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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-KSB
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(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934
[FEE REQUIRED]
For the fiscal year ended November 30, 1997
[ ] TRANSACTION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
[NO FEE REQUIRED]
Commission File No. 0-8350
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STAODYN, INC.
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(Name of small business issuer in its charter)
Delaware 84-0684224
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(State or other jurisdiction of (I.R.S. Employer Identification Number)
incorporation or organization)
1225 Ken Pratt Boulevard, Longmont, CO 80501
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(Address of principal executive offices) (Zip Code)
Issuer's telephone number, including area code: (303) 772-3631
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Securities registered pursuant to Section 12(b) of the Act: None
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Securities registered pursuant to Section 12(g) of the Act:
Common Stock, par value $.01 NASDAQ SmallCap
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(Title of Class) (Name of each exchange
on which registered)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
Yes X No
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Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B contained herein, and no disclosure will be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-KSB or any amendment to
this Form 10-KSB. [X]
State issuer's revenues for its most recent fiscal year. $21,142,602
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State the aggregate market value of the voting stock held by nonaffiliates of
the registrant, computed by reference to the price at which the stock was sold,
or the average bid and asked prices of such stock, as of a specified date within
the past 60 days.
$14,528,602 as of February 11, 1998
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date.
Common Stock, $.01 par value 6,708,065
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Class Outstanding at February 11,1998
Documents Incorporated by Reference: Portions of the definitive Proxy Statement
with respect to the May 21, 1997 Annual Meeting of Stockholders are incorporated
by reference in Part III hereof.
Transitional Small Business Disclosure format (check one): Yes X No
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This Form 10-KSB consists of 37 pages.
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PART I
ITEM 1. BUSINESS
GENERAL
Staodyn, Inc. (the "Company" or "Staodyn") was incorporated in 1975. Staodyn
designs, develops, manufactures, and markets noninvasive electrotherapeutic
devices, supplies, and accessories for use by physicians, physical therapists,
athletic trainers, and their patients. The Company's electrotherapeutic
products are used in the treatment of chronic and acute pain and neuromuscular
rehabilitation. The Company's pain management products treat chronic and acute
pain with transcutaneous electrical nerve stimulation ("TENS") that delivers
carefully controlled pulses of electricity through the skin to sensory nerves,
thereby relieving pain without the side effects often associated with drugs or
surgery. Staodyn's pulsed direct current ("PDC") and neuromuscular electrical
stimulation ("NMES") devices are used in physical therapy, sports medicine, and
orthopaedics for muscle reeducation and rehabilitation, and to promote healing
of soft tissue injuries.
The Company operates both a retail sales division, which sells the Company's
products directly to patients, third-party payors, and medical practitioners,
and a wholesale division, which sells primarily to home healthcare dealers. In
1997 the retail division accounted for 82% of the Company's sales. The Company
believes that it ranks second in the domestic market for TENS, PDC, and NMES
products, estimated at about $150 million annually.
The Company is continually seeking to broaden and diversify its products
through internal development, by adding complementary products developed and/or
manufactured by others, through acquisitions, and by entering into selected
marketing arrangements with other manufacturers. By utilizing its expertise in
electrotherapeutic products, the Company developed SporTX(R), introduced in June
1995, designed primarily to accelerate recovery from athletic injuries. The
Company has also developed the Dermapulse(R) wound management system, for the
treatment of severe skin wounds such as pressure ulcers. The commercial
opportunity for this product in the U.S. is subject to FDA approval. The
product is currently being marketed in Germany, and to a lesser extent in France
and England.
PRODUCTS
The Company's business is composed primarily of electrotherapeutic devices,
supplies, and accessories for pain management and for rehabilitation.
TENS Devices
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Although TENS is not effective for every patient or all types of pain,
physicians and physical therapists have treated their patients with TENS for
over twenty years and have generally accepted TENS as an effective treatment for
acute and chronic pain. The acceptance of TENS, and its efficacy as a treatment
modality, has led to its use in other applications where drug use may be
undesirable, such as in sports medicine and certain kinds of postoperative
recovery. TENS has been useful for treatment of a variety of conditions,
including pain from arthritis and back injuries. The pain relief generally
lasts only as long as the devices are being used. For this reason, TENS devices
are often needed by patients for several months or years. Pursuant to FDA
regulations, the sale of TENS devices is restricted to persons who receive a
physician's prescription for their use.
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While TENS devices generally offer a safe, noninvasive alternative to drugs,
there are contraindications and precautions for their use. TENS is
contraindicated in patients with demand-type cardiac pacemakers, over the
carotid sinus nerves, and transcerebrally. TENS devices have no curative value
and may mask the sensation of pain which would otherwise warn the user that
something is not right physiologically. TENS devices generally work most
effectively on local (single site) peripheral origin pain as opposed to systemic
or central origin pain. The safety of TENS for use during pregnancy and
delivery has not been established. Electronic monitoring equipment, such as EKG
equipment, may not operate properly when TENS is in use.
TENS devices consist of a small, portable, battery-powered electrical pulse
generator that is connected by wires to electrodes placed on or near the pain
site. The electrodes are attached to the skin with an intervening layer of
conductive gel. The stimulator produces low voltage pulses, delivered
continuously or intermittently, in different waveforms.
The use of TENS for pain relief, when successful, is extremely cost effective
for third-party payors and patients. When used in a chronic pain situation,
such as chronic lower back pain, TENS generally permits return to a more normal
lifestyle and work, which might not be possible otherwise. In an acute pain
situation (e.g., TENS used postoperatively), the cost for TENS rental should be
comparable to drug cost, both of which would be nominal relative to the
hospitalization and surgical costs preceding them. As a result of the ease with
which drugs may be administered, TENS in an acute pain setting would normally
only be used where an intolerance for drugs or risk of addiction was present.
TENS selling prices tend to be in the $300-$500 range, and rentals in the $50-
$100 per month range. Prices for related supplies (leads, electrodes, and gel)
might average $50-$100 per patient per month. Successful treatment with a TENS
device normally requires a clinician who has been trained in the use of the
device and its variable parameters, such as its intensity, pulse width, rate,
and mode, as well as the different types of electrodes and their placement.
Such training is not difficult for most healthcare professionals.
The Company's pain management product line consists primarily of four
different products. The microprocesser-based Maxima(R) III is a multimode unit
that is easy to use. It offers normal, modulation, and burst modes. Its
Automatic Power Miser significantly extends the Maxima III's battery life up to
150 hours. The Maxima III offers strength duration modulation features and soft
turn-on, a patented feature that provides for slow ramp-up of the electrical
current at turn-on or after current interruption. Maxima III also allows the
patient to alter pulse width without having to readjust the intensity control.
The Maxima(R) II is similar to the Maxima III, without the strength duration
modulation or soft turn-on features. The Company also offers the Maxima(R) I,
which is equivalent to a Maxima II without burst mode. The Nuwave(R) electrical
stimulation system is marketed primarily for the treatment of chronic lower back
pain. This product utilizes a patented electrical waveform based on research
directed at improving the effectiveness of TENS for pain management. Nuwave
does not have the adjustable parameters of the Maxima series, but is therefore
simpler for patient use, and has a waveform which has been optimized for chronic
lower back pain.
A clinical trial conducted by the Pain Treatment Center of the University of
Tennessee in 1990 concluded that Nuwave TENS often proves to be beneficial in
patients with postlaminectomy or peripheral neuralgic pain, even if they have
not responded to other TENS therapy. The study sample consisted of 98 patients
suffering from chronic pain of several etiologies, who had previously tried and
been unsuccessful in obtaining relief using TENS therapy. Fifty-two of the 98
patients obtained relief using a Staodyn Nuwave TENS, and in the case of those
with postlaminectomy pain, the success ratio was 83%--that is, 40 of 48 patients
obtained noticeable relief from pain with the Nuwave. The Company uses the
results of this study to take to third-party payors on a case by case basis to
differentiate this product and demonstrate the justification for higher
insurance reimbursement levels. The Company's distribution
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strategy and marketing approach with respect to this product focuses on
physician as well as physical therapy markets.
TENS devices generally are eligible for insurance reimbursement in whole or in
part by Medicare, Medicaid, workers' compensation, and by most medical insurance
carriers. Medicare, some workers' compensation, and private insurers have
reduced, limited, and in a few cases, attempted to deny reimbursement. TENS
devices do not provide pain relief in all cases, and the industry has been
subject to some abuse by medical practitioners prescribing and billing for
unwarranted TENS services, or not properly treating the patient. TENS therapy
for pain relief is not as widely utilized by the medical profession compared to
drugs, and is more difficult to administer. Pain relief also tends to be
subjective.
NMES Devices
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The use of electrical stimulation to provide passive muscle exercise and
rehabilitation predates TENS. As a natural extension of its development of
electrical modalities for pain management, the Company developed a line of
portable neuromuscular electrical stimulators (NMES) to assist faster recovery
of normal function in muscle and other soft tissue affected by disease or
trauma. The Company's NMES devices work noninvasively to activate the motor
nerves which control muscle function. These devices produce regulated,
involuntary muscle contractions, thereby enabling the patient to begin
rehabilitative exercise before such time as the patient can perform voluntary
muscle contraction. Clinicians, or other licensed healthcare practitioners,
normally prescribe these products in conjunction with other therapeutic
techniques in orthopaedic, sports, and physical medicine. The Company's NMES
product line started in 1980 with the Staodyn EMS, which has been modified and
improved several times to its current version, the EMS+2.
The EMS+2 is a two-channel, two-waveform neuromuscular stimulator designed
primarily for clinical use in a variety of rehabilitative programs, including
muscle exercise against disuse atrophy, gait training, inhibition of spasticity,
and soft tissue management. The two-channel capability enables opposing muscles
to be exercised reciprocally or separate muscles to be exercised simultaneously;
the second waveform option provides additional flexibility for the clinician.
This is a dual channel device, which utilizes microcomputer-based circuitry,
designed to be simple for the clinician to program and for the patient to
continue using in a nonclinical setting.
NMES is well accepted as a therapy for rehabilitation, and in general has been
subject to less of the downward pricing pressures or reimbursement problems
encountered in the TENS market. The Company normally receives full price
reimbursement on NMES devices, including the EMS+2.
NMES devices in general, and the EMS+2 in particular, have similar
contraindications to TENS devices. That is, they should not be used on patients
with cardiac demand pacemakers and should not be used transcerebrally or over
the carotid sinus nerves. In addition, NMES devices are contraindicated for
cancer patients.
Pulsed Direct Current (PDC) Devices
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Pulsed direct current utilizes direct current to reduce swelling (or edema),
influence local blood circulation, reduce muscle spasm, and increase range of
motion.
The Company's SporTX unit was introduced in 1995 and is targeted specifically
at sports medicine applications. SporTX is an electrotherapeutic product that
combines in one small, portable device, two different electrotherapeutic
waveforms: (i) the pulsed direct current aspect of the EMS+2 NMES device and
(ii) the unique pain management features of the Nuwave TENS device.
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Following various types of injuries or surgeries, the affected tissue or joint
is subject not only to pain, but also to swelling and muscle spasm, which in
turn increase the pain and restrict the use of the affected area. For example,
after an injury or surgery of the knee, swelling may be severe, lasting a week
or more. Physicians generally want to begin physical therapy of the joint as
soon as possible after injury to speed the rehabilitative process and prevent
disuse atrophy of the muscles. They may use analgesic drugs to control the
pain, and elevation of the extremity and ice to control the edema. Drugs often
have problems with side effects, including the potential for addiction, while
the edema reduction measures may not be very effective.
The Nuwave component is designed for relief of postsurgical and posttraumatic
pain. The Company believes it may reduce or eliminate the need for analgesic
drugs. Pulsed direct current is effective for reducing edema and muscle spasm,
and influencing local blood flow. This effect also contributes to pain
reduction which may promote rapid return to function by increasing range of
motion and preventing disuse atrophy. The product had significant success in
1997, particularly in sports medicine and orthopaedic applications, as well as
in physical therapy, where treatment of postsurgical and posttraumatic injuries
are common. The product is currently used by numerous sports teams at the
professional, college, and high school level. SporTX sales exceeded $2 million
in 1997, and it was the Company's largest selling non-TENS product.
Dermapulse is a portable, microcomputer-based, pulsed direct current
stimulator. The technology embodied in this device is the subject of two issued
U.S. patents. The disposable, single-use treatment electrode is the subject of
patent filings in the United States, Canada, England, Germany, Italy, and three
other European countries. In 1994 the Company formed a legal subsidiary in the
Netherlands, Staodyn B.V., to possibly facilitate the marketing of Dermapulse in
the European Union. Through 1997 this subsidiary had not been active.
Since 1985, when the Company first became aware of the potential use of its
electrical stimulation technology to promote the healing of wounds, it has
pursued the development and approval of proprietary wound healing technology.
In addition to engineering the device and a new single-use, sterile, disposable
electrode, it has conducted animal and human studies to support a PMA
application to the FDA. A PMA was submitted in December 1990 and was subject to
amendments in 1991 and 1992. The Company and medical experts met with FDA in
August 1994. In a subsequent letter, the FDA reiterated their position that the
data previously provided by the Company was not sufficient for them to approve
the Company's PMA and a new clinical study was required. As a result of this,
the Company withdrew its PMA in November 1994. In December 1994 the U.S. Agency
for Healthcare Policy and Research issued guidelines for the treatment of
pressure ulcers, which recommended "that a course of electrical stimulation be
considered for Stage III and IV pressure ulcers that do not respond to
conventional therapy." Total fixed assets related directly to the Dermapulse
system at November 30, 1997 were approximately $166,000, net of accumulated
depreciation.
The Company conducted two human clinical trials to demonstrate the
effectiveness and safety of the Dermapulse system in the treatment of pressure
ulcers (also known as decubitus ulcers or bedsores). In management's opinion,
each of the two clinical studies included in the Dermapulse PMA demonstrated
significant improvement in the healing rate of serious pressure ulcers when used
as an adjunct to standard care. These studies were carried out at a variety of
institutions, including university medical centers, a Veterans Administration
hospital, a hospital's specialized pressure ulcer treatment unit, and nursing
homes.
The Company has obtained the U.S. and foreign government approvals necessary
to market Dermapulse in Canada and the European Union. The Company's primary
marketing efforts in 1997 and 1996 were in Germany, and Dermapulse revenues for
those two years were $126,000 and $219,000, respectively.
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During 1998 the Company plans to introduce two new PDC devices, the SporTX II,
which substitutes a second PDC channel for the TENS channel in SporTX, and a
Varapulse II, a multifunctional, portable clinical or home unit for increased
circulation and edema reduction.
Accessories and Supplies
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Both the pain management and rehabilitation electrotherapeutic products
require accessories and supplies, including electrodes, electrode attachment
systems, conductive media, skin care products, and batteries. Patients purchase
these accessories and supplies on a recurring basis. Total sales of accessories
and supplies accounted for approximately 37% of total sales in 1997 and 38% in
1996. The majority of the Company's electrodes are purchased by the Company
from outside suppliers. However, the active sterile dressings used in the
Dermapulse wound management system are manufactured by the Company and the
Company believes that this capability will find additional profitable
applications.
SALES AND MARKETING
The Company distributes its products through its retail division and on a
wholesale basis to independent home healthcare dealers via telemarketing and
independent manufacturers' representatives. The Company supports its sales
efforts with a full line of quality pain management and rehabilitation products,
supported by promotional aids, educational literature, and training programs.
The Company utilizes several methods to promote its products and services,
including advertising in trade publications, product-oriented literature, and
clinical applications literature. In addition, the Company's products are
exhibited at national and regional trade shows and at Company-sponsored clinical
and technical seminars.
Most of the Company's foreign sales are in Canada and Europe, and those
accounted for less than 5% of total sales in 1997 and 1996.
The Company fills all orders for its products promptly as received, and
generally maintains sufficient finished product inventory in most product lines
to fill anticipated orders. The Company carries significant inventory both in-
stock and at retail clinics to meet rapid delivery requirements, and seldom has
a backlog of orders.
Retail
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The retail division presently sells TENS, NMES, other durable medical
equipment, and related supplies to the physician, physical therapy, and
rehabilitation clinic markets throughout the United States. The retail field
sales force presently calls on approximately 3,000 physical therapy clinics and
physician rehabilitation practices in the U.S. The Company's retail sales force
grew in 1997 by the addition of sales representatives and independent rep
groups, and through the acquisition of three dealer sales organizations between
May 1996 and March 1997. The retail division's products (devices) generally are
placed in clinics on a consignment basis, and subsequently used, rented, and/or
sold to patients as needed with the appropriate physician prescription and
supervision.
The retail division's internal operations are focused on supporting the field
sales activity through (1) a full-service distribution capability, providing
next day service of products and supplies to clinics and patients; (2) a trained
staff who work with physicians, rehabilitation clinics, insurance carriers, and
adjusters to provide billing, collection, and reimbursement services for clinics
and their patients; and (3) a telemarketing sales staff utilizing proprietary
computer software to follow-up with patients to ensure that their product,
supplies, and paperwork needs are met, as well as assisting them in the purchase
process.
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Wholesale
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The Company's products are also sold "wholesale" via telemarketing and in
limited geographic areas by independent manufacturers' representatives, most of
whom sell the Company's products and other noncompeting medical products to
approximately 400 active home healthcare dealers. Independent representatives
have exclusive geographic territories and are paid commissions for all sales
within their territories. Sales commissions to independent sales
representatives for the years ended November 30, 1997 and 1996 totaled about 5%
and 6% of wholesale sales, respectively. Home healthcare dealers, also known as
durable medical equipment (DME) dealers, sell or rent the products to individual
users, who are referred by a physician, physical therapist, or other medical
professional. To support its wholesale distribution network, the Company has
employees dedicated to providing clinical and customer support, product
management, training, and education.
MANUFACTURING AND QUALITY ASSURANCE
The Company manufactures its electrotherapeutic products at its facilities in
Longmont, Colorado. The Company's manufacturing capabilities include a broad
variety of operations required in the development and production of its
electronic devices and accessory items, including manual and automated
electronic assembly equipment, automatic surface mounted device equipment,
electrode fabrication equipment, and design and fabrication of automated test
equipment. The Company purchases discrete electronic components, printed
circuit boards, batteries, cases and other packaging materials, lead wire and
electrode materials, and other standard items from outside suppliers. Most
purchased items are tested by the Company before assembly into finished
products.
The Company believes that product quality and reliability are of critical
importance in medical equipment and takes extensive measures to assure that all
of its products meet the highest standards. The extensive use of surface mount
technology (SMT) in each of its products contributes to their quality,
reliability, and low energy consumption characteristics. The Company's surface
mount capability was substantially enhanced during 1997 with the addition of
new, higher-capacity SMT equipment. Each product is tested at several
subassembly stages during the assembly process. In addition, all of the
Company's electronic devices are "burned in" for a minimum of 16 hours prior to
final testing. A final review of each step of the assembly process is conducted
by the quality organization before the devices are released for shipment.
RAW MATERIALS
The Company's electronic devices involve electromechanical assemblies and
proprietary electronic circuitry. Most of the raw materials and manufactured
components used in the Company's products are available from a number of
different suppliers. The Company maintains multiple sources of supply for most
significant items and believes that alternative sources could be developed, if
required, for present single supply sources without a material disruption of its
operations.
RESEARCH AND DEVELOPMENT AND NEW PRODUCTS
The Company conducts research and development in present and proposed areas of
its business, including the development of new products and product
applications, and the improvement and redesign of its existing products.
Existing devices and accessories are updated and redesigned to improve their
features, performance, reliability, and convenience.
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Research and development expenditures have been held relatively constant over
the past several years as part of cost-containment efforts. Additional
investment in research and development related to the Company's wound healing
technology may occur in the future dependent upon the Company's assessment of
the regulatory climate and the domestic and international market potential. The
Company also pursues additional new product opportunities in its core business
which require research and development expenditures.
COMPETITION
Numerous other companies currently manufacture and distribute TENS and NMES
devices and related accessories that compete with the Company's products. Some
of these competitors have substantially greater capital resources, marketing and
distribution capabilities, research and development staffs, and experience in
obtaining regulatory approvals than the Company. The largest such direct
competitor is Empi, which is about four times the size of the Company, with an
estimated 50% market share. In terms of product offerings and marketing and
distribution presence, Empi is by far the dominant competitor of the Company in
the Company's markets. Other significant competitors are Rehabilicare, Henley
Healthcare, and the TENS division of Sparta Surgical Corporation.
The TENS market is considered to be a mature market characterized by slow or
limited growth. This has been accentuated in dollar terms in recent years by
reductions in reimbursement levels and the growth of managed care. The
Company's pain control products, in addition to competing with the TENS products
of other manufacturers, also in some instances may be deemed to compete against
drugs for pain relief. The wide public acceptance and availability of
nonprescription ibuprofen has served to adversely impact the growth rate of TENS
for pain relief. See "Business - Third-Party Reimbursement."
PATENTS AND TRADEMARKS
The Company has maintained the practice, where possible, of obtaining patent
protection on its products and processes. As of November 30, 1997, the Company
had 25 United States patents and three Canadian patents issued as well as eight
foreign patents pending relating to the design and output of its products. Of
the patents issued, 19 relate to TENS and related products (seven of which are
for Nuwave), and four relate to Dermapulse. The Company plans to make
additional patent applications as appropriate. The Company also holds several
registered trademarks in the United States, including "Staodyn(R),"
"Staoderm(R)," "Maxima(R)," "Nuwave(R)," "Dermapulse(R)," "SporTX(R)," "Lo-
Back(R)," and "Cervitrak(R)."
