<PAGE> 1
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from _____________ to _____________
Commission file number 1-9983
OEC MEDICAL SYSTEMS, INC.
(Registrant)
Incorporated in the State of Delaware
I.R.S. Employer Identification Number 94-2538512
384 Wright Brothers Drive, Salt Lake City, Utah 84116
(Address of Principal Executive Offices)
Telephone: (801) 328-9300
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 requirements
for the past 90 days.
Yes X No
--- ---
As of April 30, 1997, there were 13,251,573 shares of Common Stock ($.01 par
value) outstanding.
<PAGE> 2
Part I. Financial Information
Item 1. Financial Statements
OEC MEDICAL SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
FOR THE THREE MONTHS ENDED MARCH 31, 1997 AND 1996
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
1997 1996
-------- --------
<S> <C> <C>
Net sales
Product $ 28,120 $ 22,198
Service 4,194 3,985
-------- --------
Total net sales 32,314 26,183
-------- --------
Cost of sales
Product 16,634 13,202
Service 2,983 2,443
-------- --------
Total cost of sales 19,617 15,645
-------- --------
Gross margin 12,697 10,538
-------- --------
Operating Expenses
Research and development 2,625 2,105
Marketing and sales 5,283 4,515
Administrative, general and other 1,663 1,365
-------- --------
Total operating expenses 9,571 7,985
-------- --------
Operating income 3,126 2,553
Interest income 255 188
Interest expense (3) (2)
-------- --------
Income before income taxes 3,378 2,739
Income tax expense 1,077 --
-------- --------
Net income $ 2,301 $ 2,739
======== ========
Net income per common and
common equivalent share: $ 0.18 $ 0.22
======== ========
Common and
common equivalent shares 13,072 12,523
</TABLE>
2
<PAGE> 3
OEC MEDICAL SYSTEMS, INC.
CONSOLIDATED BALANCE SHEETS
MARCH 31, 1997 AND DECEMBER 31, 1996
(In thousands)
ASSETS
<TABLE>
<CAPTION>
1997 1996
--------- ---------
(Unaudited)
<S> <C> <C>
Current Assets:
Cash and short-term cash investments $ 14,983 $ 17,103
Accounts and notes receivable, net of
allowances of $953 and $853, respectively 32,402 33,191
Inventories 26,848 23,868
Prepaid expenses and other current assets 1,922 1,451
Deferred income taxes 8,006 8,006
--------- ---------
Total current assets 84,161 83,619
Long-term receivables 1,243 1,627
Property and equipment, net 11,814 11,903
Cost in excess of net assets acquired, net of
accumulated amortization of $8,426 and $8,183, respectively 11,622 10,213
Deferred income taxes 3,695 3,879
Other assets, net 729 705
--------- ---------
$ 113,264 $ 111,946
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable $ 9,417 $ 7,358
Accrued salaries and benefits 2,732 4,127
Accrued warranty and installation costs 1,888 1,748
Deferred income and customer deposits 5,345 5,462
Income taxes payable 813 509
Accrued legal fees and litigation settlements 4,195 4,062
Accrued distributor commissions 2,133 2,891
Other accrued liabilities 2,954 3,615
--------- ---------
Total current liabilities 29,477 29,772
--------- ---------
Stockholders' equity:
Preferred stock, $.01 par value
Authorized--2,000 shares, including 1,100 shares
of convertible preferred stock, none outstanding
Common stock, $.01 par value
Authorized--30,000 shares
Outstanding -- 13,249 and 13,158 shares, respectively 132 132
Capital in excess of par value 79,642 79,341
Retained earnings 12,087 9,786
Treasury stock, 852 and 801 shares at cost, respectively (7,679) (6,850)
Foreign currency translation adjustment (395) (235)
--------- ---------
Total stockholders' equity 83,787 82,174
--------- ---------
$ 113,264 $ 111,946
========= =========
</TABLE>
3
<PAGE> 4
OEC MEDICAL SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 1997 AND 1996
(In thousands)
(unaudited)
<TABLE>
<CAPTION>
1997 1996
-------- --------
<S> <C> <C>
OPERATING ACTIVITIES:
Net income $ 2,301 $ 2,739
Adjustments to reconcile net income
to net cash provided by operating activities:
Depreciation and amortization 758 699
Bad debt expense (270) (20)
Deferred income tax expense 184 --
Current tax benefit attributable to stock options exercised 286 --
Changes in current assets and liabilities, net of
effects of purchase of subsidiary:
Accounts and notes receivable, net 1,201 (1,868)
Inventories (2,254) (1,708)
Prepaid expenses and other current assets (389) (64)
Other assets, net (213) (188)
Accounts payable 1,035 1,468
Accrued salaries and benefits (1,395) (784)
Accrued warranty and installation costs 140 (17)
