HAEMONETICS CORP, 10-K, 1996-06-07

HAEMONETICS CORP
10-K, 1996-06-07
SURGICAL & MEDICAL INSTRUMENTS & APPARATUS

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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-K

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934

FOR THE FISCAL YEAR ENDED MARCH 30, 1996. COMMISSION FILE NUMBER 1-10730

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HAEMONETICS CORPORATION
(Exact name of registrant as specified in its charter)

MASSACHUSETTS 04-2882273
(State of Incorporation) (I.R.S. Employer Identification No.)

400 WOOD ROAD,
BRAINTREE, MASSACHUSETTS 02184-9114
(617) 848-7100
(Address, including zip code, and telephone number,
including area code, of principal executive offices)

SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:

NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
------------------- -------------------
COMMON STOCK, $.01 PAR VALUE NEW YORK STOCK EXCHANGE

SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT: NONE

Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 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
--- ---
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not 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-K or any
amendment to this form 10-K. [_]

THE AGGREGATE MARKET VALUE OF THE VOTING STOCK HELD BY NON-AFFILIATES OF THE
REGISTRANT BASED ON THE CLOSING SALE PRICE OF MAY 22, 1996, WAS APPROXIMATELY
$471,000,000.

THE NUMBER OF SHARES OF THE REGISTRANT'S COMMON STOCK, $.01 PAR VALUE,
OUTSTANDING AS OF MAY 22, 1996, WAS 27,242,229.

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DOCUMENTS INCORPORATED BY REFERENCE

Part III incorporates information by reference from the definitive Proxy
Statement for the Registrant's Annual Meeting to be held July 19, 1996.

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TABLE OF CONTENTS

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PAGE NUMBER
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<C> <S> <C>
Item 1. Business................................................ 3
(a)New Developments in the Business..................... 3
(b)General Development of the Business.................. 3
(c)Financial Information about Industry Segments........ 4
(d)Narrative Description of Business.................... 4
(e)Financial Information about Foreign and Domestic
Operations and Export Sales............................ 11
Item 2. Properties.............................................. 11
Item 3. Legal Proceedings....................................... 12
Item 4. Submission of Matters to a Vote of Security Holders..... 12
Item 5. Market for the Registrant's Common Equity and Related
Stockholder Matters.................................... 12
Item 6. Selected Consolidated Financial Data.................... 13
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations.................... 14
Item 8. Financial Statements and Supplementary Data............. 17
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure.................... 33
Item 10. Directors and Executive Officers of the Registrant...... 33
(a)Identification of Directors.......................... 33
(b)Identification of Executive Officers................. 33
Item 11. Executive Compensation.................................. 33
Item 12. Security Ownership of Certain Beneficial Owners and
Management............................................. 34
Item 13. Certain Relationships and Related Transactions.......... 34
Item 14. Exhibits, Financial Statement Schedules and Reports on
Form 8-K............................................... 34
(a)Financial Statements................................. 34
(b)Reports on Form 8-K.................................. 34
(c)Exhibits............................................. 34
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ITEM 1. BUSINESS

(A) NEW DEVELOPMENTS IN THE BUSINESS.

FDA Developments

In April 1996, Haemonetics received marketing clearance from the FDA to
market its proprietary two-unit red blood cell collection protocol for
autologous donors. This follows the clearance given in October 1995 to market
the single-unit red cell and two-unit plasma protocol. These protocols allow
blood centers to replace labor-intensive manual collection methods for red
blood cells with highly-efficient automated apheresis systems while producing
a more consistent red blood cell transfusion unit. In addition, for the first
time, blood centers now have the ability to practice total apheresis, the
automated collection of transfusable units of any of the three blood
components; red blood cells, plasma, or platelets. Total apheresis will allow
for the most efficient and cost effective use of an ever shrinking donor
population.

In April 1996, Haemonetics received marketing clearance from the FDA for a
new protocol which allows the collection of 130-155 ml of leukocytes in
addition to 450-750 ml source plasma or plasma for reinfusion. Leukocytes
(white blood cells) collected from donors are used as a raw material in the
manufacturing of diagnostic tests and as therapeutic agents. Currently, many
of Haemonetics' customers collect leukocytes and separate them from plasma
using manual methods. This new protocol will allow the Company's customers to
automate the process using apheresis technology. The protocol produces two
products for subsequent sale: leukocytes and source plasma, making it very
cost effective for the collector.

In February 1996, Haemonetics received marketing clearance from the FDA for
a double, single-donor platelet protocol. The ability to get a double unit
platelet product from a single donor is very important given the donor
population continues to decrease.

In July 1995, Haemonetics received FDA substantial equivalence for the
CollectFirst(TM) system. This system is the newest product offering from
Haemonetics in the area of surgical autotransfusion. It is approved for both
intraoperative and postoperative autotransfusion and it allows for the
continuous collection, filtration, and reinfusion of salvaged blood. This
system offers versatility to the physician through its unique ability to be
used either for direct reinfusion or with the Haemonetics(R) Cell Saver(R)
system for washing of collected red blood cells.

Acquisition Developments

Haemonetics acquired the assets of DHL Laboratories in Union, South Carolina
in August 1995. The acquisition is expected to allow the Company to expand its
offerings to include the solutions used during automated blood collection
procedures. This expansion in capability is particularly critical for the
storage and anticoagulant solutions used in the red blood cell business.

In October 1995, Haemonetics announced the formation of HPPS, Haemonetics
Plasma Product Services. HPPS was founded to provide expertise to blood
banking systems throughout the world to assist them in all phases of plasma
processing from collection to fractionation. The goal of HPPS is to enhance
the progress made by the Company's customers to convert plasma collected into
biological products. HPPS will be based in Lille, France.

(B) GENERAL DEVELOPMENT OF THE BUSINESS.

Haemonetics Corporation was incorporated in Massachusetts in 1985. The terms
"Haemonetics" and the "Company" as used herein include its subsidiaries and
its predecessor where the context so requires.

Haemonetics was founded in 1971 and became a publicly owned company for the
first time in 1979. In August 1983, Haemonetics was acquired by American
Hospital Supply Corporation ("AHS"). In connection

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with the acquisition of AHS by Baxter Travenol Laboratories, Inc. in 1985,
Baxter Travenol divested Haemonetics to address antitrust concerns related to
the acquisition. Haemonetics was purchased in December 1985 by investors which
included two of the Company's present executive officers (John F. White and
James L. Peterson), E. I. du Pont de Nemours and Company ("Du Pont"), and
other present and former employees of the Company. In May 1991, the Company
completed an Initial Public Offering, at which time Du Pont divested its
entire interest in the Company.

Haemonetics is engaged in the design, manufacture and worldwide marketing of
automated systems for the collection, processing and surgical salvage of
blood. Since the development of its first proprietary cell washing system in
1971, the Company has pioneered a family of innovative systems and
technologies for blood processing. The Company's business is focused on
surgical blood salvage, blood component therapy, automated red cell and plasma
collection. Haemonetics' blood processing systems consist of proprietary
disposable sets driven by specialized equipment. The Company's equipment
employs over 100 different sterile, single-use disposable products. The
Company markets its products to hospitals, independent blood banks, commercial
plasma collection firms and national health organizations in over 50
countries.

The Company operates in and reports the results of its operations for only
one industry segment.

(D) NARRATIVE DESCRIPTION OF BUSINESS.

BACKGROUND

All of the Company's products involve the extracorporeal processing of human
blood. Each person has approximately 10 units of blood (1 unit = one pint),
which consists of both cellular and liquid portions. The cellular portion,
which constitutes approximately 45% of the body's blood by volume, is composed
of red blood cells, white blood cells and platelets. All of these are derived
from stem cells which originate in the bone marrow. The liquid portion, which
constitutes the remaining 55% of blood volume, is composed of plasma and
soluble blood proteins.

The practice of modern medicine relies on the availability of a safe and
adequate blood supply and the ability to treat a deficiency in one or more of
the above components. These deficiencies can be related to hereditary
disorders (e.g. hemophilia), serious injury or major surgery (e.g. open heart
surgery).

Traditionally, a deficiency in any one of the components of blood has been
addressed by the transfusion of whole blood or blood components from one or
more third-party donors ("homologous blood transfusion"). These transfusions
have major drawbacks. First, homologous blood transfusions carry the risk of
transfusion reactions ranging from mild allergic responses to life-threatening
red cell incompatibility. Second, while the vast majority of units of blood
in the United States and other developed countries are tested for transfusion-
related diseases such as AIDS, hepatitis and cytomegalovirus, such screening
tests are not completely comprehensive and the evidence of disease
contamination in the blood supply is well documented. This risk is multiplied
when using blood collected from multiple donors.

As a result of the above risks and limitations of traditional transfusion
treatment, three important trends have emerged in blood transfusion therapy
and practice: increasing acceptance of autologous blood transfusion which
involves the reinfusion of a patient's own blood; increasing use of techniques
and systems that reduce the number of donors to which patients are exposed in
the course of therapies involving donor blood or blood components; and
increasing prevalence of blood component therapy which involves the
administration of only those blood components needed by the patient.

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MARKETS AND PRODUCTS

Haemonetics' products address four important therapeutic markets for blood
and blood components: surgical blood salvage, blood component therapy,
automated red cell and plasma collection.

Surgical Blood Salvage

Surgical blood salvage, also known as autologous blood transfusion, involves
the rapid and safe collection of a patient's own blood before, during and
after surgery for reinfusion to the same patient. This process normally
includes an additional washing procedure whereby unwanted substances are
removed from the blood prior to reinfusion.

Autologous blood transfusion reduces or eliminates a patient's dependence on
blood donated from others, which carries the risk of transmission of diseases,
such as AIDS and hepatitis, as well as potentially severe transfusion
reactions. The decision to transfuse a unit of homologous blood involves
weighing the potential therapeutic benefits of such transfusion against the
risks of the transfusion itself. The Company believes there is increasing
recognition within the medical community that blood transfusions should be
autologous wherever possible to avoid the risks associated with homologous
blood transfusion. Moreover, patients are becoming increasingly aware of the
availability and advantages of autologous blood transfusions. Ongoing
shortages of blood and blood components reinforce the benefits of this
approach.

The need for a blood transfusion during surgery is common with open heart,
trauma, transplant, vascular and orthopedic operations.

Haemonetics, which pioneered the first autologous blood transfusion system,
has developed a full line of products to address the needs of the surgical
blood salvage market. The core product line, the Cell Saver(R) autologous
blood recovery system, reduces the patient's dependence on homologous red cell
transfusions and leads to more rapid delivery of higher quality, compatible
blood to the surgical patient intra- and post-operatively. An extension of
this product line is the HaemoLite(R) autologous blood recovery system, an
automated portable system which requires limited operator monitoring and is
designed for lower blood loss procedures. The Collectfirst(TM) autologous
blood collection system allows continual collection, filtration and reinfusion
of salvaged blood. This system offers versatility to the physician through its
ability to be used either for direct reinfusion or with the Cell Saver(R)
system for washing of the collected red blood cells.

The Company markets its surgical blood salvage products to hospital-based
medical specialists, primarily cardiovascular, orthopedic and trauma surgeons.

Blood Component Therapy

Blood component therapy involves the treatment of patients using specific
blood components, such as platelets, red blood cells, peripheral blood stem
cells or white blood cells, as opposed to whole blood. Blood component therapy
applications are increasing and have become integral to the treatment of a
wide variety of cancers, blood disorders and conditions involving
hemorrhaging. Platelet therapy is most often used to alleviate the side
effects of bone marrow suppression, a condition in which bone marrow is unable
to produce a sufficient quantity of platelets. Bone marrow suppression arises
from a number of causes, including infection, but most typically as a side
effect of chemotherapy. The demand for platelets is growing in conjunction
with increasingly aggressive cancer therapies.

Traditionally, platelets for therapeutic use have been derived from the
manual separation of platelets from blood obtained through whole blood
donations. However, platelets constitute a very small portion of an
individual's total blood volume. Hence, a single unit of whole blood contains
only one-sixth to one-eighth the quantity of platelets required for a
therapeutically useful dosage. As a result, the medical community has had to
rely on platelet pooling (the merging of platelets from multiple donors) to
obtain a volume of platelets sufficient for therapeutic treatment, thus
amplifying the risk of transmission of blood borne disease or adverse
reaction.

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The Company addresses these drawbacks of platelet therapy with its apheresis
systems such as the Haemonetics MCS(R)+ mobile collection system. The
apheresis process permits the collection of therapeutically useful quantities
of components such as platelets from a single donor. The end product of
platelet apheresis is referred to as single donor platelets (as opposed to
pooled or random donor platelets traditionally available from blood banks or
hospital centers). Apheresis technology conserves the donor pool since donors
can donate non-red cell blood components more often than whole blood. Whole
blood donors are restricted in their ability to donate by regulatory agencies
to eight week intervals, whereas apheresis donors may donate as often as twice
a week. In addition, apheresis systems offer a purer and safer product to the
recipient because of the significant reduction in the number of donors to
which the recipient is exposed.

The Company markets its automated apheresis systems to hematologists,
oncologists and blood bankers.

Plasma Collection

Many important therapeutic and diagnostic products are derived from the
collection and subsequent processing of plasma. Therapeutic products derived
from plasma include albumin and plasma protein fractions, which are used
primarily as volume expanders for burn and shock victims; gamma globulins,
which are used for the prevention of diseases such as tetanus, rabies,
measles, etc.; coagulation specific concentrate products such as Factor VIII
and other derivatives such as hepatitis vaccine. Several companies have
developed and applied for U.S. Food and Drug Administration ("FDA") approval
to market non-plasma derived recombinant Factor VIII products. While such
products may reduce demand for plasma derived Factor VIII, the Company
believes they should have minimal effect on the demand for other plasma
products such as albumin and gamma globulin. Diagnostic products derived from
source plasma include blood grouping sera, test kit controls and quality
control reagents.

Traditionally, plasma has been collected by manual techniques as part of
whole blood collection. As in the case of manual blood component collection,
manual techniques for collection of plasma have had poor product yields and
are very time consuming.

In the United States, commercial operators account for approximately 95% of
plasma collection, with the remainder collected from volunteer donors of other
blood bank organizations. Outside of the United States, plasma is collected
primarily from volunteer donors.

Commercial plasma collection firms in the United States pay donors for their
plasma and then fractionate the collected plasma themselves and sell the
resultant protein products or sell the collected plasma worldwide for
fractionation purposes. Outside the United States, virtually every
industrialized nation has announced, and is implementing, major programs to
reduce dependence on imports of blood components from commercial operators and
to become self-sufficient in plasma collection. Increased competitive
pressures from these self-sufficiency programs and the increased appeal of
more efficient, user-friendly automated systems are leading to conversion from
manual to automated plasma collection techniques.

The Haemonetics automated plasma collection systems, PCS(R) and PCS(R)2
shorten the collection procedure to approximately forty minutes from ninety
minutes required for the manual collection. Donor safety is also increased as
the donor is never separated from his or her own blood, eliminating the risk
that exists in manual collection of having the wrong red cells returned to the
donor. The PCS(R) and PCS(R)2 systems also yield a higher quality plasma than
manual methods, since a smaller amount of anticoagulant is needed and the
donor is not given any intravenous fluids to dilute his or her native plasma.

Haemonetics has aggressively pursued the conversion of commercial plasma
collection firms from manual methods to the Company's automated PCS(R)
systems. Under contracts with Alpha Therapeutics, Bayer and Armour
pharmaceuticals, the Company has agreed to install and service its PCS(R) and
PCS(R)2 systems free of charge to certain plasma collection centers operated
by these parties. These fractionators, in turn, have agreed to purchase
certain minimum numbers of processing chambers from Haemonetics.

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Plasma collection from volunteer donors is undergoing dramatic changes due
to the implementation of national self-sufficiency programs driven by the
threat of AIDS and other infectious diseases. The Company has been the primary
supplier of automated plasma collection systems to the national blood
collection programs of Japan, France, Sweden, Canada and the United Kingdom.

Automated Red Cell Collection

Red blood cell transfusions are performed to restore the oxygen-carrying
capacity of the blood, in situations involving hemorrhaging, such as surgery
and trauma and other blood disorders.

Traditionally, red blood cells have been derived from the manual separation
of red blood cells obtained through whole blood donations. However, this
process involves time consuming secondary handling and processing. It also
produces a red cell transfusion product of variable therapeutic content due to
variations found in donor characteristics and the whole blood donation
process.

Haemonetics has recently extended its MCS(R)+ system product line to offer
systems for the apheresis collection of red blood cells. The Company's red
blood cell apheresis systems automate the manual red blood cell collection
process, producing a more consistent red cell transfusion unit and eliminating
the lengthy secondary handling and processing steps. In addition, by
collecting red blood cells in multiple units or together with other apheresis
products such as plasma, the blood center can meet its collection requirements
more efficiently and make better use of a shrinking donor base.

Revenue Detail

In the year ended March 30, 1996, sales of disposable products accounted for
approximately 88% of net revenues. Sales of disposable products by the Company
were 7.7% higher in 1996 than in 1995 and grew at a compound average annual
growth rate of 12% for the three years ended March 30, 1996. There can be no
assurance that sales of disposable products will continue to grow at this
rate. Growth in sales of disposables is related to increases in installed
equipment in use, as well as increased utilization rates of the Company's
equipment. Service revenues, which are included as part of disposables
revenues, have in recent years accounted for approximately 1.0% of the
Company's net revenues.

Sales of equipment accounted for approximately 12% of net revenues in fiscal
1996 and approximately 13% in fiscal 1995. Variations in the level of the
Company's sales of equipment are likely to occur from year to year and quarter
to quarter. These variations reflect the buying cycles of the Company's
customers and, in particular, the level of equipment purchases by the national
blood organizations in Europe, Japan and other countries which are
implementing programs for national self-sufficiency in blood products with the
use of the Company's products.

MARKETING/SALES/DISTRIBUTION

Haemonetics markets and sells its products to hospitals, independent blood
banks, commercial plasma collection centers and national health organizations
through its own direct sales force in North America, Western Europe and Japan.
This sales force is composed of full-time sales representatives and clinical
specialists based in the United States, United Kingdom, Germany, France,
Sweden, The Netherlands, Denmark, Italy, Australia, Austria, Hong Kong,
Canada, Japan, Switzerland, and Belgium. These sales representatives and
clinical specialists interact with physicians, surgeons and nurses to promote
and sell Haemonetics' products and services, approximately 40% focusing on the
surgical blood salvage market and the remainder on the combination of the
Company's other markets. The clinical specialists assist the Company's sales
force and customers through demonstrations and training.

Haemonetics distributes its disposable Cell Saver(R) products in North
American cardiovascular hospitals exclusively through the Bentley Laboratories
division of Baxter International, Inc. ("Bentley"). This relationship gives
Haemonetics valuable additional exposure to the important North American
cardiovascular market. In

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addition, Haemonetics uses numerous distributors to market its products in
South America, Eastern Europe, the Middle East and the Far East.

Haemonetics' field service engineers support its equipment sales through
ongoing professional equipment service worldwide. The functional and safety
features of the equipment are checked to ensure correct and reliable
operation. All new equipment is covered by a 12-month warranty, during which
all service needs are covered at no charge and all equipment receives a
preventive maintenance check. After the initial warranty period, the Company
provides service compensated under preventive maintenance contracts or through
emergency service fees.

The field service engineer group is supported by a headquarters-based
technical support engineering staff which also provides 24-hour phone support
365 days a year. Many hospital customers have their own staffs of biomedical
engineers who rely on the Company's technical training and spare parts
logistic systems.

The Company endeavors to minimize the time between the receipt of purchase
orders and the date of delivery of products. Accordingly, the Company's
backlog as of the end of any period represents only a portion of actual sales
for the succeeding period.

RESEARCH AND DEVELOPMENT

The development of extracorporeal blood processing systems has required that
Haemonetics develop technical expertise in mechanical engineering, electrical
engineering, software engineering and materials engineering. The Company's
mechanical engineers design pumps, valves, equipment packaging, centrifuge
rotors and disposable plastic components (i.e. harness sets and processing
chambers). The Company's electrical engineers design sensors (optical,
ultrasonic, pressure, weight speed), motors, control circuits, driver
circuits, computers and display systems. The Company's software electrical
engineers create programs that use input data from sensors to control the
actuation of mechanical components used to collect or manipulate the blood
components. The materials engineers monitor products' biocompatibility and
clinical performance and work with major raw materials and tooling vendors.
Innovations resulting from these efforts will allow the Company to develop
systems that are faster, smaller and more user-friendly or that incorporate
additional features important to its customer base.

Haemonetics operates research and development centers in Switzerland, Japan
and the United States, so that protocol variations are incorporated which
closely match local customer requirements. For the past three fiscal years,
the Company's expenditures for research and development were $18.5 million,
$16.7 million and $15.8 million, respectively. All research and development
costs are expensed as incurred. The Company expects to continue to invest
substantial resources in research and development.

Customer collaboration is an important part of Haemonetics' technical
strength and competitive advantage. Since its inception, Haemonetics has built
close working relationships with a significant number of blood processing
professionals around the world. This network of experts provides Haemonetics
with ideas for new products, ways to improve existing products, new
applications and enhanced protocols. They also provide Haemonetics with test
sites, objective evaluations and expert opinions regarding technical and
performance issues.

MANUFACTURING

Disposables

Each individual blood collection procedure requires a disposable plastic
set, which contains a medical-grade tubing harness, bags, filters and a
processing chamber. Haemonetics molds many of its own components which it then
assembles with manufactured and purchased tubing and sheeting to form the
final products. The Company tests the materials for purity to determine that
they are biocompatible and free of contamination. Assembly is accomplished in
a clean room environment.

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Production begins with injection, molding or extrusion of plastic parts.
Molding tools are qualified to ensure specified tolerances and
reproducibility. Each step of the subsequent manufacturing and assembly
processes is qualified and validated. Critical process steps and materials are
documented to ensure that every unit produced consistently meets performance
requirements.

All processing chamber and most set assembly is done in the Company's
Braintree, Pittsburgh, or Scotland facilities. All disposable blood processing
products are sterilized for patient and donor protection and are tested in
laboratories to confirm sterility. Some manufacturing of less proprietary
components is performed for the Company by outside contractors. The Company
also maintains two important relationships with Japanese manufacturers who
provide finished sets in Singapore and Thailand. These sets are primarily used
by our customers in Japan.

Equipment

Each Haemonetics blood processing machine is designed in-house and assembled
from components that are either manufactured by the Company or manufactured by
others to Company specifications. Many critical mechanical assemblies are
machined and fabricated utilizing the Company's own process control
procedures. The completed instruments are programmed, calibrated and tested to
ensure compliance with the Company's engineering and quality assurance
specifications. Throughout the manufacturing process, inspection checks are
made to verify proper assembly and functionality. When mechanical and
electronic components are sourced from outside vendors, detailed vendor
qualification requirements are met and verified through focused incoming
inspection programs. Approximately 98% of the Company's equipment, including
all new systems, is manufactured by Haemonetics. The remainder, consisting
entirely of established products, is manufactured for the Company by an
outside contractor.

Certain parts and components used in the Company's equipment and disposables
are purchased from various single sources. If it became necessary to do so,
the Company believes that, in most cases, alternative sources of supply could
be developed over a relatively short period of time. Nevertheless, an
interruption in supply could temporarily interfere with production schedules
and affect the Company's results of operations.

