<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934. (NO FEE REQUIRED)
For the quarterly period ended June 30, 1996
or
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934. (NO FEE REQUIRED)
For the transition period from ___________ to ___________
Commission file number 34-________
------------------------------
IVAC MEDICAL SYSTEMS, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 95-3177311
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
10221 WATERIDGE CIRCLE 92121-2733
SAN DIEGO, CALIFORNIA (Zip Code)
(Address of principal executive offices)
Registrant's telephone number, including area code: (619) 458-7000
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:
--- ---
As of August 13, 1996, registrant had 100 shares of its Common Stock
($0.01 par value) outstanding.
<PAGE>
IVAC MEDICAL SYSTEMS, INC.
FORM 10-Q
FOR THE QUARTER ENDED JUNE 30, 1996
INDEX
PAGE
----
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
Condensed Consolidated Balance Sheet at June 30, 1996 and
December 31, 1995 3
Condensed Consolidated Statement of Operations for the
three months ended June 30, 1996 and 1995
and for the six months ended June 30, 1996 and 1995 4
Condensed Consolidated Statement of Cash Flows for the
six months ended June 30, 1996 and 1995 5
Notes to Condensed Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations. 8
PART II - OTHER INFORMATION
Item 1. Legal Proceedings. 12
Item 2. Changes in Securities. 12
Item 3. Defaults Upon Senior Securities. 12
Item 4. Submission of Matters to a Vote of Security Holders. 12
Item 5. Other Information. 12
Item 6. Exhibits and Reports on Form 8-K. 13
Signatures 14
2
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PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
IVAC MEDICAL SYSTEMS, INC.
CONDENSED CONSOLIDATED BALANCE SHEET
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1996 1995
----------- ------------
(unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . $ 7,657 $ 18,308
Accounts receivable, net . . . . . . . . . . . . . . . . . . . 49,032 54,133
Current portion of contract receivables, net . . . . . . . . . 5,451 5,414
Inventories, net. . . . . . . . . . . . . . . . . . . . . . . . 38,456 34,625
Prepaid expenses and other assets . . . . . . . . . . . . . . . 2,327 3,143
-------- --------
Total current assets . . . . . . . . . . . . . . . . . . . 102,923 115,623
Long-term contract receivables, net . . . . . . . . . . . . . . . 18,427 19,957
Property, plant and equipment, net . . . . . . . . . . . . . . . . 45,931 48,277
Intangible assets, net . . . . . . . . . . . . . . . . . . . . . . 22,518 30,893
Other long-term assets . . . . . . . . . . . . . . . . . . . . . . 500 1,245
-------- --------
$190,299 $215,995
-------- --------
-------- --------
LIABILITIES AND SHAREHOLDER'S EQUITY
Current liabilities:
Accounts payable and accrued warranty . . . . . . . . . . . . . $ 24,450 $ 21,355
Accrued employee liabilities. . . . . . . . . . . . . . . . . . 7,196 9,528
Current portion of long-term debt . . . . . . . . . . . . . . . 17,500 8,091
Other current liabilities . . . . . . . . . . . . . . . . . . . 35,198 34,869
-------- --------
Total current liabilities. . . . . . . . . . . . . . . . . 84,344 73,843
Long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . 105,562 123,733
Other non-current liabilities. . . . . . . . . . . . . . . . . . . 1,243 5,043
Shareholder's equity:
Common stock, $.01 par value; 1,000 shares authorized;
100 shares issued and outstanding. . . . . . . . . . . . . - -
Additional paid-in capital. . . . . . . . . . . . . . . . . . . 63,333 63,333
Accumulated deficit . . . . . . . . . . . . . . . . . . . . . . (64,951) (51,804)
Foreign currency translation adjustment . . . . . . . . . . . . 768 1,847
-------- --------
Total shareholder's equity . . . . . . . . . . . . . . . . (850) 13,376
-------- --------
$190,299 $215,995
-------- --------
-------- --------
</TABLE>
See accompanying notes to condensed consolidated financial statements.
3
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IVAC MEDICAL SYSTEMS, INC.
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(DOLLARS IN THOUSANDS)
(unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED JUNE 30, SIX MONTHS ENDED JUNE 30,
1996 1995 1996 1995
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Net sales . . . . . . . . . . . . . . . . . . . . . $ 58,748 $ 60,243 $ 112,762 $ 118,791
Cost of sales . . . . . . . . . . . . . . . . . . . 34,566 35,323 65,633 84,749
--------- --------- --------- ---------
Gross profit . . . . . . . . . . . . . . . . . . 24,182 24,920 47,129 34,042
Sales and marketing . . . . . . . . . . . . . . . . 10,239 11,518 19,668 22,860
General and administrative . . . . . . . . . . . . . 6,557 6,550 12,001 12,168
Research and development . . . . . . . . . . . . . . 2,778 3,466 4,913 7,250
Restructuring and special items . . . . . . . . . . 17,396 - 17,396 -
Purchased research and development . . . . . . . . . - - - 19,883
--------- --------- --------- ---------
Income (loss) from operations . . . . . . . . . (12,788) 3,386 (6,849) (28,119)
Interest income (expense):
Interest income . . . . . . . . . . . . . . . . 752 847 1,465 1,598
Interest expense . . . . . . . . . . . . . . . . (3,365) (5,576) (7,037) (11,206)
--------- --------- --------- ---------
Loss before income taxes . . . . . . . . . . . . (15,401) (1,343) (12,421) (37,727)
Provision for (benefit from) income taxes. . . . . . (213) (94) 726 (2,821)
--------- --------- --------- ---------
Net loss . . . . . . . . . . . . . . . . . . . . $ (15,188) $ (1,249) $ (13,147) $ (34,906)
--------- --------- --------- ---------
--------- --------- --------- ---------
</TABLE>
See accompanying notes to condensed consolidated financial statements.
4
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IVAC MEDICAL SYSTEMS, INC.
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(DOLLARS IN THOUSANDS)
(unaudited)
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30,
1996 1995
----------- -----------
<S> <C> <C>
Net cash provided by operating activities. . . . . . . . . . . . . . . $ 9,972 $ 27,790
Cash flows from investing activities:
Acquisitions, net of cash and cash equivalents acquired. . . . . . . - (185,055)
Proceeds from disposal of property . . . . . . . . . . . . . . . . . 40 -
Capital expenditures, net . . . . . . . . . . . . . . . . . . . . . (10,225) (5,644)
----------- -----------
Net cash used by investing activities. . . . . . . . . . . (10,185) (190,699)
Cash flows from financing activities:
Capital contributions . . . . . . . . . . . . . . . . . . . . . . . - 50,000
Borrowings under term loan and revolving credit arrangements . . . . 3,000 68,500
Proceeds from bridge notes . . . . . . . . . . . . . . . . . . . . . - 80,000
Repayment of term loan and revolving debt . . . . . . . . . . . . . (7,500) (8,500)
Payment of other debt obligations . . . . . . . . . . . . . . . . . (4,533) -
Debt issue costs . . . . . . . . . . . . . . . . . . . . . . . . . . (27) (6,566)
Capital lease payments . . . . . . . . . . . . . . . . . . . . . . . (299) (170)
----------- -----------
Net cash (used) provided by financing activities . . . . . (9,359) 183,264
Effect of exchange rate changes on cash. . . . . . . . . . . . . . . . (1,079) 1,419
----------- -----------
Net (decrease) increase in cash and cash equivalents . . . . . . . . . (10,651) 21,774
Cash and cash equivalents at the beginning of the period . . . . . . . 18,308 0
----------- -----------
Cash and cash equivalents at the end of the period . . . . . . . . . . $ 7,657 $ 21,774
----------- -----------
----------- -----------
Supplemental disclosure of non-cash financing activities:
Contribution of River capital stock . . . . . . . . . . . . . . . . - $ 13,333
----------
----------
</TABLE>
See accompanying notes to condensed consolidated financial statements.
5
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IVAC MEDICAL SYSTEMS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
(unaudited)
NOTE 1--BUSINESS
IVAC Medical Systems, Inc. ("IVAC" or the "Company"), formerly known as
IVAC Corporation, designs, manufactures, distributes and services intravenous
infusion therapy and vital signs measurement instruments and related disposables
and accessories. The Company sells a full range of products to hospitals and
alternate site facilities in the United States, Canada and Europe. IVAC is a
wholly owned subsidiary of IVAC Holdings, Inc. ("Holdings").
In management's opinion, the accompanying unaudited condensed consolidated
financial statements of the Company for the six months ended June 30, 1996 and
1995 have been prepared in accordance with generally accepted accounting
principles for interim financial statements and include all adjustments
(consisting only of normal recurring accruals) necessary for a fair presentation
of the financial position, results of operations and cash flows for all periods
presented. All such financial statements are unaudited except for the December
31, 1995 balance sheet. The unaudited condensed consolidated financial
statements include the accounts and results of operations of the Company and its
subsidiaries, all of which are wholly owned. All significant intercompany
balances and transactions have been eliminated. Interim operating results are
not necessarily indicative of operating results for the full year. These
financial statements should be read in conjunction with the financial statements
and notes thereto included in the Company's Annual Report on Form 10-K filed for
the year ended December 31, 1995.
NOTE 2--EARNINGS PER SHARE
Due to the fact that IVAC is a wholly owned subsidiary of Holdings,
earnings per share data is not considered meaningful and, therefore, is not
presented.
NOTE 3--INVENTORIES
Inventories at June 30, 1996 and December 31, 1995 consisted of:
JUNE 30, DECEMBER 31,
1996 1995
--------- ------------
Finished products . . . . . . . . . . . . $ 15,628 $ 14,998
Work-in-process . . . . . . . . . . . . . 5,514 3,472
Raw materials . . . . . . . . . . . . . . 20,336 17,867
--------- ---------
41,478 36,337
Less reserves . . . . . . . . . . . . . . (3,022) (1,712)
--------- ---------
$ 38,456 $ 34,625
--------- ---------
--------- ---------
6
<PAGE>
IVAC MEDICAL SYSTEMS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
(unaudited)
NOTE 4--LONG-TERM DEBT
On March 29, 1996, the Company amended and restated its Bank Credit
Facility. The amended and restated senior credit facility (the "Facility") is
available through March 29, 1999, provides for borrowings of up to $40,000 and
is secured by substantially all of the Company's domestic assets. Borrowings
under the Facility bear interest at a rate equal to the Alternate Base Rate (as
defined in the Facility) plus 0.25% or Adjusted LIBOR plus 1.50%, at the option
of the Company. The interest rate is also subject to change quarterly based
upon certain debt and interest coverage ratios.
NOTE 5--LITIGATION
The Company's subsidiary, River Medical, Inc. ("River"), was a defendant in
an action alleging misappropriation of trade secrets and other proprietary
information of the plaintiff, an infusion pump company. River and the other
parties, without admission of liability, entered into a settlement agreement in
June 1996. The resolution of the matter did not result in adjustment to the
Company's consolidated financial position or results of operations. In
addition, the Company is a party to various other legal actions which have
occurred in the normal course of business. Management believes the Company has
meritorious defenses and intends to defend vigorously against these allegations
and claims. In management's opinion, liabilities arising from the above
matters, if any, will not have a material adverse effect on the Company's
consolidated financial position or results of operations.
NOTE 6--RIVER MEDICAL, INC. DIVESTITURE
The Company has made the decision to close River and to seek to divest the
subsidiary's assets. River's primary assets include patents, technologies,
trade secrets, inventories and manufacturing equipment. The Company has
recorded a restructuring charge of $17,396 during the three months ended June
30, 1996.
7
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
Excluding the effect of pre-tax 1995 acquisition purchase accounting
adjustments of $34.7 million and 1996 pre-tax restructuring charges of $17.4
million, income before income taxes increased $8.0 million, from a loss before
taxes of $3.0 million for the six months ended June 30, 1995 to income before
taxes of $5.0 million for the six months ended June 30, 1996, due to (i)
reduction of overall spending as a result of workforce restructurings and other
cost savings programs, and (ii) the benefits of lower interest expense as a
result of the Company's actions to restructure and repay debt through the sale
of $100 million of 9 1/4% Senior Notes and the sale of the San Diego
headquarters facility in the fourth quarter of 1995.
Adjusted EBITDA (as defined below) increased $4.2 million, or 25.6%, from
$16.4 million for the six months ended June 30, 1995 to $20.6 million for the
six months ended June 30, 1996. Adjusted EBITDA margin increased from 13.8% for
the six months ended June 30, 1995 to 18.3% for the six months ended June 30,
1996. Adjusted EBITDA represents operating profit (loss) before net interest
expense, income taxes, certain purchase accounting adjustments, restructurings
and depreciation and amortization. Adjusted EBITDA does not represent net
income or cash flows from operations, as these terms are defined under generally
accepted accounting principles, and should not be considered as an alternative
to net income as an indicator of the Company's operating performance or to cash
flows as a measure of liquidity. The Company has included information
concerning Adjusted EBITDA herein because it understands that such information
is used by certain investors as one measure of the Company's historical ability
to service debt.