The Company believes that it owns, has the right to use, or has the right to
license all proprietary technology necessary to manufacture and market its
current products and those under development. The Company has no knowledge that
it is infringing upon any patents held by others. The Company may decide for
business reasons to retain a patentable invention as a trade secret. In such
event, or if patent protection is not available, the Company must rely on trade
secrets, know-how, and continuing technological innovation to develop and
maintain its competitive position. The Company's key employees and consultants
have access to proprietary information and have signed confidentiality
agreements.
GOVERNMENTAL REGULATION
Regulation by governmental authorities in the United States and other
countries is a significant factor in the production and marketing of the
Company's products and in its ongoing research and development activities. The
FDA's Center for Devices and Radiological Health (CDRH) regulates medical
devices. This regulation has become increasingly stringent and the approval
process more expensive and time-consuming. The Company's products are subject to
these regulations. The FDA's device regulations
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categorize devices into three regulatory classifications subject to varying
degrees of regulatory control, with Class I devices being subject to the least
regulatory control and Class III devices being subject to the most control. In
general, Class I devices require compliance with labeling and record-keeping
regulations and are subject to other general controls. Class II devices are
subject to performance standards, in addition to general controls, and Class III
devices, which are products that are life supporting or life sustaining, or are
of substantial importance in preventing impairment of human health, require
clinical testing to assure safety and effectiveness prior to marketing and
distribution.
The Company's pain management and rehabilitation devices (such as TENS, PDC,
and NMES) are Class II devices, subject to a premarket notification process
pursuant to Section 510(k) of the Federal Food Drug and Cosmetic Act. This
regulation requires that new products being introduced into commercial
distribution for the first time, or changes in existing products that could
significantly affect the safety or effectiveness of the device, be preceded by a
510(k) notification containing information which establishes that the product is
substantially equivalent to an existing device that is or has been legally
marketed. Once the FDA determines that the product is substantially equivalent,
the Company is granted clearance to market the product.
The Company's Dermapulse wound management system is a Class III device,
subject to the Premarket Approval (PMA) regulations. In order to receive
marketing approval, such devices must undergo preclinical and clinical testing
in compliance with the Investigational Device Exemption (IDE) regulations, which
permit human testing of the device in controlled trials. If the device is a
"significant risk" device, the sponsor of the research must file an IDE
application and obtain approval from the FDA prior to beginning clinical trials.
If it is a "nonsignificant risk" device (such as Dermapulse), then the sponsor
need not file an IDE, but must adhere to the provisions of the regulation, such
as obtaining approval for the study from an institutional review board (IRB) or
committee established for this purpose, obtaining informed consent from the
patients, and adhering to good study practices, especially with regard to data
integrity and record-keeping.
FDA regulations pertain not only to human healthcare products and medical
devices, but also to the processes and facilities used to manufacture such
products. Among the conditions for marketing products cleared by the FDA is the
requirement that the prospective manufacturer's quality control and
manufacturing procedures conform to the FDA's Good Manufacturing Practice (GMP)
regulations. In complying with standards set forth in these regulations,
manufacturers must continue to expend time, money, and effort in the areas of
production and quality control to ensure full technical compliance. Good
Manufacturing Practice regulations require adherence to strict quality control
procedures, including documentation of all aspects of the manufacturing process
to demonstrate that products are made by a "controlled" process which ensures
consistency and reliability of the end product. Significant changes to the
manufacturing process require notification to the FDA, and all changes require
documentation. The FDA has the right to conduct inspections of the
manufacturing facility at any time at its discretion. The Company adheres to
these regulations and has full-time quality assurance personnel. In August 1995
the FDA completed a GMP inspection of the Company's manufacturing facilities and
determined that the Company was in compliance.
The Company's products are subject to foreign regulatory approval before they
may be marketed abroad. In some cases, in order to comply with foreign
regulations, products have to be modified in their electronics, appearance, or
labeling. In January 1996 the Company received ISO 9001 certification to the
European Medical Devices Directive. Additionally, the Company's SporTX, Nuwave,
and Dermapulse products and associated accessories bear the CE mark. ISO 9001
certification as well as compliance with CE requirements enable the Company to
market its products in European Union countries. The Company
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successfully completed ISO 9001 certification compliance audits by TUV Product
Service in January 1997 and 1998.
Compliance with Federal, State, and local provisions, which have been enacted
or adopted regulating the discharge of materials into the environment or
otherwise relating to the protection of the environment, have not had a material
effect upon the capital expenditures, earnings, or competitive position of the
Company, nor are they expected to be significant in the future.
THIRD-PARTY REIMBURSEMENT
Governmental and other efforts to reduce healthcare spending have affected,
and will continue to affect, the Company's operating results. The cost of a
significant portion of medical care in the United States is funded by government
and private insurance programs, such as Medicare, Medicaid, health maintenance
organizations, and private insurers, including Blue Cross/Blue Shield plans.
Governmentally imposed limits on reimbursement of hospitals and other healthcare
providers have significantly curtailed their spending budgets. Under certain
government insurance programs, a healthcare provider is reimbursed a fixed sum
for services rendered in treating a patient, regardless of the actual charge for
such treatment. Private third-party reimbursement plans are also developing
increasingly sophisticated methods of controlling healthcare costs through
redesign of benefits and exploration of more cost-effective methods of
delivering healthcare. In general, these government and private cost-
containment measures have caused healthcare providers to be more selective in
the purchase of medical products.
All of the Company's products are subject to reimbursement from third-party
payors, including Medicare. Reimbursement levels vary among geographic regions
and among payors within a particular region. Reimbursement levels are partially
dependent on the Company's billing (retail) price for the product, and how the
payor views the comparability of this price to the prices of competitive
products. Reimbursement ranges for the Company's device products tend to be at
70-100% of retail price levels.
Significant uncertainty exists as to the reimbursement status of newly
approved healthcare products, and there can be no assurance that adequate third-
party coverage will be available. Limitations imposed by government and private
insurance programs and the failure of certain third-party payors to fully or
substantially reimburse healthcare providers for the use of the Company's
products could have a material adverse effect on the Company.
EMPLOYEES
On November 30, 1997, the Company employed 199 persons, three of whom were
employed on a part-time basis, compared with a total of 181 on November 30,
1996. The Company presently has a 1983 Employee Stock Purchase Plan, a 401(k)
Profit Sharing Plan, and a 1992 Stock Option Plan in effect for the benefit of
its employees, which are administered by a Compensation Committee consisting of
outside members of the Board of Directors. Company contributions to the 401(k)
Profit Sharing Plan are partially dependent upon Company earnings, and the
contributions made for fiscal 1997 and 1996 were $52,000 and $29,000,
respectively. For additional information concerning these Plans, see Notes 6
and 8 to the Consolidated Financial Statements.
ITEM 2. PROPERTIES
The Company's Longmont, Colorado, operations occupy a single two-story
building consisting of approximately 50,000 square feet. A limited liability
company, of which an officer of the Company is a 16% participant, owns 26,000
square feet and 6.25 acres of related land and leases it back to the
9
<PAGE>
Company. The Company leases the remaining 24,000 square feet from an unrelated
party. The Company has an option to purchase each leased portion at any time
during a five-year period commencing July 1998. The present building sits on a
site of approximately 7.2 acres, and the available building area could be
increased up to a maximum of 125,000 square feet on the existing site. The
Company has no present requirement to expand its facilities.
The retail division's operations in Tampa, Florida, occupy approximately
11,800 square feet of leased office space, including 2,300 square feet added in
February 1997. The lease expires in April 2001; the Company has an option to
extend this lease for an additional five years after the initial period.
ITEM 3. LEGAL PROCEEDINGS
The Company is a party to ordinary and routine litigation incidental to its
business, none of which is expected to have a material adverse effect on the
Company's results of operation or financial condition.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters submitted to a stockholder vote during the last quarter
of the fiscal year ended November 30, 1997.
10
<PAGE>
PART II
-------
ITEM 5. MARKET FOR THE COMPANY'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Company's Common Stock is traded on the NASDAQ SmallCap Market under the
symbol "SDYN." The following table sets forth, for the periods indicated, the
range of high and low closing prices for the Common Stock as reported by NASDAQ.
The Company has never paid a dividend and does not anticipate payment of
dividends in the foreseeable future.
<TABLE>
<CAPTION>
Fiscal year ended November 30, 1996: High Low
------ ------
<S> <C> <C>
First quarter $1.750 $1.375
Second quarter $2.125 $1.312
Third quarter $1.750 $1.375
Fourth quarter $1.687 $1.312
Fiscal year ended November 30, 1997:
First quarter $1.687 $1.187
Second quarter $1.531 $1.219
Third quarter $1.719 $1.344
Fourth quarter $2.500 $1.375
</TABLE>
On February 11, 1998, the closing price of the Common Stock on NASDAQ was $2.19
per share. As of February 11, 1998 there were approximately 987 holders of
record of the Common Stock.
11
<PAGE>
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
The Company generated cash from operations of $789,000 during fiscal 1997, as
compared to $235,000 in fiscal 1996. The improvement in cash generation was due
to lower amounts of cash used to finance both accounts receivable and
inventories as well as higher levels of income. Net income, after adjustments
for non-cash items, provided $1,442,000 in 1997; in 1996, net income as adjusted
provided $1,222,000 of net cash. Accounts receivable increased by $214,000 in
1997; the increase of $661,000 in 1996 was due to much higher sales in the third
and fourth quarter resulting from the May and August 1996 dealer acquisitions.
Similarly, inventory increased by $191,000 in 1997; the much higher increase of
$774,000 in 1996 was related to the inventory purchased in the acquisitions as
well as required for consignment for a larger clinical base.
Cash of $111,000 was used for investing activities in 1997, as compared to
$617,000 in the prior year. Investments in property, plant and equipment were
comparable to those in the prior year; however, $207,000 was provided by the net
maturity of short-term investments in fiscal 1997 as compared to a usage of
$281,000 in 1996.
Financing activities used cash of $283,000 in fiscal 1997, as compared to
$204,000. The Company utilized $109,000 for the purchase of treasury stock in
1997. The note payable to a related party was satisfied early in 1996, and the
related cash usage of $31,000 was not required to be expended for this purpose
in 1997.
The Company's net working capital at November 30, 1997 was $11,634,000, with a
current ratio of 8:1, as compared to $10,200,000 and 6:1 at November 30, 1996.
The Company believes that funds on hand are sufficient to support existing and
planned operations for at least the next twelve months. Should additional
financial resources be required, the Company believes that funds would be
available from the collateralization of accounts receivable and inventory.
The Company is a party to a proposed Agreement and Plan of Merger, dated
December 1, 1997, between Staodyn, Inc. and Rehabilicare, Inc., a Minnesota
corporation. Under the Agreement and Plan of Merger, Staodyn will be merged
into Rehabilicare; each share of Staodyn Common Stock would be exchanged for
.829 shares of Rehabilicare Common Stock. A Registration Statement on Form S-4
covering this transaction was filed with the Securities and Exchange Commission
on February 11, 1998. Both companies have scheduled shareholder meetings on
March 17, 1998 to vote on the transaction. If the merger is approved by the
shareholders of both companies, and certain other conditions to the merger are
satisfied or waived, Staodyn will become a wholly-owned subsidiary of
Rehabilicare. The officers of the combined company will be the officers of
Rehabilicare. Cost-savings resulting from the merger are expected to ultimately
be approximately $3.2 million (pre-tax). No assurances can be given with
respect to the ultimate level of cost savings, if any, to be realized. Costs to
be incurred relative to the merger and subsequent restructuring are estimated to
be $2.5 to $3.5 million (pre-tax). It is anticipated that substantially all of
these expenses and charges will be incurred in the first year following the
effective date of the merger. The management of Rehabilicare, Inc. has announced
that it will consolidate all manufacturing, warehousing, shipping, and wholesale
sales operations into its New Brighton, Minnesota facility, and that all retail
sales operations will be consolidated into the Staodyn, Inc. Tampa, Florida
facility. Staodyn's Longmont facility is expected to be closed during 1998.
12
<PAGE>
Statements in this Form 10-KSB which are not historical facts are
forward-looking as that term is defined in the Private Securities Litigation
Reform Act of 1995. The words or phrases "anticipates," "estimates," "expect,"
or expressions of a similar nature denote forward-looking statements. Those
statements are subject to risks and uncertainties, including the risk that
shareholder approval of the merger might not be obtained or that other
contingencies set forth in the merger agreement are not satisfied.
RESULTS OF OPERATIONS
Fiscal Year Ended November 30, 1997
- -----------------------------------
Net sales for the fiscal year ended November 30, 1997 were $21,143,000, an
increase of $2,199,000, or 12%, over the prior fiscal year. Retail net sales
continued to grow, increasing approximately 17% from the prior year, offset by a
decline in wholesale sales of $374,000 or 9% of 1996 sales. Retail sales growth
is attributed to an expanded sales force, particularly the impact of two
independent representative groups who were active with the Company for the
entire fiscal year.
Gross profit was $13,666,000 or 65% of net sales; this is comparable to the
$12,311,000 or 65% of net sales generated in 1996.
Selling, general, and administrative expenses totaled $12,633,000 or 60% of
net sales in the fiscal year ended November 30, 1997. This represents an
increase of $1,079,000 or 9% over fiscal 1996 expenses of $11,554,000 or 61% of
net sales. The increase is due primarily to higher commissions paid on higher
levels of sales, as well as increased payroll costs to support the sales
operations. Research and development expenses remained essentially unchanged.
Other expenses for the year ended November 30, 1997 were $110,000, an increase
of $55,000 over the fiscal 1996 level of $55,000. The increase is due to
approximately $55,000 of merger-related expenses incurred during the fourth
quarter (see Note 2 of the financial statements).
The Company recognized a portion of its deferred tax assets in 1997, reducing
its valuation allowance to approximately 50%. This resulted in a tax benefit of
$762,000. Net income for the fiscal year ended November 30, 1997 was $1,230,000,
or $.19 per share, compared to $257,000 or $.04 per share for the fiscal year
ended November 30, 1996.
Fiscal Year Ended November 30, 1996
- -----------------------------------
Net sales for the fiscal year ended November 30, 1996 were $18,944,000 an
increase of $573,000 or 3% from the prior fiscal year. Retail sales increased
$655,858 or 5%. This increase in retail sales was due to the expansion of the
retail sales force, primarily in the second half of the year. Net sales in the
second half of the year were up 11% over the same period of 1995. Two
independent representative groups, who had previously been customers of the
wholesale division, were added to the retail distribution network. Wholesale
division sales decreased by $83,000 or 2%.
Gross profit was $12,311,000 for the year, or 65% of net sales, as compared to
$11,797,000 or 64% of net sales in 1995. The improvement in gross profit is
attributable to the sales mix improvement between the retail and wholesale
division sales.
13
<PAGE>
Selling, general, and administrative expenses in fiscal 1996 totaled
$11,554,000, as compared to $11,084,000 in fiscal 1995. The increase of
$470,000, or 5%, is due to several factors. Sales and marketing expenses were
higher due to a significant expansion of the retail sales force during the year,
as well as higher commissions on the higher sales in the retail division.
Additionally, the Company hired a new President and Chief Executive Officer in
June 1996 in anticipation of the retirement of W. Bayne Gibson in December 1996.
This resulted in increased salary and moving expenses.
Research and development expenditures remained fairly level. Research and
development expenses increased by $9,000 or 2%, to $446,000.
Other expenses for the year ended November 30, 1996 were $55,000, as compared
to $73,000 for fiscal 1995. Other income (expense) consists primarily of
interest earned on short-term cash investments and interest expense on debt and
capital leases. Interest earned on short-term investments increased by $24,000;
interest expense decreased by $32,000 as related debt principal was decreased.
These improvements, totaling $55,000, were offset by lower other income of
$33,000. Other income in fiscal 1995 consisted primarily of a rebate of rent
which had been paid in prior years.
Net income for the fiscal year ended November 30, 1996 was $257,000 or $.04
per share, compared to $204,000 or $.03 per share for the fiscal year ended
November 30, 1995.
ITEM 7. FINANCIAL STATEMENTS
The information required by this item is herein on pages F-1 through F-18.
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
There have been no disagreements between the Company and its independent
accountants on any matter of accounting principles or practices or financial
statement disclosure since the Company's inception.
PART III
--------
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT OF THE REGISTRANT
ITEM 10. EXECUTIVE COMPENSATION
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information called for by Part III, Items 9 through 12, is incorporated by
reference to sections captioned "Election of Directors," "Executive Officers,"
"Executive Compensation," "Security Ownership of Certain Beneficial Owners and
Management," and "Stock Options and Warrants" from the registrant's definitive
proxy statement expected to be filed with the Securities and Exchange Commission
on or before March 30, 1998.
14
<PAGE>
ITEM 13. EXHIBITS, LIST AND REPORTS ON FORM 8-K
(a) Exhibits:
--------
The following documents are filed as exhibits or, where indicated, are
incorporated by reference:
No. Exhibit Document
--- ----------------
3.1 Certificate of Incorporation (1)
3.2 Bylaws (1)
3.3 Certificate of Merger of Staodynamics, Inc. (a Colorado corporation)
into Staodynamics, Inc. (a Delaware corporation) (2)
3.4 Amendments to the Bylaws of the Registrant (3)
3.5 Certificate of Amendment to Certificate of Incorporation (4)
3.6 Articles of Association of Staodyn B.V. (16)
4.1 Specimen Common Stock Certificate (5)
4.2 Specimen Warrant (11)
4.3 Warrant Agreement (12)
10.1 1983 Employee Stock Purchase Plan (6)
10.2 1982 Incentive Stock Option Plan (7)
10.3 1992 Stock Option Plan (8)
10.4 Asset Purchase Agreement dated November 6, 1992 between the Company and
Technical Medical Devices, Inc. (10)
10.5 Lease Agreement dated July 16, 1993 between the Company and 1225
Building, LLC (13)
10.6 Lease Agreement dated July 16, 1993 between the Company and Pendleton
Construction Co., Inc. (14)
10.7 Employment Agreement - John R. South (17)
10.8 Change of Control Agreement - John R. South*
10.9 Change of Control Agreement - Michael J. Newman*
10.10 Change of Control Agreement - John L. Fenstermaker*
10.11 Change of Control Agreement - David S. Hood*
15
<PAGE>
10.12 Change of Control Agreement - Oscar R. Jones*
10.13 CIT Group/Equipment Financing Master Lease and Equipment Schedule No.
01*
10.14 CIT Group/Equipment Financing Equipment Schedule No. 02, dated
November 12, 1997*
10.15 CIT Group/Equipment Financing Equipment Schedule No. 03, dated
December 4, 1997*
21.1 Subsidiaries of the Registrant (16)
23.1 Consent of Price Waterhouse LLP, independent accountants, to
incorporation by reference of their report into Registration Statement
Nos. 33-74614, 2-96535, 2-87595, and 33-42053, and in the prospectuses
constituting part of the Registration Statement Nos. 33-46186 and 33-
74464*
27.1 Financial Data Schedule*
(b) Reports on Form 8-K:
-------------------
On December 3, 1997, the Company filed a Form 8-K covering the
definitive agreement to merge between Rehabilicare, Inc and Staodyn, Inc.
- ----------------------------------------------
(1) Incorporated by reference from Form 10-K for fiscal year ended March 3,
1990.
(2) Denoted as Exhibit 3.2 to Registration Statement No. 33-40195 on Form S-1
and incorporated herein by reference.
(3) Denoted as Exhibit 3.5 to Registration Statement No. 33-40195 on Form S-1
and incorporated herein by reference.
(4) Denoted as Exhibit 3.3 to Registration Statement No. 33-40195 on Form S-1
and incorporated herein by reference.
(5) Denoted as Exhibit 4.1 to Registration Statement No. 33-40195 on Form S-1
and incorporated herein by reference.
(6) Denoted as Exhibit 4.4 to Registration Statement No. 33-40195 on Form S-1
and incorporated herein by reference.
(7) Incorporated by reference from the Company's Registration Statement No. 2-
87595 on Form S-8 and as amended in Registration Statement No. 2-96535 on
Form S-8.
(8) Denoted as Exhibit 10.3 to Company's Annual Report on Form 10-K for fiscal
year ended February 29, 1992 and incorporated herein by reference.
(9) Denoted as Exhibit 10.2 to Registration Statement No. 33-40195 on Form S-1
and incorporated herein by reference.
(10) Denoted as Exhibit 2.1 to Company's Current Report on Form 8-K dated
November 15, 1992.
(11) Denoted as Exhibit 4.2 to Registration Statement No. 33-58074 on Form S-2
and incorporated herein by reference.
(12) Denoted as Exhibit 4.3 to Registration Statement No. 33-58074 on Form S-2
and incorporated herein by reference.
(13) Denoted as Exhibit 10.7 to Registration Statement No. 33-58074 on Form S-2
and incorporated herein by reference.
(14) Denoted as Exhibit 10.8 to Registration Statement No. 33-58074 on Form S-2
and incorporated herein by reference.
16
<PAGE>
(15) Denoted as Exhibit 10.9 to Registration Statement No. 33-58074 on Form S-2
and incorporated herein by reference.
(16) Incorporated by reference from Form 10-KSB for fiscal year ended November
30, 1994.
(17) Incorporated by reference from Form 10-KSB for fiscal year ended November
30, 1996.
* Filed as part of this report.
17
<PAGE>
Index to Consolidated Financial Statements
<TABLE>
<CAPTION>
<S> <C>
Report of Independent Accountants......................................... F-2
Consolidated Balance Sheets as of November 30, 1997 and 1996.............. F-3, F-4
Consolidated Statements of Operations for the years
ended November 30, 1997 and 1996......................................... F-5
Consolidated Statements of Changes in Stockholders' Equity for the years
ended November 30, 1997 and 1996......................................... F-6
Consolidated Statements of Cash Flows for the years
ended November 30, 1997 and 1996......................................... F-7, F-8
Notes to Consolidated Financial Statements................................ F-9 through F-18
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and
Stockholders of Staodyn, Inc.