Deferred income and customer deposits (117) 898
Income taxes payable 304 (196)
Accrued legal fees and litigation settlements 133 (134)
Accrued distributor commissions (758) 159
Other accrued liabilities (1,190) 530
-------- --------
Net cash provided (used) by operating activities (244) 1,514
INVESTING ACTIVITIES:
Decrease used in long-term receivables (714) (633)
Additions to property and equipment (304) (1,383)
Net cash acquired upon purchase of subsidiary 116 --
Other (160) (125)
-------- --------
Net cash used by investing activities (1,062) (2,141)
FINANCING ACTIVITIES:
Common stock issued under benefit plans 1,015 565
Repurchase of warrants (1,000) --
Purchases of treasury stock (829) (1,319)
-------- --------
Net cash used by financing activities (814) (754)
Net decrease in cash and short-term cash investments (2,120) (1,381)
Cash and short-term cash investments at beginning of period 17,103 16,584
-------- --------
Cash and short-term cash investments at end of period $ 14,983 $ 15,203
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for interest $ 3 $ 2
Cash paid during the period for income taxes $ 303 $ 196
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES:
During the quarter ended March 31, 1997, the Company increased
its ownership in BMS from 19.8% to 100% as follows:
Original 19.8% interest $ 190
January 1, 1997 transactions:
Cash payment 193
Options granted 274
Loans converted to equity 615
--------
Total investment 1,272
Net liabilities acquired 380
--------
Total purchase price in excess of net liabilities acquired $ 1,652
========
</TABLE>
(See Accompanying Notes)
4
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OEC MEDICAL SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1997 AND 1996
(unaudited)
1. Interim information is unaudited but, in the opinion of Company
management, all adjustments necessary for a fair presentation of
interim results have been included. The results for the three months
ended March 31, 1997 and 1996, are not necessarily indicative of the
results to be expected for the entire year. These consolidated
financial statements and notes should be read in conjunction with the
Company's consolidated financial statements for the year ended December
31, 1996, filed on Form 10-K on March 27, 1997.
2. Inventories are stated at the lower of cost, utilizing the
first-in/first-out method, or market. Inventories consist of the
following:
<TABLE>
<CAPTION>
March 31, December 31,
1997 1996
-------- --------
(In thousands)
<S> <C> <C>
Purchased parts and
completed subassemblies $ 12,549 $ 10,432
Work-in-process 3,730 3,097
Finished goods 1,072 2,023
Demonstration equipment 9,911 8,203
Service and repair parts 4,147 4,475
-------- --------
Total $ 31,409 $ 28,230
Less: reserves for excess (4,561) (4,362)
and obsolete inventory -------- --------
Net $ 26,848 $ 23,868
</TABLE>
* Certain prior year amounts have been reclassified to conform with the
current year's presentation.
3. In February 1997, the Financial Accounting Standards Board issued SFAS
No. 128, "Earnings per Share." This standard establishes standards for
computing and presenting earnings per share (EPS). SFAS No. 128
simplifies the approach for computing earnings per share previously found
in Accounting Principles Board Opinion (APB) Opinion No. 5. It replaces
the presentation of primary EPS with a presentation of basic EPS. It also
requires dual presentation of basic and diluted EPS on the face of the
income statement for all entries with complex capital structures.
Under the new statement, basic EPS excludes dilution and is computed by
dividing income available to common stockholders by the weighted-average
number of common shares outstanding for the period. Diluted EPS reflects
the potential dilution that could occur if securities or other contracts
to issue common stock were exercised or converted into common stock.
Diluted EPS is computed similarly to fully diluted EPS pursuant to APB
Opinion No. 15.
SFAS No. 128 is effective for financial statements issued for periods
ending after December 15, 1997, with earlier application not permitted.
The computation of basic EPS under SFAS No. 128 would have resulted in
net income per common share of $0.19 for the quarter ended March 31,
1997, compared to $0.22 for the same period in 1996. Diluted EPS
computed under FASB No. 128 would have resulted in net income per common
share of $0.18 for the quarter ended March 31, 1997.