RESULTS OF OPERATIONS
THREE MONTHS ENDED JUNE 30, 1996 COMPARED TO THREE MONTHS ENDED
JUNE 30, 1995
NET SALES. Net sales decreased $1.5 million, or 2.5%, from $60.2 million
for the three months ended June 30, 1995 to $58.7 million for the three months
ended June 30, 1996. U.S. net sales, which were 66.1% of net sales for the
three months ended June 30, 1996, decreased $2.0 million, or 4.9%, from $40.8
million for the three months ended June 30, 1995 to $38.8 million for the
three months ended June 30, 1996. Within the U.S. infusion therapy business,
net sales decreased for the three months ended June 30, 1996 as compared to
the three months ended June 30, 1995 as a result of attrition in the installed
base of older technology products. In addition, the Company has been impacted
by the market trend of increasing concentration of buying power among
healthcare providers. Separately, in June 1996, the Company temporarily
ceased manufacturing and distribution of its Signature Edition infusion pumps
in order to evaluate field complaints. The Company subsequently implemented a
voluntary recall of the Signature Edition pumps. Production and distribution
of the Signature Edition product line, incorporating product improvements,
resumed during the third quarter of 1996. International net sales increased
$0.5 million, or 2.5%, from $19.4 million for the three months ended June 30,
1995 to $19.9 million for the three months ended June 30, 1996, primarily as a
result of the increased volume of drug infusion disposable administration sets
offset in part by the unfavorable impact of exchange rate fluctuations which
reduced net sales by $1.0 million.
GROSS PROFIT. Gross profit decreased $0.7 million, or 3.0%, from $24.9
million for the three months ended June 30, 1995 to $24.2 million for the three
months ended June 30, 1996 due primarily to (i) the impact of unfavorable
exchange rate fluctuations which decreased international sales, (ii) the
decrease in U.S. infusion therapy product sales, and (iii) the estimated costs
associated with the Signature Edition pumps voluntary recall, offset in part by
the ongoing benefit of lower manufacturing costs associated with restructuring
of the manufacturing workforce in 1995 and lower repair costs associated with
the MedSystem III product line.
SELLING AND MARKETING. As a percent of net sales, selling and marketing
expenses decreased from 19.1%, or $11.5 million, for the three months ended June
30, 1995 to 17.4%, or $10.2 million, for the three months ended June 30, 1996.
This decrease is primarily a result of cost savings derived from restructuring
the Company's hospital field sales force during 1995 and lower international
spending due to the termination of the services agreement with Eli Lilly and
Company (IVAC's former parent). The Company is currently performing these
services.
8
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GENERAL AND ADMINISTRATIVE. General and administrative expenses were $6.6
million for the three months ended June 30, 1995 and 1996. As a percent of net
sales, general and administrative expenses increased from 10.9% for the three
months ended June 30, 1995 to 11.1% for the same period in 1996 reflecting flat
spending spread over a reduced sales base.
RESEARCH AND DEVELOPMENT. As a percent of net sales, research and
development expenses decreased from 5.8%, or $3.5 million, for the three months
ended June 30, 1995 to 4.7%, or $2.8 million, for the three months ended June
30, 1996, primarily as a result of reduced spending on the new Signature Edition
product as it reached the final phase of the development cycle during the fourth
quarter of 1995.
RESTRUCTURING AND SPECIAL ITEMS. The restructuring and special items for
1996, totaling $17.4 million, consisted of a non-recurring charge for the
intended divestiture of the River assets. River's primary assets include
patents, technologies, trade secrets, inventories and manufacturing equipment.
River has ceased operations and the Company is continuing to seek the most
advantageous sale of River's assets. Management believes the divestiture of
River will allow the Company to focus on its core products in infusion therapy
and vital signs monitoring markets.
INCOME (LOSS) FROM OPERATIONS. Income from operations decreased $16.2
million from income of $3.4 million for the three months ended June 30, 1995 to
a loss from operations of $12.8 million for the three months ended June 30,
1996, as a result of the one time restructuring charge for the divestiture of
the River assets. Excluding the effect of the one time restructuring
adjustment, income from operations increased $1.2 million from income of $3.4
million for the three months ended June 30, 1995 to income of $4.6 million for
the three months ended June 30, 1996, reflecting the reduction in production and
operating costs attributed to the Company's restructuring and cost savings
actions initiated in 1995 and continuing in 1996.
INTEREST INCOME/EXPENSE. Net interest expense for the three months ended
June 30, 1995 was $4.7 million, consisting of interest income of $0.8 million
and interest expense of $5.5 million, compared to net interest expense for the
three months ended June 30, 1996 of $2.6 million, consisting of interest income
of $0.8 million and interest expense of $3.4 million. Interest income during
both periods included interest income related to NCA contracts, which allow
hospitals to acquire instruments at no initial cost by paying a premium (a
portion of which is recorded by the Company as interest income) for subsequent
purchases of disposables. The term of these contracts is generally three to
five years, with interest at rates of 9% to 15%. Interest expense was lower for
the three months ended June 30, 1996 as a result of refinancing and repayment of
debt during the fourth quarter of 1995. See "Liquidity and Capital Resources."
LOSS BEFORE INCOME TAXES. Excluding the effect of the 1996 pre-tax
restructuring charge of $17.4 million, income before income taxes increased
$3.3 million, or 248.5%, from a loss before income taxes of $1.3 million for
the three months ended June 30, 1995 to income before income taxes of $2.0
million for the three months ended June 30, 1996, reflecting the cost savings
discussed above.
PROVISION FOR (BENEFIT FROM) INCOME TAXES. The benefit from income taxes
was $0.1 million for the three months ended June 30, 1995 compared to $0.2
million for the three months ended June 30, 1996. The Company has recorded a
valuation allowance against its deferred tax assets based on an assessment that
it is more likely than not that the deferred tax assets will not be realized.
SIX MONTHS ENDED JUNE 30, 1996 COMPARED TO SIX MONTHS ENDED JUNE 30, 1995
NET SALES. Net sales decreased $6.0 million, or 5.1%, from $118.8 million
for the six months ended June 30, 1995 to $112.8 million for the six months
ended June 30, 1996. U.S. net sales, which were 67.4% of net sales for the six
months ended June 30, 1996, decreased $5.6 million, or 7.0%, from $80.1 million
for the six months ended June 30, 1995 to $74.5 million for the six months ended
June 30, 1996. Within the U.S. infusion therapy business, sales decreased for
the six months ended June 30, 1996 as compared to the six months ended June 30,
1995 as a result of (i) shipment in 1995 of the MedSystem III product backlog
which had resulted from the discontinuation of production due to product design
and manufacturing process problems during the fourth quarter 1994, and (ii)
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attrition in the installed base of older technology products. In addition,
the Company has been impacted by the market trend of increasing concentration
of buying power among healthcare providers. Separately, in June 1996, the
Company temporarily ceased manufacturing and distribution of its Signature
Edition infusion pumps in order to evaluate field complaints. The Company
subsequently implemented a voluntary recall of the Signature Edition pumps.
Production and distribution of the Signature Edition product line,
incorporating product improvements, resumed during the third quarter of 1996.
International net sales decreased $0.4 million, or 1.0%, from $38.7 million for
the six months ended June 30, 1995 to $38.3 million for the six months ended
June 30, 1996, primarily as a result of the unfavorable impact of exchange
rate fluctuations, partially offset by the increased volume of drug infusion
disposable administration sets.
GROSS PROFIT. Gross profit increased $13.1 million, or 38.4%, from $34.0
million for the six months ended June 30, 1995 to $47.1 million for the six
months ended June 30, 1996 due to (i) a one time $14.8 million charge in 1995
for the acquisition purchase price allocation to inventories in excess of
historical costs, (ii) the ongoing benefit of lower manufacturing costs
associated with restructuring of the manufacturing workforce in 1995, and (iii)
the lower repair costs associated with the MedSystem III product line. These
factors were offset in part by decreased net sales, which reduced the Company's
economies of scale, and the estimated costs associated with the Signature
Edition pumps voluntary recall. Excluding the 1995 effect of the one time
purchase accounting adjustment, gross profit as a percent of net sales improved
from 41.1% for the six months ended June 30, 1995 to 41.8% for the six months
ended June 30, 1996.
SELLING AND MARKETING. As a percent of net sales, selling and marketing
expenses decreased from 19.2%, or $22.9 million, for the six months ended June
30, 1995 to 17.4%, or $19.7 million, for the six months ended June 30, 1996,
primarily as a result of cost savings derived from restructuring the Company's
hospital field sales force during 1995 and lower international spending due to
the termination of the services agreement with Eli Lilly and Company (IVAC's
former parent). The Company is currently performing these services.
GENERAL AND ADMINISTRATIVE. General and administrative expenses decreased
$0.2 million, or 1.4%, from $12.2 million for the six months ended June 30, 1995
to $12.0 million for the six months ended June 30, 1996, primarily as a result
of lower legal costs associated with the SmartDose product line. As a percent
of net sales, general and administrative expenses increased from 10.2% for the
six months ended June 30, 1995 to 10.7% for the same period in 1996 primarily as
a result of expenses spread over a reduced sales base.
RESEARCH AND DEVELOPMENT. As a percent of net sales, research and
development expenses decreased from 6.1%, or $7.3 million, for the six months
ended June 30, 1995 to 4.4%, or $4.9 million, for the six months ended June
30, 1996, primarily as a result of 1995 headcount reductions and reduced
spending on the new Signature Edition product as it reached the final phase of
the development cycle during the fourth quarter of 1995.
RESTRUCTURING AND SPECIAL ITEMS. The restructuring and special items for
1996, totaling $17.4 million, consisted of a non-recurring charge for the
intended divestiture of the River assets. River's primary assets include
patents, technologies, trade secrets, inventories and manufacturing equipment.
River has ceased operations and the Company is continuing to seek the most
advantageous sale of River's assets. Management believes the divestiture of
River will allow the Company to focus on its core products in infusion therapy
and vital signs monitoring markets.
PURCHASED RESEARCH AND DEVELOPMENT. In 1995, the Company recorded a one
time purchase accounting adjustment of $19.9 million for purchased research and
development relating to the revaluation of assets in conjunction with the
acquisition of IVAC and River by IVAC Holdings, Inc. in December 1994.
INCOME (LOSS) FROM OPERATIONS. Loss from operations decreased $21.3
million from a loss of $28.1 million for the six months ended June 30, 1995 to a
loss from operations of $6.8 million for the six months ended June 30, 1996.
Excluding 1995's one time acquisition purchase accounting charges of $34.7
million, of which $14.8 million was included in cost of sales and $19.9 million
in purchased research and development and the 1996 one time restructuring charge
of $17.4 million for the divestiture of the River assets, income from operations
increased $4.0 million, or 61.3%, from $6.6 million for the six months ended
June 30, 1995 to $10.6 million for the six
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months ended June 30, 1996, reflecting the reduction in production and operating
costs attributed to the Company's restructuring and cost savings actions
initiated in 1995 and continuing in 1996.
INTEREST INCOME/EXPENSE. Net interest expense for the six months ended
June 30, 1995 was $9.6 million, consisting of interest income of $1.6 million
and interest expense of $11.2 million, compared to net interest expense for the
six months ended June 30, 1996 of $5.6 million, consisting of interest income of
$1.4 million and interest expense of $7.0 million. Interest income during both
periods included interest income related to NCA contracts, which allow hospitals
to acquire instruments at no initial cost by paying a premium (a portion of
which is recorded by the Company as interest income) for subsequent purchases of
disposables. The term of these contracts is generally three to five years, with
interest at rates of 9% to 15%. Interest expense was lower for the six months
ended June 30, 1996 as a result of refinancing and repayment of debt during the
fourth quarter of 1995. See "Liquidity and Capital Resources."
LOSS BEFORE INCOME TAXES. Excluding the effect of pre-tax 1995 acquisition
purchase accounting adjustments of $34.7 million and 1996 pre-tax restructuring
charges of $17.4 million, income before income taxes increased $8.0 million,
from a loss before taxes of $3.0 million for the six months ended June 30, 1995
to income before taxes of $5.0 million for the six months ended June 30, 1996,
reflecting the cost savings discussed above.
PROVISION FOR (BENEFIT FROM) INCOME TAXES. The benefit from income taxes
was $2.8 million for the six months ended June 30, 1995 compared to income tax
expense of $0.7 million for the six months ended June 30, 1996. The 1995
benefit reflects the write-off of purchased research and development partially
offset by foreign taxes. The Company has recorded a valuation allowance against
its deferred tax assets based on an assessment that it is more likely than not
that the deferred tax assets will not be realized.
