EXHIBIT 10.49
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PURCHASE AGREEMENT
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THIS PURCHASE AGREEMENT and the Exhibits and Schedules attached hereto
(collectively, the "Agreement") is dated as of August 3, 1998, by and among A.
XXXXXX XxxXXXXXXX, an individual residing in Woburn, Massachusetts, A. XXXX
XxxXXXXXXX, an individual residing in Lynnfield, Massachusetts, XXXXX XxxXXXXXXX
XXXXX, an individual residing in Charlestown, Massachusetts, XXXXXXX XxxXXXXXXX,
an individual residing in Hudson, New Hampshire, XXXXX XxxXXXXXXX, an individual
residing in West Palm Beach, Florida, XXXXXXX XxxXXXXXXX, an individual residing
in Woburn, Massachusetts, XXXXXXXXX XxxXXXXXXX, an individual residing in
Newton, Massachusetts, XXXX XxxXXXXXXX, an individual residing in Woburn,
Massachusetts, XXXXXXX X. XXXXXXX, an individual residing in Cohassett,
Massachusetts, XXXXXXX X. XXXXXXX, XX., an individual residing in Berkeley,
California, XXX XXXXXXX, an individual residing in Austin, Massachusetts, XXXXXX
X. XXXXX, an individual residing in Norwood, Massachusetts and XXXXXXX X.
XXXXXXX, an individual residing in Hingham, Massachusetts (hereinafter
individually and collectively referred to as the "Sellers") and MEDICAL
PARAMETERS, INC., a Massachusetts corporation (the "Company")
AND
ARROW INTERNATIONAL, INC., a Pennsylvania corporation (the "Buyer").
Background
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A. The Company is primarily in the business of manufacturing, selling and
distributing specialty tubing sets and related products for anesthesia
applications in hospitals (the "Business"). The operations of the Business are
conducted at 0XX Xxxxxxxx Xxx and at 00 Xxxxxxxx Xxx, Xxxxxx, Xxxxxxxxxxxxx
00000 (collectively, the "Facility").
X. Xxxxxxx own a total of 1,000 shares of common stock, no par value, of
the Company (the "Securities"), which constitute all of the Company's presently
outstanding common stock. Attached hereto, marked Exhibit "A" and made a part
hereof is a list of the Sellers and the number of shares of the Securities owned
by each of the Sellers.
C. Buyer desires to purchase from Sellers and Sellers desire to sell to
Buyer the Securities, upon the terms and subject to the conditions hereinafter
set forth. In addition, Buyer desires to purchase from the Company, and the
Company is willing to issue and sell to Buyer, an additional 255.23 shares of
the Company's common stock (the "Newly Issued Securities"), upon the terms and
subject to the conditions hereinafter set forth.
Accordingly, INTENDING TO BE LEGALLY BOUND, the parties hereto hereby agree
as follows:
ARTICLE I
DEFINITIONS
1.1 Definitions.
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(a) Certain Definitions. As used in this Agreement, the following
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terms shall have the following meanings:
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"Affiliate" of any Person means any Person directly or indirectly
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controlling, controlled by or under common control with such Person, and
includes any Person who is an officer, director or employee of such Person and
any Person that would be deemed to be an "affiliate" or an "associate" of such
Person, as those terms are defined in Rule 12b-2 of the General Rules and
Regulations under the Securities Exchange Act of 1934, as amended. As used in
this definition, "controlling" (including, with its correlative meanings,
"controlled by" and "under common control with") means possession, directly or
indirectly, of power to direct or cause the direction of management or policies
(whether through ownership of securities, partnership or other ownership
interests, by contract or otherwise).
"Authority" means any Federal, state, provincial, local or foreign
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governmental department, regulatory agency, authority, commission, board or
court or other law, rule or regulation-making entity having jurisdiction over
the Company.
"Best Efforts" means a diligent, reasonable and good faith effort to
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accomplish the applicable objective, provided that Best Efforts does not require
any unreasonable expenditure of funds or the incurrence of any unreasonable
liability on the part of the obligated party, nor does it require the obligated
party to act in a manner which would otherwise be contrary to prudent business
judgment or normal commercial practices in order to accomplish the objective.
"Business Day" means any day other than a Saturday, Sunday, or a day on
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which banking institutions in New York, New York, are authorized or obligated by
law or executive order to close.
"Employee" means an individual listed in Schedule 5.2(d)(i) (as updated
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by Sellers and the Company on the Closing Date) who, as of the Business Day
immediately preceding the Closing Date,
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(i) shall be (or in the case of (D) below, is about to become) an employee of
the Company and (ii) either (A) shall have been employed and at work on the
Business Day immediately preceding the Closing Date, or (B) shall have been on
short-term disability (including maternity disability), workers' compensation,
vacation, parental or other leave of absence consistent with the Company's
policies, practices and procedures in effect at the time such leave commenced,
or (C) shall have been receiving short term disability benefits for no more than
180 consecutive days or (D) shall have received and accepted an offer of
employment with the Company, in the ordinary course of business, but shall have
not yet commenced work.
"Environmental Laws" means all applicable federal, state and local laws,
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rules, regulations, codes and ordinances, and any orders, decrees, judgments or
injunctions issued, promulgated, approved or entered thereunder, relating to the
environment, including, without limitation, the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, as amended by the Superfund
Amendments and Reauthorization Act, as further amended ("CERCLA"); the Resource
Conservation and Recovery Act of 1976, as amended; the Federal Water Pollution
Control Act, as amended; the Federal Clear Air Act, as amended; the Toxic
Substances Control Act, as amended; the Surface Mining Control and Reclamation
Act of 1977, as amended; the Safe Drinking Water Act, as amended; the Pollution
Control Act of 1990, as amended; the Federal Insecticide, Fungicide and
Rodenticide Act, as amended; and comparable state and local laws, in all of the
foregoing cases, in effect on the date hereof.
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"Hazardous Substances" means any substance (a) that is defined as a
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"hazardous waste", "hazardous material", "hazardous substance", "toxic
substance" or similar term used under any Environmental Law; or (b) that
contains or consists of oil, petroleum or petroleum products.
"Knowledge: means, with respect to Sellers, the actual current knowledge
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of any of the Sellers and, with respect to the Company, any of those officers of
the Company identified in Schedule 4. 1 (q) hereto. The knowledge of any of the
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Sellers shall be imputed to and shall constitute the knowledge of all of the
Sellers.
"Material Adverse Effect" means a material adverse effect on the
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financial condition or results of operations of the Company or the Buyer, as the
case may be, other than with respect to any adverse effects which, directly or
indirectly, relate to or result from matters which are public or industry
knowledge relating to transactions contemplated by this Agreement.
"Person" means an individual, a corporation, a partnership, an
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association, a trust or other entity or organization, including an Authority.
(b) Other Definitions. The following defined terms shall have the
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meanings set forth in the referenced Section:
Defined Term As Defined in Section
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Agreement......................... Recitals
Annual Financial Statements....... 4.1(e)
Basket............................ 7.1(a)
Books and Records................. 5.2(a)
Business.......................... Recitals
Buyer............................. Recitals
Cap............................... 7.1(a)
Closing........................... 3.1
Closing Date...................... 3.1
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Closing Date Financial Statements. 2.1(c)(ii)
Code.............................. 4.1(f)(i)
Collateral Source................. 7.3
Company........................... Recitals
Company's Working Capital......... 2.1(c)(ii)
Contracts......................... 4.1(i)
Employee Benefit Plans............ 4.1(k)(i)
Encumbrances...................... 4.1(c)
Environmental Permits............. 4.1(n)(i)
ERISA............................. 4.1(k)(i)
Facility.......................... Recital
FDA............................... 4.1(j)(iii)
Financial Statements Date......... 4.1(e)
Form 483s......................... 4.1(r)
GAAP.............................. 4.1(e)
IDE............................... 4.1(r)
Indemnified Party................. 7.5
Indemnifying Party................ 7.5
Interim Financial Statements...... 4.1(e)
IRS............................... 4.1(k)(iii)
Landlord.......................... 4.1(t)
Lease............................. 4.1(t)
Loss.............................. 7.1(a)
Multiemployer Plans............... 4.1(k)(i)
Multiple Employer Plans........... 4.1(k)(i)
Newly Issued Securities........... Recitals
Newly Issued Securities Purchase
Price........................... 2.1(b)
Non-Competitive Period............ 5.1(f)
Patents........................... 4.1(h)
PBGC.............................. 4.1(k)(iii)
PMA............................... 4.1(r)
Purchase Price.................... 2.1(b)
Qualified Plans................... 4.1(k)(iii)
Returns........................... 4.1(f)(ii)
Sellers........................... Recitals
Sellers' Tax Returns.............. 6.3(a)
Securities........................ Recitals
Securities Purchase Price......... 2.1(b)
Sub-limit......................... 7.1(a)
Taxes............................. 4.1(f)
Third Party Claim................. 7.5
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510(k).............................. 4.1(r)
ARTICLE II
PURCHASE AND SALE OF THE PATENTS AND THE SECURITIES
2.1 Purchase and Sale of the Securities and the Newly Issued Securities;
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Payment of Purchase Price.
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(a) On the terms and subject to the conditions of this Agreement, at
the Closing referred to below, (i) Sellers will sell, transfer and deliver to
Buyer, and Buyer will purchase from the Seller, the Securities, free and clear
of any Encumbrances (as hereinafter defined in Section 4.1(c)), and (ii) the
Company will sell, transfer and deliver to Buyer, and Buyer will purchase from
the Company, the Newly Issued Securities, free and clear of any Encumbrances.
(b) Subject to a working capital adjustment hereinafter described, the
purchase price for the Securities (the "Securities Purchase Price") shall be
Eleven Million Nine Hundred Fifty Thousand Dollars ($11,950,000.00) and the
purchase price for the Newly Issued Securities (the "Newly Issued Securities
Purchase Price") shall be Three Million Fifty Thousand Dollars ($3,050,000.00).
(c) The Securities Purchase Price shall be paid by Buyer to Sellers as
follows:
(i) Eleven Thousand Four Hundred Fifty Thousand Dollars
($11,450,000.00) shall be paid at the Closing by certified check or transfer of
funds wired to Sellers' account in accordance with Sellers' instructions.
(ii) Within thirty (30) days after the Date of Closing, the Company
shall prepare its financial statements as of the Closing Date (the "Closing Date
Financial Statements").
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Promptly thereafter, and within five (5) Business Days after the completion of
the Closing Date Financial Statements, the Buyer shall cause the Company to
deliver to the Sellers a true and correct copy of the Company's Closing Date
Financial Statements and at such time the Buyer shall pay to the Sellers, by
certified check or transfer of funds wired to Sellers' account in accordance
with Sellers' instructions, the sum of Five Hundred Thousand Dollars
($500,000.00), reduced by the amount, if any, by which the Company's working
capital ("Company's Working Capital") as of the end of the day immediately
preceding the Closing Date is less than Two Million Two Hundred Thousand Dollars
($2,200,00.00). For the purposes of this provision, the Company's Working
Capital, as said term is used in this provision, after the Closing Date, shall
be equal to (i) the Company's current assets as of the Closing Date, consisting
of cash and cash equivalents, accounts receivable, inventory (at cost) and
prepaid and other current assets minus the Company's current liabilities as of
the Closing Date, consisting of accounts payable, and accrued and other current
liabilities including, without limitation, (i) all unpaid Taxes for any period
of time preceding the Closing Date, but not due or payable until on or after the
Closing Date and (ii) all indebtedness for money borrowed (including, without
limitation, indebtedness repayable over any period of time); provided, however,
the determination of current liabilities shall not include a certain loan
recently made or about to be made by Woburn National Bank to the Company in the
amount of Three Million Fifty Thousand Dollars ($3,050,000.00), the proceeds of
which the Company intends to distribute to the Sellers prior to the Closing
Date.
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(d) The New Issued Securities Purchase Price shall be paid at the
Closing by certified check or transfer of funds wired to the Company's account
in accordance with the Company's instructions
ARTICLE III
THE CLOSING
3.1 Closing Date. The closing (the "Closing") of the purchase and sale
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of the Securities and the Newly Issued Securities shall be held at the offices
of Buyer, 0000 Xxxxxxxxx Xxxx, Xxxxxxx, Xxxxxxxxxxxx 00000, on Monday, August 3,
1998, at 10:00 a.m. EDST The date on which the Closing shall occur is
hereinafter referred to as the "Closing Date". All transactions at the Closing
shall be deemed to take place simultaneously and effective as of 12:01 a.m.,
EDST on the Closing Date.
3.2 Conditions to Obligations of Buyer. The obligation of Buyer to
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purchase and pay for the Securities and the Newly Issued Securities is subject
to the satisfaction (or waiver by the Buyer) as of the Closing of the following
conditions:
(a) (i) The representations and warranties of Sellers and the
Company made in this Agreement shall be true and correct in all material
respects on and as of the Closing, as though made on or as of the Closing Date,
except for (1) changes contemplated by this Agreement or attributable to matters
disclosed by Sellers or the Company in the Schedules hereto and (2) those
representations and warranties that address matters only as of a particular date
(which shall be true and correct as of that date); (ii) Sellers and the
Company shall have performed their respective covenants contained in this
Agreement required to be performed by the time of the Closing; (iii) all
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consents by third parties that are required for the transfer of the Securities
and/or the Newly Issued Securities or that are required in order to prevent a
breach of, a default under, a termination and modification of, or any
acceleration of, any material agreement or any obligations thereunder to which
the Company is a party shall have been obtained; (iv) A. Xxxxxx XxxXxxxxxx,
Xxxxxxx X. Xxxxxxx, A. Xxxx XxxXxxxxxx, Xxxxx XxxXxxxxxx Xxxxx and Xxxxxxx
Xxxxxxx shall have entered into employment agreements with the Company, in form
and substance satisfactory to the Buyer; (v) the Buyer shall receive an opinion,
dated the Closing Date, of Xxxxxx, Hall & Xxxxxxx, counsel to the Sellers and
the Company, in form and substance satisfactory to the Buyer and (vi) Sellers
shall have delivered to Buyer a certificate dated the Closing Date and signed by
the Sellers and the duly authorized signatories of the Company, in the form of
Exhibit "B", confirming the satisfaction of the foregoing clauses (i) through
(iv) inclusive. At the Closing, Sellers and the Company shall deliver to Buyer
such additional documentation as Buyer may reasonably request pertaining to the
performance by Sellers and the Company of their covenants contained in this
Agreement.
(b) No injunction or order of any court or administrative agency of
competent jurisdiction shall be in effect as of the Closing which restrains or
prohibits the purchase and sale of the Securities and/or the Newly Issued
Securities.
(c) All accounts between (i) Sellers on the one hand and the Company on
the other hand and (the Company on the one hand and its Affiliates, if any, on
the other hand), shall be paid or otherwise satisfied in full.
(d) The directors and officers of the Company shall have delivered
resignations to Buyer.
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3.3 Conditions to Obligations of Sellers and Company. The obligation of
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the Sellers to sell and deliver the Securities to Buyer and the obligation of
the Company to sell and deliver the Newly Issued Securities to Buyer are subject
to the satisfaction (or waiver by the Sellers or the Company, as applicable) as
of the Closing of the following conditions:
(a) (i) The representations and warranties of Buyer made in this
Agreement shall be true and correct in all material respects on and as of the
Closing, as though made on or as of the Closing Date, except for (1) changes
contemplated by this Agreement or attributable to matters disclosed by Buyer in
the Schedules hereto and (2) those representations and warranties that address
matters only as of a particular date (which shall be true and correct as of that
date); (ii) Buyer shall have performed the covenants of Buyer contained in this
Agreement required to be performed by the time of the Closing; (iii) the Sellers
shall receive an opinion, dated the Closing Date, of Xxxxx, Xxxxxx & Xxxxxxx,
counsel to the Buyer, in form and substance satisfactory to the Sellers, and
(iv) Buyer shall have delivered to the Sellers a certificate dated the Closing
Date and signed by the duly authorized signatories of Buyer, in the form of
Exhibit "C", confirming the satisfaction of the foregoing clauses (i) and (ii).
(b) No injunction or order of any court or administrative agency of
competent jurisdiction shall be in effect as of the Closing which restrains or
prohibits the purchase and sale of the Securities and/or the Newly Issued
Securities.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
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4.1 Representations and Warranties of Sellers and the Company. Sellers and
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the Company hereby jointly and severally represent and warrant to Buyer as
follows:
(a) Authority. The Company has all requisite corporate power and the
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Sellers and the Company have all requisite authority to enter into this
Agreement and to consummate the transactions contemplated hereby. All acts and
other proceedings required to be taken by each of the Sellers and the Company to
authorize the execution, delivery and performance of this Agreement and the
consummation of the transactions contemplated hereby have been duly and properly
taken. This Agreement has been duly executed and delivered by each of the
Sellers and the Company and constitutes the legal, valid and binding obligation
of each of them, enforceable against them in accordance with its terms. The
execution, delivery and performance by Sellers and the Company of this Agreement
and the consummation by each of them of the transactions contemplated hereby
will not (i) violate any provision of law, rule or regulation to which any of
them is subject, (ii) violate or conflict with any order, judgment, injunction,
award or decree applicable to any of them, (iii) violate or conflict with the
certificate or articles of organization, bylaws or other similar governing
documents of the Company, (iv) constitute a default under or give rise to a
right of termination, cancellation or acceleration of any right or obligation of
the Sellers or the Company under any provision of any material agreement,
contract or other instrument binding upon the Sellers or the Company or any
license, franchise, permit or other similar authorization held by Sellers or the
Company, or (v) result in the creation or imposition of any lien, encumbrance,
charge or claim upon any of the assets of the Company, the Securities, or the
Newly Issued Securities, except in the case of any of the foregoing clauses (i)
- (iv) and that portion of clause (v) pertaining to the assets of the
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Company, for any such violation, conflict, default, right or lien which would
not individually or in the aggregate have a Material Adverse Effect. The
execution, delivery and performance by Sellers and the Company of this Agreement
and the consummation by each of them of the transactions contemplated hereby do
not require any consent from or filing with any Authority except for (i) any
consent or filing that Buyer is required to obtain or make; and (ii) consents
and filings which, if not obtained or made, will not individually or in the
aggregate have a Material Adverse Effect.