5
<PAGE> 6
OEC MEDICAL SYSTEMS, INC.
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Except for historical information, this discussion contains forward looking
statements that involve risks and uncertainties that could cause actual results
to differ materially from those projected. Such risk and uncertainties include
those described in the "Risk Factors" section on page 8 of this Form 10-Q.
Results of Operations
For the quarter ended March 31, 1997, OEC Medical Systems, Inc. had net
income of $2.3 million, compared with net income of $2.7 million for the same
period last year. The results for the three month period ended March 31, 1997
reflect tax expense of $1.1 million, as compared to the same period in 1996, in
which the Company had no tax expense. Operating income improved from $2.6
million in 1996 to $3.1 million in 1997.
The following table sets forth OEC's operating results as a percent of net
sales:
<TABLE>
<CAPTION>
Three Months
1997 1996
------ ------
<S> <C> <C>
Net sales
Product 87.02% 84.78%
Service 12.98% 15.22%
------ ------
Total net sales 100.00% 100.00%
Cost of sales
Product 51.48% 50.43%
Service 9.23% 9.33%
------ ------
Total cost of sales 60.71% 59.76%
Gross margin 39.29% 40.24%
Operating expenses:
Research and development 8.12% 8.04%
Marketing and sales 16.35% 17.24%
Administrative, general and other 5.15% 5.21%
------ ------
Total operating expenses 29.62% 30.50%
------ ------
Operating income 9.67% 9.75%
Net income 7.12% 10.46%
</TABLE>
Sales and Markets
Net sales for the quarter ended March 31, 1997, were $32.3 million, compared to
net sales of $26.2 million for the comparable period of 1996. This reflects a
23% increase. Product sales for the quarter ended March 31, 1997 were $28.1
million, compared to product sales of $22.2 million for the same quarter last
year.
The order rate for the company's core product, the Series 9600 Digital Mobile
Imaging System, is ahead of last year, both domestically and internationally.
The increase is a result of increased sales coverage and market acceptance of
the product in all regions along with growth in sales of the Series 9600 12"
image intensifier option. This system offers a wider field-of-view needed for
some existing procedures as well as new applications such as aortic stent graph
placement. Sales and bookings for the Uroview 2600 were basically flat quarter
to quarter. Revenue from the newly introduced MINI 6600 and COMPACT 7600 C-arms
contributed to the overall revenue growth from the same period
6
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last year. The 6600 is gaining market share in line with the company's
expectations, and the 7600 market acceptance has improved and is now in line
with expectations. Although product sales have been improving, continued
competitive pricing pressures worldwide in all product categories are expected
to remain for the foreseeable future.
Service revenue for the quarter ended March 31, 1997 was $4.2 million, up from
the previous year's $4.0 million. Revenue growth in service has slowed somewhat
from prior years. The main reason is that independent service organizations and
the consolidation of hospitals have taken away some of the service revenue
opportunities.
Margin Analysis
OEC's gross margin expressed as a percentage of net sales decreased 0.95% for
the first quarter when compared with the same period in 1996. Ongoing
improvements in manufacturing efficiency did not fully offset the impact of
continuing pricing pressures in all product lines.
Service expenses for the quarter were up against last year by $0.5 million.
These increases are attributed to higher labor costs and lower warranty
utilization due to increasing system reliability.
Operating Expenses
Research and development costs are up $0.5 million for the three month
period compared to the prior year. This reflects the Company's continuing
investment in product development and improvements such as the recently
introduced Series 9600 Cardiac system.
Marketing and sales expenses are up $0.8 million for the three month
period compared to the prior year. This increase is due primarily to greater
commissions because of higher sales and increased costs associated with
additional sales coverage, both domestically and internationally, to obtain the
higher revenue. The Company recorded expense of $0.4 million due to unrealized
currency translation losses in the first quarter. Expressed as a percentage of
total revenue, the marketing and sales expense was down 0.89%.
Administrative expenses are up $0.3 million for the three months
compared to the prior year. The main reason for the increase in the first
quarter was the cost associated with the implementation of a new computer
system and associated training costs. These costs are expected to continue into
the second and third quarters of 1997 but at lower levels.