LIQUIDITY AND CAPITAL RESOURCES
During the six months ended June 30, 1996, cash and cash equivalents
decreased to $7.7 million from $18.3 million at December 31, 1995, due primarily
to (i) $10.2 million of capital expenditures inclusive of leasehold improvements
associated with the Company's relocation of its corporate and primary instrument
manufacturing facilities in San Diego, (ii) the March 1996 prepayment of $5.5
million of bank term loans (concurrent with the amendment and restatement of the
Bank Credit Facility), and (iii) the payment of additional consideration of $4.5
million related to the 1993 acquisition of the MiniMed product line; all of the
above being offset in part by $10.0 million of cash provided by operating
activities (resulting from operating profitability and reductions in net working
capital levels).
At June 30, 1996, the Company had working capital of $18.6 million, a
decrease of $23.2 million, or 55.5%, from the level at December 31, 1995 of
$41.8 million. The decrease in working capital was due primarily to (i) the
$7.4 million working capital impact of the writedown for the intended
divestiture of the River assets, and (ii) the impact of the prepayment of $5.5
million on the bank term loan concurrent with the conversion of the loan to a
revolving Bank Credit Facility which resulted in a reclassification of $9.7
million from long-term debt to current debt.
The Company amended and restated its Bank Credit Facility on March 29,
1996. The amended and restated Facility is available through March 29, 1999,
provides for borrowings of up to $40 million and is secured by substantially
all of the Company's domestic assets. Borrowings under the Facility bear
interest at a rate equal to the Alternate Base Rate (as defined in the Facility)
plus 0.25% or Adjusted LIBOR plus 1.50%, at the option of the Company. The
interest rate is also subject to change quarterly based upon certain debt and
interest coverage ratios. At June 30, 1996 the Company had $24.4 million of
available revolving borrowings under the amended and restated Facility.
The Company believes that, based on current levels of operations, its cash flow
from operations, together with borrowings under the amended and restated Bank
Credit Facility, will be adequate, at least through the next 12 months, to
finance contemplated operations and make required payments of interest and
principal on its debt and planned capital expenditures. However, the Company's
ability to finance its operations, to make interest payments on such
indebtedness, to repay such indebtedness at maturity and to make capital
expenditures will be dependent on the Company's future operating performance.
11
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PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
In February 1995, Block Medical, Inc. ("Block") commenced a lawsuit against
River, in the Superior Court of the State of California, San Diego County.
Block asserted that River misappropriated certain of Block's trade secrets and
proprietary rights in connection with the development of the SmartDose product.
River and the other parties, without admission of liability, entered into a
settlement agreement in June 1996. The resolution of the matter did not result
in adjustment to the Company's consolidated financial position or results of
operations.
In June 1996, Sherwood Medical Company ("Sherwood") filed a lawsuit against
the Company in the United States District Court for the District of Delaware.
The complaint alleges infringement of two Sherwood patents by reason of certain
activities including the sale by the Company of disposable probe covers for use
with infrared tympanic thermometers. The Company plans to vigorously contest
the suit.
In addition, the Company is a party to various other legal actions which
have occurred in the normal course of business. Management believes the Company
has meritorious defense and intends to defend vigorously against these
allegations and claims. In management's opinion, liabilities arising from the
above matters, if any, will not have a material adverse effect on the Company's
consolidated financial position or results of operations.
ITEM 2. CHANGES IN SECURITIES.
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
In the annual meeting of stockholders held in April 1996, the Company's
sole stockholder elected the following persons as directors of the Company:
Samuel Colella, Thompson Dean, Albert Henry, William Mercer, Reid Perper,
Gregory Sancoff and Karl Wyss.
ITEM 5. OTHER INFORMATION.
On July 25, 1996, the Company closed its subsidiary, River, and
announced the decision to seek to divest the subsidiary's assets. River's
primary assets include patents, technologies, trade secrets, inventories and
manufacturing equipment. The Company has recorded a restructuring charge of
$17.4 million during the three months ended June 30, 1996.
12
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ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits
10.1 IVAC Holdings, Inc., 1996 Key Contributor Stock Option Plan.
10.2 Indemnification Agreements with IVAC Officers and Board of
Directors.
27.1 Financial Data Schedule
(b) Reports on Form 8-K
Report on Form 8-K filed on May 3, 1996 with respect to an event dated
March 29, 1996 (the amendment and restatement of the Bank Credit Facility).
13
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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.
IVAC MEDICAL SYSTEMS, INC.
Date: August 13, 1996 By: /s/ William J. Mercer
--------------------------
William J. Mercer
Chief Executive Officer and
President
Date: August 13, 1996 By: /s/ Debra P. Crawford
--------------------------
Debra P. Crawford
Chief Financial Officer and
Vice President of Finance
and Administration
14
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EXHIBIT 10.1
IVAC HOLDINGS, INC.
1996 KEY CONTRIBUTOR STOCK OPTION PLAN
ARTICLE I
GENERAL PROVISIONS
1. PURPOSE OF THE PLAN
This 1996 Key Contributor Stock Option Plan ("Plan") is intended to
promote the interests of IVAC Holdings, Inc., a Delaware corporation (the
"Corporation"), by providing eligible persons with the opportunity to acquire
ownership interests, or otherwise increase their ownership interests, in the
Corporation as an incentive for them to remain in the service of the Corporation
(or any Parent or Subsidiary).
2. TERMINOLOGY
For the purposes of this Plan, any capitalized term not otherwise
defined within the Plan shall have the meaning assigned in the Definitions
Appendix hereof, unless the context clearly requires otherwise.
3. ADMINISTRATION OF THE PLAN
A. This Plan shall be administered by either the Board or a
committee of two (2) or more Board members appointed by the Board to which the
Board has delegated administrative functions under the Plan (as the case may be,
the "Plan Administrator"); provided, however, that the Plan Administrator may
delegate to the President of the Corporation the Plan Administrator's discretion
and authority under Article I, Section 4. Members of any committee to which the
Board has delegated any administrative functions shall serve for such terms as
the Board shall determine and subject to the Board's right of removal. All
delegations of authority to any committee or the President shall be and remain
revocable by the Board.
B. The Plan Administrator shall have full power and authority to
implement, interpret and administer the Plan, to establish all such rules and
regulations as it deems appropriate, and to make such determinations under the
Plan and any outstanding option grants or post-exercise restriction agreements
as it deems necessary or advisable. Decisions of the Plan Administrator shall
be final and binding on all parties who have an interest in the Plan or any
outstanding option or any shares subject to post-exercise restriction
agreements.
4. ELIGIBILITY AND SELECTION
A. The persons eligible to receive option grants under the Plan are
as follows:
(i) Employees, and
(ii) natural persons who provide consulting services (but
not consulting services related to capital-raising) to the Corporation
(or any Parent or Subsidiary); provided, however, that no officer,
director or 10% stockholder of the Corporation shall be eligible to
receive option grants under the Plan.
B. The Plan Administrator shall have the absolute discretion and
full authority to:
(i) determine (subject to the provisions of the Plan) which
eligible persons are to receive option grants, the time or times when such
option grants are to be made, the number of shares to be covered by each such
grant, the status of the granted option as either an Incentive Option or a Non-
Statutory Option, the time or times at which each option is to become
exercisable, the vesting schedule (if any) applicable to the option and/or the
shares subject to a post-exercise restriction agreement, and the maximum term
for which the option is to remain outstanding, and
<PAGE>
(ii) grant options in accordance with the Plan.
C. Shares issuable upon exercise of an option under the Plan may be
subject to such restrictions on transfer, repurchase rights, rights of first
refusal, market stand-off requirements and/or other restrictions as may be
imposed by the Plan Administrator in its absolute discretion and set forth in
the documents governing such option or exercise (including any documents
required to be entered into as a condition of exercise of such option).
5. STOCK SUBJECT TO THE PLAN
A. The stock issuable under the Plan shall be shares of authorized
but unissued or reacquired (Class A) Common Stock of the Corporation. The
maximum number of shares of Common Stock which may be issued over the term of
the Plan shall not exceed 700,000 shares, subject to adjustment from time to
time in accordance with the provisions of this Section 5.
B. Shares reserved for issuance under granted options but not in
fact issued pursuant to options granted under the Plan due to the expiration or
termination of the option or the cancellation of the option in accordance with
Article II, Section 6, will again become available for issuance under the Plan.
Shares actually issued under the Plan which are subsequently repurchased by the
Corporation will not become available for future issuance.
C. In the event any change is made to the Common Stock issuable
under the Plan by reason of any recapitalization, stock dividend, stock split,
combination of shares, exchange of shares or other change affecting the
outstanding Common Stock as a class without receipt of consideration, then
appropriate adjustments shall be made to (i) the aggregate number and/or class
of shares issuable under the Plan and (ii) the aggregate number and/or class of
shares and the option price per share in effect under each outstanding option in
order to prevent the dilution or enlargement of benefits thereunder. The
adjustments determined by the Plan Administrator shall be final, binding and
conclusive. In no event shall any such adjustments be made in connection with
the conversion of the Corporation's Class B Common Stock into shares of (Class
A) Common Stock.
ARTICLE II
OPTION GRANT PROGRAM
1. OPTION TERMS
Each option shall be evidenced by one or more documents in the form
approved by the Plan Administrator; PROVIDED, however, that each such document
shall comply with the terms specified in the Plan. Each document evidencing an
Incentive Option shall, in addition, be subject to the provisions of Article II,
Section 2.
A. EXERCISE PRICE.
(1) The exercise price per share shall be fixed by the Plan
Administrator, and shall not be less than eighty-five percent (85%) of the Fair
Market Value per share of Common Stock on the option grant date.
(2) The exercise price shall become immediately due upon
exercise of the option and shall, subject to the provisions of Section 1 of
Article III and the documents evidencing the option, be payable in cash or check
made payable to the Corporation. However, should the Common Stock be registered
under Section 12 of the Securities Exchange Act of 1934 at the time the option
is exercised, then the exercise price may also be paid as follows:
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(i) in shares of Common Stock held by the Optionee
for the requisite period necessary to avoid a charge to the
Corporation's earnings for financial reporting purposes and valued at
Fair Market Value on the Exercise Date, or
(ii) through a special sale and remittance procedure
pursuant to which the Optionee shall concurrently provide irrevocable written
instructions (a) to a Corporation-designated brokerage firm to effect the
immediate sale of the purchased shares and remit to the Corporation, out of the
sale proceeds available on the settlement date, sufficient funds to cover the
aggregate exercise price payable for the purchased shares plus all applicable
Federal, state and local income and employment taxes required to be withheld by
the Corporation by reason of such exercise and (b) to the Corporation to deliver
the certificates for the purchased shares directly to such brokerage firm in
order to complete the sale.
Except to the extent such sale and remittance procedure is
utilized, payment of the exercise price for the purchased shares must be made on
the Exercise Date.
B. EXERCISE AND TERM OF OPTIONS. Each option granted under the Plan
shall be exercisable at such time or times, during such period and for such
number of shares as shall be determined by the Plan Administrator and set forth
in the documents evidencing the option. However, no option granted under the
Plan shall have a term in excess of ten (10) years measured from the option
grant date.
C. LIMITED TRANSFERABILITY OF OPTIONS. During the lifetime of the
Optionee, an option shall be exercisable only by the Optionee and shall not be
assignable or transferable other than by will or by the laws of descent and
distribution following the Optionee's death.
D. EFFECT OF TERMINATION OF SERVICE. The following provisions shall
govern the exercise of any options held by the Optionee at the time of cessation
of Service or death:
(i) Any option outstanding at the time of the
Optionee's cessation of Service for any reason OTHER THAN CAUSE shall remain
exercisable for such period of time thereafter as shall be determined by the
Plan Administrator and set forth in the documents evidencing the option. The
period set forth in the documents evidencing the option during which the option
shall remain exercisable following the cessation of Service by reason of death
or permanent disability (within the meaning of Internal Revenue Code Section
22(e)(3)) shall not be less than a twelve (12)-month period following the date
of such cessation of Service, nor less than a three (3)-month period following
cessation of Service for any other reason. ANY OUTSTANDING OPTION SHALL
IMMEDIATELY TERMINATE AT THE TIME OF THE OPTIONEE'S TERMINATION FOR CAUSE.
(ii) Any option exercisable in whole or in part by the
Optionee at the time of death may be subsequently exercised by the executor or
administrator of the Optionee's estate or by the person or persons to whom the
option is transferred pursuant to the Optionee's will or in accordance with the
laws of descent and distribution.
(iii) Under no circumstances, however, shall any such
option be exercisable after the specified expiration of the option term.
(iv) During the applicable post-Service exercise period,
the option may not be exercised in the aggregate for more than the number of
vested shares for which the option is exercisable on the date of the Optionee's
cessation of Service. Upon the expiration of the applicable exercise period or
(if earlier) upon the expiration of the option term, the option shall terminate
and cease to be outstanding for any shares for which the option has not been
exercised. However, the option shall, immediately upon the Optionee's cessation
of Service, terminate and cease to be outstanding to the extent it is not
exercisable for vested shares on the date of such cessation of Service.