(b) Organization and Standing of the Company. The Company is a
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corporation duly organized and validly existing under the laws of the
Commonwealth of Massachusetts. The Company has full corporate power and
authority and possesses all material governmental franchises, licenses, permits,
authorizations and approvals necessary to enable it to use its corporate name
and to own, lease or otherwise hold its properties and assets and to carry on
its Business in all respects as presently conducted. The Company is not
qualified or registered as a foreign corporation to do business in any other
jurisdiction. The Company has delivered to Buyer true and correct copies of the
Articles of Organization, as amended to date, duly certified by the Secretary of
the Commonwealth of Massachusetts, and the Bylaws, as in effect on the date
hereof, of the Company, duly certified as being true and correct by the
Secretary of the Company,
(c) Capital Structure of the Company, Ownership of Securities. The
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authorized capital stock of the Company consists solely of 10,000 shares of
common stock, of which 1,000 shares are duly authorized, validly issued and
outstanding, fully paid and nonassessable. There are no outstanding warrants,
options, agreements, subscriptions, convertible or exchangeable securities or
other commitments pursuant to which the Company is or may become obligated to
issue, sell,
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purchase, return or redeem any shares of capital stock or other securities of
the Company and no equity securities of the Company are reserved for issuance
for any purpose, except with respect to the issuance of the Newly Issued
Securities on the Closing Date. Except as set forth on Schedule 4.1(c), each of
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the Sellers owns of record and beneficially the Securities, free and clear of
any claims, liens, encumbrances, security interests, options, charges or
restrictions whatsoever ("Encumbrances") as set forth on Exhibit "A", attached
hereto and made a part hereof. At the Closing, the Sellers will convey to Buyer
good and marketable title to the Securities, free and clear of all Encumbrances
and the Company will issue to Buyer the Newly Issued Securities, free and clear
of all Encumbrances.
(d) Subsidiaries and Affiliates of the Company. The Company does not,
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directly or indirectly, own any stock of, or any other interest in, any other
corporation or business entity other than those entities listed on Schedule
4.1(d). In addition, the Company does not have any Affiliates.
(e) Financial Statements. Schedule 4.1(e) sets forth the audited
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balance sheet of the Company as of February 28, 1998 (the "Financial Statements
Date"), and the related statement of income for the year then ended, together
with the notes to such financial statements (collectively, the "Annual Financial
Statements"). The Annual Financial Statements fairly present, in all material
respects, the financial position of the Company as of February 28, 1998 and the
results of operations of the Company for the year then ended, in conformity with
United States generally accepted accounting principles as applied by the Company
("GAAP") and in a manner consistent with prior practice. Schedule 4.1(e) also
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sets forth the unaudited financial statements of the Company as of May 31, 1998
(the "Interim Financial Statements") which fairly represent in all material
respects, the financial position of the Company for the three (3) month period
ended May 31, 1998, in conformity
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with GAAP and in a manner consistent with prior practice. Schedule 4.1(e) also
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sets forth a list of all of the Company's current indebtedness for borrowed
money, whether borrowed from lending institutions or elsewhere as well as a list
of accrued but unpaid Taxes and the dates such Taxes, if any, are due and
payable.
(f) Taxes.
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(i) For purposes of this Agreement, (A) "Tax" or "Taxes" shall mean
all Federal, state, local and foreign income, franchise, sales and use, real
estate, excise and other taxes and assessments, including all interest,
penalties and additions imposed with respect to such amounts and (B) "Code"
shall mean the Internal Revenue Code of 1986, as amended.
(ii) Except as set forth on Schedule 4.1(f): (A) the Company has filed
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or caused to be filed in a timely manner (without any applicable extension
periods) all Tax returns, reports and forms required to have been filed by the
Code or by applicable state, local or foreign Tax laws (collectively "Returns");
(B) all Taxes shown to be due on such Returns have been timely paid in full or,
as disclosed on Schedule 4.1(f), as of the Closing Date are being contested in
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good faith with adequate reserves provided for on the Interim Financial
Statements and/or the Closing Date Financial Statements; and (C) no Tax liens
have been filed and no material claims are being asserted in writing with
respect to any Taxes. Except as set forth on Schedule 4.1(f), no presently
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effective waivers or extensions of statutes of limitations with respect to Taxes
have been given by the Company for any taxable year. Except as set forth on
Schedule 4.1(f), as of the date of this Agreement, the Returns filed by, or with
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respect to, the Company are not being examined by, and no written notification
of intention to examine has been received from the Internal Revenue Service or,
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to the Knowledge of the Sellers, any other taxing authority with respect to
Taxes. Except as set forth in Schedule 4.1(f), no currently pending issues
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involving the Company have been raised in writing by the Internal Revenue
Service or, to the Sellers' Knowledge, any other taxing authority in connection
with any Return. Except as set forth in Schedule 4.1(f), the Company has no
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agreement with Sellers or any of its Affiliates or, to the Knowledge of Sellers
or the Company, with any other Person regarding the filing of Returns or
relating to the sharing of Tax benefits or liabilities with such Persons.
(g) Properties. Except as described on Schedule 4.1(g), the Company
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has good and valid title, free and clear of all Encumbrances, to all its owned
properties and assets, real and personal, tangible and intangible (including
those reflected on the Annual Financial Statements or acquired by the Company
since the Financial Statements Date), except property sold or otherwise disposed
of in the ordinary course of business since the Financial Statements Date.
(h) Intellectual Property. Schedule 4.1(h) sets forth a true and
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complete list of all (i) United States and foreign Patents owned by or licensed
to the Company, as well as all United States and foreign applications now
pending, (ii) trademarks, trade names, and service marks currently in use by the
Company in the Business and (iii) material copyrights and applications therefor
owned by or licensed to the Company. Except as set forth in Schedule 4.1(h),
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Sellers and the Company have no notice or Knowledge of any objections or claims
being asserted in writing by any Person with respect to the ownership, validity,
enforceability or use of any such Patents, trademarks, trade names, copyrights
and applications therefor or challenging or questioning the validity or
effectiveness of any such license.
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(i) Contracts. Except as described in Schedule 4.1(i) or the other
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Schedules hereto (and except for purchase order agreements (other than
requirements contracts) for inventory purchased in the ordinary course of
business consistent with past practice), the Company is not as of the date of
this Agreement party to or bound by any of the following written agreements:
(i) employee collective bargaining agreement or other contract
with any labor union;
(ii) employment agreement with any director, officer or employee;
(iii) (A) lease or similar agreement under which the Company is
lessee of, or holds or uses, any machinery, equipment, vehicle or other tangible
personal property owned by a third party, (B) continuing contract for the future
purchase of materials, supplies or equipment, (C) management, service,
consulting or other similar type of contract, (D) distribution or sales agency
agreement or arrangement, or (E) advertising agreement or arrangement, in any
such case which has an aggregate future liability in excess of Twenty-Five
Thousand Dollars ($25,000) or which is not terminable by the Company (x) on not
more than ninety (90) days' notice without penalty or premium or (y) for a cost
of less than twenty five thousand dollars ($25,000);
(iv) agreement or contract under which the Company has borrowed or
loaned any money or financed any purchase or issued any note, bond, indenture or
other evidence of indebtedness or guaranteed indebtedness, liabilities or
obligations of others, in each case for an amount in excess of twenty-five
thousand dollars ($25,000);
(v) mortgage, pledge, security agreement, deed of trust or other
document, in each case granting a lien (including liens upon properties acquired
under conditional sales, capital
17
leases or other title retention or security devices) securing obligations in
excess of twenty five thousand dollars ($25,000);
(vi) license of any patent, trademark, trade name, or copyright by or
to the Company involving a royalty or similar payment by or to the Company
during the immediately preceding or succeeding twelve (12) months, in each case
in excess of ten thousand dollars ($10,000) in the aggregate for such twelve
(12) month period,
(vii) lease or similar agreement under which the Company is lessee of
any real property; and
(viii) any other agreement, license, undertaking, covenant or
understanding involving a payment by the Company during the immediately
preceding or succeeding twelve (12) month period, in each case in excess of
Twenty-Five Thousand Dollars ($25,000) in the aggregate for such twelve (12)
month period.
To the Knowledge of the Sellers after reasonable investigation, each
agreement, contract, lease, license, commitment or instrument of the Company
described on Schedule 4.1(i) or the other Schedules hereto (collectively, the
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"Contracts") is in full force and effect, except as disclosed on Schedule 4.1(i)
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or the other Schedules hereto. Schedule 4.1(i) includes, without limitation, a
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list of all insurance policies to which the Company is a party and/or the named
insured, and which provide coverage for, without limitation, general liability,
product liability, automobile, property, workmen's compensation, life and
officers and directors omissions. To the Knowledge of the Sellers after
reasonable investigation, the Company is not (with or without the lapse of time
or the giving of notice, or both) in breach or default in any material respect
as concerns any of the Contracts, and no
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other party to any of the Contracts is (with or without the lapse of time or the
giving of notice, or both) in breach or default in any material respect
thereunder,
(j) Litigation, Compliance with Laws.
--------------------------------
(i) Except as set forth in Schedule 4.1(j) or otherwise described in
--------------
Section 4.1(r) hereto, there is no action, suit, proceeding or investigation
pending or, to the Knowledge of Sellers, threatened, against or involving the
Company or any of its assets (whether or not covered by insurance) which would,
individually or in the aggregate, have a Material Adverse Effect. To the
Knowledge of the Sellers, there exists no basis for the commencement of any
action, proceeding or investigation against the Company which would,
individually or in the aggregate, have a Material Adverse Effect. Except as set
forth on Schedule 4.1(j), there is no outstanding judgment, order, writ,
--------------
injunction or decree against the Company or related to any of its assets, other
than any such judgment, order, writ, injunction or decree which would not,
individually or in the aggregate, have a Material Adverse Effect.
(ii) There is no action, suit, investigation or proceeding pending
against, or to the Knowledge of Sellers threatened against or affecting, the
Company before any court or arbitrator or any Authority which in any manner
challenges or seeks to prevent, enjoin, alter or delay the transactions
contemplated by this Agreement.
(iii) Except as set forth on Schedule 4.1(j) (or, with respect to
------------
matters described in either Section 4. 1(n) or Section 4. 1(r) hereto), the
Company is in compliance with all applicable local, Federal, state, domestic or
foreign laws, statutes, rules, regulations, ordinances, orders, judgments and
decrees, (including, without limitation, U.S. Food and Drug Administration
19
("FDA") good manufacturing practice regulations, applicable insurance
requirements, requirements of any Board of Fire Underwriters or similar body,
building, zoning, occupational safety and health, pension, fair employment,
equal opportunity, safety, health, procurement, reimbursement, consumer
protection or similar laws, rules, regulations and ordinances), other than where
any such failure to comply would not have a Material Adverse Effect. No notice
has been received by the Company or Sellers, and neither the Company nor Sellers
has Knowledge of any notice being given, with respect to any violation of any
such legal requirements. There is no action or proceeding by the FDA, the
Health Care Financing Agency or other agency or part of the U.S. Department of
Health & Human Services or any other Authority, including, but not limited to,
recall procedures, pending or, to Sellers' or the Company's Knowledge,
threatened against the Company relating to the safety or efficacy of or use or
charges for any of the Company's products developed or sold in connection with
the Business.
(k) Benefit Plans.
-------------
(i) Schedule 4.1(k) sets forth a complete and correct list of all
---------------
"employee benefit plans", as defined in Section 3(3) of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA"), and any other pension plans
or employee benefit arrangements or payroll practices (including, without
limitation, severance pay, vacation pay, company awards, salary continuation for
disability, sick leave, deferred compensation, bonus or other incentive
compensation, stock purchase arrangements or policies) maintained, or
contributed to, by the Company for the benefit of any employees of the Company
or to which the Sellers or the Company contribute or are obligated to contribute
with respect to employees of the Company ("Employee Benefit Plans").
20
Schedule 4.1(k) identifies, in separate categories, Employee Benefit Plans that
---------------
are (i) subject to Section 4063 and 4064 of ERISA ("Multiple Employer Plans"),
(ii) multiemployer plans (as defined in Section 4001(a) of ERISA)
("Multiemployer Plans") or (iii) welfare plans providing continuing benefits
after the termination of employment (other than as required by Section 4980B of
the Code and at the former employee's own expense).
(ii) To the Knowledge of the Sellers and the Company, none of the
Company or any ERISA Affiliate (defined as any trade or business which, with the
Company, is treated as a single employer under Section 414(b), (c) or (m) of the
Code) has incurred any liability to the Pension Benefit Guaranty Corporation
("PBGC") under, arising out of or by operation of Title IV of ERISA (other than
any liability for premiums to the PBGC arising in the ordinary course of
business), including, without limitation, any material liability in connection
with (i) the termination or reorganization of any employee pension benefit plan
subject to Title IV of ERISA or (ii) the withdrawal from any Multiemployer Plan
or Multiple Employer Plan, and no fact or event exists which could reasonably be
expected to give rise to any such material liability. Except as set forth on
Schedule 4.1(k), to the Knowledge of the Sellers and the Company, no complete or
---------------
partial termination has occurred within the five (5) years preceding the date
hereof with respect to any Employee Benefit Plan.
(iii) Each of the Employee Benefit Plans intended to qualify under
Section 401 of the Code ("Qualified Plans"), which Qualified Plans are
designated as such on Schedule 4.1(k), has received a favorable determination
---------------
letter from the Internal Revenue Service ("IRS") that such plan is so qualified,
and to the Knowledge of the Sellers and the Company, since the date of such IRS
21
determination, except as disclosed on Schedule 4.1(k), nothing has occurred with
---------------
respect to the operation of any such plan which, either individually or in the
aggregate, would likely cause the loss of such qualification.
(iv) To the Knowledge of the Sellers and the Company, all
contributions and premiums required by law or by the terms of any Employee
Benefit Plan or any agreement relating thereto have been timely made (without
regard to any waivers granted with respect thereto) and, except as disclosed on
Schedule 4.1(k) hereto, no accumulated funding deficiencies exist in any of the
---------------
Employee Benefit Plans subject to Section 412 of the Code.
(v) To the Knowledge of the Sellers and the Company, the liabilities
of each Employee Benefit Plan that has been terminated or otherwise wound up
within the two (2) years preceding the date hereof, have been fully discharged
in compliance with applicable law.
(vi) Except as disclosed on Schedule 4.1(k) hereto, to the Knowledge
---------------
of the Sellers and the Company, there has been no "reportable event" as that
term is defined in Section 4043 of ERISA and the regulations thereunder with
respect to any of the Employee Benefit Plans subject to Title IV of ERISA which
would require the giving of notice, or any event requiring notice to be provided
under Section 4063(a) of ERISA.
(vii) To the Knowledge of the Sellers and the Company, there has been
no violation of ERISA with respect to the filing of applicable returns, reports,
documents and notices regarding any of the Employee Benefit Plans with the
Secretary of Labor or the Secretary of the Treasury or the furnishing of such
notices or documents to the participants or beneficiaries of the
22
Employee Benefit Plan which, either individually or in the aggregate, could
result in material liability to the Company.
(viii)Complete and correct copies of the following documents, with
respect to each of the Employee Benefit Plans (as applicable), have been
delivered to Buyer: (i) any plan documents and related trust documents, and all
amendments thereto; (ii) the most recent Forms 5500 and schedules thereto; (iii)
the most recent IRS determination letter; (iv) the most recent summary plan
descriptions; and (v) written descriptions of all nonwritten agreements relating
to the Employee Benefit Plans.
(ix) To the Knowledge of the Sellers and the Company, there are no
pending legal proceedings which have been asserted or instituted against any of
the Employee Benefit Plans, the assets of any such plans or the Company or the
plan administrator or any fiduciary of the Employee Benefit Plans with respect
to the operation of such plans (other than routine, uncontested benefit claims).
(x) To the Knowledge of the Sellers and the Company, each of the
Employee Benefit Plans has been maintained, in all material respects, in
accordance with its terms and all provisions of applicable laws and regulations,
except where noncompliance would not have a Material Adverse Effect. To the
Knowledge of the Sellers, all amendments and actions required to bring each of
the Employee Benefit Plans into conformity in all material respects with all of
the applicable provisions of ERISA and other applicable laws and regulations
have been made or taken except to the extent that such amendments or actions are
not required by law to be made or taken until a date after the Closing Date.
23
(xi) Except as disclosed on Schedule 4.1(k) hereto, none of the
---------------
Company or any ERISA Affiliate maintains a welfare benefit plan providing
continuing benefits to Company employees after the termination of employment
(other than as required by Section 4980B of the Code and at the former
employee's own expense), and the Company and each of the ERISA Affiliates have
complied in all material respects with the notice and continuation requirements
of Section 4980B of the Code and the regulations thereunder.
(xii) To the Knowledge of Sellers and the Company, none of the Company
or any ERISA Affiliate has divested any business or entity maintaining or
sponsoring a defined benefit pension plan having unfunded benefit liabilities
(within the meaning of Section 4001(a)(18) of ERISA) or transferred any such
plan to any Person other than the Company or any ERISA Affiliate during the
five-year period ending on the Closing Date in a transaction that could
reasonably be expected to result in a Material Adverse Effect.
(xiii)Except as disclosed on Schedule 4.1(k) hereto, no Employee
---------------
Benefit Plan will require the payment by the Company of any severance benefits,
separation pay or any similar pay as a result of the consummation of the
transactions contemplated by this Agreement.
(l) Absence of Changes or Events. Except as set forth in Schedule
----------------------------- --------
4.1(1) hereto, or any other Schedule to this Agreement, from the Financial
------
Statements Date until the Closing Date, the Business has been and will continue
to be conducted in the ordinary course consistent with past practice and there
has not been any change in the financial condition or results of operations of
the Company taken as a whole (other than changes relating to the economy in
general or industry conditions), which would, individually or in the aggregate,
have a Material Adverse Effect.
