<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
/X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED JUNE 30, 1996
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
COMMISSION FILE NUMBER 0-9042
MEDEX, INC.
(Exact name of registrant as specified in its charter)
OHIO 31-4441680
(State of Incorporation) (I.R.S. Employer Identification No.)
3637 LACON ROAD, HILLIARD, OHIO 43026
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (614) 876-2413
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, Par Value $.01 per share
(Title of class)
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. X
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, and (2) has been subject to such filing requirements
for the past 90 days. Yes X No
As of September 23, 1996, 6,209,922 common shares were outstanding. The
aggregate market value of such common shares held by non-affiliates of the
Registrant (based upon actual last transaction price as reported by the NASDAQ
National Market System) was $82,415,361.
1
<PAGE> 2
DOCUMENTS INCORPORATED BY REFERENCE
(1) Portions of the 1996 Annual Report to Shareholders are incorporated by
reference in Parts II and IV of this Annual Report. The 1996 Annual Report
to Shareholders shall be deemed to have been "filed" only to the extent
portions thereof are expressly incorporated by reference.
(2) Portions of the Proxy Statement of Registrant for the Annual Meeting of
Shareholders to be held on November 13, 1996, are incorporated in Part III.
2
<PAGE> 3
PART I
ITEM 1. BUSINESS
GENERAL
Medex, Inc. and its subsidiaries, (the Company), designs, manufactures,
assembles, and markets a broad range of health care products for the diagnosis
and treatment of patients receiving care in hospitals, alternative health care
facilities and the home health care environment. The Company operates in one
principal industry segment providing critical care accessories and infusion
systems for medical and surgical applications.
Medex, Inc. was formed as an Ohio corporation in 1959 under the name W & J,
Inc., and adopted its present name in 1961. Medex, Inc. and its subsidiaries
carry on the Company's business in the United States and throughout the world.
The Company's domestic operations are located in the Columbus, Ohio and Atlanta,
Georgia metropolitan areas. During fiscal 1995 the Company closed its Denver,
Colorado facility and integrated its functions and product lines into its
Columbus and Atlanta operations. Medex Medical, Inc., carries on the Company's
manufacturing, sales and distribution business in the United Kingdom and certain
other European countries. Ashfield Medical Systems Limited, acquired in fiscal
1995, and also located in the United Kingdom, manufactures surgical drapes for
the European market. Medex Medical, GmbH, a German corporation, carries on sales
and distribution operations in Germany and other parts of continental Europe.
Medex Medical France, SARL, is a French subsidiary which carries on sales and
distribution operations in France and certain other European countries. In
addition, the Company maintains a Foreign Sales Corporation, Medex Exports,
Inc., situated in the United States Virgin Islands.
In July of 1996, the Company divested its WalkMed(R) ambulatory product line of
infusion pumps, related disposables and associated assets (see Note 9 of "Notes
to Consolidated Financial Statements"). Pursuant to separate Manufacturing and
Distribution Agreements, the Company will continue to manufacture the WalkMed
line for up to three years and will continue to distribute WalkMed Products
outside of North America for up to three years.
3
<PAGE> 4
PRODUCTS
The Company's products are used to diagnose and treat patients in all age
groups. Treatment areas for these procedures include intensive care units,
operating rooms, anesthesia suites, post-anesthesia recovery rooms, outpatient
surgical centers, cardiac catheterization laboratories, labor and delivery
facilities and emergency rooms. Home infusion therapy products are also utilized
in hospital outpatient care facilities, oncology clinics, pain management
clinics and in the home where patients are managed by professional home health
care agencies.
The Company's products are categorized into two classes of similar products:
critical care accessories and infusion systems.
The Company's critical care accessories product line offers a wide range of
precision products utilized in intravenous therapies such as fluid and drug
administration. Other products include blood pressure transducers used by
clinicians monitoring the cardiovascular system, specialty devices used in
cardiac catheterization procedures, intrauterine monitoring products used during
high risk labor and delivery situations and surgical drapes. Many of these
products can be used alone or as components assembled into kits. By offering
standard and custom configurations, the Company's critical care products can
address the specific needs of a customer.
The Company's infusion systems include a broad line of infusion pumps designed
to deliver prescribed doses of drugs and fluids to patients. These include
syringe pumps and large volume infusion pumps for bedside administration. A full
range of disposable product sets, providing the interface between pump and
patient, complete the system.
Included below is a representative sample of the products included in each of
these categories:
CRITICAL CARE ACCESSORIES
Stopcocks
- ---------
Stopcocks are specialized valves used as a component in the administration of
parenteral fluids or blood and provide a convenient means to administer drugs or
liquid anesthetics in conjunction with such fluids. Stopcocks provide multiple
flow paths for the selection and direction of fluids, drugs and anesthetics
depending upon the particular procedural requirements and the preference of the
user. The Company has been manufacturing stopcocks of various types since 1961,
and these items are sold both separately and as components in the Company's
assembled products. The Company manufactures one-way, three-way and four-way
stopcocks, which it markets under the name Guide-Flo(R). In addition to fluid
and drug administration, the growth of invasive pressure monitoring and cardiac
catheterization diagnostic procedures have resulted in a significant increase in
demand for stopcocks of various configurations and performance characteristics.
The Company manufactures a line (ULTRA) of stopcocks and other related
components which
4
<PAGE> 5
are composed of chemically resistant plastic materials to minimize cracking and
reactions with potent agents used in certain therapies.
Administration (Extension) Sets
- -------------------------------
An administration set is the apparatus by which fluid is delivered from a
container or a pump to the patient. In delivery from a container, these sets
consist of an entry spike, drip chamber, a length of tubing with a flow control
device and a catheter adapter. The entry spike is used to enter the fluid bottle
or bag, and the drip chamber, which is made of a clear plastic, provides a
reservoir of fluid. Fluid flows into the system one drop at a time, which can be
seen and counted, permitting calculation of the volume of fluid being
administered. This flow rate can be manually adjusted by external clamps when
gravity is used to create fluid flow.
Disposable administration sets are manufactured in standard and customized
configurations and may incorporate numerous additional components such as
stopcocks, continuous flush devices, or injection sites for intravenous drug
administration. The administration sets are designed to ensure clinical
flexibility, volumetric accuracy and sterility. The Company markets the
Micribore Extension Set which is used in neonatal applications requiring small
volumes of fluid to produce optimal flow to patients of fluids.
NU-SITE(R)
- ----------
NU-SITE introduced in fiscal 1995, is a needle-less injection system designed to
help prevent needlestick injuries to healthcare providers, and thereby reduce
associated risks of infectious disease. NU-SITE is adaptable to a large variety
of administration sets and accessories and is resistant to long-term exposure to
lipids and certain other plastic-interactive fluids.
Transtar(TM)
- ------------
The Transtar disposable pressure transducer is a device that senses hydraulic
pressure and converts it to an electrical signal that is transmitted to a
patient monitor. The monitor then processes and graphically displays this data.
NOVATRANS II(R)
- ---------------
NOVATRANS II is a reusable pressure transducer that delivers the cost efficiency
of a reusable unit while providing electrical safety and accuracy.
SimulCath(TM) and IUP Kits
- --------------------------
SimulCath is an intrauterine pressure monitoring system that accommodates the
implementation of amnioinfusion, a procedure designed to increase the efficiency
of labor as well as provide direct support to a fetus exhibiting signs of
distress. In this procedure, sterile saline is infused into the uterus to
directly relieve fetal distress by providing hydraulic support of the umbilical
cord and to increase the effect of labor contractions until
5
<PAGE> 6
delivery is accomplished. In addition, the Company manufactures and markets
intrauterine pressure monitoring kits. These completely preassembled kits are
designed to monitor the intensity of contractions during child birth and are
used in conjunction with SimulCath.
Secure(TM) Systems
- ------------------
The Secure System is a closed system arterial pressure monitoring kit whereby
blood samples can be withdrawn through a special access port that mitigates the
risk of accidental line contamination and patient infection. Another feature of
the Secure System is the shrouded needle which is mounted on a hypodermic
syringe, thereby reducing the clinician's risk of accidental needlestick injury.
The shrouded needle and syringe are used to access the arterial line for the
aseptic sampling of blood. The system design also allows the reinfusing of
blood/saline mixture to preserve the red blood cell mass of a critically ill
patient.
Kids Kit
- --------
Kids Kit is a low volume pediatric version of the Secure pressure monitoring
system for adults. The Kids Kit provides a closed system which minimizes
contamination and infant blood loss as well as helping to prevent accidental
needlestick injuries to clinicians.
