national bank) Identification No.) 225 Franklin Street, Boston, Massachusetts 02110 (Address of principal executive offices) (Zip Code) Maureen Scannell Bateman, Esq. Executive Vice President and General Counsel 225 Franklin Street, Boston, Massachusetts 02110 (617) 654-3253 (Name, address and telephone number of agent for service) FMC TRUST FINANCE S.A.R.L. LUXEMBOURG-III FRESENIUS MEDICAL CARE AKTIENGESELLSCHAFT FRESENIUS MEDICAL CARE HOLDINGS, INC. FRESENIUS MEDICAL CARE DEUTSCHLAND GMBH (Exact name of obligor as specified in its charter) LUXEMBOURG N/A GERMANY N/A NEW YORK 13-3461988 GERMANY N/A (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) L-2557 LUXEMBOURG, 7A RUE ROBERT STUMPER ELSE-KRONER STR. 1, 61356 BAD HOMBURG v.d.H., GERMANY 95 HAYDEN AVENUE, LEXINGTON, MA 02173 ELSE-KRONER STR. 1, 61356 BAD HOMBURG v.d.H., GERMANY (Address of principal executive offices) (Zip Code) 7 3/8% SENIOR SUBORDINATED NOTES 2 (Title of indenture securities) GENERAL ITEM 1. GENERAL INFORMATION. FURNISH THE FOLLOWING INFORMATION AS TO THE TRUSTEE: (a) NAME AND ADDRESS OF EACH EXAMINING OR SUPERVISORY AUTHORITY TO WHICH IT IS SUBJECT. Department of Banking and Insurance of The Commonwealth of Massachusetts, 100 Cambridge Street, Boston, Massachusetts. Board of Governors of the Federal Reserve System, Washington, D.C., Federal Deposit Insurance Corporation, Washington, D.C. (b) WHETHER IT IS AUTHORIZED TO EXERCISE CORPORATE TRUST POWERS. Trustee is authorized to exercise corporate trust powers. ITEM 2. AFFILIATIONS WITH OBLIGOR. IF THE OBLIGOR IS AN AFFILIATE OF THE TRUSTEE, DESCRIBE EACH SUCH AFFILIATION. The obligor is not an affiliate of the trustee or of its parent, State Street Corporation. (See note on page 2.) ITEM 3. THROUGH ITEM 15. NOT APPLICABLE. ITEM 16. LIST OF EXHIBITS. LIST BELOW ALL EXHIBITS FILED AS PART OF THIS STATEMENT OF ELIGIBILITY. 1. A COPY OF THE ARTICLES OF ASSOCIATION OF THE TRUSTEE AS NOW IN EFFECT. A copy of the Articles of Association of the trustee, as now in effect, is on file with the Securities and Exchange Commission as Exhibit 1 to Amendment No. 1 to the Statement of Eligibility and Qualification of Trustee (Form T-1) filed with the Registration Statement of Morse Shoe, Inc. (File No. 22-17940) and is incorporated herein by reference thereto. 2. A COPY OF THE CERTIFICATE OF AUTHORITY OF THE TRUSTEE TO COMMENCE BUSINESS, IF NOT CONTAINED IN THE ARTICLES OF ASSOCIATION. A copy of a Statement from the Commissioner of Banks of Massachusetts that no certificate of authority for the trustee to commence business was necessary or issued is on file with the Securities and Exchange Commission as Exhibit 2 to Amendment No. 1 to the Statement of Eligibility and Qualification of Trustee (Form T-1) filed with the Registration Statement of Morse Shoe, Inc. (File No. 22-17940) and is incorporated herein by reference thereto. 3. A COPY OF THE AUTHORIZATION OF THE TRUSTEE TO EXERCISE CORPORATE TRUST POWERS, IF SUCH AUTHORIZATION IS NOT CONTAINED IN THE DOCUMENTS SPECIFIED IN PARAGRAPH (1) OR (2), ABOVE. A copy of the authorization of the trustee to exercise corporate trust powers is on file with the Securities and Exchange Commission as Exhibit 3 to Amendment No. 1 to the Statement of Eligibility and Qualification of Trustee (Form T-1) filed with the Registration Statement of Morse Shoe, Inc. (File No. 22-17940) and is incorporated herein by reference thereto. 4. A COPY OF THE EXISTING BY-LAWS OF THE TRUSTEE, OR INSTRUMENTS CORRESPONDING THERETO. A copy of the by-laws of the trustee, as now in effect, is on file with the Securities and Exchange Commission as Exhibit 4 to the Statement of Eligibility and Qualification of Trustee (Form T-1) filed with the Registration Statement of Eastern Edison Company (File No. 33-37823) and is incorporated herein by reference thereto. 2 3 5. A COPY OF EACH INDENTURE REFERRED TO IN ITEM 4. IF THE OBLIGOR IS IN DEFAULT. Not applicable. 6. THE CONSENTS OF UNITED STATES INSTITUTIONAL TRUSTEES REQUIRED BY SECTION 321(b) OF THE ACT. The consent of the trustee required by Section 321(b) of the Act is annexed hereto as Exhibit 6 and made a part hereof. 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. A copy of the latest report of condition of the trustee published pursuant to law or the requirements of its supervising or examining authority is annexed hereto as Exhibit 7 and made a part hereof. NOTES In answering any item of this Statement of Eligibility which relates to matters peculiarly within the knowledge of the obligor or any underwriter for the obligor, the trustee has relied upon information furnished to it by the obligor and the underwriters, and the trustee disclaims responsibility for the accuracy or completeness of such information. The answer furnished to Item 2. of this statement will be amended, if necessary, to reflect any facts which differ from those stated and which would have been required to be stated if known at the date hereof. SIGNATURE Pursuant to the requirements of the Trust Indenture Act of 1939, as amended, the trustee, State Street Bank and Trust Company, a corporation organized and existing under the laws of The Commonwealth of Massachusetts, has duly caused this statement of eligibility to be signed on its behalf by the undersigned, thereunto duly authorized, all in the City of Hartford and the State of Connecticut, on the 1st of August 2001. STATE STREET BANK AND TRUST COMPANY By: /s/ Elizabeth C. Hammer ----------------------- NAME: ELIZABETH C. HAMMER TITLE: VICE PRESIDENT 4 EXHIBIT 6 CONSENT OF THE TRUSTEE Pursuant to the requirements of Section 321(b) of the Trust Indenture Act of 1939, as amended, in connection with the proposed issuance by FMC TRUST FINANCE S.a.r.l LUXEMBOURG-III of its 7 3/8% SENIOR SUBORDINATED NOTES we hereby consent that reports of examination by Federal, State, Territorial or District authorities may be furnished by such authorities to the Securities and Exchange Commission upon request therefor. STATE STREET BANK AND TRUST COMPANY By: /s/Elizabeth C. Hammer ---------------------- NAME: ELIZABETH C. HAMMER TITLE: VICE PRESIDENT DATED: AUGUST 1, 2001 5 EXHIBIT 7 Consolidated Report of Condition of State Street Bank and Trust Company, Massachusetts and foreign and domestic subsidiaries, a state banking institution organized and operating under the banking laws of this commonwealth and a member of the Federal Reserve System, at the close of business March 31, 2001 published in accordance with a call made by the Federal Reserve Bank of this District pursuant to the provisions of the Federal Reserve Act and in accordance with a call made by the Commissioner of Banks under General Laws, Chapter 172, Section 22(a).