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E. STOCKHOLDER RIGHTS. The holder of an option shall have no
stockholder rights with respect to the shares subject to the option until such
person shall have exercised the option, paid the exercise price and become a
holder of record of the purchased shares.
F. VESTING SCHEDULE. The Plan Administrator shall have the
discretion to grant options which are exercisable for unvested shares of Common
Stock under the Plan. Should the Optionee cease Service while holding such
unvested shares, the Corporation shall have the right to repurchase, at the
exercise price paid per share, all or (at the discretion of the Corporation and
with the consent of the Optionee) any of those unvested shares. The terms upon
which such repurchase right shall be exercisable (including the period and
procedure for exercise and the appropriate vesting schedule for the purchased
shares) shall be established by the Plan Administrator and set forth in the
document evidencing such repurchase right. The Plan Administrator may not
impose a vesting schedule upon any option grant which is more restrictive than
twenty percent (20%) per year vesting, beginning one (1) year after the option
grant date, nor a vesting schedule upon any shares subject to a post-exercise
restriction agreement which is more restrictive than twenty percent (20%) per
year vesting, beginning one (1) year after the Exercise Date.
2. INCENTIVE OPTIONS
All provisions of the Plan shall be applicable to Incentive Options
granted hereunder and, in addition, the terms and conditions specified in this
Section 2 shall be applicable to Incentive Options granted under the Plan.
Options which are specifically designated as Non-Statutory Options when granted
under the Plan shall NOT be subject to such terms and conditions set forth in
this Section 2.
A. ELIGIBILITY. Incentive Options may only be granted to Employees.
B. EXERCISE PRICE. The exercise price per share shall not be less
than one hundred percent (100%) of the Fair Market Value per share of Common
Stock on the option grant date.
C. DOLLAR LIMITATION. The aggregate Fair Market Value of the shares
of Common Stock (determined as of the respective date or dates of grant) for
which one or more options granted to any Employee under the Plan (or any other
option plan of the Corporation or any Parent or Subsidiary) may for the first
time become exercisable as Incentive Options during any one (1) calendar year
shall not exceed the sum of One Hundred Thousand Dollars ($100,000). To the
extent the Employee holds two (2) or more such options which become exercisable
for the first time in the same calendar year, the foregoing limitation on the
exercisability of such options as Incentive Options shall be applied on the
basis of the order in which such options are granted. Any options becoming
exercisable in such calendar year in excess of such limitation shall
automatically be treated as Non-Statutory Options.
3. WITHHOLDING
The Corporation's obligation to deliver shares of Common Stock upon
the exercise of any options under the Plan shall be subject to the satisfaction
of all applicable Federal, state and local income and employment tax withholding
requirements.
4. SECURITIES LAWS; LEGENDS
A. No shares of Common Stock or other assets shall be issued or
delivered upon option exercises under this Plan unless and until the Corporation
shall have determined that there has been full and adequate compliance with all
applicable requirements of the Federal and state securities laws and all other
applicable legal and regulatory requirements.
B. Shares issued upon option exercises under the Plan shall bear
such legends as the Plan Administrator deems necessary or appropriate, including
such restrictive legends as the Plan Administrator shall require to reflect the
terms of any agreement between the Optionee and the Corporation.
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5. ADDITIONAL AUTHORITY
The Plan Administrator shall have the discretion, exercisable either
at the time an option is granted or at any time while the option remains
outstanding, to:
(i) extend the period of time for which the option is to
remain exercisable following the Optionee's cessation of Service from
the limited period otherwise in effect for that option to such greater
period of time as the Plan Administrator shall deem appropriate, but
in no event beyond the expiration of the option term, and/or
(ii) permit the option to be exercised, during the applicable
post-Service exercise period, not only with respect to the number of
shares of Common Stock as to which such option is vested at the time
of the Optionee's cessation of Service also with respect to one or
more additional installments in which the Optionee would have vested
under the option had the Optionee continued in Service.
6. CANCELLATION AND REGRANT OF OPTIONS
The Plan Administrator shall have the authority to effect, at any time
and from time to time, with the consent of the affected Optionees, the
cancellation of any or all outstanding options under the Plan and to grant in
substitution therefor new options under the Plan covering the same or different
number of shares of Common Stock but with an exercise price per share based on
the Fair Market Value per share of Common Stock on the new option grant date.
7. CORPORATE TRANSACTION
A. In the event of any Corporate Transaction, each outstanding
option shall terminate and cease to be outstanding, except to the extent assumed
by the successor corporation (or Parent thereof) in connection with such
Corporate Transaction. In addition, all outstanding repurchase rights under the
Plan shall terminate in the event of any Corporate Transaction, except to the
extent the repurchase rights are assigned to the successor corporation (or
Parent thereof) in connection with such Corporate Transaction.
B. Each option which is expressly assumed in connection with a
Corporate Transaction shall be appropriately adjusted, immediately after such
Corporate Transaction, to apply to the number and class of securities which
would have been issuable to the Optionee in the consummation of such Corporate
Transaction, had the option been exercised immediately prior to such Corporate
Transaction. Appropriate adjustments shall also be made to (i) the number and
class of securities available for issuance under the Plan following the
consummation of such Corporate Transaction and (ii) the exercise price payable
per share under each outstanding option, PROVIDED the aggregate exercise price
payable for such securities shall remain the same.
C. The grant of options under the Plan shall in no way affect the
right of the Corporation to adjust, reclassify, reorganize or otherwise change
its capital or business structure or to merge, consolidate, dissolve, liquidate
or sell or transfer all or any part of its business, stock or assets.
ARTICLE III
MISCELLANEOUS
1. FINANCING
The Plan Administrator may permit any Optionee to pay the option
exercise price by delivering a promissory note payable in one or more
installments. The terms of any such promissory note (including the
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interest rate and the terms of repayment) shall be established by the Plan
Administrator in its sole discretion. Promissory notes may be authorized with
or without security or collateral. In all events, the maximum credit available
to the Optionee may not exceed the SUM of (i) the aggregate option exercise
price payable for the purchased shares (less the par value of such shares) plus
(ii) any Federal, state and local income and employment tax liability incurred
by the Optionee in connection with the option exercise.
2. EFFECTIVE DATE AND TERM OF THE PLAN
A. The Plan shall become effective when adopted by the Board, but
no option granted under the Plan may be exercised, and no shares shall be issued
upon option exercises under the Plan, until the Plan is approved by the
Corporation's stockholders. If such stockholder approval is not obtained within
twelve (12) months after the date of the Board's adoption of the Plan, then all
options previously granted under the Plan shall terminate and cease to be
outstanding, and no further options shall be granted and no shares shall be
issued upon option exercises under the Plan. Subject to such limitation, the
Plan Administrator may grant options under the Plan at any time after the
effective date of the Plan and before the date fixed herein for termination of
the Plan.
B. The Plan shall terminate upon the EARLIEST of (i) the
expiration of the ten (10)-year period measured from the date the Plan is
adopted by the Board, (ii) the date on which all shares available for issuance
under the Plan shall have been issued pursuant to the exercise of options under
the Plan or (iii) the termination of all outstanding options in connection with
a Corporate Transaction. The termination of the Plan shall have no effect on
any outstanding options under or shares issued and outstanding upon option
exercises under the Plan, and such securities shall thereafter continue to have
force and effect in accordance with the provisions of the agreements evidencing
such options and any post-exercise restriction agreements.
3. AMENDMENT OF THE PLAN
A. The Board shall have complete and exclusive power and
authority to amend or modify the Plan in any or all respects whatsoever.
However, no such amendment or modification shall adversely affect the rights and
obligations of an Optionee with respect to options at the time outstanding under
the Plan, nor adversely affect the rights of any issuee with respect to Common
Stock issued upon option exercises under the Plan prior to such action unless
such Optionee or issuee consents to such amendment. In addition, the Board
shall not, without the approval of the Corporation's stockholders, amend the
Plan so as to (i) increase the maximum number of shares issuable under the Plan
(except for adjustments required under Article I, Section 5.C), (ii) materially
increase the benefits accruing to individuals who participate in the Plan, or
(iii) materially modify the eligibility requirements for participation in the
Plan.
B. Options to purchase shares of Common Stock may be granted
under the Plan and shares of Common Stock may be issued upon option exercises
under the Plan that are in each instance in excess of the number of shares then
available for issuance under the Plan, provided any excess shares actually
issued under the Plan are held in escrow until there is obtained Board and
stockholder approval of an amendment sufficiently increasing the number of
shares of Common Stock available for issuance under the Plan. If such Board and
stockholder approval is not obtained within twelve (12) months after the date
the first such excess issuances are made, then (i) any unexercised options
granted on the basis of such excess shares shall terminate and cease to be
outstanding and (ii) the Corporation shall promptly refund to the Optionees the
exercise price paid for any excess shares issued upon option exercises under the
Plan and held in escrow, together with interest (at the applicable federal short
term rate as determined under Internal Revenue Code Section 1274(d)) for the
period the shares were held in escrow, and such shares shall thereupon be
automatically cancelled and cease to be outstanding.
4. USE OF PROCEEDS
Any cash proceeds received by the Corporation from the sale of shares
of Common Stock under the Plan shall be used for general corporate purposes.
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5. NO EMPLOYMENT OR SERVICE RIGHTS
Nothing in the Plan shall confer upon any person any right to continue
in Service for any period of specific duration or interfere with or otherwise
restrict in any way the rights of the Corporation (or any Parent or Subsidiary
employing or retaining such person) or of the Optionee, which rights are hereby
expressly reserved by each, to terminate such person's Service at any time for
any reason whatsoever, with or without cause, nor interfere with or otherwise
restrict in any way the right of the Corporation to engage in any Corporate
Transaction.
6. FINANCIAL REPORTS
The Corporation shall deliver a balance sheet and an income statement
at least annually to each individual holding an outstanding option under the
Plan, unless such individual is a key Employee whose duties in connection with
the Corporation (or any Parent or Subsidiary) assure such individual access to
equivalent information.
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IVAC HOLDINGS, INC.
1996 KEY CONTRIBUTOR STOCK OPTION PLAN
DEFINITIONS APPENDIX
The following definitions shall be in effect under the Plan:
A. BOARD shall mean the Corporation's Board of Directors.
B. COMMON STOCK shall mean the Corporation's Class A Common Stock.
C. CORPORATE TRANSACTION shall mean any of the following
stockholder-approved transactions to which the Corporation is a party:
(i) a merger or consolidation in which the Corporation is not the
surviving entity,
(ii) the sale, transfer or other disposition of all or
substantially all of the Corporation's assets, or
(iii) any transaction (other than an issuance of shares by the
Corporation for cash) in or by means of which one or more persons acting in
concert acquire, in the aggregate, more than 50% of the outstanding shares
of the stock of the Corporation.
D. EMPLOYEE shall mean an individual who is in the employ of the
Corporation (or any Parent or Subsidiary), subject to the control and direction
of the employer entity as to both the work to be performed and the manner and
method of performance.
E. EXERCISE DATE shall mean the date on which the Corporation shall have
received written notice of the option exercise.
F. FAIR MARKET VALUE per share of Common Stock on any relevant date shall
be determined in accordance with the following provisions:
(i) If the Common Stock is not at the time listed or admitted to
trading on any stock exchange but is traded in the Nasdaq National Market,
the Fair Market Value shall be the closing selling price of one share of
Common Stock on the date in question, as such price is reported by the
National Association of Securities Dealers through its NASDAQ system or any
successor system. If there is no closing selling price for the Common
Stock on the date in question, then the closing selling price on the last
preceding date for which such quotation exists shall be determinative of
Fair Market Value.
(ii) If the Common Stock is at the time listed or admitted to
trading on any stock exchange, then the Fair Market Value shall be the
closing selling price per share of Common Stock on the date in question on
the stock exchange determined by the Plan Administrator to be the primary
market for the Common Stock, as such price is officially quoted in the
composite tape of transactions on such exchange. If there is no reported
sale of Common Stock on such exchange on the date in question, then the
Fair Market Value shall be the closing selling price on the exchange on the
last preceding date for which such quotation exists.
(iii) If the Common Stock is at the time neither listed on any Stock
Exchange nor traded on the Nasdaq National Market, then the Fair Market
Value shall be determined by the Plan Administrator after taking into
account such factors as the Plan Administrator shall deem appropriate,
including the Corporation's earnings history, book value and prospects in
the light of market conditions generally.
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G. INCENTIVE OPTION shall mean an option which satisfies the requirements
of Internal Revenue Code Section 422.
H. NON-STATUTORY OPTION shall mean an option not intended to satisfy the
requirements of Internal Revenue Code Section 422.
I. OPTIONEE shall mean any person to whom an option is granted under the
Plan.
J. PARENT shall mean any corporation (other than the Corporation) in an
unbroken chain of corporations ending with the Corporation, provided each
corporation in the unbroken chain (other than the Corporation) owns, at the time
of the determination, stock possessing fifty percent (50%) or more of the total
combined voting power of all classes of stock in one of the other corporations
in such chain.