Continuous Flush Devices
- ------------------------
The continuous flush device is a component used in invasive cardiovascular
pressure monitoring systems. This device allows a small amount of saline
(typically 3-6 cc(s) per hour) to be infused through the catheter in order to
reduce the tendency of blood to clot in the catheter, which could distort or
eliminate the ability of the system to monitor pressure. The continuous flush
device also incorporates a valve that, when activated, will allow a large volume
of fluid to enter the system for purposes such as priming the initial set up or
for clearing the system of accumulated blood. The continuous flush devices
manufactured by the Company are used primarily as components in standard and
custom pressure monitoring kits assembled and marketed by the Company.
Pressure Infusor Cuffs
- ----------------------
Pressure infusor cuffs are designed to be placed around bags of fluid and
manually inflated with air to create and maintain a specific fluid pressure.
This pressure, in conjunction with the action of the continuous flush device,
permits controlled flow rates and fast flushing of the invasive pressure
monitoring systems. In addition, pressure infusor cuffs are used for rapid
infusion of blood and other fluids. The Company manufactures and markets two
infusor cuffs, C-Fusor(R) and Clear Cuff(R).
C-Fusor is made of clear polyurethane, which permits immediate assessment of the
fluid level in the bag from any angle. This materials stain resistance and
durability extends the useful life of the product. The closure system
6
<PAGE> 7
used in the C-Fusor provides secure closure and significantly simplifies fluid
bag setup and replacement.
The Clear Cuff pressure infusor complements the Company's C-Fusor reusable
pressure infusor. The Clear Cuff offers the flexibility of being disposable or
reusable as dictated by clinical considerations.
Angiography and Coronary Angioplasty Products
- ---------------------------------------------
Angiography is a diagnostic procedure used to evaluate the condition of major
blood vessels within a patients vascular system. Coronary angioplasty is a
therapeutic procedure that involves the utilization of a balloon catheter to
expand the inner diameter of a patients coronary arteries to improve blood flow.
The Company manufactures and markets a series of Hemostatic Y Connectors used to
facilitate the placement of specialty catheters for angiographic and angioplasty
procedures in the cardiac catheterization laboratory. In addition, the Company
markets the Matrix 250(TM) and the Matrix 550(TM) series of one-piece, hand-held
manifolds, the Encore II(TM) control syringe, high pressure injection tubing and
high pressure rotators which are used during angiography and angioplasty
procedures. During fiscal 1995 and fiscal 1996, the Company introduced Medflator
II to the European and United States markets respectively. This product, a new
analog version of the original digital product, is an inflation device used to
inflate balloon catheters during therapeutic or interventional procedures such
as angioplasty.
Kits and Procedure Packs
- ------------------------
The Company assembles many of the disposable products described above into
integrated systems (kits). These kits are available in standard configurations
or they may be custom designed to meet the specific requirements of an
individual customer. Standard and custom kits may include one or more of the
following products: intravenous administration sets; stopcocks; pressure tubing;
continuous flush devices; surgical drapes; and other products.
In Europe, the Company purchases various components from other manufacturers and
packages them with the Company's products to produce kits specifically for
sophisticated hospital procedures. Procedure packing lowers costs, increases
hospital throughput, and saves labor by eliminating the need for healthcare
providers to purchase parts individually and assemble them on site. Procedure
packing is a growing market in Europe and the Company has expanded its United
Kingdom facilities to access this growing market.
INFUSION SYSTEMS
Medfusion 2001 Syringe Pump
- ---------------------------
The Company's leading pump product is the Medfusion Model 2001 syringe pump.
This product is capable of accepting all conventional hypodermic syringes
7
<PAGE> 8
which range from 1 through 60 cc in volume. This capability makes the pump very
useful for the intravenous and regional infusion of anesthetic agents in the
operating room as well as in neonatal intensive care units where low volume drug
infusions are required for premature infants.
Additionally, a syringe offers the lowest cost intravenous fluid container
available to the hospital pharmacist. The added labor costs of the pharmacist
prefilling a syringe with the exact amount of drug required by the patient,
labeling the syringe, and delivering it to the patients bedside for loading into
the syringe pump is offset by the overall cost savings of syringe pump use.
The 2001 syringe pump is microprocessor based and capable of automatically
recognizing the size and manufacturer of the syringe attached to it. The pumps
occlusion alarm is automatically varied in accordance with the syringe size in
use. If the drug infusion line or catheter becomes kinked or obstructed, the
pump is designed to automatically switch off and sound an alarm. The operational
programming of the pump is software prompted and easily taught to clinical
personnel.
Medfusion 2010 and 2010i Syringe Pumps
- --------------------------------------
The Medfusion Models 2010 and 2010i syringe pumps are designed specifically for
use by anesthesiologists in the operating room. These syringe pumps build upon
the electromechanical success of the 2001 syringe pump through utilization of
expandable system architecture.
Anesthesiologists frequently administer drugs according to mass units (i.e., the
number of milligrams or micrograms of drug per kilogram of patient body weight
per unit of time required for the anesthetic.) The 2010 syringe pump is capable
of making drug concentration calculations in mass units as well as tracking the
total mass units of drugs infused over a period of time.
Additionally, anesthesiologists frequently manually infuse preselected volumes
of drugs intravenously into patients over short intervals ("bolus infusions") to
achieve rapid sequential effects. The 2010 syringe pump is capable of
automatically delivering programmed boluses of drugs to patients over a
specified time interval and then reverting to a continuous infusion mode for the
duration of the procedure.
The 2010i syringe pump is an enhanced version of the 2010 syringe pump. The
2010i syringe pump stores hospital managed drug protocols in an on board
computer library, thereby greatly extending the utility and ease of use of the
2010 version anesthesia syringe pump.
EZ-1(TM)
- --------
The EZ-1 is a large volume infusion pump used for administrating large fluid
volumes ranging from 0.1 ml per hour to 999.9 ml per hour. The EZ-1 pump uses a
specially calibrated pumping cassette as part of the disposable infusion
8
<PAGE> 9
set. The EZ-1, unlike syringe pumps, utilizes a broad range of dedicated
disposable infusion sets for different protocols.
KIDS(TM) Pump
- -------------
The Company's KIDS Pump was designed specifically for the neonatal and pediatric
markets and can be used for the administration of large, as well as small, fluid
volumes. The KIDS Pump, in tandem with the 2001 syringe pump, is capable of
delivering most neonatal pediatric fluid and drug administration protocols.
The KIDS Pump, like the EZ-1 large volume pump, utilizes a broad range of
dedicated disposable infusion sets for different clinical protocols. A special
calibrated pumping cassette is inserted into the KIDS Pump as an integral part
of the disposable infusion set. The calibration of the cassette delivers flow
rates ranging from 0.1 ml per hour to 999.9 ml per hour. The combined accuracies
and safety features of the 2001 syringe pump and the KIDS Pump address concerns
of neonatal and pediatric intensive care physicians and nurses. The KIDS Pump is
among the easiest pumps of its kind to operate and service and can be programmed
to prevent tampering.
Trilogy(TM)
- -------------
Trilogy, a three-channel large volume pediatric infusion pump, provides the
capabilities of three KIDS pumps in one housing of substantially less size and
weight; thus allowing the clinician more efficient use of bedside space.
The following table sets forth the percentage of consolidated net sales
contributed by each class of similar products for the last three fiscal years:
YEAR ENDED JUNE 30, 1996 1995 1994
- ------------------- ---- ---- ----
Critical Care Accessories 71% 69% 70%
Infusion Systems 29% 31% 30%
The Company's backlog orders believed to be firm, at June 30, 1996, were
approximately $11,792,000 as compared to approximately $9,733,000 as of the end
of the preceding fiscal year. It is expected that approximately 90% of these
orders will be filled during the current fiscal year.
RESEARCH AND DEVELOPMENT
The Company's research and development activities concentrate on the
investigation and development of new and improved products in the area of
critical care medicine. The Company's research and development expenditures for
the years ended June 30, 1996, 1995, and 1994 were approximately $3,018,000,
$3,147,000 and $3,299,000 respectively.
As a result of this activity, the Company has introduced invasive pressure
monitoring transducers, hospital and ambulatory infusion pumps, balloon
9
<PAGE> 10
inflation devices, various products for fluid and drug delivery and special
pressure monitoring systems for critically ill patients. The majority of the
research and development activities are performed by the Company's personnel.