Thousands of ASSETS Dollars Cash and balances due from depository institutions: Noninterest-bearing balances and currency and coin 897,105 Interest-bearing balances ...............................................................17,983,011 Securities .......................................................................................16,720,906 Federal funds sold and securities purchased under agreements to resell in domestic offices of the bank and its Edge subsidiary .....................................................15,060,119 Loans and lease financing receivables: Loans and leases, net of unearned income ...................6,262,440 Allowance for loan and lease losses ...........................57,674 Allocated transfer risk reserve ....................................0 Loans and leases, net of unearned income and allowances ..................................6,204,766 Assets held in trading accounts ...................................................................3,067,581 Premises and fixed assets ...........................................................................570,144 Other real estate owned ...................................................................................0 Investments in unconsolidated subsidiaries ...........................................................22,733 Customers' liability to this bank on acceptances outstanding ........................................167,024 Intangible assets ...................................................................................456,769 Other assets ......................................................................................1,512,531 ---------- Total assets .....................................................................................62,662,689 ---------- LIABILITIES Deposits: In domestic offices .....................................................................12,418,125 Noninterest-bearing ...............................7,272,865 Interest-bearing ..................................5,145,260 In foreign offices and Edge subsidiary ..................................................25,631,712 Noninterest-bearing ..................................96,103 Interest-bearing .................................25,535,609 Federal funds purchased and securities sold under agreements to repurchase in domestic offices of the bank and of its Edge subsidiary .....................................................16,541,928 Demand notes issued to the U S Treasury ..................................................................0 Trading liabilities ...............................................................................2,336,011 Other borrowed money ................................................................................184,267 Subordinated notes and debentures .........................................................................0 Bank's liability on acceptances executed and outstanding ............................................167,024 Other liabilities .................................................................................1,566,844 Total liabilities ................................................................................58,845,911 ---------- Minority interest in consolidated subsidiaries .......................................................49,273 EQUITY CAPITAL Perpetual preferred stock and related surplus .............................................................0 Common stock .........................................................................................29,931 Surplus .............................................................................................567,089 Retained Earnings .................................................................................3,140,648 Accumulated other comprehensive income ..............................................29,837 Other equity capital components ...........................................................................0 Undivided profits and capital reserves/Net unrealized holding gains (losses) ..............................0
6
Net unrealized holding gains (losses) on available-for-sale securities ...................0 Cumulative foreign currency translation adjustments .......................................................0 Total equity capital ..............................................................................3,767,505 --------- Total liabilities, minority interest and equity capital ..........................................62,662,689 ----------
I, Frederick P. Baughman, Senior Vice President and Comptroller of the above named bank do hereby declare that this Report of Condition has been prepared in conformance with the instructions issued by the Board of Governors of the Federal Reserve System and is true to the best of my knowledge and belief. Frederick P. Baughman We, the undersigned directors, attest to the correctness of this Report of Condition and declare that it has been examined by us and to the best of our knowledge and belief has been prepared in conformance with the instructions issued by the Board of Governors of the Federal Reserve System and is true and correct. Ronald E. Logue David A. Spina Truman S. Casner EX-99.1 36 y51284ex99-1.txt FORM OF LETTER OF TRANSMITTAL 1 EXHIBIT 99.1 LETTER OF TRANSMITTAL 7 7/8% TRUST PREFERRED SECURITIES OF FRESENIUS MEDICAL CARE CAPITAL TRUST IV WHICH HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 AND 7 3/8% TRUST PREFERRED SECURITIES OF FRESENIUS MEDICAL CARE CAPITAL TRUST V WHICH HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 PURSUANT TO THE EXCHANGE OFFERS IN RESPECT OF ALL OF THE OUTSTANDING 7 7/8% TRUST PREFERRED SECURITIES OF FRESENIUS MEDICAL CARE CAPITAL TRUST IV AND ALL OF THE OUTSTANDING 7 3/8% TRUST PREFERRED SECURITIES OF FRESENIUS MEDICAL CARE CAPITAL TRUST V THE EXCHANGE OFFER FOR OUTSTANDING USD TRUST PREFERRED SECURITIES WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME ON , 2001 AND THE EXCHANGE OFFER FOR THE OUTSTANDING EURO TRUST PREFERRED SECURITIES WILL EXPIRE AT 5:00 P.M., LONDON TIME, ON , 2001 (IN EACH CASE, THE "EXPIRATION DATE") UNLESS EXTENDED IN THE SOLE DISCRETION OF FRESENIUS MEDICAL CARE AG AND THE TRUSTS. TENDERS OF OUTSTANDING TRUST PREFERRED SECURITIES MAY BE WITHDRAWN AT ANY TIME PRIOR TO 5:00 P.M., NEW YORK CITY TIME IN THE CASE OF USD TRUST PREFERRED SECURITIES, AND 5:00 P.M., LONDON TIME IN THE CASE OF EURO TRUST PREFERRED SECURITIES, ON THE EXPIRATION DATE. THE EXCHANGE AGENT FOR USD TRUST PREFERRED SECURITIES:
By Hand or Overnight By Registered or Certified By Facsimile Transmission: Service: Mail: (617) 662-1452 State Street Bank and Trust Company State Street Bank and Trust Company Confirm By Telephone: Corporate Trust Department Corporate Trust Department (617) 662-1548 2 Avenue de Lafayette P.O. Box 778 Corporate Trust Window Boston, MA 02102-0078 5th Floor Attention: Ralph Jones Boston, MA 02111-1724 Attention: Ralph Jones
DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS, OR TRANSMISSION VIA TELEGRAM, TELEX OR FACSIMILE, OTHER THAN AS SET FORTH ABOVE WILL NOT CONSTITUTE A VALID DELIVERY. THE INSTRUCTIONS CONTAINED HEREIN SHOULD BE READ CAREFULLY BEFORE THIS LETTER OF TRANSMITTAL IS COMPLETED. HOLDERS WHO WISH TO BE ELIGIBLE TO RECEIVE USD TRUST PREFERRED SECURITIES FOR THEIR OUTSTANDING OLD USD TRUST PREFERRED SECURITIES PURSUANT TO THE USD EXCHANGE OFFER MUST VALIDLY TENDER (AND NOT WITHDRAW) THEIR OUTSTANDING OLD USD TRUST PREFERRED SECURITIES TO THE EXCHANGE AGENT PRIOR TO THE EXPIRATION DATE. 2 FOR EURO TRUST PREFERRED SECURITIES: ALL OUTSTANDING OLD EURO TRUST PREFERRED SECURITIES MUST BE TENDERED BY BOOK-ENTRY TRANSFER IN ACCORDANCE WITH THE STANDARD OPERATING PROCEDURES OF EUROCLEAR OR CLEARSTREAM, LUXEMBOURG. FOR MORE INFORMATION AND FURTHER INSTRUCTIONS ON TENDERING OUTSTANDING EURO TRUST PREFERRED SECURITIES, CONTACT THE EXCHANGE AGENT FOR THE EURO EXCHANGE OFFER AT:
By Facsimile Transmission By Hand Delivery, Overnight Service or Mail ++44 (0) 207 547-0271 Deutsche Bank AG London Winchester House Confirm By Telephone 1 Great Winchester Street London EC2N 2DB England ++44 (0) 207 545-8000 Attention: Corporate Trust and Agency Services
HOLDERS WHO WISH TO BE ELIGIBLE TO RECEIVE TRUST PREFERRED SECURITIES FOR THEIR OUTSTANDING OLD EURO TRUST PREFERRED SECURITIES PURSUANT TO THE EURO EXCHANGE OFFER MUST VALIDLY TENDER (AND NOT WITHDRAW) THEIR OUTSTANDING OLD EURO TRUST PREFERRED SECURITIES BY BOOK-ENTRY TRANSFER TO EUROCLEAR OR CLEARSTREAM, LUXEMBOURG, AS THE CASE MAY BE, PRIOR TO THE EXPIRATION DATE. By execution hereof, the undersigned acknowledges receipt of the Prospectus (the "Prospectus"), dated , 2001, of Fresenius Medical Care AG, Fresenius Medical Care Holdings, Inc., Fresenius Medical Care Deutschland GmbH, FMC Trust Finance S.a.r.l. Luxembourg-III and the Trusts which, together with this Letter of Transmittal and the instructions hereto (the "Letter of Transmittal"), constitutes the offers (the "Exchange Offers") to exchange U.S.$225,000,000 aggregate liquidation amount of 7 7/8% trust preferred securities (the "USD trust preferred securities") of Fresenius Medical Care Capital Trust IV ("Trust IV") and E 300,000,000 aggregate liquidation amount of 7 3/8% trust preferred securities (the "Euro trust preferred securities) of Fresenius Medical Care Capital Trust V ("Trust V") (collectively, the "trust preferred securities") that have been registered under the Securities Act of 1933, as amended (the "Securities Act"), for U.S.