24
(m) Licenses, Permits. To the Knowledge of the Sellers and the
------------------
Company, all material governmental licenses, permits or authorizations of the
Company are validly held by the Company, the Company has complied in all
material respects with all requirements in connection therewith and the same
will not be subject to suspension, modification or revocation as a result of
this Agreement or the consummation of the transactions contemplated hereby. To
the Knowledge of the Sellers and the Company, the Company has all of the
governmental licenses, permits or authorizations which are required to carry on
the Business as such Business is now conducted.
(n) Environmental Matters. Except as set forth on Schedule 4.1(n)
---------------------- ---------------
hereto or as described in Section 4.1(r) hereto:
(i) The Company has all permits, licenses, and other authorizations
required for the operations or conduct of the Business under applicable
Environmental Laws (the "Environmental Permits"), other than where the failure
to have such permits, licenses or other authorizations would not have a Material
Adverse Effect. The Company is, and at all times since the Company has been
owned by any of the Sellers, or to the Knowledge of the Sellers, prior to the
time that the Sellers, or any of them, owned a majority of the issued and
outstanding shares of the common stock of the Company, has been in compliance
with all terms and conditions of the Environmental Permits, and with all
applicable Environmental Laws. Set forth in Schedule 4.l(n) hereto is a list of
---------------
the Environmental Permits.
(ii) Since the majority of the issued and outstanding shares of the
common stock of the Company has been owned by the Sellers, or any of them, or to
the Knowledge of the Sellers prior to the time that the Sellers, or any of them,
owned a majority of the issued and
25
outstanding shares of the common stock of the Company, the Company has received
no written notice of any citation, summons, order, complaint, penalty,
investigation, or review by any Authority or other Person with respect to any
violation by the Company of any Environmental Law; and there is no action, suit,
investigation or proceeding pending, or to the Knowledge of the Sellers or of
Company, threatened, against or involving the Company involving or arising out
of any alleged violation of any Environmental Laws.
(iii) Since a majority of the issued and outstanding shares of the
common stock of the Company has been owned by the Sellers, or any of them, or to
the Knowledge of the Sellers, prior to the time that the Sellers, or any of
them, owned a majority of the issued and outstanding shares of the common stock
of the Company, the Company has received no written notice of claim, demand or
notification that it is, or may be, potentially responsible with respect to any
investigation or cleanup of any threatened or actual release of any Hazardous
Substance or with respect to any personal injury or property damage arising from
or caused by exposure to, or the threatened or actual release of, any Hazard
Substance, and there is no action, suit, investigation or proceeding pending, or
to the Sellers' and the Company's Knowledge, threatened, against or involving
the Company involving any potential liability caused by or relating to Hazardous
Substances.
(iv) To the Knowledge of the Sellers and the Company, there are no
aboveground or underground storage tanks, no friable asbestos and no
polychlorinated biphenyls on property currently leased by the Company.
26
(v) To the Knowledge of the Sellers and the Company, no employees of
the Company have been exposed to any Hazardous Substances in connection with
employment with the Company which exposure is reasonably likely to give rise to
liability of the Company under Environmental Laws or other statutory or common
law.
(vi) To the Knowledge of the Sellers and the Company, no site
assessment, audit or other investigation has been conducted by or on behalf of
the Company by a third party professional engineer as to environmental matters
at any property owned, leased, operated or occupied by the Company.
(vii) To the Knowledge of the Sellers and the Company, no disposal,
release or burial of any Hazardous Substances has occurred on the Facility or
any other facilities or properties now or heretofore owned, leased, or operated
by the Company which require remediation by the Company under applicable
Environmental Laws except for such remediation which would not have a Material
Adverse Effect.
(o) Employee and Labor Relations. Except as set forth in Schedule
----------------------------- --------
4.1(o) hereto:
------
(i) There is no labor strike, dispute, slowdown, or work stoppage,
boycott, picketing, handbilling or lockout actually pending or, to the Knowledge
of the Sellers and the Company, threatened against or affecting the Company, and
during the past year there has not been any such action.
(ii) There is no unfair labor practice charge, petition, application
or complaint against the Company pending or, to the Knowledge of Sellers and the
Company, threatened
27
before the National Labor Relations Board, the Massachusetts Labor Relations
Commission or any other Authority.
(iii) There is no complaint against the Company pending, or to the
Knowledge of the Sellers and the Company, threatened before the Equal Employment
Opportunity Commission, the Massachusetts Commission Against Discrimination, the
Department of Labor and Workplace Development or any other Authority.
(p) Undisclosed Liabilities. To the Knowledge of the Sellers and the
------------------------
Company, after reasonable investigation, the Company does not have any material
liabilities or obligations of any nature (where accrued, absolute, contingent,
unasserted or otherwise) required by GAAP to be reflected on a balance sheet or
in notes thereto, except (i) as set forth or reflected on the Interim Financial
Statements, (ii) for items disclosed in the Schedules hereto or for which Buyer
shall be otherwise indemnified by Sellers hereunder, (iii) for purchase
contracts and orders for inventory in the ordinary course of business and (iv)
for liabilities and obligations incurred in the ordinary course of business
consistent with past practices since the Financial Statements Date and not in
violation of this Agreement.
(q) Accounts, Safe Deposit Boxes, Powers of Attorney, Officers and
--------------------------------------------------------------
Directors. Attached hereto as Schedule 4.1(q) are (i) a true and correct list
--------- ---------------
of all bank and savings accounts, investment accounts, certificates of deposits
and safe deposit boxes and outstanding powers of attorney of the Company and
those Persons authorized to sign thereon, (ii) true and correct copies of all
corporate borrowing, depository and transfer resolutions and those Persons
entitled to act thereunder, and (iii) a true and correct list of all officers
and directors of the Company.
28
(r) Regulatory Matters. Except as set forth on Schedule 4.1(r) hereto,
------------------- ---------------
the Company, and the products manufactured, assembled and/or sold by the Company
and the labeling of such products, are in compliance with all current and
otherwise applicable statutes, rules, regulations, standards, guides or orders
administered or issued by FDA and all other Authorities having regulatory
authority over the products of the Company and the Business.
Except as set forth on Schedule 4.1(r) hereto, since January 1, 1994 no
---------------
Notice of Adverse Findings, Warning Letter, Section 305 notice, subpoena, or
other similar communication by any Authority has been given to the Company with
respect to the Company or the Business, and there have been no recalls, field
notifications, alerts or seizures requested or, to the knowledge of the Company
and the Sellers, threatened relating to the products sold by the Company.
Except as set forth on Schedule 4.1(r) hereto, the Company has made
---------------
available to Buyer a copy of all currently active investigational device
exemptions ("IDF") filed with or approved by FDA by or on behalf of the Company
and all premarket approval ("PMA") and premarket notification ("510(k)")
clearance or concurrence letters received from the FDA and comparable
communications received from any other applicable Authority and provided Buyer
with access to all related documents and information, including device master
files and post-market studies.
Except as set forth on Schedule 4.1(r) hereto, the Company has made
---------------
available to Buyer in a manner so as to provide Buyer an opportunity to review
all FDA inspection reports ("Forms 483s") or comparable reports of a foreign
Authority, the Company's Responses to such Form 483s or comparable foreign
reports and the FDA Establishment Inspection Reports which the Company has
obtained for all FDA inspections of the Company's facilities since January 1,
1994. The
29
Company has also furnished Buyer with access to all internal inspection reports
(as required by 21 C.F.R. Section 820.20) conducted by the Company since January
1, 1994, as well as the written procedure for such audits.
The Company has made available to Buyer in a manner so as to provide
Buyer an opportunity to review copies of all complaint files (as required by 21
C.F.R. Section 820.198) and foreign vigilance reports as well as all Medical
Device Reports filed by the Company and maintained by such person (as required
by 21 C.F.R. Section 803) as well as copies of all related documents and a copy
of the Company's corporate policy for maintaining such files and filing such
reports.
The Company has made available to Buyer in a manner so as to provide
Buyer an opportunity to review copies of all labels and the label history for
all of the Company's products in the Company's possession.
The Company has made available to Buyer in a manner so as to provide
Buyer an opportunity to review copies of all regulatory approvals obtained from
any foreign regulatory body related to the products distributed and sold by the
Company.
(s) Except as set forth in Schedule 4.1(s) hereto, the Company does not
---------------
have or use, nor does it have any agreements with, any distributor,
representative or other agents not employees of the Company, for the sale or
other distribution of any of the Company's products.
(t) The Company operates its Business out of the Facility pursuant to a
lease dated March 10, 1997 (the "Lease") between the Company and Xxxxxxx Omnibus
XI Limited Partnership, a Massachusetts limited partnership (the "Landlord"). A
true and correct copy of the
30
Lease is attached hereto as Schedule 4.1(t). The company is in full compliance
---------------
with the terms of the Lease and is not in default thereunder.
(u) There are no claims or any threatened claims against the Company
involving death or bodily injury to a third party arising out of the design,
manufacture, labeling, sale or other handling or distribution of Products of the
Company sold prior to the Closing Date.
4.2 Representations and Warranties of Buyer. Buyer hereby represents and
---------------------------------------
warrants to the Company and the Sellers as follows:
(a) Authority. Buyer has all requisite corporate power and the
---------
authority to enter into this Agreement and to consummate the transactions
contemplated hereby. All corporate acts and other proceedings required to be
taken by Buyer to authorize the execution, delivery and performance of this
Agreement and the consummation of the transactions contemplated hereby have been
duly and properly taken. This Agreement has been duly executed and delivered by
Buyer and constitutes the legal, valid and binding obligation of Buyer,
enforceable against Buyer in accordance with its terms. The execution, delivery
and performance by Buyer of this Agreement and the consummation by Buyer and the
transactions contemplated hereby will not (i) violate any provision of law, rule
or regulation to which Buyer is subject, (ii) conflict with or violate any
order, judgment, injunction, award or decree applicable to Buyer, (iii) violate
or conflict with the certificate or articles of incorporation, bylaws or other
similar governing documents of Buyer, (iv) constitute a default under or give
rise to a right of termination, cancellation or acceleration of any right or
obligation of such Buyer under any provision of any material agreement, contract
or other instrument binding upon Buyer or any license, franchise, permit or
other similar authorization held by Buyer, or (v) result in
31
the creation or imposition of any lien, encumbrance, charge or claim upon any of
the assets of Buyer, except in the case of any of the foregoing clauses (i)-(v)
for any such violation, conflict, default, right or lien which would not
individually or in the aggregate have a Material Adverse Effect. The execution,
delivery and performance by Buyer of this Agreement and the consummation by
Buyer of the transactions contemplated hereby do not require any consent from or
filing with any Authority except for (i) any consent or filing that the Company
or Sellers are required to obtain or make; and (ii) consents and filings which,
if not obtained or made, will not individually or in the aggregate have a
Material Adverse Effect or have a material adverse effect on the ability of the
parties hereto to consummate the transactions contemplated hereby.
(b) Sufficient Funds. Buyer has sufficient funds to pay both the
----------------
Securities Purchase Price and the Newly Issued Securities Purchase Price.
(c) Organization and Standing of Buyer. Buyer represents and warrants
----------------------------------
that it is a corporation duly organized and validly existing under the laws of
the Commonwealth of Pennsylvania. Buyer has full corporate power and authority
and possesses all material governmental franchises, licenses, permits,
authorizations and approvals necessary to enable it to use its corporate name
and to own, lease or otherwise to hold its properties and assets and to carry on
its business in all material respects as presently conducted.
(d) Litigation, Decrees. There are no law suits, claims, proceedings
-------------------
or investigations pending or, to the Knowledge of Buyer, threatened by or
against or affecting Buyer or any of its properties, assets, operations or
businesses which challenge the legality of this
32
Agreement or any action to be taken in connection herewith. To the best of its
Knowledge, Buyer is not in default under any judgment, order, or decree which
would have a Material Adverse Effect.
ARTICLE V
COVENANTS
5.1 Covenants of Sellers. Sellers covenant and agree as follows:
--------------------
(a) Access. Prior to the Closing, Sellers will cause the Company to
-------
give Buyer's representatives, employees, counsel and accountants reasonable
access to the properties, books and records of the Company during mutually
agreeable business hours; it being understood that Sellers, in their sole
discretion, may deny or restrict any access involving possible breaches of
applicable confidentiality agreements with third parties or possible waivers of
any applicable attorney-client privileges.
(b) Ordinary Conduct. From and after the date hereto and prior to
-----------------
Closing, and unless Buyer shall otherwise consent or agree in writing and except
as contemplated by this Agreement, Sellers covenant and agree that the Company:
(i) Will use its Best Efforts to conduct the Business in the ordinary
course and shall not sell or convey any assets owned by the Company and utilized
in the Business other than in the ordinary course.
(ii) Will use its Best Efforts to preserve its business organization
intact and to preserve the goodwill of the suppliers, customers and others
having business dealings with the Company.
33
(iii) Will not amend its Articles of Organization, Bylaws or other
similar governing documents.
(iv) Will not issue any capital stock (other than the Newly Issued
Securities to be issued to Buyer) or rights, warrants or options to acquire
shares of such capital stock or issue any securities convertible into such
shares or convertible into securities in turn so convertible, or grant any
options, warrants or rights to acquire any such convertible securities.
(v) Will not split, combine or reclassify its outstanding capital
stock.
(vi) Will not declare or pay any dividend or other distribution in
respect of any class of its capital stock, or make any payment to redeem,
purchase or otherwise acquire, or call for redemption, any of such stock.
(vii) Will not merge or consolidate with any other corporation or,
except in the ordinary course of business, acquire any property or assets of any
other Person.
(viii)Will use its Best Efforts to maintain the services of its
present key employees, and by the time of Closing, will have entered into
employment agreements substantially in form and substance satisfactory to Buyer,
with the following individuals: A. Xxxxxx XxxXxxxxxx, Xxxxxxx Xxxxxxx, A. Xxxx
XxxXxxxxxx, Xxxxx XxxXxxxxxx Xxxxx and Xxxxxxx Xxxxxxx.
(ix) Will, together with A. Xxxxxx XxxXxxxxxx and Xxxxxxx X. Xxxxxxx,
two of the Sellers, terminate a certain Shareholders' Agreement dated December
22, 1988 and cause the Company to reissue all certificates for Securities that
have noted thereon a legend as provided by the aforesaid Stockholders' Agreement
so as to remove said legend from said reissued certificates.
34
(x) Except as set forth in Schedule 5.1(b), will pay and satisfy in
----------
full (i) all indebtedness of the Company for borrowed money, whether borrowed
from lending institutions or elsewhere, and (ii) all purchase money obligations.
(xi) Will either terminate all Company memberships in private clubs
or other private organizations or cause said memberships to be transferred to
individuals and pay in full all obligations owing to such clubs or
organizations, so that on and after the Closing Date, the Company shall no
longer have any liability or responsibility, financial or otherwise, for such
memberships.
(xii) Will cancel or transfer to the appropriate Persons all life
insurance policies either owned by the Company or the premiums for which are
paid by the Company, so that the Company shall no longer have any obligations as
concerns said policies by the Closing Date; and as concerns the split-dollar
policy issued by Phoenix Home Life Mutual Insurance Company wherein Xxxxxxx X.
Xxxxxxx is the insured, assign said policy to the said Xxxxxxx X. Xxxxxxx or to
a Person designated by him upon payment to the Company of an amount equivalent
to the present cash value of said policy.
(xiii)Will cancel or transfer to the appropriate Persons all leases
for motor vehicles leased by the Company for the benefit of any of the officers
or directors of the Company, so that on and after the Closing Date, the Company
shall have no further liability or obligation pursuant to any of said leases.
(xiv) Will provide to Buyer a statement as of the Closing Date of all
accrued entitlements for Employees including, but not limited to, vacation days,
wages and other compensation consistent with past practice.
35
(xv) At the Closing, will issue and deliver the New Issued
Securities to the Buyer free and clear of all Encumbrances.
(c) Confidentiality. For a period of three (3) years from the Closing,
---------------
Sellers will keep confidential all non-public information relating to the
Company and the Business, except as required by applicable law or legal process
and except for information which becomes public other than as a result of a
breach of this Section 5. 1 (c).
(d) Other Transactions. Prior to the Closing, none of Sellers, the
------------------
Company nor any of its Affiliates shall, nor shall they permit any of their
respective officers, directors or other representatives to, directly or
indirectly, encourage, solicit, initiate or participate in discussions or
negotiations with, or provide any information or assistance to, any Person
(other than the representatives of Buyer) concerning any merger, sale of the
Securities or any other securities, sale of substantial assets or any similar
transaction involving the Company.
(e) Non-Competition. As a further inducement to Buyer to purchase the
---------------
Securities, A. Xxxxxx XxxXxxxxxx and Xxxxxxx X. Xxxxxxx, two of the Sellers,
severally and not jointly, agree that for a period beginning on the Closing Date
and ending on the third anniversary of the Closing Date (the "Non-Competition
Period"), each of them will not, either directly or indirectly, individually or
in conjunction with any other Person as an employee, partner, stockholder,
representative, agent, or otherwise, compete with the Company by engaging in the
development, license, manufacture, sale or distribution anywhere in the United
States, of any product presently manufactured, sold or distributed by the
Company or in development by the Company as of the date hereof. Notwithstanding
the aforesaid, if any of the Sellers are on the Closing Date, or thereafter
36
become, parties to any employment agreement with the Company which contains a
different Non-Competition Period, the Non-Competition Period contained in the
said employment agreement shall prevail in the event such Seller's employment
with the Company is terminated.
(f) Lease. Prior to the Closing Date, the Seller shall obtain from the
-----
Landlord and deliver to Buyer any consents that may be required by the Lease as
a result of the sale of the Securities by the Sellers to Buyer and/or as a
result of the Company's issuance of the Newly Issued Securities to Buyer.