Income Taxes
During the first quarter of 1997, the Company recorded $1.1 million of tax
expense, compared to no tax expense in the first quarter of 1996 as the reversal
of the valuation allowance for deferred tax assets in that quarter had offset
the tax provisions required for federal and state income taxes. During 1996, the
company has reversed the remaining balance of the valuation allowance for the
deferred tax assets. The company believes that it will generate enough taxable
income to fully utilize the deferred tax assets, primarily made up of tax
credits, prior to their expiration.
Liquidity and Capital Resources
Cash used by operations for the first three months of 1997 was $0.2
million, compared to cash provided of $1.5 million for the first three months
of 1996. The primary operational cash usage was for inventory increases to
support increased production due to the broadened product line and to provide
additional demonstration units.
A stock repurchase program of 750,000 shares of its outstanding common stock was
announced December 1994 and the authorized amount was increased to 1,250,000
shares January 1996. As of March 31, 1997, 939,983 shares have been repurchased
at a cost of $8,194,688 of which 87,983 were retired and 852,000 shares were
recorded as treasury stock. Also, $1.0 million was used to buy back warrants to
purchase common stock from PaineWebber R&D Partners II, L.P.
The Company plans building additions to its Salt Lake City facility in 1997 in
the amount of $3.0 million with work commencing in the second quarter of 1997
and completion by year-end. This building expansion is for increased
manufacturing capacity.
7
<PAGE> 8
OEC believes that it has sufficient liquidity and anticipated cash flow to meet
its obligations in 1997. In addition, OEC continues to carry an unused $10
million line of credit.
Risk Factors
The Company's business involves risks and uncertainties that could cause actual
results to differ materially from those projected. Such risks and uncertainties
include: Product demand and market acceptance; the effect of general economic
conditions and foreign currency fluctuations; the impact of competitive products
and pricing; new product development and commercialization; the effect of the
continuing shift in growth from domestic to international healthcare customers,
and the impact of managed care initiatives in the United States and the ability
to increase operating margins on higher sales.
Future operating results are dependent on the Company's' ability to develop,
manufacture and market innovative products that meet customers' needs. Inherent
in this process are a number of risks that the Company must successfully manage
in order to achieve favorable operating results. The process of developing new
high technology medical products is complex and uncertain and requires
innovative designs that anticipate customer needs, technological trends and
healthcare shifts. There can be no assurance that the Company will be able to
develop and market new products on a cost-effective and timely basis, that such
products will compete favorably with products developed by others or that
technology will not be superseded by new discoveries or breakthroughs, for
example, the delay in introduction of the Series 9600 in 1994 which negatively
impacted revenue and earnings for the year.
Because of the substantial length of time and expense associated with bringing
new products through development and regulatory approval to the marketplace, the
medical device industry places considerable importance on obtaining patent,
trademark, copyright and trade secret protection for new technologies, products
and processes. A loss of protection could have a material adverse effect on the
Company's business.
Major items that OEC currently purchases from others include video monitors,
X-ray tubes, image intensifiers, CCD cameras and power supplies. Some of these
parts and components are available from a limited number of single-source
manufacturers or suppliers. While the Company believes any of these
single-source items could be replaced over time, abrupt disruption in the supply
of a part for a product could have a material adverse effect on the Company's
production in cases where the existing inventory of the components is not
adequate to meet the Company's demand for the component during such disruption
and could have a material adverse effect on its financial condition and results
of operations.
The testing, marketing and sale of human healthcare products entails an inherent
risk of product liability, and there can be no assurance that product liability
claims will not be asserted against OEC. Although OEC has product liability
insurance coverage, there can be no assurance that such coverage will provide
adequate coverage against all potential claims.
As a manufacturer of medical devices, OEC is subject to extensive and rigorous
governmental regulation, principally by the FDA and corresponding state and
foreign agencies. Failure to comply with FDA regulations could result in
sanctions being imposed, including restrictions on the marketing of or recall of
the affected products.
OEC's facilities and manufacturing processes have been periodically inspected by
the FDA and other agencies, but remain subject to audit from time to time. OEC
continues to devote substantial human and financial resources to regulatory
compliance and believes that it remains in substantial compliance with all
applicable federal and state regulations. Nevertheless, there can be no
assurance that the FDA or a state agency will agree with OEC's positions, or
that its GMP compliance will not be challenged at some subsequent point in time.