All of the Company's equipment and disposable manufacturing sites are
certified to the ISO 9000 standard and to the medical device directive
allowing placement of the CE mark of conformity.

COMPETITION

The markets for the Company's products are developing and are highly
competitive. Although the Company competes directly with others, no one
company competes with the Company across its full line of products.
Haemonetics has established a record of innovation and leadership in each of
the areas in which it competes.

Competition in the surgical blood salvage market, where the underlying
technology among the major competitors is similar, is based upon reliability,
ease of use, service, support and price. Haemonetics competes with Medtronics,
Inc.; COBE Laboratories, Inc. ("COBE"), a subsidiary of Gambro AB; and Sorin
Biomedica.

In the blood component therapy market, competition is based upon the ability
of systems to achieve higher levels of performance as measured by the time and
efficiency of component collection and the quality of the components
collected. The Company's major competitors in this market are COBE and Baxter
International, Inc. Each of these companies has taken a different
technological approach than the Company in the design of systems for the
component therapy market.

In the area of plasma collection, the Company competes with Baxter
International, Inc. on the basis of overall cost-effectiveness of equipment
and disposables over the long term and on the quality, ease of use and
technical features of their systems. The Company's automated systems also
compete with manual collection systems, which are less expensive, but also
slower, less efficient and clinically riskier.

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The Company believes its technical staff is highly skilled, but many of its
competitors have substantially greater financial resources and larger
technical staffs at their disposal. There can be no assurance that such
competitors will not direct substantial efforts and resources toward the
development and marketing of products competitive with those of the Company.

The Company believes its ability to maintain its competitive advantage will
continue to depend on a combination of market leadership, its reputation, its
patents, its unpatented proprietary know-how in several technological areas,
the quality, safety and cost effectiveness of its products and the need to
rigorously document clinical performance.

SEASONALITY

Net revenues have historically been higher in the Company's third and fourth
quarters, reflecting principally the seasonal buying patterns of the Company's
customers.

PATENTS

Haemonetics holds patents in the United States and abroad on certain of its
machines and disposables. These patents cover certain elements of its systems,
including protocols employed in its equipment and certain aspects of its
processing chambers and other disposables. The Company considers its patents
to be important but not indispensable to its business. To maintain its
competitive position, the Company relies to a greater degree on the technical
expertise and know-how of its personnel than on its patents. The Company
pursues an active and formal program of invention disclosure and patent
application both in the United States and abroad. The Company also owns
various trademarks which have been registered in the United States and certain
other countries.

REGULATION

The products manufactured and marketed by the Company are subject to
regulation by the Center for Biologics ("CBER") and the Center of Devices
("CDRH") of the U.S. Food and Drug Administration ("FDA") and in many
instances, by state and non-U.S. government agencies.

All medical devices introduced to the market since 1976 are required by the
FDA, as a condition of marketing, to secure either a 510(k) premarket
notification clearance or an approved Premarket Approval Application ("PMA").
A 510(k) premarket notification clearance indicates FDA agreement with an
applicant's determination that the product for which clearance has been sought
is substantially equivalent to another legally marketed medical device. An
approved PMA application indicates that the FDA has determined that the device
has been proven, through the submission of clinical data and manufacturing
information, to be safe and effective for its labeled indications. The process
of obtaining a 510(k) clearance typically takes six to nine months and
involves the submission of limited clinical data and supporting information,
while the PMA process typically will last more than a year and requires the
submission of significant quantities of clinical data and supporting
information.

The Company maintains customer complaint files, records all lot numbers of
disposable products and conducts periodic audits to assure compliance with FDA
regulations. The Company places special emphasis on customer training, and
advises all customers that blood processing procedures should be undertaken
only by qualified personnel.

The Company is also subject to regulation in the countries in which it
markets its products. Many of the regulations applicable to the Company's
products in such countries are similar to those of the FDA. However, the
national health or social security organizations of certain countries require
the Company's products to be qualified before they can be marketed in those
countries. Haemonetics has complied with these regulations and has obtained
such qualifications.

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Federal, state and foreign regulations regarding the manufacture and sale of
products such as the Company's systems are subject to change. The Company
cannot predict what impact, if any, such changes might have on its business.

ENVIRONMENTAL MATTERS

The Company does not anticipate that compliance with federal, state and
local environmental protection laws presently in effect will have a material
adverse impact upon the Company or require any material capital expenditures.

EMPLOYEES

As of March 30, 1996, Haemonetics employed 1,251 persons assigned to the
following functional areas: manufacturing, 575; sales and marketing, 258;
general and administrative, 189; research and development, 100; quality
control and field service, 129. The Company considers its employee relations
to be satisfactory.

(E) FINANCIAL INFORMATION ABOUT FOREIGN AND DOMESTIC OPERATIONS AND EXPORT
SALES.

The information required by this item is included in Part II of this report
in footnote 11 of the financial statements, page 30.

ITEM 2. PROPERTIES

The Company owns its main facility, which is located on 14 acres in
Braintree, Massachusetts. This facility is located in a light industrial park
and was constructed in the 1970s. The building is approximately 180,000 square
feet, of which 72,000 square feet are devoted to manufacturing and quality
control operations, 38,000 square feet to warehousing, 60,000 square feet for
administrative and research and development activities and 10,000 square feet
available for expansion.

In July 1991, the Company leased 9,631 square feet of space on property
adjacent to the main facility in Braintree. The space is used for general
office requirements. Annual lease rental expense is $81,863. In January of
1992, an additional 5,400 square feet was leased in the building. This space
is used to operate Kids Space at Haemonetics, a child care facility for use by
employees of the Company. Annual lease expense for this space is $104,913. In
November of 1992, the original 9,631 square feet was increased by 16,370
square feet in order to accommodate additional office space requirements.
Annual lease expense for this is $187,531.

The Company leases an 81,850 square foot facility in Pittsburgh,
Pennsylvania. This facility is used for warehousing, distribution of the
products and, as of November of 1991, manufacturing operations. Annual lease
expense is $251,000 for this facility.

In April 1994, the Company purchased a facility in Bothwell, Scotland. The
facility manufactures disposable components for its automated plasma
collection and surgical blood salvage systems for its European customers. The
facility and related property were acquired at a cost of approximately
$1,600,000. The facility is approximately 22,200 square feet. Manufacturing
operations began in August, 1994.

In September 1994, the Company acquired a facility in Tucson, Arizona. This
facility provides administrative, training and blood donation center space for
Haemonetics Blood Services and Training Institute. This facility was acquired
at a cost of approximately $1,850,000 for four floors totaling 28,500 square
feet.

In August 1995, the Company purchased a facility in Union, South Carolina.
This facility will be used for the manufacture of solutions to support the
Company's component therapy and plasma businesses. The facility and land were
acquired for a cost of $2,423,000. The facility is approximately 57,700 square
feet.

The Company also leases sales, service and distribution facilities in the
United Kingdom, France, Sweden, Switzerland, The Netherlands, Germany, Japan,
Hong Kong, Italy, Belgium and Austria.

11
<PAGE>

ITEM 3. LEGAL PROCEEDINGS

The Company is presently engaged in various legal actions, and although
ultimate liability cannot be determined at the present time, the Company
believes that any such liability will not materially affect the consolidated
financial position of the Company or its results of operations.

The Company's products are relied upon by medical personnel in connection
with the treatment of patients and the collection of blood from donors. In the
event that patients or donors sustain injury or death in connection with their
condition or treatment, the Company, along with others, may be sued, and
whether or not the Company is ultimately determined to be liable, it may incur
significant legal expenses. In addition, such litigation could damage the
Company's reputation and, therefore, impair its ability to market its products
and impair its ability to obtain product liability insurance or cause the
premiums for such insurance to increase. The Company carries product liability
coverage. While management of the Company believes that the aggregate current
coverage is sufficient, there can be no assurance that such coverage will be
adequate to cover liabilities which may be incurred. Moreover, the Company may
in the future be unable to obtain product liability coverage in amounts and on
terms that it finds acceptable, if at all.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

None

EXECUTIVE OFFICERS OF THE REGISTRANT

The information concerning the Company's Executive Officers required by this
item is incorporated by reference to the section in Part III hereof entitled
"Directors and Executive Officers of the Registrant."

PART II

ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS

SUMMARY OF QUARTERLY DATA
(UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE DATA)

<TABLE>
<CAPTION>
1996 QUARTER ENDED 1995 QUARTER ENDED
------------------------------------ ---------------------------------
JULY 1, SEPT. 30, DEC. 30, MARCH 30, JULY 2, OCT. 1, DEC. 31, APRIL 1,
1995 1995 1995 1996 1994 1994 1994 1995
------- --------- -------- --------- ------- ------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net revenues............ $68,775 $69,133 $69,858 $70,450 $63,311 $65,337 $65,574 $68,194
Gross profit............ 37,317 38,565 39,120 39,611 35,815 36,695 36,040 36,305
Operating income........ 13,560 13,724 13,760 13,327 12,641 13,812 12,953 12,972
Net income.............. 8,740 9,200 8,886 9,099 8,100 8,505 8,465 8,575
Net income per share.... $ 0.32 $ 0.33 $ 0.32 $ 0.33 $ 0.28 $ 0.30 $ 0.30 $ 0.31
</TABLE>

Haemonetics' common stock is listed on the New York Stock Exchange. The
following table sets forth for the periods indicated the high and low of the
daily sales prices, which represent actual transactions as reported by the New
York Stock Exchange.

There were approximately 773 holders of record of the Company's common stock
as of May 22, 1996.

12
<PAGE>

ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA

HAEMONETICS CORPORATION AND SUBSIDIARIES
TEN-YEAR REVIEW
(IN THOUSANDS, EXCEPT SHARE DATA)

<TABLE>
<CAPTION>
SUMMARY OF OPERATIONS 1996 1995 1994 1993 1992 1991 1990 1989 1988 1987
- --------------------- --------- --------- --------- --------- --------- --------- --------- --------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net revenues......... $ 278,216 $ 262,416 $ 248,449 $ 216,286 $ 176,419 $ 157,332 $ 124,363 $ 115,244 $ 91,409 $ 52,682
Cost of goods sold... 123,603 117,561 104,879 97,296 85,524 82,656 62,322 54,611 42,840 28,800
--------- --------- --------- --------- --------- --------- --------- --------- -------- --------
Gross profit......... 154,613 144,855 143,570 118,990 90,895 74,676 62,041 60,633 48,569 23,882
--------- --------- --------- --------- --------- --------- --------- --------- -------- --------
Operating expenses:
Research and
development........ 18,467 16,729 15,786 13,589 10,478 8,386 5,776 5,226 4,799 3,206
Selling, general and
administrative..... 81,775 75,748 75,940 63,576 50,517 42,452 34,940 34,783 26,724 17,543
--------- --------- --------- --------- --------- --------- --------- --------- -------- --------
Total Operating
Expenses........... 100,242 92,477 91,726 77,165 60,995 50,838 40,716 40,009 31,523 20,749
--------- --------- --------- --------- --------- --------- --------- --------- -------- --------
Operating income..... 54,371 52,378 51,844 41,825 29,900 23,838 21,325 20,624 17,046 3,133
Other
income/(expense),
net................. 883 192 (1,050) (1,839) (2,222) (2,927) (4,491) (2,822) (263) (764)
--------- --------- --------- --------- --------- --------- --------- --------- -------- --------
Income before
provision for income
taxes............... 55,254 52,570 50,794 39,986 27,678 20,911 16,834 17,802 16,783 2,369
Provision for income
taxes............... 19,329 18,925 19,305 15,231 9,687 7,110 5,455 6,272 6,782 373
--------- --------- --------- --------- --------- --------- --------- --------- -------- --------
Net income........... $ 35,925 $ 33,645 $ 31,489 $ 24,755 $ 17,991 $ 13,801 $ 11,379 $ 11,530 $ 10,001 $ 1,996
========= ========= ========= ========= ========= ========= ========= ========= ======== ========
Earnings per share:
Net income.......... $ 1.30 $ 1.18 $ 1.09 $ 0.87 $ 0.63 $ 0.50 $ 0.41 $ 0.42 $ 0.36 $ 0.07
Weighted average
number of common and
common equivalent
shares.............. 27,722 28,443 28,802 28,612 28,342 27,554 27,554 27,554 27,554 27,554
========= ========= ========= ========= ========= ========= ========= ========= ======== ========
<CAPTION>
FINANCIAL AND
STATISTICAL DATA: 1996 1995 1994 1993 1992 1991 1990 1989 1988 1987
- ----------------- --------- --------- --------- --------- --------- --------- --------- --------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Working capital...... $ 112,440 $ 108,459 $ 81,504 $ 63,431 $ 40,919 $ 29,471 $ 27,233 $ 30,369 $ 19,668 $ 12,122
--------- --------- --------- --------- --------- --------- --------- --------- -------- --------
Current ratio........ 3.4 3.2 2.7 2.6 2.1 1.8 1.8 2.4 1.7 2.0
Property, plant and
equipment, net...... $ 86,416 $ 82,059 $ 68,342 $ 56,015 $ 46,751 $ 42,300 $ 36,214 $ 23,267 $ 20,403 $ 14,801
--------- --------- --------- --------- --------- --------- --------- --------- -------- --------
Capital expenditures. $ 19,710 $ 24,907 $ 22,891 $ 17,595 $ 11,373 $ 12,975 $ 17,538 $ 7,314 $ 7,616 $ 4,599
Depreciation and
amortization........ $ 13,143 $ 13,711 $ 10,720 $ 8,517 $ 6,954 $ 6,996 $ 4,561 $ 3,494 $ 4,569 $ 3,957
--------- --------- --------- --------- --------- --------- --------- --------- -------- --------
Total assets......... $ 287,818 $ 280,509 $ 230,684 $ 187,755 $ 144,846 $ 117,754 $ 110,630 $ 87,752 $ 68,399 $ 41,747
Total debt........... $ 18,534 $ 33,392 $ 14,278 $ 13,562 $ 24,098 $ 24,805 $ 33,903 $ 28,588 $ 14,792 $ 10,399
--------- --------- --------- --------- --------- --------- --------- --------- -------- --------
Stockholders' equity. $ 216,970 $ 193,177 $ 160,776 $ 126,650 $ 90,581 $ 67,543 $ 54,083 $ 42,415 $ 31,627 $ 21,313
Return on average
equity.............. 17.5% 19.0% 21.9% 22.8% 22.8% 22.7% 23.6% 31.1% 37.8% 11.6%
Debt as a % of
stockholders'
equity.............. 8.5% 17.3% 8.9% 10.7% 26.6% 36.7% 62.7% 67.4% 46.8% 48.8%
--------- --------- --------- --------- --------- --------- --------- --------- -------- --------
Number of employees.. 1,251 1,282 1,109 1,002 965 923 810 742 780 625
Net revenues per
employee............ $ 222 $ 205 $ 224 $ 216 $ 183 $ 170 $ 154 $ 155 $ 117 $ 84
--------- --------- --------- --------- --------- --------- --------- --------- -------- --------
</TABLE>

13
<PAGE>

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS

Results of Operations

The table outlines the components of the consolidated statements of income
as a percentage of net revenues;

<TABLE>
<CAPTION>
PERCENTAGE OF NET REVENUES PERCENTAGE INCREASE
------------------------------------------ -------------------
YEAR ENDED YEAR ENDED YEAR ENDED
MARCH 30, 1996 APRIL 1, 1995 APRIL 2, 1994 1996/95 1995/94
-------------- ------------- ------------- ------- -------
<S> <C> <C> <C> <C> <C>
Net revenues............ 100.0% 100.0% 100.0% 6.0% 5.6%
Cost of goods sold...... 44.4 44.8 42.2 5.1 12.1
----- ----- ----- ----- -----
Gross profit............ 55.6 55.2 57.8 6.7 0.9
Operating expenses:
Research and develop-
ment................. 6.6 6.4 6.3 10.4 6.0
Selling, general and
administrative....... 29.5 28.8 30.6 8.0 --
----- ----- ----- ----- -----
Total operating ex-
penses............. 36.1 35.2 36.9 8.4 0.8
----- ----- ----- ----- -----
Operating income........ 19.5 20.0 20.9 3.8 1.0
Interest expense........ (0.8) (0.7) (0.7) 26.4 3.8
Interest income......... 0.8 0.9 1.1 (17.6) (6.9)
Other income (expense),
net.................... 0.4 (0.2) (0.8) 321.9 (74.8)
----- ----- ----- ----- -----
Income before provision
for income taxes....... 19.9 20.0 20.5 5.1 3.5
Provision for income
taxes.................. 7.0 7.2 7.8 2.1 (2.0)
----- ----- ----- ----- -----
Net income.............. 12.9% 12.8% 12.7% 6.8 6.8
===== ===== ===== ===== =====
</TABLE>

1996 compared to 1995

Net revenues in 1996 increased 6.0% to $278.2 million from $262.4 million in
1995. Worldwide disposable sales increased 7.7% while increased equipment
sales in the domestic markets were offset by decreases in the international
markets. Sales of disposables products accounted for approximately 88% and
87%, respectively, of net revenues for the twelve months ended March 30, 1996
and April 1, 1995. During the first half of 1995, the Company discontinued
distribution of the SCD system (Sterile Connection Device) and its disposables
wafers. Without the effects of such sales, net revenues increased 7.4% in 1996
from 1995, and worldwide disposables sales increased 9.3% and worldwide
equipment sales decreased 4.3%.

Gross profit in 1996 increased to $154.6 million from $144.9 million in
1995. As a percentage of net revenues gross profit increased 0.4% to 55.6% in
1996 from 55.2% in 1995. The favorable manufacturing variance during the year
accounts for 0.7% of the increase in gross profit. This was offset by a 0.3%
decrease attributable to lower margins on domestic sales.

The Company expended $18.5 million in 1996 on research and development (6.6%
of net revenues) and $16.7 million in 1995 (6.4% of net revenues).

Selling, general and administrative expenses were $81.8 million in 1996 and
$75.7 million in 1995 an increase as a percentage of net revenues to 29.5%
from 28.8%. The increased spending resulted from increased staffing and
related personnel costs in both the domestic and international markets.

Interest expense increased in 1996 to $2.3 million from $1.8 million in 1995
due to increases in both the average level of borrowing during the year and in
interest rates. Interest income decreased in 1996 to $2.1 million from $2.5
million in 1995 resulting from a decrease in the Company's average investment
in sales-type leases of its equipment during the year. In 1996 other income,
net, was $1.1 million compared to other expenses, net of $0.5 million in 1995
due to the lower net costs of foreign exchange contracts.

14
<PAGE>

The provision for income taxes decreased as a percentage of pretax income to
approximately 35.0% in 1996 from 36.0% in 1995, due to favorable tax treatment
of certain international operations.

1995 Compared to 1994

Net revenues in 1995 increased 5.6% to $262.4 million from $248.4 million in
1994. Worldwide disposable sales increased 8.0%, with increases in both the
domestic and international markets. This represents 6.7% of the increase in
revenues, offset 1.1% by a worldwide equipment sales decrease of 7.3%. Sales
of disposable products accounted for approximately 87% and 85%, respectively,
of total net revenues in fiscal 1995 and 1994. During the year ended April 1,
1995, the Company discontinued distribution of the SCD system and its
disposables wafers. Without the effects of such sales in both years, net
revenues increased 8.7% in 1995 from 1994, composed of an increase in
worldwide disposables sales of 10.7% and a decrease in worldwide equipment
sales of 2.9%.

Gross profit in 1995 increased to $144.9 million from $143.6 million in
1994. As a percentage of net revenues, gross profit decreased to 55.2% from
57.8%. Unfavorable results in manufacturing costs and efficiencies resulted in
a 1.0% reduction in gross profit. The remaining 1.6% reduction was
attributable to worldwide pricing pressure on equipment and the overall
product mix of both equipment and disposable sales.

The Company expended $16.7 million in 1995 (6.4% of net revenues) and $15.8
million in 1994 (6.3% of net revenues) on research and development. The
increase resulted primarily from increased staffing, related personnel costs
and use of external resources.

Selling, general and administrative expenses decreased to $75.7 million in
1995 from $75.9 million in 1994 and decreased as a percentage of net revenues
to 28.8% from 30.6%. Increased staffing, related personnel costs and
distribution expenses, primarily in the international markets, were offset by
a decrease in various domestic expenses.

Interest expense remained level at $1.8 million in 1995 and 1994 and as a
percentage of net revenues of 0.7% in 1995 and 1994.

Interest income decreased to $2.5 million in 1995 from $2.7 million in 1994
resulting primarily from a decrease in the Company's average investment in
sales-type leases of its equipment. Other expense net, decreased to $0.5
million in 1995 from $2.0 million in 1994, primarily due to reduced net
expenses of $1.6 million on foreign currency hedging expenses.

The provision for income taxes decreased as a percentage of pretax income to
approximately 36.0% in 1995 from 38.0% in 1994, due to utilization of tax
credits and favorable tax treatment of the Company's Foreign Sales
Corporation.

LIQUIDITY AND CAPITAL RESOURCES

The Company historically has satisfied its cash requirements principally
from internally generated cash flow, stock offerings and bank borrowings.
During the twelve months ended March 30, 1996, the Company generated $54.8
million in cash flow from operating activities compared to $15.6 million in
cash flow from operating activities for the twelve months ended April 1, 1995.
The Company's need for funds is derived primarily from capital expenditures,
acquisitions, treasury stock purchases and working capital. Cash used to pay
down the Company's revolving credit agreements totaled $12.8 million for the
twelve months ended March 30, 1996. During the twelve months ended March 30,
1996, net cash used for capital expenditures was $19.7 million related to
equipment utilized in the U.S. commercial plasma business and investments in
facilities and manufacturing equipment. The Company utilized $6.2 million to
acquire the assets and related liabilities of DHL Laboratories on August 18,
1995. The change in accounts receivable utilized net cash of $1.9 million. The
Company used $8.9 million to repurchase 514,141 shares of treasury stock
during the twelve months ended March 30, 1996. On January 19, 1996, the
Company's Board of Directors approved an additional 1,000,000 share

15
<PAGE>

repurchase program to be implemented upon the completion of the existing
1,000,000 share program. Combined under both programs there remains
approximately 1,492,000 shares available to repurchase by the Company at
prevailing prices as market conditions warrant. The Company believes that
committed bank lines, combined with internally generated funds, will be
sufficient to meet future liquidity and capital needs.

At March 30, 1996, the Company had working capital of $112.4 million. This
reflects an increase of $4.0 million in working capital for the twelve months
ended March 30, 1996.