5.2 Covenants of Buyer. Buyer covenants and agrees as follows:
------------------
(a) Financial and Other Information. Buyer will (i) hold all of the
-------------------------------
books and records of the Company existing on the Closing Date (or copies,
microfiche or other comparable reproductions thereof (collectively "Books and
Records") and not destroy or dispose of any thereof for a period of eight (8)
years from the Closing Date or such longer time as may be required by law, and
thereafter, if it desires to destroy or dispose of any such Books and Records,
will offer first in writing at least sixty (60) days prior to such destruction
or disposition to surrender them to Sellers and (ii) provide to Sellers
financial information with respect to the Company for the portion of the current
fiscal year during which the Securities were owned by Sellers in accordance with
past practice to allow Sellers to comply with securities law, financial and tax
reporting and accounting requirements. Buyer shall reasonably cooperate with
Sellers after the Closing Date so that Sellers have access to the business
records, contracts, regulatory filings and related materials, and other
information relating to the Company and the Business as is reasonably necessary
for (a) the preparation for or the prosecution or defense of any suit, action,
litigation or administrative,
37
arbitration or other proceeding or investigation by or against Sellers, (b) the
preparation and filing of any tax return or election relating to the Company and
the Business and any audit by any taxing authority of any Returns of Sellers
relating thereto, and in this respect, Buyer agrees that the Company, within
sixty (60) days after the Closing Date, will prepare and file the Company's
Subchapter S short term Tax Returns and will thereafter provide for the
distribution to the Sellers, consistent with the Company's prior practice, of
such funds as are required for the Sellers to pay any Tax that may be due as a
result of said short term Tax Returns, and (c) the preparation and filing of any
other documents required by any Authority. The access to Books and Records
contemplated by this Section 5.2(b) shall be during normal business hours and
upon not less than two (2) Business Days prior written request.
(b) Solicitation of Employees. If this Agreement is terminated in
-------------------------
accordance with Section 8.3, Buyer agrees that neither it nor any of its
Affiliates will solicit, entice or offer employment to any employee of the
Company for a period of three (3) years from the date of this Agreement;
provided, that the foregoing shall not prohibit Buyer from employing any
individual who has received notice of termination from, or ceased to be employed
by, the Company prior to the first time such individual discussed employment by
Buyer with any representative of Buyer.
(c) Employees and Employee Benefits.
-------------------------------
(i) Offer of Employment, Continued Employment, Severance. Buyer
----------------------------------------------------
agrees to continue the employment, as of the Closing Date, of each Employee at a
rate of pay at least equal to the Employee's rate of pay in effect on the
Business Day immediately preceding the Closing Date. Schedule 5.2(c)(i) (which
------------------
shall be updated by Sellers or the Company on the Closing Date)
38
shall set forth each Employee's current rate of pay, position and date of hire.
For purposes of this covenant, Buyer shall be entitled to rely on the accuracy
thereof and, with respect to such Employee's benefits under the Company's
Benefit Plans, on the materials referred to in Schedule 4.1(k). Buyer shall have
------------------
no obligation whatsoever with regard to any Employees or former Employees of the
Company constituting (a) retired or inactive employees, who are not, or shall
have ceased to be, Employees as of the Business Day immediately preceding the
Closing Date; or (b) Employees who do not accept any offer of employment that
may be extended by Buyer and do not work for Buyer at least one (1) day. The
Company shall be solely responsible for all salaries or wages accruing on or
after the Closing Date with respect to any of the Employees that become
employees of Buyer. After the Closing Date, the Company may, at its discretion,
change the conditions of employment, except as concerns such employment
agreements referred to in Section 5. 1 (b)(viii) above; provided, however, that
during the period from the Closing Date until February 28, 1999, the Company
agrees to maintain or cause to be maintained wages, compensation levels,
employee pension and welfare plans and other employee benefits for the benefit
of the Company's Employees which are, in the aggregate, no less favorable than
those wages, compensation levels and other benefits provided under the Company's
Benefit Plans that are in effect on the date of this Agreement. In addition,
the Company's Employees shall be permitted to participate in the Buyer's 401(k)
at the earliest practical date. Sellers and the Company represent and warrant
that the sale of the Securities and/or the Newly Issued Securities contemplated
by this Agreement, will not give rise to any severance or termination benefits
under any of the Benefit Plans described in Schedule 4.1(k) hereto for which
---------------
Buyer shall be responsible.
39
(ii) No Third Party Beneficiaries, No Buyer Limitations. Nothing
--------------------------------------------------
expressed or implied in this Section 5.2 shall create any third party
beneficiary or other rights in any employee or former employee (including any
beneficiary or dependent thereof) of the Company with respect to continued
employment (or resumed employment) with Buyer or any Affiliate of Buyer.
Further, no provision of this Section 5.2 shall create any such rights in any
employee or former employee (including any beneficiary or dependent thereof) of
the Company with respect to any benefits that may be provided, directly or
indirectly, under any employee compensation and benefits plans, programs,
policies or arrangements or any plan or arrangement which may be established by
Buyer. Notwithstanding anything contained herein to the contrary, no provision
of this Agreement shall constitute a limitation on rights to amend, modify or
terminate, after the Closing Date, any specific plan or arrangement of Buyer.
5.3 Mutual Covenants. Each of the Sellers, the Company and Buyer covenants
----------------
and agrees as follows:
(a) Publicity. Prior to the Closing, Sellers and the Company on the
----------
one hand and Buyer on the other hand agree that no public release or
announcement concerning the transactions contemplated hereby shall be issued by
any of them without the prior consent (which consent shall not be unreasonably
withheld) of the other, except such release or announcement as may be required
by law or the rules or regulations of any United States or foreign securities
exchange or the NASDAQ Stock Market, in which case the party required to make
the release or announcement shall allow the other party reasonable time to
comment on such release or announcement in advance of issuing such release or
announcement.
40
(ii) No Third Party Beneficiaries, No Buyer Limitations. Nothing
--------------------------------------------------
expressed or implied in this Section 5.2 shall create any third party
beneficiary or other rights in any employee or former employee (including any
beneficiary or dependent thereof) of the Company with respect to continued
employment (or resumed employment) with Buyer or any Affiliate of Buyer.
Further, no provision of this Section 5.2 shall create any such rights in any
employee or former employee (including any beneficiary or dependent thereof) of
the Company with respect to any benefits that may be provided, directly or
indirectly, under any employee compensation and benefits plans, programs,
policies or arrangements or any plan or arrangement which may be established by
Buyer. Notwithstanding anything contained herein to the contrary, no provision
of this Agreement shall constitute a limitation on rights to amend, modify or
terminate, after the Closing Date, any specific plan or arrangement of Buyer.
5.3 Mutual Covenants. Each of the Sellers, the Company and Buyer covenants
----------------
and agrees as follows:
(a) Publicity. Prior to the Closing, Sellers and the Company on the
---------
one hand and Buyer on the other hand agree that no public release or
announcement concerning the transactions contemplated hereby shall be issued by
any of them without the prior consent (which consent shall not be unreasonably
withheld) of the other, except such release or announcement as may be required
by law or the rules or regulations of any United States or foreign securities
exchange or the NASDAQ Stock Market, in which case the party required to make
the release or announcement shall allow the other party reasonable time to
comment on such release or announcement in advance of issuing such release or
announcement.
40
(b) Reasonable Diligent Efforts. Subject to the terms and conditions
---------------------------
of this Agreement, each party will, severally, use its reasonable diligent
efforts to cause the Closing to occur as promptly as reasonably possible.
(c) Cooperation. The Sellers, the Company and the Buyer shall
-----------
cooperate with each other and shall cause their respective officers, employees,
agents, auditors and representatives to cooperate with the others during the
period prior to the Closing and for a period of one hundred twenty (120) days
after the Closing to ensure the orderly transition of the Company from the
Sellers to the Buyer and reasonably minimize any disruption to the respective
businesses of the Company and Buyer that might result from the transactions
contemplated hereby. Neither the Sellers nor the Buyer shall be required by
this Section 5.3(d) to take any action that would unreasonably interfere with
the conduct of the business of the Company or of Buyer.
(d) Tax Treatment. Sellers on the one hand and Buyer on the other hand
-------------
agree to treat the sale of the Securities contemplated by this Agreement in
accordance with its form as a sale of capital stock of the Company for tax
purposes.
ARTICLE VI
OTHER AGREEMENTS
6.1 Certain Understandings. Each of the parties is sophisticated and was
----------------------
advised by experienced counsel and, to the extent it deemed necessary, other
advisors in connection with this Agreement. Each of the parties hereby
acknowledges that (i) no party has relied or will rely in respect of this
Agreement or the transactions contemplated hereby upon any document or written
or oral information previously furnished to or discovered by it or its
representatives, other than this
41
Agreement (including the Schedules hereto) and other documents delivered at the
Closing, (ii) there are no representations or warranties by or on behalf of any
party hereto or any of its respective Affiliates or representatives other than
those expressly set forth in this Agreement or in documents delivered at the
Closing, and (iii) the parties' respective rights and obligations with respect
to this Agreement and the events giving rise thereto will be solely as set forth
in this Agreement.
6.2 Further Assurances. From time to time, as and when requested by any
------------------
party hereto, the other parties shall execute and deliver, or cause to be
executed and delivered, all such documents and instruments and shall take, or
cause to be taken, all such further or other actions as such other party may
reasonably deem necessary or desirable to consummate the transactions
contemplated by this Agreement.
6.3 Tax Matters. (a) Sellers shall be responsible for the preparation, on a
-----------
basis consistent with Returns filed for the previous periods, and filing of all
Federal, state and local income Tax Returns of the Company for all taxable
periods that are due (giving effect to valid extensions) before the Closing Date
("Sellers' Tax Returns"). Sellers shall make all payments required with respect
to Sellers' Tax Returns, as well as the payments required with respect to the
Subchapter S short term Tax Returns referred to in Section 5.2(a) above.
(b) Buyer and/or the Company will be responsible for the timely (i)
preparation and filing of all Returns of the Company and (ii) payment of all
Taxes related thereto, for periods of time beginning on the Closing Date and
ending after the Closing Date or accrued on the Interim Financial Statements or
otherwise set forth on Schedule 4.1(e).
------
42
(c) Sellers and Buyer shall provide reasonable cooperation to each
other in connection with (i) the preparation or filing of any Return, Tax
election, Tax consent or certification, or any claim for a Tax refund, (ii) any
determination of liability for Taxes, and (iii) any audit, examination or other
proceeding in respect of Taxes related to the Company. Such cooperation shall
include, if requested by Sellers, making available, on a reasonable basis,
employees of Buyer or the Company, as the case may be, whose out-of-pocket
costs, if any, shall be reimbursed by the Sellers. After the Closing Date,
Sellers and Buyer shall make available to each other, as reasonably requested,
all information, records or documents of the Company for all periods prior to
and including the Closing Date and shall preserve all such information, records
and documents until the expiration of any applicable statute of limitations,
including extensions thereof, provided that notice of such extension is given to
the party which did not grant the extension, but in all events such information,
records and documents shall be preserved for a period of not less than eight (8)
years.
(d) Sellers shall have the right, at their own expense, to control any
audit or examination by any Authority to initiate any claim for refund, to amend
any Company Tax Return or to contest, resolve and defend against any assessment,
notice of deficiency, or other adjustment or proposed adjustment relating to
Sellers' Tax Returns (whether or not a Tax Return was actually filed). Buyer
shall notify Sellers within ten (10) days following receipt of notice from any
taxing or other Authority relating to any proposed investigation, audit or other
proceeding that may affect Sellers' Tax Returns.
(e) Tax Indemnity. Notwithstanding the provisions of Article VII of
-------------
this Agreement, Sellers agree to indemnify Buyer for and hold Buyer harmless
from any Taxes of the
43
Company with respect to Sellers' Tax Returns or otherwise with respect to any
Taxes which are not either accrued on the Interim Financial Statements or set
forth on Schedule 4.1 (e), are payable or due prior to the Closing Date and
which relate to the ownership and/or operation of the Business prior to the
Closing Date (including, without limitation, all interest, penalties, reasonable
costs of defense and reasonable legal fees and expenses incurred by Buyer).
Notwithstanding the provisions of Article VII of this Agreement. Buyer shall
indemnify and hold Sellers harmless for all Tax liabilities of the Company
including, without limitation, all interest, penalties, reasonable costs of
defense and reasonable legal fees incurred by Sellers, payable with respect to
any period on and after the Closing Date (other than amounts that are the
responsibility of Sellers pursuant to Section 6.3(a) of this Agreement).
ARTICLE VII
INDEMNIFICATION
7.1 Indemnification by Sellers. (a) Sellers hereby agree to indemnify
--------------------------
Buyer, its Affiliates and, after the Closing Date, the Company and their
respective officers and directors against and hold them harmless on a net after-
Tax basis from any loss, liability, claim, damage or expense (including
reasonable legal fees and expenses and costs of enforcing any right to
indemnification pursuant to this Agreement (a "Loss") suffered or incurred by
any such indemnified party (other than any relating to Taxes, for which
indemnification provisions are set forth in Section 6.3 of this Agreement) as a
direct consequence of (i) any breach of any representation or warranty of
Sellers contained in this Agreement which by the terms of Section 8.4 survives
the Closing, (ii) any breach of any covenant of Sellers contained in this
Agreement; provided, however, that the covenants of X. Xxxxxx
44
XxxXxxxxxx and Xxxxxxx X. Xxxxxxx, two of the Sellers, set forth in Section 5.1
(f) are several and not joint and several, and any breach by either individual
of such covenants shall only create an obligation hereunder of such individual,
(iii) the release or threatened release of any Hazardous Substance by the
Company or its employees or agents during the Company's ownership, lease or
operation of real property now or formerly owned, leased or operated by the
Company (or with respect to the Facility, during or prior to the Company's lease
of the Facility) to the extent arising prior to the Closing Date at, on, or
under any portion of such real property which requires remediation by the
Company under applicable Environmental Laws or which constitutes a violation by
the Company of applicable Environmental Laws or the off-site disposal or
shipment for disposal by the Company prior to the Closing Date of any Hazardous
Substance, or (iv) the injury to or the death of any employee of the Company or
any other third person resulting from the release or threatened release by the
Company or its employees or agents of any Hazardous Substance that arose prior
to the Closing Date, regardless of where such release occurred and regardless of
when the injury or death of such person occurred or occurs; provided, however,
that Sellers shall not have any liability hereunder (other than with respect to
clause (ii) above) unless and until the aggregate of all Losses, for which
Sellers would, but for this proviso, be liable exceeds on a cumulative basis a
dollar amount equal to One Hundred Thousand Dollars ($100,000.00) (the
"Basket"), and then only to the extent of any amount which, in the aggregate,
exceeds the Basket; provided, further, that Sellers shall not have any liability
hereunder unless and until the amount of Loss with respect to each individual
matter, or series of related matters, exceeds Ten Thousand Dollars ($10,000.00)
(the "Sub-limit"); provided, further, that the maximum aggregate obligation of
Sellers to Buyer (including, but not limited to, liabilities of
45
Sellers for costs, expenses and attorneys' fees paid or incurred in connection
therewith or in connection with the curing of any or all breaches of the
Sellers' representations and warranties) collectively pursuant to this Section
7.l(a) shall not exceed Three Million Dollars ($3,000,000.00) (the "Cap");
provided, however that the Cap shall not apply to any obligation arising out of
the Tax indemnification provided for in Section 6.3(e) of this Agreement; nor
shall any such Tax obligation be included in determining or calculating the Cap.
(b) Buyer acknowledges and agrees that Sellers shall not have any
liability under any provision of this Agreement for any Loss to the extent that
such Loss relates to actions taken by or omitted to be taken by Buyer, the
Company or their respective Affiliates after the Closing Date.
7.2 Indemnification by Buyer. (a) Buyer and, after the Closing, the
------------------------
Company, hereby agrees to indemnify Sellers against and hold them harmless on a
net after-Tax basis from any loss suffered or incurred by Sellers (other than
any relating to Taxes, for which indemnification provisions are set forth in
Section 6.3 of this Agreement) as a direct consequence of (i) any breach of any
representation or warranty of the Buyer contained in this Agreement which by the
terms of Section 8.4 survives the Closing, (ii) any breach of any covenant of
Buyer contained in this Agreement, (iii) any obligation or liability of the
Company arising on or after the Closing Date (except to the extent Sellers are
obligated to indemnify Buyer pursuant to Section 7.1(a) of this Agreement), or
(iv) without limiting the indemnity provided in clause (iii) of this Section
7.2, the release or threatened release, or the exacerbation of any pre-Closing
release (but only to the extent of such exacerbation), of any Hazardous
Substance, to the extent arising after the Closing Date at, on, or under any
portion of the real property owned, leased or operated by the Company
(including, without limitation, the
46
Facility) which requires remediation under applicable Environmental Laws or
which constitutes a violation of applicable Environmental Laws or the off-site
disposal or shipment for disposal by the Company on or after the Closing Date of
any Hazardous Substance; provided, however, that Buyer shall not have any
liability hereunder unless and until the aggregate of all Losses, for which
Buyer would, but for this proviso, be liable exceeds on a cumulative basis the
Basket, and then only to the extent of any amount which, in the aggregate,
exceeds the Basket; provided, further, that Buyer shall not have any liability
hereunder unless and until the amount of Loss with respect to each individual
matter, or series of related matters, exceeds the Sub-limit; provided, further,
that the maximum aggregate obligation of Buyer to the Sellers (including, but
not limited to, liabilities of the Buyer for costs, expenses and attorneys' fees
paid or incurred in connection therewith or in connection with the curing of any
or all breaches of Buyer's representations or warranties) collectively pursuant
to this Section 7.2(a) shall not exceed the Cap.