In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of operations, of changes in stockholders' equity and of
cash flows present fairly, in all material respects, the financial position of
Staodyn, Inc. and its subsidiary at November 30, 1997 and 1996 and the results
of their operations and their cash flows for each of the two fiscal years in the
period ended November 30, 1997, in conformity with generally accepted accounting
principles. These financial statements are the responsibility of the Company's
management; our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these statements in
accordance with generally accepted auditing standards which require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for the opinion expressed
above.
PRICE WATERHOUSE LLP
Boulder, Colorado
January 30, 1998
F-2
<PAGE>
Staodyn, Inc.
Consolidated Balance Sheets
<TABLE>
<CAPTION>
NOVEMBER 30
--------------------------
1997 1996
------------ ------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 1,419,959 $ 1,025,343
Short-term investments 1,187,630 1,323,706
Accounts receivable, net of allowance for doubtful
accounts of $1,334,151 and $950,821, respectively 5,533,377 5,319,749
Deferred tax assets 465,138 -
Inventories, net 4,589,274 4,398,525
Prepaid expenses and other assets 225,322 235,220
----------- -----------
Total current assets 13,420,700 12,302,543
----------- -----------
Property, plant, and equipment (at cost)
Land 156,554 156,554
Buildings and improvements 1,468,709 1,442,839
Production and laboratory equipment 2,626,806 2,330,971
Office furniture and fixtures 1,073,903 988,799
Data processing equipment 2,499,863 2,206,159
Automotive equipment 8,153 8,153
----------- -----------
7,833,988 7,133,475
Less accumulated depreciation and amortization (5,827,856) (5,204,990)
----------- -----------
2,006,132 1,928,485
----------- -----------
Intangible assets:
Product supply agreement, net of accumulated
amortization of $450,000 and $360,000, respectively 450,000 540,000
Goodwill, noncompete agreement, and other intangibles,
net of accumulated amortization of $996,642 and
$732,610, respectively 620,875 873,457
Long-term deferred tax assets 359,626 -
Other assets 11,960 9,967
----------- -----------
Total assets $16,869,293 $15,654,452
=========== ===========
</TABLE>
See accompanying notes.
F-3
<PAGE>
Staodyn, Inc.
Consolidated Balance Sheets
(continued)
<TABLE>
<CAPTION>
NOVEMBER 30
-----------------------
1997 1996
---------- -----------
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of capitalized lease obligations $ 77,628 $ 207,086
Accounts payable 540,474 730,938
Commissions payable 185,195 184,585
Accrued payroll expense 530,089 502,650
Taxes payable, other than income 115,868 113,102
Other accrued liabilities 273,917 364,229
Income taxes payable 63,117 -
---------- ----------
Total current liabilities 1,786,288 2,102,590
---------- ----------
Long-term debt:
Finance obligation, net of unamortized debt expense
of $18,409 and $21,681, respectively 1,256,591 1,253,319
Capitalized lease obligations, long-term 340,682 4,827
---------- ----------
Total long-term debt 1,597,273 1,258,146
---------- ----------
Commitments and contingencies
Stockholders' equity:
Preferred stock - $0.01 par value; 1,000,000
shares authorized; none issued - -
Common Stock - $0.01 par value; 10,000,000
shares authorized; 6,708,065 and 6,641,217 shares,
issued and outstanding, respectively 67,081 66,412
Additional paid-in capital 15,539,518 15,468,439
Accumulated deficit (2,011,549) (3,241,135)
----------- -----------
13,595,050 12,293,716
Less treasury stock (at cost) - 74,000 shares (109,318) -
----------- -----------
13,485,732 12,293,716
----------- -----------
Total liabilities and stockholders' equity $16,869,293 $15,654,452
=========== ===========
</TABLE>
See accompanying notes.
F-4
<PAGE>
Staodyn, Inc.
Consolidated Statements of Operations
<TABLE>
<CAPTION>
YEAR ENDED
NOVEMBER 30
-------------------------
1997 1996
------------ -----------
<S> <C> <C>
Sales $21,142,602 $18,943,519
Cost of sales 7,476,323 6,632,071
----------- -----------
Gross profit 13,666,279 12,311,448
----------- -----------
Operating expenses:
Selling, general, and administrative 12,632,798 11,553,939
Research and development 455,800 445,814
----------- -----------
13,088,598 11,999,753
----------- -----------
Income from operations 577,681 311,695
Other income (expense):
Interest income 104,578 121,475
Other income--related party 5,822 13,135
Interest expense (163,270) (186,667)
Other income (expense), net (56,872) (2,823)
----------- -----------
(109,742) (54,880)
Income before income taxes 467,939 256,815
Income tax benefit 761,647 -
----------- -----------
Net income $ 1,229,586 $ 256,815
=========== ===========
Net income per common share $ .19 $ .04
=========== ===========
Weighted average number of
common shares outstanding 6,643,076 6,469,618
=========== ===========
</TABLE>
See accompanying notes.
F-5
<PAGE>
Staodyn, Inc.
Consolidated Statements of Changes in Stockholders' Equity
<TABLE>
<CAPTION>
Common Stock Additional
--------------------- Paid In Accumulated Treasury
Shares Amount Capital Deficit Stock
------------ ------- ----------- ------------ ----------
<S> <C> <C> <C> <C> <C>
Balance at November 30, 1995 6,325,036 $63,250 $15,106,068 $(3,497,950) $ -
Issuance of Common Stock
for acquisition of distribution
channels 264,357 2,644 300,583 - -
Issuance of Common Stock for
employee stock bonus and
employee stock purchase plans 31,824 318 40,988 - -
Issuance of Common Stock
as compensation to directors 20,000 200 20,800 - -
Net income - - - 256,815 -
--------- ------- ----------- ----------- ---------
Balance at November 30, 1996 6,641,217 $66,412 $15,468,439 $(3,241,135) $ -
Issuance of Common Stock for
employee stock bonus and
employee stock purchase plans 41,848 419 47,811 - -
Issuance of Common Stock as
compensation to directors 25,000 250 23,268 - -
Purchase of treasury stock
(74,000 shares) - - - - (109,318)
Net income - - - 1,229,586 -
--------- ------- ----------- ----------- ---------
Balance at November 30, 1997 6,708,065 $67,081 $15,539,518 $(2,011,549) $(109,318)
========= ======= =========== =========== =========
</TABLE>
See accompanying notes.
F-6
<PAGE>
Staodyn, Inc.
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
YEAR ENDED
NOVEMBER 30
--------------------------
1997 1996
------------ ------------
<S> <C> <C>
OPERATING ACTIVITIES
Net income $ 1,229,586 $ 256,815
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization 1,013,657 997,842
Income tax benefit (761,647) -
Stock compensation 22,888 22,416
Loss on sale of equipment 8,941 2,582
Accrued interest (70,995) (58,000)
Increase (decrease) from changes in assets and liabilities:
Accounts receivable, net (213,628) (660,534)
Inventories, net (190,749) (773,615)
Prepaid expenses and deposits 2,456 (85,924)
Other assets (1,993) 2,819
Accounts payable (190,464) 261,348
Commissions payable 610 37,691
Accrued payroll expense 27,439 97,534
Taxes payable, other than income 2,766 7,678
Other accrued liabilities (90,312) 126,623
----------- -----------
Net cash provided by operating activities 788,555 235,275
----------- -----------
INVESTING ACTIVITIES
Payments for purchases of property, plant, and equipment (306,342) (325,783)
Payments for other noncurrent assets (11,450) (18,055)
Purchases of short-term investments (2,379,929) (2,796,097)
Maturities of short-term investments 2,587,000 2,515,000
Proceeds from sale of equipment - 8,000
----------- -----------
Net cash used in investing activities (110,721) (616,935)
----------- -----------
</TABLE>
See accompanying notes.
F-7
<PAGE>
Staodyn, Inc.
Consolidated Statements of Cash Flows
(continued)
<TABLE>
<CAPTION>
YEAR ENDED
NOVEMBER 30
-------------------------
1997 1996
----------- ------------
<S> <C> <C>
FINANCING ACTIVITIES
Proceeds from issuances of Common Stock $ 48,230 $ 41,306
Principal payments of note payable--related party - (31,170)
Principal payments under capital lease obligations (222,130) (213,773)
Purchases of treasury stock (109,318) -
---------- ----------
Net cash used in financing activities (283,218) (203,637)
---------- ----------
Net increase (decrease) in cash and cash equivalents 394,616 (585,297)
Cash and cash equivalents at beginning of period 1,025,343 1,610,640
---------- ----------
Cash and cash equivalents at end of period $1,419,959 $1,025,343
========== ==========
Supplemental information:
Interest paid $ 163,270 $ 186,667
Supplemental schedule of noncash investing activities
Equipment acquisitions through capital lease
obligations $ 428,527 $ -
Stock issued as compensation 23,518 21,000
Stock issued for acquisition of distribution channels - 295,975
Stock issued for purchase of inventory - 7,252
</TABLE>
See accompanying notes.
F-8
<PAGE>
Staodyn, Inc.
Notes to Consolidated Financial Statements
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF CONSOLIDATION
In 1994 the Company incorporated a subsidiary in the Netherlands (Staodyn
B.V.) in anticipation of marketing products to the European Community. The
consolidated financial statements include the accounts of this wholly-owned
subsidiary. All significant intercompany accounts and transactions have been
eliminated.
CASH, CASH EQUIVALENTS, AND SHORT-TERM INVESTMENTS
The Company considers all highly liquid debt instruments purchased with
original maturities of three months or less to be cash equivalents. Short-term
investments at November 30, 1997 represent investments in commercial paper of
approximately $1,188,000, whose amortized cost approximates fair market value.
These securities mature within six months or less. Under Statement of Financial
Accounting Standards No. 115, "Accounting for Certain Investments in Debt and
Equity Securities," these securities are carried at amortized cost as the
Company has both the ability and intent to hold to maturity.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The Company's financial instruments consist of cash and cash equivalents,
short-term investments, accounts receivable, payables, and accrued liabilities
whose fair values approximates the carrying amounts due to the short maturities
of these instruments.
INVENTORIES
Inventories are generally stated at the lower of first-in, first-out (FIFO)
cost or market.
INCOME TAXES
Deferred income taxes are provided for the difference between the book and
tax basis of assets and liabilities.
DEPRECIATION AND AMORTIZATION OF PROPERTY, PLANT, AND EQUIPMENT
Depreciation is calculated using the straight-line method over the estimated
useful lives of the assets. Property, plant, and equipment held under capital
leases are amortized using the straight-line method over the shorter of the
lease term or estimated useful lives of the assets. The estimated useful lives
of property, plant, and equipment for purposes of computing depreciation are:
Buildings 30 years
Leasehold improvements 5 to 15 years
Production and laboratory equipment 3 to 5 years
Office furniture and fixtures 3 to 5 years
Data processing equipment 3 to 5 years
Automotive equipment 3 years
F-9
<PAGE>
Staodyn, Inc.
Notes to Consolidated Financial Statements
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
DEPRECIATION AND AMORTIZATION OF PROPERTY, PLANT, AND EQUIPMENT (CONTINUED)
Depreciation expense totaled approximately $648,000 and $698,000 for the
fiscal years ended November 30, 1997 and 1996, respectively.
INTANGIBLE ASSETS
Intangible assets are amortized using the straight-line method over the
following estimated useful lives:
Product supply agreement 10 years
Goodwill 3 to 20 years
Noncompete agreement 5 years
RESEARCH AND DEVELOPMENT
The Company expenses all research and development costs as incurred.
EARNINGS PER SHARE
Earnings per common share are based on the weighted average number of common
and common equivalent shares, including dilutive Common Stock options and
warrants outstanding during the year. Options and warrants outstanding during
the fiscal years ended November 30, 1997 and 1996 are not included in the
computation of weighted average shares outstanding as their inclusion results in
a dilution of less than three percent.
In February 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 128, "Earnings per Share" (SFAS 128). SFAS
128 requires dual presentation of basic earnings per share and diluted earnings
per share and is required to be adopted by the Company during fiscal 1998.
Implementation of SFAS 128 is not expected to have a material impact on reported
earnings per share.
STOCK-BASED COMPENSATION
Statement of Financial Accounting Standards No. 123 ("SFAS 123"),
"Accounting for Stock-Based Compensation" encourages, but does not require,
companies to record compensation cost for stock-based employee compensation
plans at fair value. The Company has chosen to present required disclosures and
to continue to account for employee stock-based compensation using the method
prescribed in Accounting Principles Board Opinion 25 ("APB 25"), "Accounting for
Stock Issued to Employees." Accordingly, compensation cost for stock options and
other stock-based compensation is measured as the excess, if any, of the quoted
market price of the Company's stock at the date of grant over the amount an
employee must pay to acquire the stock.
F-10
<PAGE>
Staodyn, Inc.
Notes to Consolidated Financial Statements
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
CONCENTRATION OF CREDIT RISK
The Company's accounts receivable are due from a large number of insurance
carriers and individuals throughout the United States and from approximately 500
active medical product dealers and distributors.
USE OF ESTIMATES
The preparation of the Company's consolidated financial statements in
conformity with generally accepted accounting principles requires the Company's
management to make estimates and assumptions that affect the amounts reported in
these financial statements and accompanying notes. The more significant areas
requiring the use of management estimates relate to accounts receivable and
inventory reserves, the estimated useful lives of intangible assets, and the
valuation allowance for deferred tax assets. Actual results could differ from
those estimates.
2. SUBSEQUENT EVENT
On December 1, 1997, the Company reached a definitive agreement to merge
with Rehabilicare, Inc., a Minnesota-based company. Under the Agreement and Plan
of Merger (the "Merger Agreement"), each outstanding share of Staodyn Common
Stock will become the right to receive .829 shares of Rehabilicare, Inc. Common
Stock, and Staodyn would become a wholly-owned subsidiary of Rehabilicare.
Completion of the Agreement is subject to several conditions, including, but not
limited to, approval of the transaction by the Securities and Exchange
Commission and shareholder approval by a majority of the stockholders of both
companies, respectively, entitled to vote. Additionally, the Agreement may be
terminated if the market price of Rehabilicare, Inc. Common Stock falls below
$3.00, on average, for a specified period of time prior to the closing date.
Rehabilicare, Inc. has announced that it intends to close the Company's
Longmont, Colorado facility by approximately June 30, 1998. The merger is to be
accounted for as a pooling of interests.
3. ASSET ACQUISITIONS
On November 15, 1992, the Company purchased substantially all of the assets,
excluding accounts receivable, of Technical Medical Devices, Inc. (TMD), a
wholly-owned medical products distribution subsidiary of Pharmacy Management
Services, Inc. (PMSI). In conjunction with the purchase, the Company entered
into a transition support agreement with PMSI whereby PMSI agreed to provide
operating facilities and support services subsequent to the purchase. These
support services were terminated in 1996. During fiscal 1996, expenses totaling
approximately $42,250 were paid to PMSI for support services under this
agreement.
PMSI's ownership percentage is approximately 17% as of November 30, 1997.
The shareholder agreement granted PMSI demand registration rights after June 30,
1994. PMSI was acquired by Beverly Enterprises in June 1995.
F-11
<PAGE>
Staodyn, Inc.
Notes to Consolidated Financial Statements
3. ASSET ACQUISITIONS (CONTINUED)
In connection with the purchase of two distribution channels during 1996,
the Company issued 264,357 shares of unissued, restricted Common Stock.
Approximately 71,000 shares are subject to a contingent guarantee which provides
that the number of shares issued may be adjusted as of August 12, 1998. Such
shares will be increased proportionately should the value of these shares fall
below $87,500, or decreased proportionately if the value exceeds $125,000.
4. INVENTORIES
Inventories at November 30 include the following components:
<TABLE>
<CAPTION>
1997 1996
<S> <C> <C>
Raw materials $ 616,599 $ 684,860
Work in process 72,552 46,450
Finished goods 3,900,123 3,667,215
---------- ----------
$4,589,274 $4,398,525
========== ==========
</TABLE>
5. LONG-TERM DEBT
Long-term debt at November 30 consists of the following:
<TABLE>
<CAPTION>
1997 1996
<S> <C> <C>
Finance obligation, net $1,256,591 $1,253,319
Capitalized lease obligations 418,310 211,913
---------- ----------
1,674,901 1,465,232
Less current portion (77,628) (207,086)
---------- ----------
$1,597,273 $1,258,146
========== ==========
</TABLE>
FINANCE OBLIGATION--SALE AND LEASEBACK OF BUILDING
In July 1993 the Company completed a sale and leaseback transaction on the
owned portion of its facilities and related land in Longmont, Colorado. The
property was sold to a limited liability company (LLC) for $1,275,000 in cash.
The sale and leaseback transaction is accounted for as a financing; the sales
price (net of unamortized debt expenses) is reflected as a long-term financing
obligation and the operating lease payments as interest until the earlier of the
end of the lease term or the exercise of the purchase option included in the
lease. The building and related improvements are carried as assets on the
Company's books and depreciated. One of the officers of the Company is a
minority (16%) participant in the LLC.
The financing obligation will mature in July 2003.
F-12
<PAGE>
Staodyn, Inc.
Notes to Consolidated Financial Statements
5. LONG-TERM DEBT (CONTINUED)
CAPITALIZED LEASE OBLIGATIONS
The capitalized lease obligations relate to certain production, data
processing, and office equipment. Original cost and accumulated depreciation of
assets under capital leases at November 30, 1997 are:
<TABLE>
<CAPTION>
<S> <C>
Cost $460,147
Less accumulated depreciation (40,944)
--------
$419,203
========
</TABLE>
Future minimum lease payments at November 30, 1997 for these leases are
as follows:
<TABLE>
<CAPTION>
<S> <C>
1998 $108,908
1999 106,194
2000 104,804
2001 104,804
2002 82,071
--------
Total minimum lease payments 506,781
Less amounts representing interest (88,471)
--------
Present value of lease payments 418,310
Less current portion (77,628)
--------
$340,682
========
</TABLE>
6. PROFIT SHARING PLAN
All full-time employees who have completed at least one year of service are
eligible to participate in the Company's 401(k) Plan. The Plan meets the
requirements of Section 401(k) of the Internal Revenue Code, and total Company
contributions are limited to 50% of the aggregate employee contributions to the
Plan, subject to a maximum amount of 3% of regular compensation for each
employee. The rules applicable to Section 401(k) may also serve to further
limit the Company's contributions to the Plan, particularly with respect to
highly compensated employees. Company expense for contributions to the Plan was
approximately $60,500 and $28,500 for fiscal 1997 and 1996, respectively.
7. COMMITMENTS AND CONTINGENCIES
OPERATING LEASES
The Company leases land and a building in Longmont, Colorado, under two
operating leases expiring in July 2003. The leases call for payments totaling
$219,500 per year; the annual payments may be adjusted in fiscal 1998 based upon
the prime rate at the anniversary date of the leases. Each lease gives the
Company the option to purchase the respective property at any time after the
fifth year of the lease (July 1998); the purchase option prices vary based upon
the year exercised and range from 110% of an established price in the fifth year
to 120% in the tenth year (the established price is $1,275,000 for the portion
which was sold and leased back; $720,000 for the second lease). Total interest
expense in fiscal
F-13
<PAGE>
Staodyn, Inc.
Notes to Consolidated Financial Statements
7. COMMITMENTS AND CONTINGENCIES (CONTINUED)
OPERATING LEASES (CONTINUED)
1997 and 1996 was $140,250 in each year for the portion sold and leased back.
Total rent expense was $79,200 for the remaining portion in both fiscal 1997 and
1996.
The Company subleased building space for its operation in Tampa, Florida,
from PMSI under an operating lease which expired in March 1996. Total rent
expense under this lease was $41,068 in fiscal 1996. Additionally, the Company
leased a separate warehouse facility under an operating lease which expired in
February 1996. A portion of this facility was subleased to PMSI in September
1995 for approximately $2,700 per month, or a total of $17,242 in 1996. Rent
expense under this lease, net of sublease income, was $3,025 in fiscal 1996.
The Company leased new office facilities for its operation in Tampa,
Florida, in May of 1996. This lease was amended to include additional office
space in January of 1997. The lease, which expires in April of 2001, calls for
total monthly payments of approximately $12,000. Total rent expense under this
lease was $130,802 and $60,713 for fiscal 1997 and 1996, respectively.
The Company also leases certain office equipment under noncancelable
operating leases. Total rent expense under these leases was approximately $9,200
and $11,500 in each of the years ended November 30, 1997 and 1996, respectively.
Future minimum lease payments for all noncancelable operating leases and
subleases having remaining terms in excess of one year as of November 30, 1997
are as follows:
<TABLE>
<CAPTION>
<S> <C>
1998 $ 373,033
1999 377,963
2000 383,845
2001 295,752
2002 222,285
Thereafter 137,156
----------
Total minimum lease obligations $1,790,034
==========
</TABLE>
8. STOCKHOLDERS' EQUITY
STOCK OPTIONS
The Company maintains the 1982 and 1992 Stock Option Plans (SOP) which
provide for the granting of incentive and nonincentive options to employees,
directors, and consultants of the Company. The Company's 1982 SOP expired on May
31, 1992. The 1992 SOP permits options to be granted to purchase a maximum of
400,000 shares of the Company's Common Stock. The term of the options granted
may not exceed 10 years. All options are granted at the fair market value as of
the date of the grant, and vest over a period of two to five years.
F-14
<PAGE>
Staodyn, Inc.