The Company maintains separate research and development groups at its Ohio and
Georgia facilities whose scientific and engineering disciplines are specific to
the products manufactured at those locations.
SALES AND MARKETING
The Company currently markets more than 600 standard products as well as custom
products and bulk O.E.M. products in the United States, Canada and
internationally. Single patient use (disposable) products currently account for
approximately 75% of net sales.
The Company's domestic sales and marketing efforts are accomplished primarily by
a network of direct sales representatives and are supplemented in select
geographic areas by independent sales agents. These representatives work with
independent hospital supply dealers to whom the Company sells many of its
products. In addition, these representatives work with the dealers' sales force
at the hospital level to promote sales of the Company's products. The Company
also sells directly to hospitals, home health care companies, other alternate
site health care facilities, as well as other medical device manufacturers on an
original equipment basis.
Sales in the United Kingdom, continental Europe, and the Middle East are
conducted mainly by direct sales representatives of Medex Medical, Inc., Medex
Medical GmbH, Ashfield Medical Systems Limited and Medex Medical France SARL.
Sales to other international markets are conducted through dealers located in
the various countries. (See Note 8 of "Notes to Consolidated Financial
Statements".)
During fiscal 1995, the Company completed the reorganization of its domestic
sales force to centralize sales, customer service and marketing efforts between
Medex and its former subsidiaries, Medfusion, Inc. and Ivion Corporation, with
the goal of creating a single sales force to focus on the Company's entire line
of hospital products.
Increasingly, hospitals and other customers are relying upon third parties to
purchase supplies, manage inventories and distribute goods. The Company
recognizes the influence of these hospital group purchasing organizations, as
well as "stockless" and "just in time" programs with major distributors, and
continues to establish and pursue on-going relationships with these types of
organizations. In addition, the Company has invested significant resources to
improve customer ordering efficiency through the implementation of a centralized
order entry and billing system utilizing an electronic data interface system
that allows customers to directly place domestic product orders to a single
location, thereby reducing human error and speeding order turn around.
MAJOR CUSTOMERS
10
<PAGE> 11
During fiscal 1996, 1995 and 1994, Medex had sales to Owens & Minor, a domestic
distributor of its products, totaling approximately 11%, 12% and 11% of total
net sales, respectively, and sales of cath lab products to Cordis Europa
totaling approximately 12%, 8% and 1% of total net sales, respectively. Cordis
Europa was acquired by a large diversified healthcare Company during 1996.
While Management can not predict how the Cordis Europa acquisition will affect
Medex sales to that Company, Management believes fiscal 1997 sales to Cordis
Europa combined with the Company's own new cath lab sales will maintain overall
European cath lab sales at or slightly above 1996 levels.
MANUFACTURING OPERATIONS
The Company's manufacturing operations are undertaken at its facilities located
in Hilliard and Dublin, Ohio; Duluth, Georgia; Rossendale, England; and in
Cumbernauld, Scotland.
The Company utilizes sixty automated molding machines and an array of automated
assembly machines located at the Dublin facility to fabricate over 400 million
components annually for its operating entities. This produces manufacturing
efficiencies by avoiding duplication of technical manpower, support facilities,
and capital equipment at its other manufacturing operations. The disposable
components manufactured at the Dublin facility are transferred directly to the
Company's various assembly facilities where the final assembly of products is
undertaken according to Good Manufacturing Practice (GMP) standards set forth by
the United States Food and Drug Administration and/or standards as set forth by
similar agencies in foreign countries. The quality control, packaging, and
labeling of disposable products are completed at those locations. The Ohio
facilities utilize the Company's own sterilization operations located at the
Hilliard facility, while the other assembly facilities primarily rely upon
contracted sterilization services.
The design, manufacture, and servicing of infusion pumps and certain disposable
products are undertaken at the Company's Duluth facility.
The Company assembles and packages products including procedure packs for
distribution to Europe, Africa and the Middle East from Medex Medical's
facilities in Rossendale, England. Surgical drapes are manufactured at Ashfield
Medical Systems Limited's facility in Cumbernauld, Scotland for inclusion in the
Company's procedure packs and for sale to other manufacturers.
Quality control procedures include rigid specifications for the examination of
components, packaging materials and labels, and sterilization procedures.
Quality control tests performed at different stages in the manufacturing and
assembly processes are designed to assure that exacting standards for finished
goods and their component parts are met. Periodically, these efforts are audited
by a group of qualified employees and outside consultants to confirm that the
Company's actions fulfill regulatory requirements.
Certain components, such as extruded tubing, silicon chips, and
electromechanical subassemblies for infusion pumps, are purchased from outside
suppliers. Outside suppliers of medical components must adhere to the Company's
specifications, GMP's and/or standards as set forth by regulatory agencies in
foreign countries.
11
<PAGE> 12
RAW MATERIALS
Purchased raw materials used in the Company's production process are generally
available from a number of suppliers. The primary raw materials used include
thermoplastic resins, plastic tubing, electronic componentry, paper and plastic
packaging materials.
Due to increased worldwide demand, some users of polycarbonate resins
periodically have experienced shortages in supply and delays in delivery of such
resins. The Company uses polycarbonate in the manufacture of certain plastic
components. To date, the Company has been minimally impacted by such shortages
and delays. While the Company believes that an adequate supply will be available
in the near term, the cost of such material will likely continue to increase.
PATENTS AND TRADEMARKS
The Company possesses rights under a number of domestic and foreign patents and
trademarks relating to its products and business. While the Company considers
its trademarks important in the operation of its business and, in particular,
the name Medex, Inc.(R), the business of the Company is not dependent on any
trademark or on any single patent or group of patents.
As a condition of employment, many of the Company's employees involved in
research and development activities are required to sign an agreement to
maintain the confidentiality of Company secrets and to assign to the Company his
or her interest in any inventions conceived during the course of his or her
employment. The Company recognizes that such agreements are sometimes difficult
to enforce.
COMPETITION
There are a significant number of manufacturers that compete with the Company.
The principal methods of competition are price, service, scope of product line
and product quality. The Company is not presently a dominant factor in the
markets served by its critical care accessories and most of its competitors have
greater financial and other resources. Although the infusion pump market is
extremely competitive, the Company believes that it is a major factor among
those manufacturers who supply the children's hospital, neonatal and pediatric
marketplace.
GOVERNMENT REGULATIONS
The Company is subject, in the manufacture, clinical testing and marketing of
its products, to mandatory procedures and safety standards which are
administered by the United States Food and Drug Administration (FDA) and similar
agencies in foreign countries. The FDA regulates the Company as to the quality
and safety of its products and the practices by which they are manufactured and
sold. The FDA also regulates the introduction of new products, makes periodic
inspections of manufacturing processes to confirm
12
<PAGE> 13
that such processes meet FDA standards, and receives, investigates and resolves
any complaints against the Company. The Company believes that it is in
compliance with the FDA's Good Manufacturing Practice (GMP) standards.
Additionally, the Company's Rossendale, U.K. facility has received ISO 9002 (an
international standard for quality systems) certification and the Company is
currently pursuing ISO certification for its facilities in the United States.
FDA regulations require clearance by the agency, prior to marketing a new
product. The two principal processes for obtaining this clearance are known as
"510(k)" premarket notification and premarket approval ("PMA"). Historically,
the process of obtaining a 510(k) clearance typically has taken several months
and involves the submission of limited clinical data and supporting information.
However, in recent years this time period has been extended. The PMA process
typically will last more than a year and requires the submission of significant
quantities of clinical data and manufacturing information. Historically, the
Company's new products have fallen into the FDA's class of products which are
subject to the 510(k) process. The Company presently expects that any new
products it is contemplating will be subject to the 510(k) process.
The Company is subject to various international, federal, state and local
regulations relating to the maintenance of safe working conditions,
manufacturing practices, and the use and discharge of harmful or potentially
harmful substances. The Company believes that it is in compliance with all such
regulations applicable to its operations.
The Company is currently operating three gas sterilizers at its Hilliard, Ohio
plant which use a sterilant gas mixture of ethylene oxide and HCFC 124. These
sterilizers are operational with the Company's sterilant recovery system.
ENVIRONMENTAL
During the fiscal year ended June 30, 1996, the amounts incurred in compliance
with federal, state and local environmental laws and regulations did not have a
material effect upon the capital expenditures or earnings of the Company and the
Company does not anticipate that such compliance will have a material effect on
future capital expenditures or earnings.