16
<PAGE>

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

HAEMONETICS CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)

<TABLE>
<CAPTION>
MARCH 30, APRIL 1,
1996 1995
--------- --------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents................................. $ 13,434 $ 4,230
Accounts receivable, less allowance of $984 in 1996 and
$681 in 1995............................................. 60,326 63,277
Inventories............................................... 56,729 59,993
Current investment in sales-type leases, net.............. 11,020 10,821
Deferred tax asset........................................ 10,911 10,911
Other prepaid and current assets.......................... 6,459 8,362
-------- --------
Total current assets.................................... 158,879 157,594
PROPERTY, PLANT AND EQUIPMENT:
Land, building, and building improvements................. 23,156 17,598
Machinery and equipment................................... 73,149 67,152
Furniture and fixtures.................................... 6,599 3,253
Commercial plasma and rental equipment.................... 57,920 54,924
-------- --------
Total property, plant and equipment..................... 160,824 142,927
Less: accumulated depreciation.......................... 74,408 60,868
-------- --------
Net property, plant and equipment....................... 86,416 82,059
OTHER ASSETS:
Investment in sales-type leases, net...................... 21,428 19,192
Distribution rights, net.................................. 12,418 15,517
Other assets, net......................................... 8,677 6,147
-------- --------
Total other assets...................................... 42,523 40,856
-------- --------
Total assets............................................ $287,818 $280,509
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Notes payable and current maturities of long-term debt.... $ 3,378 $ 8,325
Accounts payable.......................................... 16,909 15,646
Accrued payroll and related costs......................... 8,305 8,328
Accrued income taxes...................................... 8,345 8,485
Other accrued liabilities................................. 9,502 8,351
-------- --------
Total current liabilities............................... 46,439 49,135
DEFERRED INCOME TAXES....................................... 9,253 13,130
LONG-TERM DEBT, NET OF CURRENT MATURITIES................... 15,156 25,067
COMMITMENTS AND CONTINGENCIES (NOTE 6)
STOCKHOLDERS' EQUITY:
Common stock, $.01 par value; Authorized--80,000,000
shares; Issued--28,770,346 shares in 1996; 28,402,858
shares in 1995........................................... 288 284
Additional paid-in capital................................ 52,355 50,086
Retained earnings......................................... 182,707 146,824
Cumulative translation adjustment......................... 7,387 13,502
-------- --------
Stockholders' equity before treasury stock................ 242,737 210,696
Less: treasury stock at cost--1,607,354 shares in 1996;
1,133,048 shares in 1995............................... 25,767 17,519
-------- --------
Total stockholders' equity.............................. 216,970 193,177
-------- --------
Total liabilities and stockholders' equity.............. $287,818 $280,509
======== ========
</TABLE>

The accompanying notes are an integral part of these consolidated financial
statements.

17
<PAGE>

HAEMONETICS CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
YEAR ENDED
-----------------------------
MARCH 30, APRIL 1, APRIL 2,
1996 1995 1994
--------- -------- --------
<S> <C> <C> <C>
Net revenues..................................... $278,216 $262,416 $248,449
Cost of goods sold............................... 123,603 117,561 104,879
-------- -------- --------
Gross profit..................................... 154,613 144,855 143,570
-------- -------- --------
Operating expenses:
Research and development....................... 18,467 16,729 15,786
Selling, general and administrative............ 81,775 75,748 75,940
-------- -------- --------
Total operating expenses..................... 100,242 92,477 91,726
-------- -------- --------
Operating income................................. 54,371 52,378 51,844
Interest expense................................. (2,338) (1,849) (1,781)
Interest income.................................. 2,098 2,547 2,735
Other income (expense), net...................... 1,123 (506) (2,004)
-------- -------- --------
Income before provision for income taxes......... 55,254 52,570 50,794
Provision for income taxes....................... 19,329 18,925 19,305
-------- -------- --------
Net income....................................... $ 35,925 $ 33,645 $ 31,489
======== ======== ========
Net income per share............................. $ 1.30 $ 1.18 $ 1.09
======== ======== ========
Weighted average common and common equivalent
shares outstanding.............................. 27,722 28,443 28,802
======== ======== ========
</TABLE>

The accompanying notes are an integral part of these consolidated financial
statements.

18
<PAGE>

HAEMONETICS CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS" EQUITY
(IN THOUSANDS)

<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL CUMULATIVE TOTAL
------------- PAID-IN RETAINED TREASURY TRANSLATION STOCKHOLDERS'
SHARES $'S CAPITAL EARNINGS STOCK ADJUSTMENT EQUITY
------- ----- ---------- -------- -------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, April 3, 1993.. 28,016 $ 280 $46,339 $ 81,708 $ (2,061) $ 384 $126,650
Employee stock
purchase plan........ 41 -- 864 -- -- -- 864
Exercise of stock
options and related
tax benefit.......... 158 2 1,471 -- -- -- 1,473
Purchase of treasury
stock................ -- -- -- -- (115) -- (115)
Net income............ -- -- -- 31,489 -- -- 31,489
Translation
adjustment........... -- -- -- -- -- 415 415
------- ----- ------- -------- -------- ------- --------
Balance, April 2, 1994.. 28,215 282 48,674 113,197 (2,176) 799 160,776
Employee stock
purchase plan........ 25 -- 384 (18) 381 -- 747
Exercise of stock
options and related
tax benefit.......... 163 2 1,028 -- -- -- 1,030
Purchase of treasury
stock................ -- -- -- -- (15,724) -- (15,724)
Net income............ -- -- -- 33,645 -- -- 33,645
Translation
adjustment........... -- -- -- -- -- 12,703 12,703
------- ----- ------- -------- -------- ------- --------
Balance, April 1, 1995.. 28,403 284 50,086 146,824 (17,519) 13,502 193,177
Employee stock
purchase plan........ -- -- -- (42) 633 -- 591
Exercise of stock
options and related
tax benefit.......... 367 4 2,269 -- -- -- 2,273
Purchase of treasury
stock................ -- -- -- -- (8,881) -- (8,881)
Net income............ -- -- -- 35,925 -- -- 35,925
Translation
adjustment........... -- -- -- -- -- (6,115) (6,115)
------- ----- ------- -------- -------- ------- --------
Balance, March 30, 1996. 28,770 $ 288 $52,355 $182,707 $(25,767) $ 7,387 $216,970
======= ===== ======= ======== ======== ======= ========
</TABLE>

The accompanying notes are an integral part of these consolidated financial
statements.

19
<PAGE>

HAEMONETICS CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)

<TABLE>
<CAPTION>
YEAR ENDED
-----------------------------
MARCH 30, APRIL 1, APRIL 2,
1996 1995 1994
--------- -------- --------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income..................................... $ 35,925 $ 33,645 $ 31,489
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization................ 13,143 13,711 10,720
Increase (decrease) in deferred income taxes. (3,178) 892 (1,586)
Increase in accounts receivable--net......... (1,931) (9,880) (7,876)
Increase in inventories...................... (188) (13,474) (10,636)
Increase in sales-type leases................ (3,259) (48) (2,670)
(Increase) decrease in other assets.......... 7,968 (3,166) 1,210
Increase (decrease) in accounts payable,
accrued expenses and deferred revenue....... 6,330 (6,052) 6,361
-------- -------- --------
Total adjustments.......................... 18,885 (18,017) (4,477)
-------- -------- --------
Net cash provided by operating activities.. 54,810 15,628 27,012
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures on property, plant and
equipment, net................................ (19,710) (24,907) (22,891)
Increase in distribution rights................ -- (5,195) (1,333)
DHL asset acquisition.......................... (6,189) -- --
-------- -------- --------
Net cash used in investing activities...... (25,899) (30,102) (24,224)
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments on long-term real estate mortgage..... (152) (152) (124)
Net increase (decrease) in short-term revolving
credit agreements............................. (4,022) 2,175 1,459
Net increase (decrease) in long-term revolving
credit agreements............................. (8,798) 14,132 (1,712)
Employee stock purchase plan................... 591 747 864
Exercise of stock options and related tax
benefit....................................... 2,273 1,030 1,473
Purchase of treasury stock..................... (8,881) (15,724) (115)
-------- -------- --------
Net cash provided by (used in) financing
activities................................ (18,989) 2,208 1,845
Effect of exchange rates on cash and cash
equivalents..................................... (718) 339 1,263
-------- -------- --------
Net Increase (Decrease) in Cash and Cash
Equivalents..................................... 9,204 (11,927) 5,896
Cash and Cash Equivalents at Beginning of year... 4,230 16,157 10,261
-------- -------- --------
Cash and Cash Equivalents at End of year......... $ 13,434 $ 4,230 $ 16,157
======== ======== ========
Supplemental disclosures of cash flow
information:
Interest paid.................................. $ 1,791 $ 1,441 $ 1,587
Income taxes paid, net of refunds.............. $ 22,058 $ 22,583 $ 15,252
======== ======== ========
</TABLE>

The accompanying notes are an integral part of these consolidated financial
statements.

20
<PAGE>

HAEMONETICS CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. DESCRIPTION OF THE BUSINESS

Haemonetics Corporation and subsidiaries (the "Company") designs,
manufactures and markets automated systems for the collection, processing and
surgical salvage of blood.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Fiscal Year

The Company's fiscal year ends on the Saturday closest to the last day of
March. Fiscal 1996, fiscal 1995 and fiscal 1994 each included 52 weeks.

Principles of Consolidation

The accompanying consolidated financial statements include the accounts of
the Company and its subsidiaries. All significant intercompany accounts and
transactions have been eliminated in consolidation.

Use of Estimates

The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.

Cash and Cash Equivalents

Cash equivalents include money market funds with a maturity of less than one
week. Cash and cash equivalents are recorded at cost which approximates market
value.

Net Income per Share

Net income per share data are computed using the weighted average number of
shares of common stock outstanding and common equivalent shares from stock
options (using the treasury stock method). Fully diluted net income per share
data have not been presented as the amounts do not differ significantly from
primary net income per share.

Foreign Currency

Foreign currency transactions and financial statements are translated into
U.S. dollars following the provisions of Statement of Financial Accounting
Standards No. 52, "Foreign Currency Translation." Accordingly, assets and
liabilities of foreign subsidiaries are translated into U.S. dollars at
exchange rates in effect at year-end. Net revenues and costs and expenses are
translated at average rates in effect during the year. Included in other
income/expense in 1996, 1995, and 1994 are $710,000, $583,000 and $711,000,
respectively, in foreign currency transaction gains.

The Company enters into forward exchange contracts to hedge certain firm
sales commitments to customers, which are denominated in foreign currencies.
The purpose of the Company's foreign currency hedging activities is to protect
the Company from the risk that the eventual dollar cash flows resulting from
the sale of products to international customers will be adversely affected by
changes in exchange rates. Gains and losses realized on these contracts are
recorded in operations, offsetting the related foreign currency transactions.
The cash flows related to the gains and losses on these foreign currency
hedges are classified in the statements of cash flows as part of cash flows
from operating activities.

21
<PAGE>

HAEMONETICS CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

At March 30, 1996 and April 1, 1995, the Company had forward exchange
contracts, all having maturities of less than one year, to exchange foreign
currencies (major European currencies and Japanese yen) primarily for U.S.
dollars totaling $144,234,000 and $157,651,000, respectively. Gross unrealized
gains and losses from hedging firm sales commitments, based on current spot
rates, were a $6,964,000 gain and a $333,000 loss at March 30, 1996 and a
$154,000 gain and a $8,665,000 loss at April 1, 1995. Deferred gains and
losses are recognized in earnings when the future sales are recognized.
Management anticipates that these deferred amounts at March 30, 1996 will be
offset by the foreign exchange effect on sales of products to international
customers in fiscal year 1997.

The Company is exposed to credit loss in the event of nonperformance by
counter-parties on these foreign exchange contracts. The Company does not
anticipate nonperformance by any of these parties.

Financial Instruments

Statement of Financial Accounting Standards No. 107 ("SFAS 107"),
"Disclosures About Fair Value of Financial Instruments," requires disclosure
of an estimate of the fair value of certain financial instruments. The fair
value of the Company's financial instruments, including cash and cash
equivalents, notes payable and long-term debt, pursuant to SFAS 107
approximated their carrying values at March 30, 1996 and April 1, 1995. Fair
values have been determined through information obtained from market sources
and management estimates.

Property, Plant and Equipment

The Company provides for depreciation and amortization by charges to
operations using the straight-line method in amounts estimated to recover the
cost of the building and improvements, equipment, and furniture and fixtures
over their estimated useful lives as follows:

<TABLE>
<CAPTION>
ESTIMATED
ASSET CLASSIFICATION USEFUL LIVES
-------------------- ------------
<S> <C>
Building........................................................ 30 Years
Building and leasehold improvements............................. 5-25 Years
Machinery and equipment......................................... 3-10 Years
Furniture and fixtures.......................................... 5-8 Years
Commercial plasma and rental equipment.......................... 6-8 Years
</TABLE>

Leasehold improvements are amortized over the lesser of their useful lives
or the term of the lease. Maintenance and repairs are charged to operations as
incurred. When equipment and improvements are fully depreciated, sold or
otherwise disposed of, the asset cost and accumulated depreciation are removed
from the accounts, and the resulting gain or loss, if any, is included in the
results of operations.

Inventories

Inventories are stated at the lower of cost or market and include the cost
of material, labor and manufacturing overhead. Cost is determined on the
first-in, first-out method.

Inventories consist of the following:

<TABLE>
<CAPTION>
MARCH 30, APRIL 1,
1996 1995
--------- --------
(IN THOUSANDS)
<S> <C> <C>
Raw materials............................................. $ 6,727 $ 6,214
Work-in-process........................................... 6,699 5,186
Finished goods............................................ 43,303 48,593
------- -------
$56,729 $59,993
======= =======
</TABLE>

22
<PAGE>

HAEMONETICS CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

Revenue Recognition

Revenues from equipment and disposable product sales and sales-type leases
are recognized upon shipment. Service revenues are recognized ratably over the
contractual periods or as the services are provided. The Company provides for
the cost of warranty based on product shipments.

Income Taxes

The Company accounts for income taxes in accordance with Statement of
Financial Accounting Standards No. 109 ("SFAS 109"), "Accounting for Income
Taxes." SFAS 109 requires the recognition of deferred tax liabilities and
assets for the expected future tax consequences of the temporary differences
between the tax and financial reporting bases of assets and liabilities.

Accounting for Stock-Based Compensation

In December 1995, the Financial Accounting Standards Board issued Statement
of Accounting Standards No. 123 (SFAS No. 123) "Accounting for Stock-Based
Compensation," which is to become effective for fiscal years beginning after
December 15, 1995. SFAS No. 123 requires that employee stock-based
compensation be recorded or disclosed at its fair value. Management expects to
continue to account for stock-based compensation under APB No. 25 and does not
expect to adopt the new accounting provision for stock-based compensation in
SFAS No. 123 but will include the additional required disclosures in their
fiscal 1997 consolidated financial statements.

Accounting for Impairment of Long-Lived Assets

In March 1995, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 121 (SFAS No. 121),"Accounting for
Impairment of Long-Lived Assets and for Long-Lived Assets To Be Disposed Of,"
which is effective for the Company in Fiscal 1997. SFAS No. 121 requires that
long-lived assets and certain identifiable intangibles be reviewed for
impairment whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable. The statement also
requires that certain long-lived assets and identifiable intangibles that are
to be disposed be reported at the lower of the carrying amount or fair value
less cost to sell. The Company has not completed its analysis with respect to
the provisions of SFAS No. 121 and, accordingly, has not determined the effect
on the Company's consolidated financial condition or results of operations.

3. INVESTMENT IN SALES-TYPE LEASES

The Company leases equipment to customers under sales-type leases. The
components of the Company's net investment in sales-type leases are as
follows:

<TABLE>
<CAPTION>
MARCH 30, APRIL 1,
1996 1995
--------- --------
(IN THOUSANDS)
<S> <C> <C>
Total minimum lease payments receivable................... $39,537 $35,897
Less--Unearned interest.................................. 7,089 5,884
------- -------
Net investment in sales-type leases....................... 32,448 30,013
Less--Current portion.................................... 11,020 10,821
------- -------
$21,428 $19,192
======= =======
</TABLE>

23
<PAGE>

HAEMONETICS CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

Future minimum lease payments receivable under noncancelable leases as of
March 30, 1996 are as follows:

<TABLE>
<CAPTION>
FISCAL YEAR ENDING
------------------ (IN THOUSANDS)
<S> <C>
1997.......................................................... $13,905
1998.......................................................... 11,379
1999.......................................................... 7,835
2000.......................................................... 4,434
2001 and thereafter........................................... 1,984
-------
$39,537
=======
</TABLE>

4. NOTES PAYABLE AND LONG-TERM DEBT

Notes payable and long-term debt consist of the following:

<TABLE>
<CAPTION>
MARCH 30, APRIL 1,
1996 1995
--------- --------
(IN THOUSANDS)
<S> <C> <C>
Real estate mortgage...................................... $ 8,923 $ 9,075
U.S. borrowings........................................... 1,080 11,200
Non-U.S. borrowings....................................... 8,531 13,117
------- -------
18,534 33,392
Less -- Current portion................................... 3,378 8,325
------- -------
$15,156 $25,067
======= =======
</TABLE>

Credit Facilities

U.S. borrowings are evidenced by a $20,000,000 committed, unsecured
revolving credit facility and a $10,000,000 uncommitted, unsecured credit
line. The committed facilities are under separate financing agreements dated
October 1, 1993 and October 15, 1993 (the "Agreements"), amended February 9,
1995 and March 10, 1995, respectively. These facilities are available through
September 30, 1996, on which date all borrowings become due. The uncommitted
line is under a financing agreement dated February 8, 1995, amended May 8,
1995. The credit line is available through June 30, 1996, on which date all
borrowings become due. As of March 30, 1996 this credit line had no funds
drawn against it.

Interest on all facilities are at the bank's base rate, or, at the Company's
option, may be based on the one year London Interbank Offered Rate or at the
bank's money market rate. At March 30, 1996, the interest rate on U.S.
borrowings was 5.9% which represents the bank's money market rate.

The Agreements provide for a commitment fee of 0.20% on the unused portion
of the revolving credit facility. The Agreements contain several restrictive
covenants principally related to the maintenance of minimum tangible net
worth, debt to net worth ratio, and a minimum debt service interest ratio.

Non-U.S. borrowings represent the financing arranged by the Company's
subsidiaries with local banks which are guaranteed by the Company. The long-
term borrowings have maturities at various dates through 1998. Interest rates
ranged from 1.38% to 13.0% in fiscal 1996 and fiscal 1995.

The weighted average short-term rates for U.S. and Non-U.S. borrowings were
5.47%, 5.69% and 7.48% as of March 30, 1996, April 1, 1995 and April 2, 1994
respectively.

24
<PAGE>

HAEMONETICS CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Real Estate Mortgage Agreement

The Company has a $10,000,000 real estate mortgage agreement (the "Mortgage
Agreement") with an insurance company. The Mortgage Agreement requires
principal and interest payments of $91,500 per month for a period of 120
months, commencing October 1, 1990, with the remaining unpaid principal
balance and interest thereon due and payable on September 1, 2000. The entire
balance of the loan may be repaid, subject to a prepayment premium equal to
the greater of either 1% of the principal balance at prepayment, or an amount
calculated based on the interest rate differential, the principal balance due,
and the remaining loan term. The Mortgage Agreement provides for interest to
accrue on the unpaid principal balance at a rate of 10.5% per annum.
Borrowings under the Mortgage Agreement are secured by the land, building and
improvements at the Company's headquarters and manufacturing facility. The
Mortgage Agreement also includes minimum tangible net worth and current ratio
requirements. The terms and conditions of this agreement remain unchanged for
future periods.

As of March 30, 1996, notes payable and long-term debt mature as follows:

<TABLE>
<CAPTION>
FISCAL YEARS ENDING (IN THOUSANDS)
------------------- --------------
<S> <C>
1997.......................................................... $ 3,378
1998.......................................................... 6,573
1999.......................................................... 208
2000.......................................................... 230
2001 and thereafter........................................... 8,145
-------
$18,534
=======
</TABLE>

5. INCOME TAXES

The components of domestic and foreign income before the provision for
income taxes are as follows:

<TABLE>
<CAPTION>
YEARS ENDED
---------------------------
MARCH 30, APRIL 1, APRIL 2,
1996 1995 1994
--------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
Domestic......................................... $43,020 $42,910 $39,686
Foreign.......................................... 12,234 9,660 11,108
------- ------- -------
$55,254 $52,570 $50,794
======= ======= =======
</TABLE>

25
<PAGE>

HAEMONETICS CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

The provision for income taxes consists of the following components:

<TABLE>
<CAPTION>
YEARS ENDED
----------------------------
MARCH 30, APRIL 1, APRIL 2,
1996 1995 1994
--------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
Current
Federal....................................... $15,543 $16,229 $15,304
State......................................... 2,390 2,447 2,857
Foreign....................................... 2,303 2,351 2,749
------- ------- -------
20,236 21,027 20,910
------- ------- -------
Deferred
Federal....................................... (980) (1,414) (1,150)
State......................................... (154) (258) (212)
Foreign....................................... 227 (430) (243)
------- ------- -------
(907) (2,102) (1,605)
------- ------- -------
$19,329 $18,925 $19,305
======= ======= =======
</TABLE>

Included in the federal and state income tax provisions for fiscal years
1996, 1995 and 1994 are approximately $3,209,000, $3,321,000 and $3,089,000,
respectively, provided on foreign source income of approximately $9,169,000 in
1996, $9,224,000 in 1995 and $7,942,000 in 1994, taxes on which are payable in
the United States.

The tax effect of significant temporary differences comprising the net
deferred tax asset / (liability) is as follows:

<TABLE>
<CAPTION>
YEARS ENDED
------------------
MARCH 30, APRIL 1,
1996 1995
--------- --------
(IN THOUSANDS)
<S> <C> <C>
Depreciation............................................. $(6,345) $(8,200)
Amortization............................................. (2,908) (4,929)
Inventory................................................ 10,148 10,588
Accruals and reserves.................................... 753 328
Other.................................................... 10 (6)
------- -------
Total net deferred taxes............................... $ 1,658 $(2,219)
======= =======
</TABLE>

26
<PAGE>

HAEMONETICS CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

The provision for income taxes differs from the amount computed by applying
the statutory U.S. federal income tax rate of 35% in 1996, 1995 and 1994 due
to the following:

<TABLE>
<CAPTION>
YEARS ENDED
----------------------------
MARCH 30, APRIL 1, APRIL 2,
1996 1995 1994
--------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
Tax at federal statutory rate................... $19,340 $18,399 $17,778
Difference due to:
Foreign sales corporation..................... (1,268) (1,462) (1,026)
Difference between U.S. tax rate and tax rates
used in other tax jurisdictions.............. 1,457 1,768 1,400
State taxes, net of federal income tax benefit.. 1,355 1,422 1,719
Foreign tax credits and research and develop-
ment........................................... (1,310) (1,335) (724)
Adjustment of estimated tax liabilities....... (173)
Other, net...................................... (245) 133 331
------- ------- -------
$19,329 $18,925 $19,305
======= ======= =======
</TABLE>

6. COMMITMENTS AND CONTINGENCIES

The Company leases facilities and certain equipment under operating leases
expiring at various dates through fiscal year 2004. Facility leases require
the Company to pay certain insurance expenses, maintenance costs and real
estate taxes.

Approximate future basic rental commitments under operating leases as of
March 30, 1996 are as follows:

<TABLE>
<CAPTION>
FISCAL YEAR ENDING (IN THOUSANDS)
------------------ --------------
<S> <C>
1997.......................................................... 5,440
1998.......................................................... 3,579
1999.......................................................... 3,324
2000.......................................................... 2,868
2001 and thereafter........................................... 13,709
-------
$28,920
=======
</TABLE>

Rent expense in 1996, 1995 and 1994 was $4,219,000, $3,713,000, and
$4,217,000, respectively.