Notes to Consolidated Financial Statements
8. STOCKHOLDERS' EQUITY (CONTINUED)
STOCK OPTIONS (CONTINUED)
Stock option activity was as follows:
<TABLE>
<CAPTION>
WEIGHTED-AVERAGE
WEIGHTED GRANT-DATE
AVERAGE PRICE FAIR VALUE
SHARES PER SHARE PER SHARE
------- ------------- ----------------
<S> <C> <C> <C>
Outstanding at November 30, 1995 272,500 $2.727
Granted 138,000 1.770 $0.955
Canceled (4,001) 1.636
-------
Outstanding at November 30, 1996 406,499 2.413
Granted 34,000 1.399 $0.741
Canceled (45,000) 2.352
-------
Outstanding at November 30, 1997 395,499 $2.333
=======
At November 30, 1997:
Number of shares exercisable 241,119 $2.748
Number of shares authorized and
available for future grant 260,001
</TABLE>
Information regarding options outstanding and exercisable by exercise price
range as of November 30, 1997 is as follows:
<TABLE>
<CAPTION>
Outstanding Exercisable
==================================== =================
Weighted Weighted Weighted
Average Average Average
Range of No. of Remaining Exercise Exercise
Exercise Prices Shares Contractual Life Price Shares Price
- ----------------- ------- ---------------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
$1.25 - $1.74 98,166 3.58 $1.389 28,161 $1.373
1.75 - 2.49 169,833 2.78 1.915 90,494 1.945
2.50 - 3.49 68,500 2.03 2.741 63,464 2.749
3.50 - 5.25 59,000 2.89 4.635 59,000 4.635
------- ---- ------ ------- ------
395,499 2.84 $2.333 241,119 $2.748
======= ==== ====== ======= ======
</TABLE>
F-15
<PAGE>
Staodyn, Inc.
Notes to Consolidated Financial Statements
8. STOCKHOLDERS' EQUITY (CONTINUED)
STOCK PURCHASE PLAN
The 1983 Employee Qualified Stock Purchase Plan (the ESPP) permits employees
to purchase a maximum of 600,000 shares of the Company's Common Stock. Eligible
employees are offered the right to purchase shares semiannually in June and
December at a purchase price equal to 85% of the lesser of the fair market value
on either the first or the last business day of the purchase period.
Participants may contribute up to 10% of their regular base pay toward the
purchase of the shares. During the fiscal years ended November 30, 1997 and
1996, 39,548 and 29,424 shares were purchased at an average price of $1.23 and
$1.26 per share, respectively. At November 30, 1997 there were 214,391 shares
authorized and available for issuance under the ESPP.
Participation in the ESPP was temporarily discontinued as of December 31,
1997, due to the pending merger transaction (see Note 2).
STOCK WARRANTS
In connection with the Company's November 1993 public offering, underwriters
were granted Unit Purchase Options entitling the underwriters to purchase up to
130,000 units for $6.75 per unit. Each unit originally consisted of one share
of Common Stock of the Company and one redeemable Series II Common Stock
Purchase Warrant. The underlying purchase warrants expired in November of 1996.
These options are currently exercisable and expire in November 1998.
STOCK-BASED COMPENSATION
The Company applies APB 25 and related interpretations in accounting for
stock option grants to employees under its stock option plans. Because the
exercise price of the options is equal to the market price of the underlying
stock on the date of grant, no compensation cost has been recognized in the
Company's financial statements. Pro forma disclosures assuming compensation cost
had been determined based on the fair value of stock options (including the
issuance of shares under the ESPP) at the grant dates in accordance with SFAS
123 as follows:
<TABLE>
<CAPTION>
Net Income Earnings Per Share
As Reported Pro Forma As Reported Pro Forma
----------- --------- ----------- ---------
<S> <C> <C> <C> <C>
Year ended November 30, 1996 256,815 217,553 .04 .03
Year ended November 30, 1997 467,939 412,113 .07 .06
</TABLE>
F-16
<PAGE>
Staodyn, Inc.
Notes to Consolidated Financial Statements
8. STOCKHOLDER'S EQUITY (CONTINUED)
STOCK-BASED COMPENSATION (CONTINUED)
The estimates of weighted average grant date fair values of options granted and
option compensation has been estimated using the Black-Scholes option-pricing
model (single option approach) with the following weighted-average assumptions
for grants:
<TABLE>
<CAPTION>
1997 1996
<S> <C> <C>
Volatility 57% 56%
Risk-free interest rate 6.8% 6.3%
Expected life 5 years 5 years
Dividend yield None None
</TABLE>
9. INCOME TAXES
The Company has general business tax credit carryforwards of approximately
$252,000 expiring from 1998 to 2005. Utilization of credits may be subject to
an annual limitation due to the ownership change limitations provided by the
Internal Revenue Code of 1986. The annual limitation may result in the
expiration of credits before utilization.
A valuation allowance is recorded against deferred tax assets to the extent
that management considers that it is unlikely whether such deferred tax assets
will be realized. Management has considered a variety of factors, both positive
and negative evidence, in reaching this conclusion, which is based primarily on
the cumulative operating loss over the last four years. Significant components
of the Company's deferred tax assets and liabilities at November 30 are as
follows:
<TABLE>
<CAPTION>
1997 1996
<S> <C> <C>
Deferred tax assets:
Sale and leaseback $ 312,312 $ 311,091
Accounts receivable reserves and allowances 497,639 484,049
Inventory 246,221 245,753
Accrued liabilities 95,276 108,110
Contribution carryforwards - 16,629
Property and equipment 122,384 59,817
Intangible assets 29,012 -
Alternative minimum tax credits 50,199 5,729
General business tax credits 252,486 296,486
Net operating loss carryforwards - 517,256
---------- -----------
Subtotal 1,605,529 2,044,920
Valuation allowance (780,765) (2,044,920)
---------- -----------
Total deferred tax assets, net $ 824,764 $ -
========== ===========
</TABLE>
F-17
<PAGE>
Staodyn, Inc.
Notes to Consolidated Financial Statements
9. INCOME TAXES (CONTINUED)
A reconciliation between the Company's actual income tax benefit and income
taxes computed by applying the federal statutory rate of 34% at November 30 is
as follows:
<TABLE>
<CAPTION>
1997 1996
<S> <C> <C>
Computed income tax expense at the statutory rate $ 159,100 $ 87,300
Release of valuation allowance (700,200) -
Effect of net operating losses (293,700) (130,700)
Goodwill amortization 9,500 21,800
Nondeductible T & E 19,100 13,400
Nondeductible merger costs 17,000 -
Effect of state income taxes 27,600 8,500
Other - (300)
----------- ---------
$ (761,600) $ -
=========== =========
</TABLE>
10. RELATED PARTY TRANSACTIONS
The Company sells products to PMSI under the terms of the Product Supply
Agreement entered into in conjunction with the acquisition of TMD. Sales to
PMSI under this agreement totaled approximately $124,000 and $228,000 in the
years ended November 30, 1997 and 1996, respectively.
Additionally, the Company provided services related to the collection
of pre-acquisition accounts receivable for PMSI for which fees are received.
Total income under this agreement was approximately $6,000 and $13,000 for the
years ended November 30, 1997 and 1996, respectively.
F-18
<PAGE>
EXHIBIT 10.8
CHANGE OF CONTROL AGREEMENT
AGREEMENT made as of this 1st day of June 1996, by and between STAODYN, INC., a
Delaware corporation, with its principal offices located at 1225 Ken Pratt
Boulevard, Longmont, Colorado 80501 (hereinafter the "Company"), and JOHN R.
SOUTH, residing at 7 Alison Way, Andover, Massachusetts 01810 (hereinafter the
"Officer").
1. Definitions. For purposes of this Agreement, the following terms shall have
the meanings set forth below:
(a) For the purposes of this Agreement, a "Change of Control" shall be deemed
to have occurred if (a) any "person" or "group" (within the meaning of
Sections 13(d) and 14(d)(2) of the Securities Exchange Act of 1934) other
than a trustee or other fiduciary holding securities under an employee
benefit plan of the Company, beneficially owns 50% or more of the
Company's voting common stock; or, (b) at any time during the period of
three consecutive years (not including any period prior to the date
hereof), individuals who at the beginning of such period constitute the
Board (and any new director whose election by the Board or whose
nomination for election by the Company's stockholders were approved by a
vote of at least two-thirds of the directors then still in office who
either were directors at the beginning of such period or whose election or
nomination for election was previously so approved) cease for any reason
to constitute a majority thereof; or (c) the stockholders of the Company
approve a merger or consolidation of the Company with any other
corporation, other than a merger or consolidation in which both (i) a
majority of the directors of the surviving entity were directors of the
Company prior to such consolidation or merger; and (ii) which would result
in the voting securities of the Company outstanding immediately prior
thereto continue to represent (either by remaining outstanding or by being
changed into voting securities of the surviving entity) at least 51% of
the combined voting power of the voting securities of the surviving entity
outstanding immediately after such merger or consolidation; or (d) the
stockholders approve a plan of complete liquidation of the Company or an
agreement for the sale or disposition by the Company of all or
substantially all of the Company's assets.
(b) "Cause" shall mean the commission by the Officer of any act involving
gross misconduct such as, but not limited to, dishonesty, gross neglect of
duty, frequent unexplained absence from work, or other misconduct
seriously detrimental to the interests of the Company.
(c) "Termination Date" shall mean the date following a Change of Control when
the Officer receives written notice that his employment is Terminated
without Cause or, if later, such other termination date specified in the
written notice.
1
<PAGE>
(d) "Terminate" shall mean not only a complete termination of employment by
the Company or its successor but also a significant negative change in the
terms of employment with the Company or its successor, including but not
limited to a requirement to relocate or a significant reduction in salary
and benefits.
(e) "Termination Following a Change of Control" shall mean a termination
without Cause by the Company following or in connection with a Change of
Control or a termination by the Officer for "Good Reason" of the Officer's
employment with the Company within two years following a "Change of
Control" (as defined below).
(f) For purposes of this Agreement, "Good Reason" shall include, but not be
limited to, any of the following (without the Officer's express written
consent):
i) the assignment to the Officer by the Company of duties inconsistent
with or a substantial alteration in the nature or status of, the
Officer's responsibilities as in effect immediately prior to a Change
of Control;
ii) a reduction by the Company in the Officer's compensation or benefits
as in effect immediately prior to the date of a Change of Control;
iii) a relocation of the Company's principal offices beyond 30 miles from
the present Longmont, Colorado location, or the Officer's relocation
to any place other than the Longmont, Colorado offices of the
Company, except for reasonably required travel by the Officer on the
Company's business;
iv) any material breach by the Company of any provision of this Agreement
if such material breach has not been cured within thirty (30) days
following written notice of such breach by the Officer to the Company
setting forth with specificity the nature of the breach; or
v) any failure by the Company to obtain the assumption and performance of
the Employment Agreement and this Agreement by any successor (by
merger, consolidation or otherwise) or assign of the Company.
2. Severance Benefits. In the event there is a Termination Following a Change
of Control, the Officer shall be entitled to the following severance benefits
for a period of 12 months after the Termination Date:
(a) Continued base salary in regular biweekly payments, or if so elected by
the Officer, a lump sum payable within 30 days of the Officer's election.
(b) Bonus payable in such amount as would be payable to the Officer had he
been employed by the Company for the full fiscal year during which the
termination occurred, and the Company had achieved Plan performance for
such fiscal year. Such bonus shall be paid in the same manner as elected
by the Officer in (a) above;
(c) Continued medical, dental, life and disability insurance benefits; and
2
<PAGE>
(d) Continued retirement benefits, including 401(k) plan.
Such benefits shall be identical to the salary, bonus, insurance and
retirement plan benefits to which the Officer was entitled immediately prior
to the Change of Control. During such 12-month period, the Officer shall
continue to be an employee of the Company for purposes of participation in the
plans which provide the benefits described in subsections (c) and (d) above
but shall have no further responsibilities as an employee and shall not be
required or permitted to continue his former duties. Subject to Section 4,
the Officer shall be free to accept other employment during such period, and
there shall be no offset of any employment compensation earned by Officer in
such other employment during such period against payments due the Officer
hereunder, and there shall be no offset in any compensation or benefits
received from such other employment against the continued salary and benefits
set forth above.
3. Stock Option Vesting. In the event of a Termination Following a Change of
Control, all outstanding stock options held by the Officer which are not then
exercisable, shall become exercisable in their entirety, as of the date
immediately preceding the Termination Date.
4. Noncompetition Agreement. Officer acknowledges that the Company has trade
secrets and confidential information, that as President and Chief Executive
Officer he will have access to all such trade secrets and confidential
information and that in performing duties in an executive position for
another company he might necessarily use and divulge such trade secrets and
confidential information. Therefore, in consideration for the severance
benefits set forth above, the Officer agrees that for a period of 12 months
subsequent to the Termination Date, the Officer will not, directly or
indirectly:
(a) Call upon any person or entity which was a customer of the Company
immediately prior to the Termination Date for the purpose of diverting,
taking away the business of, or selling products or services competitive
with significant products or services provided by the Company;
(b) In any manner, misuse or divulge to any person any list of customers,
confidential information or trade secrets of the Company;
(c) Alone or in any capacity solicit or in any manner attempt to solicit or
induce any person or persons employed by the Company within one year prior
to the Termination Date to leave such employment;
(d) Within the United States of America, either as an employee, employer,
consultant, agent principal, partner, more than 5% stockholder, corporate
officer, director, or in any other individual or representative capacity,
engage or participate in any business that is in competition in any
significant manner with any material business conducted by the Company on
the Termination Date.
5. Termination. This Agreement may be terminated only as follows:
(a) by mutual written agreement of the parties;
3
<PAGE>
(b) upon termination of Officer's employment prior to, and not in connection
with, a Change of Control.
(c) when the Officer attains age 65.
6. Severability. Should a court or other body of competent jurisdiction
determine that any provision of this Agreement is excessive in scope or
otherwise invalid or unenforceable, such provision shall be adjusted rather
than voided, if possible, so that it is enforceable to the maximum extent
possible, and all other provisions of the Agreement shall be deemed valid and
enforceable to the extent possible.
7. Assignment. The parties may assign their economic rights under this
Agreement but shall not assign any personal obligations from this Agreement.
8. Miscellaneous. This Agreement: (a) contains the entire agreement among the
parties regarding the subject matter hereof and supersedes any prior
agreements on this subject between the parties; (b) may not be amended nor
may any rights hereunder be waived except by an instrument in writing signed
by the party sought to be charged with such amendment or waiver; (c) shall be
construed in accordance with, and governed by, the laws of Colorado; and (d)
shall be binding upon and shall inure to the benefit of the parties and their
respective personal representatives and permitted assigns, including, without
limitation, any successor to the business of the Company.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the day and
year first above written.
THE OFFICER STAODYN, INC.
/s/ JOHN R. SOUTH [SIGNATURE OF CHAIRMAN OF BOARD APPEARS HERE]
- ---------------------------- ----------------------------------
John R. South Chairman of the Board
6/19/96 [SIGNATURE OF VP APPEARS HERE]
- ---------------------------- ----------------------------------
Date Vice President - Finance and Administration
Corporate Secretary
June 19, 1996
----------------------------------
Date
4
<PAGE>
EXHIBIT 10.9
CHANGE OF CONTROL AGREEMENT
AGREEMENT made as of July 1, 1996, by and between STAODYN, INC., a Delaware
corporation, with its principal offices located at 1225 Ken Pratt Boulevard,
Longmont, Colorado 80501 (hereinafter the "Company"), and MICHAEL J. NEWMAN,
residing at 700 Cascade Avenue, Boulder, Colorado 80302 (hereinafter the
"Officer").
1. Definitions. For purposes of this Agreement, the following terms shall have
the meanings set forth below:
(a) For the purposes of this Agreement, a "Change of Control" shall be deemed
to have occurred if (a) any "person" or "group" (within the meaning of
Sections 13(d) and 14(d)(2) of the Securities Exchange Act of 1934) other
than a trustee or other fiduciary holding securities under an employee
benefit plan of the Company, beneficially owns 50% or more of the
Company's voting common stock; or, (b) at any time during the period of
three consecutive years (not including any period prior to the date
hereof), individuals who at the beginning of such period constitute the
Board (and any new director whose election by the Board or whose
nomination for election by the Company's stockholders were approved by a
vote of at least two-thirds of the directors then still in office who
either were directors at the beginning of such period or whose election
or nomination for election was previously so approved) cease for any
reason to constitute a majority thereof; or (c) the stockholders of the
Company approve a merger or consolidation of the Company with any other
corporation, other than a merger or consolidation in which both (i) a
majority of the directors of the surviving entity were directors of the
Company prior to such consolidation or merger; and (ii) which would
result in the voting securities of the Company outstanding immediately
prior thereto continue to represent (either by remaining outstanding or
by being changed into voting securities of the surviving entity) at least
51% of the combined voting power of the voting securities of the
surviving entity outstanding immediately after such merger or
consolidation; or (d) the stockholders approve a plan of complete
liquidation of the Company or an agreement for the sale or disposition by
the Company of all or substantially all of the Company's assets.
(b) "Cause" shall mean the commission by the Officer of any act involving
gross misconduct such as, but not limited to, dishonesty, gross neglect
of duty, frequent unexplained absence from work, or other misconduct
seriously detrimental to the interests of the Company.
(c) "Termination Date" shall mean the date following a Change of Control when
the Officer receives written notice that his employment is Terminated
without Cause or, if later, such other termination date specified in the
written notice.
1
<PAGE>
(d) "Terminate" shall mean not only a complete termination of employment by
the Company or its successor but also a significant negative change in
the terms of employment with the Company or its successor, including but
not limited to a requirement to relocate or a significant reduction in
salary and benefits.
(e) "Termination Following a Change of Control" shall mean a termination
without Cause by the Company following or in connection with a Change of
Control or a termination by the Officer for "Good Reason" of the
Officer's employment with the Company within two years following a
"Change of Control" (as defined below).
(f) For purposes of this Agreement, "Good Reason" shall include, but not be
limited to, any of the following (without the Officer's express written
consent):
i) the assignment to the Officer by the Company of duties inconsistent
with or a substantial alteration in the nature or status of, the
Officer's responsibilities as in effect immediately prior to a
Change of Control;
ii) a reduction by the Company in the Officer's compensation or
benefits as in effect immediately prior to the date of a Change of
Control;
iii) a relocation of the Company's principal offices beyond 30 miles
from the present Longmont, Colorado location, or the Officer's
relocation to any place other than the Longmont, Colorado offices
of the Company, except for reasonably required travel by the
Officer on the Company's business;
iv) any material breach by the Company of any provision of this
Agreement if such material breach has not been cured within thirty
(30) days following written notice of such breach by the Officer to
the Company setting forth with specificity the nature of the
breach; or
v) any failure by the Company to obtain the assumption and performance
of this Agreement by any successor (by merger, consolidation or
otherwise) or assign of the Company.
2. Severance Benefits. In the event there is a Termination Following a Change
of Control, the Officer shall be entitled to the following severance benefits
for a period of 12 months after the Termination Date:
(a) Continued base salary in regular biweekly payments, or if so elected by
the Officer, a lump sum payable within 30 days of the Officer's election.
(b) Bonus payable in such amount as would be payable to the Officer had he
been employed by the Company for the full fiscal year during which the
termination occurred, and the Company had achieved Plan performance for
such fiscal year. Such bonus shall be paid in the same manner as elected
by the Officer in (a) above;
(c) Continued medical, dental, life and disability insurance benefits; and
2
<PAGE>
(d) Continued retirement benefits, including 401(k) plan.
Such benefits shall be identical to the salary, bonus, insurance and
retirement plan benefits to which the Officer was entitled immediately prior
to the Change of Control. During such 12-month period, the Officer shall
continue to be an employee of the Company for purposes of participation in
the plans which provide the benefits described in subsections (c) and (d)
above but shall have no further responsibilities as an employee and shall not
be required or permitted to continue his former duties. Subject to Section 4,
the Officer shall be free to accept other employment during such period, and
there shall be no offset of any employment compensation earned by Officer in
such other employment during such period against payments due the Officer
hereunder, and there shall be no offset in any compensation or benefits
received from such other employment against the continued salary and benefits
set forth above.
3. Stock Option Vesting. In the event of a Termination Following a Change of
Control, all outstanding stock options held by the Officer which are not then
exercisable, shall become exercisable in their entirety, as of the date
immediately preceding the Termination Date.
4. Noncompetition Agreement. Officer acknowledges that the Company has trade
secrets and confidential information, that as an Officer he will have access
to all such trade secrets and confidential information and that in performing
duties in an executive position for another company he might necessarily use
and divulge such trade secrets and confidential information. Therefore, in
consideration for the severance benefits set forth above, the Officer agrees
that for a period of 12 months subsequent to the Termination Date, the
Officer will not, directly or indirectly:
(a) Call upon any person or entity which was a customer of the Company
immediately prior to the Termination Date for the purpose of diverting,
taking away the business of, or selling products or services competitive
with significant products or services provided by the Company;
(b) In any manner, misuse or divulge to any person any list of customers,
confidential information or trade secrets of the Company;
(c) Alone or in any capacity solicit or in any manner attempt to solicit or
induce any person or persons employed by the Company within one year
prior to the Termination Date to leave such employment;
(d) Within the United States of America, either as an employee, employer,
consultant, agent principal, partner, more than 5% stockholder, corporate
officer, director, or in any other individual or representative capacity,
engage or participate in any business that is in competition in any
significant manner with any material business conducted by the Company on
the Termination Date.
5. Termination. This Agreement may be terminated only as follows:
(a) by mutual written agreement of the parties;
3
<PAGE>
(b) upon termination of Officer's employment prior to, and not in connection
with, a Change of Control.
(c) when the Officer attains age 65.
6. Severability. Should a court or other body of competent jurisdiction
determine that any provision of this Agreement is excessive in scope or
otherwise invalid or unenforceable, such provision shall be adjusted rather
than voided, if possible, so that it is enforceable to the maximum extent
possible, and all other provisions of the Agreement shall be deemed valid and
enforceable to the extent possible.
7. Assignment. The parties may assign their economic rights under this
Agreement but shall not assign any personal obligations from this Agreement.