The Comprehensive Environmental Response Compensation and Liability Act (CERCLA)
provides governmental agencies with authority to require clean up of hazardous
waste sites and release of hazardous substances into the environment. Liability
under this act is joint and several and can be applied retroactively. The
Company, along with over one hundred other companies, was previously identified
by the United States Environmental Protection Agency (EPA) as a potentially
responsible party (PRP) for the clean up of a contaminated waste disposal site
near Granville, Ohio. The Company along with approximately 80 other PRP's formed
a PRP Group in order to develop responsive actions in connection with the site.
The Company, along with the majority of the PRP group members, has entered into
an Administrative Order
13
<PAGE> 14
on Consent with the U.S. EPA and a clean up plan is currently being implemented
at the site. Current clean up estimates provided to the PRP Group are
approximately $8.5 million. However, because the Company's share allocation
within the PRP Group is de minimis, the Company, at this time, believes that its
liability for this matter will not have a materially adverse affect on its
results of operations or financial condition.
EMPLOYEES
The Company and its subsidiaries employ approximately 1,100 employees worldwide.
None of the Company's employees are currently employed under a union contract.
The Company believes it has a good relationship with its employees.
ITEM 2. PROPERTIES
The Company owns a complex of facilities totaling approximately 150,000 square
feet situated on approximately 11 acres of land located in Hilliard, Ohio. These
facilities contain the Company's executive offices, management information
systems, production, sterilization operations, quality control laboratories,
and general warehouse space.
The Company owns an approximately 100,000 square feet facility located on
approximately 23 acres of land in Dublin, Ohio. The facility is being used for
research and development, production, automation, tooling, quality control
laboratories, warehousing and administrative offices.
The Company owns an approximately 52,000 square feet production, research,
warehouse, and office facility situated on approximately 8 acres of land in
Duluth, Georgia.
Medex Medical, Inc. owns and occupies an approximately 24,000 square feet
building located on approximately 2 acres of land in Rossendale, England. The
facility houses office, warehouse and production facilities for international
manufacturing and distribution operations. Additionally, the Company, during
fiscal 1996, exercised its option to purchase the fee interest in an
approximately 3 acre parcel of land. The Company had previously purchased a 999
year leasehold interest and the 69,000 square feet building situated thereon
which is adjacent to the above Rossendale facility. This facility is being
utilized for additional manufacturing, warehousing and office space principally
in connection with the Company's European procedure packing operations.
Ashfield Medical Systems Limited leases approximately 17,000 square feet of
production, warehousing and office space located in Cumbernauld, Scotland. The
Company during fiscal 1996 completed renovation of a portion of this facility to
provide a new "clean room" production area. The current term of the lease
extends until May 2017.
14
<PAGE> 15
Medex Medical GmbH leases a facility located in Ratingen, Germany containing
approximately 26,000 square feet of office, sales, marketing and warehouse
space. The lease on this facility expires in September 1997.
Medex Medical France, SARL leases a facility in Nantes, France containing
approximately 3,000 square feet of office, sales and warehousing space. The
lease term extends until January 1998 with an option to renew for an additional
3 year period.
The Company believes that its current facilities and ongoing expansions will be
suitable and adequate for its operations for the immediate future.
15
<PAGE> 16
ITEM 3. LEGAL PROCEEDINGS
The Company is not presently a party to any material pending legal
proceedings.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
16
<PAGE> 17
EXECUTIVE OFFICERS OF THE REGISTRANT
The following table sets forth certain information concerning officers
of the Company:
<TABLE>
<CAPTION>
NAME POSITION WITH THE COMPANY AGE
- ---- ------------------------- ---
<S> <C> <C>
C. Craig Waldbillig Chairman of the Board 70
and Director
Bradley P. Gould President, Chief Executive 42
Officer and Director
Terry L. Sanborn Senior Vice President, 53
Manufacturing and
Chief Operating Officer
Michael J. Barilla Senior Vice President and 45
Chief Financial Officer
Georg W. Landsberg Senior Vice President, 42
European Operations
Robert E. Boyd, Jr. Secretary, General Counsel 70
and Director
Kevin L. Barnett Vice President, Treasurer and 34
Corporate Controller
Alan M. Fermier Vice President, Human Resources & 43
Organizational Development
Clint R. Lawson Vice President, Corporate Quality 47
Assurance & Regulatory Affairs
David G. Musgrove Vice President, International & 52
O.E.M. Development
Nigel S. Perry Vice President of Operations, Europe 45
Julie A. Reichert Vice President, New Product 33
Development
Alan Upton Vice President, Finance & 49
Administration, Europe
</TABLE>
C. Craig Waldbillig, a co-founder of the Company in 1959, was elected Chairman
of the Board in 1982. Mr. Waldbillig retired as Chief Executive Officer of the
Company in 1993. Mr. Waldbillig is also a director and
17
<PAGE> 18
Chairman of Medex Medical, Inc. and a director of Medex Exports, Inc. Mr.
Waldbillig serves as a director of Danninger Medical Technology, Inc.
Bradley P. Gould was elected Chief Executive Officer as of October 1995 and
appointed Director and elected President in May 1996. In 1993, he was elected
Senior Vice President, European Operations. Mr. Gould was first elected Vice
President in 1992. From 1991 until May of 1992, Mr. Gould was Director of
Sales/Marketing European Operations. Mr. Gould is also a Director of Medex
Medical, Inc. and Ashfield Medical Systems Limited; a Managing Director of Medex
Medical GmbH and Medex Medical France SARL; and a Director and President of
Medex Exports, Inc.
Terry L. Sanborn was elected Chief Operating Officer in May of 1993. Mr. Sanborn
has served as Senior Vice President of Manufacturing since May 1995. Mr. Sanborn
also served as Executive Vice President from May 1993 to 1995; Senior Vice
President, Corporate Operations from 1991 to 1993; and as a Vice President since
1979. Mr. Sanborn is also a Vice President of Medex Medical, Inc.
Michael J. Barilla was elected Senior Vice President and Chief Financial Officer
in August 1996. In October 1995 he was elected acting Chief Financial Officer.
Mr. Barilla was elected Vice President, Internal Auditing in fiscal 1995. From
1993 to 1995 he served as Senior Vice President, Corporate Operations and
Administration. He was first elected as Vice President in 1990 and previously
served as Corporate Controller. Mr. Barilla is also Chief Financial Officer,
Medex Exports, Inc. and Assistant Treasurer, Medex Medical, Inc.
Georg W. Landsberg was elected Senior Vice President, European Operations in
August 1996. Dr. Landsberg was first elected Vice President in 1994. From May
1992 to November 1994, he was Director, Sales & Marketing, European Operations.
Prior to May 1992 he served as Sales & Marketing Manager, Cardionova GmbH. Dr.
Landsberg is also a Director and President, Medex Medical, Inc.; a Director of
Ashfield Medical Systems Limited; and a Managing Director, Medex Medical GmbH
and Medex Medical France SARL.
Robert E. Boyd, Jr., was elected Secretary and General Counsel in 1960 and has
been a director since 1964. Mr. Boyd has been a practicing attorney for more
than 44 years. Mr. Boyd is also a Director and Secretary of Medex Medical, Inc.
and Medex Exports, Inc.
Kevin L. Barnett was elected Treasurer in November 1995 and had previously
become Vice President and Corporate Controller in 1994. From April of 1992 until
May of 1994 he was Assistant Treasurer of the Company. Prior to April of 1992,
Mr. Barnett was employed by Deloitte & Touche as Manager, Auditing Services. Mr.
Barnett is also Assistant Treasurer, Medex Medical, Inc. and Treasurer, Medex
Exports, Inc.
Alan M. Fermier was elected Vice President, Human Resources & Organizational
Development in December 1995. Prior to joining the Company, Mr. Fermier was Vice
President, Human Resources and Administration for Cardiac Alliance, Inc.
18
<PAGE> 19
from 1993 to 1995 and from 1987 to 1993 he was Regional Director, Human
Resources for Tokos Medical Corporation.
Clint R. Lawson was elected Vice President in 1990 and is responsible for
quality assurance and regulatory affairs. Prior to 1990, he was Director of
Corporate Quality Control and Regulatory Affairs for the Company.
David G. Musgrove was elected Vice President in 1982 and is currently
responsible for international, O.E.M., and bulk sales development. Mr. Musgrove
is a Vice President of Medex Exports, Inc.
Nigel S. Perry was elected Vice President of Operations, Europe in May 1996.
From 1991 until 1996 he was Director of Operations, Medex Medical, Inc. Mr.