$225,000,000 aggregate liquidation amount of the outstanding 7 7/8% Senior Trust preferred securities of Trust IV (the "Old USD Trust preferred securities") and E 300,000,000 aggregate liquidation amount of outstanding 7 3/8% Trust preferred securities of Trust V (the "old Euro Trust preferred securities"), respectively (together, the "old Trust preferred securities"), pursuant to a registration statement of which the Prospectus constitutes a part, upon the terms and subject to the conditions set forth in the Prospectus and this Letter of Transmittal. This Letter of Transmittal is to be used by Holders (as defined below) of Old USD Trust preferred securities if: (i) certificates representing Old USD Trust preferred securities are to be physically delivered to the Exchange Agent for the USD Exchange Offer herewith by Holders; (ii) tender of Old USD Trust preferred securities is to be made by book-entry transfer to the account of Exchange Agent for the USD Exchange Offer at The Depository Trust Company ("DTC") pursuant to the procedures set forth in the Prospectus under "The Exchange Offers--Procedures for Tendering Old Trust preferred Securities--Book- Entry Transfer--USD Exchange Offer" by any financial institution that is a participant in DTC and whose name appears on a security position listing as the owner of Old USD Trust preferred securities (such participants, acting on behalf of Holders, are referred to herein, together with such Holders, as "Acting Holders"); or (iii) tender of Old USD Trust preferred securities is to be made according to the guaranteed delivery procedures set forth in the Prospectus under "The Exchange Offers--Guaranteed Delivery of Old USD Trust preferred Securities." Delivery of documents to DTC does not constitute delivery to the Exchange Agent. If delivery of the Old USD Trust preferred securities is to be made by book-entry transfer to the account maintained by the Exchange Agent for the USD Exchange Offer at DTC as set forth in clause 3 (ii) in the immediately preceding paragraph, this Letter of Transmittal need not be manually executed; provided, however, that tenders of Old USD Trust preferred securities must be effected in accordance with the procedures mandated by DTC's Automated Tender Offer Program ("ATOP"). To tender Old USD Trust preferred securities through ATOP, the electronic instructions sent to DTC and transmitted by DTC to the Exchange Agent for the USD Exchange Offer must contain the character by which the participant acknowledges its receipt of and agrees to be bound by this Letter of Transmittal. Delivery of the Old Euro Trust preferred securities must be made by book-entry transfer to an account maintained at Euroclear or Clearstream, Luxembourg, and this Letter of Transmittal need not be manually executed; provided, however, that tenders of Old Euro Trust preferred securities must be effected in accordance with the procedures mandated by the standard operating procedures Euroclear or Clearstream, Luxembourg, as the case may be, for tendering Old Euro Trust preferred securities. To tender Old Euro trust preferred securities through Euroclear or Clearstream, Luxembourg, the electronic instructions sent to Euroclear or Clearstream, Luxembourg must contain the character by which the participant acknowledges its receipt of and agrees to be bound by this Letter of Transmittal. Delivery of documents to Deutsche Bank AG London does not constitute delivery to Euroclear or Clearstream, Luxembourg. Unless the context requires otherwise, the term "Holder" for purposes of this Letter of Transmittal means: (i) any person in whose name Old trust preferred securities are registered on the books of a Trust or any other person who has obtained a properly completed bond power from the registered Holder or (ii) any participant in DTC, Euroclear or Clearstream, Luxembourg whose Old trust preferred securities are held of record by DTC, Euroclear or Clearstream, Luxembourg who desires to deliver such Old trust preferred securities by book-entry transfer at DTC, Euroclear or Clearstream, Luxembourg, as the case may be. The undersigned has completed, executed and delivered this Letter of Transmittal to indicate the action the undersigned desires to take with respect to the Exchange Offers. Holders who wish to tender their Old trust preferred securities must complete this letter in its entirety, except as provided herein. All capitalized terms used herein without definition but defined in the Prospectus (whether or not capitalized in the Prospectus) shall have the meaning ascribed to them in the Prospectus. The instructions included with this Letter of Transmittal must be followed. Questions and requests for assistance or for additional copies of the Prospectus, this Letter of Transmittal and the Notice of Guaranteed Delivery may be directed to State Street Bank and Trust Company, Exchange Agent for the USD Exchange Offer, or to Deutsche Bank AG London, the Exchange Agent for the Euro Exchange Offer, as the case may be. See Instruction 8 herein. HOLDERS WHO WISH TO ACCEPT THE EXCHANGE OFFERS AND TENDER THEIR OLD TRUST PREFERRED SECURITIES MUST COMPLETE THIS LETTER OF TRANSMITTAL IN ITS ENTIRETY, EXCEPT AS PROVIDED HEREIN. List below the Old trust preferred securities to which this Letter of Transmittal relates. If the space provided below is inadequate, list the certificate numbers and aggregate liquidation amounts on a separately executed schedule and affix the schedule to this Letter of Transmittal. Tenders of Old Trust preferred securities will be accepted only in minimum liquidation amounts of U.S. $100,000 or E 100,000, and integral multiples of authorized denominations of U.S. $1,000 or E 1,000 in excess thereof. 4 - ---------------------------------------------------------------------------------------------------------- DESCRIPTION OF OLD TRUST PREFERRED SECURITIES - ---------------------------------------------------------------------------------------------------------- AGGREGATE CERTIFICATE NUMBER(S) LIQUIDATION AMOUNT NAME(S) AND ADDRESS(ES) OF HOLDER(S) (ATTACH SIGNED LIST TENDERED (PLEASE FILL IN, IF BLANK) IF NECESSARY)* (IF LESS THAN ALL)** - ---------------------------------------------------------------------------------------------------------- --------------------------------------------- --------------------------------------------- - ---------------------------------------------------------------------------------------------------------- TOTAL LIQUIDATION AMOUNT OF OLD TRUST PREFERRED SECURITIES TENDERED: - ----------------------------------------------------------------------------------------------------------
* Need not be completed by Holders tendering by book-entry transfer. ** Need not be completed by Holders who wish to tender with respect to all Old Trust preferred securities listed. See Instruction 2. - -------------------------------------------------------------------------------- [ ] CHECK HERE IF TENDERED OLD USD TRUST PREFERRED SECURITIES ARE BEING DELIVERED BY DTC TO THE ACCOUNT OF THE EXCHANGE AGENT FOR THE USD EXCHANGE OFFER AT DTC AND COMPLETE THE FOLLOWING (USD TRUST PREFERRED SECURITIES ONLY): NAME OF TENDERING INSTITUTION: ----------------------------------------------- DTC BOOK-ENTRY ACCOUNT: ------------------------------------------------------ TRANSACTION CODE NO.: -------------------------------------------------------- Holders who wish to tender their Old USD trust preferred securities and (i) whose Old USD trust preferred securities are not immediately available, or (ii) who cannot deliver their Old USD trust preferred securities, the Letter of Transmittal or any other required documents to the Exchange Agent for the USD Exchange Offer prior to the Expiration Date, or cannot complete the procedure for book-entry transfer on a timely basis, may effect a tender according to the guaranteed delivery procedures set forth in the Prospectus under the caption "The Exchange Offers--Guaranteed Delivery of Old USD Trust Preferred Securities." [ ] CHECK HERE IF TENDERED OLD USD TRUST PREFERRED SECURITIES ARE BEING DELIVERED PURSUANT TO A NOTICE OF GUARANTEED DELIVERY PREVIOUSLY DELIVERED TO THE EXCHANGE AGENT AND COMPLETE THE FOLLOWING (USD TRUST PREFERRED SECURITIES ONLY): NAME(S) OF HOLDER(S) OF OLD USD TRUST PREFERRED SECURITIES: ------------------ ----------------------------------------------------------------------------- WINDOW TICKET NO. (IF ANY): -------------------------------------------------- DATE OF EXECUTION OF NOTICE OF GUARANTEED DELIVERY: -------------------------- ----------------------------------------------------------------------------- NAME OF ELIGIBLE INSTITUTION THAT GUARANTEED DELIVERY: ----------------------- ----------------------------------------------------------------------------- DTC BOOK-ENTRY ACCOUNT NO.: -------------------------------------------------- IF DELIVERED BY BOOK-ENTRY TRANSFER: ----------------------------------------- NAME OF TENDERING INSTITUTION: ---------------------------------------- TRANSACTION CODE NO.: ------------------------------------------------- [ ] CHECK HERE IF YOU ARE A PARTICIPATING BROKER-DEALER AND WISH TO RECEIVE 10 ADDITIONAL COPIES OF THE PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS OR SUPPLEMENTS THERETO (SEE "THE EXCHANGE OFFERS--RESALES OF TRUST PREFERRED SECURITIES"). NAME: ------------------------------------------------------------------- ADDRESS: ---------------------------------------------------------------- 5 Ladies and Gentlemen: Subject to the terms of the applicable Exchange Offer, the undersigned hereby tenders to Fresenius Medical Care Capital Trust IV, or to Fresenius Medical Care Capital Trust V, as applicable (individually, a "Trust" and, collectively, the "Trusts"), the aggregate liquidation amount of Old trust