8. Miscellaneous. This Agreement: (a) contains the entire agreement among the
parties regarding the subject matter hereof and supersedes any prior
agreements on this subject between the parties; (b) may not be amended nor
may any rights hereunder be waived except by an instrument in writing signed
by the party sought to be charged with such amendment or waiver; (c) shall be
construed in accordance with, and governed by, the laws of Colorado; and (d)
shall be binding upon and shall inure to the benefit of the parties and their
respective personal representatives and permitted assigns, including, without
limitation, any successor to the business of the Company.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the day and
year first above written.
THE OFFICER STAODYN, INC.
/s/ Michael J. Newman /s/ John R. South
- ----------------------- -------------------
Michael J. Newman President
July 17, 1996 7/17/96
- ----------------------- -------------------
Date Date
4
<PAGE>
EXHIBIT 10.10
CHANGE OF CONTROL AGREEMENT
AGREEMENT made as of July 1, 1996, by and between STAODYN, INC., a Delaware
corporation, with its principal offices located at 1225 Ken Pratt Boulevard,
Longmont, Colorado 80501 (hereinafter the "Company"), and JOHN L. FENSTERMAKER,
residing at 1228 Fox Hill Drive, Longmont, Colorado 80501(hereinafter the
"Officer").
1. Definitions. For purposes of this Agreement, the following terms shall have
the meanings set forth below:
(a) For the purposes of this Agreement, a "Change of Control" shall be deemed
to have occurred if (a) any "person" or "group" (within the meaning of
Sections 13(d) and 14(d)(2) of the Securities Exchange Act of 1934) other
than a trustee or other fiduciary holding securities under an employee
benefit plan of the Company, beneficially owns 50% or more of the
Company's voting common stock; or, (b) at any time during the period of
three consecutive years (not including any period prior to the date
hereof), individuals who at the beginning of such period constitute the
Board (and any new director whose election by the Board or whose
nomination for election by the Company's stockholders were approved by a
vote of at least two-thirds of the directors then still in office who
either were directors at the beginning of such period or whose election
or nomination for election was previously so approved) cease for any
reason to constitute a majority thereof; or (c) the stockholders of the
Company approve a merger or consolidation of the Company with any other
corporation, other than a merger or consolidation in which both (i) a
majority of the directors of the surviving entity were directors of the
Company prior to such consolidation or merger; and (ii) which would
result in the voting securities of the Company outstanding immediately
prior thereto continue to represent (either by remaining outstanding or
by being changed into voting securities of the surviving entity) at least
51% of the combined voting power of the voting securities of the
surviving entity outstanding immediately after such merger or
consolidation; or (d) the stockholders approve a plan of complete
liquidation of the Company or an agreement for the sale or disposition by
the Company of all or substantially all of the Company's assets.
(b) "Cause" shall mean the commission by the Officer of any act involving
gross misconduct such as, but not limited to, dishonesty, gross neglect
of duty, frequent unexplained absence from work, or other misconduct
seriously detrimental to the interests of the Company.
(c) "Termination Date" shall mean the date following a Change of Control when
the Officer receives written notice that his employment is Terminated
without Cause or, if later, such other termination date specified in the
written notice.
1
<PAGE>
(d) "Terminate" shall mean not only a complete termination of employment by
the Company or its successor but also a significant negative change in
the terms of employment with the Company or its successor, including but
not limited to a requirement to relocate or a significant reduction in
salary and benefits.
(e) "Termination Following a Change of Control" shall mean a termination
without Cause by the Company following or in connection with a Change of
Control or a termination by the Officer for "Good Reason" of the
Officer's employment with the Company within two years following a
"Change of Control" (as defined below).
(f) For purposes of this Agreement, "Good Reason" shall include, but not be
limited to, any of the following (without the Officer's express written
consent):
i) the assignment to the Officer by the Company of duties inconsistent
with or a substantial alteration in the nature or status of, the
Officer's responsibilities as in effect immediately prior to a
Change of Control;
ii) a reduction by the Company in the Officer's compensation or
benefits as in effect immediately prior to the date of a Change of
Control;
iii) a relocation of the Company's principal offices beyond 30 miles
from the present Longmont, Colorado location, or the Officer's
relocation to any place other than the Longmont, Colorado offices
of the Company, except for reasonably required travel by the
Officer on the Company's business;
iv) any material breach by the Company of any provision of this
Agreement if such material breach has not been cured within thirty
(30) days following written notice of such breach by the Officer to
the Company setting forth with specificity the nature of the
breach; or
v) any failure by the Company to obtain the assumption and performance
of this Agreement by any successor (by merger, consolidation or
otherwise) or assign of the Company.
2. Severance Benefits. In the event there is a Termination Following a Change
of Control, the Officer shall be entitled to the following severance benefits
for a period of 12 months after the Termination Date:
(a) Continued base salary in regular biweekly payments, or if so elected by
the Officer, a lump sum payable within 30 days of the Officer's election.
(b) Bonus payable in such amount as would be payable to the Officer had he
been employed by the Company for the full fiscal year during which the
termination occurred, and the Company had achieved Plan performance for
such fiscal year. Such bonus shall be paid in the same manner as elected
by the Officer in (a) above;
(c) Continued medical, dental, life and disability insurance benefits; and
2
<PAGE>
(d) Continued retirement benefits, including 401(k) plan.
Such benefits shall be identical to the salary, bonus, insurance and
retirement plan benefits to which the Officer was entitled immediately prior
to the Change of Control. During such 12-month period, the Officer shall
continue to be an employee of the Company for purposes of participation in
the plans which provide the benefits described in subsections (c) and (d)
above but shall have no further responsibilities as an employee and shall not
be required or permitted to continue his former duties. Subject to Section 4,
the Officer shall be free to accept other employment during such period, and
there shall be no offset of any employment compensation earned by Officer in
such other employment during such period against payments due the Officer
hereunder, and there shall be no offset in any compensation or benefits
received from such other employment against the continued salary and benefits
set forth above.
3. Stock Option Vesting. In the event of a Termination Following a Change of
Control, all outstanding stock options held by the Officer which are not then
exercisable, shall become exercisable in their entirety, as of the date
immediately preceding the Termination Date.
4. Noncompetition Agreement. Officer acknowledges that the Company has trade
secrets and confidential information, that as an Officer he will have access
to all such trade secrets and confidential information and that in performing
duties in an executive position for another company he might necessarily use
and divulge such trade secrets and confidential information. Therefore, in
consideration for the severance benefits set forth above, the Officer agrees
that for a period of 12 months subsequent to the Termination Date, the
Officer will not, directly or indirectly:
(a) Call upon any person or entity which was a customer of the Company
immediately prior to the Termination Date for the purpose of diverting,
taking away the business of, or selling products or services competitive
with significant products or services provided by the Company;
(b) In any manner, misuse or divulge to any person any list of customers,
confidential information or trade secrets of the Company;
(c) Alone or in any capacity solicit or in any manner attempt to solicit or
induce any person or persons employed by the Company within one year
prior to the Termination Date to leave such employment;
(d) Within the United States of America, either as an employee, employer,
consultant, agent principal, partner, more than 5% stockholder, corporate
officer, director, or in any other individual or representative capacity,
engage or participate in any business that is in competition in any
significant manner with any material business conducted by the Company on
the Termination Date.
5. Termination. This Agreement may be terminated only as follows:
(a) by mutual written agreement of the parties;
3
<PAGE>
(b) upon termination of Officer's employment prior to, and not in connection
with, a Change of Control.
(c) when the Officer attains age 65.
6. Severability. Should a court or other body of competent jurisdiction
determine that any provision of this Agreement is excessive in scope or
otherwise invalid or unenforceable, such provision shall be adjusted rather
than voided, if possible, so that it is enforceable to the maximum extent
possible, and all other provisions of the Agreement shall be deemed valid and
enforceable to the extent possible.
7. Assignment. The parties may assign their economic rights under this
Agreement but shall not assign any personal obligations from this Agreement.
8. Miscellaneous. This Agreement: (a) contains the entire agreement among the
parties regarding the subject matter hereof and supersedes any prior
agreements on this subject between the parties; (b) may not be amended nor
may any rights hereunder be waived except by an instrument in writing signed
by the party sought to be charged with such amendment or waiver; (c) shall be
construed in accordance with, and governed by, the laws of Colorado; and (d)
shall be binding upon and shall inure to the benefit of the parties and their
respective personal representatives and permitted assigns, including, without
limitation, any successor to the business of the Company.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the day and
year first above written.
THE OFFICER STAODYN, INC.
/s/John L. Fenstermaker /s/ John R. South
- ----------------------- -----------------------
John L. Fenstermaker President
7-18-96 7-17-96
- ----------------------- -----------------------
Date Date
4
<PAGE>
EXHIBIT 10.11
CHANGE OF CONTROL AGREEMENT
AGREEMENT made as of July 1, 1997, by and between STAODYN, INC., a Delaware
corporation, with its principal offices located at 1225 Ken Pratt Boulevard,
Longmont, Colorado 80501 (hereinafter the "Company"), and DAVID S. HOOD,
residing at 2541 Sweetwater Circle, Lafayette, Colorado 80026 (hereinafter the
"Employee"). This Agreement replaces Severance Agreement dated as of November
16, 1992, by and between David S. Hood and Staodyn, Inc.
1. Definitions. For purposes of this Agreement, the following terms shall have
the meanings set forth below:
(a) For the purposes of this Agreement, a "Change of Control" shall be deemed
to have occurred if (a) any "person" or "group" (within the meaning of
Sections 13(d) and 14(d)(2) of the Securities Exchange Act of 1934) other
than a trustee or other fiduciary holding securities under an employee
benefit plan of the Company, beneficially owns 50% or more of the
Company's voting common stock; or, (b) at any time during the period of
three consecutive years (not including any period prior to the date
hereof), individuals who at the beginning of such period constitute the
Board (and any new director whose election by the Board or whose
nomination for election by the Company's stockholders were approved by a
vote of at least two-thirds of the directors then still in office who
either were directors at the beginning of such period or whose election or
nomination for election was previously so approved) cease for any reason
to constitute a majority thereof; or (c) the stockholders of the Company
approve a merger or consolidation of the Company with any other
corporation, other than a merger or consolidation in which both (i) a
majority of the directors of the surviving entity were directors of the
Company prior to such consolidation or merger; and (ii) which would result
in the voting securities of the Company outstanding immediately prior
thereto continue to represent (either by remaining outstanding or by being
changed into voting securities of the surviving entity) at least 51% of
the combined voting power of the voting securities of the surviving entity
outstanding immediately after such merger or consolidation; or (d) the
stockholders approve a plan of complete liquidation of the Company or an
agreement for the sale or disposition by the Company of all or
substantially all of the Company's assets.
(b) "Cause" shall mean the commission by the Employee of any act involving
gross misconduct such as, but not limited to, dishonesty, gross neglect of
duty, frequent unexplained absence from work, or other misconduct
seriously detrimental to the interests of the Company.
(c) "Termination Date" shall mean the date following a Change of Control when
the Employee receives written notice that his employment is Terminated
without Cause or, if later, such other termination date specified in the
written notice.
1
<PAGE>
(d) "Terminate" shall mean not only a complete termination of employment by
the Company or its successor but also a significant negative change in the
terms of employment with the Company or its successor, including but not
limited to a requirement to relocate or a significant reduction in salary
and benefits.
(e) "Termination Following a Change of Control" shall mean a termination
without Cause by the Company following or in connection with a Change of
Control or a termination by the Employee for "Good Reason" of the
Employee's employment with the Company within two years following a
"Change of Control" (as defined below).
(f) For purposes of this Agreement, "Good Reason" shall include, but not be
limited to, any of the following (without the Employee's express written
consent):
i) the assignment to the Employee by the Company of duties inconsistent
with or a substantial alteration in the nature or status of, the
Employee's responsibilities as in effect immediately prior to a
Change of Control;
ii) a reduction by the Company in the Employee's compensation or benefits
as in effect immediately prior to the date of a Change of Control;
iii) a relocation of the Company's principal offices beyond 30 miles from
the present Longmont, Colorado location, or the Employee's relocation
to any place other than the Longmont, Colorado offices of the
Company, except for reasonably required travel by the Employee on the
Company's business;
iv) any material breach by the Company of any provision of this Agreement
if such material breach has not been cured within thirty (30) days
following written notice of such breach by the Employee to the
Company setting forth with specificity the nature of the breach; or
v) any failure by the Company to obtain the assumption and performance
of this Agreement by any successor (by merger, consolidation or
otherwise) or assign of the Company.
2. Severance Benefits. In the event there is a Termination Following a Change
of Control, the Employee shall be entitled to the following severance
benefits for a period of six (6) months after the Termination Date:
(a) Continued base salary in regular biweekly payments, or if so elected by
the Employee, a lump sum payable within 30 days of the Employee's
election.
(b) Bonus payable in such amount as would be payable to the Employee had he
been employed by the Company for the 6 months following such termination,
and the Company had achieved Plan performance for such period. Such bonus
shall be paid in the same manner as elected by the Employee in (a) above;
(c) Continued medical, dental, life and disability insurance benefits;
2
<PAGE>
(d) Continued retirement benefits, including 401(k) plan; and
(e) If requested, direct payment or reimbursement for moving expenses for the
Employee and family to relocate to the Tampa, Florida area.
Such benefits shall be identical to the salary, bonus, insurance and
retirement plan benefits to which the Employee was entitled immediately prior
to the Change of Control. During such 6-month period, the Employee shall
continue to be an employee of the Company for purposes of participation in the
plans which provide the benefits described in subsections (c) and (d) above
but shall have no further responsibilities as an employee and shall not be
required or permitted to continue his former duties. Subject to Section 4,
the Employee shall be free to accept other employment during such period, and
there shall be no offset of any employment compensation earned by Employee in
such other employment during such period against payments due the Employee
hereunder, and there shall be no offset in any compensation or benefits
received from such other employment against the continued salary and benefits
set forth above.
3. Stock Option Vesting. In the event of a Termination Following a Change of
Control, all outstanding stock options held by the Employee which are not
then exercisable, shall become exercisable in their entirety, as of the date
immediately preceding the Termination Date.
4. Noncompetition Agreement. Employee acknowledges that the Company has trade
secrets and confidential information, that as a key employee he will have
access to all such trade secrets and confidential information and that in
performing duties in an executive position for another company he might
necessarily use and divulge such trade secrets and confidential information.
Therefore, in consideration for the severance benefits set forth above, the
Employee agrees that for a period of 6 months subsequent to the Termination
Date, the Employee will not, directly or indirectly:
(a) Call upon any person or entity which was a customer of the Company
immediately prior to the Termination Date for the purpose of diverting,
taking away the business of, or selling products or services competitive
with significant products or services provided by the Company;
(b) In any manner, misuse or divulge to any person any list of customers,
confidential information or trade secrets of the Company;
(c) Alone or in any capacity solicit or in any manner attempt to solicit or
induce any person or persons employed by the Company within one year prior
to the Termination Date to leave such employment;
(d) Within the United States of America, either as an employee, employer,
consultant, agent principal, partner, more than 5% stockholder, corporate
Employee, director, or in any other individual or representative capacity,
engage or participate in any business that is in competition in any
significant manner with any material business conducted by the Company on
the Termination Date.
3
<PAGE>
5. Termination. This Agreement may be terminated only as follows:
(a) by mutual written agreement of the parties;
(b) upon termination of Employee's employment prior to, and not in connection
with, a Change of Control.
(c) when the Employee attains age 65.
6. Severability. Should a court or other body of competent jurisdiction
determine that any provision of this Agreement is excessive in scope or
otherwise invalid or unenforceable, such provision shall be adjusted rather
than voided, if possible, so that it is enforceable to the maximum extent
possible, and all other provisions of the Agreement shall be deemed valid and
enforceable to the extent possible.
7. Assignment. The parties may assign their economic rights under this
Agreement but shall not assign any personal obligations from this Agreement.
8. Miscellaneous. This Agreement: (a) contains the entire agreement among the
parties regarding the subject matter hereof and supersedes any prior
agreements on this subject between the parties; (b) may not be amended nor
may any rights hereunder be waived except by an instrument in writing signed
by the party sought to be charged with such amendment or waiver; (c) shall be
construed in accordance with, and governed by, the laws of Colorado; and (d)
shall be binding upon and shall inure to the benefit of the parties and their
respective personal representatives and permitted assigns, including, without
limitation, any successor to the business of the Company.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the day and
year first above written.
THE EMPLOYEE STAODYN, INC.
/s/ DAVID S. HOOD [SIGNATURE OF PRESIDENT APPEARS HERE]
- ------------------------- -----------------------------
David S. Hood President
8/5/97 8/3/97
- ------------------------- -----------------------------
Date Date
4
<PAGE>
EXHIBIT 10.12
CHANGE OF CONTROL AGREEMENT
AGREEMENT made as of January 1, 1997, by and between STAODYN, INC., a Delaware
corporation, with its principal offices located at 1225 Ken Pratt Boulevard,
Longmont, Colorado 80501 (hereinafter the "Company"), and OSCAR R. JONES,
residing at 28811 Falling Leaves Way, Wesley Chapel, Florida 33543 (hereinafter
the "Employee").
1. Definitions. For purposes of this Agreement, the following terms shall have
the meanings set forth below:
(a) For the purposes of this Agreement, a "Change of Control" shall be deemed
to have occurred if (a) any "person" or "group" (within the meaning of
Sections 13(d) and 14(d)(2) of the Securities Exchange Act of 1934) other
than a trustee or other fiduciary holding securities under an employee
benefit plan of the Company, beneficially owns 50% or more of the
Company's voting common stock; or, (b) at any time during the period of
three consecutive years (not including any period prior to the date
hereof), individuals who at the beginning of such period constitute the
Board (and any new director whose election by the Board or whose
nomination for election by the Company's stockholders were approved by a
vote of at least two-thirds of the directors then still in office who
either were directors at the beginning of such period or whose election or
nomination for election was previously so approved) cease for any reason
to constitute a majority thereof; or (c) the stockholders of the Company
approve a merger or consolidation of the Company with any other
corporation, other than a merger or consolidation in which both (i) a
majority of the directors of the surviving entity were directors of the
Company prior to such consolidation or merger; and (ii) which would result
in the voting securities of the Company outstanding immediately prior
thereto continue to represent (either by remaining outstanding or by being
changed into voting securities of the surviving entity) at least 51% of
the combined voting power of the voting securities of the surviving entity
outstanding immediately after such merger or consolidation; or (d) the
stockholders approve a plan of complete liquidation of the Company or an
agreement for the sale or disposition by the Company of all or
substantially all of the Company's assets.
(b) "Cause" shall mean the commission by the Employee of any act involving
gross misconduct such as, but not limited to, dishonesty, gross neglect of
duty, frequent unexplained absence from work, or other misconduct
seriously detrimental to the interests of the Company.
(c) "Termination Date" shall mean the date following a Change of Control when
the Employee receives written notice that his employment is Terminated
without Cause or, if later, such other termination date specified in the
written notice.
1
<PAGE>
(d) "Terminate" shall mean not only a complete termination of employment by
the Company or its successor but also a significant negative change in the
terms of employment with the Company or its successor, including but not
limited to a requirement to relocate or a significant reduction in salary
and benefits.
(e) "Termination Following a Change of Control" shall mean a termination
without cause by the Company following or in connection with a change of
control or a termination by the Employee for "Good Reason" of the
Employee's employment with the Company within two years following a
"Change of Control" (as defined below).
(f) For purposes of this Agreement, "Good Reason" shall include, but not be
limited to, any of the following (without the Employee's express written
consent):
i) the assignment to the Employee by the Company of duties inconsistent
with or a substantial alteration in the nature or status of, the
Employee's responsibilities as in effect immediately prior to a
Change of Control;
ii) a reduction by the Company in the Employee's compensation or
benefits as in effect immediately prior to the date of a Change of
Control;
iii) a relocation of the Company's principal offices beyond 30 miles from
the present Tampa, Florida location, or the Employee's relocation to
any place other than the Tampa, Florida offices of the Company,
except for reasonably required travel by the Employee on the
Company's business;
iv) any material breach by the Company of any provision of this
Agreement if such material breach has not been cured within thirty
(30) days following written notice of such breach by the Employee to
the Company setting forth with specificity the nature of the breach;
or
v) any failure by the Company to obtain the assumption and performance
of the Employment Agreement and this Agreement by any successor (by
merger, consolidation or otherwise) or assign of the Company.
2. Severance Benefits. In the event there is a Termination Following a Change
of Control, the Employee shall be entitled to the following severance
benefits for a period of three (3) months after the Termination Date:
(a) Continued base salary in regular biweekly payments, or if so elected by
the Employee, a lump sum payable within 30 days of the Employee's
election.
(b) Bonus payable in such amount as would be payable to the Employee had he
been employed by the Company for the full fiscal year during which the
termination occurred, and the Company had achieved Plan performance for
such fiscal year. Such bonus shall be paid in the same manner as elected
by the Employee in (a) above;
(c) Continued medical, dental, life and disability insurance benefits; and
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(d) Continued retirement benefits, including 401(k) plan.
Such benefits shall be identical to the salary, bonus, insurance and
retirement plan benefits to which the Employee was entitled immediately prior
to the Change of Control. During such 3-month period, the Employee shall
continue to be an employee of the Company for purposes of participation in the
plans which provide the benefits described in subsections (c) and (d) above
but shall have no further responsibilities as an employee and shall not be
required or permitted to continue his former duties. Subject to Section 4,
the Employee shall be free to accept other employment during such period, and
there shall be no offset of any employment compensation earned by Employee in
such other employment during such period against payments due the Employee
hereunder, and there shall be no offset in any compensation or benefits
received from such other employment against the continued salary and benefits
set forth above.