OEC has received approval from the FDA and foreign regulatory authorities in the
past, when required, to market its products. In general, the length of time for
all reviews and approvals, most particularly from the FDA, has been lengthening
and the review or approval process for medical devices has become substantially
more difficult and expensive. Moreover, regulatory approvals, when granted, may
contain significant limitations on the standards due to unforeseen problems. To
date, product reviews for medical imaging technologies have been obtained within
three to twelve months. There can be no assurance that OEC will be able to
obtain necessary regulatory approvals in the future, and delays in the receipt
of or
8
<PAGE> 9
failure to receive such approvals, the loss of existing approvals or failure to
comply with regulatory requirements could have a material adverse effect on the
business, financial condition and results of operation of OEC.
A portion of the Company's research and development activities, its corporate
headquarters and other critical business operations are located near a major
earthquake fault. The ultimate impact on the Company, significant suppliers and
the general infrastructure is unknown, but operating results could be materially
affected in the event of a major earthquake.
Although OEC believes that it has the product offerings and resources needed for
continuing success, future revenue and margin trends cannot be reliably
predicted and may cause the Company to adjust its operations. Factors external
to the Company can result in volatility of the Company's common stock price.
PART II. Other information.
ITEM 1. Legal proceedings
There are no significant changes in legal proceedings from the previous stated
position in the Company's annual report for 1996 or Form 10K filed with the
Securities & Exchange Commission on March 27, 1997.
9
<PAGE> 10
ITEM 6. Exhibits
(a) The following exhibit (numbered in accordance with Item 601 of SEC
Regulations S-K) is filed as part of this report:
<TABLE>
<CAPTION>
Exhibit
Number Description
------ -----------
<S> <C>
3.1 Certificate of Incorporation, as amended. Incorporated by
reference to the OEC Medical Systems, Inc. Form 10-K, filed
March 30, 1994.
3.2 By-Laws, as amended. Incorporated by reference to the OEC
Medical Systems, Inc. Form 10-K, filed March 30, 1994.
4 Rights Agreement, dated as of June 20, 1988, between
Diasonics, Inc. and Bank of America NT&SA. Incorporated by
reference to Exhibit 4.3 of the Diasonics, Inc. Form 8-K,
filed August 1, 1988
10.1 Diasonics, Inc. 1979 Stock Option Plan, amended and restated
as of June 1, 1982. Incorporated by reference to Exhibit
10.6 of the Diasonics, Inc. Registration Statement on Form
S-8, filed May 2, 1983.
10.4 Diasonics, Inc. 1990 Stock Option/Stock Purchase Plan.
Incorporated by reference to Exhibit 10.79 of the Diasonics,
Inc. Form S-8, filed on May 1, 1991.
10.5 Warrant for the Purchase of Common Shares issued to
PaineWebber R&D Partners II, L.P., as amended. Incorporated
by reference to the OEC Medical Systems, Inc. Form 10-K,
filed on March 30, 1994.
10.14 Form of Option Agreement used in connection with options
having service vesting provisions. Incorporated by reference
to the OEC Medical Systems, Inc. Form 10-K, filed March 30,
1994.
10.15 Form of Option Agreement used in connection with options
having milestone provisions. Incorporated by reference to
the OEC Medical Systems, Inc. Form 10-K, filed March 30,
1994.
10.16 Form of Option Agreement used in connection with automatic
option grant program for non-employee directors.
Incorporated by reference to the OEC Medical Systems, Inc.
Form 10-K, filed March 30, 1994.
10.19 Note and Stock Pledge Agreement between Ruediger
Naumann-Etienne and OEC Medical, Inc., dated September 5,
1995. Incorporated by reference to the OEC Medical Systems,
Inc. Form 10- K, filed April 1, 1996.
10.20 Form of Warrant Agreement used in connection with grant to
independent contractors for the purchase of common shares.
Incorporated by reference to the OEC Medical Systems, Inc.
Form 10-K, filed March 27, 1997.
10.21 Agreement, dated December 17, 1996, to acquire full
ownership of Barwig Medizinische Systeme GmbH (BMS).
Incorporated by reference to the OEC Medical Systems, Inc.
Form 10-K, filed March 27, 1997.
</TABLE>
10
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<TABLE>
<S> <C>
10.22 Agreement dated January 10, 1997 to repurchase warrants for
the purchase of common shares issued to PaineWebber R&D
Partners II, L.P., filed herein.