Perry is also a Director, Ashfield Medical Systems Limited and a Director and
Vice President, Medex Medical, Inc.
Julie A. Reichert was elected Vice President, New Product Development in
September 1996. Ms. Reichert was the Research & Development Manager, Hospital
Infusion Systems from May 1995 until her election. Prior to joining the Company,
she was employed by Ohmeda Monitoring Systems as Project Manager and Engineer.
Alan Upton was elected Vice President, Finance & Administration, Europe in May
1996. From 1992 until 1996, he was Director of Finance, Medex Medical, Inc. and
had previously been employed as an accountant at Medex Medical, Inc. from 1985
until 1992. Mr. Upton is also a Director and Treasurer, Medex Medical, Inc.; a
Director of Ashfield Medical Systems Limited; and a Managing Director of Medex
Medical GmbH and Medex Medical France SARL.
Officers are elected by the Board of Directors following the annual meeting and
serve until the next annual meeting or until their successors are named.
There are no family relationships between any director or executive officer and
any other director or executive officer of the Company.
There are no arrangements or understandings between any of the executive
officers of the Company and other persons relating to their selection as
officers.
There have been no events under any bankruptcy act, no original proceedings, and
no judgments or injunctions material to the evaluation of the ability and
integrity of any director or executive officer during the past five years.
19
<PAGE> 20
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The information required by this item is incorporated herein by reference to
"Market for the Registrant's Common Stock and Related Shareholder Matters"
appearing in Exhibit 13 of this Form 10-K Annual Report.
ITEM 6. SELECTED FINANCIAL DATA
The information required by this item is incorporated herein by reference to
"Selected Consolidated Financial Data" appearing in Exhibit 13 of this Form 10-K
Annual Report.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The information required by this item is incorporated herein by reference to
"Management's Discussion and Analysis of Results of Operations and Financial
Condition" appearing in Exhibit 13 of this Form 10-K Annual Report.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The information required by this item is incorporated herein by reference to the
financial statements and supplementary financial information appearing in
Exhibit 13 of this Form 10-K Annual Report.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
20
<PAGE> 21
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information required by this item is set forth under the captions "Election
of Directors" in the Company's Proxy Statement for its annual meeting of
shareholders to be held on November 13, 1996, and is incorporated herein by
reference. The information with respect to "Executive Officers of the Company"
is contained at the end of Part I of this Form 10-K Annual Report.
ITEM 11. EXECUTIVE COMPENSATION
The information required by this item is set forth under the caption
"Compensation of Directors and Executive Officers" in the Company's Proxy
Statement for its annual meeting of shareholders to be held on November 13,
1996, and is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by this item is set forth under the caption "Beneficial
Ownership of the Company's Common Stock" in the Company's Proxy Statement for
its annual meeting of shareholders to be held on November 13, 1996, and is
incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by this item is set forth under the caption "Election
of Directors" in the Company's Proxy Statement for its annual meeting of
shareholders to be held on November 13, 1996, and is incorporated herein by
reference.
21
<PAGE> 22
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
A. DOCUMENTS FILED AS A PART OF THIS REPORT.
1. FINANCIAL STATEMENTS
The consolidated financial statements as of June 30, 1996 and 1995 and for each
of the three years in the period ended June 30, 1996, together with the report
thereon of Deloitte & Touche LLP dated August 13, 1996, appearing in Exhibit 13
of this Form 10-K Annual Report are incorporated herein by reference.
INDEX TO FINANCIAL STATEMENTS
Consolidated Statements of Income for the years ended June 30, 1996, 1995 and
1994.
Consolidated Balance Sheets at June 30, 1996 and 1995.
Consolidated Statements of Cash Flows for the years ended June 30, 1996, 1995
and 1994.
Consolidated Statements of Shareholders' Equity for the years ended June 30,
1996, 1995 and 1994.
Notes to Consolidated Financial Statements.
Independent Auditors' Report.
2. FINANCIAL STATEMENT SCHEDULES REQUIRED BY ITEMS 8 AND 14(D).
Included in Part IV of this report is the following additional financial data
which should be read in conjunction with the consolidated financial statements
in the 1996 Annual Report to Shareholders.
Independent Auditors' Report
Supplemental Consolidated Schedules for each of the three years ended June 30,
1996:
Schedule II - Valuation and Qualifying Accounts
Schedules not included above have been omitted because they are not applicable
or the required information is shown in the financial statements or notes
thereto.
3. EXHIBITS SEE INDEX TO EXHIBITS.
B. REPORTS ON FORM 8-K.
22
<PAGE> 23
No reports on Form 8-K were filed during the three months ended June 30, 1996.
23
<PAGE> 24
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
MEDEX, INC.
Date: September 27, 1996 By: /s/ BRADLEY P. GOULD
_________________________
Bradley P. Gould
President,
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
is signed below by the following persons on behalf of the Registrant and in the
capacities and on the dates indicated.
/s/ BRADLEY P. GOULD
_______________________ President, Chief September 27, 1996
Bradley P. Gould Executive Officer
and Director
/s/ MICHAEL J. BARILLA
_______________________ Senior Vice President September 27, 1996
Michael J. Barilla and Chief Financial
Officer (Principal
Accounting Officer)
/s/ ROBERT E. BOYD, JR.
_______________________ Secretary and Director September 27, 1996
Robert E. Boyd, Jr.
24
<PAGE> 25
/s/ JAMES L. GINTER
_____________________________ Director September 27, 1996
James L. Ginter
/s/ THOMAS A. HELMRATH, M.D.
_____________________________ Director September 26, 1996
Thomas A. Helmrath, M.D.
/s/ JOHN N. HOLSCHER
_____________________________ Director September 27, 1996
John N. Holscher
/s/ THOMAS M. JORDAN, JR.
_____________________________ Director September 27, 1996
Thomas M. Jordan, Jr.
/s/ JOHN B. JOYCE, JR.
_____________________________ Director September 27, 1996
John B. Joyce, Jr.
_____________________________ Director
J. David Martino, M.D.
/s/ C. CRAIG WALDBILLIG
_____________________________ Chairman of September 27, 1996
C. Craig Waldbillig the Board
and Director
25
<PAGE> 26
INDEPENDENT AUDITORS' REPORT
To the Shareholders and Directors of
Medex, Inc.:
We have audited the consolidated financial statements of Medex, Inc. and
subsidiaries as of June 30, 1996 and 1995, and for each of the three years in
the period ended June 30, 1996, and have issued our report thereon dated August
13, 1996, which report includes an explanatory paragraph as to the change in the
method of accounting for income taxes; such financial statements and report are
included in your 1996 Annual Report to Shareholders and are incorporated herein
by reference. Our audits also included the consolidated financial statement
schedule of Medex, Inc., listed in Item 14. This financial statement schedule is
the responsibility of the Company's management. Our responsibility is to express
an opinion based on our audits. In our opinion, such consolidated financial
statement schedule, when considered in relation to the basic consolidated
financial statements taken as a whole, presents fairly in all material respects
the information set forth therein.
DELOITTE & TOUCHE LLP
Columbus, Ohio
August 13, 1996
26
<PAGE> 27
MEDEX, INC. AND SUBSIDIARIES SCHEDULE II
<TABLE>
<CAPTION>
Valuation and Qualifying Accounts and Reserves
for the Years Ended June 30, 1996, 1995 and 1994
- ---------------------------------------------------------------------------------------------------------------------------------
COLUMN C ADDITIONS
COLUMN A COLUMN B (1) (2) COLUMN D COLUMN E
BALANCE AT CHARGED TO CHARGED TO
BEGINNING COSTS AND OTHER DEDUCTIONS BALANCE AT
DESCRIPTION OF YEAR EXPENSES ACCOUNTS (A) END OF YEAR
Reserves Deducted From Asset to Which it Applies Allowance for doubtful accounts
of trade receivables:
<S> <C> <C> <C> <C>
Year Ended June 30, 1996 $714,000 $169,000 $120,000 $763,000
Year Ended June 30, 1995 $570,000 $367,000 $223,000 $714,000
Year Ended June 30, 1994 $548,000 $248,000 $226,000 $570,000
<FN>
(A) Amount represents uncollectible accounts written off and the effect of
changes in foreign currency exchange rates used to translate foreign
subsidiary amounts.
</TABLE>
27
<PAGE> 28
MEDEX, INC
FORM 10-K
JUNE 30, 1996
INDEX TO EXHIBITS
NUMBER DESCRIPTION OF EXHIBIT
- ------ ----------------------
3.1 Articles of Incorporation, incorporated herein by reference
to Exhibit 3(a) of the Company's Quarterly Report on Form
10-Q for the quarter ended December 31, 1991.