preferred securities indicated above. For avoidance of doubt, tenders of Old USD trust preferred securities are made solely to Trust IV and tenders of Old Euro trust preferred securities are made solely to Trust V. Subject to and effective upon the acceptance for exchange of the aggregate liquidation amount of Old trust preferred securities tendered in accordance with this Letter of Transmittal, the undersigned sells, assigns and transfers to, or upon the order of, the applicable Trust all right, title and interest in and to the Old trust preferred securities tendered hereby. The undersigned hereby irrevocably constitutes and appoints (a) with respect to tenders of Old USD trust preferred securities, State Street Bank and Trust Company, the Exchange Agent for the USD Exchange Offer, as the undersigned's agent and attorney-in-fact (with full knowledge that State Street Bank and Trust Company also acts as the agent of Trust IV and as Trustee under the Indentures for the notes and under the trust declarations for the Old trust preferred securities and the trust preferred securities) and (b) with respect to tenders of Old Euro trust preferred securities, Deutsche Bank AG London, the Exchange Agent for the Euro Exchange Offer, its agent and attorney-in-fact (with full knowledge that Deutsche Bank AG London also acts as the agent of Trust V and as paying agent for the Euro trust preferred securities and common depositary for Euroclear and Clearstream, Luxembourg, in each case with respect to the tendered Old trust preferred securities and with full power of substitution to (i) deliver certificates for such Old trust preferred securities to the applicable Trust, or transfer ownership of such Old trust preferred securities on the account books maintained by DTC, Euroclear or Clearstream, Luxembourg, as the case may be, together, in any such case, with all accompanying evidences of transfer and authenticity to, or upon the order of, the applicable Trust and (ii) present such Old trust preferred securities for transfer on the books of the applicable Trust and receive all benefits and otherwise exercise all rights of beneficial ownership of such Old trust preferred securities, all in accordance with the terms of the USD Exchange Offer or the Euro Exchange Offer, as the case may be. The powers of attorney granted in this paragraph shall be deemed irrevocable and coupled with an interest. The undersigned hereby represents and warrants that he or she has full power and authority to tender, sell, assign and transfer the Old trust preferred securities tendered hereby and that each Trust to which such tender is made will acquire good and unencumbered title thereto, free and clear of all liens, restrictions, charges and encumbrances and not subject to any adverse claim, when the same are acquired by the Trust. The undersigned also acknowledges that the Exchange Offers are being made in reliance upon interpretations by the staff of the Securities and Exchange Commission that securities such as the trust preferred securities issued in exchange for the Old trust preferred securities pursuant to the Exchange Offers may be offered for sale, resold and otherwise transferred by holders thereof (other than any such holder that is an "affiliate" of the Trust 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 trust preferred securities are acquired in the ordinary course of such holder's business and such holders have no arrangement with any person to participate in the distribution of such trust preferred securities. If the undersigned is not a broker-dealer, the undersigned represents that it is not engaged in, and does not intend to engage in, a distribution of the trust preferred securities. If the undersigned is a broker-dealer that will receive trust preferred securities from its own account in exchange for Old trust preferred securities, the undersigned represents that such Old trust preferred securities were acquired as a result of market-making activities or other trading activities and acknowledges that it will deliver a prospectus meeting the requirements of the Securities Act in connection with any resale of such trust preferred securities; however, by so acknowledging and by delivering a prospectus, the undersigned will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act. The undersigned Holder represents that (i) the trust preferred securities to be acquired pursuant to the Exchange Offers are being obtained in the ordinary course of business of the person receiving such 6 trust preferred securities, whether or not such person is such Holder, (ii) neither the Holder of Old trust preferred securities nor any other person has an arrangement or understanding with any person to participate in the distribution of such trust preferred securities, (iii) if the Holder is not a broker-dealer, or is a broker-dealer but will not receive trust preferred securities for its own account in exchange for Old trust preferred securities, neither the Holder nor any such other person is engaged in or intends to participate in the distribution of such trust preferred securities and (iv) neither the Holder nor any such other person is an "affiliate" of the Trusts within the meaning of Rule 405 of the Securities Act or, if such Holder is an affiliate, that such Holder will comply with the registration and prospectus delivery requirements of the Securities Act to the extent applicable. Fresenius Medical Care and the Trusts have agreed that, subject to the provisions of the Registration Rights Agreements, the Prospectus, as it may be amended or supplemented from time to time, may be use by a participating broker-dealer in connection with resales of trust preferred securities received in exchange or Old trust preferred securities, where such Old trust preferred securities were acquired by such participation broker-dealer for its own account as a result of market-making activities or other trading activities, for a period ending upon the earlier to occur of 90 days following the Expiration Date (subject to extension under certain limited circumstances described in the Prospectus) or the date on which all trust preferred securities have been disposed of by such participating broker-dealer. In that regard, each participating broker-dealer who acquired Old trust preferred securities for its own account as a result of market-making or other trading activities, by tendering such Old trust preferred securities and executing this letter of transmittal, agrees that, upon receipt of notice from Fresenius Medical Care AG or a Trust of the occurrence of any event or the discovery of any fact which makes any statement contained or incorporated by reference in the Prospectus untrue in any material respect or which causes the Prospectus to omit to state a material fact necessary in order to make the statements contained or incorporated by reference therein in the light of the circumstances under which they were made, not misleading or of the occurrence of certain other events specified in the Registration Rights Agreements, such participating broker-dealer will suspend the sale of trust preferred securities until the prospectus has been amended or supplemented to correct such misstatement or omission and copies of the amended or supplemented prospectus have been furnished to the participating broker-dealer or Fresenius Medical Care AG or a Trust has given notice that the sale of the trust preferred securities may be resumed, as the case may be. If Fresenius Medical Care or a Trust gives such notice to suspend the sale of the trust preferred securities it shall extend the 90-day period referred to above during which participating broker-dealers are entitled to use the prospectus in connection with resales of trust preferred securities by the number of days during the period from and including the date of the giving of such notice to and including the date when participating broker-dealers shall have received copies of the supplemented or amended prospectus necessary to permit resales of the trust preferred securities or to and including the date on Fresenius Medical Care or a Trust has given notice that the sale of trust preferred securities may be resumed, as the case may be. The undersigned will, upon request, execute and deliver any additional documents deemed by Fresenius Medical Care AG, the applicable Exchange Agent or the applicable Trust to be necessary or desirable to complete the assignment and transfer of the Old trust preferred securities tendered hereby. For purposes of the Exchange Offers, a Trust shall be deemed to have accepted validly tendered Old trust preferred securities when, as and if the Trust has given oral or written notice thereof to the applicable Exchange Agent and complied with the applicable provisions of the Registration Rights Agreements. If any tendered Old trust preferred securities are not accepted for exchange pursuant to the applicable Exchange Offer for any reason or if Old trust preferred securities are submitted for a greater aggregate liquidation amount than the Holder desires to exchange, such unaccepted or non-exchanged Old trust preferred securities will be returned without expense to the tendering Holder thereof (or, in the case of Old trust preferred securities tendered by book-entry transfer pursuant to the book-entry transfer procedures described in the Prospectus under "The Exchange Offers--Procedures for Tendering Old Trust Preferred Securities--Book-Entry Transfer," such non-exchanged trust preferred securities will be credited 7 to an account maintained with DTC, Euroclear, or Clearstream, Luxembourg, as the case