21 List of Subsidiaries, filed herein.
27 Financial Data Schedule (FDS) for Edgar Filing.
</TABLE>
(b) Reports on Form 8-K:
Not applicable
11
<PAGE> 12
SIGNATURES
Pursuant to the requirements 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.
OEC MEDICAL SYSTEMS, INC.
(Registrant)
By: /s/ Randy W. Zundel
--------------------------------
Randy W. Zundel
Chief Financial Officer
(Principal Accounting Officer)
Date: May 13, 1997
<PAGE> 13
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
No. Description
------- -----------
<S> <C>
10.22 Agreement dated January 10, 1997 to repurchase warrants for
the purchase of common shares issued to PaineWebber R&D
Partners II, L.P., filed herein.
21 List of Subsidiaries, filed herein.
27 Financial Data Schedule (FDS) for Edgar Filing.
</TABLE>
<PAGE> 1
EXHIBIT 10.22
PURCHASE AGREEMENT
This agreement (the "Agreement") is made as of January 26,
1997 between OEC MEDICAL SYSTEMS, INC., a corporation organized and existing
under the laws of the State of Delaware (the "Company") and the
successor-in-interest to Diasonics, Inc., and PAINEWEBBER R&D PARTNERS II, L.P.,
a limited partnership organized and existing under the laws of the State of
Delaware (the "Fund").
The Fund desires to sell to the Company a warrant to purchase
200,000 shares of common stock of the Company (the "Warrant") on the terms and
conditions set forth herein and the Company is willing to purchase the Warrant.
ARTICLE I
REPRESENTATIONS AND WARRANTIES
1.1 REPRESENTATIONS AND WARRANTIES OF THE FUND. The Fund
represents and warrants that:
(a) It is the sole and lawful owner of the Warrant, free and
clear of liens, charges, security interest and encumbrances, and no other person
(except for the interest of any partner in the Fund in its capacity as such) has
any right or interest in the Partnership Interest.
(b) It has full right, power, capacity and authority to sell
to the Company the Warrant, and to consummate the transactions contemplated
hereby. This Agreement constitutes the valid and binding obligation of the Fund
in accordance with its terms.
(c) The execution, delivery and performance of the Fund of
this Agreement, and the consummation of the transactions contemplated hereby,
have been duly authorized by all requisite action, require no approval of,
filing with or other action by or in respect of, any governmental body, agency
or official, do not violate, conflict with, or constitute a default under the
Fund's certificate of limited partnership or agreement of limited partnership or
the terms or provisions of any material agreement, license, sublicense, trust,
indenture or other instrument or restriction to which the Fund is a party or by
which it is bound or any law, order, award, judgment or decree to which the Fund
is a party or by which it is bound.
1
<PAGE> 2
1.2 REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company
represents and warrants that:
(a) The Company is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware. The
Company has full right, power, capacity and authority to execute and deliver
this Agreement and to consummate the transactions contemplated hereby. This
Agreement constitutes the valid and binding obligation of the Company in
accordance with its terms.
(b) The execution, delivery and performance of the Company of
this Agreement, and the consummation of the transactions contemplated hereby,
have been duly authorized by all requisite action, require no approval of,
filing with or other action by or in respect of, any governmental body, agency
or official, do not violate, conflict with, or constitute a default under the
Company's charter or bylaws or the terms or provisions of any material
agreement, license, sublicense, trust, indenture or other instrument or
restriction to which the Company is a party or by which it is bound or any law,
order, award, judgment or decree to which the Company is a party or by which it
is bound.
ARTICLE II
PURCHASE AND SALE OF WARRANT;
PURCHASE PRICE
2.1 PURCHASE OF WARRANT. The Fund hereby sells, transfers,
assigns, conveys and delivers to the Company, and the Company hereby purchases
from the Fund, the Warrant. At the request and expense of the Company, the Fund
shall execute such further proper assignments and instruments as are necessary
to accomplish and record such purchase and sale and establish the sole ownership
of the Company in and to the Warrant.
2.2 PURCHASE PRICE OF WARRANT.
(a) As complete and full consideration for the sale to the
Company by the Fund of the Warrant, the Company shall pay to the Fund the sum of
One Million Dollars ($1,000,000) in same day funds against delivery of the
Warrant to the Company.