7.3 Losses Net of Insurance, Etc. The amount of any Loss for which
----------------------------
indemnification is provided under this Article VII shall be net of (i) in the
case of Section 7.1, any accruals or reserves on the Annual Financial Statements
which relate specifically to such Loss, (ii) any amounts recovered by the
Indemnified Party (as such term is defined in Section 7.5 of this Agreement)
pursuant to any indemnification by or indemnification agreement with any third
party, (iii) the positive difference, if any, between (a) any insurance proceeds
or other cash receipts or sources of reimbursement recovered as an offset
against such Loss and (b) the net present value of any increase in insurance
premiums payable by the Indemnified Party which such party is able to
demonstrate to the Indemnifying Party (as such term is defined in Section 7.5 of
this Agreement) is directly attributable
47
to any insurance proceeds paid on account of such Loss (each such Person named
in clauses (i), (ii) and (iii), a "Collateral Source") and (iv) an amount equal
to the Tax benefit, if any, attributable to such Loss. If the amount to be
netted hereunder from any payment required under Sections 7.1 or 7.2 is
determined after payment by the Indemnifying Party of any amount otherwise
required to be paid to an Indemnified Party pursuant to this Article VII, the
Indemnified Party shall repay to the Indemnifying Party, promptly after such
determination, any amount that the Indemnifying Party would not have had to pay
pursuant to this Article VII had such determination been made at the time of
such payment.
7.4 Termination of Indemnification. The obligations to indemnify and hold
------------------------------
harmless a party hereto, pursuant to Sections 7.1 and 7.2, shall terminate when
the applicable representation or warranty terminates pursuant to Section 8.4;
provided; however, that the obligation of Sellers to indemnify and hold harmless
Buyer pursuant to Section 7.1(a) clause (iii) with respect to the Facility shall
terminate on the third anniversary of the Closing Date; provided, further, that
the obligation of Sellers to indemnify and hold harmless Buyer pursuant to
Section 7.1(a) clause (iii) with respect to the off-site disposal or shipment
for disposal by the Company prior to the Closing Date of any Hazardous Substance
and pursuant to Section 7.1(a) clause (iv) with respect to injury or death
resulting from a release or threatened release of any Hazardous Substance shall
terminate on the fifth (5th) anniversary of the Closing Date; provided, further,
that such obligations to indemnify and hold harmless shall not terminate with
respect to any item as to which the person to be indemnified (or the related
party thereto) shall have, before the expiration of the applicable period,
previously made a claim by delivering a notice (stating in reasonable detail the
basis of such claim) to the party providing
48
the indemnification. Notwithstanding the aforesaid, the obligations of all of
the Sellers, other than A. Xxxxxx XxxXxxxxxx and Xxxxxxx X. Xxxxxxx, to
indemnify and hold harmless the Buyer pursuant to Section 7.1 of this Agreement
shall terminate on the first anniversary of the Closing Date. In addition, the
obligations of the Buyer and the Company to indemnify and hold harmless the
Sellers, pursuant to Section 7.2 of this Agreement, shall terminate on the first
(1st) anniversary of the Closing Date except that the obligations of the Buyer
and the Company to indemnify and hold harmless the Sellers, pursuant to Section
7.2(a)(iv) with respect to the Facility, shall terminate on the third (3rd)
anniversary of the Closing Date, and the obligations of the Buyer and the
Company to indemnify and hold harmless the Sellers, pursuant to Section 7.2 (iv)
with respect to off-site disposal, or shipment for disposal, by the Company on
or after the Closing Date of any Hazardous Substances shall terminate on the
fifth (5th) anniversary of the Closing Date.
7.5 Procedures Relating to Indemnification under Sections 7.1 and 7.2 In
-----------------------------------------------------------------
order for a party (the "Indemnified Party") to be entitled to any
indemnification provided for under Sections 7.1 or 7.2 of this Agreement in
respect of, arising out of or involving a claim or demand made by any Person
against the Indemnified Party (a "Third Party Claim"), such Indemnified Party
must notify the party from whom indemnification is sought (the "Indemnifying
Party") in writing of the Third Party Claim within ten (10) Business Days after
receipt by such Indemnified Party of written notice of the Third Party Claim;
provided, however, that failure to give such notification shall not affect the
indemnification provided hereunder except to the extent the Indemnifying Party
shall have been prejudiced as a result of such failure (except that the
Indemnifying Party shall not be liable for any expenses incurred during the
period in which the Indemnified Party failed to give such notice).
49
Thereafter, the Indemnified Party shall deliver to the Indemnifying Party,
within five (5) Business Days after the Indemnified Party's receipt thereof,
copies of all notices and documents (including, without Stations court papers)
received by the Indemnified Party relating to the Third Party Claim.
If a Third Party Claim is made against an Indemnified Party, the
Indemnifying Party will be entitled to participate in the defense thereof and,
if it so chooses, assume at any time the defense thereof with counsel selected
by the Indemnifying Party and reasonably acceptable to the Indemnified Party.
Should the Indemnified Party so elect to assume and control the defense and
settlement of a Third Party Claim (assuming the Indemnifying Party has not
chosen to assume such defense), the Indemnifying Party will not be liable to the
Indemnified Party for legal expenses subsequently incurred by the Indemnified
Party in connection with the defense or settlement thereof. If the Indemnifying
Party assumes such defense, the Indemnified Party shall have the right to
participate in, but not control, the defense thereof and to employ counsel, at
its own expense, separate from the counsel employed by the Indemnifying Party.
The Indemnifying Party shall be liable for the fees and expenses of counsel
employed by the Indemnified Party for any period during which the Indemnifying
Party has not assumed the defense thereof (subject to the first sentence of the
first paragraph of this Section 7.5). Whether or not the Indemnifying Party
chooses to defend or prosecute any Third Party Claim, both parties hereto shall
cooperate in the defense or prosecution thereof. Such cooperation shall include
the retention and (upon the Indemnifying Party's written request) the provision
to the Indemnifying Party of records and information which are reasonably
relevant to such Third Party Claim, and making employees available on a mutually
convenient basis to provide additional information and explanation of any
material provided hereunder. Whether or not the Indemnifying
50
Party shall have assumed the defense of a Third Party Claim, the Indemnifying
Party shall not admit any liability with respect to, or settle, compromise or
discharge, such Third Party Claim without the Indemnified Party's prior written
consent.
7.6 Exclusive Remedy. The indemnification provided in this Article II
----------------
shall be the sole and exclusive remedy after the Closing Date for monetary
damages available to Buyer and Sellers for breach of any of the terms,
conditions, representations or warranties contained herein. As between Sellers
on the one hand, and Buyer and its Affiliates, including without limitation
after the Closing, the Company, on the other hand, the rights and obligations
set forth in this Agreement will be the exclusive rights and obligations with
respect to this Agreement, the events giving rise to this Agreement and the
transactions provided for herein or contemplated hereby. Without limiting the
generality or effect of the foregoing, as a material inducement to the other
parties hereto entering into this Agreement, and in right of, among other
factors, the acknowledgments contained in this Section 7.6, each of the parties
to this Agreement hereby waives any claim or cause of action, known and unknown,
foreseen and unforeseen, which exists or may arise in the future, or which it
otherwise might assert, including without limitation under the common law or
Federal or state securities laws, trade regulation laws, Environmental Laws
(including CERCLA or any other statutes now or hereafter in effect) or other
laws, by reason of this Agreement, the events giving rise to this Agreement and
the transactions provided for herein or contemplated hereby or thereby, except
for (i) claims or causes of action brought under or in accordance with and
subject to the terms and conditions of this Agreement, or (ii) injunctive or
other equitable relief (other than for rescission or rescissory or similar
damages). Notwithstanding any other provision contained in this Section 7.6,
51
none of the parties to this Agreement shall be deemed to have waived or
otherwise limited such party's rights on account of any fraudulent act by any of
the other parties hereto. In addition and notwithstanding any limitation in
this Section to the applicability of this Section, each of the Sellers hereby
waives and releases the Company from any and all other claims or causes of
action, known and unknown, foreseen and unforeseen, which any of the Sellers may
have, as of the date of this Agreement, against the Company for any reason
whatsoever.
7.7 Collateral Sources. Indemnification under this Article VII shall not
------------------
be available to any Indemnified Party unless such Indemnified Party concurrently
seeks recovery from any Collateral Source for such claim. Any Indemnifying
Party may, in its sole discretion, require any Indemnified Party to grant an
assignment of the right of such Indemnified Party to assert a claim against any
Collateral Source. In the event of such assignment, the Indemnifying Party will
pursue such claim at its own expense.
7.8 Certain Limitations. Sellers hereby agree that if any payment by
-------------------
Sellers is made under the terms of this Agreement, Sellers shall have no rights
or causes of action against the Company or any director, officer, employee or
agent thereof, whether by reason of contribution, indemnification, subrogation,
set off or otherwise (including, without limitations, by reason of the making of
the Company of representations and warranties hereunder, it being understood and
agreed that the Company made such representations and warranties for the benefit
of Sellers), in respect of any such payments, any action or inaction at or prior
to the Closing Date, or in respect of any representation, warranty, covenant or
agreement made by the Company hereunder, and shall not take any action against
the Company or any director, officer, employee or agent thereof with respect
52
thereto. Any such rights which Sellers may, by operation of law or otherwise,
have against the Company or any director, officer, employee or agent thereof
shall, at the Closing Date, be deemed to be hereby expressly and knowingly
waived.
ARTICLE VIII
MISCELLANEOUS
8.1 Assignment. This Agreement and the rights hereunder shall not be
----------
assignable or transferable by Buyer at any time prior to the payment of the
Securities Purchase Price (subject to any adjustment in accordance with Section
2.1(c)(ii) of this Agreement), or by the Sellers (including by sale of stock,
operation of law in connection with a merger, or sale of substantially all the
assets of Buyer or the Company), without the prior written consent of the other
party hereto. This Agreement shall inure to the benefit of, and be binding upon
and enforceable against, the successors and permitted assigns of the respective
parties hereto.
8.2 No Third-Party Beneficiaries. Except as provided in Article VII, this
----------------------------
Agreement is for the sole benefit of the parties hereto and their permitted
assigns and nothing herein expressed or implied shall give or be construed to
give to any Person, other than the parties hereto and such assigns, any legal or
equitable rights hereunder.
8.3 Termination.
-----------
(a) This Agreement may be terminated by written notice given by Buyer
to Sellers or Sellers to Buyer (i) if the Closing shall not have occurred by
September 1, 1998, other than as a result of a material default by the party
seeking to terminate, or (ii) if (x) the purchase and sale of the Securities
and/or the Newly Issued Securities contemplated hereby shall violate any non-
appealable
53
final order, decree or judgment of any Authority having competent jurisdiction
or (y) there shall be a statute, rule or regulation which makes the purchase and
sale of the Securities and/or the Newly Issued Securities contemplated hereby
illegal or otherwise prohibited.
(b) In the event of termination by Sellers or Buyer pursuant to
paragraph (a) of this Section 8.3, written notice thereof shall forthwith be
given to the other and the transactions contemplated by this Agreement shall be
terminated, without further action by either. If the transactions contemplated
by this Agreement are terminated as provided herein:
(i) Buyer shall return all documents and other material received from
Sellers, or the Company relating to the transactions contemplated hereby,
whether so obtained before or after the execution hereof, to Sellers;
(ii) only the provisions of Sections 5.2(b), 8.5, 8.9, 8.10, 8.11 and
8.15 hereof shall remain in full force and effect; and
(iii) in no event shall any termination of this Agreement limit or
restrict the rights and remedies of any party hereto against any other party
which has willfully breached any of the agreements or other provisions of this
Agreement prior to termination hereof.
8.4 Survival of Representations. The representations and warranties in
---------------------------
this Agreement shall survive the Closing solely for purposes of Sections 7.1 and
7.2 of this Agreement and shall terminate at the close of business on the first
anniversary of the date hereof, provided, however that as concerns A. Xxxxxx
XxxXxxxxxx and Xxxxxxx X. Xxxxxxx, two of the Sellers, the representations and
warranties in Section 4.1(c), Section 4.1(k), Section 4.1(g), and Section 4.1(n)
of this Agreement shall terminate at the close of business on the fifth (5th)
anniversary of the Closing Date.
54
8.5 Expenses. Whether or not the transactions contemplated hereby are
--------
consummated, all costs and expenses incurred in connection with this Agreement
and the transactions contemplated hereby shall be paid by the party incurring
such costs or expenses, except as may otherwise be expressly provided in this
Agreement.
8.6 Amendments. No amendment to or modification of this Agreement shall be
----------
effective unless it shall be in writing and signed by each of the parties
hereto.
8.7 Notices. All notices and other communications hereunder shall be in
-------
writing and shall be deemed given (a) on the date of delivery if delivered
personally; (b) on the date of transmission if sent via facsimile transmission
to the facsimile number, if any, given below, and telephonic confirmation of
receipt is obtained promptly after completion of transmission; (c) on the date
after delivery to a reputable nationally recognized overnight courier service or
(d) three (3) days after being mailed by registered or certified mail (return
receipt requested) by the parties at the following addresses (or at such other
address for a party as shall be specified by like notice):
(i) If to Sellers:
A. Xxxxxx XxxXxxxxxx
00 Xxxxxxx Xxxx
Xxxxxx, XX 00000
Xxxxxxx X. Xxxxxxx, Xx.
000 Xxxxxxxx Xxxxxx
Xxxxxxxx, XX 00000
With a required copy to:
Xxxxxx, Hall & Xxxxxxx
Attn: Xxxxx X. Xxxxxxx, Xx., Esquire
00 Xxxxx Xxxxxx
Xxxxxx, XX 00000
Telecopier: 617/248-4000
55
(ii) If to Arrow,
Arrow International, Inc.
0000 Xxxxxxxxx Xxxx
Xxxxxxx, Xxxxxxxxxxxx 00000
Attention: Vice President-Finance
Telecopier: 610/478-3177
With a required copy to:
Xxxxx, Xxxxxx & Xxxxxxx
Attention: Xxxxxx X. Xxxxxxxx, Esquire
000 Xxxxxxxxxx Xxxxxx
X.X. Xxx 000
Xxxxxxx, XX 00000-0000
Telecopier: 610/374-6061
(iii) If to the Company, to:
Medical Parameters, Inc.
00 X Xxxxxxxx Xxx
Xxxxxx, XX 00000
Attention: President
Telecopier: 781/935-5931
Such addresses may be changed, from time to time by means of a notice given in
the manner provided in this Section (provided that no such notice shall be
effective until it is received by the other parties hereto). Notice to the
Sellers named above in this Section shall constitute notice to all of the
Sellers without further notice to the other Sellers.
8.8 Fees. Each party hereto hereby agrees that no broker or finder has
----
acted for such party in connection with this Agreement or the transactions
contemplated hereby or that may be entitled to any brokerage fee, finder's fee
or commission in respect thereof.
56
8.9 Consent to Jurisdiction. Buyer and Sellers each irrevocably submits to
-----------------------
the nonexclusive jurisdiction of (a) the state courts of the Commonwealth of
Pennsylvania, Berks County, and (b) the United States District Court for the
Eastern District of Pennsylvania, for the purpose of any suit, action or other
proceeding arising out of this Agreement or any transactions contemplated
hereby. Buyer and Sellers consent to service of process in accordance with the
procedures set forth in Section 8.7 of this Agreement or as otherwise permitted
by law.
8.10 Severability. If any provision of this Agreement or the application
------------
of any such provision to any Person or circumstance shall be held invalid,
illegal or unenforceable in any respect by a court of competent jurisdiction,
such invalidity, illegality or unenforceability shall not effect any other
provision hereof.
8.11 Interpretation. All references to immediately available funds or
--------------
dollar amounts contained in this Agreement shall mean United States dollars.
The headings contained in this Agreement are for reference purposes only and
shall not affect in any way the meaning or interpretation of this Agreement.
The parties acknowledge and agree that (i) each party and its counsel have
reviewed the terms and provisions of this Agreement and have contributed to its
revision, (ii) the normal rule of construction, to the effect that any
ambiguities are resolved against the drafting party, shall not be employed in
the interpretation of it, and (iii) the terms and provisions of this Agreement
shall be constructed fairly as to all parties hereto, regardless of which party
was generally responsible for the preparation of this Agreement. All
information disclosed by Sellers in any Schedule hereto or any representation or
warranty herein shall be deemed to have been disclosed in any other Schedule
hereto or any representation or warranty herein where such disclosure of such
57
information is required or pertains to a representation or warranty made by
Sellers herein. Reference in this Agreement to dollar amount thresholds
(including such references in Article VII of this Agreement) shall not, for
purposes of this Agreement, be deemed to be evidence of materiality or a
Material Adverse Effect.
8.12 Waiver. Waiver of any term or condition of this Agreement by any
------
party shall be effective if in writing and shall not be construed as a waiver of
any subsequent breach or failure of the same term or condition, or a waiver of
any other term of this Agreement. No failure or delay by any party in
exercising any right, power or privilege hereunder shall operate as a waiver
thereof nor shall any single or partial exercise thereof preclude any other or
further exercise thereof or the exercise of any other right, power or privilege.
8.13 Counterparts. This Agreement may be executed in any number of
------------
counterparts, all of which shall be considered one and the same agreement, and
shall become effective when one or more such counterparts have been signed by
each of the parties and delivered to the other parties.
8.14 Entire Agreement. This Agreement, including the Schedules hereto and
---------
the other documents delivered pursuant to this Agreement, contains the entire
agreement and understanding between the parties hereto with respect to the
subject matter hereof and supersede all prior and contemporaneous agreements,
negotiations, correspondence, undertakings and understandings, oral or written,
relating to such subject matter.
8.15 Governing Law. This Agreement shall be governed by and construed in
-------------
accordance with the internal laws of the Commonwealth of Pennsylvania applicable
to agreements made and to
58
be performed entirely within the Commonwealth of Pennsylvania, without regard to
the conflicts of law principles thereof.
8.16 Gender and Number. When the sense so requires, words of any gender
-----------------
used in this Agreement shall be deemed to include any other gender and words
used in the singular number shall be deemed to include the plural, and vice
versa.
IN WITNESS WHEREOF, the parties hereto, INTENDING TO BE LEGALLY BOUND, have
executed, or caused this Agreement to be executed by their duly authorized
officers, the day and year first above written.