may be) as promptly as practicable after the expiration or termination of the applicable Exchange Offer. All authority conferred or agreed to be conferred by this Letter of Transmittal shall survive the death, incapacity or dissolution of the undersigned and every obligation under this Letter of Transmittal shall be binding upon the undersigned's heirs, personal representatives, successors and assigns. The undersigned understands that tenders of Old trust preferred securities pursuant to the procedures described under the caption "The Exchange Offers--Procedures for Tendering Old Trust Preferred Securities--Book-Entry Transfer" in the Prospectus and in the instructions hereto will constitute a binding agreement between the undersigned and the Trust to which such tender is made upon the terms and subject to the conditions of the applicable Exchange Offer. Unless otherwise indicated under "Special Issuance Instructions," please issue the certificates representing the trust preferred securities issued in exchange for the Old trust preferred securities accepted for exchange and return any Old trust preferred securities not tendered or not exchanged, in the name(s) of the undersigned (or in either such event in the case of Old trust preferred securities tendered through DTC, Euroclear or Clearstream, Luxembourg, by credit to the account at DTC, Euroclear or Clearstream, Luxembourg). Similarly, unless otherwise indicated under "Special Delivery Instructions," please send the certificates representing the trust preferred securities issued in exchange for the Old trust preferred securities accepted for exchange and any certificates for Old trust preferred securities not tendered or not exchanged (and accompanying documents, as appropriate) to the undersigned at the address shown below the undersigned's signatures, unless, in either event, tender is being made through DTC, Euroclear or Clearstream, Luxembourg. In the event that both "Special Issuance Instructions" and "Special Delivery Instructions" are completed, please issue the certificates representing the trust preferred securities issued in exchange for the Old trust preferred securities accepted for exchange and return any Old trust preferred securities not tendered or not exchanged in the name(s) of, and send said certificates to, the person(s) so indicated. The undersigned recognizes that a Trust has no obligation pursuant to the "Special Issuance Instructions" and "Special Delivery Instructions" to transfer any Old trust preferred securities from the name of the registered holder(s) thereof if the Trust does not accept for exchange any of the Old trust preferred securities so tendered. 8 PLEASE SIGN HERE (To Be Completed by All Tendering Holders of Old trust preferred securities Regardless of Whether Old trust preferred securities Are Being Physically Delivered Herewith) This Letter of Transmittal must be signed by the Holder(s) of Old trust preferred securities exactly as their name(s) appear(s) on certificate(s) for Old trust preferred securities or, if tendered by a participant in DTC, exactly as such participant's name appears on a security position listing as the owner of Old trust preferred securities, or by person(s) authorized to become registered Holder(s) by endorsements and documents transmitted with this Letter of Transmittal. 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 set forth his or her full title below under "Capacity" and submit satisfactory evidence of such person's authority to so act. See Instruction 3 herein. If the signature appearing below is not of the registered Holder(s) of the Old trust preferred securities, then the registered Holder(s) must sign a valid proxy. X Date: --------------------------------------------------- ------------------------------------------------ X Date: --------------------------------------------------- ------------------------------------------------ SIGNATURE(S) OF HOLDER(S) OR AUTHORIZED SIGNATORY Name(s): Address: -------------------------------------------- ---------------------------------------------- - ----------------------------------------------------- ------------------------------------------------------ (PLEASE PRINT) (INCLUDING ZIP CODE) Capacity(ies): Area Code and Telephone No: --------------------------------------- --------------------------- Social Security No(s).: ------------------------------
PLEASE COMPLETE SUBSTITUTE FORM W-9 HEREIN SIGNATURE GUARANTEE (SEE INSTRUCTION 3 HEREIN) CERTAIN SIGNATURES MUST BE GUARANTEED BY AN ELIGIBLE INSTITUTION - -------------------------------------------------------------------------------- (NAME OF ELIGIBLE INSTITUTION GUARANTEEING SIGNATURES) - -------------------------------------------------------------------------------- (ADDRESS (INCLUDING ZIP CODE) AND TELEPHONE NUMBER (INCLUDING AREA CODE) OF FIRM) - -------------------------------------------------------------------------------- (AUTHORIZED SIGNATURE) - -------------------------------------------------------------------------------- (PRINTED NAME) - -------------------------------------------------------------------------------- (TITLE) DATE: ------------------------------------------- 9 - ------------------------------------------------------------------------------- SPECIAL ISSUANCE INSTRUCTIONS (SEE INSTRUCTION 4 HEREIN) To be completed ONLY if certificates for Old trust preferred securities in an aggregate liquidation amount not tendered are to be issued in the name of, or the trust preferred securities issued pursuant to the Exchange Offers are to be issued to the order of, someone other than the person or persons whose signature(s) appear(s) within this Letter of Transmittal or issued to an address different from that shown in the box entitled "Description of Old trust preferred securities" within this Letter of Transmittal, or if Old trust preferred securities tendered by book-entry transfer that are not accepted for purchase are to be credited to an account maintained at a clearing agency other than the account at such clearing agency indicated above. Name: --------------------------------------------------------------------------- (PLEASE PRINT) Address: ------------------------------------------------------------------------ - -------------------------------------------------------------------------------- (PLEASE PRINT) - -------------------------------------------------------------------------------- ZIP CODE - -------------------------------------------------------------------------------- TAXPAYER IDENTIFICATION OR SOCIAL SECURITY NUMBER (SEE SUBSTITUTE FORM W-9 HEREIN) - -------------------------------------------------------------------------------- SPECIAL DELIVERY INSTRUCTIONS (SEE INSTRUCTION 4 HEREIN) To be completed ONLY if certificates for Old trust preferred securities in an aggregate liquidation amount not tendered or not accepted for purchase or the trust preferred securities issued pursuant to the Exchange Offers are to be sent to someone other than the person or persons whose signature(s) appear(s) within this Letter of Transmittal or to an address different from that shown in the box entitled "Description of Old trust preferred securities" within this Letter of Transmittal or to be credited to an account maintained at a clearing agency other than the account at such clearing agency indicated above. Name: --------------------------------------------------------------------------- (PLEASE PRINT) Address: ------------------------------------------------------------------------ - -------------------------------------------------------------------------------- (PLEASE PRINT) - -------------------------------------------------------------------------------- ZIP CODE - -------------------------------------------------------------------------------- TAXPAYER IDENTIFICATION OR SOCIAL SECURITY NUMBER (SEE SUBSTITUTE FORM W-9 HEREIN) - -------------------------------------------------------------------------------- 10 INSTRUCTIONS FORMING PART OF THE TERMS AND CONDITIONS OF THE EXCHANGE OFFERS AND THE SOLICITATION 1. DELIVERY OF THIS LETTER OF TRANSMITTAL AND OLD TRUST PREFERRED SECURITIES. The certificates for the tendered Old trust preferred securities (or a confirmation of a book-entry transfer into the account of the Exchange Agent for the USD Exchange Offer at DTC, or pursuant to Euroclear's or Clearstream, Luxembourg's standard operating procedures for all Old trust preferred securities delivered electronically), as well as a properly completed and duly executed copy of this Letter of Transmittal or facsimile hereof and any other documents required by this Letter of Transmittal must be received by the Exchange Agent for the USD Exchange Offer at its address set forth herein prior to 5:00 P.M., New York City time in the case of the USD Exchange Offer, and by the Exchange Agent for the Euro Exchange Offer at its address set forth herein prior to 5:00 P.M., London time, in the case of the Euro Exchange Offer, on the Expiration Date. The method of delivery of the tendered Old trust preferred securities, this Letter of Transmittal and all other required documents to the Exchange Agent for the USD Exchange Offer or to Euroclear or Clearstream, Luxembourg for the Euro Exchange Offer are at the election and risk of the Holder and, except as otherwise provided below, the delivery will be deemed made only when actually received by the Exchange Agent for the USD Exchange Offer or by Euroclear or Clearstream, Luxembourg, as the case may be. 