The Company is presently engaged in various legal actions, and although
ultimate liability cannot be determined at the present time, the Company
believes, based on consultation with counsel, that any such liability will not
materially affect the consolidated financial position of the Company or its
results of operations.

7. CAPITAL STOCK

Treasury Stock

During 1996 and 1995, the Company repurchased 514,141 shares and 1,005,311
shares, respectively, of its outstanding common stock at average prevailing
prices of $17.24 and $15.64, respectively. The Company expects any repurchased
shares to be made available for issuance pursuant to its employee benefit and
incentive plans and for other corporate purposes.

27
<PAGE>

HAEMONETICS CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

Stock Options

The Company has a long-term incentive plan under which a maximum of
2,278,057 shares of the Company's common stock may be issued pursuant to
incentive and or nonqualified stock options and stock awards granted to key
employees, consultants and advisers (the "Long-term Incentive Plan"). The
Long-term Incentive Plan is administered by the Compensation Committee of the
Board of Directors (the "Committee") consisting of two or more disinterested
members of the Company's Board of Directors. The exercise price for
nonqualified options granted under the Long-term Incentive Plan is determined
by the Committee, but in no event shall such option price be less than 50% of
the fair market value of the common stock at the time the option is granted.
Incentive options may be granted at a price not less than fair market value on
the date of grant. Options become exercisable in a manner determined by the
Committee, and incentive options expire not more than ten years from the date
of the grant.

The Company also has a nonqualified stock option plan for non-employee
directors for the purchase of common stock (the "Non-employee Plan"). Under
the Non-employee Plan, a maximum of 6,000 shares can be granted to each
director, not to exceed 24,000 shares per calendar year, and a maximum of
90,000 shares in aggregate. Options are granted at not less than fair market
value on the date of grant.

The Company also has a stock option plan which grants options to key
employees and consultants for the purchase of common stock (the "Option
Plan"). The Option Plan is administered by the Committee, which is empowered
to grant either nonqualified or incentive stock options. Under the Option
Plan, options to purchase up to 1,468,800 shares may be granted at a price, in
the case of incentive options, not less than fair market value on the date of
grant. Options become exercisable in a manner determined by the Committee, and
incentive options expire not more than ten years from the date of grant.

A summary of stock option information for the combined plans is as follows:

<TABLE>
<CAPTION>
PRICE NUMBER OF
RANGE SHARES
-------------- ---------
<S> <C> <C>
Outstanding at April 3, 1993....................... $ 5.555-23.875 1,844,002
Granted............................................ 18.375-24.563 449,428
Exercised.......................................... 5.555-19.406 (157,365)
Terminated......................................... 5.555-17.625 (24,200)
-------------- ---------
Outstanding at April 2, 1994....................... $ 5.555-24.563 2,111,865
Granted............................................ 14.438-18.250 466,613
Exercised.......................................... 5.555-13.938 (163,300)
Terminated......................................... 5.555-24.563 (212,566)
-------------- ---------
Outstanding at April 1, 1995....................... $ 5.555-24.563 2,202,612
Granted............................................ 15.438-21.875 652,079
Exercised.......................................... 5.555-19.406 (367,488)
Terminated......................................... 5.555-24.563 (142,992)
-------------- ---------
Outstanding at March 30, 1996...................... $ 5.555-24.563 2,344,211
</TABLE>

At March 30, 1996, 714,095 shares were available for future grants. Options
exercisable at March 30, 1996 total 895,956, at prices ranging from $5.555 to
$24.563.

No accounting recognition is given to options granted at fair market value
until they are exercised. Upon exercise, net proceeds, including tax benefits
realized, are credited to equity.

28
<PAGE>

HAEMONETICS CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

1991 Employee Stock Purchase Plan

The Company has an Employee Stock Purchase Plan (the "Purchase Plan"), under
which a maximum of 289,200 shares (subject to adjustment for stock splits and
similar changes) of common stock may be purchased by eligible employees.
Substantially all full-time employees of the Company are eligible to
participate in the Purchase Plan.

The Purchase Plan provides for two "purchase periods" within each of the
Company's fiscal years, the first commencing on January 1 of each calendar
year and continuing through June 30 of such calendar year, and the second
commencing on July 1 of each year and continuing through December 31 of such
calendar year. Eligible employees may elect to become participants in the
Purchase Plan for a purchase period by completing a stock purchase agreement
prior to the first day of the purchase period for which the election is made.
Shares are purchased through accumulation of payroll deductions (of not less
than 2% nor more than 8% of compensation, as defined) for the number of whole
shares determined by dividing the balance in the employee's account on the
last day of the purchase period by the purchase price per share for the stock
determined under the Purchase Plan. The purchase price for shares will be the
lower of 85% of the fair market value of the common stock at the beginning of
the purchase period, or 85% of such value at the end of the purchase period.

During 1996, there were 39,835 shares purchased at a range of $14.66 to
$15.09 per share under the Purchase Plan. During 1995, there were 49,708
shares purchased at a range of $14.66 to $15.41 per share under the Purchase
Plan.

8. DISTRIBUTION AGREEMENTS

In fiscal 1992, the Company acquired the direct distribution rights for its
blood component therapy and plasma collection products in Japan from Labo
Science Co., Ltd., Tokyo, Japan, at a historical cost of approximately $7.4
million. The rights are being amortized on a straight-line basis over an
estimated useful life of 20 years. Accumulated amortization was $1,976,000 as
of March 30, 1996 and $1,483,000 as of April 1, 1995. Haemonetics Japan, a
wholly owned subsidiary of the Company, will provide all sales, service and
marketing for its blood component therapy and plasma collection business in
Japan.

In fiscal 1994, the Company signed an agreement with its exclusive Italian
distributor, G. Cremascoli Srl, to transition Haemonetics distribution and
sales to Haemonetics Italia Srl, a subsidiary of Haemonetics Corporation.
Cremascoli purchased a 20% minority interest in the subsidiary, effective
March, 1994. The authority to distribute directly was acquired at a cost of
approximately $1.3 million and is being amortized on a straight-line basis
over an estimated useful life of 20 years. Accumulated amortization was
$152,000 as of March 30,1996 and $84,000 as of April 1, 1995.

In fiscal 1995, the Company acquired the direct distribution rights for its
surgical blood salvage products in Japan from Kuraray Co., Ltd. at a
historical cost of approximately $4.6 million. The rights are being amortized
on a straight-line basis over an estimated useful life of 20 years.
Accumulated amortization was $349,000 as of March 30, 1996 and $114,900 as of
April 1, 1995. Haemonetics Japan will provide sales, service, and marketing
for its surgical products business in Japan.

In fiscal 1995, the Company also acquired the direct distribution rights and
created a wholly owned subsidiary in Belgium at a historical cost of
approximately $0.6 million. The rights are being amortized on a straight-line
basis over an estimated useful life of 20 years. Accumulated amortization was
approximately $54,000 as of March 30, 1996 and $22,000 as of April 1, 1995.

29
<PAGE>

HAEMONETICS CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

9. SAVINGS PLUS PLAN

The Company's Savings Plus Plan (the "Savings Plan") allows employees to
accumulate savings on a pretax basis. In addition, the Company makes matching
contributions to the Savings Plan based on preestablished rates. The Company
can also make additional discretionary contributions if approved by the Board
of Directors. The Company's matching contribution amounted to approximately
$616,000, $565,000 and $551,000 in 1996, 1995 and 1994, respectively. The
Board of Directors declared a discretionary contribution of approximately
$1,100,000 and $1,940,000 for the Savings Plan years ended March 30, 1996 and
April 2, 1994, respectively. No discretionary contribution was made for the
Savings Plan year ended April 1, 1995.

The Company has no material obligation for post retirement or post
employment benefits.

10. TRANSACTIONS WITH RELATED PARTIES

The Company advances money to various employees for relocation costs and
incentive purposes. Loans to employees, which are included in other assets,
amounted to approximately $916,000 as of March 30, 1996 and $953,000 as of
April 1, 1995 and are payable within five years. Certain loans are interest-
bearing, and the Company records interest income on these loans when
collected. Certain loans have forgiveness provisions based upon continued
service. The Company amortizes the outstanding loan balance as a charge to
operating expense as such amounts are forgiven.

11. GEOGRAPHIC AND CUSTOMER INFORMATION

The Company operates in one industry segment consisting of the design,
manufacture, marketing and service of blood processing systems and related
disposable items for use in the collection and processing of blood components,
collection of plasma and salvage of shed blood that would otherwise be lost
during surgical procedures. Geographic area information for 1996, 1995 and
1994 is as follows:

<TABLE>
<CAPTION>
GEOGRAPHIC AREA
------------------------------------------
EUROPE & FAR EAST &
DOMESTIC ALL OTHER JAPAN CONSOLIDATED
-------- --------- ---------- ------------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Year ended March 30, 1996:
Net revenues........................ $108,152 $ 78,423 $91,641 $278,216
-------- -------- ------- --------
Income before provision for income
taxes............................ $ 36,258 $ 11,063 $ 7,933 $ 55,254
-------- -------- ------- --------
Identifiable assets............... $166,771 $ 82,598 $38,449 $287,818
-------- -------- ------- --------
Year ended April 1, 1995:
Net revenues...................... $106,101 $ 76,760 $79,555 $262,416
-------- -------- ------- --------
Income before provision for income
taxes............................ $ 48,523 $ 2,102 $ 1,945 $ 52,570
-------- -------- ------- --------
Identifiable assets............... $155,322 $ 76,337 $48,850 $280,509
-------- -------- ------- --------
Year ended April 2, 1994:
Net revenues...................... $101,914 $ 75,286 $71,249 $248,449
-------- -------- ------- --------
Income before provision for income
taxes............................ $ 38,463 $ 7,184 $ 5,147 $ 50,794
-------- -------- ------- --------
Identifiable assets............... $155,428 $ 46,761 $28,495 $230,684
-------- -------- ------- --------
</TABLE>

Intercompany transfers to foreign subsidiaries are transacted at prices
intended to allow the subsidiaries comparable earnings to those of
unaffiliated distributors. Sales to unaffiliated distributors and customers
outside the United States, including U.S. export sales, were approximately
$171,410,000 in 1996, which represented 62%

30
<PAGE>

HAEMONETICS CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

of net revenues; $158,609,000 in 1995, which represented 60% of net revenues;
and $149,574,000 in 1994, which represented 60% of net revenue.

12. PURCHASE OF MANUFACTURING FACILITY IN SOUTH CAROLINA

On August 18, 1995, the Company acquired the assets of DHL Laboratories of
Union South Carolina. DHL Laboratories was a contract pharmaceutical
manufacturer specializing in mixing, filling and terminally sterilizing liquid
products in flexible packaging. The facility and related property and
equipment were acquired at a cost of approximately $6.2 million.

This facility will be integrated into the U.S. manufacturing organization.
Prior to the acquisition, DHL and Haemonetics had initiated work to receive
licenses from the FDA for anticoagulant and storage solution used by
Haemonetics' U.S. blood bank and plasma center customers. Haemonetics will
continue to provide contract manufacturing services while selectively seeking
out new opportunities.

31
<PAGE>

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To the Stockholders of Haemonetics Corporation:

We have audited the accompanying consolidated balance sheets of Haemonetics
Corporation (a Massachusetts corporation) and subsidiaries as of March 30,
1996 and April 1, 1995, and the related consolidated statements of income,
stockholders' equity and cash flows for each of the three years in the period
ended March 30, 1996. These consolidated financial statements and the schedule
referred to below are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements and schedule based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards 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. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Haemonetics Corporation
and subsidiaries as of March 30, 1996 and April 1, 1995, and the results of
their operations and their cash flows for each of the three years in the
period ended March 30, 1996, in conformity with generally accepted accounting
principles.

Our audit was made for the purpose of forming an opinion on the basic
consolidated financial statements taken as a whole. The schedule listed in the
index on page 39 is the responsibility of the Company's management and is
presented for the purpose of complying with the Securities and Exchange
Commission's rules and is not a required part of the basic consolidated
financial statements. This schedule has been subjected to the auditing
procedures applied in the audit of the basic consolidated financial statements
and, in our opinion, fairly states in all material respects the financial data
required to be set forth therein in relation to the basic consolidated
financial statements taken as a whole.

Arthur Andersen LLP

Boston, Massachusetts
April 16, 1996

32
<PAGE>

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE

None.

PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

(a) The information concerning the Company's directors and concerning
compliance with Section 16(a) of the Securities Exchange Act of 1934 required
by this Item is incorporated by reference to the Company's Proxy Statement for
the Annual Meeting to be held July 19, 1996.

(b) The information concerning the Executive Officers of the Company, who
are elected by and serve at the discretion of the Board of Directors, is as
follows:

John F. White joined Haemonetics in 1976 as Marketing and Sales Manager and
was promoted to Vice President of Marketing and Sales in 1978. In 1982, he was
elected Senior Vice President of Operations and has served as President since
1983. Prior to joining Haemonetics, Mr. White worked for the Minnesota Mining
& Manufacturing Co. where he held various managerial positions. Mr. White has
been Chairman of Haemonetics' Board of Directors since 1985.

James L. Peterson joined Haemonetics in 1980 as Director of European
Operations. In 1982, he was promoted to Vice President with responsibility for
all international activities. He was promoted to Executive Vice President in
1988. In May 1994, he assumed the role of President, International Operations.
Prior to joining Haemonetics, he was employed by Hewlett-Packard Company in
Europe and was responsible for its medical sales and service operation. Mr.
Peterson has been a member of Haemonetics' Board of Directors since 1985 and
was elected to the position of Vice Chairman of Haemonetics' Board of
Directors in April, 1994.

Brigid A. Makes joined Haemonetics in 1992 as Assistant Treasurer. In August
1992, Ms. Makes was promoted to Treasurer, responsible for all areas of
corporate treasury. In June 1993, Ms. Makes was promoted to Treasurer,
Director of Human Resources and in September 1995, was promoted to Vice
President and Treasurer responsible for treasury, human resources and tax. In
November 1995, Ms. Makes was named acting Chief Financial Officer increasing
her responsibilities to include financial planning, operational and financial
accounting, investor relations and facility management. In May 1996, Ms. Makes
was promoted to Chief Financial Officer. Prior to joining Haemonetics, Ms.
Makes was employed as Manager of Treasury Services and Controller of Sales and
Service for Lotus Development Corporation. Prior to joining Lotus, Ms. Makes
held various positions with increasing levels of responsibility at General
Electric.

John R. Barr joined Haemonetics in 1990 as Director of Customer Service
responsible for domestic and international customer services, as well as
finished goods warehousing and shipping. In September 1991, Mr. Barr was
promoted to Vice President, Operations, responsible for all manufacturing
operations: purchasing; planning raw material warehousing; and offshore
manufacturing. In April 1992, Mr. Barr was promoted to Senior Vice President
with additional responsibility for the U.S. Commercial Plasma Business. In May
1994, Mr. Barr was promoted to Executive Vice President and in October 1995
was promoted to President, North American Operations, responsible for all
manufacturing operations, North American sales and service and core research
and development. Prior to joining Haemonetics, Mr. Barr was employed as a Vice
President of Baxter Systems Division where his responsibilities included
management of R&D, customer support staffs and general operations.

ITEM 11. EXECUTIVE COMPENSATION

The information required by this Item is incorporated by reference to the
Company's Proxy Statement for the Annual Meeting to be held July 19, 1996.

33
<PAGE>

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The information required by this Item is incorporated by reference to the
Company's Proxy Statement for the Annual Meeting to be held July 19, 1996.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

None

PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.

The following documents are filed as a part of this report:

(a) Financial Statements are included in Part II of this report

Financial Statements required by Item 8 of this Form

<TABLE>
<S> <C>
Consolidated Balance Sheets............................................ 17
Consolidated Statements of Income...................................... 18
Consolidated Statements of Stockholders' Equity........................ 19
Consolidated Statements of Cash Flows.................................. 20
Notes to Consolidated Financial Statements............................. 21
Report of Independent Public Accountants............................... 32
</TABLE>

Schedules required by Article 12 of Regulation S-X

<TABLE>
<S> <C>
II Valuation and Qualifying Accounts................................... 39
</TABLE>

All other schedules have been omitted because they are not applicable or not
required.

(b) Reports on Form 8-K

None

(c) Exhibits required by Item 601 of Regulation S-K are listed in the
Exhibit Index at page 36, which is incorporated herein by reference.

34
<PAGE>

SIGNATURES

PURSUANT TO THE REQUIREMENTS OF SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934, THE REGISTRANT HAS DULY CAUSED THIS REPORT TO BE SIGNED
ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED.

Haemonetics Corporation

/s/ John F. White
By: _________________________________
JOHN F. WHITE, CHAIRMAN, PRESIDENT
AND CHIEF EXECUTIVE OFFICER

May 10, 1996

PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THIS
REPORT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS ON BEHALF OF THE
REGISTRANT AND IN THE CAPACITIES AND ON THE DATES INDICATED.

SIGNATURE TITLE DATE

/s/ John F. White Chairman, President May 10, 1996
- ------------------------------------- and Chief Executive
JOHN F. WHITE Officer

/s/ James L. Peterson Vice Chairman and May 10, 1996
- ------------------------------------- President,
JAMES L. PETERSON International
Operations

/s/ Brigid A. Makes Vice President of May 10, 1996
- ------------------------------------- Finance and Chief
BRIGID A. MAKES Financial Officer,
(Principal Financial
and Accounting
Officer)

/s/ John R. Barr President, North May 10, 1996
- ------------------------------------- American
JOHN R. BARR Operations,
Director

/s/ Sir Stuart Burgess Director May 10, 1996
- -------------------------------------
SIR STUART BURGESS

/s/ Yutaka Sakurada Sr. Vice President May 10, 1996
- ------------------------------------- Haemonetics Corp.
YUTAKA SAKURADA and President,
Haemonetics Japan
Director

/s/ Jerry E. Robertson Director May 10, 1996
- -------------------------------------
JERRY E. ROBERTSON

/s/ Donna C. E. Williamson Director May 10, 1996
- -------------------------------------
DONNA C. E. WILLIAMSON

35
<PAGE>

EXHIBITS FILED WITH SECURITIES AND EXCHANGE COMMISSION

<TABLE>
<CAPTION>
NUMBER AND DESCRIPTION OF EXHIBIT
---------------------------------
3. Articles of Organization
<C> <S>
3A* Articles of Organization of the Company effective August 29, 1985, as
amended December 12, 1985 and May 21, 1987 (filed as Exhibit 3A to the
Company's Form S-1 No. 33-39490 and incorporated herein by reference).
3B* Form of Restated Articles of Organization of the Company (filed as
Exhibit 3B to the Company's Form S-1 No. 33-39490 and incorporated
herein by reference).
3C* By-Laws of the Company presently in effect (filed as Exhibit 3C to the
Company's Form 10-K No. 1-10730 for the year ended April 3, 1993 and
incorporated herein by reference).
3D* Articles of Amendment to the Articles of Organization of the Company
filed May 8, 1991 with the Secretary of the Commonwealth of
Massachusetts (filed as Exhibit 3E to the Company's Amendment No. 1 to
Form S-1 No. 33-39490 and incorporated herein by reference).
4. Instruments defining the rights of security holders

4A* Specimen certificate for shares of common stock (filed as Exhibit 4B
to the Company's Amendment No. 1 to Form S-1 No. 33-39490 and
incorporated herein by reference).

10. Material Contracts

10A* The 1990 Stock Option Plan, as amended (filed as Exhibit 4A to the
Company's Form S-8 No. 33-42006 and incorporated herein by reference).
10B* Form of Option Agreements for Incentive and Non-qualified Options
(filed as Exhibit 10B to the Company's Form S-1 No. 33-39490 and
incorporated herein by reference).
10C* Distribution Agreement dated April 11, 1990 between Baxter Healthcare
Corporation, acting through its Bentley Laboratories Division, and the
Company (filed as Exhibit 10C to the Company's Form S-1 No. 33-39490
and incorporated herein by reference).
10D* Agreement dated December 8, 1987 between the Company and Miles, Inc.,
Cutter Biological (filed as Exhibit 10D to the Company's Form S-1 No.
33-39490 and incorporated herein by reference).
10E* Supply Agreement between the Company and Alpha Therapeutic Corporation
dated December, 1988 (filed as Exhibit 10E to the Company's Form S-1
No. 33-39490 and incorporated herein by reference).
10F* Sublease dated October 29, 1992 between Clean Harbors of Kingston,
Inc. and the Company (filed as Exhibit 10F to the Company's Form 10-K
No. 1-10730 for the year ended April 3, 1993 and incorporated herein
by reference).
10G* Third Amended and Restated Financing Agreement dated as of August 22,
1990 among the Company, Fleet Credit Corporation and Fleet National
Bank (filed as Exhibit 10G to the Company's Form S-1 No. 33-39490 and
incorporated herein by reference).
10H* First Supplement to the Third Amended and Restated Financing Agreement
dated as of February 3, 1992, and the related Revolving Credit Note,
among the Company, Fleet Credit Corporation and Fleet National Bank
(filed as Exhibit 10H to the Company's Form 10-K No. 1-10730 for the
year ended March 28, 1992 and incorporated herein by reference).
10I* Second Supplement to the Third Amended and Restated Financing
Agreement dated as of March 27, 1992 among the Company, Fleet Credit
Corporation and Fleet National Bank (filed as Exhibit 10I to the
Company's form 10-K No. 1-10730 for the year ended March 28, 1992 and
incorporated herein by reference).
10J* Note and Mortgage dated August 7, 1990 between the Company and John
Hancock Mutual Life Insurance Company relating to the Braintree
facility (filed as Exhibit 10H to the Company's Form S-1 No. 33-39490
and incorporated herein by reference).
</TABLE>

36
<PAGE>

<TABLE>
<CAPTION>
NUMBER AND DESCRIPTION OF EXHIBIT
---------------------------------
<C> <S>
10K* Credit Facility with Swiss Bank Corporation (filed as Exhibit 10J to
the Company's Amendment No. 1 to Form S-1 No. 33-39490 and
incorporated herein by reference).
10L* Lease dated July 17, 1990 between the Buncher Company and the Company
of property in Pittsburgh, Pennsylvania (filed as Exhibit 10K to the
Company's Form S-1 No. 33-39490 and incorporated herein by reference).
10M* Lease dated July 3, 1991 between Wood Road Associates II Limited
Partnership and the Company for the property adjacent to the main
facility in Braintree, Massachusetts (filed as Exhibit 10M to the
Company's Form 10- K No. 1-10730 for the year ended March 28, 1992 and
incorporated herein by reference).
10N* Amendment No. 1 to Lease dated July 3, 1991 between Wood Road
Associates II Limited Partnership and the Company for the child care
facility (filed as Exhibit 10N to the Company's Form 10-K No. 1-10730
for the year ended March 28, 1992 and incorporated herein by
reference).
10O* Bank Overdraft Facility between The Sumitomo Bank and the Company with
an annual renewal beginning February 28, 1993 (filed as Exhibit 10O to
the Company's Form 10-K No. 1-10730 for the year ended March 28, 1992
and incorporated herein by reference)
10P* Bank Overdraft Facility between The Mitsubishi Bank and the Company
with an annual renewal beginning June 30, 1993 (filed as Exhibit 10P
to the Company's Form 10-K, No. 1-10730 for the year ended March 28,
1992 and incorporated herein by reference).
10Q* Short-term Loan Agreement between The Mitsubishi Bank and the Company
renewable every three months (filed as Exhibit 10Q to the Company's
Form 10-K No. 1-10730 for the year ended March 28, 1992 and
incorporated herein by reference).
10R* 1991 Employee Stock Purchase Plan as amended (filed as Exhibit 10R to
the Company's Form 10-K No. 1-10730 for the year ended April 3, 1993
and incorporated herein by reference).
10S* Amendment No. 2 to Lease dated July 3, 1991 between Wood Road
Associates II Limited Partnership and the Company (filed as Exhibit
10S to the Company's Form 10-K No. 1-10730 for the year ended April 3,
1993 and incorporated herein by reference).
10T* Equipment Lease Agreement dated October 13, 1992 between First
Security Bank of Utah and Haemonetics Services Inc. (filed as Exhibit
10T to the Company's Form 10-K No. 1-10730 for the year ended April 3,
1993 and incorporated herein by reference).
10U* 1992 Stock Option Plan for Non-Employee Directors (filed as Exhibit
10U to the Company's Form 10-K No. 1-10730 for the year ended April 3,
1993 and incorporated herein by reference).
10V* 1992 Long-Term Incentive Plan (filed as Exhibit 10V to the Company's
Form 10-K No. 1-10730 for the year ended April 3, 1993 and
incorporated herein by reference).
10W* Agreement dated April 3, 1993 between Cellco, Inc. and Haemonetics
Ventures Corporation for the purchase of Cellco, Inc. Preferred Shares
and Warrants (filed as Exhibit 10W to the Company's Form 10-K No. 1-
10730 for the year ended April 2, 1994 and incorporated herein by
reference).
10X* Revolving Credit Agreement dated October 1, 1993 between Mellon Bank,
N.A. and the Company (filed as Exhibit 10X to the Company's Form 10-K
No. 1-10730 for the year ended April 2, 1994 and incorporated herein
by reference).