A. Xxxxxx XxxXxxxxxx (SEAL)
------------------------------
A. XXXXXX XxxXXXXXXX
A. Xxxx XxxXxxxxxx (SEAL)
------------------------------
A. XXXX XxxXXXXXXX
Xxxxx XxxXxxxxxx Xxxxx (SEAL)
------------------------------
XXXXX XxxXXXXXXX CHASE
Xxxxxxx XxxXxxxxxx (SEAL)
------------------------------
XXXXXXX XxxXXXXXXX
Xxxxx XxxXxxxxxx (SEAL)
------------------------------
XXXXX XxxXXXXXXX
Xxxxxxx XxxXxxxxxx (SEAL)
------------------------------
XXXXXXX XxxXXXXXXX
Xxxxxxxxx XxxXxxxxxx (SEAL)
------------------------------
XXXXXXXXX XxxXXXXXXX
Xxxx XxxXxxxxxx (SEAL)
------------------------------
XXXX XxxXXXXXXX
ONE SIGNATURE PAGE FOLLOWS
59
Xxxxxxx X. Xxxxxxx (SEAL)
-------------------------------
XXXXXXX X. XXXXXXX
Xxxxxx X. Xxxxx (SEAL)
-------------------------------
XXXXXX X. XXXXX
Xxxxxxx X. Xxxxxxx (SEAL)
-------------------------------
XXXXXXX X. XXXXXXX
Xxxxxxx X. Xxxxxxx, Xx. (SEAL)
-------------------------------
XXXXXXX X. XXXXXXX, XX.
Xxx Xxxxxxx (SEAL)
-------------------------------
XXX XXXXXXX
"SELLERS"
MEDICAL PARAMTERS, INC.
By: A. Xxxxxx XxxXxxxxxx
-------------------------------
A. Xxxxxx XxxXxxxxxx, President
Attest: Xxxx XxxXxxxxxx
-------------------------------
Xxxx XxxXxxxxxx, Clerk
"COMPANY"
ARROW INTERNATIONAL, INC.
By: Xxxxxx Xxxxxx Xx.
---------------------------------
President
Attest: Xxxxxxx Xxxx
---------------------------------
(Assistant) Secretary
"BUYER"
60
SHAREHOLDER ADDRESS SHARES
Xxxxxxx Xxxxxx Xxxxxxx Cohassett, MA 229.500
Xxxxxx X. Xxxxx Westwood, MA 20.000
Xxxxxxx Xxxx Xxxxxxx Hingham, MA 10.000
Alexander Xxxxxx XxxXxxxxxx Woburn, MA 578.200
Xxxx Xxxxxx XxxXxxxxxx Woburn, MA 38.200
Xxxxx Xxxxx Xxxxx Charlestown, MA 20.600
Xxxxxxxxx Xxxx XxxXxxxxxx Lynnfield, MA 20.600
Xxxxxxxxxxx Xxxxxxx XxxXxxxxxx West Palm Beach, FL 20.600
Xxxxxxx Xxxxx XxxXxxxxxx Hudson, NH 20.600
Xxxxxxxxx Xxx XxxXxxxxxx Newton, MA 00.000
Xxxxxxx Xxxxxx XxxXxxxxxx Xxxxxx, XX 20.600
Xxx Xxxxxxxxx Xxxxxxx Boston, MA 0.250
Xxxxxxx Xxxxxx Xxxxxxx, Xx. Xxxxxxx, CA 0.250
---------
1,000.000
=========
EXHIBIT "B"
WAIVED BY COUNSEL FOR SELLERS AND COUNSEL FOR BUYERS
EXHIBIT "C"
WAIVED BY COUNSEL FOR SELLERS AND COUNSEL FOR BUYERS
Schedule 4.1(c) - Encumbrances on Securities
None
Schedule 4.1(d)-- Subsidiaries of the Company
None
FINANCIAL STATEMENTS
MEDICAL PARAMETERS, INC.
FEBRUARY 28, 1998
CONTENTS
________________________________________________________________________________
INDEPENDENT AUDITORS' REPORT ON FINANCIAL STATEMENTS.. 1
FINANCIAL STATEMENTS:
Statements of Financial Position................... 2
Statements of Earnings............................. 3
Statements of Cash Flows........................... 4
NOTES TO FINANCIAL STATEMENTS......................... 5-8
SUPPLEMENTAL SCHEDULES:
Schedules of Property and Equipment................ 9
Schedules to Statements of Earnings................ 10
FINANCIAL STATEMENT RATIOS............................ 11-13
XXXXXX & XXXXXXX, P.C. Certified Public Accountants
================================================================================
XXX XXXXXX XXXXX XXXXXX
XXXXXX, XXXXXXXXXXXXX 00000
------
TELEPHONE (000) 000-0000
FAX (000) 000-0000
INDEPENDENT AUDITOR'S REPORT
To the Stockholders and
Board of Directors of
MEDICAL PARAMETERS, Inc.
We have audited the accompanying statements of financial position of MEDICAL
PARAMETERS, INC. as of February 28, 1998 and 1997, and the related statements of
earnings and cash flows for the years then ended. These financial statements
are the responsibility of the company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of MEDICAL PARAMETERS, INC. as of
February 28, 1998 and 1997, and the results of its operations and its cash flows
for the years then ended in conformity with generally accepted accounting
principles.
Our audit was conducted for the purpose of forming an opinion on the basic
financial statements taken as a whole. The additional information contained in
pages nine and ten is presented for purposes of additional analysis and is not a
required part of the basic financial statements. Such information has been
subjected to the auditing procedures applied in the audit of the basic financial
statements and, in our opinion, is fairly stated in all material respects in
relation to the basic financial statements taken as a whole.
June 30, 1998
Xxxxxx & Xxxxxxx, P.C.
MEDICAL PARAMETERS, INC.
------------------------
STATEMENTS OF FINANCIAL POSITION
--------------------------------
FEBRUARY 28, 1998 and 1997
--------------------------
ASSETS
------
1998 1997
--------- ---------
CURRENT ASSETS
--------------
Cash and cash equivalents 333,010 168,906
Accounts receivable 1,426,965 1,498,689
Inventory 1,265,256 1,284,689
Due from stockholders 28,290 22,568
Prepaid expenses 79,409 97,049
--------- ---------
Total current assets 3,132,930 3,071,901
--------- ---------
PROPERTY AND EOUIPMENT 213,671 262,374
---------------------- --------- ---------
OTHER ASSETS
------------
Cash surrender value of life insurance 92,404 38,987
Deposits 327,704 224,550
--------- ---------
Total other assets 420,108 263,537
--------- ---------
TOTAL ASSETS 3,766,709 3,597,812
------------ ========= =========
LIABILITIES AND STOCKHOLDERS' EOUITY
------------------------------------
CURRENT LIABILITIES
-------------------
Notes payable - bank 0 360,000
Current maturities of long-term debt 147,495 176,676
Accounts payable 462,383 491,747
Accruals and other current liabilities 323,678 229,980
--------- ---------
Total current liabilities 933,556 1,258,403
--------- ---------
LONG-TERM DEBT
--------------
Term notes payable - bank 326,899 503,575
Less: current portion 147,495 176,676
--------- ---------
Net long-term debt 179,404 326,899
--------- ---------
TOTAL LIABILITIES 1,112,960 1,585,302
----------------- --------- ---------
STOCKHOLDERS' EOUITY
--------------------
Common stock - no par value -
10,000 shares authorized;
1,000 shares issued and outstanding 10,000 10,000
Retained earnings 2,643,749 2,002,510
--------- ---------
Total stockholders' equity 2,653,749 2,012,510
--------- ---------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY 3,766,709 3,597,812
-------------------- ========= =========
See accountants' audit report and accompanying notes.
2
MEDICAL PARAMETERS, INC.
------------------------
STATEMENTS OF EARNINGS
----------------------
FOR THE YEARS ENDED FEBRUARY 28, 1998 AND 1997
----------------------------------------------
1998 Pct 1997 Pct
--------- ------ --------- ------
SALES
-----
Sales - Walrus Products 8,250,453 84.92 6,869,264 75.56
Sales - Distributed Products 1,385,004 14.26 2,066,987 22.74
Commissions 43,674 0.45 140,412 1.54
Service Income 36,210 0.37 14,000 0.15
--------- ------ --------- ------
Total sales 9,715,341 100.00 9,090,663 100.00
--------- ------ --------- ------
COST OF SALES
-------------
Walrus division 4,816,884 58.38 4,225,093 61.51
Distributor products 1,000,543 72.24 1,456,340 70.46
--------- ------ --------- ------
Total cost of sales 5,817,427 59.88 5,681,433 62.50
--------- ------ --------- ------
GROSS PROFIT
------------
Walrus division 3,433,569 41.62 2,644,171 38.49
Distributor products 384,461 27.76 610,647 29.54
Commissions 43,674 100.00 140,412 100.00
Service Income 36,210 100.00 14,000 100.00
--------- ------ --------- ------
Total gross profit 3,897,914 40.12 3,409,230 37.50
--------- ------ --------- ------
EXPENSES
--------
Sales 1,713,503 17.64 1,535,737 16.89
Administration 1,076,426 11.08 1,009,247 11.10
--------- ------ --------- ------
Total expenses 2,789,929 28.72 2,544,984 28.00
--------- ------ --------- ------
NET INCOME BEFORE TAXES 1,107,985 11.40 864,246 9.51
-----------------------
PROVISION FOR TAXES 69,000 0.71 38,753 0.43
------------------- --------- ------ --------- ------
NET INCOME BEFORE
EXTRAORDINARY ITEMS 1,038,985 10.69 825,493 9.08
-------------------
EXTRAORDINARY ITEMS 225,000 2.32 (152,226) (1.67)
------------------- --------- ------ --------- ------
NET INCOME 1,263,985 13.01 673,267 7.41
----------
RETAINED EARNINGS
BEGINNING OF YEAR 2,002,510 1,751,243
-----------------
LESS: DIVIDENDS 622,746 422,000
--------------- --------- ---------
RETAINED EARNINGS
END OF YEAR 2,643,749 2,002,510
----------- ========= =========
See accountants' audit report and accompanying notes.
3
MEDICAL PARAMETERS, INC.
------------------------
STATEMENTS OF CASH FLOWS
------------------------
FOR THE YEARS ENDED FEBRUARY 28, 1998 AND 1997
----------------------------------------- ----
1998 1997
----------- ---------
CASH PROVIDED BY (APPLIED TO)
OPERATING ACTIVITIES
--------------------
Net income 1,263,985 673,267
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation 96,265 92,061
Changes in operating assets and
liabilities:
Accounts receivable 71,724 (209,362)
Inventory 19,433 19,324
Miscellaneous receivables (10,388) (10,094)
Prepaid expenses 28,028 12,258
Cash surrender value of life insurance (53,417) (19,375)
Accounts payable (29,364) (195,661)
Accruals & other current liabilities 93,698 44,598
Tax and utility deposits (103,154) (85,687)
---------- --------
Net cash provided by/(applied to)
operating activities 1,376,810 321,329
---------- --------
CASH (APPLIED TO)
INVESTING ACTIVITIES
--------------------
Acquisition of fixed assets (47,562) (26,922)
---------- --------
CASH (APPLIED TO)
FINANCING ACTIVITIES
--------------------
Dividends to stockholders (622,746) (422,000)
Loans from/(repayments to) stockholders (5,722) (6,490)
Increase/(decrease) in notes payable (536,676) 58,324
---------- --------
Net cash provided by/(applied to)
financing activities (1,165,144) (370,166)
---------- --------
NET CASH FLOW 164,104 (75,759)
-------------
CASH AT BEGINNING OF YEAR 168,906 244,665
------------------------- ---------- --------
CASH AT END OF YEAR 333,010 168,906
------------------- ========== ========
SUPPLEMENTAL CASH FLOW DATA
Cash paid during the year for:
Interest 94,942 97,335
Income Taxes 51,655 30,099
See accountants' audit report and accompanying notes.
4
MEDICAL PARAMETERS, INC.
------------------------
NOTES TO FINANCIAL STATEMENTS
-----------------------------
FEBRUARY 28, 1998
-----------------
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
------------------------------------------
A) NATURE OF BUSINESS
------------------
The company develops and manufactures custom fluid high flow delivery
systems for which some patents are acquired. They also sell specialty
medical products purchased from other medical device manufacturers.
B) BASIS OF ACCOUNTING
-------------------
The company uses the accrual method of accounting. Sales revenues and
commissions are recorded at the time of product shipment and expenses
are recorded when incurred by the company.
C) CONCENTRATION OF RISK
---------------------
Amounts on deposit at a single financial institution occasionally exceed
the $100,000 federally insured limit. As of February 28, 1998, the
amounts on deposit exceeded the insured limit by $29,514.
D) ESTIMATES
---------
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect certain reported amounts and disclosures.
Accordingly, actual results could differ from those estimates.
E) CASH EQUIVALENTS
----------------
The Company considers all highly liquid investments with a maturity of
three months or less to be cash equivalents. The Company has also
included a small mutual fund in cash equivalents since it is readily
convertible to cash and the balance is immaterial on the financial
statements taken as a whole.
F) INVENTORIES
-----------
The inventory is valued at the lower of cost (first-in, first-out
method) or market. Inventories consist of:
Raw Materials $ 493,165 $ 430,177
Work in Process 213,542 219,189
Finished Goods 558,549 635,323
---------- ----------
$1,265,256 $1,284,689
========== ==========
5
MEDICAL PARAMETERS, INC.
------------------------
NOTES TO FINANCIAL STATEMENTS
-----------------------------
FEBRUARY 28, 1998
-----------------
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
------------------------------------------
G) PROPERTY AND EQUIPMENT
----------------------
The company depreciates its property and equipment over their
estimated useful lives by the accelerated and straight line methods.
Expenditures for maintenance and repairs are charged directly to the
appropriate operating account at the time the expense is incurred.
Expenditures representing additions, betterments, and capitalized
lease obligations are included in property and equipment.
H) S CORPORATION - INCOME TAX STATUS
---------------------------------
The Company, with the consent of its shareholders, had elected under
the Internal Revenue Code to be an S corporation effective March 1,
1988. In lieu of corporate income taxes, the shareholders of an S
corporation are taxed on their proportionate share of the Company's
taxable income. Thus, no provision for federal income taxes and only
the portion of state taxes payable by the corporation are included
within these financial statements.
I) ACCOUNTS RECEIVABLE
-------------------
The allowance for doubtful accounts is based on management's
evaluation of outstanding accounts receivable at the end of the
year. Due to the amount of bad debts incurred in fiscal year 1998 as
noted below, management has decided to record an allowance of
$10,000 for 1998. The allowance was zero for 1997 as management
believed substantially all of the receivables would be collectible.
Bad debts were $5,861 for 1998 and $389 for 1997.
NOTE 2 - RETAINED EARNINGS
-----------------
The components of retained earnings at the end of the year are as
follows:
1998 1997
----------- -----------
Pre-election accumulations $ 245,560 $ 245,560
Other adjustments account (237,580) (250,106)
Accumulated adjustments account 2,635,769 2,007,056
---------- ----------
Total Retained Earnings $2,643,749 $2,002,510
========== ==========
6
MEDICAL PARAMETERS, INC.
------------------------
NOTES TO FINANCIAL STATEMENTS
-----------------------------
FEBRUARY 28, 1998
-----------------
NOTE 3 - BUILDING RENTAL
---------------
The Company conducts it operations from leased facilities. On March 10,
1997, the Company entered into a new forty-one month lease, classified
as an operating lease, which expires on August 31, 2000 with an option
to renew for two additional years. The initial base rent was
$121,439.41 payable in monthly installments. Also, as additional rent,
the Company pays its proportionate share of the real estate taxes and
operating costs of the building of which the premises are a part. The
additional rent is included in the monthly payments. The total rent
expense for the year was $206,410. The base rent increases February 1
of each year as follows:
Annual Monthly
------------ ----------
1998 $139,360.99 $11,613.41
1999 144,898.49 12,074.87
2000 86,074.24* 12,296.32
* 7 months only (2/l/00 - 8/31/00)
NOTE 4 - SALES
-----
During fiscal 1998, there was no one customer to whom sales of Walrus
products or distributor products exceeded 10% of the corporation's
sales. As noted below, the sale of distributor products was comprised
primarily of Pall Biomedical products and the rights to this line were
sold during the year.
NOTE 5 - SUPPLIERS
---------
Elcam Plastics, an Israeli company, provided 39% and NP Medical, Inc.
provided 16% of the material purchases during fiscal 1998 for Walrus
Products. No other company supplied more than 10% of Walrus materials
purchased.
Pall Biomedical Inc. accounted for virtually all of the distributor
products purchased during the current year. As noted below, the rights
to this line were sold during the year.
NOTE 6 - EXTRAORDINARY ITEMS
-------------------
During 1997, the Company incurred legal, investment banking and
accounting fees in relation to a proposed sale of substantially all of
its assets to an outside third party. Several issues could not be
resolved and the sale was never consummated.
During 1998, the Company sold its rights to the exclusive distribution
of Pall Corporation products in a certain territory to an unrelated
corporation. The Company received $225,000 at the time of the sale and
will receive another $225,000 subject to certain contingencies.
7
MEDICAL PARAMETERS, INC.
------------------------
NOTES TO FINANCIAL STATEMENTS
-----------------------------
FEBRUARY 28, 1998
-----------------
NOTE 7 - NOTES PAYABLE - BANK
--------------------
Currently, the corporation has three agreements with Woburn National
Bank for financing. The first is a $750,000 revolving line of credit
which carries interest set at prime plus 1.0% and is evidenced by a
demand note. The second is a $633,312 sixty month term loan with
interest set at prime plus 2.0% and matures on August 20, 2000. The
third is a $150,000 thirty-six month term loan with interest set at
prime plus 2.0% and matures on August 20, 1998. These loans are secured
by a first security interest on "all business assets" and have the
unconditional guaranty of A. Xxxxxx XxxXxxxxxx and Xxxxxxx X. Xxxxxxx.
The corporation is in compliance with all loan covenants as of February
28, 1998.