3.2 Code of Regulations, incorporated herein by reference to
Exhibit 3.2 of the Company's Annual Report on Form 10-K for
fiscal year ended June 30, 1994.
3.3 Code of By-Laws, as amended.
4.1 The Company agrees to furnish to the Commission upon request
copies of instruments defining the rights of holders of
long-term debt which are not being filed as part of this
Report in reliance on Item 601(b)(4)(iii) because the total
amount of securities authorized under each such instrument
does not exceed 10% of the total assets of the Company and its
subsidiaries on a consolidated basis.
4.2 Rights Agreement, dated as of October 12, 1995, between Medex,
Inc. and Huntington National Bank, incorporated herein by
reference to Exhibit 1 of Registration Statement on Form 8-A
filed on October 23, 1995.
10.1 Medex, Inc. Administrative Incentive Stock Option Plan II, as
amended.
10.2 Medex, Inc. Non-Employee Director Restricted Stock Option
Plan, incorporated herein by reference to Exhibit 10.3 of the
Company's Annual Report on Form 10-K for fiscal year ended
June 30, 1994.
10.3 Medex, Inc. Non-Employee Director Restricted Stock Option
Plan II, incorporated herein by reference to Exhibit 10.3 of
the Company's Annual Report on Form 10-K for fiscal year ended
June 30, 1995.
10.4 Medex, Inc. Non-Employee Director Restricted Stock Option
Plan III, incorporated herein by reference to Exhibit 10.1
of the Company's Quarterly Report on Form 10-Q for the quarter
ended December 31, 1993.
10.5 Medex, Inc. Non-Employee Director Restricted Stock Option
Plan IV.
10.6 Medex, Inc. 1994 Executive Stock Option Plan, as amended.
10.7 Medex, Inc. Key Employee Nonstatutory Stock Option Plan, as
amended.
28
<PAGE> 29
10.8 Forms of Director and Executive Officer Indemnification Agreements as
executed by all Directors and Bradley P. Gould, respectively.
10.9 Forms of Executive Split Dollar Insurance Benefit Plan Master Agreement
and Joinder Agreements available to executive officers and certain
management employees of the Company.
10.10 Form of Employment Agreement as executed by all executive officers of the
Company, except C. Craig Waldbillig, Robert E. Boyd, Jr., Georg W.
Landsberg, Nigel S. Perry, Julie A. Reichert, and Alan Upton.
10.11 Amendment to Employment Agreement between the Company and Bradley P.
Gould, dated November 1, 1995, incorporated herein by reference to Exhibit
10.2 of the Company's Quarterly Report on Form 10-Q for the quarter ended
December 31, 1995.
10.12 Executive Employment Agreement between the Company and Bradley P. Gould,
dated February 14, 1996, incorporated herein by reference to Exhibit 10 of
the Company's Quarterly Report on Form 10-Q for the quarter ended March
31, 1996.
10.13 Severance Agreement between the Company and Phillip D. Messinger, dated
March 27, 1996.
10.14 Separation Agreement between the Company and William J. Post, dated June
4, 1996.
10.15 Directors Retirement Plan, see Exhibit 3.3 hereto.
10.16 Description of Medex, Inc.'s Annual Incentive Compensation Program for
executive officers of the Company, incorporated herein by reference to
Exhibit 10.11 of the Company's Annual Report on Form 10-K for fiscal year
ended June 30, 1995.
10.17 Split Dollar Life Insurance Agreement between the Company and Craig
Waldbillig Trust, incorporated herein by reference to Exhibit 10.5 of the
Company's Annual Report on Form 10-K for fiscal year ended June 30, 1994.
11. Computation of earnings per share.
13. Annual Report to Shareholders.
21. Subsidiaries of Registrant.
23. Consent of Experts and Counsel. (1) The consent of Deloitte & Touche LLP
to the incorporation by reference in Registration Statements No. 33-23787,
33-36739, 33-44859, 33-79854 and 33- 89964 on Form S-8 of their opinion
dated August 13, 1996, appearing and incorporated by reference in the
Annual Report on Form 10-K of Medex, Inc. for the year ended June 30,
1996.
27. Financial Data Schedule.
29
<PAGE> 1
Exhibit 3.3
MEDEX, INC.
CODE OF BY-LAWS
ARTICLE I
MEETINGS OF BOARD
-----------------
Section 1. Organization of Meetings
------------------------
At each meeting of the Board of Directors, the Chairman, or, in his
absence, the President, or, in the absence of both the foregoing, a Chairman
chosen by a majority of the Board of Directors present, shall preside. The
Secretary, or, in his absence, any person appointed by the Chairman, shall
perform the duties of Secretary of the meeting and shall keep the minutes
thereof.
Section 2. Place of Meetings
-----------------
The meetings of the Board shall be held at such place or places, within
or without the State of Ohio, as may from time to time be fixed by the Board of
Directors, or as shall be specified or fixed in the respective notices or
waivers of notice thereof.
Section 3. Meetings
--------
Meetings of the Board of Directors shall be held whenever called by the
Chairman, or, in his absence, the President, or by any two Directors. Unless
waived before, at or after the meeting as hereinafter provided, notice of each
such meeting shall be given by the Chairman or the persons calling such meetings
to each Director in any of the following way:
(1) By orally informing him of the meeting in person or by telephone
not later than two days before the date of the meeting.
(2) By personal delivery to him not later than two days before the date
of the meeting of written notice thereof.
(3) By mailing written notice to him, or by sending notice to him by
telegram, cablegram, radiogram, any such notice to be posted or dispatched, as
the case may be, a sufficient length of time before the meeting so that in the
ordinary course of the mail or of the transmission of telegrams, cablegrams, or
radiograms, as the case may be, delivery thereof would normally be made to him
not later than two days before the date of the meeting.
Unless otherwise required by this Code of By-Laws, the notice of any
meeting need not specify the purpose or purposes of the meeting. Notice of any
meeting of the Board may be waived by any Director, either before, at or after
the meeting, in writing or by telegram, cablegram or radiogram.
<PAGE> 2
Section 4. Order of Business
-----------------
The order of business, but not the agenda at meetings of the Board
shall be such as the Chairman may prescribe or follow, subject, however, to his
being overruled with respect thereto by a majority vote of the members of the
Board present.
ARTICLE II
OFFICERS OF THE COMPANY AND THEIR AUTHORITY
-------------------------------------------
Section 1. Creation of the Offices of Chairman of the Board and Vice Chairman
------------------------------------------------------------------
of the Board
------------
(1) There is hereby created the office of Chairman of the Board, who
shall be referred to in these By-Laws as the "Chairman." The Chairman shall have
such authority as is or may be conferred by the General Corporation Law of Ohio,
the Articles of Incorporation, the Code of Regulations, these By-Laws of the
Company and resolutions of the Board of Directors. The Chairman shall be a
director.
The Chairman of the Board shall be responsible for the organization of
and shall conduct as presiding Officer all shareholder meetings and, with an
Agenda provided by the Chief Executive Officer and such additional matters as
may be requested by individual directors, shall conduct all meetings of the
Board of Directors of the Company.
(2) There is hereby created the office of Vice Chairman of the Board,
who shall be referred to in these By-Laws as the Vice Chairman. The Vice
Chairman shall have such authority as is or may be conferred by the General
Corporation Law of Ohio, the Articles of Incorporation, the Code of Regulations,
these By-Laws of the Company and resolutions of the Board of Directors.
Section 2. Creation of the Office of Chief Executive Officer
-------------------------------------------------
There is hereby created the office of Chief Executive Officer of the
Company, who shall be referred to in these By-Laws as the "CEO." The CEO shall
have such authority as is or may be conferred by the General Corporation Law of
Ohio, the Articles of Incorporation, and Code of Regulations and these By-Laws,
including the primary responsibility for and authority over the following
matters:
(1) The direction of the senior management in the development of the
basic mission, objective, policies, and operating plans of the company, to
organize this work into a short term (3 year) and long term (5 year) strategic
plan for presentation to and approval by the Board of Directors. Further, to
periodically and regularly see that these plans are reviewed and amended as
necessary by the Board of Directors.
(2) The recommendation to the Board of Directors of employment, terms
of employment, compensation, termination, terms of termination, including
performance appraisals of all Officers of the Company appointed by the Board of
Directors.
(3) Have executive authority over and direct supervision of and receive
the reports of the Chief Operating Officer of the Company.