10Y* Revolving Credit Agreement dated October 15, 1993 between The First
National Bank of Boston and the Company (filed as Exhibit 10Y to the
Company's Form 10-K No. 1-10730 for the year ended April 2, 1994 and
incorporated herein by reference).
10Z* Bridge loan and convertible promissory notes dated April 15 and June
10, 1994 between Cellco, Inc. and the Company (filed as Exhibit 10Z to
the Company's form 10-K No. 1-10730 for the year ended April 1, 1995
and incorporated herein by reference).
</TABLE>

37
<PAGE>

<TABLE>
<CAPTION>
NUMBER AND DESCRIPTION OF EXHIBIT
---------------------------------
<C> <S>
10AA* Real Estate purchase agreement dated May 1, 1994 between 3M UK
Holding PLC and the Company (filed as Exhibit 10AA to the Company's
form 10-K No. 1-10730 for the year ended April 1, 1995 and
incorporated herein by reference).
10AB* Real Estate purchase agreement dated September 30, 1994 between The
Midland Mutual Life Insurance Company and the Company (filed as
Exhibit 10AB to the Company's form 10-K No. 1-10730 for the year
ended April 1, 1995 and incorporated herein by reference).
10AC* Purchase agreement dated October 1, 1994 between Kuraray Co. and the
Company (filed as Exhibit 10AC to the Company's form 10-K No. 1-10730
for the year ended April 1, 1995 and incorporated herein by
reference).
10AD* Amendment No. 1 dated February 9, 1995 to Revolving Credit Agreement
dated October 1, 1993 between Mellon Bank, N.A. and the Company
(filed as Exhibit 10AD to the Company's form 10-K No. 1-10730 for the
year ended April 1, 1995 and incorporated herein by reference).
10AE* Amendment No. 1 dated March 10, 1995 to Revolving Credit Agreement
dated October 15, 1993 between The First National Bank of Boston and
the Company (filed as Exhibit 10AE to the Company's form 10-K No. 1-
10730 for the year ended April 1, 1995 and incorporated herein by
reference).
10AF Asset Purchase Agreement dated as of July 18, 1995 between between
the Company and DHL Laboratories, Inc.
</TABLE>

11. Statement re: computation of per share earnings

21. Subsidiaries of the Company

23. Consent of the Independent Public Auditors

27. Financial Data Schedule

- --------
* Incorporated by reference.

(ALL OTHER EXHIBITS ARE INAPPLICABLE.)

38
<PAGE>

SCHEDULE II

HAEMONETICS CORPORATION

VALUATION AND QUALIFYING ACCOUNTS
(DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
BALANCE AT CHARGED TO WRITE-OFFS BALANCE AT
BEGINNING COSTS AND (NET OF END
ALLOWANCE FOR DOUBTFUL ACCOUNTS OF PERIOD EXPENSES RECOVERIES) OF PERIOD
- ------------------------------- ---------- ---------- ----------- ----------
<S> <C> <C> <C> <C>
For the Year Ended March 30, 1996. $681 $321 $(18) $984
For the Year Ended April 1, 1995.. 464 222 (5) 681
For the Year Ended April 2, 1994.. 307 173 (16) 464
</TABLE>

<PAGE>

EXHIBIT 10AF

ASSET PURCHASE AGREEMENT

Asset Purchase Agreement (the "Agreement") dated as of July 18, 1995,
between Haemonetics Corporation, a Massachusetts corporation ("Buyer"), and DHL
Laboratories, Inc., a North Carolina corporation ("Seller").

WHEREAS, Seller owns and operates certain real estate and the improvements
thereon and the assets comprising or used in connection therewith in the
operation of Seller's business; and

WHEREAS, Buyer desires to acquire from Seller, and Seller desires to sell
to Buyer, all of said real estate, improvements and assets as more fully
described herein, all upon and subject to the terms and conditions contained
herein;

In consideration of the foregoing, the mutual representations, warranties
and covenants set forth herein, and for other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the parties to
this Agreement hereby agree as follows:

ARTICLE I
DEFINITIONS

1.1 DEFINITIONS. For the purposes of this Agreement, all capitalized
words or expressions used in this Agreement (including the Schedules and
Exhibits annexed hereto) shall have the meanings specified in this Article I
(such meanings to be equally applicable to both the singular and plural forms of
the terms defined):

"Affiliate" means when used with respect to any Person, (a) if such Person
is a corporation, any officer or director thereof and any Person which is,
directly or indirectly, the beneficial owner (by itself or as part of any group)
of more than five percent (5%) of any class of any equity security thereof, and,
if such beneficial owner is a partnership, any general or limited partner
thereof, or if such beneficial owner is a corporation, any Person controlling,
controlled by or under common control with such beneficial owner, or any officer
or director of such beneficial owner or of any corporation occupying any such
control relationship, (b) if such Person is a partnership, any general or
limited partner thereof, and (c) any other Person which, directly or indirectly,
controls or is controlled by or is under common control with such Person. For
purposes of this definition, "control" (including the correlative terms
"controlling", "controlled by" and "under common control with"), with respect to
any Person, shall mean possession, directly or indirectly, of the power to
direct or cause the direction of the management and policies of such Person,
whether through the ownership of voting securities or by contract or otherwise.

Page 1 of 40
<PAGE>

"Agreement" means this Asset Purchase Agreement (together with all Exhibits
and Schedules hereto) as from time to time assigned, supplemented, modified,
amended, or restated or as the terms hereof may be waived.

"Assets" shall have the meaning ascribed thereto in Section 2.1 hereof.

"Assumed Liabilities" shall have the meaning ascribed thereto in Section
2.2(a) hereof.

"Business Day" means any day, excluding Saturday, Sunday and any other day
on which commercial banks in Boston, Massachusetts are authorized or required by
law to close.

"Buyer" means Haemonetics Corporation, a Massachusetts corporation, and its
successors and assigns.

"CERCLA" means the Comprehensive Environmental Response Compensation and
Liability Act of 1980, as amended, and the regulations thereunder, and court
decisions in respect thereof, all as the same shall be in effect at the time.

"Charter" means the Certificate of Incorporation, Articles of Incorporation
or Organization or other organizational document of a corporation, as amended
and restated through the date hereof.

"Claim" means an action, suit, proceeding, hearing, investigation,
litigation, charge, complaint, claim or demand.

"Code" means the Internal Revenue Code of 1986, and the regulations
thereunder, published Internal Revenue Service rulings, and court decisions in
respect thereof, all as the same shall be in effect at the time.

"Consulting Agreement" means the Consulting Agreement between Buyer and
Seller described in Section 2.7 hereof.

"Environmental Action" means any administrative, regulatory or judicial
action, suit, demand, demand letter, claim, notice of non-compliance or
violation, investigation, request for information, proceeding, consent order or
consent agreement relating in any way to any Environmental Law or any
Environmental Permit, including, without limitation, (a) any claim by any
governmental or regulatory authority for enforcement, cleanup, removal,
response, remedial or other actions or damages pursuant to any Environmental
Law, and (b) any claim by any third party seeking damages, contribution,
indemnification, cost recovery, compensation or injunctive relief resulting from
Hazardous Materials, damage to the environment or alleged injury or threat of
injury to human health or safety from pollution or other environmental
degradation.

Page 2 of 40
<PAGE>

"Environmental Law" means any applicable federal, state or local law,
statute, rule, regulation, or ordinance relating to the environment, human
health or safety from pollution or other environmental degradation or Hazardous
Materials, including, without limitation, CERCLA, the Resource Conservation and
Recovery Act, the Hazardous Materials Transportation Act, the Clean Water Act,
the Toxic Substances Control Act, the Clean Air Act, the Safe Drinking Water
Act, the Atomic Energy Act, the Federal Insecticide, Fungicide and Rodenticide
Act and the Occupational Safety and Health Act, and any similar state and local
laws or by-laws, the rules, regulations and interpretations thereunder, all as
the same shall be in effect from time to time.

"Environmental Permit" means any permit, approval, identification number,
license or other authorization required under any Environmental Law.

"ERISA" means the Employee Retirement Income Security Act of 1974, and any
similar or successor federal statute, and the rules, regulations and
interpretations thereunder, all as the same shall be in effect at the time.

"Financial Statements" shall have the meaning ascribed thereto in Section
3.5 hereof.

"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board and the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as may be approved by a significant segment of the accounting
profession, which are applicable to the circumstances as of the date of
determination.

"Hazardous Materials" means (a) petroleum or petroleum products, natural or
synthetic gas, asbestos, urea formaldehyde foam insulation and radon gas, (b)
any substances defined as or included in the definition of "hazardous
substances," "hazardous wastes," "hazardous materials," "extremely hazardous
wastes" "restricted hazardous waters," toxic substances," "toxic pollutants,"
"contaminants" or "pollutants," or words of similar import, under any
Environmental Law, and (c) any other substance exposure to which is regulated
under any Environmental Law.

"Indebtedness" means all obligations, contingent or otherwise, whether
current or long-term, which in accordance with GAAP would be classified upon the
obligor's balance sheet as liabilities (other than deferred taxes) and shall
also include capitalized leases, guaranties, endorsements (other than for
collection in the ordinary course of business) or other arrangements whereby
responsibility is assumed for the obligations of others, including any agreement
to purchase or otherwise acquire the obligations of others or any agreement,
contingent or otherwise, to furnish funds for the purchase of goods, supplies or
services for the purpose of payment of the obligations of others.

Page 3 of 40
<PAGE>

"IRS" means the Internal Revenue Service and any similar or successor
agency of the federal government administering the Code.

"JEDA" means the South Carolina Jobs Economic Development Authority.

"JEDA/Union Loans" means the loans made to Seller by JEDA and the City of
Union, South Carolina.

"Lien" means, with respect to any asset, any mortgage, deed of trust,
pledge, hypothecation, assignment, security interest, lien, charge, restriction,
adverse claim by a third party, title defect or encumbrance of any kind
(including any conditional sale or other title retention agreement, any lease in
the nature thereof, any assignment or other conveyance of any right to receive
income and any assignment of receivables with recourse against assignor), any
filing of any financing statement as debtor under the Uniform Commercial Code or
comparable law of any jurisdiction and any agreement to give or make any of the
foregoing.

"Material Adverse Effect" means a material adverse impact or effect on (a)
the business, operations, assets, liabilities, prospects or condition (financial
or otherwise) of Seller, (b) the ability of Seller to perform its obligations
hereunder, (c) the validity or enforceability of any of this Agreement or any
document or instrument executed in connection therewith, or (d) the rights and
remedies of Buyer hereunder.

"Mortgage" means the mortgage or mortgages from Seller, as mortgagor, to
the City of Union, South Carolina and to JEDA, respectively as mortgagees, which
secure the JEDA/Union Loans and cover the Property.

"Officer's Certificate" means a certificate signed in the name of a
corporation by its President, Treasurer or, if so specified, the Clerk or
Secretary, acting in his or her official capacity.

"Person" means any individual, firm, partnership, association, trust,
corporation, limited liability company, governmental body or other entity.

"PBGC" means the Pension Benefit Guaranty Corporation, and any successor
thereto.

"Property" shall mean the land shown on the plan attached hereto as Exhibit
A, and all buildings and improvements thereon, including, without limitation,
all easements, rights of way, permits and other appurtenances thereto.

Page 4 of 40
<PAGE>

"Release" means any release, issuance, disposal, discharge, dispersal,
leaching or migration into the indoor or outdoor environment or into or out of
any property, including the movement of Hazardous Materials through or in the
air, soil, surface water, ground water, or property other than in compliance
with all Environmental Laws.

"Retained Liabilities" shall mean all Indebtedness of Seller, now existing
or hereafter arising, which is not specifically assumed by Buyer pursuant to
Section 2.2(a), including, without limitation, those set forth in Section
2.2(b).

"Seller" means DHL Laboratories, Inc., a North Carolina corporation, and
its successors and assigns.

"Subsidiary" means, with respect to any Person (a) any corporation,
association or other entity of which at least a majority in interest of the
outstanding capital stock or other equity securities having by the terms thereof
voting power under ordinary circumstances to elect a majority of the directors,
managers or trustees thereof, irrespective of whether or not at the time capital
stock or other equity securities of any other class or classes of such
corporation, association or other entity shall have or might have voting power
by reason of the happening of any contingency, is at the time, directly or
indirectly, owned or controlled by such Person, or (b) any entity (other than a
corporation) in which such Person, one or more Subsidiaries of such Person, or
such Person and one or more Subsidiaries of such Person, directly or indirectly
at the date of determination thereof, has at least majority ownership interest.

"Tax" means any federal, state, local or foreign income, gross receipts,
license, payroll, employment, excise, severance, stamp, occupation, premium,
windfall profits, environmental, customs duties, capital stock, franchise,
profits, withholding, social security, unemployment, disability, real property,
personal property, sales, use, transfer, registration, value added, alternative
or add-on minimum, estimated, or other tax of any kind whatsoever, including any
interest, penalty, or addition thereto, whether disputed or not.

"Tax Return" means any return, declaration, report, claim for refund, or
information return or statement relating to Taxes, including any schedule or
attachment thereto, and including any amendment thereof.

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<PAGE>

ARTICLE II

PURCHASE AND SALE OF ASSETS

2.1 PURCHASE AND SALE. Upon the terms and subject to the conditions
contained in this Agreement, at the Closing (as defined in Section 2.3), Seller
shall sell, assign, transfer and deliver to Buyer, and Buyer will accept and
purchase from Seller, all of the Assets, free and clear of all Liens, . The
term "Assets" shall mean all of the assets owned by Seller or in which Seller
has any rights or interests and used by Seller in connection with or related to
the ownership, management or operation of its business or the Property as of the
Closing Date, whether or not specifically referred to herein, including, without
limitation, the following:

(a) The right to use the name "DHL Laboratories" and all derivatives
thereof; provided that Seller may continue its corporate existence so
long as it conducts business under the d/b/a LRY Company;

(b) The Property, including, without limitation, all structures and other
improvements of any kind thereon, including all alleyways and
connecting tunnels, sidewalks, utility pipes, conduits and lines (on-
site and off-site), and parking areas and roadways appurtenant to such
buildings, structures and facilities presently or hereafter situated
upon or under the Property in which Seller has an interest and all
easements, rights of way, permits, and contract rights appurtenant
thereto, and all right, title and interest of Seller in and to any
award to be made in lieu thereof for any taking subsequent to the date
hereof and in and to any award for damage to the Property for any
taking made subsequent to the date hereof;

(c) All inventories of Seller existing on the Closing Date and used or to
be used by the Seller in connection with the ownership, management or
operation of its business (including, without limitation, products
ordered and held for shipment or in transit to or from the Seller) and
all supplies used in connection with its business, including, without
limitation, at least a reasonable supply of each and every item of
consumables used by Seller in the ownership, management or operation
of its business (the "Inventories");

(d) All plant, machinery, leasehold improvements, fixtures, construction
in progress, parts, furniture, furnishings, office and computer
equipment and other equipment now or hereafter owned by Seller prior
to or on the Closing Date, and now or hereafter located in, on or
about the Property or used or to be used by Seller in connection with
the ownership, operation or management of the Property and its
business or related thereto,

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<PAGE>

including, without limitation, those fixed assets described on
Schedule 2.1(d) attached hereto;

(e) All contracts and contract rights of Seller assumed by Buyer in
accordance with Section 5.5;

(f) Any and all patents and patent applications, trademarks and trademark
applications, service marks and service mark applications, trade and
product names, copyrights and copyright applications, and including
the associated goodwill, the right to sue for and recover such damages
and such other relief as might be granted by a court of competent
jurisdiction for past infringement thereof, and any operating permits
or governmental permits, including, without limitation, from the U.S.
Food and Drug Administration, together with any applications therefor,
with respect to the business and or operations of Seller;

(g) Any and all warranties and guaranties made to or in favor of Seller or
with respect to its business, any components thereof or the Property;

(h) All cash, bank balances and accounts, money market accounts,
certificates of deposit, marketable securities, accounts and loans
receivable, chattel paper, instruments, drafts, acceptances,
documents, documents of title, contract rights and prepaid expenses of
Seller; and

(i) All other tangible and intangible assets owned by Seller and used in
connection with the ownership or operation of the Property or its
business, on the date hereof or on the Closing Date and/or now or
hereafter located in, on or about the Property, customer and supplier
lists, policy manuals, accounts receivable, records (except the
Seller's general ledger, income and franchise tax returns, corporate
minute books and stock books), Seller's forms and office supplies, all
promotional literature relating to Seller's business, all computer
programs and documentation, if any, used in conducting such business,
all operating manuals, and the rights to use Seller's telephone
numbers and listings pertaining to same.

2.2 CONSIDERATION. (a) Upon the terms and subject to the conditions
contained in this Agreement, in reliance upon the representations, warranties
and agreements of Seller contained herein, and in consideration of the sale,
assignment, transfer and delivery of the Assets, Buyer will (i) pay, by wire
transfer of immediately available funds, Six Million Dollars ($6,000,000) to
discharge solely such amount of Seller's Indebtedness to First Union National
Bank; (ii) pay by wire transfer of immediately available funds, the amount
required to discharge Sellers outstanding Indebtedness to the City of Union,
South Carolina and JEDA, and (iii) assume all trade payables of Seller set forth
on Schedule 2.2 and all trade payables after the execution

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<PAGE>

of this Agreement in the ordinary course of business which are under forty five
(45) days old (the "Payables") (such payment, assumption of Indebtedness and the
Payables hereinafter collectively referred to as the "Assumed Liabilities").
Buyer and Seller shall allocate the sum of the cash purchase price and assume
liabilities in a mutually agreeable manner pursuant to the rules and regulations
of Section 1060 of the Internal Revenue Code of 1986, as amended. Such
allocation will be reflected in Exhibit H attached hereto.

(b) Buyer will not assume or perform any Indebtedness, liabilities or
obligations not specifically included within the Assumed Liabilities or which
are specifically enumerated in this Section 2.2(b), all of which shall be
"Retained Liabilities" and which Seller shall pay or perform when due. Without
limiting the generality of the foregoing, Buyer will not assume or perform any
of the following Indebtedness, obligations and liabilities, all of which shall
be "Retained Liabilities" and which shall remain the sole and exclusive
obligations of Seller:

(i) any Indebtedness, liability or obligation of Seller for federal,
state, local or other taxes, assessments or governmental charges
incurred by Seller on account of the transactions contemplated by this
Agreement;

(ii) any Indebtedness, liability or obligation of Seller or its
shareholders incurred in connection with the making or performance of
this Agreement;

(iii) any Indebtedness, liability or obligation arising in connection with
any employee of Seller, whether for severance or termination, in
connection with a Plan (as hereinafter defined) or otherwise; or

(iv) any trade or other payables other than the Payables.

2.3 TIME AND PLACE OF CLOSING. The closing of the transactions described
in Sections 2.1 and 2.2 hereof (the "Closing") shall take place at the offices
of Smith, Helms, Mulliss & Moore, L.L.P., at 10:00 a.m. on or before August 18,
1995, or at such other place or time as the parties hereto may agree. The date
and time at which the Closing actually occurs is hereinafter referred to as the
"Closing Date."

2.4 INSTRUMENTS OF TRANSFER AND CONVEYANCE. (a) The conveyance of the
Property shall be effected by delivery of a good and sufficient general warranty
deed running to Buyer, which general warranty deed shall be substantially in the
form of Exhibit B attached hereto (the "Deed") and shall convey to Buyer (i)
good and clear, record and marketable fee simple title to the Property, free
from all Liens and encumbrances of whatever kind , and (ii) full use and
undisturbed peaceful possession of the Property.

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<PAGE>

(b) The sale of all other Assets, as herein provided, shall be effected by
delivery by Seller at the Closing of such bills of sale or other instruments of
conveyance as Buyer reasonably deems necessary to vest in Buyer good and clear,
record and marketable title to the Assets. Such instruments of transfer and
conveyance shall be in form reasonably satisfactory to Buyer and shall contain
warranties as to marketable title and that the Assets are free and clear of all
Liens of any kind whatsoever.

(c) Seller will, from time to time after the Closing Date, upon the
request of Buyer, promptly provide all such further documents as may be
reasonably necessary or advisable in the opinion of Buyer's counsel to assure or
confirm Buyer's good and clear record marketable and insurable title to and
interest in, or to enable it to deal with and dispose of, any of the Assets.

(d) At the Closing a certain Agreement dated May 26, 1995 between Buyer
and Seller shall be terminated in its entirety (the "Termination"); provided
that notwithstanding any language to the contrary in such Agreement, Buyer shall
compensate Seller for Seller's actual costs and expenses incurred by Seller
prior to the Closing Date in connection with Seller's performance of its
obligations under such Agreement.

(e) Subsequent to the Closing, Buyer shall have full control and operation
of the Assets with no restrictions of any nature whatsoever imposed by Seller
on Buyer's operational autonomy. In connection therewith, Buyer shall have the
right, but not the obligation, to hire such employees of Seller as Buyer may, in
its sole discretion, desire, for such compensation as Buyer may choose, without
any obligation or liability of any nature whatsoever with respect to any aspect
of the employment relationship between Seller and such employees.