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 Old trust preferred securities should be sent to the Trusts. Holders who wish to tender their Old USD trust preferred securities and (i) whose Old USD trust preferred securities are not immediately available or (ii) who cannot deliver their Old trust preferred securities, this Letter of Transmittal or any other documents required hereby to the Exchange Agent for the USD Exchange Offer prior to the Expiration Date, or who cannot complete the procedure for book-entry transfer on a timely basis must tender their Old trust preferred securities and follow the guaranteed delivery procedures set forth in the Prospectus under "The Exchange Offers--Guaranteed Delivery of Old USD Trust Preferred Securities." Pursuant to such procedures: (i) such tender must be made by or through an Eligible Institution (as defined below); (ii) prior to the Expiration Date, the Exchange Agent for the USD Exchange Offer must have received from the Eligible Institution a properly completed and duly executed Notice of Guaranteed Delivery (by facsimile transmission, mail or hand delivery) setting forth the name and address of the Holder of the Old USD trust preferred securities, the certificate number or numbers of such Old USD trust preferred securities and the aggregate liquidation amount of Old USD trust preferred securities tendered, stating that the tender is being made thereby and guaranteeing that within three New York Stock Exchange trading days after the Expiration Date, this Letter of Transmittal (or copy thereof) together with the certificate(s) representing the Old USD trust preferred securities (or a confirmation of electronic mail delivery of book-entry delivery into the account of the Exchange Agent for the USD Exchange Offer at DTC) and any of the required documents will be deposited by the Eligible Institution with the Exchange Agent for the USD Exchange Offer; and (iii) such properly completed and executed Letter of Transmittal (or copy thereof), as well as all other documents required by this Letter of Transmittal and the certificate(s) representing all tendered Old trust preferred securities in proper form for transfer or a confirmation of electronic mail delivery of book-entry delivery into the account of Exchange Agent for the USD Exchange Offer at DTC, must be received by that Exchange Agent within three New York Stock Exchange trading days after the Expiration Date, all as provided in the Prospectus under the caption "The Exchange Offers--Procedures for Tendering Old Trust Preferred Securities--Book-Entry Transfer--USD Exchange Offer." Any Holder of Old USD trust preferred securities who wishes to tender his Old USD trust preferred securities pursuant to the guaranteed delivery procedures described above must ensure that the Exchange Agent for the USD Exchange Offer receives the Notice of Guaranteed Delivery prior to 5:00 P.M., New York City time, on the Expiration Date. All questions as to the validity, form, eligibility (including time of receipt), acceptance and withdrawal of tendered Old trust preferred securities will be determined by Fresenius Medical Care AG 1 11 and the applicable Trust in their sole discretion, which determination will be final and binding. Fresenius Medical Care AG and each Trust reserve the absolute right to reject any and all Old trust preferred securities not properly tendered or any Old trust preferred securities the acceptance of which would, in the opinion of counsel for Fresenius Medical Care AG and the Trust, be unlawful. Fresenius Medical Care AG and each Trust also reserve the absolute right to waive any defects, irregularities or conditions of tender as to particular Old trust preferred securities. Their interpretation of the terms and conditions of the Exchange Offers (including the instructions in this Letter of Transmittal) will be final and binding on all parties. Unless waived, any defects or irregularities in connection with tenders of Old trust preferred securities must be cured within such time as Fresenius Medical Care AG and the applicable Trust shall determine. Although the Trusts may notify Holders of defects or irregularities with respect to tenders of Old trust preferred securities, none of Fresenius Medical Care AG, either Trust, either Exchange Agent or any other person shall be under any duty to give notification of defects or irregularities with respect to tenders of Old trust preferred securities, nor shall any of them incur any liability for failure to give such notification. Tenders of Old trust preferred securities will not be deemed to have been made until such defects or irregularities have been cured or waived. Any Old trust preferred securities received by the Exchange Agent for the USD Exchange Offer or by Euroclear or Clearstream, Luxembourg in connection with the Euro Exchange Offer, that are not properly tendered and as to which the defects or irregularities have not been cured or waived will be returned without cost to the tendering Holders of Old trust preferred securities, unless otherwise provided in this Letter of Transmittal, as soon as practicable following the Expiration Date. 2. PARTIAL TENDERS. Tenders of Old trust preferred securities will be accepted only in minimum liquidation amounts of U.S. $100,000 or E 100,000, and integral multiples of U.S. $1,000 or E 1 000 in excess thereof. If less than the entire aggregate liquidation amount of any Old trust preferred securities is tendered, the tendering Holder should fill in the aggregate liquidation amount tendered in the third column of the chart entitled "Description of Old trust preferred securities." The entire aggregate liquidation amount of Old trust preferred securities delivered by the Holder will be deemed to have been tendered unless otherwise indicated. If the entire aggregate liquidation amount of all Old trust preferred securities is not tendered, Old trust preferred securities for the aggregate liquidation amount of Old trust preferred securities actually delivered to the Exchange Agent will be deemed to have been tendered unless otherwise indicated. If the entire aggregate liquidation amount of all Old trust preferred securities is not tendered, Old trust preferred securities for the aggregate liquidation amount of Old trust preferred securities not tendered and a certificate or certificates representing trust preferred securities issued in exchange of any Old trust preferred securities 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 or unless tender is made through DTC, Euroclear or Clearstream, Luxembourg, promptly after the Old trust preferred securities are accepted for exchange. 3. SIGNATURES ON THE LETTER OF TRANSMITTAL; BOND POWERS AND ENDORSEMENTS; GUARANTEE OF SIGNATURES. If this Letter of Transmittal (or copy hereof) is signed by the registered Holder(s) of the Old trust preferred securities tendered hereby, the signature must correspond with the name(s) as written on the face of the Old trust preferred securities without alteration, enlargement or any change whatsoever. If this Letter of Transmittal (or copy hereof) is signed by the registered Holder(s) of Old trust preferred securities tendered and the certificate(s) for trust preferred securities issued in exchange therefor is to be issued (or any untendered aggregate liquidation amount of Old trust preferred securities is to be reissued) to the registered Holder, such Holder need not and should not endorse any tendered Old trust preferred security, nor provide a separate bond power. In any other case, such holder must either properly endorse the Old trust preferred securities tendered or transmit a properly completed separate bond power with this Letter of Transmittal, with the signatures on the endorsement or bond power guaranteed by an Eligible Institution. If this Letter of Transmittal (or copy hereof) is signed by a person other than the registered Holder(s) of Old trust preferred securities listed therein, such Old trust preferred securities must be endorsed or accompanied by properly completed bond powers which authorize such person to tender the 2 12 Old trust preferred securities on behalf of the registered Holder, in either case signed as the name of the registered Holder or Holders appears on the Old trust preferred securities. If this Letter of Transmittal (or copy hereof) or any Old trust preferred securities or bond powers are signed by trustees, executors, administrators, guardians, attorneys-in-fact, or officers of corporations or others acting in a fiduciary or representative capacity, such persons should so indicate when signing, and unless waived by the applicable Trust, evidence satisfactory to that Trust of their authority to so act must be submitted with this Letter of Transmittal. Endorsements on Old trust preferred securities or signatures on bond powers required by this Instruction 3 must be guaranteed by an Eligible Institution. Signatures on this Letter of Transmittal (or copy hereof) or a notice of withdrawal, as the case may be, must be guaranteed by a member firm of a registered national securities exchange or of the National Association of Securities Dealers, Inc., a commercial bank or trust company having an office or correspondent in the United States or an "eligible guarantor institution" within the meaning of Rule 17Ad-15 under the Exchange Act (an "Eligible Institution") unless the Old trust preferred securities tendered pursuant thereto are tendered (i) by a registered Holder (including any participant in DTC, Euroclear or Clearstream, Luxembourg whose name appears on a security position listing as the owner of Old trust preferred securities) who has not completed the box set forth herein entitled "Special Issuance Instructions" or "Special Delivery Instructions" of this Letter of Transmittal or (ii) for the account of an Eligible Institution. 