K. SERVICE shall mean the provision of services to the Corporation (or
any Parent or Subsidiary) by a person in the capacity of an Employee or a
consultant.
L. SUBSIDIARY shall mean any corporation (other than the Corporation) in
an unbroken chain of corporations beginning with the Corporation, provided each
corporation (other than the last corporation) in the unbroken chain owns, at the
time of the determination, stock possessing fifty percent (50%) or more of the
total combined voting power of all classes of stock in one of the other
corporations in such chain.
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EXHIBIT 10.2
INDEMNIFICATION AGREEMENT
THIS AGREEMENT is made and entered into this 1st day of May, 1996 between
IVAC MEDICAL SYSTEMS, INC., a Delaware corporation ("Corporation"), and
__________________ ("Director").
RECITALS:
A. Director, a member of the Board of Directors of Corporation, performs
a valuable service in such capacity for Corporation; and
B. The stockholders of Corporation have adopted Bylaws (the "Bylaws")
providing for the indemnification of the officers, directors, agents and
employees of Corporation to the maximum extent authorized by Section 145 of the
Delaware General Corporation Law, as amended (the "Law"); and
C. The Bylaws and the Law, by their non-exclusive nature, permit
contracts between Corporation and the members of its Board of Directors with
respect to indemnification of such directors; and
D. In accordance with the authorization as provided by the Law,
Corporation may from time to time purchase and maintain a policy or policies of
Directors and Officers Liability Insurance ("D & O Insurance"), covering certain
liabilities which may be incurred by its directors and officers in the
performance of services as directors and officers of Corporation; and
E. As a result of developments affecting the terms, scope and
availability of D & O Insurance there exists general uncertainty as to the
extent and overall desirability of protection afforded members of the Board of
Directors by such D & O Insurance, if any, and by statutory and bylaw
indemnification provisions; and
F. In order to induce Director to continue to serve as a member of the
Board of Directors of Corporation, Corporation has determined and agreed to
enter into this contract with Director;
NOW, THEREFORE, in consideration of Director's continued service as a
director after the date hereof, the parties hereto agree as follows:
1. INDEMNITY OF DIRECTOR. Corporation hereby agrees to hold harmless and
indemnify Director to the fullest extent authorized or permitted by the
provisions of the Law, as may be amended from time to time.
<PAGE>
2. ADDITIONAL INDEMNITY. Subject only to the exclusions set forth in
Section 3 hereof, Corporation hereby further agrees to hold harmless and
indemnify Director:
(a) against any and all expenses (including attorneys' fees), witness
fees, judgments, fines and amounts paid in settlement actually and reasonably
incurred by Director in connection with any threatened, pending or completed
action, suit or proceeding, whether civil, criminal, administrative or
investigative (including an action by or in the right of Corporation) to which
Director is, was or at any time becomes a party, or is threatened to be made a
party, by reason of the fact that Director is, was or at any time becomes a
director, officer, employee or agent of Corporation, or is or was serving or at
any time serves at the request of Corporation as a director, officer, employee
or agent of another corporation, partnership, joint venture, trust, employee
benefit plan or other enterprise; and
(b) otherwise to the fullest extent as may be provided to Director by
Corporation under the non-exclusivity provisions of the Bylaws of Corporation
and the Law.
3. LIMITATIONS ON ADDITIONAL INDEMNITY. No indemnity pursuant to Section
2 hereof shall be paid by Corporation:
(a) except to the extent the aggregate of losses to be indemnified
thereunder exceeds the sum of such losses for which the Director is indemnified
pursuant to Section 1 hereof or pursuant to any D & O Insurance purchased and
maintained by Corporation;
(b) in respect of remuneration paid to Director if it shall be
determined by a final judgment or other final adjudication that such
remuneration was in violation of law;
(c) on account of any action, suit or proceeding in which judgment is
rendered against Director for an accounting of profits made from the purchase or
sale by Director of securities of Corporation pursuant to the provisions of
Section 16(b) of the Securities Exchange Act of 1934 and amendments thereto or
similar provisions of any federal, state or local statutory law;
(d) on account of Director's conduct which is finally adjudged to
have been knowingly fraudulent or deliberately dishonest, or to constitute
willful misconduct;
(e) on account of Director's conduct which is the subject of an
action, suit or proceeding described in Section 7(c)(ii) hereof;
(f) on account of or arising in response to any action, suit or
proceeding (other than an action, suit or proceeding referred to in Section 8(b)
hereof) initiated by Director or any of Director's affiliates against
Corporation or any officer, director or stockholder of Corporation unless such
action, suit or proceeding was authorized in the specific case by action of the
Board of Directors of Corporation;
-2-
<PAGE>
(g) on account of any action, suit or proceeding to the extent that
Director is a plaintiff, a counter-complainant or a cross-complainant therein
(other than an action, suit or proceeding permitted by Section 3(f) hereof); or
(h) if a final decision by a Court having jurisdiction in the matter
shall determine that such indemnification is not lawful (and, in this respect,
both Corporation and Director have been advised that the Securities and Exchange
Commission believes that indemnification for liabilities arising under the
federal securities laws is against public policy and is, therefore,
unenforceable and that claims for indemnification should be submitted to
appropriate courts for adjudication).
4. CONTRIBUTION. If the indemnification provided in Sections 1 and 2 is
unavailable and may not be paid to Director for any reason other than those set
forth in paragraphs (b) through (g) of Section 3, then in respect of any
threatened, pending or completed action, suit or proceeding in which Corporation
is or is alleged to be jointly liable with Director (or would be if joined in
such action, suit or proceeding), Corporation shall contribute to the amount of
expenses (including attorneys' fees), judgments, fines and amounts paid in
settlement actually and reasonably incurred and paid or payable by Director in
such proportion as is appropriate to reflect (i) the relative benefits received
by Corporation on the one hand and Director on the other hand from the
transaction from which such action, suit or proceeding arose, and (ii) the
relative fault of Corporation on the one hand and of Director on the other hand
in connection with the events which resulted in such expenses, judgments, fines
or settlement amounts, as well as any other relevant equitable considerations.
The relative fault of Corporation on the one hand and of Director on the other
shall be determined by reference to, among other things, the parties' relative
intent, knowledge, access to information and opportunity to correct or prevent
the circumstances resulting in such expenses, judgments, fines or settlement
amounts. Corporation agrees that it would not be just and equitable if
contribution pursuant to this Section 4 were determined by pro rata allocation
or any other method of allocation which does not take account of the foregoing
equitable considerations.
5. CONTINUATION OF OBLIGATIONS. All agreements and obligations of
Corporation contained herein shall continue during the period Director is a
director, officer, employee or agent of Corporation (or is or was serving at the
request of Corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust, employee benefit plan or other
enterprise) and shall continue thereafter so long as Director shall be subject
to any possible claim or threatened, pending or completed action, suit or
proceeding, whether civil, criminal or investigative, by reason of the fact that
Director was serving Corporation or such other entity in any capacity referred
to herein.
6. NOTIFICATION AND DEFENSE OF CLAIM. Not later than thirty (30) days
after receipt by Director of notice of the commencement of any action, suit or
proceeding, Director will, if a claim in respect thereof is to be made against
Corporation under this Agreement, notify Corporation of the commencement
thereof; but the omission so to notify Corporation will not
-3-
<PAGE>
relieve it from any liability which it may have to Director otherwise than under
this Agreement. With respect to any such action, suit or proceeding as to which
Director notifies Corporation of the commencement thereof:
(a) Corporation will be entitled to participate therein at its own
expense;
(b) except as otherwise provided below, to the extent that it may
wish, Corporation jointly with any other indemnifying party similarly notified
will be entitled to assume the defense thereof, with counsel reasonably
satisfactory to Director. After notice from Corporation to Director of its
election so as to assume the defense thereof, Corporation will not be liable to
Director under this Agreement for any legal or other expenses subsequently
incurred by Director in connection with the defense thereof other than
reasonable costs of investigation or as otherwise provided below. Director
shall have the right to employ his own counsel in such action, suit or
proceeding but the fees and expenses of such counsel incurred after notice from
Corporation of its assumption of the defense thereof shall be at the expense of
Director unless (i) the employment of counsel by Director has been authorized by
Corporation, (ii) Director shall have reasonably concluded that there may be a
conflict of interest between Corporation and Director in the conduct of the
defense of such action or (iii) Corporation shall not in fact have employed
counsel to assume the defense of such action, in each of which cases the fees
and expenses of Director's separate counsel shall be at the expense of
Corporation. Corporation shall not be entitled to assume the defense of any
action, suit or proceeding brought by or on behalf of Corporation or as to which
Director shall have made the conclusion provided for in (ii) above; and
(c) Corporation shall not be liable to indemnify Director under this
Agreement for any amounts paid in settlement of any action or claim effected
without its written consent. Corporation shall be permitted to settle any
action except that it shall not settle any action or claim in any manner which
would impose any penalty, out-of-pocket liability, or limitation on Director
without Director's written consent. Neither Corporation nor Director will
unreasonably withhold its or his consent to any proposed settlement.
7. ADVANCEMENT AND REPAYMENT OF EXPENSES.
(a) In the event that Director employs his own counsel pursuant to
Section 6(b)(i) through (iii) above, Corporation shall advance to Director,
prior to any final disposition of any threatened or pending action, suit or
proceeding, whether civil, criminal, administrative or investigative, any and
all reasonable expenses (including legal fees and expenses) incurred in
investigating or defending any such action, suit or proceeding within ten (10)
days after receiving copies of invoices presented to Director for such expenses.
(b) Director agrees that Director will reimburse Corporation for all
reasonable expenses paid by Corporation in defending any civil or criminal
action, suit or proceeding against Director in the event and only to the extent
it shall be ultimately determined by a final judicial decision (from which there
is no right of appeal) that Director is not
-4-
<PAGE>
entitled, under the provisions of the Law, the Bylaws, this Agreement or
otherwise, to be indemnified by Corporation for such expenses.
(c) Notwithstanding the foregoing, Corporation shall not be required
to advance such expenses to Director if Director (i) commences any action, suit
or proceeding as a plaintiff unless such advance is specifically approved by a
majority of the Board of Directors or (ii) is a party to an action, suit or
proceeding brought by Corporation and approved by a majority of the Board which
alleges willful misappropriation of corporate assets by Director, disclosure of
confidential information in violation of Director's fiduciary or contractual
obligations to Corporation, or any other willful and deliberate breach in bad
faith of Director's duty to Corporation or its shareholders.
8. ENFORCEMENT.
(a) Corporation expressly confirms and agrees that it has entered
into this Agreement and assumed the obligations imposed on Corporation hereby in
order to induce Director to continue as a director of Corporation, and
acknowledges that Director is relying upon this Agreement in continuing in such
capacity.
(b) In the event Director is required to bring any action to enforce
rights or to collect moneys due under this Agreement and is successful in such
action, the Corporation shall reimburse Director for all Director's reasonable
fees and expenses in bringing and pursuing such action.
9. SUBROGATION. In the event of payment under this agreement,
Corporation shall be subrogated to the extent of such payment to all of the
rights of recovery of Director, who shall execute all documents required and
shall do all acts that may be necessary to secure such rights and to enable
Corporation effectively to bring suit to enforce such rights.
10. NON-EXCLUSIVITY OF RIGHTS. The rights conferred on Director by this
Agreement shall not be exclusive of any other right which Director may have or
hereafter acquire under any statute, provision of Corporation's Certificate of
Incorporation or Bylaws, agreement, vote of stockholders or directors, or
otherwise, both as to action in his official capacity and as to action in
another capacity while holding office.
11. SURVIVAL OF RIGHTS. The rights conferred on Director by this
Agreement shall continue after Director has ceased to be a director, officer,
employee or other agent of Corporation or such other entity and shall inure to
the benefit of Director's heirs, executors and administrators.
12. SEPARABILITY. Each of the provisions of this Agreement is a separate
and distinct agreement and independent of the others, so that if any or all of
the provisions hereof shall be held to be invalid or unenforceable to any extent
for any reason, such invalidity or unenforceability shall not affect the
validity or enforceability of the other provisions hereof or
-5-
<PAGE>
the obligation of the Corporation to indemnify the Director to the full extent
provided by the Bylaws or the Law, and the affected provision shall be construed
and enforced so as to effectuate the parties' intent to the maximum extent
possible.
13. GOVERNING LAW. This Agreement shall be interpreted and enforced in
accordance with the internal laws of the State of Delaware.
14. BINDING EFFECT. This Agreement shall be binding upon Director and
upon Corporation, its successors and assigns, and shall inure to the benefit of
Director, his heirs, personal representatives and assigns and to the benefit of
Corporation, its successors and assigns.
15. AMENDMENT AND TERMINATION. No amendment, modification, termination or
cancellation of this Agreement shall be effective unless set forth in a writing
signed by both parties hereto.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on and
as of the day and year first above written.
DIRECTOR: IVAC MEDICAL SYSTEMS, INC.