2.5 ALLOCATION OF PURCHASE PRICE. The purchase price shall be allocated
among the Assets in accordance with Schedule 2.5 attached hereto. Seller and
Buyer hereby covenant with each other that they shall record the transaction
contemplated hereby on their respective books and records, and otherwise act, in
accordance with such allocation.

2.6 SELLER'S ABILITY TO CLEAR TITLE. If on the Closing Date for any
reason, (i) title to the Assets shall not conform to the provisions of this
Agreement; or (ii) any of the conditions precedent specified herein have not
been satisfied, then Buyer may at its election, without waiving any of Buyer's
other rights hereunder by virtue thereof, at the written request of Buyer,
require Seller to use, and Seller shall use, all reasonable efforts to correct
and perfect said title, make the Assets conform to the provisions hereof, or
satisfy such conditions precedent, as the case may be. Buyer shall give
reasonably prompt notice to Seller of any such defect in title, condition or
unsatisfied condition upon discovery of the same. Upon such notice given by
Buyer, the Closing

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<PAGE>

Date shall be extended for a reasonable period of time not to exceed thirty (30)
days to permit Seller to satisfy such conditions precedent as are unsatisfied as
described above. Any such notice to extend, if given, shall indicate a Closing
Date which shall afford Seller a reasonable opportunity to cure such defects,
make the title to or condition of the Assets conform, or satisfy such condition
precedent, as the case may be, as above provided but, in any event, shall not
exceed thirty (30) days. If, at the expiration of such extended time, Seller
shall have failed to remove such defect, or to make the title conform, or to
satisfy such condition precedent, as the case may be, Buyer shall be entitled to
its remedies set forth herein.

2.7 CONSULTING AGREEMENT. At the Closing, Buyer and Seller shall execute
a Consulting Agreement in form and substance as set forth in Exhibit G attached
hereto.

ARTICLE III

REPRESENTATIONS AND WARRANTIES OF SELLER

Seller hereby represents and warrants to Buyer as follows:

3.1 ORGANIZATION AND QUALIFICATION. Seller is a corporation duly
organized, validly existing and in good standing under the laws of the State of
North Carolina. Seller has full power and authority to own, use and lease its
properties and to conduct its business as such properties are owned, used or
leased and as such business is currently conducted and as it is proposed to be
conducted. The copies of Seller's Charter and By-Laws, as amended to date,
certified by its Secretary and delivered to Buyer's counsel prior to the
Closing, are true, complete and correct. Except as set forth on Schedule 3.1
attached hereto, Seller is qualified to do business as a foreign corporation and
is in good standing in each jurisdiction in which it owns or leases property or
maintains inventories or where the conduct of its business would require such
qualification.

3.2 AUTHORITY; NO VIOLATION. Seller has all requisite corporate power and
authority to enter into this Agreement and to carry out the transactions
contemplated hereby. The execution, delivery and performance of this Agreement
by Seller have been duly and validly authorized and approved by all necessary
corporate action. This Agreement constitutes the legal and binding obligation
of Seller, enforceable against it in accordance with its terms. Assuming the
accuracy of the representations and warranties of Buyer hereunder, the entering
into of this Agreement by Seller does not, and the consummation by Seller of the
transactions contemplated hereby, including specifically the transfer of the
Assets to Buyer by Seller, will not, violate the provisions of (i) any
applicable federal, state, local or foreign laws, (ii) Seller's Charter or By-
Laws, or (iii) any provision of, or result in a default or acceleration of any
obligation under, or result in any change in the rights or obligations of Seller
under, any Lien, contract,

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<PAGE>

agreement, license, lease, instrument, indenture, order, arbitration award,
judgment, or decree to which Seller is a party or by which Seller is bound, or
to which any property of Seller is subject.

3.3 OWNERSHIP OF ASSETS. (a) Seller is the fee simple owner of the
Property free from all Liens, encumbrances, rights, easements, agreements,
encroachments, overlaps, special assessments, claims, leases, tenancies, adverse
interests, federal or state taxes, or defects. Seller does not own, lease or
have any rights or interest in any real property other than the Property.

(b) Seller is the owner of the Assets other than the Property free from
all Liens, rights, agreements, claims, adverse interests, federal or state
taxes, or defects, .

(c) Seller enjoys exclusive, peaceful and undisturbed possession under all
real and personal property leases to which it is a party. Seller has posted
security deposits for the performance of its obligations under such leases as
set forth on Schedule 3.3 attached hereto, and there are no claims or charges
against such security deposits which have been asserted or, to the best of
Seller's knowledge, for which there exists a legal basis for such assertion.
With respect to such leases, the consent of only the landlords and those lenders
under financing documents identified on Schedule 3.3 are required for Seller to
consummate the transactions required by this Agreement and, subject to the
receipt of such consents, the same shall not breach, or constitute a default of,
such leases.

(d) The Assets constitute all of the assets and properties necessary for
the continued operation of the business of Seller.

(e) Seller is in possession of all the permits and applications therefor
listed on Schedule 3.3. True and complete copies thereof are included in
Schedule 3.3. There are no proceedings pending or threatened, or any basis
therefor, which may result in the appeal, revocation, suspension or modification
of any such permits or applications therefor.

3.4 SUBSIDIARIES. Seller does not own, directly or indirectly, any
securities issued by any other Person except for United States government
securities, certificates of deposit, or other cash equivalents and is not a
partner or participant in any partnership or joint venture of any kind.

3.5 FINANCIAL STATEMENTS. Attached hereto as Schedule 3.5 are the
following financial statements (collectively the "Financial Statements"): (i)
unaudited consolidated balance sheets and statements of income, and cash flow as
of and for the fiscal years ended November 3, 1991, November 1, 1992, October
31, 1993, and October 30, 1994, for Seller; and (ii) unaudited consolidated
balance sheets and statements of income, and cash flow (the "Most Recent
Financial Statements") as of

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and for the 8 months ended July 2, 1995 for Seller. The Financial Statements
(including the notes thereto) have been prepared in accordance with GAAP applied
on a consistent basis throughout the periods covered thereby, present fairly the
financial condition of Seller as of such dates and the results of operations of
Seller for such periods, are correct and complete, and are consistent with the
books and records of Seller, subject to normal year-end adjustments (which will
not be material individually or in the aggregate) and the absence of footnotes
and other presentation items.

3.6 ABSENCE OF UNDISCLOSED LIABILITIES. Except as set forth in Schedule
3.6 attached hereto, there are no material liabilities of Seller, whether
accrued, absolute, contingent or otherwise (including, without limitation,
liabilities as guarantor or otherwise with respect to obligations of any other
Person, or liabilities for Taxes due or then accrued or to become due), except
for liabilities which have arisen in the ordinary course of business of Seller
since the date of the Most Recent Financial Statements. Schedule 3.6 sets forth
a true and correct aged list of all accounts payable of Seller as of_____, 19 .

3.7 ABSENCE OF CERTAIN CHANGES. Except as otherwise disclosed in Schedule
3.7 attached hereto, since July 18, 1995, there has not been:

(a) any change in the business, operations, assets, liabilities,
prospects or condition (financial or otherwise) of Seller that, by itself or in
conjunction with all other such changes, whether or not arising in the ordinary
course of business, has been or is reasonably likely to be materially adverse
with respect to Seller (including, by way of example and not of limitation, the
loss of any significant distributor, customer or vendor, any announcement of new
developments in competitive technology, or the intention on the part of any key
employee of Seller to leave Seller's employ);

(b) any obligation or liability incurred by Seller other than
obligations and liabilities incurred in the ordinary course of business for an
amount not more than $10,000 in each case or $25,000 in the aggregate;

(d) any contingent liabilities incurred by Seller with respect to the
obligations of any other Person;

(e) any purchase, sale, lease, assignment, transfer or other
disposition, or any agreement or other arrangement for the purchase, sale,
lease, assignment, transfer or other disposition, of any part of the Assets,
other than purchases for and sales from inventory for fair consideration in the
ordinary course of business, except for fixed assets purchased or other capital
expenditures made in amounts not exceeding $5,000 for any single item and
$25,000 in the aggregate for all such items;

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(f) any damage, destruction or loss, whether or not covered by
insurance, adversely affecting the Assets;

(g) any declaration, setting aside or payment of any dividend on, or
the making of any other distribution in respect of, any equity security of
Seller, or any direct or indirect redemption, purchase or other acquisition by
Seller of any of its own equity securities, or any issuance by Seller of any
equity security;

(h) any labor trouble or claim of unfair labor practices involving
Seller; any change in the employment contracts of or compensation payable or to
become payable by Seller to any of its officers, directors, employees,
consultants or agents, or any bonus payment or arrangement made to or with any
of such officers, directors, employees, consultants or agents; or any change in
coverage or benefits available under any Plan (as hereinafter defined);

(i) any change with respect to Seller's senior management;

(j) any payment or discharge of a material Lien or liability of
Seller not disclosed on the Financial Statements or incurred in the ordinary
course of business;

(k) any obligation or liability incurred by Seller with respect to
any loan, advance or commitment to lend by any bank, financial institution or
institutional lender to any of the officers, directors, employees, consultants,
agents, or stockholders of Seller or to any other Person; or any loans or
advances made by Seller to any officers, directors, employees, consultants,
agents or stockholders of Seller, except for normal compensation, professional
fees and expense allowances payable to officers and directors;

(l) any contracts, licenses, leases or agreements entered into by
Seller which are outside the ordinary course of business or which obligate
Seller for more than $5,000 in any one case or more than $25,000 in the
aggregate;

(m) any recapitalization or reorganization;

(n) any amendment or other change (or any authorization to make such
an amendment or change) to the Seller's Charter or By-Laws, except as required
in connection with the consummation of the transactions contemplated hereby;

(o) any postponement or delay in payment of any accounts payable or
other liability of Seller except in the ordinary course of business consistent
with prior practices;

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<PAGE>

(p) any cancellation, waiver, compromise or release of any right or
claim either involving more than $10,000 or outside the ordinary course of
business consistent with prior practices;

(q) any cancellation, termination, modification, or acceleration by
any party to any contract, license, lease or agreement involving more than
$10,000 to which Seller is a party or by which it is bound; or

(r) any other occurrence, action, failure to act or transaction
involving Seller other than transactions in the ordinary course of business
consistent with prior practices.

3.8 FDA STATUS. Schedule 3.8 attached hereto contains a full, accurate
and complete description of the status of Seller's new drug application for 5%
dextrose to the U.S. Food and Drug Administration.

3.9 SUFFICIENCY AND CONDITION OF ASSETS. Seller owns or leases all real,
personal, tangible and intangible property and assets necessary for the conduct
of its business as such business is presently conducted. All tangible
properties and assets owned or leased by Seller are in good operating condition
and repair, ordinary wear and tear excepted, have been maintained, and conform
with all applicable laws, statutes, ordinances, rules and regulations in all
material respects.

3.10 REAL ESTATE.

(a) The Property is the only real property owned by Seller. There
are no leases, subleases, licenses, concessions, or other agreements, written or
oral, granting to any party or parties the right to use or occupy any portion of
the Property. There are no outstanding options or rights of first refusal to
purchase the Property, or any portion thereof or interest therein. There is no
Person (other than Seller) in possession of the Property. All facilities
located on the Property are supplied with utilities and other services necessary
for the operation of such facilities, including gas, electricity, water,
telephone, sanitary sewer, and storm sewer, all of which services are adequate
in accordance with all applicable laws, ordinances, rules, and regulations and
are provided via public roads or via permanent, irrevocable, appurtenant
easements benefiting the Property. The Property abuts on and has direct
vehicular access to a public road, or has access to a public road via a
permanent, irrevocable, appurtenant easement benefiting the Property, and access
to the Property is provided by paved public right-of-way with adequate curb cuts
available.

(b) DHL has no real property, owned, leased or subleased, other than the
Property.

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3.11 ACCOUNTS RECEIVABLE. All of the accounts receivable of Seller are
properly reflected in the Financial Statements are fully collectible in the
ordinary course of business, subject to the allowance for doubtful accounts set
forth therein, and are valid and enforceable claims, subject to no set-off or
counterclaim. Seller has no accounts receivable or loans or notes receivable
from any Affiliates or from any of its officers, directors, consultants,
employees, agents or stockholders.

3.12 INVENTORIES.

(a) Except as disclosed in Schedule 3.12 attached hereto (i) the
Inventories are properly reflected in the Most Recent Financial Statements and
are of a quality and quantity saleable in the ordinary course of business of
Seller at prevailing market prices, and (ii) the values of the Inventories
stated in the Financial Statements reflect Seller's normal inventory valuation
policies and were determined in accordance with GAAP consistently applied.

(b) As of the date hereof, purchase commitments for raw materials and
parts for Seller are not, individually or in the aggregate, in excess of normal
requirements and none of such commitments are at prices materially in excess of
current market prices. Sales commitments for finished goods are all at prices
in excess of prices used in valuing inventory items or of estimated costs of
manufacture of items not in inventory after allowing for selling expenses and a
normal profit margin.

3.13 INTELLECTUAL PROPERTY. All patents, patent applications, registered
copyrights, trade names, registered trademarks and trademark applications which
are owned by or licensed to Seller are listed in Schedule 3.13 attached hereto,
which indicates with respect to each the nature of Seller's interest therein and
the expiration date thereof or the date on which Seller's interest therein
terminates. All of Seller's patents and registered trademarks have been duly
registered in, filed in or issued by the United States Patent Office or the
corresponding offices of other countries identified in Schedule 3.13, and have
been properly maintained and renewed in accordance with all applicable laws and
regulations in the United States and each such country. Except as set forth in
Schedule 3.13, use of said patents, patent applications, registered copyrights,
trade names, registered trademarks or trademark applications owned by Seller
does not require the consent of any other Person and the same are freely
transferable (except as otherwise provided by law) and are owned exclusively by
Seller free and clear of any Liens. Except as set forth in Schedule 3.13, (i)
no other Person has an interest in or right or license to use, or the right to
license any other Person to use, any of said patents, patent applications,
registered copyrights, trade names, registered trademarks or trademark
applications, (ii) there are no claims or demands of any other Person pertaining
thereto and no proceedings have been instituted, or are pending or, to the
knowledge of Seller, threatened, which challenge Seller's rights in respect
thereof, (iii) none of the patents, copyrights, trade names or trademarks listed
in Schedule 3.13 is being infringed by another Person or is subject to any
outstanding

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order, decree, ruling, charge, injunction, judgment or stipulation, (iv) no
Claim has been made or is threatened charging Seller with infringement of any
adversely held patent, trade name, trademark or copyright, and (v) there does
not exist (a) any unexpired patent with claims which are or would be infringed
by products of Seller or by apparatus, methods or designs employed by it in
manufacturing such products or (b) any patent or application therefor or
invention which would materially adversely affect Seller's ability to
manufacture, use or sell any such product, apparatus, method or design.

3.14 TRADE SECRETS AND CUSTOMER LISTS. Seller has the right to use, free
and clear of any Claims or rights of any other Person, all trade secrets,
customer lists, manufacturing and secret processes and know-how (if any)
required for or used in the manufacture or marketing of all products being sold,
manufactured, or under development by it, including products licensed from other
Persons. Any payments required to be made by Seller for the use of such trade
secrets, customer lists, manufacturing and secret processes and know-how are
described in Schedule 3.14 attached hereto. Seller is not in any way making an
unlawful or wrongful use of any confidential information, know-how, or trade
secrets of any other Person, including, without limitation, any former employer
of any present or past employee of Seller. Except as described on Schedule
3.14, Seller or any officer, director or employee of Seller is not a party to
any non-competition or confidentiality agreement with any Person other than
Seller.

3.15 CONTRACTS. Except for contracts, commitments, leases, licenses, plans
and agreements described in Schedule 3.15 attached hereto, Seller is not a party
to or subject to:

(a) any plan or contract regarding or providing for bonuses,
pensions, options, stock purchases, deferred compensation, severance benefits
retirement payments, profit sharing, stock appreciation, collective bargaining
or the like, or any contract or agreement with any labor union;

(b) any employment or consulting contract or contract for personal
services not terminable at will by Seller without penalty to Seller;

(c) any contract or agreement for the purchase of any commodity,
product, material, supplies, equipment or other personal property, or for the
receipt of any service, other than purchase orders entered into in the ordinary
course of business for less than $5,000 each and which in the aggregate do not
exceed $25,000;

(d) any contract or agreement for the purchase or lease of any fixed
asset, whether or not such purchase or lease is in the ordinary course of
business, for a price in excess of $5,000;

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(e) any contract or agreement for the sale of any commodity, product,
material, equipment, or other personal property, or the furnishing by Seller of
any service, other than contracts with customers entered into in the ordinary
course of business;

(f) any contract or agreement providing for the purchase of all or
substantially all of its requirements of a particular product from a supplier,
or for periodic minimum purchases of a particular product from a supplier;

(g) any contract or agreement with any sales agent, distributor or
OEM (original equipment manufacturer) of products of Seller;

(h) any contract or agreement concerning a partnership or joint
venture with one or more Persons;

(i) any confidentiality agreement or any non-competition agreement or
other contract or agreement containing covenants limiting Seller's freedom to
compete in any line of business or in any location or with any Person;

(j) any license agreement (as licensor or licensee);

(k) any contract or agreement with any present or former officer,
director, consultant, agent or stockholder of Seller;

(l) any loan agreement, indenture, note, bond, debenture or any other
document or agreement evidencing a capitalized lease obligation or Indebtedness
to any Person;

(m) any agreement of guaranty, indemnification, or other similar
commitment with respect to the obligations or liabilities of any other Person
(other than lawful indemnification provisions contained in the Charter and By-
Laws of Seller);

(n) any agreement under which the consequences of a default or
termination could have a Material Adverse Effect; or

(o) any other agreement or contract (or group or related agreements
or contracts) the performance of which involves consideration paid or received
by Seller in excess of $10,000.

Copies of all such contracts, commitments, plans, leases, licenses and
agreements have been provided to Buyer prior to the execution of this Agreement,
and all such copies are true, correct and complete and have been subject to no
amendment, extension or other modification as of the date hereof, except such as
are described in Schedule 3.15. Except as listed and described in Schedule
3.15, neither

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Seller nor any other Person is in default under any such contract, commitment,
plan, lease, license or agreement described in Schedule 3.15 (a "default" being
defined for purposes hereof as an actual default or event of default or the
existence of any fact or circumstance which would, upon receipt of notice or
passage of time, constitute a default).

3.16 CUSTOMERS AND SUPPLIERS. Schedule 3.16 attached hereto sets forth the
twenty (20) largest suppliers and customers of Seller in the calendar year 1994
(the "Large Suppliers and Customers"). Except as reflected in Schedule 3.16, no
supplier is a material sole source of supply to Seller. The relationships of
Seller with its suppliers and customers are good commercial working
relationships and, except as set forth on Schedule 3.16, neither (i) any of the
Large Suppliers and Customers, nor (ii) any supplier who at any time during 1994
or 1995 was or is the sole source of supply of any item, has cancelled or
otherwise terminated, or threatened to cancel or otherwise terminate, its
relationship with Seller or has during the last twelve (12) months decreased
materially or threatened to decrease or limit materially, its services, supplies
or materials to Seller or its usage or purchase of the services or products of
Seller. Seller has no knowledge that any of the Large Suppliers and Customers
intends to cancel or otherwise adversely modify its relationship with Seller or
to decrease materially or limit its services, supplies or materials to Seller or
its usage or purchase of the services or products of Seller, and the acquisition
of the Assets by Buyer will not, to the knowledge of Seller, adversely affect
the relationship of Seller with any of the Large Suppliers and Customers.

3.17 COMPLIANCE WITH LAWS.

(a) Seller has all licenses, permits, franchises, orders, approvals,
accreditations, written waivers and other authorizations as are necessary in
order to enable it to own and conduct its business as currently conducted and to
occupy and use its real and personal properties without incurring any material
liability. No registration, filing, application, notice, transfer, consent,
approval, order, qualification, waiver or other action of any kind is required
by virtue of the execution and delivery of this Agreement or the consummation of
the transactions contemplated hereby to avoid the loss of any rights pertaining
to any such license, permit, franchise, order, approval, accreditation, waiver
or authorization. Seller is in full compliance with the terms and conditions of
all such licenses, permits, franchises, orders, approvals, accreditations,
waivers and authorizations.

(b) Seller has conducted and is conducting its business in compliance
with applicable federal, state, local or foreign laws, statutes, ordinances,
regulations, rules or orders or other requirements of any governmental,
regulatory or administrative agency or authority or court or other tribunal
relating to it (including, but not limited to, any law, statute, ordinance,
regulation, rule, order or requirement relating to securities, properties,
business, products, advertising, sales or employment practices, immigration,

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<PAGE>

terms and conditions of employment, wages and hours, safety, occupational
safety, health or welfare conditions relating to premises occupied, product
safety and liability or civil rights). Seller is not now charged with, and to
the knowledge of Seller, is not now under investigation with respect to, any
possible violation of any applicable law, statute, ordinance, regulation, rule,
order or requirement relating to any of the foregoing in connection with the
business of Seller, and Seller has filed all material reports required to be
filed with any governmental, regulatory or administrative agency or authority.
Seller shall promptly inform Buyer of any notice relating to the foregoing
received after the date hereof and on or prior to the Closing Date.

3.18 TAXES.

(a) Seller has filed all Tax Returns that it was required to file.
All such Tax Returns were correct and complete in all respects. All Taxes owed
by Seller have been paid (whether or not shown on any Tax Return). Seller
currently is not the beneficiary of any extension of time within which to file
any Tax Return. No Claim has ever been made by an authority in a jurisdiction
where Seller does not file Tax Returns that it is or may be subject to the
imposition of any Tax by that jurisdiction. There are no Liens on any of the
Assets that arose in connection with any failure (or alleged failure) to pay any
Tax.

(b) Seller has withheld and paid all Taxes required to have been
withheld and paid in connection with amounts paid or owing to any employee,
consultant, independent contractor, creditor, stockholder, or other third party.

(c) Seller does not expect any authority to assess any additional
Taxes for any period for which Tax Returns have been filed. Seller is not aware
of any dispute or Claim concerning any liability for Taxes of Seller. Schedule
3.18 attached hereto lists all federal, state, local, and foreign income Tax
Returns filed with respect to Seller for taxable periods ended on or after
__________, 19 , indicates those Tax Returns that have been audited, and
indicates those Tax Returns that currently are the subject of audit. Seller has
delivered to Buyer correct and complete copies of all federal income Tax
Returns, examination reports, and statements of deficiencies assessed against or
agreed to by Seller since __________, 19 .

(d) Seller has not waived any statute of limitations in respect of
Taxes or agreed to any extension of time with respect to a Tax assessment or
deficiency.

(e) Seller has not filed a consent under Section 341(f) of the Code
concerning collapsible corporations. Seller has not made or is not obligated to
make any payments or is not a party to any agreement that under certain
circumstances could obligate it to make any payments that will not be deductible
under Section 280G of the Code or that are subject to an excise tax under
Section 4999 of the Code. Seller has not been a United States real property
holding corporation within the meaning of

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<PAGE>

Section 897(c)(2) of the Code during the applicable period specified in Section
897(c)(1)(A)(ii) of the Code. Seller is not a party to any Tax allocation or
sharing agreement. Seller (i) has not been a member of an Affiliated Group (as
defined by Section 1504 of the Code) filing a consolidated federal income Tax
Return, and (ii) has no liability for the Taxes of any Person (other than
Seller) under Treas. Reg.{ 1.1502-6 (or any similar provision of state, local,
or foreign law), as a transferee or successor by contract or otherwise.