The balance of each loan on February 28, 1998 is:
Current Long-term Total
---------- --------- ---------
Term loan $126,672 $179,404 $306,076
Term loan
(equipment) 20,823 -0- 20,823
Line of credit -0- -0- -0-
-------- -------- --------
Total $147,495 $179,404 $326,899
======== ======== ========
Debt maturing in the next five years consists of:
Current Long-Term
--------- ---------
Fiscal Y/E 2/99 $147,495
2/00 $126,672
2/01 52,732
2/02 -0-
2/03 -0-
--------
$147,495 $179,404
======== ========
NOTE 8 - SUBSEQUENT EVENTS
-----------------
As of the date of the auditors' report, the stockholders were
negotiating a sale of their shares to an unrelated third party.
8
MEDICAL PARAMETERS, INC.
------------------------
SCHEDULES OF PROPERTY AND EOUIPMENT
-----------------------------------
FEBRUARY 28, 1998 AND 1997
--------------------------
1998 1997
------- -------
PROPERTY AND EOUIPMENT
Equipment 520,706 492,149
Accumulated depreciation 376,843 302,482
------- -------
143,863 189,667
======= =======
Motor Vehicles 57,292 92,145
Accumulated depreciation 29,822 49,384
------- -------
27,470 42,761
======= =======
Leasehold Improvements 61,103 42,553
Accumulated depreciation 18,765 12,607
------- -------
42,338 29,946
------- -------
Total property and equipment 213,671 262,374
======= =======
9
MEDICAL PARAMETERS, INC.
------------------------
SCHEDULES TO STATEMENTS OF EARNINGS
-----------------------------------
FOR THE YEARS ENDED FEBRUARY 28, 1998 AND 1997
----------------------------------------------
1998 Pct 1997 Pct
---------- ------ --------- -----
COST OF SALES - WALRUS PRODUCTS
-------------------------------
Beginning inventory 963,603 9.92 942,096 10.36
Purchases 2,607,113 26.84 2,188,686 24.08
Labor and related costs 1,820,348 18.74 1,570,966 17.28
Supplies and other costs 555,918 5.72 486,948 5.36
--------- ----- --------- -----
Available for sale 5,946,982 61.21 5,188,696 57.08
Less - ending inventory 1,130,098 11.63 963,603 10.60
--------- ----- --------- -----
Total cost of sales 4,816,884 49.58 4,225,093 46.48
========= ===== ========= =====
COST OF SALES DISTRIBUTOR PRODUCTS
----------------------------------
Beginning inventory 321,087 3.30 361,917 3.98
Purchases 814,613 8.38 1,415,510 15.57
--------- ----- --------- -----
Available for sale 1,135,700 11.69 1,777,427 19.55
Less - ending inventory 135,157 1.39 321,087 3.53
--------- ----- --------- -----
Total cost of sales 1,000,543 10.30 1,456,340 16.02
========= ===== ========= =====
SALES EXPENSE
-------------
Salaries and wages 651,250 6.70 576,858 6.35
Fringe benefits 101,279 1.04 95,575 1.05
--------- ----- --------- -----
Total 752,529 7.75 672,433 7.40
Commissions 436,754 4.50 398,439 4.38
Travel and entertainment 279,090 2.87 227,457 2.50
Communications 59,173 0.61 66,383 0.73
Promotion and marketing 75,017 0.77 49,481 0.54
Computer expenses 59,609 0.61 73,093 0.80
Other sales expenses 12,371 0.13 19,988 0.22
Occupancy expense 38,960 0.40 28,463 0.31
--------- ----- --------- -----
Total sales expense 1,713,503 17.64 1,535,737 16.89
========= ===== ========= =====
ADMINISTRATION EXPENSE
----------------------
Salaries and wages 491,276 5.06 467,878 5.15
Fringe benefits 69,868 0.72 73,420 0.81
--------- ----- --------- -----
Total 561,144 5.78 541,298 5.95
Professional services 151,099 1.56 140,141 1.54
Travel and entertainment 83,373 0.86 80,794 0.89
Officers' life insurance (4,920) (0.05) 26,147 0.29
Financial expense 102,857 1.06 90,673 1.00
Other administrative expenses 55,145 0.57 26,497 0.29
Communications 29,336 0.30 33,526 0.37
Computer expenses 42,149 0.43 43,354 0.48
Occupancy expense 55,576 0.57 22,525 0.25
Equipment expense 667 0.01 4,292 0.05
--------- ----- --------- -----
Total administration expense 1,076,426 11.08 1,009,247 11.10
========= ===== ========= =====
10
MEDICAL PARAMETERS, INC.
------------------------
FINANCIAL STATEMENT RATIOS
--------------------------
FEBRUARY 28, 1998 and 1997
--------------------------
1998 1997
----------- -----------
RATIOS TO MEASURE RETURN ON INVESTMENTS
1. RETURN ON EOUITY 54.18% 35.68%
-------------------
Measures the return on the investment
made by the owners.
Net income
----------------------------
Average shareholders, equity
2. RETURN ON ASSETS 33.81% 18.83%
-------------------
Measures return on the gross investment in
the business, including that financed by the
owners as well as that financed by creditors.
Net income
------------
Total assets
RATIOS TO MEASURE SAFETY AND LIQUIDITY
1. NET WORKING CAPITAL 2,199,373 1,813,503
----------------------
Indicates the ability to meet short-term
obligations, reporting the excess of
current assets over current liabilities.
Current Assets
-------------------
Current Liabilities
2. CURRENT RATIO 3.43 : 1 2.47 : 1
----------------
Also indicates the ability to pay
current liabilities as they mature.
Current assets
-------------------
Current liabilities
3. QUICK RATIO 1.94 : 1 1.35 : 1
--------------
Measures the ability to meet
current liabilities with cash and
accounts receivable.
Cash + accounts receivable
--------------------------
Current liabilities
11
MEDICAL PARAMETERS, INC.
------------------------
FINANCIAL STATEMENT RATIOS
--------------------------
FEBRUARY 28, 1998 and 1997
--------------------------
1998 1997
------------- -------------
4. DEBT TO EQUITY 0.41 : 1 0.78 : 1
-----------------
Indicates the proportion of capital
provided by creditors rather than by owners.
Total debt
-------------
Total equity
5. LONG-TERM DEBT RATIO 6.33% 13.97%
-----------------------
Indicates the balance between total
equity ownership and long-term debt.
Long-term debt
----------------------------------
Capitalization(long-term debt plus
stockholders' equity)
6. TIMES INTEREST EARNED 14.31 times 7.92 times
------------------------
Measures the ability of a company to
cover the payment of interest to lenders.
Income before interest
----------------------
Interest expense
7. DEBT SERVICE RATIO 5.61 times 1.22 times
---------------------
An indicator of the company's
ability to pay both the interest
and the current principal installments
on its outstanding debt.
Income before interest
----------------------
Interest expense + current portion
of long-term debt
12
MEDICAL PARAMETERS, INC.
------------------------
FINANCIAL STATEMENT RATIOS
--------------------------
FEBRUARY 28, 1998 and 1997
1998 1997
------------ ------------
RATIOS TO MEASURE OPERATING EFFICIENCY
--------------------------------------
1. COLLECTION PERIOD 39.15 days 39.87 days
--------------------
Measures the number of days' sales that
are uncollected in average accounts
receivable providing an idea of how
successful the firm is in collecting
its customer debt.
Average accounts receivable
---------------------------
Average daily sales
2. RECEIVABLE TURNOVER RATIO 6.64 times 6.52 times
----------------------------
An alternative, but equivalent, measure
of the efficiency of the company's
receivable collection efforts.
Total sales
-----------
Average accounts receivable
3. NUMBER OF DAYS' SALES IN INVENTORY 56.98 days 59.23 days
-------------------------------------
An indicator of the amount of inventory
maintained relative to the company's
sales (as measured by cost of goods
sold).
Average inventory
-----------------
Average daily cost of sales
4. INVENTORY TURNOVER RATIO 4.56 times 4.39 times
---------------------------
An alternative measure of how
quickly inventory is sold.
Cost of goods sold
------------------
Average inventory
13
UNAUDITED
May `98
MEDICAL PARAMETER, INC.
STATEMENTS OF NET INCOME AND RETAINED EARNINGS
FOR THE MONTHS ENDED MAY 31, 1998 AND 1997
Fiscal 99 Fiscal 99 Fiscal 98
Current month Percent Year to date Percent Year to date Percent
-------------- --------- ------------- --------- ------------ --------
Sales
Walrus $725,323 77.2% $2,100,460 80.7% $1,890,815 81.0%
Distributor products 9,966 1.1% 38,136 1.6% 446,746 19.1%
Commission rep pro 204,285 21.7% 204,285 8.7% 0 0.0%
-------- ----- ---------- ----- ---------- -----
Total sa 939,574 100.0% 2,342,881 100.0% 2,337,561 100.1%
Sales Discounts (2,606) (0.3%) (10,093) (0.4%)
Cost of goods sold
Walrus 436,343 60.2% 1,187,438 56.5% 1,111,681 58.8%
Distributor products 7,579 76.0% 30,454 79.9% 315,487 70.6%
Commission rep products
-------- ----- ---------- ----- ---------- -----
Total co 443,922 47.2% 1,217,892 62.0% 1,427,168 61.1%
Gross profit
Walrus 286,374 39.5% 902,929 43.0% 779,134 41.2%
Distributor products 2,387 24.0% 7,682 20.1% 131,259 29.4%
Commission, rep pro 204,285 100.0% 204,285 100.0% 0 #DIV/0!
-------- ----- ---------- ----- ---------- -----
Total gr. 493,046 52.5% 1,114,896 47.6% 910,393 38.9%
Expenses
Sales 138,677 14.8% 438,627 18.7% 353,855 15.1%
Administration 85,378 9.1% 268,507 11.5% 254,403 10.9%
-------- ----- ---------- ----- ---------- -----
Total ex 224,055 23.9% 707,134 30.2% 608,258 26.0%
Earnings before interest and 268,991 28.6% 407,762 17.4% 302,135 12.9%
Interest 2,489 0.3% 7,761 0.3% 24,244 1.0%
Sub-S income tax equivalent 102,217 10.9% 154,950 6.6% 114,811 4.9%
-------- ----- ---------- ----- ---------- -----
NET INCOME $164,285 17.7% $ 245,051 10.8% $ 163,080 8.0%
======== ===== ========== ===== ========== =====
RETAINED EARNINGS Fiscal 99 Fiscal 98
Year to date Year to date
------------ ------------
Beginning of year $2,098,499 $2,091,657
Net income 245,051 163,080
Less Sub-S dividends 93,000 234,483
---------- ----------
END OF PERIOD $2,250,550 $2,020,254
========== ==========
Page 1
May `98
MEDICAL PARAMETERS, INC
SCHEDULE OF COST OF GOODS SOLD
FOR THE TWELVE MONTHS ENDED MAY 31,1998 AND 1997
Fiscal 99 Fiscal 99 Fiscal 98
Current month Percent Year to date Percent Year to date Percent
----------------------- ---------------------- -----------------------
Labor and fringe benefits
Beginni 225,831 51.8% $ 179,671 15.1% 138,371 12.5%
Labor 82,996 19.0% 296,910 25.0% 259,840 23.4%
Fringe D 24,866 5.7% 65,111 5.5% 40,448 4.4%
Ending i (196,364) (45.0%) (196,364) (16.5%) (136,798) (12.3%)
----------------------- ---------------------- ------------------------
Total labor and fring $ 137,329 31.5% $ 345,328 29.1% $ 311,861 28.0%
======================= ====================== ========================
Materials
Beginni 872,201 199.9% $ 849,362 71.5% 751,820 67.6%
Material 187,607 43.1% 631,024 53.2% 634,096 57.0%
Sterilizi 16,745 3.8% 50,244 4.2% 31,080 2.8%
Royalty 0 0.0% 0 0.0% 902 0.1%
Ending: (851,280) ###### (851,280) (71.7%) (793,459) (71.4%)
----------------------- ---------------------- ------------------------
Total materials $ 225,273 51.7% $ 679,350 57.2% $ 624,439 56.1%
======================= ====================== ========================
Production overhead
Beginni 127,030 29.1% $ 101,065 8.5% 78,553 7.1%
Salary a. 30,651 7.0% 87,761 7.4% 82,437 7.4%
Fringe b 6,507 1.5% 14,348 1.2% 10,232 0.9%
Occup 13,967 3.2% 49,122 4.1% 59,638 5.4%
Comput 3,173 0.7% 13,727 1.2% 6,761 0.6%
Other 2,000 0.7% 6,086 0.6% 12,135 1.1%
Equipm. 0 0.0% 208 0.0% 2,674 0.2%
Ending: (110,455) (25.3%) (110,455) (9.3%) (77,049) (6.9%)
----------------------- ---------------------- ------------------------
Total production ove: $ 73,741 16.9% $ 162,760 13.7% $ 175,381 15.8%
======================= ====================== ========================
Total Walrus cost of $ 436,343 100.1% $1,187,438 100.0% $ 1,111,681 99.9%
======================= ====================== ========================
Page 2
May `98
MEDICAL PARAMETERS, INC.
SCHEDULES OF SALES AND ADMINISTRATION EXPENSES
FOR THE TWELVE MONTHS ENDED MAY 31, 1998 AND 1997
Fiscal 99 Fiscal 99 Fiscal 98
Current month Percent Year to date Percent Year to date Percent
------------------------- ------------------------ ----------------------
SALES EXPENSES,
Salary and wages $ 58,163 41.9% $177,022 40.4% $135,712 38.4%
Fringe benefits 14,458 10.4% 32,011 7.3% 26,283 7.4%
------------------- ------------------- -----------------
Salary 72,021 52.3% 200,033 47.7% 161,995 45.8%
Commission 37,828 27.3% 98,079 22.4% 95,804 27.1%
------------------- ------------------- -----------------
Subtotal 110,449 79.6% 307,112 70.1% 257,799 72.9%
Travel and entertain 10,019 7.2% 39,066 8.9% 43,448 12.3%
Training 0 0.0% 10,542 2.4% 4,702
Meetings 403 0.3% 8,556 2.0%
Shows 1,378 1.0% 16,986 3.9% 4,858
Computer 3,173 2.3% 13,727 3.1% 6,761 1.9%
Communication 5,409 3.9% 11,109 2.5% 14,144 4.0%
Promotion and xxxx 3,240 2.3% 15,993 3.6% 5,003 1.4%
Occupancy expense 2,358 1.7% 8,293 1.9% 10,068 2.8%
Other 2,248 1.6% 7,243 1.7% 7,072 2.0%
------------------- ------------------- -----------------
Total $138,677 99.9% $438,627 100.1% $353,855 97.3%
=================== =================== =================
Page 3
May '98
ADMINISTRATION EXPENS
Salary and wages $47,361 55.5% $146,896 54.7% $123,657 48.6%
Fringe benefits 10,642 12.5% 25,120 9.4% 19,404 7.6%
------- ----- -------- ----- -------- ----
Salary, 58,003 68.0% 172,016 64.1% 143,061 56.2%
Travel and entertain 5,036 5.9% 21,150 7.9% 18,074 7.2%
Research and Devel 677 0.8% 2,819 1.0%
Professional service 3,145 3.7% 22,955 0.5% 49,102 19.3%
Insurance expense 1,869 2.2% 10,813 4.0% 5,103 2.0%
Other 3,763 4.4% 10,150 3.8% 6,099 2.4%
Communication 2,317 2.7% 8,063 3.0% 6,828 2.7%
Computer expense 5,108 6.0% 10,386 3.9% 8,027 3.2%
Taxes income 3,000 3.5% 9,000 3.4% 9,282
Occupancy expense 1,981 2.3% 547 0.2% 8,702 3.4%
Equipment expense 479 0.6% 608 0.2% 125 0.0%
------- ----- -------- ----- -------- ----
Total a $85,378 100.1% $268,507 100.0% $254,403 96.4%
======= ===== ======== ===== ======== ====
Page 4
UNAUDITED
Bal Sheet
MEDICAL PARAMETERS, INC.
BALANCE SHEET
May-98
ASSETS
CURRENT ASSETS
Cash and cash equivalents 629,968
Accounts receivable 1,420,969
Inventory, at cost 1,287,760
Prepaid and other current assets 38,821
---------
3,377,518
PROPERTY AND EQUIPMENT
Cost 661,901
Accumulated depreciation 448,416
213,485
OTHER ASSETS 399,468
Deposits
TOTAL ASSETS 3,990,471
STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Note payable, bank 0
Accounts payable 642,147
Due to stockholders 29,948
Tax dividend payable
Accruals and other current liabilities 229,416
Current portion of long-term debt
Total Current Liabilities 841,615
LONG TERM DEBT
Term note - bank 282,730
less; current portion
STOCKHOLDERS EQUITY
Common stock, no par value, 10,000
Retained earnings 2,856,396
TOTAL LIABILITIES AND
STOCKHOLDERS EQUITY 3,990,741
Schedule 4.1 (C) - List of Current Indebtedness
Woburn National Bank $750000 Line of Credit..........$0
Woburn National Bank $150000 Equipment Loan..........$0
Woburn National Bank $633312 Term Loan.........$253,296
Ford Motor Credit (Automobile Loan).............$24,816
Lloyds Credit (Insurance).......................$13,706
Woburn National Bank subordinated loans......$3,050,000
Annual Massachusetts Corporate Excise Tax
Annual Massachusetts Annual Report
Semi-annual Woburn personal property taxes
Massachusetts Vehicle Excise Tax
Quarterly Federal Unemployment Tax
Quarterly Federal Social Security and Medicare Taxes
Quarterly State Unemployment Taxes (Filed in States where the Field sales
force resides)
Annual Pennsylvania Foreign Franchise' Tax
Schedule 4.1(f) Tax Issues
City of Philadelphia Business Privilege Taxes (1986- 1998)........... $18,117
Note:MPI is protesting this tax assessment as it does not
conduct business in Philadelphia as defined in the
Business Privilege Tax Ordinance and Regulations.
We are working with a local CPA, Xxxxxx Xxxxxx.
(000) 000-0000
The Company is a Subchapter S Corporation and has historically made quarterly
distributions to shareholders in the maximum amount of Federal and State taxes
due from the shareholders in the highest tax bracket.