4. SPECIAL ISSUANCE AND DELIVERY INSTRUCTIONS. Tendering Holders should indicate in the applicable spaces the name and address to which trust preferred securities or substitute Old trust preferred securities for aggregate liquidation amounts not tendered or not accepted for exchange are to be issued or sent, if different from the name and address of the person signing this Letter of Transmittal (or in the case of tender of the Old trust preferred securities through DTC, Euroclear or Clearstream, Luxembourg, if different from the account maintained at DTC, Euroclear or Clearstream, Luxembourg indicated above). In the case of issuance in a different name, the taxpayer identification or social security number of the person named must also be indicated. 5. TRANSFER TAXES. The Trust will pay all transfer taxes, if any, applicable to the exchange of Old trust preferred securities pursuant to the Exchange Offers. If, however, certificates representing trust preferred securities or Old trust preferred securities for aggregate liquidation amounts not tendered or accepted for exchange are to be delivered to, or are to be registered or issued in the name of, any person other than the registered Holder of the Old trust preferred securities tendered hereby, or if tendered Old trust preferred securities are registered in the name of any person other than the person signing this Letter of Transmittal, or if a transfer tax is imposed for any reason other than the exchange of Old trust preferred securities pursuant to the Exchange Offers, then the amount of any such transfer taxes (whether imposed on the registered Holder or 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 5, it will not be necessary for transfer tax stamps to be affixed to the Old trust preferred securities listed in this Letter of Transmittal. 6. WAIVER OF CONDITIONS. Fresenius Medical Care AG and the Trusts reserve the absolute right to amend, waive or modify specified conditions in the Exchange Offers in the case of any Old trust preferred securities tendered. 7. MUTILATED, LOST, STOLEN OR DESTROYED OLD TRUST PREFERRED SECURITIES. Any tendering Holder whose Old trust preferred securities have been mutilated, lost, stolen or destroyed should contact the Exchange Agent for the USD Exchange Offer or the Exchange Agent for the Euro Exchange Offer, as the case may be, at their respective addresses indicated herein for further instruction. 3 13 8. 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 for the USD Exchange Offer or the Exchange Agent for the Euro Exchange Offer, as the case may be, at their respective addresses specified in the Prospectus. Holders may also contact their broker, dealer, commercial bank, trust company or other nominee for assistance concerning the Exchange Offers. 9. IRREGULARITIES. All questions as to the validity, form, eligibility (including time of receipt), and acceptance of Letters of Transmittal or Old trust preferred securities will be resolved by Fresenius Medical Care AG and the applicable Trust, whose determination will be final and binding. Fresenius Medical Care AG and the Trusts reserve the absolute right to reject any or all Letters of Transmittal or tenders that are not in proper form or the acceptance of which would, in the opinion of their counsel, be unlawful. Fresenius Medical Care AG and the Trusts also reserve the absolute right to waive any irregularities or conditions of tender as to the particular Old trust preferred securities covered by any Letter of Transmittal or tendered pursuant to such Letter of Transmittal. None of Fresenius Medical Care AG, either Trust, either Exchange Agent or any other person will be under any duty to give notification of any defects or irregularities in tenders or incur any liability for failure to give any such notification. Fresenius Medical Care AG and the Trusts' interpretation of the terms and conditions of the Exchange Offers shall be final and binding. 4 14 IMPORTANT TAX INFORMATION A United States Holder of the Old trust preferred securities is required to give the Exchange Agent its social security number or employer identification number. If the Old trust preferred securities are in more than one name or are not in the name of the actual owner, consult the enclosed Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9 for additional guidance on which number to report. TO BE COMPLETED BY ALL UNITED STATES TENDERING HOLDERS OF OLD USD TRUST PREFERRED SECURITIES PAYOR'S NAME: FRESENIUS MEDICAL CARE CAPITAL TRUST IV SUBSTITUTE PART 1 -- PLEASE PROVIDE YOUR TIN IN SOCIAL SECURITY FORM W-9 THE BOX AT RIGHT AND CERTIFY BY NUMBER SIGNING AND DATING BELOW OR EMPLOYER IDENTIFICATION NUMBER --------------- DEPARTMENT OF THE TREASURY PART 2 -- CERTIFICATION -- Under penalties of perjury, I certify INTERNAL REVENUE SERVICE that: (1) The number shown on this form is my correct Taxpayer Identification Number (or I am waiting for a number to be issued to me) and (2) I am not subject to backup withholding either because: (a) I am exempt from backup withholding, or (b) I have not been notified by the Internal Revenue Service (the "IRS") that I am subject to backup withholding as a result of a failure to report all interest or dividends, or (c) the IRS has notified me that I am no longer subject to backup withholding. PAYER'S REQUEST FOR TAXPAYER CERTIFICATION INSTRUCTIONS -- You must PART 3 -- Check if IDENTIFICATION NUMBER (TIN) cross out item (2) above if you have Awaiting TIN [ ] been notified by the IRS that you are currently subject to backup withholding because of under-reporting interest or dividends on your tax return. SIGNATUREDATE_______________
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP WITHHOLDING OF 31 PERCENT OF ANY PAYMENTS MADE TO YOU UNDER THE TRUST PREFERRED SECURITIES. PLEASE REVIEW THE ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS. YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU CHECKED THE BOX IN PART 3 OR SUBSTITUTE FORM W-9. CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER I certify under penalties of perjury that a taxpayer identification number has not been issued to me, and either (1) I have mailed or delivered an application to receive a taxpayer identification number to the appropriate Internal Revenue Service Center or Social Security Administration Office or (2) I intend to mail or deliver an application in the near future. I understand that if I do not provide a taxpayer identification number by the time of payment, 31% of all reportable payments made to me will be withheld, but that such amounts will be refunded to me if I then provide a Taxpayer Identification Number within sixty (60) days. Signature Date - ------------------------------------------------------------ ----------------------------- Name (Please Print) - ------------------------------------------------------------------------------------------- Address (Please Print) - -------------------------------------------------------------------------------------------
1 15 TO BE COMPLETED BY ALL UNITED STATES TENDERING HOLDERS OF OLD EURO TRUST PREFERRED SECURITIES PAYOR'S NAME: FRESENIUS MEDICAL CARE CAPITAL TRUST V SUBSTITUTE PART 1 -- PLEASE PROVIDE YOUR TIN SOCIAL SECURITY FORM W-9 IN THE BOX AT RIGHT AND CERTIFY BY NUMBER SIGNING AND DATING BELOW OR EMPLOYER IDENTIFICATION NUMBER --------------- PART 2 -- CERTIFICATION -- Under penalties of perjury, I certify that: (1) The number shown on this form is my correct Taxpayer Identification Number (or I am waiting for a number to be issued to me) and DEPARTMENT OF THE TREASURY (2) I am not subject to backup withholding either because: (a) I INTERNAL REVENUE SERVICE am exempt from backup withholding, or (b) I have not been notified by the Internal Revenue Service (the "IRS") that I am subject to backup withholding as a result of a failure to report all interest or dividends, or (c) the IRS has notified me that I am no longer subject to backup withholding. PAYER'S REQUEST FOR TAXPAYER CERTIFICATION INSTRUCTIONS -- You PART 3 -- Check if Awaiting IDENTIFICATION NUMBER (TIN) must cross out item (2) above if TIN [ ] you have been notified by the IRS that you are currently subject to back-up withholding because of under-reporting interest or dividends on your tax return. SIGNATUREDATE_______________
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP WITHHOLDING OF 31 PERCENT OF ANY PAYMENTS MADE TO YOU UNDER THE TRUST PREFERRED SECURITIES. PLEASE REVIEW THE ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS. YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU CHECKED THE BOX IN PART 3 OF SUBSTITUTE FORM W-9. - -------------------------------------------------------------------------------- CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER I certify under penalties of perjury that a taxpayer identification number has not been issued to me, and either (1) I have mailed or delivered an application to receive a taxpayer identification number to the appropriate Internal Revenue Service Center or Social Security Administration Office or (2) I intend to mail or deliver an application in the near future. I understand that if I do not provide a taxpayer identification number by the time of payment, 31% of all reportable payments made to me will be withheld, but that such amounts will be refunded to me if I then provide a Taxpayer Identification Number within sixty (60) days. Signature Date - -------------------------------------------------------------- ---------------- Name (Please Print) - -------------------------------------------------------------------------------- Address (Please Print) - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 2 16 IMPORTANT: TO TENDER OLD USD TRUST PREFERRED SECURITIES, THIS LETTER OF TRANSMITTAL OR A FACSIMILE THEREOF (TOGETHER WITH CERTIFICATES FOR OLD USD TRUST PREFERRED SECURITIES AND ALL OTHER REQUIRED DOCUMENTS) OR A NOTICE OF GUARANTEED DELIVERY MUST BE RECEIVED BY THE EXCHANGE AGENT FOR THE USD EXCHANGE OFFER ON OR PRIOR TO 5:00 P.M., NEW YORK CITY TIME ON THE EXPIRATION DATE. TO TENDER OLD EURO TRUST PREFERRED SECURITIES, HOLDERS MUST COMPLY WITH THE STANDARD PROCEDURES FOR ELECTRONIC TENDERS OF EUROCLEAR OR CLEARSTREAM, LUXEMBOURG, AS THE CASE MAY BE, ON OR PRIOR TO 5:00 P.M., LONDON TIME, ON THE EXPIRATION DATE, IN LIEU OF DELIVERING THIS LETTER OF TRANSMITTAL OR NOTICE OF GUARANTEED DELIVERY TO THE EXCHANGE AGENT FOR THE EURO EXCHANGE OFFER, AS FURTHER DESCRIBED HEREIN. (DO NOT WRITE IN SPACE BELOW)