(f) The unpaid Taxes of Seller (i) did not, as of the date of the Most
Recent Financial Statements, exceed the reserve for Tax Liabilities (rather than
any reserve for deferred Taxes established to reflect timing differences between
book and Tax income) set forth on the face of the Most Recent Financial
Statements (rather than in any notes thereto), and (ii) do not exceed that
reserve as adjusted for the passage of time through the Closing Date in
accordance with the past custom and practice of Seller in filing its Tax
Returns.

3.19 EMPLOYEE BENEFIT PLANS. Seller is in full compliance with the
provisions of, and any legal requirements relating to, any (a) "Employee Pension
Benefit Plan" (as such term is defined in Section 3(2) of ERISA) which is not a
Multiemployer Plan; (b) "Multiemployer Plan" (as such term is defined in Section
3(37) or 4001(a)(3) of ERISA); (c) "Employee Welfare Benefit Plan" (as such term
is defined in Section 3(3) of ERISA); and (d) stock purchase, option or bonus
plan, deferred compensation, severance pay, incentive, vacation, sick pay or
leave, fringe benefit plan, policy or arrangement or payroll practice; which is,
or was within five (5) years prior to the Closing Date, maintained or
contributed to by Seller or under which Seller has any liability or contingent
liability (individually a "Plan" and collectively, the "Plans").

3.20 ENVIRONMENTAL MATTERS.

(a) Except as disclosed in Schedule 3.20 attached hereto, the use and
operation by Seller and, to the knowledge of Seller, by all past owners and
operators, of all facilities and properties used in the business of Seller have
been, and will be on the Closing Date, in compliance with all Environmental
Laws, and no Environmental Action has been filed, commenced, or, to the
knowledge of Seller, threatened with or against any of them alleging any failure
so to comply.

(b) Seller has received all Environmental Permits required to allow
it to conduct its operations and businesses, such Environmental Permits are
valid and in effect, and Seller is in compliance with such Environmental
Permits.

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<PAGE>

(c) Except as disclosed in Schedule 3.20, Seller has never sent or
arranged for the transportation of Hazardous Materials to a site, or owned or
operated a site, which, pursuant to CERCLA or any similar state law, has been
placed or is proposed (by the United States Environmental Protection Agency
("EPA") or similar state authority) to be placed, on the "National Priorities
List," as in effect as of the Closing Date, of hazardous waste sites or any
similar state list.

(d) Except as disclosed in Schedule 3.20, Seller has not received
notice from any Person, (i) that it has been identified by the EPA or similar
state authority as a potentially responsible party under CERCLA with respect to
a site listed on the "National Priorities List," as in effect as of the Closing
Date, of hazardous waste sites or any similar state list; (ii) that any
Hazardous Materials which Seller has generated, transported, or disposed of has
been found at any site at which a Person has conducted or has ordered that
Seller conduct a remedial investigation, removal, or other response action
pursuant to any Environmental Law; or (iii) that Seller is or shall be a named
party to any Environmental Action arising out of any Person's incurrence of
costs, expenses, losses, or damages of any kind whatsoever in connection with
the release of Hazardous Materials.

(e) Except as disclosed in Schedule 3.20, there are no underground
fuel or other storage tanks located on the Property. All such tanks disclosed
in Schedule 3.20, together with all appurtenant piping, valve, and related
facilities, are, except as disclosed in Schedule 3.20, structurally sound, are
not currently, and, to Seller's knowledge, have not in the past been leaking or
releasing their contents into the soil or groundwater, and are in compliance
with all applicable registration, testing, monitoring, containment, and
corrosion protection requirements.

(f) Except as disclosed in Schedule 3.20, there have been no
unpermitted Releases or threatened Releases in the Property that are or at any
time were reasonably likely to occur of Hazardous Materials on, upon, into, or
from the Assets; and, to the knowledge of Seller, there have been no Releases
on, upon, from, or into any real property in the vicinity of Assets which,
through the soil, groundwater, or surface water, may have come to be located on,
upon, or under such Assets.

(g) Without in any way limiting the generality of the foregoing,
there is, to the knowledge of Seller, no asbestos contained in or forming part
of any building, building component, structure, or office space owned or leased
by Seller; and, to the knowledge of Seller, no polychlorinated biphenyls (PCBs)
are used or stored at any property owned or leased by Seller. To Seller's
knowledge, all properties and equipment used in the business of Seller have been
free of methylene chloride, trichloroethylene, 1, 2 - transdichloroethylene,
dioxins, dibenzofurans, and Extremely Hazardous Substances, as such term is
defined in Section 302 of the Emergency Planning and Community Right-to-Know Act
of 1986, as amended.

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(h) None of the Assets is or shall be subject to any applicable
environmental clean-up responsibility law or environmental restrictive transfer
law or regulation, solely by virtue of the transactions set forth herein and
contemplated hereby.

3.21 EMPLOYEES. Seller is not a party to, and none of its employees are
subject to, any collective bargaining agreement or other union contract. Seller
is in compliance in all material respects with applicable federal, state and
local laws affecting employment and employment practices, including terms and
conditions of employment and wages and hours, and there are, and have been
during the past five (5) years, no complaints against Seller pending or, to the
knowledge of Seller, threatened before the National Labor Relations Board or any
similar state or local agency.

3.22 LITIGATION. Except as disclosed on Schedule 3.22 attached hereto, (a)
there is no Claim pending or, to the knowledge of Seller, threatened (or, to the
knowledge of Seller, any facts which could lead to such a claim) by, against,
affecting or regarding Seller or its business or the Assets, at law or in
equity, before any federal, state, local or foreign court or any other
governmental or administrative agency or tribunal or any arbitrator or
arbitration panel, and (b) there are no judgments, orders, rulings, charges,
decrees, injunctions, notices of violation or other mandates against or
affecting Seller with respect to its business or the Assets. Nothing listed on
Schedule 3.22, either individually or when aggregated with other listings on
such Schedule, would reasonably be expected to have a Material Adverse Effect.

3.23 INSURANCE. Schedule 3.23 attached hereto sets forth a summary of all
insurance policies (including policies providing property, casualty, liability,
and workers' compensation coverage, benefits or coverage for any Plan and bond
and surety arrangements) to which Seller has been a party, a named insured, or
otherwise the beneficiary of coverage at any time within the past three (3)
years and specifies the insurer, the amount of coverage, type of insurance,
expiration date, and any retroactive premium adjustments or other loss sharing
arrangements. With respect to each such insurance policy (a) the policy is
legal, valid, binding, enforceable, and in full force and effect; (b) Seller is
not in breach or default (including with respect to the payment of premiums or
the giving of notices), and no event has occurred which, with notice or the
lapse of time, would constitute such a breach or default, or permit termination,
modification, or acceleration under the policy; and (c) no party to the policy
has repudiated any provision thereof.

3.24 PRODUCTS. Each product manufactured, sold, leased, distributed or
delivered by Seller ("Products") has been in conformity with all applicable
contractual commitments and all applicable express and implied service and
product warranties. Except as disclosed in Schedule 3.24 attached hereto, (a)
there are no existing or, to the knowledge of Seller, threatened Claims against
Seller for services or merchandise which are defective or fail to meet any
express or implied service or product warranties,

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<PAGE>

or any facts which, if discovered by a third party, would support such a Claim;
and (b) no Claim has been asserted against Seller for renegotiation or price
redetermination with respect to any transaction, and, to Seller's knowledge,
there are no facts upon which any such Claim could be based. Except as set forth
on Schedule 3.24, there are no statements, citations or decisions by any
governmental or regulatory body or agency that any Product is defective or fails
to meet any standards promulgated by any such governmental or regulatory body or
agency. Except as set forth on Schedule 3.24, there have been no recalls ordered
by any such governmental or regulatory body or agency with respect to any
Product.

3.25 POWERS OF ATTORNEY. Seller has not granted any outstanding power of
attorney.

3.26 BROKERS. Except as disclosed in Schedule 3.26 attached hereto, Seller
or anyone acting on its behalf has not engaged, retained, or incurred any
liability to any broker, investment banker, finder or agent or has agreed to pay
any brokerage fees, commissions, finder's fees or other fees with respect to
this Agreement or the transactions contemplated hereby.

3.27 BURDENSOME AGREEMENTS. Seller is not subject to or bound by any
agreement, judgment, decree or order which does or may in the future reasonably
be expected to result in a Material Adverse Effect.

3.28 Transactions with Interested Persons. Except as set forth on Schedule
3.28 attached hereto, no officer, supervisory employee or director of Seller
owns directly or indirectly, either individually or jointly, any material
interest in, or serves as an officer or director of, any customer, competitor or
supplier of Seller, or any organization which has a material contract or
arrangement with Seller.

3.29 COPIES OF DOCUMENTS. Seller has made available for inspection and
copying by Buyer and its counsel true and correct copies of all documents
referred to in this Article III or in the Schedules delivered to Buyer pursuant
to this Agreement.

3.30 DISCLOSURE OF MATERIAL INFORMATION. Neither this Agreement (including
the Schedules and Exhibits hereto) nor any document, certificate or instrument
furnished in connection therewith contains, with respect to Seller, any untrue
statement of a material fact or omits to state a material fact necessary to make
the statements therein not misleading. There is no fact known to Seller which
has or would reasonably be expected in the future to result in a Material
Adverse Effect and which has not been set forth in this Agreement. Seller has
reported to Buyer any and all indications of which it is aware of potential
material adverse factors in Seller's business, such as (by way of example, not
of limitation) loss of a distributor, vendor or customer, new announcements in
competitive technology, intentions of key employees to resign or leave Seller or
any other adverse factor taking place prior to the date of this Agreement.

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ARTICLE IV

REPRESENTATIONS AND WARRANTIES OF BUYER

Buyer hereby represents and warrants to Seller as follows:

4.1 ORGANIZATION AND QUALIFICATION. Buyer is a corporation duly
organized, validly existing and in good standing under the laws of the
Commonwealth of Massachusetts, with full power and authority to own, use or
lease its properties and to conduct its business as such properties are owned,
used or leased and as such business is conducted.

4.2 AUTHORITY. Buyer has the requisite corporate power and authority to
enter into this Agreement and to carry out the transactions contemplated hereby.
The execution, delivery and performance of this Agreement by Buyer have been
duly and validly authorized and approved by all necessary corporate action on
the part of Buyer, and this Agreement constitutes the legal and binding
obligation of Buyer, enforceable against Buyer in accordance with its terms.
Assuming the accuracy of the representations and warranties of Seller hereunder
and to the best knowledge of Buyer, the entering into of this Agreement by Buyer
does not, and the consummation by Buyer of the transactions contemplated hereby
will not, violate the provisions of (i) any applicable laws of the United States
or any other state or jurisdiction in which Buyer does business, (ii) the
Charter or By-Laws of Buyer, or (iii) any provision of, or result in a default
or acceleration of any obligation under, or result in any change in the rights
or obligations of Buyer under, any mortgage, Lien, lease, agreement, contract,
instrument, order, arbitration award, judgment, or decree to which Buyer is a
party or by which Buyer is bound, or to which any property of Buyer is subject.

4.3 BROKERS. Neither Buyer nor anyone acting on its behalf has engaged,
retained or incurred any liability to any broker, investment banker, finder or
agent or has agreed to pay any brokerage fees, commissions, finder's fees or
other fees with respect to this Agreement or the transactions contemplated
hereby.

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ARTICLE V

COVENANTS

The parties hereto agree to the following covenants:

5.1 COVENANTS OF SELLER. Seller hereby agrees with Buyer to keep, perform
and fully discharge the following covenants and agreements:

(a) Interim Conduct of Business. From the date hereof until the
Closing, Seller shall operate its business as a going concern consistent with
prior practice and in the ordinary course of business (except as may be
authorized pursuant to this Agreement or as set forth on Schedule 5.1(a)
hereto). Without limiting the generality of the foregoing, from the date hereof
until the Closing, except for transactions contemplated by this Agreement or
expressly approved in writing by Buyer, Seller shall not:

(i) enter into or amend any employment, bonus, severance or
retirement contract or arrangement, or increase any salary or other
form of compensation payable or to become payable to any executive or
employee other than in the ordinary course of business consistent with
prior practice;

(ii) purchase, lease or otherwise acquire any real estate or any
interest therein;

(iii) declare, set aside or pay any dividend or make any other
distribution with respect to any equity security;

(iv) merge or consolidate with or agree to merge or consolidate with,
or purchase or agree to purchase all or substantially all of the
assets of, acquire securities of or otherwise acquire any Person;

(v) sell, lease or otherwise dispose of or agree to sell, lease or
otherwise dispose of any of its assets, properties, rights or claims,
whether tangible or intangible, except in the ordinary course of
business consistent with prior practice;

(vi) authorize for issuance, issue, sell or deliver any of its own
equity securities;

(vii) split, combine or reclassify any class of equity security or
redeem or otherwise acquire, directly or indirectly, any of its equity
securities;

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(viii) incur any liability, guaranty or obligation (fixed or
contingent) other than in the ordinary course of business consistent
with prior practice;

(ix) place or permit to be placed any Lien on any Assets, other than
statutory Liens arising in the ordinary course of business;

(x) make or authorize any amendments or changes to its Charter or By-
Laws;

(xi) make any investment in excess of $5,000, whether singly or in
the aggregate, in property, plant and equipment and other items of
capital expenditure;

(xii) accelerate receivables or delay or postpone payment of any
accounts payable or other liability, except in the ordinary course of
business consistent with prior practice; or

(xiii) abandon any part of its business.

(b) Access. Seller shall, upon reasonable notice, give Buyer and its
representatives full and free access to all properties, assets, books,
contracts, commitments and records of Seller during reasonable business hours
and shall promptly furnish Buyer with all financial and operating data and other
information as to the history, ownership, business, operations, properties,
assets, liabilities, or condition (financial or otherwise) of Seller as Buyer
may from time to time reasonably request.

(c) Satisfaction of Conditions. Seller shall use its best efforts to
accomplish the satisfaction of the conditions precedent to Closing contained in
Section 6.1 hereof on or prior to the Closing Date.

(d) No Solicitation, Confidentiality, Etc. Prior to the termination
of this Agreement pursuant to Article VII hereof, Seller will not (i) solicit or
negotiate with respect to any inquiries or proposals relating to (x) the
possible direct or indirect acquisition of any equity security of Seller or of
all or a portion of the assets or business of Seller, or (y) any merger,
consolidation, joint venture or business combination with Seller, or (ii)
discuss or disclose either this Agreement or other confidential information
pertaining to Seller with or to any Person (except as may be required by law or
except as may be required in connection with the transactions contemplated by
this Agreement to Affiliates, officers, directors, employees and agents of
Seller) without the prior written approval of Buyer.

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(e) Accuracy of Representations and Warranties. Without the prior
written consent of Buyer, Seller will not take any action from the date hereof
to the Closing Date that would cause any representation or warranty of Seller
contained in this Agreement to become untrue or cause the breach of any
agreement hereof or covenant contained herein. Seller will promptly bring to
the attention of Buyer any facts which come to Seller's attention that would
cause any of the representations and warranties of Seller to be untrue or
materially misleading in any respect.

(f) Tax Matters. (i) Seller shall be responsible for and shall cause
to be prepared and duly filed all Tax Returns relating to Taxes of Seller for
all taxable periods ending on or before the Closing Date. Seller shall be
responsible for and shall indemnify and hold harmless Buyer with respect to all
Taxes to which such Tax Returns relate for all taxable periods covered by such
Tax Returns. (ii) Seller shall be responsible for and cause to be prepared and
duly filed all Tax Returns relating to Taxes of Seller for any taxable period
which includes and ends after the Closing Date (the "Stub Period"). Seller
shall be responsible for and shall indemnify and hold harmless Buyer with
respect to all Taxes with respect to Seller for the Stub Period.

(g) Disclosure Supplements. From time to time prior to the Closing,
Seller will supplement or amend the Schedules hereto with respect to any matter
hereafter arising which, if existing or occurring at or prior to the date of
this Agreement, would have been required to be set forth or described in any
such Schedule or which is necessary to complete or correct any information in
any such Schedule or in any representation or warranty of Seller which has been
rendered inaccurate thereby. For purposes of determining the satisfaction of
the conditions set forth in Section 6.1 hereof, such supplement or amendment
shall be given effect, provided that if any such supplement or amendment would
have a Material Adverse Effect, Buyer shall have the right to terminate this
Agreement.

5.2 COVENANTS OF BUYER. Buyer hereby agrees with Seller to keep, perform
and fully discharge the following covenants and agreements:

(a) Confidentiality. Buyer shall hold, and cause its officers,
directors, employees, consultants, agents and stockholders to hold, all
information heretofore or hereafter obtained from Seller or its advisers in
strict confidence and use the information so obtained only for the purpose of
evaluating the purchase of the Assets; provided, however, that Buyer shall also
be entitled to share such information with any adviser to Buyer, so long as such
adviser is subject to the same confidentiality requirements as Buyer. Buyer
shall promptly return all such information to Seller if the Closing is not
consummated as contemplated hereby.

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(b) Satisfaction of Conditions. Buyer will use its best efforts to
accomplish the satisfaction of the conditions precedent to Closing contained in
Section 6.2 hereof on or prior to the Closing Date.

5.3 RISK OF LOSS; CONDEMNATION. The risk of loss, destruction,
condemnation, eminent domain taking or damage to any component of the Property
and all other Assets by any cause prior to the Closing is assumed by Seller, and
Seller shall maintain in full force and effect through such date the scope and
levels of insurance coverage currently in effect thereon. Seller shall
immediately notify Buyer if, prior to, or at, the Closing, there shall have been
any loss, destruction or damage to, or any commenced or threatened proceedings
to condemn or institute eminent domain taking of, all or a portion of the
Property or any other of the Assets.

5.4 CASUALTY LOSSES. If any material casualty loss, destruction or damage
should occur to the Property, Seller shall restore or repair the Property to its
current condition, all expenses for which shall be paid by Seller on or before
the Closing Date to the extent they exceed available insurance proceeds actually
received by Seller. If Seller is unable or unwilling so to restore or repair
the Property prior to the Closing, Buyer may at its option elect to consummate
the transactions contemplated hereby with the Property in its then condition, in
which event Seller will assign all available insurance proceeds to Buyer or if a
holder of a mortgage or security interest on the Property shall not permit
Seller to assign all insurance proceeds to Buyer, Seller will give to Buyer a
credit against the purchase price equal to amounts recovered or recoverable
under the terms of the insurance policy less any amounts reasonably expended by
Seller for any partial restoration; notwithstanding the foregoing, Buyer may
elect to terminate this Agreement in accordance with the terms hereof. For
purposes of this Section 5.4, the term "material" shall mean that such
restoration or repair will be expected to cost in excess of $5,000 in the
aggregate.

5.5 ASSUMPTION OF CONTRACTS. On or prior to the date which is five (5)
Business Days from the date Buyer receives complete information with respect to
Schedules 3.7, 3.10 and 3.15, Buyer shall notify Seller in writing of which of
the agreements listed on Schedules 3.7, 3.10 and 3.15, if any, Buyer desires to
assume as part of the consummation of the transactions contemplated herein.
Seller shall transfer all of its right, title and interest in, to and under all
of such agreements to Buyer at the Closing. Failure of Buyer so to notify
Seller within such period shall mean Buyer shall not assume any of such
agreements.

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ARTICLE VI

CLOSING CONDITIONS

6.1 CONDITIONS TO OBLIGATIONS OF BUYER. The obligations of Buyer to
consummate this Agreement and the transactions contemplated hereby are subject
to the fulfillment, prior to or at the Closing, of the following conditions
precedent:

(a) Representations, Warranties and Covenants. Each of the
representations and warranties of Seller contained in this Agreement shall
remain true and correct at the Closing Date as fully as if made on the Closing
Date; Seller shall have performed, on or before the Closing Date, all of its
obligations under this Agreement and the other documents executed in connection
herewith which by the terms thereof are to be performed on or before the Closing
Date; and Seller shall have delivered to Buyer an Officer's Certificate dated
the Closing Date of Seller to such effect.

(b) No Pending Action. No legislation, order, rule, ruling or
regulation shall have been proposed, enacted or made by or on behalf of any
governmental body, department or agency, and no legislation shall have been
introduced in either House of Congress or in the legislature of any state, and
no investigation by any governmental authority shall have been commenced or
threatened, and no action, suit, investigation or proceeding shall have been
commenced before, and no decision shall have been rendered by, any court or
other governmental authority or arbitrator, which, in any such case, in the
reasonable judgment of Buyer could adversely affect, restrain, prevent or
rescind the transactions contemplated by this Agreement (including, without
limitation, the purchase and sale of the Assets) or result in a Material Adverse
Effect.

(c) Purchase Permitted by Applicable Laws; Legal Investment. Buyer's
purchase of and payment for the Assets (a) shall not be prohibited by any
applicable law or governmental order, rule, ruling, regulation, release or
interpretation, (b) shall not subject Buyer to any penalty, Tax, liability or,
in Buyer's reasonable judgment, any other onerous condition under or pursuant to
any applicable law, statute, ordinance, regulation or rule, (c) shall not
constitute a fraudulent or voidable conveyance under any applicable law, and (d)
shall be permitted by all applicable laws, statutes, ordinances, regulations and
rules of the jurisdictions or regulatory agencies to which Buyer is subject.

(d) Proceedings Satisfactory. All proceedings taken in connection
with the purchase and sale of the Assets and all documents and papers relating
thereto shall be in form and substance reasonably satisfactory to Buyer. Buyer
and its counsel shall have received copies of such documents and papers as Buyer
or its counsel may reasonably request in connection therewith, all in form and
substance reasonably

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satisfactory to Buyer. Any Schedule or Exhibit to this Agreement and any other
document, agreement or certificate contemplated by this Agreement, not approved
by Buyer in writing as to form and substance on the date this Agreement is
executed, shall be reasonably satisfactory in form and substance to Buyer.

(e) Consents - Permits. Seller shall have received (and there shall
be in full force and effect) all material consents, approvals, licenses,
permits, orders and other authorizations of, and shall have made (and there
shall be in full force and effect) all such filings, registrations,
qualifications and declarations with, any Person pursuant to any applicable law,
statute, ordinance regulation or rule or pursuant to any agreement, order or
decree to which Seller is a party or to which it is subject, in connection with
the transactions contemplated by this Agreement and the sale of the Assets.

(f) Corporate Documents. Seller shall have delivered to Buyer:

(i) An Officer's Certificate of the Secretary of Seller
certifying (x) the incumbency and genuineness of signatures of all officers of
Seller executing this Agreement, any document delivered by Seller at the Closing
and any other document, instrument or agreement executed in connection herewith,
(y) the truth and correctness of resolutions of Seller authorizing the entry by
Seller into this Agreement and the transactions contemplated hereby, and (z) the
truth, correctness and completeness of the By-Laws of Seller;

(ii) the Charter of Seller certified as of a recent date by
the Secretary of State of the State of North Carolina; and

(iii) certificates of corporate and tax good standing and
legal existence of Seller as of a recent date from the Secretary of State of the
State of North Carolina.