By:
- ------------------------- ------------------------------------------
(Signature)
- ------------------------- ----------------------------------------------
Print Name Print Name and Title
-6-
<PAGE>
INDEMNIFICATION AGREEMENT
THIS AGREEMENT is made and entered into this 1st day of May, 1996 between
IVAC MEDICAL SYSTEMS, INC., a Delaware corporation ("Corporation"), and
____________________ ("Officer").
RECITALS:
G. Officer, an officer (but not currently a member of the Board of
Directors) of Corporation, performs a valuable service in such capacity for
Corporation; and
H. The stockholders of Corporation have adopted Bylaws (the "Bylaws")
providing, for the indemnification of the officers, directors, agents and
employees of Corporation to the maximum extent authorized by Section 145 of the
Delaware General Corporation Law, as amended (the "Law"); and
I. The Bylaws and the Law, by their non-exclusive nature, permit
contracts between Corporation and its officers with respect to indemnification
of officers; and
J. In accordance with the authorization as provided by the Law,
Corporation may from time to time purchase and maintain a policy or policies of
Directors and Officers Liability Insurance ("D & O Insurance"), covering certain
liabilities which may be incurred by its directors and officers in the
performance of services as directors and officers of Corporation; and
K. As a result of developments affecting the terms, scope and
availability of D & O Insurance there exists general uncertainty as to the
extent and overall desirability of protection afforded officers by such D & O
Insurance, if any, and by statutory and bylaw indemnification provisions; and
L. In order to induce Officer to continue to serve as an officer of
Corporation, Corporation has determined and agreed to enter into this contract
with Officer;
NOW, THEREFORE, in consideration of Officer's continued service as an
officer after the date hereof, the parties hereto agree as follows:
16. INDEMNITY OF OFFICER. Corporation hereby agrees to hold harmless and
indemnify Officer to the fullest extent authorized or permitted by the
provisions of the Law, as it may be amended from time to time.
17. ADDITIONAL INDEMNITY. Subject only to the exclusions set forth in
Section 3 hereof, Corporation hereby further agrees to hold harmless and
indemnify Officer:
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<PAGE>
(a) against any and all legal expenses (including attorneys' fees),
witness fees, judgments, fines and amounts paid in settlement actually and
reasonably incurred by Officer in connection with any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative (including an action by or in the right of Corporation) to which
Officer is, was or at any time becomes a party, or is threatened to be made a
party, by reason of the fact that Officer is, was or at any time becomes a
director, officer, employee or agent of Corporation, or is or was serving or at
any time serves at the request of Corporation as a director, officer, employee
or agent of another corporation, partnership, joint venture, trust, employee
benefit plan or other enterprise; and
(b) otherwise to the fullest extent as may be provided to Officer by
Corporation under the non-exclusivity provisions of the Bylaws of Corporation
and the Law.
18. LIMITATIONS ON ADDITIONAL INDEMNITY. No indemnity pursuant to Section
2 hereof shall be paid by Corporation:
(a) except to the extent the aggregate of losses to be indemnified
thereunder exceeds the sum of such losses for which Officer is indemnified
pursuant to Section 1 hereof or pursuant to any D & O Insurance purchased and
maintained by Corporation;
(b) in respect of remuneration paid to Officer if it shall be
determined by a final judgment or other final adjudication that such
remuneration was in violation of law;
(c) on account of any action, suit or proceeding in which judgment is
rendered against Officer for an accounting of profits made from the purchase or
sale by Officer of securities of Corporation pursuant to the provisions of
Section 16(b) of the Securities Exchange Act of 1934 and amendments thereto or
similar provisions of any federal, state or local statutory law;
(d) on account of Officer's conduct which is finally adjudged to have
been knowingly fraudulent or deliberately dishonest, or to constitute willful
misconduct;
(e) on account of Officer's conduct which is the subject of an
action, suit or proceeding described in Section 7(c)(ii) hereof;
(f) on account of or arising in response to any action, suit or
proceeding (other than an action, suit or proceeding referred to in Section 8(b)
hereof) initiated by Officer or any of Officer's affiliates against Corporation
or any officer, director or stockholder of Corporation unless such action, suit
or proceeding was authorized in the specific case by action of the Board of
Directors of Corporation;
-8-
<PAGE>
(g) on account of any action, suit or proceeding to the extent that
Officer is a plaintiff, a counter-complainant or a cross-complainant therein
(other than an action, suit or proceeding permitted by Section 3(f) hereof); or
(h) if a final decision by a Court having jurisdiction in the matter
shall determine that such indemnification is not lawful (and, in this respect,
both Corporation and Officer have been advised that the Securities and Exchange
Commission believes that indemnification for liabilities arising under the
federal securities laws is against public policy and is, therefore,
unenforceable and that claims for indemnification should be submitted to
appropriate courts for adjudication).
19. CONTRIBUTION. If the indemnification provided in Sections 1 and 2 is
unavailable and may not be paid to Officer for any reason other than those set
forth in paragraphs (b) through (g) of Section 3, then in respect of any
threatened, pending or completed action, suit or proceeding in which Corporation
is or is alleged to be jointly liable with Officer (or would be if joined in
such action, suit or proceeding), Corporation shall contribute to the amount of
expenses (including attorneys' fees), judgments, fines and amounts paid in
settlement actually and reasonably incurred and paid or payable by Officer in
such proportion as is appropriate to reflect (i) the relative benefits received
by Corporation on the one hand and Officer on the other hand from the
transaction from which such action, suit or proceeding arose, and (ii) the
relative fault of Corporation on the one hand and of Officer on the other hand
in connection with the events which resulted in such expenses, judgments, fines
or settlement amounts, as well as any other relevant equitable considerations.
The relative fault of Corporation on the one hand and of Officer on the other
hand shall be determined by reference to, among other things, the parties'
relative intent, knowledge, access to information and opportunity to correct or
prevent the circumstances resulting in such expenses, judgments, fines or
settlement amounts. Corporation agrees that it would not be just and equitable
if contribution pursuant to this Section 4 were determined by pro rata
allocation or any other method of allocation which does not take account of the
foregoing equitable considerations.
20. CONTINUATION OF OBLIGATIONS. All agreements and obligations of
Corporation contained herein shall continue during the period Officer is a
director, officer, employee or agent of Corporation (or is or was serving at the
request of Corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust, employee benefit plan or other
enterprise) and shall continue thereafter so long as Officer shall be subject to
any possible claim or threatened, pending or completed action, suit or
proceeding, whether civil, criminal or investigative, by reason of the fact that
Officer was serving Corporation or such other entity in any capacity referred to
herein.
21. NOTIFICATION AND DEFENSE OF CLAIM. Not later than thirty (30) days
after receipt by Officer of notice of the commencement of any action, suit or
proceeding, Officer will, if a claim in respect thereof is to be made against
Corporation under this Agreement, notify Corporation of the commencement
thereof; but the omission so to notify Corporation will not relieve it from any
liability which it may have to Officer otherwise than under this Agreement.
-9-
<PAGE>
With respect to any such action, suit or proceeding as to which Officer notifies
Corporation of the commencement thereof:
(a) Corporation will be entitled to participate therein at its own
expense;
(b) except as otherwise provided below, to the extent that it may
wish, Corporation jointly with any other indemnifying party similarly notified
will be entitled to assume the defense thereof, with counsel reasonably
satisfactory to Officer. After notice from Corporation to Officer of its
election so as to assume the defense thereof, Corporation will not be liable to
Officer under this Agreement for any legal or other expenses subsequently
incurred by Officer in connection with the defense thereof other than reasonable
costs of investigation or as otherwise provided below. Officer shall have the
right to employ his or her own counsel in such action, suit or proceeding but
the fees and expenses of such counsel incurred after notice from Corporation of
its assumption of the defense thereof shall be at the expense of Officer unless
(i) the employment of counsel by Officer has been authorized by Corporation,
(ii) Officer shall have reasonably concluded that there may be a conflict of
interest between Corporation and Officer in the conduct of the defense of such
action or (iii) Corporation shall not in fact have employed counsel to assume
the defense of such action, in each of which cases the fees and expenses of
Officer's separate counsel shall be at the expense of Corporation. Corporation
shall not be entitled to assume the defense of any action, suit or proceeding
brought by or on behalf of Corporation or as to which Officer shall have made
the conclusion provided for in (ii) above; and
(c) Corporation shall not be liable to indemnify Officer under this
Agreement for any amounts paid in settlement of any action or claim effected
without its written consent. Corporation shall be permitted to settle any
action except that it shall not settle any action or claim in any manner which
would impose any penalty, out-of-pocket liability, or limitation on Officer
without Officer's written consent. Neither Corporation nor Officer will
unreasonably withhold its or his or her consent to any proposed settlement.
22. ADVANCEMENT AND REPAYMENT OF EXPENSES.
(a) In the event that Officer employs his or her own counsel pursuant
to Section 6(b)(i) through (iii) above, Corporation shall advance to Officer,
prior to any final disposition of any threatened or pending action, suit or
proceeding, whether civil, criminal, administrative or investigative, any and
all reasonable expenses (including legal fees and expenses) incurred in
investigating or defending any such action, suit or proceeding within ten (10)
days after receiving copies of invoices presented to Officer for such expenses.
(b) Officer agrees that Officer will reimburse Corporation for all
reasonable expenses paid by Corporation in defending any civil or criminal
action, suit or proceeding against Officer in the event and only to the extent
it shall be ultimately determined by a final judicial decision (from which there
is no right of appeal) that Officer is not entitled, under the
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<PAGE>
provisions of the Law, the Bylaws, this Agreement or otherwise, to be
indemnified by Corporation for such expenses.
(c) Notwithstanding the foregoing, Corporation shall not be required
to advance such expenses to Officer if Officer (i) commences any action, suit or
proceeding as a plaintiff unless such advance is specifically approved by a
majority of the Board of Directors or (ii) is a party to an action, suit or
proceeding brought by Corporation and approved by a majority of the Board which
alleges willful misappropriation of corporate assets by Officer, disclosure of
confidential information in violation of Officer's fiduciary or contractual
obligations to Corporation, or any other willful and deliberate breach in bad
faith of Officer's duty to Corporation or its shareholders.
23. ENFORCEMENT.
(a) Corporation expressly confirms and agrees that it has entered
into this Agreement and assumed the obligations imposed on Corporation hereby in
order to induce Officer to continue as an officer of Corporation, and
acknowledges that Officer is relying upon this Agreement in continuing in such
capacity.
(b) In the event Officer is required to bring any action to enforce
rights or to collect moneys due under this Agreement and is successful in such
action, Corporation shall reimburse Officer for all of Officer's reasonable fees
and expenses in bringing and pursuing such action.
24. SUBROGATION. In the event of payment under this agreement,
Corporation shall be subrogated to the extent of such payment to all of the
rights of recovery of Officer, who shall execute all documents required and
shall do all acts that may be necessary to secure such rights and to enable
Corporation effectively to bring suit to enforce such rights.
25. NON-EXCLUSIVITY OF RIGHTS. The rights conferred on Officer by this
Agreement shall not be exclusive of any other right which Officer may have or
hereafter acquire under any statute, provision of Corporation's Certificate of
Incorporation or Bylaws, agreement, vote of stockholders or directors, or
otherwise, both as to action in his official capacity and as to action in
another capacity while holding office.
26. SURVIVAL OF RIGHTS. The rights conferred on Officer by this Agreement
shall continue after Officer has ceased to be a director, officer, employee or
other agent of Corporation or such other entity and shall inure to the benefit
of Officer's heirs, executors and administrators.
27. SEPARABILITY. Each of the provisions of this Agreement is a separate
and distinct agreement and independent of the others, so that if any or all of
the provisions hereof shall be held to be invalid or unenforceable to any extent
for any reason, such invalidity or unenforceability shall not affect the
validity or enforceability of the other provisions hereof or
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<PAGE>
the obligation of Corporation to indemnify Officer to the full extent provided
by the Bylaws or the Law, and the affected provision shall be construed and
enforced so as to effectuate the parties' intent to the maximum extent possible.
28. GOVERNING LAW. This Agreement shall be interpreted and enforced in
accordance with the internal laws of the State of Delaware.
29. BINDING EFFECT. This Agreement shall be binding upon Officer and upon
Corporation, its successors and assigns, and shall inure to the benefit of
Officer, his or her heirs, personal representatives and assigns and to the
benefit of Corporation, its successors and assigns.
30. AMENDMENT AND TERMINATION. No amendment, modification, termination or
cancellation of this Agreement shall be effective unless set forth in a writing
signed by both parties hereto.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on and
as of the day and year first above written.
OFFICER: IVAC MEDICAL SYSTEMS, INC.