- --------------------------------------------------------------------------------------- Old trust preferred Old trust preferred securities securities Certificate Surrendered Tendered Accepted - --------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------- Delivery Prepared by ______ Checked by ____________ Date ____________________
3 17 The Exchange Agent for the USD Exchange Offer is: STATE STREET BANK AND TRUST COMPANY
By Hand or Overnight Service: By Registered or Certified Mail: By Facsimile Transmission: State Street Bank and Trust Company State Street Bank and Trust Company (617) 662-1452 Corporate Trust Department Corporate Trust Department 2 Avenue de Lafayette P.O. Box 778 Confirm By Telephone: Corporate Trust Window Boston, MA 02102-0078 (617) 662-1548 5th Floor Attention: Ralph Jones Boston, MA 02111-1724 Attention: Ralph Jones
FOR ANY QUESTIONS REGARDING THIS LETTER OF TRANSMITTAL OR FOR ANY ADDITIONAL INFORMATION CONCERNING THE TENDER OF OLD USD TRUST PREFERRED SECURITIES, YOU MAY CONTACT THE EXCHANGE AGENT FOR THE USD EXCHANGE OFFER IN BOSTON BY TELEPHONE AT (617) 662-1548, OR BY FACSIMILE AT (617) 662-1452. The Exchange Agent for the Euro Exchange Offer is: Deutsche Bank AG London Winchester House 1 Great Winchester Street London EC2N 2DB England Attention: Corporate Trust and Agency Services Phone: ++44 (0) 207 545-8000 Fax: ++44 (0) 207 547-0271 FOR ANY QUESTIONS REGARDING THIS LETTER OF TRANSMITTAL OR FOR ANY ADDITIONAL INFORMATION CONCERNING THE TENDER OF OLD EURO TRUST PREFERRED SECURITIES, YOU MAY CONTACT THE EXCHANGE AGENT IN LONDON BY TELEPHONE AT ++44 (0) 207 545-8000 OR BY FACSIMILE AT ++44 (0) 207 547-0271. ALL OLD EURO TRUST PREFERRED SECURITIES MUST BE TENDERED BY BOOK-ENTRY TRANSFER IN ACCORDANCE WITH THE STANDARD OPERATING PROCEDURES OF EUROCLEAR OR CLEARSTREAM, LUXEMBOURG. HOLDERS WHO WISH TO BE ELIGIBLE TO RECEIVE EURO TRUST PREFERRED SECURITIES FOR THEIR OLD EURO TRUST PREFERRED SECURITIES PURSUANT TO THE EURO EXCHANGE OFFER MUST VALIDLY TENDER (AND NOT WITHDRAW) THEIR OLD EURO TRUST PREFERRED SECURITIES TO EUROCLEAR OR CLEARSTREAM, LUXEMBOURG, AS THE CASE MAY BE, PRIOR TO THE EXPIRATION DATE. 1 EX-99.2 37 y51284ex99-2.txt FORM OF NOTICE OF GUARANTEED DELIVERY 1 EXHIBIT 99.2 NOTICE OF GUARANTEED DELIVERY TO BE USED IN CONNECTION WITH FRESENIUS MEDICAL CARE CAPITAL TRUST IV OFFER TO EXCHANGE ITS 7 7/8% TRUST PREFERRED SECURITIES (LIQUIDATION AMOUNT $1,000 PER 1,000 PER TRUST PREFERRED SECURITY) WHICH HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 FOR ANY AND ALL OF ITS OUTSTANDING 7 7/8% TRUST PREFERRED SECURITIES (LIQUIDATION AMOUNT $1,000 PER TRUST PREFERRED SECURITY) THE USD EXCHANGE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME ON , 2001 UNLESS EXTENDED As set forth in the USD Exchange Offer (as defined below), this Notice of Guaranteed Delivery, or one substantially equivalent to this form, must be used to accept the USD Exchange Offer if (i) certificates for Trust IV's (as defined below) 7 7/8% Trust Preferred Securities (the "Old USD Trust Preferred Securities") are not immediately available, (ii) the Old USD Trust Preferred Securities, the Letter of Transmittal and all other required documents cannot be delivered to State Street Bank and Trust Company, the Exchange Agent for the USD Exchange Offer (the "Exchange Agent") on or prior to the Expiration Date (as defined in the Prospectus referred to below) or (iii) the procedures for delivery by book-entry transfer cannot be completed on or prior to the Expiration Date. This Notice of Guaranteed Delivery may be delivered by hand, overnight courier or mail, or transmitted by facsimile transmission, to the Exchange Agent on or prior to the Expiration Date. See "The USD Exchange Offer--Procedures for Tendering Old Trust Preferred Securities--Guaranteed Delivery of Old USD Trust Preferred Securities" in the Prospectus. STATE STREET BANK AND TRUST COMPANY, EXCHANGE AGENT
By Mail By Overnight or Hand Delivery State Street Bank and Trust Company State Street Bank and Trust Company Corporate Trust Department Corporate Trust Department P.O. Box 778 2 Avenue de Lafayette Boston, MA 02102-0078 Corporate Trust Window, 5th Floor Attn: Ralph Jones Boston, MA 02111-1724 Attn: Ralph Jones
By Facsimile State Street Bank and Trust Company Attn: Ralph Jones Fax No.: 617-662-1452 To Confirm Receipt: 617-662-1548 DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE, OR TRANSMISSION OF THIS INSTRUMENT VIA FACSIMILE OTHER THAN AS SET FORTH ABOVE, WILL NOT CONSTITUTE A VALID DELIVER. THIS NOTICE OF GUARANTEED DELIVERY 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 OF THE LETTER OF TRANSMITTAL. 2 Ladies and Gentlemen: The undersigned hereby tenders to Fresenius Medical Care Capital Trust IV, a Delaware statutory business trust ("Trust IV"), upon the terms and subject to the conditions set forth in the Prospectus dated , 2001 (as the same may be amended or supplemented from time to time, the "Prospectus"), and the related Letter of Transmittal (which together constitute the "USD Exchange Offer"), receipt of which is hereby acknowledged, the aggregate liquidation amount of Old USD Trust Preferred Securities set forth below pursuant to the guaranteed delivery procedures set forth in the Prospectus under the caption "The USD Exchange Offer-Procedures for Tendering Old Trust Preferred Securities Guaranteed Delivery of Old USD Trust Preferred Securities." Aggregate Liquidation Amount Tendered: _______________________________________________________________ Name of Registered Holder:______________________________________________________ Address:________________________________________________________________________ ................................................................................ Certificate Nos. (if available): Area Code and Telephone Number:________________________________________________ Signature:_____________________________________________________________________ The undersigned understands that tenders of Old USD Trust Preferred Securities will be accepted only in liquidation amounts of $100,000 and integral multiples of $1,000 in excess thereof. If Old USD Trust Preferred Securities will be tendered by book-entry transfer, provide the following information: DTC Account Number:____________________________________________________________ Date:__________, 2001 THE GUARANTEE ON THE REVERSE SIDE MUST BE COMPLETED 2 3 GUARANTEE (NOT TO BE USED FOR SIGNATURE GUARANTEE) The undersigned, a financial institution (including most banks, savings and loan associations and brokerage houses) that is a participant in the Securities Transfer Agent Medallion Program, the New York Stock Exchange Medallion Program or the Stock Exchange Medallion Program (an "Eligible Institution"), hereby guarantees to deliver to the Exchange Agent, at its address set forth above, either the Old USD Trust Preferred Securities tendered thereby in proper form for transfer, or confirmation of the book-entry transfer of such Old USD Trust Preferred Securities to the Exchange Agent's account at The Depository Trust Company, pursuant to the procedures or book-entry transfer set forth in the Prospectus, in either case together with one or more properly completed and duly executed Letters of Transmittal (or facsimile thereof or Agent's Message (as defined in the Letter of Transmittal) in lieu thereof) and any other required documents within three New York Stock Exchange trading days after the date of execution of this Notice of Guaranteed Delivery. The undersigned acknowledges that it must deliver the Letters of Transmittal (or facsimile thereof or Agent's Message in lieu thereof) and the Old USD Trust Preferred Securities tendered hereby (or a book-entry confirmation) to the Exchange Agent within the time period set forth above and that failure to do so could result in a financial loss to the undersigned. Name of Firm:__________________________________________________________________ (Authorized Signature)_________________________________________________________ Title: Address:_______________________________________________________________________ (Include Zip Code) ................................................................................ Area Code and Telephone Number:_________________________________________________ Date:___________________________________________________________________________ NOTE: DO NOT SEND OLD USD TRUST PREFERRED SECURITIES WITH THIS NOTICE OF GUARANTEED DELIVERY. ACTUAL SURRENDER OF OLD USD TRUST PREFERRED SECURITIES MUST BE MADE PURSUANT TO, AND BE ACCOMPANIED BY, A PROPERLY COMPLETED AND DULY EXECUTED LETTER OF TRANSMITTAL AND ANY OTHER REQUIRED DOCUMENTS. 3 -----END PRIVACY-ENHANCED MESSAGE-----