ARTICLE III
MISCELLANEOUS PROVISIONS
3.1 ASSIGNMENT. This Agreement and each and every provision
hereof, shall be binding upon and shall insure to the benefit of each of the
parties hereto, their successors, successors-in-title and assigns; and each and
every successor-in-interest to
2
<PAGE> 3
any party hereto, whether such successor acquires such interest by way of gift,
purchase, foreclosure, or by any other method, shall hold such interest subject
to all of the terms and provisions of this Agreement.
3.2 ENTIRE AGREEMENT; AMENDMENT. This Agreement sets forth and
constitutes the entire agreement between the Company and the Fund with respect
to the subject matter discussed herein, and supersedes any and all prior
agreements, understandings, promises and representations made by either the
Company or the Fund concerning the subject matter hereof.
3.3 SEVERABILITY. If any provision of this Agreement is, becomes
or is deemed invalid, illegal or unenforceable in any jurisdiction, such
provision shall be deemed amended to conform to applicable laws so as to be
valid and enforceable, or, if it cannot be so amended without materially
altering the intention of the parties hereto, it shall be stricken and the
remainder of such Agreement shall remain in full force and effect.
3.4 GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York, without regard
to the conflicts of law rules of such State.
3.5 HEADINGS. Article and Section headings contained in this
Agreement are included for convenience only and are not to be used in construing
or interpreting such Agreement.
3.6 NONWAIVER OF RIGHTS. No failure or delay on the part of the
Company or the Fund in exercising any right under this Agreement, irrespective
of the length of time for which such failure or delay shall continue, will
operate as a waiver of, or impair, any such right. No single or partial exercise
of any such right will preclude any other or further exercise thereof or the
exercise of any other right. No waiver of any such right will be effective
unless given in a signed writing. No waiver of any such right will be deemed a
waiver of any other right hereunder.
3.7 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be an original and all of which shall
constitute together by one and the same documents, binding on both the Company
and the Fund notwithstanding that the Company and the Fund may have signed
different counterparts.
3
<PAGE> 4
IN WITNESS WHEREOF, the Company and the Fund have executed this
Agreement as of the date first above mentioned.
PAINEWEBBER R&D PARTNERS II, L.P.
BY: PAINEWEBBER TECHNOLOGIES II, L.P.
GENERAL PARTNER
BY: PAINEWEBBER DEVELOPMENT
CORPORATION, GENERAL PARTNER OF
THE ABOVE-NAMED GENERAL PARTNER
BY: /S/ RICHARD F. MCCORMICK
----------------------------------
NAME: RICHARD F. MCCORMICK
TITLE: VICE PRESIDENT
OEC MEDICAL SYSTEMS, INC.
BY: /S/ RANDY W. ZUNDEL
---------------------------------
NAME: RANDY W. ZUNDEL
TITLE: CHIEF OPERATING OFFICER
CHIEF FINANCIAL OFFICER
4
<PAGE> 1
Exhibit 21
List of Subsidiaries
OEC Europe, Ltd. (England)
Frank Manufacturing
Diasonics Export Sales Corp. (Disc)
Chromosonics, Inc.
Diasonics Foreign Sales Corp. (FSC)
OEC Medical Systems (Europe) AG
OEC Medical Systems SA
OEC Medical Systems GmbH
OEC Medical Systems S.R.L.
OEC Medical International, Inc. (FSC)
BMS Medizinische Systeme GmbH
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<EXCHANGE-RATE> 1
<CASH> 14,983
<SECURITIES> 0
<RECEIVABLES> 33,355
<ALLOWANCES> 953
<INVENTORY> 26,848
<CURRENT-ASSETS> 84,161
<PP&E> 25,593
<DEPRECIATION> 13,779
<TOTAL-ASSETS> 113,264
<CURRENT-LIABILITIES> 29,477
<BONDS> 0
0
0
<COMMON> 132
<OTHER-SE> 83,655
<TOTAL-LIABILITY-AND-EQUITY> 113,264
<SALES> 28,120
<TOTAL-REVENUES> 32,314
<CGS> 16,634
<TOTAL-COSTS> 19,617
<OTHER-EXPENSES> 9,571
<LOSS-PROVISION> (270)
<INTEREST-EXPENSE> 3
<INCOME-PRETAX> 3,378
<INCOME-TAX> 1,077
<INCOME-CONTINUING> 2,301
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,301
<EPS-PRIMARY> .18
<EPS-DILUTED> .18
</TABLE>