3. Stock Option Vesting. In the event of a Termination Following a Change of
Control, all outstanding stock options held by the Employee which are not
then exercisable, shall become exercisable in their entirety, as of the date
immediately preceding the Termination Date.
4. Noncompetition Agreement. Employee acknowledges that the Company has trade
secrets and confidential information, that as an Employee he will have access
to all such trade secrets and confidential information and that in performing
duties in an executive position for another company he might necessarily use
and divulge such trade secrets and confidential information. Therefore, in
consideration for the severance benefits set forth above, the Employee agrees
that for a period of three (3) months subsequent to the Termination Date, the
Employee will not, directly or indirectly:
(a) Call upon any person or entity which was a customer of the Company
immediately prior to the Termination Date for the purpose of diverting,
taking away the business of, or selling products or services competitive
with significant products or services provided by the Company;
(b) In any manner, misuse or divulge to any person any list of customers,
confidential information or trade secrets of the Company;
(c) Alone or in any capacity solicit or in any manner attempt to solicit or
induce any person or persons employed by the Company within one year prior
to the Termination Date to leave such employment;
(d) Within the United States of America, either as an employee, employer,
consultant, agent principal, partner, more than 5% stockholder, corporate
Employee, director, or in any other individual or representative capacity,
engage or participate in any business that is in competition in any
significant manner with any material business conducted by the Company on
the Termination Date.
5. Termination. This Agreement may be terminated only as follows:
(a) by mutual written agreement of the parties;
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(b) upon termination of Employee's employment prior to, and not in connection
with, a Change of Control.
(c) when the Employee attains age 65.
6. Severability. Should a court or other body of competent jurisdiction
determine that any provision of this Agreement is excessive in scope or
otherwise invalid or unenforceable, such provision shall be adjusted rather
than voided, if possible, so that it is enforceable to the maximum extent
possible, and all other provisions of the Agreement shall be deemed valid and
enforceable to the extent possible.
7. Assignment. The parties may assign their economic rights under this
Agreement but shall not assign any personal obligations from this Agreement.
8. Miscellaneous. This Agreement: (a) contains the entire agreement among the
parties regarding the subject matter hereof and supersedes any prior
agreements on this subject between the parties; (b) may not be amended nor
may any rights hereunder be waived except by an instrument in writing signed
by the party sought to be charged with such amendment or waiver; (c) shall be
construed in accordance with, and governed by, the laws of Colorado; and (d)
shall be binding upon and shall inure to the benefit of the parties and their
respective personal representatives and permitted assigns, including, without
limitation, any successor to the business of the Company.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the day and
year first above written.
EMPLOYEE STAODYN, INC.
/s/ OSCAR R. JONES [SIGNATURE OF VP APPEARS HERE]
- --------------------- --------------------------
Oscar R. Jones Vice President - Finance
January 20, 1997 January 13, 1997
- --------------------- --------------------------
Date Date
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EXHIBIT 10.13
MASTER LEASE AGREEMENT
MASTER LEASE AGREEMENT ("Master Lease") dated as of ____________ between The CIT
Group/Equipment Financing, Inc. (Lessor),
having a place of business at 900 Ashwood Parkway, 6th Floor Atlanta GA
--------------------------------------------------
Address City State
30338, and Staodyn, Inc. ("Lessee"),
- ----- ----------------------------------------------------------
Zip Code
having a place of business at 1225 Ken Pratt Blvd. Longmont CO 80502
--------------------------------------------------
Address City State Zip Code
This Master Lease Agreement provides a set of terms and conditions that the
parties hereto intend to be applicable to various transactions for the lease of
personal property. Each lease contract shall be evidenced by an equipment
schedule ("Schedule") executed by Lessor and Lessee that explicitly incorporates
the provisions of this Master Lease Agreement and that sets forth specific terms
of that particular lease contract. Where the provisions of a Schedule conflict
with the terms hereof, the provisions of the Schedule shall prevail. Each
Schedule shall constitute a complete and separate lease agreement, independent
of all other Schedules, and without any requirement of being accompanied by an
originally executed copy of this Master Lease Agreement. The term "Lease" when
used herein shall refer to an individual Schedule.
One originally executed copy of the Schedule shall be denominated "Originally
Executed Copy No. 1 of ____ originally executed copies" and such copy shall be
retained by Lessor. If more than one copy of the Schedule is executed by Lessor
and Lessee, all such other copies shall be numbered consecutively with numbers
greater than 1. Only transfer of possession by Lessor of the originally executed
copy denominated "Originally Executed Copy No. 1" shall be effective for
purposes of perfecting an interest in such Schedule by possession.
1. EQUIPMENT LEASED AND TERM.
This Lease shall cover such personal property as is described in any Schedule
executed by or pursuant to the authority of Lessee, accepted by Lessor in
writing and identified as a part of this Lease (which personal property with all
replacement parts, additions, repairs, accessions and accessories incorporated
therein and/or affixed thereto is hereinafter called the "Equipment"). Lessor
hereby leases to Lessee and Lessee hereby hires and takes from Lessor, upon and
subject to the covenants and conditions hereinafter contained, the Equipment
described in any Schedule. NOTWITHSTANDING THE COMMENCEMENT DATE OF THE TERM OF
THIS LEASE WITH RESPECT TO ANY ITEM OF EQUIPMENT, LESSEE AGREES THAT ALL RISK OF
LOSS OF THE EQUIPMENT SHALL BE ON LESSEE FROM AND AFTER SHIPMENT OF THE
EQUIPMENT TO LESSEE BY THE SELLER THEREOF, F.O.B. seller's point of shipment,
the date of such shipment being hereinafter called "date of shipment." The term
of this Lease with respect to any item of Equipment shall be for the period as
set forth in the Schedule. Lessee hereby gives Lessor authority to insert the
actual commencement date and date of first monthly rental for any item of
Equipment in any Schedule as well as such items as serial numbers if such are
not already inserted when such Schedule is executed by Lessee. "Seller" as used
in this Lease means the supplier from which Lessor acquires any item of
Equipment.
2. RENT.
The aggregate rent payable with respect to each item of Equipment shall be in
the amount shown with respect to such item on the Schedule. Lessee shall pay to
Lessor the aggregate rental for each item of Equipment for the full period and
term for which the Equipment is leased, such rental to be payable at such times
and in such amounts for each item of Equipment as shown in the applicable
Schedule.
All rent shall be paid at Lessor's place of business shown above, or such other
place as Lessor may designate by written notice to the Lessee. ALL RENTS SHALL
BE PAID WITHOUT NOTICE OR DEMAND AND WITHOUT ABATEMENT, DEDUCTION OR SET OFF OF
ANY AMOUNT WHATSOEVER. The operation and use of the Equipment shall be at the
risk of Lessee and not of Lessor and the obligation of Lessee to pay rent
hereunder shall be unconditional.
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3. DESTRUCTION OF EQUIPMENT.
If any Equipment is lost, totally destroyed, damaged beyond repair or taken by
governmental action, the liability of the Lessee to pay rent therefor may be
discharged by paying to Lessor all the rent due thereon, plus all the rent to
become due thereon less the net amount of the recovery, if any, actually
received by Lessor from insurance or otherwise for such loss or damage.
In the event of partial destruction of any Equipment, the rent due and to become
due thereon shall not abate and Lessee shall, at its own expense, cause such
Equipment to be restored to usable condition, but Lessor shall, upon receiving
satisfactory evidence of such restoration, promptly pay Lessee the proceeds of
any insurance or compensation received by reason of such damage. If the
estimated cost of restoring such Equipment exceeds 50% of the unmatured rent
therefor, such Equipment shall, on notice by Lessee, be deemed, for all purposes
hereof, to be totally destroyed and the liability of the Lessee to pay rent
therefor shall be discharged if Lessee pays the rent described in the preceding
paragraph of this Section.
Lessor shall not be obligated to undertake by litigation or otherwise the
collection of any claim against any person for loss or damage to the Equipment.
Except as expressly provided above, the total or partial destruction of any
Equipment or the total or partial loss of use or possession thereof to Lessee
shall not release or relieve Lessee from the duty to pay the rent herein
provided.
4. NO WARRANTIES BY LESSOR; MAINTENANCE AND COMPLIANCE WITH LAWS.
Lessor, not being the manufacturer of the Equipment, nor manufacturer's agent,
MAKES NO WARRANTY OR REPRESENTATION, EITHER EXPRESS OR IMPLIED, AS TO THE
FITNESS, QUALITY, DESIGN, CONDITION, CAPACITY, SUITABILITY, MERCHANTABILITY OR
PERFORMANCE OF THE EQUIPMENT OR OF THE MATERIAL OR WORKMANSHIP THEREOF, IT BEING
AGREED THAT THE EQUIPMENT IS LEASED "AS IS" AND THAT ALL SUCH RISKS, AS BETWEEN
LESSOR AND LESSEE, ARE TO BE BORNE BY LESSEE AT ITS SOLE RISK AND EXPENSE,
Lessee accordingly agrees not to assert any claim whatsoever against Lessor
based thereon. Lessee further agrees, regardless of cause, not to assert any
claim whatsoever against Lessor for loss of anticipatory profits or
consequential damages. Lessor shall have no obligation to install, erect, test,
adjust or service the Equipment. Lessee shall look to the manufacturer and/or
Seller for any claims related to the Equipment. Lessor hereby acknowledges that
any manufacturer's and/or Seller's warranties are for the benefit of both Lessor
and Lessee.
No oral agreement, guaranty, promise, condition, representation or warranty
shall be binding; all prior conversations, agreements or representations related
hereto and/or to the Equipment are integrated herein.
Lessee agrees, at its own cost and expense:
(a) to pay all shipping charges and other expenses incurred in connection with
the shipment of the Equipment by the Seller to Lessee;
(b) to pay all charges and expenses in connection with the operation of each
item of Equipment;
(c) to comply with all governmental laws, ordinances, regulations, requirements
and rules with respect to the use, maintenance and operation of the
Equipment; and
(d) to make all repairs and replacements required to be made to maintain the
Equipment in good condition, reasonable wear and tear excepted.
5. INSURANCE.
Lessee shall maintain at all times on the Equipment, at its expense, all-risk
physical damage insurance and comprehensive general and/or automobile (as
appropriate) liability insurance (covering bodily injury and property damage
exposures including, but not limited to, contractual liability and products
liability) in such amounts, against such risks, in such form and with such
insurers as shall be satisfactory to Lessor; provided, that the amount of all-
risk physical damage insurance shall not on any date be less than the greater of
the full replacement value or a sum equal to all the rent due thereon, plus all
rent to become due. Each physical damage insurance policy will name Lessor as
loss payee. Each liability insurance policy will name Lessor as additional
insured. Each insurance policy will also require that the insurer give Lessor at
least thirty (30) days prior written notice of any alteration in or cancellation
of the terms of such policy and require that Lessor's interests be continued
insured regardless of any breach or violation by Lessee or others of any
warranties, declarations or conditions contained in such insurance policy. In no
event shall Lessor be responsible for premiums, warranties or representations to
any insurer or any agent thereof. Lessee shall furnish to Lessor a certificate
or other evidence satisfactory to Lessor that such insurance coverage is in
effect, but Lessor shall be under no duty to ascertain the existence or adequacy
of such insurance. The insurance maintained by Lessee shall be primary without
any right of contribution from insurance which may be
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<PAGE>
maintained by Lessor. Lessee shall be liable for all deductible portions of all
required insurance. Lessor may, at its own expense, for its own benefit,
purchase insurance in excess of that required under this Lease Agreement.
Physical damage insurance proceeds shall be applied as set forth in Section 6.
6. LOSS AND DAMAGE.
Lessee agrees to assume and bear the entire risk of any partial or complete loss
with respect to the Equipment from any and every cause whatsoever including
theft, loss, damage, destruction or governmental taking, whether or not such
loss is covered by insurance or caused by any default or neglect of Lessee.
Lessee agrees to give Lessor prompt notice of any damage to or loss of any
Equipment. All physical damage insurance proceeds shall be payable directly to
Lessor. Following payment of such loss, and if no Event of Default as defined in
Section 11 has occurred and remains continuing, Lessor will then:
(a) transfer to Lessee Lessor's rights to such Equipment "as-is, where-is and
with all defects," without recourse and without representation or warranty,
express or implied, other than a warranty that the Equipment is free and
clear of any liens created by Lessor; and
(b) remit to Lessee any physical damage insurance proceeds arising out of such
loss in excess of the sum due the Lessor.
Lessee shall determine in the exercise of its reasonable judgment whether the
Equipment is damaged beyond repair, subject to Lessor's approval. In the event
of damage or loss which does not result in damage beyond repair or a total loss
of the Equipment or any item thereof, Lessee shall cause the affected Equipment
to be restored to the condition required by the terms of this Lease. Upon
completion of such repair and after supplying Lessor with satisfactory evidence
thereof (and provided no Event of Default has occurred and remains continuing),
Lessee shall be entitled to receive any insurance proceeds or other recovery to
which Lessor would otherwise be entitled in connection with such loss up to the
amount expended by Lessee in making the repair.
Lessor shall not be obligated to undertake by litigation or otherwise the
collection of any claim against any person for loss of, damage to, or
governmental taking of the Equipment, but Lessor will cooperate with Lessee at
Lessee's expense to pursue such claims.
Except as expressly provided above, the total or partial destruction of any
Equipment or Lessee's total or partial loss of use or possession thereof shall
not release or relieve Lessee from its obligations under this Master Lease or
any Schedule including the duty to pay the rent(s) herein provided.
7. TAXES.
Lessee agrees that, during the term of this Lease, in addition to the rent and
all other amounts provided herein to be paid, it will promptly pay all taxes,
assessments and other governmental charges (including penalties and interest, if
any, and fees for titling or registration, if required) levied or assessed:
(a) upon the interest of Lessee in the Equipment or upon the use or operation
thereof or on the earnings arising therefrom; and
(b) against Lessor on account of its acquisition or ownership of the Equipment
or any part thereof, or the use or operation thereof or the leasing hereof
to Lessee, or the rent herein provided for, or the earnings arising
therefrom, exclusive, however, of any taxes based on net income of Lessor.
Lessee agrees to file, in behalf of Lessor, all required tax returns and reports
concerning the Equipment with all appropriate governmental agencies, and within
not more than 45 days after the due date of such filing to send Lessor
confirmation, in form satisfactory to Lessor, of such filing.
8. LESSOR'S TITLE, RIGHT OF INSPECTION AND IDENTIFICATION OF EQUIPMENT.
TITLE TO THE EQUIPMENT SHALL AT ALL TIMES REMAIN IN LESSOR and Lessee will at
all times protect and defend, at its own cost and expense, the title of Lessor
from and against all claims, liens and legal processes of creditors of Lessee
and keep all the Equipment free and clear from all such claims, liens and
processes. The Equipment is and shall remain personal property. Upon the
expiration or termination of this Lease with respect to any item of Equipment:
a) Lessee at Lessee's sole expense shall return such Equipment unencumbered to
Lessor at the place where the rent is payable or to such other place as
Lessor and Lessee agree upon, and in the same condition as when received by
Lessee, reasonable wear and tear resulting from use thereof alone excepted;
or
(b) in lieu of returning such Equipment to Lessor, Lessee agrees that Lessee
will, upon request of Lessor, store such Equipment on Lessee's premises, at
an inside location protected from the weather and elements, without charge
to Lessor for a period of 180
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days following the date of expiration or termination of this Lease. During
such storage period Lessee shall not use the Equipment for any purpose.
Upon expiration of such storage period Lessee will return such Equipment to
Lessor in accordance with the provisions of (a) above.
Lessor shall have the right from time to time during reasonable business hours
to enter upon Lessee's premises or elsewhere for the purpose of confirming the
existence, condition and proper maintenance of the Equipment and during any
period of storage Lessor shall also have the right to demonstrate and show the
Equipment to others. The foregoing rights of entry are subject to any applicable
governmental laws, regulations and rules concerning industrial security. Lessee
shall, upon the request of Lessor, and at its own expense firmly affix to the
Equipment, in a conspicuous place, such a decalcomania or metal plate as shall
be supplied by Lessor showing the Lessor as the owner and lessor of such
Equipment.
9. POSSESSION, USE AND CHANGES IN LOCATION OF EQUIPMENT.
So long as Lessee shall not be in default under the Lease it shall be entitled
to the possession and use of the Equipment in accordance with the terms of this
Lease. The Equipment shall be used in the conduct of the lawful business of
Lessee, and no item of Equipment shall be removed from its location shown on the
Schedule, without the prior written consent of Lessor. Lessee shall not, without
Lessor's prior written consent, part with possession or control of the Equipment
or attempt or purport to sell, pledge, mortgage or otherwise encumber any of the
Equipment or otherwise dispose of or encumber any interest under this Lease.
10. PERFORMANCE OF OBLIGATIONS OF LESSEE BY LESSOR.
In the event that the Lessee shall fail duly and promptly to perform any of its
obligations under the provisions of Sections 4, 5, 6, 7, and 8 of this Lease,
Lessor may, at its option, perform the same for the account of Lessee without
thereby waiving such default, and any amount paid or expense (including
reasonable attorneys' fees), penalty or other liability incurred by Lessor in
such performance, together with interest at the rate of 1 1/2% per month thereon
(but in no event greater than the highest rate permitted by relevant law) until
paid by Lessee to Lessor, shall be payable by Lessee upon demand as additional
rent for the Equipment. Lessee shall be responsible for and pay to Lessor a
returned check fee, not to exceed the maximum permitted by law, which fee will
be equal to the sum of (i) the actual bank charges incurred by Lessor plus (ii)
all other actual costs and expenses incurred by Lessor. The returned check fee
is payable upon demand as additional rent under this Lease.
11. DEFAULT.
An Event of Default shall occur if:
(a) Lessee fails to pay when due any installment of rent and such failure
continues for a period of 10 days;
(b) Lessee shall fail to perform or observe any covenant, condition or
agreement to be performed or observed by it hereunder and such failure
continues uncured for 15 days after written notice thereof to Lessee by
Lessor;
(c) Lessee ceases doing business as a going concern, makes an assignment for
the benefit of creditors, admits in writing its inability to pay its debts
as they become due, files a voluntary petition in bankruptcy, is
adjudicated a bankrupt or an insolvent, files a petition seeking for itself
any reorganization, arrangement, composition, readjustment, liquidation,
dissolution or similar arrangement under any present or future statute, law
or regulation or files an answer admitting the material allegations of a
petition filed against it in any such proceeding, consents to or acquiesces
in the appointment of a trustee, receiver, or liquidator of it or of all or
any substantial part of its assets or properties, or if it or its
shareholders shall take any action looking to its dissolution or
liquidation;
(d) within 60 days after the commencement of any proceedings against Lessee
seeking reorganization, arrangement, readjustment, liquidation, dissolution
or similar relief under any present or future statute, law or regulation,
such proceedings shall not have been dismissed, or if within 60 days after
the appointment without Lessee's consent or acquiescence of any trustee,
receiver or liquidator of it or of all or any substantial part of its
assets and properties, such appointment shall not be vacated; or
(e) Lessee attempts to remove, sell, transfer, encumber, part with possession
or sublet the Equipment or any item thereof.
Upon the occurrence of an Event of Default, Lessor shall have all the rights and
remedies provided by applicable law and by this Lease. Notwithstanding that this
Agreement is a lease and title to the Equipment is at all times in Lessor,
Lessor may nevertheless at its option choose those rights and remedies of a
secured party under the Uniform Commercial Code. In addition, Lessor, at its
option, may:
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(a) declare all sums due and to become due hereunder immediately due and
payable, but in no event shall the Lessee, upon demand by Lessor for
payment of the unpaid rent, upon acceleration of the maturity thereof or
otherwise, be obligated to pay any amount in excess of that permitted by
law;
(b) proceed by appropriate court action or actions or other proceedings either
at law or equity to enforce performance by the Lessee of any and all
covenants of this Lease and to recover damages for the breach thereof;
(c) demand that Lessee deliver the Equipment forthwith to Lessor at Lessee's
expense at such place as Lessor may designate; and
(d) Lessor and/or its agents may without notice or liability or legal process,
enter into any premises of or under control or jurisdiction of Lessee or
any agent of Lessee where the Equipment may be or by Lessor is believed to
be, and repossess all or any item thereof, disconnecting and separating all
thereof from any other property and using all force necessary or permitted
by applicable law so to do, Lessee hereby expressly waiving all further
rights to possession of the Equipment and all claims for injuries suffered
through or loss caused by such repossession; Lessor may sell or lease the
Equipment at a time and location of its choosing provided that the Lessor
acts in good faith and in a commercially reasonable manner, but the Lessor
shall nevertheless, be entitled to recover immediately as liquidated
damages for loss of the bargain and not as a penalty any unpaid rent that
accrued on or before the occurrence of the event of default plus an amount
equal to the difference between the aggregate rent reserved hereunder for
the unexpired term of this Lease and the then aggregate rental value of all
Equipment for such unexpired term, provided, however, that if any statute
governing the proceeding in which such damages are to be proved specifies
the amount of such claim, Lessor shall be entitled to prove as and for
damages for the breach an amount equal to that allowed under such statute.
The provisions of this paragraph shall be without prejudice to any rights
given to the Lessor by such statute to prove for any amounts allowed
thereby. Should any proceedings be instituted by or against Lessor for
monies due to Lessor hereunder and/or for possession of any or all of the
Equipment or for any other relief, Lessee shall pay a reasonable sum as
attorneys' fees.
No remedy of Lessor hereunder shall be exclusive of any remedy herein or by law
provided, but each shall be cumulative and in addition to every other remedy.