2
<PAGE> 3
(4) Have final authority over all employment, compensation, terms of
employment, changes in terms of employment or compensation, and termination of
employment of all Company personnel to the level of Manager and Director.
Prescribe the specific limits of the authority of subordinates. Resolve any
conflicts arising between subsidiaries, operating groups, staff departments or
other functioning units.
(5) Have in accordance with such authority as is conferred by the Board
of Directors, the General Corporation Law of Ohio, the Articles of
Incorporation, the Code of Regulations, ultimate executive authority through the
COO over all the financial and legal affairs of the Company, receive the reports
of the CFO, The Vice President for Corporate Quality Assurance and Regulatory
Affairs, and the Secretary and General Counsel.
(6) Have responsibility for the long range physical and financial
planning of the Company, including the strategic planning process.
(7) Establish and maintain an effective system of communication
throughout the company and with the Board of Directors.
(8) The CEO of the Company is hereby authorized to execute and deliver
on behalf of the Company all contracts, deeds, mortgages, leases, promissory
notes, bonds, bills, drafts and other instruments in writing as he may deem
necessary and proper in the conduct of the Company's business. The CEO shall
sign all share certificates. The CEO is also authorized to borrow any money or
otherwise incur any indebtedness on behalf of the Company which the Board of
Directors by resolution deem necessary and proper in the conduct of the
Company's business. Provided, however, the CEO is authorized to borrow money or
otherwise incur an indebtedness on behalf of the Company up to a sum established
by resolution of the Board of Directors, without Board approval. Except as
otherwise required by law or by the Code of Regulations of the Company,
resolutions of the Board of Directors or these By-Laws, no other Officer shall
execute or deliver on behalf of the Company any instrument in writing or shall
borrow any money or incur any indebtedness without the specific authorization of
the Board of Director and the CEO.
(9) Have authority over and executive responsibility for all merger
and acquisition activities of the Company.
(10) Have executive responsibility for all shareholder relations
including planning of the annual and special meeting of shareholders and reports
to the shareholders. Have responsibility for preparation of and presentation to
the Chairman of the Board, the Agenda for each Board meeting.
Section 3. Creation of the Office of Chief Operating Officer
-------------------------------------------------
There is hereby created the office of Chief Operating Officer of the
Company, who shall be referred to in these By-Laws as the "COO." The COO shall
have such authority as is or may be conferred by these By-Laws and resolutions
of the Board of Directors, including the responsibility for and authority over
the following matters:
(1) Recommending to the CEO the employment, terms of employment,
compensation, changes in terms of employment or compensation, termination, terms
of termination, of all Company personnel reporting to the COO.
3
<PAGE> 4
(2) Have executive authority over and direct supervision of, and
receive the reports of all of the Officers of the Company except CEO, the CFO,
the Vice President for Corporate Quality Assurance and Regulatory Affairs, Vice
President Sales and Marketing, Senior Vice President Medex Europe, and the
Secretary and General Counsel and their direct subordinates.
(3) Have final authority over all employment, compensation, terms of
employment, changes in terms of employment or compensation, and term of
employment of all Company personnel under his supervision below the title of
Manager and Director.
(4) Have executive authority over and responsibility for the
manufacturing, Human Resources/Organizational Development, and research and
development operations of the Company and shall have such executive authority to
direct the CFO, the Vice President for Corporate Quality Assurance and
Regulatory Affairs, and the Secretary and General Counsel in regard to their
duties as is necessary to carry out this responsibility. Have authority and
responsibility to guide and direct the management in the development, production
and servicing of the company's products and services through out the world, to
achieve budgeted profits, financial criteria and preservation of the company
capital.
(5) Develop policies to ensure the execution of the policies of the
CEO.
(6) Have authority to direct creation and use of adequate and equitable
personnel and human resource policies. Participate and direct acquisition and
growth activities in accordance with the plans of the CEO and the Board of
Directors.
(7) Have authority over activities as may be directed from time to time
by the CEO.
(8) Have authority to delegate activities and responsibilities as
necessary to those reporting to the COO.
(9) In case of the temporary absence or disability of the CEO, the COO
of the Company is hereby authorized to execute and deliver on behalf of the
Company all contracts, deeds, mortgages, leases, promissory notes, bonds, bills,
drafts and other instruments in writing as he may deem necessary and proper in
the conduct of the Company's business. The COO may also sign all share
certificates. With the written authority of the CEO, the COO is authorized to
borrow any money or otherwise incur any indebtedness on behalf of the Company up
to the limit established by the Board of Directors for the CEO. Except as
otherwise required by law, by the Code of Regulations of the Company, or by
these By-Laws, no other Officer shall execute or deliver on behalf of the
Company any instruments in writing or shall borrow any money or incur any
indebtedness without the specific authorization of the Board of Directors.
(10) In the temporary absence or disability of the CEO and with the
written approval of the majority of the Board of Directors the COO may exercise
any power of the CEO granted in these By-Laws.
Section 4. Creation of the Office of President
-----------------------------------
There is hereby created the office of President of the Company, who
shall be referred to in these By-Laws as the "President" and shall have such
authority as is or may be conferred by the General Corporation Law of the State
of Ohio, the Articles of Incorporation, the Code of Regulations, these By-Laws
of the Company, and resolutions of the Board of Directors.
4
<PAGE> 5
Section 5. Creation of the Office of Executive Vice President
--------------------------------------------------
There is hereby created the office of Executive Vice President of the
Company, who shall be referred to in these By-Laws as the "Executive Vice
President." The Executive Vice President shall have such authority as is or may
be conferred by the Code of Regulations, these By-Laws of the Company, and
resolutions of the Board of Directors.
Section 6. Creation of the Office of Senior Vice President and Vice
--------------------------------------------------------
President
---------
There is hereby created the offices of Senior Vice-President and Vice
President of the Company, who shall be referred to in these By-Laws as "Senior
Vice-President and Vice President." There shall be as many Senior
Vice-Presidents and Vice Presidents as may be created from time to time by
resolution of the Board of Directors and these Senior Vice-Presidents and Vice
Presidents shall have such authority as is or may be conferred by the Code of
Regulations, these By-Laws of the Company, and resolutions of the Board of
Directors. There is hereby created the office of Assistant Vice President of the
Company, who shall be referred to as "Assistant Vice President." There shall be
as many Assistant Vice Presidents with such authority as is conferred by the
Code of Regulations, these By-laws of the Company and resolutions of the Board
of Directors.
Section 7. Creation of the Office of Chief Financial Officer
-------------------------------------------------
There is hereby created the office of Chief Financial Officer of the
Company, who shall be referred to in these By-Laws as the "CFO." The CFO shall
report to the CEO. The CFO shall have such authority as is or may be conferred
by the General Corporation Law of Ohio, the Articles of Incorporation, the Code
of Regulations, the By-Laws of the Company and resolutions of the Board of
Directors, including the primary responsibility for and authority over the
following matters:
(1) The preservation of the balance sheet, and earnings of the company
through planning, budgeting and forecasting.
(2) The development and operation of a system of internal controls to
insure the integrity and reliability of the financial and management accounting
and reporting.
(3) The providing of accurate and timely information, counsel and
judgement to the CEO, the COO, and other officers on the executive team.
(4) The implementation of effective accounting policies and systems
for financial management of the company.
(5) The leadership and integration of related financial management
functions and accountabilities including, controllership, treasury, tax, parts
of strategic planning and investor relations and the internal administration of
stock options, profit sharing trust and other related employee benefits.
Section 8. Creation of the Office of Treasurer
-----------------------------------
There is hereby created the office of Treasurer of the Company, who
shall be referred to in the By-Laws as the "Treasurer". The Treasurer shall
report to the C.F.O. The Treasurer shall have such authority as is or may be
conferred by the General Corporation Law of Ohio,
5
<PAGE> 6
the Articles of Incorporation, the Code of Regulations, the By-Laws of the
Company and resolutions of the Board of Directors.
Section 9. Creation of the Office of Secretary
-----------------------------------
There is hereby created the office of Secretary of the Company, who
shall be referred to in these By-Laws as the "Secretary." The Secretary shall
report to the CEO. The Secretary shall have such authority as is or may be
conferred by the General Corporation Law of Ohio, the Articles of Incorporation,
the Code of Regulations, the By-Laws of the Company and resolutions of the Board
of Directors.
Section 9. Deposits and Bank Accounts
--------------------------
Such general and special bank accounts shall be opened with such banks,
trust companies or other depositories as the Board may designate or select for
the purpose.