By:
- ------------------------- -----------------------------------------
(Signature)
- ------------------------- ---------------------------------------------
Print Name Print Name and Title
[SIGNATURE PAGE TO INDEMNIFICATION AGREEMENT]
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<PAGE>
INDEMNIFICATION AGREEMENT
THIS AGREEMENT is made and entered into this 1st day of May, 1996 between
IVAC HOLDINGS, INC., a Delaware corporation ("Corporation"), and
__________________ ("Director").
RECITALS:
A. Director, a member of the Board of Directors of Corporation, performs
a valuable service in such capacity for Corporation; and
B. The stockholders of Corporation have adopted Bylaws (the "Bylaws")
providing for the indemnification of the officers, directors, agents and
employees of Corporation to the maximum extent authorized by Section 145 of the
Delaware General Corporation Law, as amended (the "Law"); and
C. The Bylaws and the Law, by their non-exclusive nature, permit
contracts between Corporation and the members of its Board of Directors with
respect to indemnification of such directors; and
D. In accordance with the authorization as provided by the Law,
Corporation may from time to time purchase and maintain a policy or policies of
Directors and Officers Liability Insurance ("D & O Insurance"), covering certain
liabilities which may be incurred by its directors and officers in the
performance of services as directors and officers of Corporation; and
E. As a result of developments affecting the terms, scope and
availability of D & O Insurance there exists general uncertainty as to the
extent and overall desirability of protection afforded members of the Board of
Directors by such D & O Insurance, if any, and by statutory and bylaw
indemnification provisions; and
F. In order to induce Director to continue to serve as a member of the
Board of Directors of Corporation, Corporation has determined and agreed to
enter into this contract with Director;
NOW, THEREFORE, in consideration of Director's continued service as a
director after the date hereof, the parties hereto agree as follows:
1. INDEMNITY OF DIRECTOR. Corporation hereby agrees to hold harmless and
indemnify Director to the fullest extent authorized or permitted by the
provisions of the Law, as may be amended from time to time.
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<PAGE>
2. ADDITIONAL INDEMNITY. Subject only to the exclusions set forth in
Section 3 hereof, Corporation hereby further agrees to hold harmless and
indemnify Director:
(a) against any and all expenses (including attorneys' fees), witness
fees, judgments, fines and amounts paid in settlement actually and reasonably
incurred by Director in connection with any threatened, pending or completed
action, suit or proceeding, whether civil, criminal, administrative or
investigative (including an action by or in the right of Corporation) to which
Director is, was or at any time becomes a party, or is threatened to be made a
party, by reason of the fact that Director is, was or at any time becomes a
director, officer, employee or agent of Corporation, or is or was serving or at
any time serves at the request of Corporation as a director, officer, employee
or agent of another corporation, partnership, joint venture, trust, employee
benefit plan or other enterprise; and
(b) otherwise to the fullest extent as may be provided to Director by
Corporation under the non-exclusivity provisions of the Bylaws of Corporation
and the Law.
3. LIMITATIONS ON ADDITIONAL INDEMNITY. No indemnity pursuant to Section
2 hereof shall be paid by Corporation:
(a) except to the extent the aggregate of losses to be indemnified
thereunder exceeds the sum of such losses for which the Director is indemnified
pursuant to Section 1 hereof or pursuant to any D & O Insurance purchased and
maintained by Corporation;
(b) in respect of remuneration paid to Director if it shall be
determined by a final judgment or other final adjudication that such
remuneration was in violation of law;
(c) on account of any action, suit or proceeding in which judgment is
rendered against Director for an accounting of profits made from the purchase or
sale by Director of securities of Corporation pursuant to the provisions of
Section 16(b) of the Securities Exchange Act of 1934 and amendments thereto or
similar provisions of any federal, state or local statutory law;
(d) on account of Director's conduct which is finally adjudged to
have been knowingly fraudulent or deliberately dishonest, or to constitute
willful misconduct;
(e) on account of Director's conduct which is the subject of an
action, suit or proceeding described in Section 7(c)(ii) hereof;
(f) on account of or arising in response to any action, suit or
proceeding (other than an action, suit or proceeding referred to in Section 8(b)
hereof) initiated by Director or any of Director's affiliates against
Corporation or any officer, director or stockholder of Corporation unless such
action, suit or proceeding was authorized in the specific case by action of the
Board of Directors of Corporation;
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<PAGE>
(g) on account of any action, suit or proceeding to the extent that
Director is a plaintiff, a counter-complainant or a cross-complainant therein
(other than an action, suit or proceeding permitted by Section 3(f) hereof); or
(h) if a final decision by a Court having jurisdiction in the matter
shall determine that such indemnification is not lawful (and, in this respect,
both Corporation and Director have been advised that the Securities and Exchange
Commission believes that indemnification for liabilities arising under the
federal securities laws is against public policy and is, therefore,
unenforceable and that claims for indemnification should be submitted to
appropriate courts for adjudication).
4. CONTRIBUTION. If the indemnification provided in Sections 1 and 2 is
unavailable and may not be paid to Director for any reason other than those set
forth in paragraphs (b) through (g) of Section 3, then in respect of any
threatened, pending or completed action, suit or proceeding in which Corporation
is or is alleged to be jointly liable with Director (or would be if joined in
such action, suit or proceeding), Corporation shall contribute to the amount of
expenses (including attorneys' fees), judgments, fines and amounts paid in
settlement actually and reasonably incurred and paid or payable by Director in
such proportion as is appropriate to reflect (i) the relative benefits received
by Corporation on the one hand and Director on the other hand from the
transaction from which such action, suit or proceeding arose, and (ii) the
relative fault of Corporation on the one hand and of Director on the other hand
in connection with the events which resulted in such expenses, judgments, fines
or settlement amounts, as well as any other relevant equitable considerations.
The relative fault of Corporation on the one hand and of Director on the other
shall be determined by reference to, among other things, the parties' relative
intent, knowledge, access to information and opportunity to correct or prevent
the circumstances resulting in such expenses, judgments, fines or settlement
amounts. Corporation agrees that it would not be just and equitable if
contribution pursuant to this Section 4 were determined by pro rata allocation
or any other method of allocation which does not take account of the foregoing
equitable considerations.
5. CONTINUATION OF OBLIGATIONS. All agreements and obligations of
Corporation contained herein shall continue during the period Director is a
director, officer, employee or agent of Corporation (or is or was serving at the
request of Corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust, employee benefit plan or other
enterprise) and shall continue thereafter so long as Director shall be subject
to any possible claim or threatened, pending or completed action, suit or
proceeding, whether civil, criminal or investigative, by reason of the fact that
Director was serving Corporation or such other entity in any capacity referred
to herein.
6. NOTIFICATION AND DEFENSE OF CLAIM. Not later than thirty (30) days
after receipt by Director of notice of the commencement of any action, suit or
proceeding, Director will, if a claim in respect thereof is to be made against
Corporation under this Agreement, notify Corporation of the commencement
thereof; but the omission so to notify Corporation will not
-15-
<PAGE>
relieve it from any liability which it may have to Director otherwise than under
this Agreement. With respect to any such action, suit or proceeding as to which
Director notifies Corporation of the commencement thereof:
(a) Corporation will be entitled to participate therein at its own
expense;
(b) except as otherwise provided below, to the extent that it may
wish, Corporation jointly with any other indemnifying party similarly notified
will be entitled to assume the defense thereof, with counsel reasonably
satisfactory to Director. After notice from Corporation to Director of its
election so as to assume the defense thereof, Corporation will not be liable to
Director under this Agreement for any legal or other expenses subsequently
incurred by Director in connection with the defense thereof other than
reasonable costs of investigation or as otherwise provided below. Director
shall have the right to employ his own counsel in such action, suit or
proceeding but the fees and expenses of such counsel incurred after notice from
Corporation of its assumption of the defense thereof shall be at the expense of
Director unless (i) the employment of counsel by Director has been authorized by
Corporation, (ii) Director shall have reasonably concluded that there may be a
conflict of interest between Corporation and Director in the conduct of the
defense of such action or (iii) Corporation shall not in fact have employed
counsel to assume the defense of such action, in each of which cases the fees
and expenses of Director's separate counsel shall be at the expense of
Corporation. Corporation shall not be entitled to assume the defense of any
action, suit or proceeding brought by or on behalf of Corporation or as to which
Director shall have made the conclusion provided for in (ii) above; and
(c) Corporation shall not be liable to indemnify Director under this
Agreement for any amounts paid in settlement of any action or claim effected
without its written consent. Corporation shall be permitted to settle any
action except that it shall not settle any action or claim in any manner which
would impose any penalty, out-of-pocket liability, or limitation on Director
without Director's written consent. Neither Corporation nor Director will
unreasonably withhold its or his consent to any proposed settlement.
7. ADVANCEMENT AND REPAYMENT OF EXPENSES.
(a) In the event that Director employs his own counsel pursuant to
Section 6(b)(i) through (iii) above, Corporation shall advance to Director,
prior to any final disposition of any threatened or pending action, suit or
proceeding, whether civil, criminal, administrative or investigative, any and
all reasonable expenses (including legal fees and expenses) incurred in
investigating or defending any such action, suit or proceeding within ten (10)
days after receiving copies of invoices presented to Director for such expenses.
(b) Director agrees that Director will reimburse Corporation for all
reasonable expenses paid by Corporation in defending any civil or criminal
action, suit or proceeding against Director in the event and only to the extent
it shall be ultimately determined by a final judicial decision (from which there
is no right of appeal) that Director is not
-16-
<PAGE>
entitled, under the provisions of the Law, the Bylaws, this Agreement or
otherwise, to be indemnified by Corporation for such expenses.
(c) Notwithstanding the foregoing, Corporation shall not be required
to advance such expenses to Director if Director (i) commences any action, suit
or proceeding as a plaintiff unless such advance is specifically approved by a
majority of the Board of Directors or (ii) is a party to an action, suit or
proceeding brought by Corporation and approved by a majority of the Board which
alleges willful misappropriation of corporate assets by Director, disclosure of
confidential information in violation of Director's fiduciary or contractual
obligations to Corporation, or any other willful and deliberate breach in bad
faith of Director's duty to Corporation or its shareholders.
8. ENFORCEMENT.
(a) Corporation expressly confirms and agrees that it has entered
into this Agreement and assumed the obligations imposed on Corporation hereby in
order to induce Director to continue as a director of Corporation, and
acknowledges that Director is relying upon this Agreement in continuing in such
capacity.
(b) In the event Director is required to bring any action to enforce
rights or to collect moneys due under this Agreement and is successful in such
action, the Corporation shall reimburse Director for all Director's reasonable
fees and expenses in bringing and pursuing such action.
9. SUBROGATION. In the event of payment under this agreement,
Corporation shall be subrogated to the extent of such payment to all of the
rights of recovery of Director, who shall execute all documents required and
shall do all acts that may be necessary to secure such rights and to enable
Corporation effectively to bring suit to enforce such rights.
10. NON-EXCLUSIVITY OF RIGHTS. The rights conferred on Director by this
Agreement shall not be exclusive of any other right which Director may have or
hereafter acquire under any statute, provision of Corporation's Certificate of
Incorporation or Bylaws, agreement, vote of stockholders or directors, or
otherwise, both as to action in his official capacity and as to action in
another capacity while holding office.
11. SURVIVAL OF RIGHTS. The rights conferred on Director by this
Agreement shall continue after Director has ceased to be a director, officer,
employee or other agent of Corporation or such other entity and shall inure to
the benefit of Director's heirs, executors and administrators.
12. SEPARABILITY. Each of the provisions of this Agreement is a separate
and distinct agreement and independent of the others, so that if any or all of
the provisions hereof shall be held to be invalid or unenforceable to any extent
for any reason, such invalidity or unenforceability shall not affect the
validity or enforceability of the other provisions hereof or
-17-
<PAGE>
the obligation of the Corporation to indemnify the Director to the full extent
provided by the Bylaws or the Law, and the affected provision shall be construed
and enforced so as to effectuate the parties' intent to the maximum extent
possible.
13. GOVERNING LAW. This Agreement shall be interpreted and enforced in
accordance with the internal laws of the State of Delaware.
14. BINDING EFFECT. This Agreement shall be binding upon Director and
upon Corporation, its successors and assigns, and shall inure to the benefit of
Director, his heirs, personal representatives and assigns and to the benefit of
Corporation, its successors and assigns.
15. AMENDMENT AND TERMINATION. No amendment, modification, termination or
cancellation of this Agreement shall be effective unless set forth in a writing
signed by both parties hereto.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on and
as of the day and year first above written.
DIRECTOR: IVAC HOLDINGS, INC.