12. INDEMNITY.
Lessee agrees that Lessor shall not be liable to Lessee for, and Lessee shall
indemnify and save Lessor harmless from and against any and all liability, loss,
damage, expense, causes of action, suits, claims or judgments arising from or
caused directly or indirectly by:
(a) Lessee's failure to promptly perform any of its obligations under the
provisions of Sections 4, 5, 6, 7 and 8 of this Lease; or
(b) injury to persons or damage to property resulting from or based upon actual
or alleged use, operation, delivery or transportation of any or all of the
Equipment or its location or condition; or
(c) inadequacy of the Equipment, or any part thereof, for any purpose or any
deficiency or defect therein or the use or maintenance thereof or any
repairs, servicing or adjustments thereto or any delay in providing or
failure to provide any thereof or any interruption or loss of service or
use thereof or any loss of business; and shall, at its own cost and
expense, defend any and all suits which may be brought against Lessor,
either alone or in conjunction with others upon any such liability or claim
or claims and shall satisfy, pay and discharge any and all judgments and
fines that may be recovered against Lessor in any such action or actions,
provided, however, that Lessor shall give Lessee written notice of any such
claim or demand. Lessee agrees that its obligations under this Section 12
shall survive the expiration or termination of this Lease.
13. ASSIGNMENT, NOTICES AND WAIVERS.
This Lease and all rights of Lessor hereunder shall be assignable by Lessor
without Lessee's consent, but Lessee shall not be obligated to any assignee of
Lessor except after written notice of such assignment from Lessor. Following
such assignment,
solely for the purpose of determining assignee's rights hereunder, the term
"Lessor" shall be deemed to include or refer to Lessor's assignee. WITHOUT THE
PRIOR WRITTEN CONSENT OF LESSOR, LESSEE SHALL NOT ASSIGN THIS LEASE OR ITS
INTERESTS HEREUNDER OR ENTER INTO ANY SUB-LEASE WITH RESPECT TO THE EQUIPMENT
COVERED HEREBY, IT BEING AGREED LESSOR WILL NOT UNREASONABLY WITHHOLD ITS
CONSENT TO A SUB-LEASE OF THE EQUIPMENT. All notices to Lessor shall be
delivered in person to an officer of the Lessor, or shall be sent certified mail
return receipt requested to Lessor at its address shown herein or at any later
address last known to the sender. All notices to Lessee shall be in writing and
shall be delivered by mail at its address shown herein or at any later address
last known to the sender. A waiver of a default shall not be a waiver of any
other or a subsequent default.
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14. FURTHER ASSURANCES.
Lessee shall execute and deliver to Lessor, upon Lessor's request such
instruments and assurances as Lessor deems necessary or advisable for the
confirmation or perfection of this Lease and Lessor's rights hereunder. Lessee
may not terminate any Schedule without the written consent of Lessor. If Lessor
in good faith believes itself insecure or performance impaired, it may declare a
default hereunder or, instead of declaring a default, Lessor may demand, and
Lessee hereby agrees to give, additional Equipment or other collateral as
security for the obligations hereunder.
15. LEASE IRREVOCABILITY.
This Lease is irrevocable for the full terms thereof as set forth in any
Schedule and for the aggregate rentals therein reserved and the rent shall not
abate by reason of termination of Lessee's right of possession and/or the taking
of possession by the Lessor or for any other reason. Any payment not made when
due shall, at the option of Lessor, bear late charges thereon calculated at the
rate of 1 1/2% per month, but in no event greater than the highest rate
permitted by relevant law.
16. PURCHASE OPTION.
If any Schedule has a purchase option price set forth therein with respect to
the items of Equipment listed on such Schedule, then at the expiration of the
original lease term in such Schedule with respect to such items of Equipment, if
Lessee has paid in full all rentals owing under such Schedule, and be not then
in default under this Lease (including all obligations under any Schedule),
Lessee shall have the option to purchase ALL, BUT NOT LESS THAN ALL, THE ITEMS
OF EQUIPMENT IN THE APPLICABLE SCHEDULE upon giving written notice not less than
30 DAYS prior to expiration of the original term thereof. The purchase price
shall be as set forth in the applicable Schedule and shall be payable upon
expiration of the original Lease term. If any Schedule does not contain a
purchase option price, then Lessee shall not have an option to purchase any
Equipment on such Schedule.
Any purchase option price stated as "fair market value" ("FMV") for any item of
Equipment on a Schedule shall be determined on the basis of, and shall be equal
in amount to, the value which would obtain in an arm's length transaction
between an informed and willing buyer-user (other than a Lessee currently in
possession and a used Equipment dealer) and an informed and willing seller under
no compulsion to sell and, in such determination, costs of removal of the items
of Equipment from their location of current use shall not be a deduction from
such value.
17. RENEWAL.
Any renewal privilege shown on any Schedule with respect to any item of
Equipment shall be exercised by Lessee giving Lessor a notice in writing and
paying Lessor the amount of the renewal rental plus applicable taxes, at least
45 DAYS prior to the commencement of the renewal term of the Lease with respect
to such item of Equipment. Upon such notification and payment, this Lease shall
be renewed for the stated renewal period at the stated renewal rental with the
other provisions and conditions of the lease continuing unchanged.
18. MISCELLANEOUS
If any provision of this Lease is contrary to, prohibited by or deemed invalid
under applicable laws or regulations of any jurisdiction, such provision shall
be inapplicable and deemed omitted but shall not invalidate the remaining
provisions hereof.
IN THE EVENT THIS LEASE OR ANY PART HEREOF IS DEEMED TO BE A LEASE INTENDED AS
SECURITY, LESSEE GRANTS LESSOR A SECURITY INTEREST IN EACH ITEM OF EQUIPMENT AS
SECURITY FOR ALL OF LESSEE'S INDEBTEDNESS AND OBLIGATIONS OWING UNDER THIS LEASE
AND UNDER EACH SCHEDULE AS WELL AS ALL OTHER PRESENT AND FUTURE INDEBTEDNESS AND
OBLIGATIONS OF LESSEE TO LESSOR OF EVERY KIND AND NATURE WHATSOEVER.
This lease contains the entire agreement between the parties with respect to the
Equipment and may not be altered, modified, terminated or discharged except by a
writing signed by the party against whom such alteration, modification,
termination or discharge is sought. LESSEE'S INITIALS ___________
Page 6 of 7
<PAGE>
19. SPECIAL PROVISIONS.
If Lessee is a corporation, this Lease is executed by authority of its Board of
Directors. If Lessee is a partnership or joint venture, this Lease is executed
by authority of all its partners or co-venturers.
Dated:
---------------
LESSEE:
Staodyn, Inc.
- ---------------------------------------------------------------------
Name of individual, corporation or partnership
By /s/ Michael J. Newman Title V.P. - Finance
------------------------------ ------------------------------
If corporation, have signed by President, Vice President or Treasurer,
and give official title.
If owner or partner, state which.
LESSOR:
THE CIT GROUP/EQUIPMENT FINANCING, INC.
By Title
------------------------------- ---------------------------
- --------------------------------------------------------------------------------
If Lessee is a partnership, enter:
Partners' names Home addresses
- --------------- --------------
Page 7 of 7
<PAGE>
EQUIPMENT SCHEDULE NO. 01, dated ___________________, to Master Lease Agreement,
--
dated
________________, between THE CIT GROUP/EQUIPMENT FINANCING, INC. ("Lessor") and
Staodyn, Inc. ("Lessee").
- --------------------------------------------------------------------
This Equipment Schedule incorporates the terms and conditions of the above-
referenced Master Lease Agreement.
This is Originally Executed Copy No. 1 of _____ originally executed copies. Only
transfer of possession by Lessor of Originally Executed Copy No. 1 shall be
effective for purposes of perfecting an interest in this Schedule by possession.
The Equipment listed on this Schedule will be located at
1225 Ken Pratt Blvd. Longmont Boulder CO 80502
- --------------------------------------------------------------------------------
Address City County State Zip Code
LEASE TERM: The term of this Lease for the items described in this Schedule
shall be 60 months.
--
RENTALS: For said term or any portion thereof, Lessee shall pay to Lessor the
stated aggregate rentals, of which
$ 0.00 is herewith paid in advance and the balance of the rentals is
- ----------------
payable in 60 equal, successive, monthly payments as stated, of which the first
--
is due on the first monthly rental date set forth below, and the others on a
like date of each month thereafter, until fully paid.
<TABLE>
<CAPTION>
====================================================================================================================
Item Description of Equipment Aggregate Monthly
No. (Include make, kind of unit, year, model and serial number.) Rental Rental
- --------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C>
One (1) Mydata TP11-UFP W/Hydraspeed Mount Option $340,991.81 $5,683.20
together with all additions, substitutions, attachments, replacements,
and accessions thereof, plus the proceeds of all the foregoing.
====================================================================================================================
====================================================================================================================
Item Date Date of Renewals Purchase
No. Lease Term First Monthly (No. of Years and Option
Commences Rental Amount per Year) Price
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$1.00
====================================================================================================================
</TABLE>
Page 1 of 2
<PAGE>
The Lease term commences on _______________________________.
The first Monthly Rental is due on ________________________.
The Lease term may be renewed for _____ months with the Monthly Rental for such
renewal term of _______________________.
The Lessee has the option to purchase the Equipment as of the last day of the
initial Lease term for $ 1.00 .
-------------
Special Provisions Instructions
ACCEPTED:
LESSEE:
Staodyn, Inc.
- ----------------------------------------------------------------
By /s/ Michael J. Newman Title V.P. - Finance
-------------------------- -----------------------------
LESSOR:
The CIT Group/Equipment Financing, Inc.
- ----------------------------------------------------------------
By Title
-------------------------- ----------------------------
Page 2 of 2
<PAGE>
SECRETARY'S CERTIFICATE
I, ________________________________________________, do hereby certify that I am
Secretary of Staodyn, Inc., a corporation duly organized and existing under the
-------------
laws of the State of Delaware ("Corporation"); that I am the keeper of the
--------
seal of the Corporation and corporation records, including without limitation,
the Charter, By-Laws and the minutes of the Board of Directors of the
Corporation; that the following is an accurate and compared transcript of the
resolutions contained in the minute book of the Corporation which resolutions
were duly adopted and ratified at a meeting of the Board of Directors of the
Corporation duly convened and held inaccordance with the By-Laws and Charter of
the Corporation on _____, at which time a quorum was present and acted
throughout; and that said resolutions have not in any way been modified,
repealed or rescinded, but are in full force and effect:
"RESOLVED, that any officer of the Corporation be and is hereby authorized
and empowered in the name and on behalf of this Corporation to enter into
one or more lease agreements with The CIT Group/Equipment Financing, Inc.
(hereinafter called "CIT") concerning personal property leased to the
Corporation; from time to time to modify, supplement or amend any such
agreements; and to do and perform all other acts and things deemed by such
officer to be necessary, convenient or proper to carry out any of the
foregoing; and be it
FURTHER RESOLVED, that any of the aforesaid officers, or his or her duly
elected or appointed successor in office, be and is hereby authorized and
empowered to do any acts, including but not limited to the mortgage, pledge
or hypothecation from time to time to CIT of any or all assets of this
Corporation to secure such leases, and to execute in the name and on behalf
of this Corporation, any instruments or agreements deemed necessary or
proper by CIT in respect of the collateral securing any obligations of this
Corporation, and to affix the seal of this Corporation to any mortgage,
pledge or other such instrument if so required or requested by CIT; and be
it
FURTHER RESOLVED, that all that any officer shall have done or may do in
connection with the matters outlined above is hereby ratified and approved;
and be it
FURTHER RESOLVED, that the foregoing resolutions shall remain in full force
and effect until written notice of their amendment or recision shall have
been received by CIT and that receipt of such notice shall not affect any
action taken or advances made by CIT prior thereto and CIT is authorized to
rely upon said resolutions until receipt by it of written notice of any
change; and be it
FURTHER RESOLVED, that the Secretary be and is hereby authorized and
directed to certify to CIT that the foregoing resolutions and the
provisions thereof are in conformity with the Charter and By-Laws of this
Corporation."
I DO FURTHER CERTIFY THAT THE MASTER LEASE AGREEMENT ENTERED INTO BY THE
CORPORATION AND CIT IS AN AGREEMENT REFERRED TO IN SAID RESOLUTIONS AND WAS DULY
EXECUTED PURSUANT THERETO AND THERE ARE NO RESTRICTIONS IMPOSED BY THE CHARTER
OR BY-LAWS OF THE CORPORATION RESTRICTING THE POWER OR AUTHORITY OF THE BOARD OF
DIRECTORS OF THE CORPORATION TO ADOPT THE FOREGOING RESOLUTIONS OR UPON THE
CORPORATION OR ITS OFFICERS TO ACT IN ACCORDANCE THEREWITH.
I do further certify that the following are names and specimen signatures of
offices the Corporation empowered and authorized by the above resolutions, each
of which has been duly elected to hold and currently holds the office of the
Corporation set opposite his or her name:
NAME OFFICE SIGNATURE
- ----------------- ------------ ---------------------
Michael J. Newman V.P.-Finance /s/ Michael J. Newman
- ----------------- ------------ ---------------------
- ----------------- ------------ ---------------------
IN WITNESS WHEREOF, I have hereunto set my hand and affixed the seal of the
Corporation on ______________.
CORPORATE SEAL
/s/ Michael J. Newman
- ---------------------
Secretary
Page 1 of 1
<PAGE>
_________________
Date
THE CIT GROUP/EQUIPMENT FINANCING, INC.
900 Ashwood Parkway - 6th Floor
- --------------------------------------------------
Address
Atlanta GA 30338
- --------------------------------------------------
City State Zip Code
Gentlemen:
You are irrevocably instructed to disburse the proceeds of the Schedule of
Leased Equipment No. 0l dated _________________, to Master Lease Agreement dated
--
_________________, between Staodyn, Inc. as Lessee and the CIT Group/Equipment
-------------
Financing, as Lessor, as follows:
Payee Names and Addresses Amount
- -------------------------------------------- ------------
Mydata $ 221,821.60
Staodyn, Inc. $ 55,455.40
The CIT Group/Equipment Financing, Inc. - Processing Fee $ 250.00
------------
Total Proceeds $ 277,527.00
------------
Very truly yours,
Staodyn, Inc.
- ---------------------------------------------------------
By /s/Michael J. Newman Title V.P. - Finance
--------------------------- --------------------
Page 1 of 1
<PAGE>
EXHIBIT 10.14
EQUIPMENT SCHEDULE NO. 02, dated November 12, 1997, to Master Lease Agreement,
-- -----------------
dated
June 18, 1997, between THE CIT GROUP/EQUIPMENT FINANCING, INC. ("Lessor")
- -------------
and
Staodyn, Inc. ("Lessee").
- -------------
This Equipment Schedule incorporates the terms and conditions of the above-
referenced Master Lease Agreement.
This is Originally Executed Copy No. 1 of 1 originally executed copies. Only
-- --
transfer of possession by Lessor of Originally Executed Copy No. 1 shall be
effective for purposes of perfecting an interest in this Schedule by possession.
The Equipment listed on this Schedule will be located at
5802 Breckenridge Parkway Tampa Hillsborough FL 33610
- ------------------------------------------------------------------------------
Address City County State Zip Code
LEASE TERM: The term of this Lease for the items described in this Schedule
shall be 60 months.
--
RENTALS: For said term or any portion thereof, Lessee shall pay to Lessor the
stated aggregate rentals, of which $3,050.47 is herewith paid in advance and the
---------
balance of the rentals is payable in 59 equal, successive, monthly payments as
--
stated, of which the first is due on the first monthly rental date set forth
below, and the others on a like date of each month thereafter, until fully paid.
<TABLE>
<CAPTION>
Item Description of Equipment Aggregate Monthly
No. (Include make, kind of unit, year, model and serial number.) Rental Rental
- ------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C>
1 One IBM AS/400 computer system with serial number 620-2179 together $151,000.00 $3,050.47
with all additions, attachments and replacements thereto and proceeds
thereof.
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Date Date of Renewals Purchase
Item Lease Term First Monthly (No. of Years and Option
No. Commences Rental Amount per Year) Price
- ------------------------------------------------------------------
<C> <S> <C> <C> <C>
1 12/18/97 12/18/97 n/a $1.00
- ------------------------------------------------------------------
</TABLE>
Page 1 of 2
<PAGE>
The Lease term commences on 12-18-97.
--------
The first Monthly Rental is due on 12-18-97.
--------
The Lease term may be renewed for _______ months with the Monthly Rental for
such renewal term of n/a .
----
The Lessee has the option to purchase the Equipment as of the last day of the
initial Lease term for $1.00.
-----
Special Provisions Instructions
ACCEPTED:
LESSEE:
Staodyn, Inc.
- -------------
By /s/ Michael J. Newman Title V.P. - Finance
---------------------- ---------------
LESSOR:
The CIT Group/Equipment Financing, Inc.
- ---------------------------------------
By /s/ Undrae L. Mitchell Title CREDIT ANALYST
----------------------- --------------
Page 2 of 2
<PAGE>
RIDER A
TO EQUIPMENT SCHEDULE NO. 2 DATED NOVEMBER 12, 1997
TO MASTER LEASE AGREEMENT DATED JUNE 18, 1997 BETWEEN
THE CIT GROUP/EQUIPMENT FINANCING, INC. AS LESSOR AND
STAODYN, INC., AS LESSEE
Lessee represents, warrants and agrees that as long as there is any obligations
owing by the Lessee to Lessor:
1. The Lessee shall not have the right to prepay the indebtedness due under the
Lease, in whole or in part, at any time during the first loan year.
2. The Lessee shall have the right to prepay the indebtedness due under the
Lease in whole but not in part, during the second, third, or fourth lease years,
provided that Lessee gives Lessor at least 30 days prior written notice of its
intention to prepay and in addition to the prepayment of all principal, accrued
interest, late charges and other amounts due under the Lease, Lessee pays a
prepayment fee equal to:
(a) five percent (5%) of the principal prepaid if such prepayment occurs
during the fourth lease year,
(b) four percent percent (4%) of the principal prepaid if such prepayment
occurs during the third lease year,
(c) three percent (3%) of the principal prepaid if such prepayment occurs
during the second lease year,
(d) two percent (2%) of the principal prepaid if such prepayment occurs
during the first lease year.
3. The term "lease year" as used herein, shall mean a period of twelve (12)
consecutive months. The first lease year shall commence 12-18-97. Subsequent
--------
lease years shall run consecutively, each commencing on the anniversary of the
first lease year.
STAODYN, INC. THE CIT GROUP/EQUIPMENT
FINANCING, INC.
By: MICHAEL J. NEWMAN By: UNDRAE L. MITCHELL
---------------------- ---------------------
Title: V.P - Finance Title: Credit Analyst
------------------- ------------------
Date: 12/2/97 Date: 12/18/97
-------------------- -------------------
<PAGE>
BILL OF SALE
TO
THE CIT GROUP/EQUIPMENT FINANCING, INC.
KNOW ALL MEN BY THESE PRESENTS THAT: The Undersigned, a corporation with a
principal place of business at 1225 Ken Pratt Blvd. Longmont, CO 80502 (herein
---------------------------------------
called the "Seller"), for and in consideration of the sum of One Dollar ($1) and
other good and valuable consideration, receipt of which is hereby acknowledged,
does hereby grant, sell, assign, transfer, and set over unto The CIT
Group/Equipment Financing, Inc., a New York corporation (herein called the
"Buyer"), its successors and assigns, all right, title, and interest of the
Seller in and to the personal property described below (and, if any additional
page is annexed hereby as Exhibit A, listed and described in said Exhibit A)
together with all parts and accessories attached thereto (all such personal
property, parts, and accessories attached thereto (all such personal property,
parts, and accessories being here collectively called the "Equipment"), TO HAVE
AND TO HOLD for its and their own use and benefit forever.
Quantity Manufacturer Model/Feature Serial Number Description Cost Per Unit
- -------- ------------ ------------- ------------- ----------- -------------
1 IBM AS/400 computer 620-2179 $151,000.0
system
The Seller hereby represents and warrants to the Buyer, its successors and
assigns: (i) that the Equipment is new and unused; (ii) that the Seller has full
legal and beneficial title to the Equipment and the good and lawful right to
sell the same; and (iii) that good and marketable title to the Equipment is
hereby duly vested in the Buyer free and clear of all claims, liens,
encumbrances, and rights of others of any nature. The Seller hereby covenants
and agrees to defend such title forever against all claims and demands
whatsoever.
IN WITNESS WHEREOF, the Seller has caused this Bill of Sale to be executed and
delivered by its duly authorized officer on ______________________.
Seller:
Staodyn, Inc.
- ----------------------------------------------------------
By /s/ Michael J. Newman Title V.P. - Finance
----------------------- ----------------------
(CORPORATE SEAL)
Page 1 of 1
<PAGE>
AFFIDAVIT
To: The CIT Group/Equipment Financing, Inc.
900 Ashwood Parkway, Suite 600
Atlanta, GA 30338
Staodyn, Inc. does hereby certify that, upon proper execution of the certain
Equipment Schedule No. 2 dated November 12, 1997, to Master Lease Agreement,
dated June 18, 1997, between Staodyn, Inc., Lessee and The CIT Group/Equipment
Financing, Inc., as Lessor, the equipment described below was owned free and
clear by Lessee.
Equipment
One (1) IBM AS/400 computer system with Serial Number 620-2179 together with all
additions, attachments and replacements thereto and proceeds thereof.
Staodyn, Inc.
By: /s/ Michael J. Newman
----------------------
Title: V.P. - Finance
-------------------
State of Colorado
-----------
County of Boulder
----------
Sworn to and subscribed before me this 6th day of December, 1997.
--- --------
/s/ Joanne M. Roth 12-7-97
- -------------------------- -----------------------
Notary Public My commission expires
<PAGE>
DELIVERY AND INSTALLATION CERTIFICATE
To: THE CIT GROUP/EQUIPMENT FINANCING, INC.