The Company files an annual Form 1120-S.
Schedule 4.1 (g) -- Encumbrances to Property
None
SCHEDULE 4.1 (h)
----------------
UNITED STATES PATENTS
---------------------
PATENT TITLE ISSUE DATE
------ ----- ----------
4,860,757 Guidewire Advancement System August 29, 1989
4,917,094 Guidewire Advancement System April 17, 1990
5,186,179 Guidewire Advancement System February 16, 1993
5,438,993 Guidewire Advancement System August 8, 1995
5,448,993 Guidewire Advancement System September 12, 1995
5,273,042 Guidewire Advancement System December 28, 1993
4,857,062 Catheter Introducer Valve August 15, 1989
5,758,657 Pressure Transducer Positioning System June 2, 1998
5,769,083 Pressure Transducer Positioning System June 23, 0000
XXXXXX XXXXXX PATENT APPLICATIONS
---------------------------------
PATENT
APPLICATION TITLE DATE FILED
-------------- ----- ----------
08/455,698 Guidewire Advancement System May 31, 1995/1/
09/069,431 Guidewire Advancement System April 29, 1998
08/828,231 Multi-Lumen Percutaneous Introducer April 3, 1997/2/
Multi-Lumen Percutaneous Introducer July 29, 1998
09/075,066 Pressure Transducer Positioning System May 8, 1998
-----------------------
1 Expected Issue Date September 22, 1998
2 Expected Issue Date September 1, 1998
SCHEDULE 4.1 (h)
Page 2
FOREIGN PATENT APPLICATIONS
---------------------------
PATENT
COUNTRY APPLICATION TITLE DATE FILED
------- -------------- ----- -----------------
Canada 2,183,679 Pressure Transducer Positioning System February 17, 1995
European 95911031.3 Pressure Transducer Positioning System February 17, 0000
Xxxxx 521931/95 Pressure Transducer Positioning System February 17, 1995
PCT PCT/US95/02024 Pressure Transducer Positioning System February 17, 1995
FEDERALLY REGISTERED
--------------------
U.S. TRADEMARKS AND APPLICATIONS
--------------------------------
REGISTRATION NO. XXXX REGISTRATION DATE
---------------- ---- -----------------
2,O33,989 ADVANCIT January 28, 1997
1,721,714 WALRUS October 6, 1992
LEVELIT Intend to use application filed on 7/28/98
COMMON LAW TRADEMARKS
XXXX FIRST USE
---- ---------
HI-FLO 3/1984/3/
-------------------------
3 An application for Federal registration of the Trademark "HIFLO" was filed
bY NYCOMED IMAGING of Oslo, Norway for Int'l Class 10 (For needles for
injection for medical purposes) on November 25, 1996. A request to extend
time for filing Notice of Opposition was filed on July 15, 1998 and expires
August 14, 1998.
SCHEDULE 4.1(h)
Page 3
U.S. REGISTERED COPYRIGHTS
--------------------------
REGISTRATION NO. TITLE DATE OF REGISTRATION
---------------- ----- --------------------
Txu 706-611 CUSTOMER PROFILE August 30,1995
Customer Information System
Schedule 4.1(i)-Contracts
* Employment agreement with Xxxxxxx X. Xxxxxxx, Director of Operations
* Paychex Section 125 Plan Premium Only Plan Service Agreement
* Cost Management Corporation Standard Service Agreement (Unemployment Insurance
Claims)
* First Bank National Association Merchant Member Agreement (VISA)
* Summit Financial Corporation Service Agreement for Medical Parameters 401(k)
Plan
* Distribution Agreement with CardioDynamics
* Distributor's Agreement with HDC
* Indemnity Agreement for Xxxx XxxXxxxxxx egarding the Distribution Rights and
Asset Transfer Agreement with Stapic Corporation.
* Charter Systems Hardware Support Agreement (Server)
* Charter Systems Master Network Support agreement
* Great Plains Software Customer Support
* Micro-MRP Customer Support Plan
* Laserstar-PM Service Agreement
* Royalty Agreement with Xxxxxx Xxxx, MD regarding the Xxxx CAVII
* Building Lease with DIV Woburn. LI.C
* Hanover Insurance Company (Policy No. AMN 5069807 02)-- Automobile
* Hanover Insurance Company (Policy No. 7DN 3665428 07)--Property/General
Liability/ Inland Marine
* Hanover Insurance Company (Policy Xx. X000 00 00) -- Xxxxxxxx
* MEDMARC Casualty Insurance Company (Policy No. 98MA38005)-- Product Liability
* Eastern Casualty Insurance Company ( Policy No. WC93605001)--Workmans'
Compensation-MA
* Hanover Insurance Company ( Policy No. WHN 5746704)-- Workmans' Compensation
GA/IL/VI/MI/CT
* Bureau of Worker's Compensation (Policy No. 1 132741-O)-Workmans Compensation-
OH
* Texas Workers Compensation Insurance Fund (Policy No. 0001019017)- Workmans
Compensation-TX
* Hanover lnsurance Company ( Policy No. BON-1621815) 401(k) Employee Dishonesty
* Woburn National Bank $633312 Term Loan
* Woburn National Bank $0000000 subordinated loan
Schedule 4.1(j)--Litigation; Compliance with Laws
In the matter referred to as California Proposition 65 MPI is a member of an
industry task force trying to reach a negotiated settlement with The Working
Group on Carcinogens and Immune Suppressing Chemicals (CISC). CISC has filed
suit in California regarding this matter. Medical Parameters is not a named
defendant in this matter. It would be as a Xxxx Xxx defendant. As a member of
the industry task force MPI would be entitled to be an part of the opt-in
settlement.
Schedule 4.l(k)-Benefits
Health Insurance-HMO Blue sponsored by Blue Cross/Blue Shield
Long Term Disability- Reliance standard Life
401(k) Retirement Plan
Life Insurance (optional benefit)--American Pharmaceutical
Ten paid holidays
Vacation pay two weeks; after 7 years three weeks; after 12 years four weeks.
Five paid sick days per year
President's discretionary bonus plan
Schedule 4.1(l)-Absence of Changes
The Company borrowed $3050000 in July and distributed the loan proceeds to the
shareholders, which equaled the AAA account in retained earnings. This
essentially eliminates the balance in the retained earnings.
Schedule 4.1(m)--Licenses; Permits
The company has FDA registration number 1220565.
Schedule 4.1(n)--Environmental Matters
None
Schedule 4.1(o)--Employee and Labor Relations
None
Schedule 4.1(q) Accounts; Safe Deposit Boxes; Powers of Attorney; Officers and
Directors
Medical Parameters Inc. (Checking Account) Northern Bank and Trust (01-00-0002848058)
Medical Parameters Inc. (Checking Account) Woburn National Bank (143669)
Medical Parameters Inc. (Checking Account) Woburn National Bank (143677)
Gatron Corporation (Checking Account) Nothern Bank and Trust (01-00-02848112)
Fidelity Cash Reserves (Investment) Fidelity (055/0006384325)
Spartan MA Muni Income (Investment) Fidelity (070/0260796222)
Spartan MA Muni Money Mkt (Investment) Fidelity (426/0484870688)
Borrowing Authority; A. Xxxxxx XxxXxxxxxx, Xxxxxxx Xxxxxxx
Signatures: A. Xxxxxx XxxXxxxxxx; Xxxxxxx Xxxxxxx; Xxxx XxxXxxxxxx; Xxxx
XxxXxxxxxx; Xxxxxxx Xxxxxxx (Note: Two signatures required for
amounts greater than $5000)
Wire Transfer Authority: A. Xxxxxx XxxXxxxxxx; Xxxxxxx Xxxxxxx; Xxxx Xxxxxxx;
Xxxx XxxXxxxxxx; Xxxxxxx Xxxxxxxx; Xxxx Xxxxx (limited
to transfers less than $10000)
Schedule 4.1(r)--Regulatory Matters
None
Schedule 4.1(s)--Agreements
None
Schedule 4.1(t)--Facility Lease
See attached lease.
Schedule 5.1(b)
At the closing the $3050000 subordinated loan will be outstanding. The parties
agree that the proceeds of the Newly Issued Securities Purchase Price will be
used on the closing date to repay this loan.
Schedule 5.2 (d)(1)--Employee Listing
AllEmpSalaries _T_A 7/29/98
Last First Hire Date Position Temp Desc. MaxOfHourly MaxOfWeekly
-------------- ----------- --------- --------------------- ----------- -----------
Xxxxxxx Xxxxxxxx 10/4/93 Assembler $8.00
Xxxxx Xxxxxxx 4/6/88 Assembler $7.75
Xxxxxxxx Xxxxx 4/4/98 Receptionist $9.00
Xxxxxxxxx Xxxx 8/3/92 Bookkeeper $10.71
Xxxxxxx Xxxxxx 7/15/92 Salesperson $625.00
Xxxxxxx Xxxxxxxx 8/10/94 Assembler $7.65
Xxxx Xxxxx 3/20/97 Assembler $7.01
Bardelti Elisa 6/9/97 Accounting Clerk $11.06
Xxxxxx Xxxxxx 10/1/92 Sales Person $576.92
Xxxxx Xxxxx 1/8/91 Assembler $6.94
Xxxxxx Xxx 5/4/87 Job Leader $10.10
Xxxxxxx Xxxxx 8/22/95 Assembler $6.85
Bourgeons Xxxxxxxx 10/24/94 Assembler $7.00
Xxxxxxx Xxxxx 1/18/88 Supervisor $11.30
Xxxxxxx Xxxx 11/30/87 Assembler $7.42
Xxxxxxxx Xxxxxx 1/20/92 Assembler $7.10
Canada Xxxxxxx 5/1/95 Assembler $6.75
Xxx Xxxx 9/19/97 Assembler $7.40
Xxxxxx Xxxxxxxx 5/3/95 Assembler $7.40
Xxxxxx Xxxxxx 1/7/91 Assembler $9.83
Xxxx Xxxx 11/1/95 Assembler $7.25
Xxxxxxx Xxxxxx 11/17/97 Assembler $6.65
Xxxxxxx Xxxxxxx 5/28/95 Assembler $6.65
Xxxxxxx Xxxxxx 10/31/84 Assembler $11.61
Xxxxxxx Xxxxxx 8/30/82 Prod. Xxxxxxx $13.15
Xxxxxxxx Xxxxxxx 5/8/95 Assembler $8.00
Xxxxx Xxxxx 6/1/92 Dir. of Sales/Marketing $1,634.61
Xxxxxx Xxxxxxxxxx 12/17/92 Assembler $9.45
Xxxxxxxx Xxxx 7/24/95 Assembler $6.80
Xxxxxxxxx Xxxxxxx 1/14/93 Assembler $7.70
Coluccicilo Xxxxxxxxx 2/25/98 Assembler $8.25
Xxxxx Xxxxxxxxxx 3/30/98 Assembler $6.40
Xxxxx Xxx 5/9/97 Sales Coordinator $442.31
D'Ampolo Grace 10/1/97 Assembler $6.94
Xx Xxxxxx Fido 10/23/97 Assembler $6.25
De Xxxxxx Xxxxxx 6/20/97 Assembler $7.55
XxXxxxx Xxxxxx 1/8/97 Assembler $6.73
XxXxxxx Xxxxx 4/8/96 Assembler $6.80
Xxxxxx Xxxx 11/23/92 Assembler $9.50
Xxxx Xxxxxxx 4/15/97 Assembler $6.95
Xxxx Xxxxxx 12/26/95 Assembler $6.75
Xxxx Xxxxxxxx 4/22/96 Assembler $6.95
Xxxxx Hon 6/24/96 Assembler $7.15
Xxxxxx Xxxxx 6/16/97 Assembler $6.99
Xxxxxxxx Xxxxxx 4/17/98 Maintenance $8.50
Xxxxxx Xxxxx 11/30/93 Assembler $7.38
Xxxxxxxx Xxxx 9/20/95 Assembler $6.80
Fields, Jr. Xxxxx 2/2/93 Salesperson $769.24
Xxxxxxxxx Xxx 2/4/93 Assembler $7.00
Xxxxxxxxxxx Xxxxxxx 5/27/97 Assembler $6.50
Xxxxxx Xxxxx 4/10/95 Salesperson $0.00 $730.76
Xxxxxxxxxx Xxxxx 2/12/85 Assembler $8.34
Xxxx Xxxxxx 8/29/88 Cust. Service Mngr. $672.01
Xxxxx Xxxxxxx 8/14/95 Assembler $8.35
Xxxxx Xxxxx 6/9/97 Assembler $6.50
Xxxxxxx Xxxxx 7/2/96 Assembler $6.80
Xxxxxxxx Xxxx 11/15/93 Assembler $7.44
Xxxxxx Xxxxxx 6/1/92 Assembler $7.57
Xxxxxxxxxx Xxxxxxxxx 3/23/93 Assembler $7.50
Xxxxxxx Xxxxx 1/17/90 Assembler $10.52
Page 1
AllEmpSalaries_T_A 7/29/98
Last First Hire Date Position Temp Desc. MaxOfHourly MaxOfWeekly
-------------- ----------- --------- --------------------- ----------- -----------
Xxxxxxxxx Xxxxx 11/23/92 Assembler $10.08
Hill, Jr. Xxxxxx 5/1/96 Salesperson $480.77
Xxxxx Xxxx Xxxx 1/12/97 Assembler $7.05
Xxxxxxx Xxxxxxx 5/1/97 Dir. of Operations $1,730.76
Xxxxx Son 6/25/98 Assembler $8.86
Xxxxx Tiien 6/16/97 Assembler $6.50
Ioshua Xxxx 11/16/83 Assembler $8.06
Larn Xxxx 10/6/97 Assembler $7.40
Xxxxxxx Xxxxx 12/22/97 QA Manager $1,182.69
XxXxxxxx Xxxxx 5/9/97 Marketing Coordinator $504.79
Lauziene Xxxxx 4/15/96 Prod. Scheduler $9.00
Xxxxxxx Xxxxxx 6/8/98 Shipping/Rec. $8.50
Xxxxx Xxxxxx 6/3/92 Nat'l Sales Manager $1,538.43
XxxXxxxxxx A. Gary 11/16/83 Dir. of Prod. $1,826.92
XxxXxxxxxx X. Xxxxxx 1/1/73 Pres/CEO $2,884.51
XxxXxxxxxx Xxxxxxx 8/20/88 Graphics Illustrator $461.53
Xxxxxxxx Xxxxxxxxx 3/28/84 Supervisor $10.21
Xxxxxxxx Xxxxxxxx 12/26/96 Assembler $7.25
Xxxxxxx Xxxx 12/22/97 Salesperson $384.61
XxXxxxxx Xxxxxxx 4/15/92 Maintenance $7.10
Xxxxxxxx Xxxxxxxxx 4/9/98 Assembler $6.76
Xxxx Xxxxx 6/23/97 Assembler $6.89
Xxxxx Xxxxxx 11/20/89 Assembler $7.69
Xxxxxx Xxxx 4/1/94 Salesperson $673.07
Mustene Incoronata 5/19/97 Assembler $6.40
O'Xxxx Xxxxx 7/22/97 Assembler $6.76
Xxx Xxxx 6/30/97 Assembler $6.05
Xxxxx Xxxxxx 7/1/94 Admin. Ass't. $538.46
Xxxxx Xxxxxx 3/1/95 MIS Consultant $769.23
Xxxxx Xxxx 11/16/75 Adm. Ass't. $738.75
Xxxxxx Xxxxx 10/30/97 Assembler $6.55
Xxxxx Xxxxxx 7/15/96 Assembler $7.65
Xxxxx Xxxxx 1/24/94 Shipper/Rec. $10.80
Xxxxx Xxxx 3/18/98 Assembler $6.65
Xxxxxx Xxxx 1/20/92 Assembler $7.10
Power Xxxx 1/13/88 Assembler $7.09
Xxxxxx Xxxxxxxxx 8/31/92 Assembler $7.50
Xxxxxxxx Xxxxx 1/9/98 Assembler $7.02
Xxxxxxx Xxxxx 11/3/97 Assembler $6.76
Xxxxx Xxxxxxx 10/3/94 Assembler $7.10
Xxxxx Xxx 9/9/90 Assembler $7.30
Xxxxxxxx Xxxx 1/7/91 Assembler $8.14
Xxxxx Xxxxxxxx 6/8/92 Assembler $10.92
Xxxxxxx Xxxxxx 8/17/97 Customer Serv. Rep. $11.25
Xxxxxxxxxx Xxx 2/1/88 Salesperson $1,180.00
Xxxxxxx Xxxxxx 3/1/93 Assembler $10.14
Xxxxxxx, Jr Xxxxxxx 12/22/88 Assembler
Xxxxxxx, Sr. Xxxxxxx 1/2/91 VP/COO $2,307.69
Xxxxxx Xxxxxxxx 3/23/88 Assembler $8.70
Xxxxxx Xxxxxx 4/18/84 Supervisor $11.09
Xxxxxxxx Xxxxx 1/4/89 Assembler $8.34
St. Xxxxxxxx Xxxxxxxxx 6/17/92 Assembler $7.68
Xxxxxxxx Xxxxxxxx 11//28/88 Assembler $7.26
Totorella Xxxxxxx 11/19/86 Assembler $9.23
Totorella Xxxxxxxx 4/2/86 Assembler $9.75
Xxxx Xxxx 5/6/96 Assembler $7.25
Xxxx Xxxxxx 4/1/97 Salesperson $334.61
Xxxxxxxxx Xxxxxxxxxxx 5/9/97 Salesperson $423.07
Xxxxxx Xxxx 10/3/94 Assembler $7.25
Xxxx Xxxx 11/6/95 Assembler $6.95
Page 2
Last First Hire Date Position Temp Desc. MaxOfHourly MaxOfWeekly
-------------- ----------- --------- --------------------- ----------- -----------
Xxxxxxx Xxx 3/7/90 Purchasing Mgr. $881.68
Xxxxxxxx Xxx 2/14/93 Assembler $7.15
Page 3