By:
- ------------------------- ------------------------------------
(Signature)
- ------------------------- ----------------------------------------
Print Name Print Name and Title
-18-
<PAGE>
INDEMNIFICATION AGREEMENT
THIS AGREEMENT is made and entered into this 1st day of May, 1996 between
IVAC HOLDINGS, INC., a Delaware corporation ("Corporation"), and
____________________ ("Officer").
RECITALS:
G. Officer, an officer (but not currently a member of the Board of
Directors) of Corporation, performs a valuable service in such capacity for
Corporation; and
H. The stockholders of Corporation have adopted Bylaws (the "Bylaws")
providing, for the indemnification of the officers, directors, agents and
employees of Corporation to the maximum extent authorized by Section 145 of the
Delaware General Corporation Law, as amended (the "Law"); and
I. The Bylaws and the Law, by their non-exclusive nature, permit
contracts between Corporation and its officers with respect to indemnification
of officers; and
J. In accordance with the authorization as provided by the Law,
Corporation may from time to time purchase and maintain a policy or policies of
Directors and Officers Liability Insurance ("D & O Insurance"), covering certain
liabilities which may be incurred by its directors and officers in the
performance of services as directors and officers of Corporation; and
K. As a result of developments affecting the terms, scope and
availability of D & O Insurance there exists general uncertainty as to the
extent and overall desirability of protection afforded officers by such D & O
Insurance, if any, and by statutory and bylaw indemnification provisions; and
L. In order to induce Officer to continue to serve as an officer of
Corporation, Corporation has determined and agreed to enter into this contract
with Officer;
NOW, THEREFORE, in consideration of Officer's continued service as an
officer after the date hereof, the parties hereto agree as follows:
16. INDEMNITY OF OFFICER. Corporation hereby agrees to hold harmless and
indemnify Officer to the fullest extent authorized or permitted by the
provisions of the Law, as it may be amended from time to time.
17. ADDITIONAL INDEMNITY. Subject only to the exclusions set forth in
Section 3 hereof, Corporation hereby further agrees to hold harmless and
indemnify Officer:
-19-
<PAGE>
(a) against any and all legal expenses (including attorneys' fees),
witness fees, judgments, fines and amounts paid in settlement actually and
reasonably incurred by Officer in connection with any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative (including an action by or in the right of Corporation) to which
Officer is, was or at any time becomes a party, or is threatened to be made a
party, by reason of the fact that Officer is, was or at any time becomes a
director, officer, employee or agent of Corporation, or is or was serving or at
any time serves at the request of Corporation as a director, officer, employee
or agent of another corporation, partnership, joint venture, trust, employee
benefit plan or other enterprise; and
(b) otherwise to the fullest extent as may be provided to Officer by
Corporation under the non-exclusivity provisions of the Bylaws of Corporation
and the Law.
18. LIMITATIONS ON ADDITIONAL INDEMNITY. No indemnity pursuant to Section
2 hereof shall be paid by Corporation:
(a) except to the extent the aggregate of losses to be indemnified
thereunder exceeds the sum of such losses for which Officer is indemnified
pursuant to Section 1 hereof or pursuant to any D & O Insurance purchased and
maintained by Corporation;
(b) in respect of remuneration paid to Officer if it shall be
determined by a final judgment or other final adjudication that such
remuneration was in violation of law;
(c) on account of any action, suit or proceeding in which judgment is
rendered against Officer for an accounting of profits made from the purchase or
sale by Officer of securities of Corporation pursuant to the provisions of
Section 16(b) of the Securities Exchange Act of 1934 and amendments thereto or
similar provisions of any federal, state or local statutory law;
(d) on account of Officer's conduct which is finally adjudged to have
been knowingly fraudulent or deliberately dishonest, or to constitute willful
misconduct;
(e) on account of Officer's conduct which is the subject of an
action, suit or proceeding described in Section 7(c)(ii) hereof;
(f) on account of or arising in response to any action, suit or
proceeding (other than an action, suit or proceeding referred to in Section 8(b)
hereof) initiated by Officer or any of Officer's affiliates against Corporation
or any officer, director or stockholder of Corporation unless such action, suit
or proceeding was authorized in the specific case by action of the Board of
Directors of Corporation;
-20-
<PAGE>
(g) on account of any action, suit or proceeding to the extent that
Officer is a plaintiff, a counter-complainant or a cross-complainant therein
(other than an action, suit or proceeding permitted by Section 3(f) hereof); or
(h) if a final decision by a Court having jurisdiction in the matter
shall determine that such indemnification is not lawful (and, in this respect,
both Corporation and Officer have been advised that the Securities and Exchange
Commission believes that indemnification for liabilities arising under the
federal securities laws is against public policy and is, therefore,
unenforceable and that claims for indemnification should be submitted to
appropriate courts for adjudication).
19. CONTRIBUTION. If the indemnification provided in Sections 1 and 2 is
unavailable and may not be paid to Officer for any reason other than those set
forth in paragraphs (b) through (g) of Section 3, then in respect of any
threatened, pending or completed action, suit or proceeding in which Corporation
is or is alleged to be jointly liable with Officer (or would be if joined in
such action, suit or proceeding), Corporation shall contribute to the amount of
expenses (including attorneys' fees), judgments, fines and amounts paid in
settlement actually and reasonably incurred and paid or payable by Officer in
such proportion as is appropriate to reflect (i) the relative benefits received
by Corporation on the one hand and Officer on the other hand from the
transaction from which such action, suit or proceeding arose, and (ii) the
relative fault of Corporation on the one hand and of Officer on the other hand
in connection with the events which resulted in such expenses, judgments, fines
or settlement amounts, as well as any other relevant equitable considerations.
The relative fault of Corporation on the one hand and of Officer on the other
hand shall be determined by reference to, among other things, the parties'
relative intent, knowledge, access to information and opportunity to correct or
prevent the circumstances resulting in such expenses, judgments, fines or
settlement amounts. Corporation agrees that it would not be just and equitable
if contribution pursuant to this Section 4 were determined by pro rata
allocation or any other method of allocation which does not take account of the
foregoing equitable considerations.
20. CONTINUATION OF OBLIGATIONS. All agreements and obligations of
Corporation contained herein shall continue during the period Officer is a
director, officer, employee or agent of Corporation (or is or was serving at the
request of Corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust, employee benefit plan or other
enterprise) and shall continue thereafter so long as Officer shall be subject to
any possible claim or threatened, pending or completed action, suit or
proceeding, whether civil, criminal or investigative, by reason of the fact that
Officer was serving Corporation or such other entity in any capacity referred to
herein.
21. NOTIFICATION AND DEFENSE OF CLAIM. Not later than thirty (30) days
after receipt by Officer of notice of the commencement of any action, suit or
proceeding, Officer will, if a claim in respect thereof is to be made against
Corporation under this Agreement, notify Corporation of the commencement
thereof; but the omission so to notify Corporation will not relieve it from any
liability which it may have to Officer otherwise than under this Agreement.
-21-
<PAGE>
With respect to any such action, suit or proceeding as to which Officer
notifies Corporation of the commencement thereof:
(a) Corporation will be entitled to participate therein at its own
expense;
(b) except as otherwise provided below, to the extent that it may
wish, Corporation jointly with any other indemnifying party similarly notified
will be entitled to assume the defense thereof, with counsel reasonably
satisfactory to Officer. After notice from Corporation to Officer of its
election so as to assume the defense thereof, Corporation will not be liable to
Officer under this Agreement for any legal or other expenses subsequently
incurred by Officer in connection with the defense thereof other than reasonable
costs of investigation or as otherwise provided below. Officer shall have the
right to employ his or her own counsel in such action, suit or proceeding but
the fees and expenses of such counsel incurred after notice from Corporation of
its assumption of the defense thereof shall be at the expense of Officer unless
(i) the employment of counsel by Officer has been authorized by Corporation,
(ii) Officer shall have reasonably concluded that there may be a conflict of
interest between Corporation and Officer in the conduct of the defense of such
action or (iii) Corporation shall not in fact have employed counsel to assume
the defense of such action, in each of which cases the fees and expenses of
Officer's separate counsel shall be at the expense of Corporation. Corporation
shall not be entitled to assume the defense of any action, suit or proceeding
brought by or on behalf of Corporation or as to which Officer shall have made
the conclusion provided for in (ii) above; and
(c) Corporation shall not be liable to indemnify Officer under this
Agreement for any amounts paid in settlement of any action or claim effected
without its written consent. Corporation shall be permitted to settle any
action except that it shall not settle any action or claim in any manner which
would impose any penalty, out-of-pocket liability, or limitation on Officer
without Officer's written consent. Neither Corporation nor Officer will
unreasonably withhold its or his or her consent to any proposed settlement.
22. ADVANCEMENT AND REPAYMENT OF EXPENSES.
(a) In the event that Officer employs his or her own counsel pursuant
to Section 6(b)(i) through (iii) above, Corporation shall advance to Officer,
prior to any final disposition of any threatened or pending action, suit or
proceeding, whether civil, criminal, administrative or investigative, any and
all reasonable expenses (including legal fees and expenses) incurred in
investigating or defending any such action, suit or proceeding within ten (10)
days after receiving copies of invoices presented to Officer for such expenses.
(b) Officer agrees that Officer will reimburse Corporation for all
reasonable expenses paid by Corporation in defending any civil or criminal
action, suit or proceeding against Officer in the event and only to the extent
it shall be ultimately determined by a final judicial decision (from which there
is no right of appeal) that Officer is not entitled, under the
-22-
<PAGE>
provisions of the Law, the Bylaws, this Agreement or otherwise, to be
indemnified by Corporation for such expenses.
(c) Notwithstanding the foregoing, Corporation shall not be required
to advance such expenses to Officer if Officer (i) commences any action, suit or
proceeding as a plaintiff unless such advance is specifically approved by a
majority of the Board of Directors or (ii) is a party to an action, suit or
proceeding brought by Corporation and approved by a majority of the Board which
alleges willful misappropriation of corporate assets by Officer, disclosure of
confidential information in violation of Officer's fiduciary or contractual
obligations to Corporation, or any other willful and deliberate breach in bad
faith of Officer's duty to Corporation or its shareholders.
23. ENFORCEMENT.
(a) Corporation expressly confirms and agrees that it has entered
into this Agreement and assumed the obligations imposed on Corporation hereby in
order to induce Officer to continue as an officer of Corporation, and
acknowledges that Officer is relying upon this Agreement in continuing in such
capacity.
(b) In the event Officer is required to bring any action to enforce
rights or to collect moneys due under this Agreement and is successful in such
action, Corporation shall reimburse Officer for all of Officer's reasonable fees
and expenses in bringing and pursuing such action.
24. SUBROGATION. In the event of payment under this agreement,
Corporation shall be subrogated to the extent of such payment to all of the
rights of recovery of Officer, who shall execute all documents required and
shall do all acts that may be necessary to secure such rights and to enable
Corporation effectively to bring suit to enforce such rights.
25. NON-EXCLUSIVITY OF RIGHTS. The rights conferred on Officer by this
Agreement shall not be exclusive of any other right which Officer may have or
hereafter acquire under any statute, provision of Corporation's Certificate of
Incorporation or Bylaws, agreement, vote of stockholders or directors, or
otherwise, both as to action in his official capacity and as to action in
another capacity while holding office.
26. SURVIVAL OF RIGHTS. The rights conferred on Officer by this Agreement
shall continue after Officer has ceased to be a director, officer, employee or
other agent of Corporation or such other entity and shall inure to the benefit
of Officer's heirs, executors and administrators.
27. SEPARABILITY. Each of the provisions of this Agreement is a separate
and distinct agreement and independent of the others, so that if any or all of
the provisions hereof shall be held to be invalid or unenforceable to any extent
for any reason, such invalidity or unenforceability shall not affect the
validity or enforceability of the other provisions hereof or
-23-
<PAGE>
the obligation of Corporation to indemnify Officer to the full extent provided
by the Bylaws or the Law, and the affected provision shall be construed and
enforced so as to effectuate the parties' intent to the maximum extent possible.
28. GOVERNING LAW. This Agreement shall be interpreted and enforced in
accordance with the internal laws of the State of Delaware.
29. BINDING EFFECT. This Agreement shall be binding upon Officer and upon
Corporation, its successors and assigns, and shall inure to the benefit of
Officer, his or her heirs, personal representatives and assigns and to the
benefit of Corporation, its successors and assigns.
30. AMENDMENT AND TERMINATION. No amendment, modification, termination or
cancellation of this Agreement shall be effective unless set forth in a writing
signed by both parties hereto.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on and
as of the day and year first above written.
OFFICER: IVAC HOLDINGS, INC.
By:
- ------------------------- ------------------------------------
(Signature)
- ------------------------- ----------------------------------------
Print Name Print Name and Title
[SIGNATURE PAGE TO INDEMNIFICATION AGREEMENT]
-24-
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<PAGE>
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<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> JUN-30-1996
<CASH> 7,657
<SECURITIES> 0
<RECEIVABLES> 53,781
<ALLOWANCES> (4,749)
<INVENTORY> 38,456
<CURRENT-ASSETS> 102,923
<PP&E> 64,461
<DEPRECIATION> (18,530)
<TOTAL-ASSETS> 190,299
<CURRENT-LIABILITIES> 84,344
<BONDS> 105,562
0
0
<COMMON> 0
<OTHER-SE> (850)
<TOTAL-LIABILITY-AND-EQUITY> 190,299
<SALES> 112,762
<TOTAL-REVENUES> 112,762
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