(g) Opinion of Counsel. Buyer shall have received a favorable
opinion, dated the Closing Date and satisfactory in form to Buyer and its
counsel, of counsel to the Sellers, as to the matters set forth on Exhibit C
attached hereto.

(h) Title Insurance; Consents. Buyer shall have obtained at normal
rates a commitment (which shall remain in effect for not less than one year from
the Closing Date) in form and content, and issued by a title insurance company
acceptable to it and its counsel for the issuance of an ALTA owner's title
insurance policy in an amount equal to the fair market value of the Property,
insuring the interests of Buyer as fee simple owner of the Property and all
improvements and fixtures thereon and all rights and appurtenances thereto as of
the Closing Date, subject only to such exceptions as are acceptable to Buyer.
Seller shall have delivered on the Closing Date such consents, subordinations,
non-disturbance agreements, estoppel certificates, and other

Page 30 of 40
<PAGE>

documentation as may be reasonably required by Buyer or said title insurance
company with respect to the Property.

(i) Bulk Sales. Seller shall at or prior to Closing provide Buyer an
indemnity acceptable to Buyer with respect to Seller's non-compliance with bulk
sales laws applicable in South Carolina.

(j) Supply Agreement. Seller shall cause its shareholders listed on
Schedule 6.1(j) attached hereto to enter into a guaranteed water supply contract
with Buyer in form and substance as set forth in Exhibit D attached hereto (the
"Supply Agreement").

(k) Non-Competition Agreements. Seller shall cause Seller's chief
executive officer, chief financial officer, quality assurance director,
regulatory affairs director and plant manager to enter non-competition
agreements with Buyer in form and substance as set forth in Exhibit E attached
hereto (the "Non-Competition Agreements").

6.2 CONDITIONS TO OBLIGATIONS OF SELLER. The obligations of Seller to
consummate this Agreement and the transactions contemplated hereby are subject
to the fulfillment, prior to or at the Closing, of the following conditions
precedent:

(a) Representations and Warranties. Each of the representations and
warranties of Buyer in this Agreement shall remain true and correct at the
Closing Date, and Buyer shall, on or before the Closing Date, have performed all
of its obligations under this Agreement and the other documents executed in
connection herewith which by the terms hereof are to be performed by it on or
before the Closing Date; and Buyer shall have delivered an Officer's Certificate
to the Seller dated the Closing Date to such effect.

(b) No Pending Action. No legislation, order, rule, ruling or
regulation shall have been proposed, enacted or made by or on behalf of any
governmental body, department or agency, and no legislation shall have been
introduced in either House of Congress or in the legislature of any state, and
no investigation by any governmental authority shall have been commenced or
threatened, and no action, suit, investigation or proceeding shall have been
commenced before, and no decision shall have been rendered by, any court or
other governmental authority or arbitrator, which, in any such case, was not
known by Seller on the date hereof or which could adversely affect, restrain,
prevent or rescind the transactions contemplated by this Agreement (including,
without limitation, the purchase and sale of the Assets) or result in a Material
Adverse Effect.

Page 31 of 40
<PAGE>

(c)Corporate Documents. Buyer shall have delivered to Seller:

(i) an Officer's Certificate of the Clerk of Buyer
certifying (x) the incumbency and genuineness of signatures of all officers of
Buyer executing this Agreement, any document delivered by Buyer at the Closing
and any other document, instrument or agreement executed in connection herewith,
(y) the truth and correctness of resolutions of Buyer authorizing the entry by
Buyer into this Agreement and the transactions contemplated hereby, and (z) the
truth, correctness and completeness of the By-Laws of Buyer;

(ii) the Charter of Buyer certified as of a recent date by
the Secretary of State of the Commonwealth of Massachusetts; and

(iii) certificates of corporate good standing and legal
existence of Buyer as of a recent date from the Secretary of State of the
Commonwealth of Massachusetts.

(d) Opinion of Counsel to Buyer. Seller shall have received a
favorable opinion, dated the Closing Date and satisfactory in form to Seller, of
counsel to Buyer, in substantially the form attached hereto as Exhibit F.

ARTICLE VII

TERMINATION

7.1 TERMINATION OF AGREEMENT. This Agreement and the transactions
contemplated hereby may (at the option of the party having the right to do so)
be terminated at any time on or prior to the Closing Date:

(a) Mutual Consent. By mutual written consent of Buyer and Seller;

(b) Court Order. By Buyer or Seller if any court of competent
jurisdiction shall have issued an order pursuant to the request of a third party
restraining, enjoining or otherwise prohibiting the consummation of the
transactions contemplated by this Agreement; or

(c) Failure to Close By August 18, 1995. By Buyer if the
transactions contemplated hereby shall not have been consummated on or before
August 18, 1995; provided, however, that such right to terminate this Agreement
shall not be available to Buyer if Buyer's failure to fulfill any obligation of
this Agreement has been the cause of, or resulted in, the failure of the
transactions contemplated hereby to be consummated on or before such date.

Page 32 of 40
<PAGE>

7.2 EFFECT OF TERMINATION AND RIGHT TO PROCEED. If this Agreement is
terminated pursuant to this Article VII, then except as provided below, all
further obligations of Buyer and Seller under this Agreement shall terminate
without further liability of Buyer or any Affiliate thereof to Seller or of
Seller or any Affiliate thereof to Buyer, except with respect to the obligations
set forth in Section 5.2(a) hereof and except as to liability for
misrepresentation, breach or default in connection with any warranty,
representation, covenant or obligation given, occurring or arising to the date
of termination. In addition, anything in this Agreement to the contrary
notwithstanding, if any of the conditions to obligations specified in Article VI
hereof have not been satisfied, Buyer, in addition to any other rights which it
may have, shall have the right to waive its right to have such conditions
satisfied and elect to proceed with the transactions contemplated hereby and, if
any of the conditions to the obligations of Seller specified in Article V hereof
have not been satisfied, Seller, in addition to any other rights which may be
available to it, shall have the right to waive its right to have such conditions
satisfied and elect to proceed with the transactions contemplated hereby.

ARTICLE VIII

INDEMNIFICATION

8.1 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The parties hereto agree
to shorten the applicable period of limitation of claims made under
representations and warranties, and for that purpose each and every such
representation and warranty set forth in this Agreement (including the Officer's
Certificates required by Sections 6.1(a) and 6.2(a) hereof), shall survive until
the second anniversary of the Closing Date, except with respect to (a) the
representations and warranties set forth in Sections 3.2, 3.4, 3.19, 3.20, 3.21,
3.26, 4.2 and 4.3, which shall survive the Closing without limitation; and (b)
the representations and warranties set forth in Section 3.18, which shall
survive the Closing until the first to occur of (x) the expiration of the
statute of limitations (and any extensions thereof) applicable to the Tax in
respect of which indemnification is being sought without the assertion of a
deficiency in respect thereof by the applicable governmental entity, or (y) the
completion of the final audit and determination by the applicable governmental
entity with respect to such Tax and final disposition of any deficiency
resulting therefrom. From and after the applicable period of survival with
respect to such respective representations and warranties of Seller and Buyer,
neither Seller or Buyer or any Affiliate of Seller or Buyer shall have any
liability whatsoever with respect to any such representation or warranty, except
for breaches as to which any party shall have notified the other party prior to
such date. This Section 8.1 shall have no effect upon any other obligation of
the parties hereto, whether to be performed before or after the Closing Date.

Page 33 of 40
<PAGE>

8.2 INDEMNIFICATION BY SELLER. Seller hereby indemnifies, defends and
holds Buyer, its officers, directors, employees, owners, agents and Affiliates,
harmless from and in respect of any and all losses, damages, costs and expenses
of any kind and nature whatsoever (including, without limitation, interest and
penalties, reasonable expenses of investigation and court costs, reasonable
attorneys' fees and disbursements and the reasonable fees and disbursements of
other professionals) which may be sustained or suffered by any of them
(collectively "Losses"), arising out of or resulting from (i) any breach or
inaccuracy of any representation or warranty or the breach of or failure to
perform any warranty, covenant, undertaking or other agreement of Seller
contained in this Agreement or any other document executed in connection
herewith, and (ii) Seller's operation or use of the Assets or manufacture of
products prior to the Closing Date.

8.3 INDEMNIFICATION BY BUYER. Buyer hereby indemnifies, defends and holds
Seller, its officers, directors, employees, consultants, owners, agents and
Affiliates, harmless from and in respect of any and all Losses which may be
sustained or suffered by any of them arising out of or resulting from (i) any
breach or inaccuracy of any representation or warranty or the breach of or
failure to perform any warranty, covenant, undertaking or other agreement of
Buyer contained in this Agreement or any other document executed in connection
herewith, and (ii) Buyer's operation or use of the Assets or manufacture of
products after the Closing Date.

8.4 NOTICE AND OPPORTUNITY TO DEFEND. If there occurs an event which a
party asserts is an indemnifiable event pursuant to Section 8.2 or 8.3, the
party seeking indemnification (the "Indemnified Party") shall promptly notify
the other party obligated to provide indemnification (the "Indemnifying Party").
If such event involves (a) any Claim, or (b) the commencement of any action,
suit or proceeding by a third person, the Indemnified Party will give such
Indemnifying Party prompt written notice of such Claim or the commencement of
such action, suit or proceeding; provided, however, that the failure to provide
prompt notice as provided herein will relieve the Indemnifying Party of its
obligations hereunder only to the extent that such failure prejudices the
Indemnifying Party hereunder. In case any such action, suit or proceeding shall
be brought against the Indemnified Party and it shall notify the Indemnifying
Party of the commencement thereof, the Indemnifying Party shall be entitled to
participate therein and, to the extent that it desires to do so, to assume the
defense thereof, with counsel reasonably satisfactory to the Indemnified Party
and, after notice from the Indemnifying Party to the Indemnified Party of such
election so to assume the defense thereof, the Indemnifying Party shall not be
liable to the Indemnified Party hereunder for any attorneys' fees or any other
expenses, in each case subsequently incurred by the Indemnified Party, in
connection with the defense of such action, suit or proceeding. The Indemnified
Party shall cooperate fully with the Indemnifying Party and its counsel in the
defense against any such action, suit or proceeding. In any event, the
Indemnified Party shall have the right to participate at its own expense in the
defense of such action, suit or proceeding.

Page 34 of 40
<PAGE>

In no event shall an Indemnifying Party be liable for any settlement or
compromise effected without its prior consent.

8.5 RIGHT OF SET-OFF. If a claim for indemnification is made by Buyer as
the Indemnified Party under this Article VIII, Buyer may, at its option by
written notice to Seller (and without limiting any other rights it may have at
law or in equity), withhold the amount of such claimed indemnity from the amount
of any payments otherwise due under Section 2.7 hereof. Upon final
determination of such claim, Buyer may reduce the amount of such payment by the
amount of which it is entitled hereunder.

ARTICLE IX

CLOSING DOCUMENTS

9.1 DELIVERIES OF SELLER AT CLOSING. At the Closing, Seller shall deliver
to Buyer the following:

(a) Good and clear record, marketable and insurable title
to the Property, free from all Liens, and full
undisturbed possession of the Property, and full use
and enjoyment of same.

(b) Officer's certificates and such certificates from
public officials relating to legal existence, corporate
good standing, charter documents, state sales tax
clearance and municipal tax payments and assessments,
which Buyer may reasonably request to verify any
warranties of Seller herein, including those described
in Section 6.1(f) hereof.

(c) Such discharges, termination statements, releases and
the like with respect to the Assets as Buyer may
reasonably request.

(d) The Deed and the documents, instruments, and agreements
referred to in Section 2.4(b) hereof.

(e) All other books, records, contracts, materials and
properties related to the Property or Seller's
business, including, without limitation, all such
books, records, contracts and materials for periods
extending back not less than seven years, which records
shall be delivered to Buyer or located at the Property.

Page 35 of 40
<PAGE>

(f) Certificate of resolutions of the board of directors
and shareholders of Seller authorizing the transactions
contemplated hereby, certified by the Secretary of
Seller.

(g) Certificate of the Secretary of Seller as to incumbency
and other related matters.

(h) A copy of the duly adopted by-laws of Seller, certified
by the Secretary of Seller to be true, complete and
accurate as of the Closing Date.

(i) Officer's Certificate referred in Section 6.1(a)
executed by Seller.

(j) Opinion of counsel referred to in Section 6.1(g).

(k) Any other document reasonably requested by Buyer to
confirm or verify the accuracy of the warranties by
Seller herein and the compliance by Seller with its
covenants herein.

(l) Certificate of Seller, executed under the pains and
penalties of perjury, stating that Seller is not a
"foreign person", as defined in Section 1445(f) of the
Code and the regulations issued thereunder, in order to
comply with Section 1445(b)(2) and the regulations
issued thereunder, in such form as Buyer or the title
insurance company issuing the title policy on the
Property may require, in their sole discretion.

(m) Mechanics lien and parties in possession affidavit, in
such form as Buyer may require.

(n) Payoff letters and discharges with respect to any
outstanding Liens on the Property.

(o) A certification of the information necessary to
complete and file with the Internal Revenue Service a
Form 1099-S in connection with the conveyance of the
Property.

Page 36 of 40
<PAGE>

(p) [Tax lien waiver relating to Seller issued by the South
Carolina Department of Revenue in connection with the
transactions herein contemplated.]

(q) Evidence of payment of all property tax bills and
tangible property tax bills due and owing related to
the Property and the Assets, including all separate tax
parcels, if applicable.

(r) Municipal lien certificate with respect to the
Property.

(s) Evidence of payment of water and sewer charges with
respect to the Property.

(t) The consent of any third parties to assumption by Buyer
of the agreements of Seller as to which Buyer has given
notice to Seller in accordance with Section 5.5 of
Buyer's intent to assume.

(u) The Supply Contract.

(v) The Termination.

(w) The Releases.

(x) The Non-Competition Agreements.

9.2 DELIVERIES OF BUYER AT CLOSING. At the Closing, Buyer shall deliver
to Seller the following:

(a) Payment in accordance with Section 2.2 hereof.

(b) Certificate of resolutions of the boards of directors
of Buyer authorizing the transactions contemplated
hereby, certified by the Clerk of Buyer.

(d) The opinion of counsel referred to in Section 6.2(d).

(e) The Supply Agreement.

Page 37 of 40
<PAGE>

ARTICLE X
MISCELLANEOUS

10.1 FEES AND EXPENSES. Each of the parties hereto will pay and discharge
its own expenses and fees in connection of with the negotiation of and entry
into this Agreement and the consummation of the transactions contemplated
hereby.

10.2 PUBLICITY AND DISCLOSURES. Prior to the Closing, no press release or
any public disclosure, either written or oral, of the transactions contemplated
by this Agreement shall be made by any party without the prior knowledge and
written consent of the other, except as may be required by law or regulation.

10.3 NOTICES. All notices, requests, demands, consents and communications
necessary or required under this Agreement shall be in writing and delivered by
hand or sent by registered or certified mail, return receipt requested, or by
telecopy (receipt confirmed) to:

if to Buyer: Haemonetics Corporation
400 Wood Road
Braintree, MA 02184

Attention: John White
with a copy to: Haemonetics Corporation
400 Wood Road
Braintree, MA 02184

Attention: Alicia R. Lopez, Esq.

if to Seller: DHL Laboratories, Inc.
200 Medical Services Drive, PO Box 85
Union, South Carolina 29379

Attention: Robert Weinstein

with a copy to: Smith, Helms, Mulliss & Moore
P.O. Box 31247
Charlotte, North Carolina 28231

Attention: Larry J. Dagenhart, Esq.

Page 38 of 40
<PAGE>

10.4 SUCCESSORS AND ASSIGNS. All covenants and agreements set forth in
this Agreement and made by or on behalf of either party hereto shall bind and
inure to the benefit of the successors and assigns of such party, whether or not
so expressed, except that Seller may not assign or transfer its rights or
obligations under this Agreement without the consent in writing of Buyer.

10.5 DESCRIPTIVE HEADINGS. The headings of the sections and paragraphs of
this Agreement have been inserted for convenience of reference only and shall
not be deemed to be part of this Agreement.

10.6 COUNTERPARTS. This Agreement may be executed in any number of
counterparts and by the different parties hereto on separate counterparts, each
of which when so executed and delivered shall be an original, but all of which
together shall constitute one and the same instrument, and it shall not be
necessary in making proof of this Agreement to produce or account for more than
one such counterpart.

10.7 SEVERABILITY. In the event that any one or more of the provisions
contained herein, or the application thereof in any circumstances, is held
invalid, illegal or unenforceable in any respect for any reason in any
jurisdiction, the validity, legality and enforceability of any such provision in
every other respect and of the remaining provisions hereof shall not be in any
way impaired or affected, it being intended that each of parties' rights and
privileges shall be enforceable to the fullest extent permitted by law, and any
such invalidity, illegality and unenforceability in any jurisdiction shall not
invalidate or render unenforceable such provision in any other jurisdiction. To
the fullest extent permitted by law, the parties hereby waive any provision of
any law, statute, ordinance, rule or regulation which might render any provision
hereof invalid, illegal or unenforceable.

10.8 ATTORNEYS' FEES. In any action or proceeding brought to enforce any
provision of this Agreement, or where any provision hereof is validly asserted
as a defense, the successful party shall be entitled to recover reasonable
attorneys' fees in addition to any other available remedy.

10.9 COURSE OF DEALING. No course of dealing and no delay on the part of
any party hereto in exercising any right, power, or remedy conferred by this
Agreement shall operate as a waiver thereof or otherwise prejudice such party's
rights, powers and remedies. The failure of any of the parties to this
Agreement to require the performance of a term or obligation under this
Agreement or the waiver by any of the parties to this Agreement of any breach
hereunder shall not prevent subsequent enforcement of such term or obligation or
be deemed a waiver of any subsequent breach hereunder. No single or partial
exercise of any rights, powers or remedies conferred by this Agreement shall
preclude any other or further exercise thereof or the exercise of any other
right, power or remedy.

Page 39 of 40
<PAGE>

10.10 THIRD PARTIES. Except as specifically set forth or referred to
herein, nothing herein expressed or implied is intended or shall be construed to
confer upon or give to any Person, other than the parties hereto and their
permitted successors or assigns, any rights or remedies under or by reason of
this Agreement.

10.11 VARIATIONS IN PRONOUNS. All pronouns and any variations thereof
refer to the masculine, feminine or neuter, singular or plural, as the identity
of the Person or Persons may require.

10.12 GOVERNING LAW. This Agreement, including the validity hereof and
the rights and obligations of the parties hereunder, shall be construed in
accordance with and governed by the laws of the Commonwealth of Massachusetts
applicable to contracts made and to be performed entirely in such state (without
giving effect to the conflicts of laws provisions thereof).

10.13 ENTIRE AGREEMENT. This Agreement, including the Schedules and
Exhibits referred to herein, is the complete and exclusive agreement of the
parties, and includes all promises, representations, understandings, warranties
and agreements with reference to the subject matter hereof, and all inducements
to the making of this Agreement relied upon by all the parties hereto have been
expressed herein or in said Schedules or Exhibits. This Agreement may not be
amended except by an instrument in writing signed on behalf of Buyer and Seller.

10.14 ARBITRATION. Any dispute, controversy or claim arising out of or in
connection with this Agreement or the breach thereof shall be exclusively
subject to binding arbitration in Boston, Massachusetts before a single
arbitrator in accordance with the then current commercial arbitration rules of
the American Arbitration Association. Judgment upon any award of the arbitrator
may be entered in any court having jurisdiction thereof.

IN WITNESS WHEREOF, the parties hereto have executed this Agreement under
seal as of the date first set forth above.

ATTEST: HAEMONETICS CORPORATION

By:/s/ John F. White
----------------------------
Title: Chairmen, President and CEO

ATTEST: DHL LABORATORIES, INC.

By:/s/ Robert Weinstein
----------------------------
Title: President

Page 40 of 40

<PAGE>

EXHIBIT 11

HAEMONETICS CORPORATION
COMPUTATION OF NET INCOME PER SHARE
(DOLLARS IN THOUSANDS EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
MARCH 30, APRIL 1, APRIL 2,
1996 1995 1994
--------- -------- --------
<S> <C> <C> <C>
Net Income......................................... $35,925 $33,645 $31,489
======= ======= =======
Weighted Average common and common equivalent
shares outstanding................................ 27,294 27,896 27,964
Net effect of dilutive stock options............... 428 547 838
------- ------- -------
Total weighted average shares outstanding.......... 27,722 28,443 28,802
======= ======= =======
Net income per common and common equivalent share.. $ 1.30 $ 1.18 $ 1.09
======= ======= =======
</TABLE>

<PAGE>

EXHIBIT 21

SUBSIDIARIES OF HAEMONETICS CORPORATION

<TABLE>
<CAPTION>
NAME JURISDICTION OF INCORPORATION
- ---- -----------------------------
<S> <C>
Haemonetics S.A. International.................. Switzerland
Haemonetics Scandinavia AB...................... Sweden
Haemonetics GmbH................................ Germany
Haemonetics France SARL......................... France
Haemonetics U.K. Ltd............................ England
Haemonetics Japan Co., Ltd...................... Japan
Haemonetics Ventures Corp. ..................... Massachusetts
Haemonetics Foreign Sales Corp. ................ Virgin Islands
Haemonetics Services, Inc....................... Delaware
Nyon Associates, Inc............................ Delaware
Haemonetics Blood Services and Training Insti-
tute, Inc. .................................... Delaware
Haemonetics Belgium S.A./N.V.................... Belgium
Haemonetics Handelsgesellschaft.m.b.H........... Austria
All of the foregoing subsidiaries are wholly owned
by Haemonetics Corporation.
Haemonetics Italia S.R.L........................ Italy
This subsidiary is 80% (eighty percent) owned by
Haemonetics Corporation
</TABLE>

<PAGE>

EXHIBIT 23

CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS

As independent public accountants, we hereby consent to the incorporation of
our reports included in this Form 10-K, into the Company's previously filed
Registration Statement File Nos. 33-42005, 33-42006, 33-70932, 33-70934, and
33-80652.

Arthur Andersen LLP

Boston, Massachusetts
June 5, 1996

<PAGE>

<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF HAEMONETICS CORPORATION AND IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000

<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> MAR-30-1996
<PERIOD-START> APR-02-1995
<PERIOD-END> MAR-30-1996
<CASH> 13,434
<SECURITIES> 0
<RECEIVABLES> 61,310
<ALLOWANCES> 984
<INVENTORY> 56,729
<CURRENT-ASSETS> 158,879
<PP&E> 160,824
<DEPRECIATION> 74,408
<TOTAL-ASSETS> 287,818
<CURRENT-LIABILITIES> 46,439
<BONDS> 15,156
0
0
<COMMON> 288
<OTHER-SE> 216,682
<TOTAL-LIABILITY-AND-EQUITY> 287,818
<SALES> 278,216
<TOTAL-REVENUES> 278,216
<CGS> 123,603
<TOTAL-COSTS> 123,603
<OTHER-EXPENSES> 18,467
<LOSS-PROVISION> 321
<INTEREST-EXPENSE> 2,338
<INCOME-PRETAX> 55,254
<INCOME-TAX> 19,329
<INCOME-CONTINUING> 35,925
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 35,925
<EPS-PRIMARY> 1.30
<EPS-DILUTED> 1.30

</TABLE>