900 Ashwood Parkway
- ----------------------------------------------
Address
Atlanta GA 30338
- ----------------------------------------------
City State Zip Code
The undersigned hereby certifies that all of the goods, chattels and equipment
(all hereinafter called "equipment") described in the Equipment Schedule No. 2
dated November 12, 1997 to Master Lease Agreement dated June 18, 1997 between
The CIT Group/Equipment Financing, Inc. as Lessor and the undersigned as Lessee,
(the "Lease") have been furnished to the undersigned at the location designated
in the Lease, that delivery and installation of the equipment have been fully
completed as required, and that the equipment has been inspected and accepted by
the undersigned as satisfactory on November 17, 1997. The undersigned
-----------------
understands that you are relying on the foregoing certification in your purchase
of the equipment described in the Lease and, to induce you to purchase the
equipment, the undersigned agrees to settle all claims, defenses, setoffs and
counterclaims it may have with
Data Systems International ("Seller") directly with the Seller and will not set
- --------------------------
up any thereof against you, that its obligation to you is absolute, and that you
are neither the manufacturer, distributor nor seller of the equipment and have
no knowledge or familiarity with it.
One IBM AS/400 computer system with serial number 620-2179 together with all
additions, attachments, replacements thereof and proceeds thereto.
Dated: 11-17-97
------------
LESSEE:
Staodyn, Inc.
- ----------------------------------------------
Name of individual, corporation or partnership
By Michael J. Newman Title V.P. - Finance
------------------------ ------------------
If corporation, have signed by President, Vice President or Treasurer, and
give official title.
If owner or partner, state which.
Page 1 of 1
<PAGE>
11/12/97
-----------------
Date
THE CIT GROUP/EQUIPMENT FINANCING, INC.
900 Ashwood Parkway
- -------------------
Atlanta, GA 30338
- -------------------
Gentlemen:
You are irrevocably instructed to pay to each of the parties named below the
amounts set forth opposite each of their names in connection with your
acquisition of the property covered by Equipment Schedule Number 2 dated
November 12, 1997 to Master Lease Agreement dated June 18, 1997, between us as
follows:
Payee Name Amount
- ------------------------------------------
Staodyn, Inc. $ 22,650.00
Data Systems International $128,350.00
Total $151,000.00
Very truly yours,
STAODYN, INC.
By: /s/ Michael J. Newman
----------------------
<PAGE>
LANDLORD'S WAIVER AND CONSENT
For use with retail transactions where CIT is Lessor in all States except
Arizona and California
12/11/97
-------------
TO: DATE
THE CIT GROUP/EQUIPMENT FINANCING, INC.
900 Ashwood Parkway
- -------------------------------------------------------
Address
Atlanta GA 30338
- -------------------------------------------------------
City State Zip Code
In consideration of the lease (the "Lease") by The CIT Group/Equipment
Financing, Inc. ("CIT") to
Staodyn, Inc.
- ------------------------------
Lessee
of the following described personal property: (FULL DESCRIPTION OF PERSONAL
PROPERTY)
One IBM AS/400 computer system with serial number 620-2179 together with all
additions, attachments, replacements thereto and proceeds thereof.
hereinafter referred to as "Collateral," now installed, to be installed or kept
at:
5802 Breckenridge Parkway Tampa FL 33610
- -----------------------------------------------------------------------------
ADDRESS CITY STATE ZIP CODE
(hereinafter called the "Premises"), the undersigned landlord of the Premises by
these presents consents to the installation of the Collateral on the Premises
and does waive and relinquish to CIT and its assigns all right of levy for rent
and all claims and demands of every kind against the Collateral, installed or
to be installed or kept at the Premises, at any such time as there are any
obligations or indebtedness owing by Lessee to CIT under the Lease or under any
present or future agreement between Lessee and CIT. The undersigned agrees that
the Collateral shall not become part of the freehold and may be repossessed by
CIT and its assigns at any time.
Page 1 of 6
<PAGE>
WITNESS the hand and seal of the undersigned landlord the day and year above
written.
Roycom Summit REIT
- -----------------------------
Landlord
Property Manager as Agent for
By [SIGNATURE ILLEGIBLE] Title Roycom Summit REIT
---------------------- ------------------------------
If corporation, have signed by President, Vice President or Treasurer and give
official title.
If owner or partner, state which.
5411 Beaumont Center Blvd. #755
- --------------------------------
Address
Tampa FL 33634
- --------------------------------
City State Zip Code
Signed, sealed and delivered in the presence of:
Demetra Elliott
- ----------------
Witness
207 Fairfield St., Oldsmar, FL 34677
- -------------------------------------
Home Address
Dawn M. Szenas
- ----------------
Witness
7209 Five Point Cr., #302 Tampa, FL 33634
- -----------------------------------------
Home Address
EXECUTE APPLICABLE ACKNOWLEDGMENT OR PROOF.
Page 2 of 6
<PAGE>
ACKNOWLEDGMENTS
NOTARY PUBLIC SHOULD ALWAYS AFFIX OFFICIAL SEAL AFTER ASCERTAINING THAT
ACKNOWLEDGMENT IS MADE CORRECTLY. FOR EACH TRANSACTION, USE AN ORIGINAL FOR EACH
RECORDING REQUIRED, ONE MORE ORIGINAL FOR THE CIT GROUP/EQUIPMENT FINANCING,
INC., AND A COPY FOR THE LANDLORD.
ACKNOWLEDGMENT BY INDIVIDUAL OR PARTNER (EXCEPT IN SOUTH CAROLINA)
STATE OF Florida, COUNTY OF Hillsborough, SS.:
--------------------------- ------------------------
I, Demetra Elliott , a Notary Public duly qualified in and for said County and
-----------------
State, do hereby certify that on December 11, 1997 , in 405 N. Reo St., #160
--------------------- ----------------------
Tampa, FL 33609 (place) in said County, before me personally appeared _________.
- ---------------
FOR INDIVIDUAL
to me personally well known as and to be the identical person named and
described in and party to and who executed in his (her) own proper handwriting
and whose name is subscribed to the within and foregoing and annexed instrument
of writing bearing date as therein indicated, and produced and delivered the
same before me and who, upon being first duly sworn by me, stated that (s)he
knows the contents of said instrument and acknowledged that (s)he signed,
sealed, executed and delivered the same as and to be his (her) free, lawful and
voluntary act and deed for the uses, purposes and consideration therein
mentioned and contained and set forth.
Given under and witness my hand and official seal the day and year in this
certificate first above written.
Notary Seal [DEMETRA ELLIOTT SEAL] Notary Public /s/ Demetra Elliott
---------------------
FOR PARTNERSHIP
to me personally well known and known as and to be a member of the partnership
of __________________________________ and the identical person described in and
party to and who executed in said partnership name the within and foregoing and
annexed instrument of writing bearing date as therein indicated, and produced
and delivered the same before me, who, upon being first duly sworn by me, stated
that (s)he knows the contents of said instrument and (s)he duly acknowledged to
me that (s)he signed, sealed and delivered the same in said partnership name as
and for and to be his (her) and said partnership's free, lawful and voluntary
act and deed for the uses, purposes and consideration therein mentioned and
contained and set forth.
Given under and witness my hand and official seal the day and year in this
certificate first above written.
Page 3 of 6
<PAGE>
Notarial Seal Notary Public __________________
Notary Public in and for __________________ County, State of ___________________
Residing at ____________________________________________________________________
My Commission expires
__________________________________ ACKNOWLEDGMENT BY CORPORATION
EXCEPT IN DISTRICT OF COLUMBIA AND SOUTH CAROLINA
STATE OF _________________________ COUNTY OF _______________________________ SS:
I hereby certify that on ____________________ in ____________________ (place) in
said County, before me ______________________, a Notary Public duly qualified in
Name of Notary Public
and for the County of __________________, State of _________________, personally
appeared ________________________________, to me personally well known to be the
Name of Officer who Signed
identical person who signed the within and foregoing instrument of writing in
his (her) own proper handwriting and well known to me to be and who has
acknowledged himself (herself) to be the ____________________________________ of
Title of Officer
______________________________________, the corporation which executed the same,
Name of Corporation
and produced and delivered the same before me, and who, being by me first duly
sworn, did say that (s)he is such officer of the aforesaid corporation, the
within named landlord; and being authorized so to do, executed the foregoing
instrument; that (s)he was duly authorized to execute said instrument for and in
the name of said corporation and make this acknowledgment;
that (s)he knows the contents of said instrument; that (s)he resides at
_______________________________; that (s)he knows the seal of said corporation;
that the seal affixed to said instrument is the corporate seal of said
corporation; that said instrument was signed, sealed and delivered on behalf of
said corporation by authority of its by-laws or by resolution of its Board of
Directors, and said __________________________________________________ (person)
acknowledged that (s)he executed said instrument as his (her) free, true and
lawful act and deed and the free, true, lawful and corporate act and deed of
said corporation, in pursuance of said authority by him (her) in his (her) said
capacity and by said corporation voluntarily executed for the uses, purposes and
consideration therein mentioned and contained and set forth, by signing the name
of the corporation by himself (herself) as such officer.
Witness my hand and official seal the day and year in this certificate first
above written.
Page 4 of 6
<PAGE>
_________________________________________________________________ NOTARY PUBLIC
Notary Public in and for __________________ County, State of ___________________
Residing at ____________________________________________________________________
Notarial Seal My Commission expires _________________
CORPORATE ACKNOWLEDGMENT
DISTRICT OF COLUMBIA, SS.: I, ___________________ a Notary Public in and for the
District of Columbia, do hereby certify that _____________________, who is named
in the above instrument as attorney in fact for _____________________________, a
corporation, the corporate party to a certain instrument of waiver and consent
bearing date on _____________________, and hereto and hereto annexed, personally
appeared before me in said District, who being personally well known to me as
the person named in the above instrument as attorney in fact for the said
corporation, acknowledged the said waiver and consent to the corporate act and
deed of said corporation and that he delivered the same as such.
Given under my hand and seal this date ________________________________________.
____________________________________________ NOTARY PUBLIC, DISTRICT OF COLUMBIA
Notarial Seal
PROOF BY SUBSCRIBING WITNESS
STATE OF SOUTH CAROLINA
COUNTY OF _____________________.
Before me, the undersigned notary public, personally appeared the undersigned
witness, who, being sworn, deposed and said that (s)he saw _____________________
Name of Landlord
by __________________________________ its ________________________________ sign,
Person who signed for Landlord Title of person who signed
seal and deliver the foregoing instrument and that (s)he, together with the
other witness subscribing above, witnessed the execution thereof.
5 of 6
<PAGE>
SWORN TO and subscribed before me on ____________________________
_________________________________________________________________
Witness
_________________________________________________________________
Home Address
Notary Public ____________________________________
Notarial Seal Notary Public for ________________________________
My Commission expires ____________________________
Page 6 of 6
<PAGE>
EXHIBIT 10.15
EQUIPMENT SCHEDULE NO. 03, dated December 4, 1997, to Master Lease Agreement,
-- ----------------
dated
June 18, 1997, between THE CIT GROUP/EQUIPMENT FINANCING, INC. ("Lessor") and
- -------------
Staodyn, Inc. ("Lessee").
- -----------------------------------------------------------------
This Equipment Schedule incorporates the terms and conditions of the above-
referenced Master Lease Agreement.
This is Originally Executed Copy No. 1 of 1 originally executed copies. Only
- -
transfer of possession by Lessor of Originally Executed Copy No. 1 shall be
effective for purposes of perfecting an interest in this Schedule by possession.
The Equipment listed on this Schedule will be located at
5802 Breckenridge Parkway Tampa Hillsborough FL 33610
- --------------------------------------------------------------------------------
Address City County State Zip Code
LEASE TERM: The term of this Lease for the items described in this Schedule
shall be 60 months.
--
RENTALS: For said term or any portion thereof, Lessee shall pay to Lessor the
stated aggregate rentals, of which
$2,711.36 is herewith paid in advance and the balance of the rentals is payable
- ---------
in 59 equal, successive, monthly payments as stated, of which the first is due
--
on the first monthly rental date set forth below, and the others on a like date
of each month thereafter, until fully paid.
<TABLE>
<CAPTION>
===================================================================================================
Item Description of Equipment Aggregate Monthly
No. (Include make, kind of unit, year, model and serial number.) Rental Rental
- ---------------------------------------------------------------------------------------------------
<C> <S> <C> <C>
1 various computer equipment more fully described on the Exhibit A 162,681.60 2,711.36
together with all additions, attachments, and replacements thereto
and proceeds thereof.
===================================================================================================
===================================================================================================
Date Date of Renewals Purchase
Item Lease Term First Monthly (No. of Years and Option
No. Commences Rental Amount per Year) Price
- ---------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
1 12/18/97 12/18/97 n/a $1.00
===================================================================================================
</TABLE>
Page 1 of 2
<PAGE>
The Lease term commences on 12/18/97 .
------------
The first Monthly Rental is due on 12/18/97 .
----------
The Lease term may be renewed for ___ months with the Monthly Rental for such
renewal term of n/a .
-----
The Lessee has the option to purchase the Equipment as of the last day of the
initial Lease term for $ 1.00
----
Special Provisions Instructions
ACCEPTED: 12/6/97
-------
LESSEE:
Staodyn, Inc.
- ---------------------------------------------------------
By /s/ Michael J. Newman Title V.P. - Finance
--------------------------- ---------------------
LESSOR:
The CIT Group/Equipment Financing, Inc.
- ----------------------------------------
By /s/ Undrae L. Mitchell Title Credit Analyst
-------------------------- ---------------------
Page 2 of 2
<PAGE>
EXHIBIT A
QUANTITY DESCRIPTION
- ------- -----------
1 Optio A5400 Server Upgrade
1 Quadrant FastFax/Plus License Transfer Fee
Old Model 310 S/N 10-81737
New Model 620 S/N 10-TBD
1 JD Edwards Software License Fee
1 Jim Sloan, Inc. Primary Software License
S/N 1012345
1 Generic Software, Inc. Upgrade of 5OQ400
to as/400 620-2179 VA.R1
1 JT Packard & Associates, Inc. Pre-owned
Exide Electronics
1 Hawkeye Information Systems PF Risc
conversion
with all additions, attachments and replacements thereto and proceeds thereof.
LESSEE:
Staodyn, Inc.
- -------------
By /s/ Michael J. Newman Title V.P. - Finance
------------------------- ---------------------------
LESSOR
The CIT Group/Equipment Financing, Inc.
- -----------------------------------------
By /s/ Undrae L. Mitchell Title Credit Analyst
---------------------------- ------------------------
<PAGE>
RIDER A
TO EQUIPMENT SCHEDULE NO. 3 DATED
TO MASTER LEASE AGREEMENT DATED JUNE 18, 1997 BETWEEN
THE CIT GROUP/EQUIPMENT FINANCING, INC. AS LESSOR AND
STAODYN, INC., AS LESSEE
Lessee represents, warrants and agrees that as long as there is any obligations
owing by the Lessee to Lessor:
1. The Lessee shall not have the right to prepay the indebtedness due under
the Lease, in whole or in part, at any time during the first loan year.
2. The Lessee shall have the right to prepay the indebtedness due under the
Lease in whole but not in part, during the second, third, or fourth lease years,
provided that Lessee gives Lessor at least 30 days prior written notice of its
intention to prepay and in addition to the prepayment of all principal, accrued
interest, late charges and other amounts due under the Lease, Lessee pays a
prepayment fee equal to:
(a) five percent (5%) of the principal prepaid if such prepayment occurs
during the fourth lease year,
(b) four percent (4%) of the principal prepaid if such prepayment occurs
during the third lease year,
(c) three percent (3%) of the principal prepaid if such prepayment occurs
during the second lease year,
(d) two percent (2%) of the principal prepaid if such prepayment occurs
during the first lease year.
3. The term "lease year" as used herein, shall mean a period of twelve (12)
consecutive months. The first lease year shall commence 12-18-97 .
--------------
Subsequent lease years shall run consecutively, each commencing on the
anniversary of the first lease year.
STAODYN, INC. THE CIT GROUP/EQUIPMENT
FINANCING,INC.
By: /s/ Michael J. Newman By: /s/ Undrae L. Mitchell
--------------------------- ------------------------
Title: V.P. - Finance Title: Credit Analyst
------------------------ ---------------------
Date: 12/9/97 Date: 12/18/97
------------------------- ----------------------
<PAGE>
DELIVERY AND INSTALLATION CERTIFICATE
To: THE CIT GROUP/EQUIPMENT FINANCING, INC.
900 Ashwood Parkway
- ---------------------------------------------------------------
Address
Atlanta GA 30338
- ---------------------------------------------------------------
City State Zip Code
The undersigned hereby certifies that all of the goods, chattels and equipment
(all hereinafter called "equipment") described in the Equipment Schedule No. 3
dated December 4, 1997 to Master Lease Agreement dated June 18, 1997 between The
CIT Group/Equipment Financing, Inc. as Lessor and the undersigned as Lessee,
(the "Lease") have been furnished to the undersigned at the location designated
in the Lease, that delivery and installation of the equipment have been fully
completed as required, and that the equipment has been inspected and accepted by
the undersigned as satisfactory on 12/9/97. The undersigned understands that you
-------
are relying on the foregoing certification in your purchase of the equipment
described in the Lease and, to induce you to purchase the equipment, the
undersigned agrees to settle all claims, defenses, setoffs and counterclaims it
may have with
various vendors ("Seller") directly with the Seller and will not
- --------------------------------
set up any thereof against you, that its obligation to you is absolute, and that
you are neither the manufacturer, distributor nor seller of the equipment and
have no knowledge or familiarity with it.
various computer equipment more fully described on the attached Exhibit A
together with all additions, attachments, and replacements thereof and proceeds
thereto.
Dated: 12/9/97
-------
LESSEE:
Staodyn, Inc.
- ---------------------------------------------------------------
Name of individual, corporation or partnership
By /s/ Michael J. Newman Title V.P. - Finance
------------------------ ------------------------------
If corporation, have signed by President, Vice President or Treasurer, and give
official title. If owner or partner, state which.
Page 1 of 1
<PAGE>
EXHIBIT A
QUANTITY DESCRIPTION
- -------- -----------
1 Optio A5400 Server Upgrade
1 Quadrant FastFax/Plus License Transfer Fee
Old Model 310 S/N 10-81737
New Model 620 S/N 10-TBD
1 JD Edwards Software License Fee
1 Jim Sloan, Inc. Primary Software License
S/N 1012345
1 Generic Software, Inc. Upgrade of 5OQ400
to as/400 620-2179 VA.Rl
1 JT Packard & Associates, Inc. Pre-owned
Exide Electronics
1 Hawkeye Information Systems PF Risc
conversion
with all additions, attachments and replacements thereto and proceeds thereof.
LESSEE:
Staodyn, Inc.
- ---------------------------------------------------------------
By /s/ Michael J. Newman Title V.P. - Finance
------------------------ ------------------------------
LESSOR:
The CIT Group/Equipment Financing, Inc.
- ---------------------------------------------------------------
By /s/ Undrae L. Mitchell Title Credit Analyst
------------------------- ----------------------------
<PAGE>
Date 12/9/97
-----------------
THE CIT GROUP/EQUIPMENT FINANCING, INC.
900 Ashwood Parkway
- --------------------------------------
Atlanta, GA 30338
- --------------------------------------
Gentlemen:
You are irrevocably instructed to disburse the proceeds of your loan to us,
evidenced by the Equipment Schedule No. 3 dated December 4, 1997 to Master Lease
Agreement dated June 18, 1997 as follows:
<TABLE>
<CAPTION>
Payee Name Amount
- -------------------------------------------------------------------------------
<S> <C>
Option Software $ 3,675.00
Quadrant Software $ 395.00
JD Edwards $ 103,936.50
Jim Sloan $ 1,500.00
Generic Software, Inc. $ 559.50
JT Packard and Associates $ 11,400.00 Paid by Staodyn
Hawkeye Information Systems $ 500.00
Staodyn, Inc. $ 22,948.50
TOTAL $ 133,514.50
</TABLE>
Very truly yours,
Staodyn, Inc.
By: /s/ Michael J. Newman
-----------------------
<PAGE>
Exhibit 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Registration
Statements on Form S-8 (Nos. 33-74614, 2-96535, 2-87595 and 33-42053) and in the
Prospectuses constituting part of the Registration Statements on Form S-3 (Nos.
33-74464 and 33-46186) of Staodyn, Inc. of our report dated January 30, 1998
appearing on Page F-2 of this Form 10-KSB.
PRICE WATERHOUSE LLP
Boulder, Colorado
February 25, 1998
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from Form 10-KSB
and is qualified in its entirety by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> NOV-30-1997
<PERIOD-START> DEC-01-1996
<PERIOD-END> NOV-30-1997
<CASH> 1,419,959
<SECURITIES> 1,187,630
<RECEIVABLES> 5,533,377
<ALLOWANCES> (1,334,151)
<INVENTORY> 4,589,274
<CURRENT-ASSETS> 13,420,700
<PP&E> 7,833,988
<DEPRECIATION> (5,827,856)
<TOTAL-ASSETS> 16,869,293
<CURRENT-LIABILITIES> 1,786,288
<BONDS> 0
0
0
<COMMON> 67,081
<OTHER-SE> 13,418,651
<TOTAL-LIABILITY-AND-EQUITY> 16,869,293
<SALES> 21,142,602
<TOTAL-REVENUES> 21,142,602
<CGS> 7,476,323
<TOTAL-COSTS> 7,476,323
<OTHER-EXPENSES> 13,088,598
<LOSS-PROVISION> 995,903
<INTEREST-EXPENSE> 163,270
<INCOME-PRETAX> 467,939
<INCOME-TAX> 761,647
<INCOME-CONTINUING> 1,229,586
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,229,586
<EPS-PRIMARY> .19
<EPS-DILUTED> .19
</TABLE>