All funds of the Company shall be deposited to the credit of the
Company in such depositories unless they are invested in accordance with
directions set forth by resolution of the Board of Directors.
ARTICLE III
COMPENSATION AND RETIREMENT OF DIRECTORS
----------------------------------------
Section 1. Compensation of Directors
-------------------------
The compensation of Directors of the Company shall be established from
time to time by the Board of Directors in accordance with the provision of
Article 4.07 of the Code of Regulations and these By-Laws.
(1) The annual directors fee shall be $ 5,000 payable $1,250 per
quarter.
(2) The Board meeting fee shall be $1,000 per meeting.
(3) The Committee meeting fee shall be $400 per meeting for the
committee members and $500 per meeting for the Chairman.
Section 2. Retirement Ages and Ages for Eligibility for Election
-----------------------------------------------------
(1) Unless an exception is created pursuant to Section 4 hereof, no
Director of the Company shall be eligible to be elected as a Director of the
Company if the term for which the Director is to be elected begins after the
annual meeting of the Company following that Directors' seventieth (70th)
birthday.
(2) Any Director who is no longer eligible for election as a Director
of the Company by virtue of Section 2. (1) above and who is not an Emeritus
Director under Article IV of these By-Laws and is otherwise in good standing,
shall be a retired Director of the Company.
Section 3. Minimum Retirement Age
----------------------
(1) Any Director of the Company may elect to retire by notifying
the Company in writing of such election if,
6
<PAGE> 7
(2) The Director is sixty-two (62) years of age and in good standing
with the Company and if,
(3) The Director has served a minimum of five (5) years as a Director
and if,
(4) The Director has not elected or been granted Emeritus status under
Article IV of these By-Laws.
Section 4. Exception to Retirement and Eligibility for Election Ages
---------------------------------------------------------
(1) The Board of Directors may by resolution adopted by affirmative
vote of seventy-five (75%) percent of the Directors of the Company waive for a
specific period any of the provisions of Section 2 of this Article, as to a
specific individual Director.
(2) The seventy-five (75%) percent affirmative vote shall not include
the vote of the Director affected.
Section 5. Retirement Benefit
------------------
(1) Eligibility:
Any outside Director (non employee) who has retired status in
accordance with the provisions of Article III of these By-Laws and is otherwise
in good standing, shall be entitled to receive the following annual benefit paid
at least in quarterly payments.
(2) The Annual Benefit:
Shall be three percent (3%) of the current annual fee times the
number of whole years of service as a Director.
(A) However, the maximum annual benefit shall be fifty
(50%) percent of the current annual fee.
(B) The annual benefit shall be payable until the death
of the retired Director, or for fifty percent (50%)
of the whole years of service of the retired Director
or for a maximum of ten (10) years, whichever is
first.
Section 6. Vote Required to Change Directors Compensation or Amend this
------------------------------------------------------------
Article III
-----------
The compensation of any Director, Director Emeritus or retired Director
of the Company provided for by Sections 1 or 5 of this Article III shall not be
stopped, reduced or otherwise diminished in any way or from any cause, prior to,
during or following any "business combination" as defined in Article Twelfth of
the Articles of Incorporation of the Company, and Article IV of these By-Laws,
nor shall this Article III of the By-Laws be amended, notwithstanding the
provisions of Article VII of these Company By-Laws, prior to, during or
following any "business combination" as defined in Article Twelfth of the
Company's Articles of Incorporation, unless the stopping, reducing or otherwise
diminishing of Directors compensation or the amending of this section is
approved by 80% of the "continuing Directors"
7
<PAGE> 8
of the Company as "continuing Director" is defined by Article Twelfth of the
Articles of Incorporation of the Company.
Section 7. Alternate Compensation
----------------------
In the event, that contrary to the provisions of Section 6 of this
Articles III of these By-Laws there is in fact, prior to, during or following a
"business combination" as defined in Section 6, a diminution of Director
compensation or a retired Directors retirement benefit from any cause, then
there shall be immediately due and payable, from the Company, to each Director
affected, in one lump sum, together with any court costs and attorney's
necessary to collect it, an amount equal to two times the total compensation
received by that Director or retired Director during the twelve months
immediately preceding the effective date of the act or cause diminishing the
Directors compensation or in the case of a retired Director, an amount equal to
the maximum total amount that the retired Director could possibly receive over
the life of the benefit pursuant to Article II Section 5, plus an amount equal
to any court cost and attorney's fees necessary to collect it.
ARTICLE IV
EMERITUS DIRECTORS
------------------
Section 1. Eligibility For Director Emeritus
---------------------------------
(1) Any Director of the Company who is eligible to be a retired
Director of the Company may upon obtaining such eligibility notify the Company
in writing of the Director's decision to become a Director Emeritus.
(2) Unless the Board at any time by resolution denies the Director
Emeritus such status, the Director shall serve as a Director Emeritus for five
years from the date of election or until the Director Emeritus' seventy-fifth
(75th) birthday, whichever shall occur first.
Section 2. Duties of Director Emeritus
---------------------------
(1) It is the purpose of the Company in creating Directors Emeritus to
preserve for the Board the source of wisdom and experience that the Director
Emeritus represent.
(2) A Director Emeritus shall attend all regular meetings of the Board
and shall offer such advice and expertise as may from time to time be
appropriate.
(3) A Director Emeritus shall attend such committee meetings as
the Board may from time to time direct.
(4) A Director Emeritus may from time to time be assigned special
projects or reports to perform for the Board.
Section 3. Compensation of the Director Emeritus
-------------------------------------
(1) A Director Emeritus shall be paid at the rate of fifty percent
(50%) of the current annual fee paid to Directors of the Company and fifty
percent (50%) of the current fee paid to Directors of the Company for attendance
at meetings.
8
<PAGE> 9
(2) A Director Emeritus shall be paid the same fee for committee
meetings actually attended, as a Director.
Section 4. Exception to Eligibility Requirement for Director Emeritus
----------------------------------------------------------
The Board of Directors may by resolution adopted by affirmative vote of
seventy-five (75%) percent of the Directors of the Company waive for a specific
period any of the provisions of Section 1 of this Article, as to a specific
individual Director.
Section 5. Vote Required to Change Director Emeritus Compensation or Amend
---------------------------------------------------------------
this Article IV
---------------
The compensation of any Director Emeritus of the Company provided for
by Section 3 of this Article IV shall not be stopped, reduced or otherwise
diminished in any way or from any cause, prior to, during or following any
"business combination" as defined in Article Twelfth of the Articles of
Incorporation of the Company, and Article III of these By-Laws, nor shall this
Article IV of the By-Laws be amended, notwithstanding the provisions of Article
VII of these Company By-Laws, prior to, during or following any "business
combination" as defined in Article Twelfth of the Company's Articles of
Incorporation, unless the stopping, reducing or otherwise diminishing of
Directors compensation or the amending of this Section is approved by 80% of the
"continuing Directors" of the Company as "continuing Director" is defined by
Articles Twelfth of the Articles of Incorporation of the Company.
Section 6. Alternate Compensation
----------------------
In the event, that contrary to the provisions of Section 5 of this
Article IV of these By-Laws there is in fact, prior to, during or following a
"business combination" as defined in Article III Section 6, a diminution of a
Director Emeritus' compensation from any cause, then there shall be immediately
due and payable, from the Company, to each Director Emeritus affected, in one
lump sum, together with any court costs and attorney's necessary to collect it,
an amount equal to three times the total compensation received by that Director
Emeritus during the twelve months immediately preceding the effective date of
the act or cause diminishing the Director Emeritus' compensation.
ARTICLE V
STANDING COMMITTEES OF THE BOARD
--------------------------------
The Board of Directors hereby creates the following permanent or
standing committees of the Board, each of which shall consist of not less than
three members chosen by the Board. The Committees shall have the duties and
responsibilities assigned herein, or assigned from time to time by resolution of
the Board.
Section 1. Audit Committee
---------------
The Audit Committee shall consist of three members of the Board
appointed by the Board and shall be responsible for:
(1). Recommending to the Board of Directors the selection of the
independent accountants to be employed by the Company.
9
<PAGE> 10
(2). Reviewing the scope of the independent audit and the results
thereof, including overseeing management's compliance with
auditor's deficiency letters.
(3). Reviewing the Company's internal accounting controls with the
independent auditors and acting as an overseer of the
financial reporting process (including quarterly reports).
(4). Reviewing the management discussion and analysis section of the
annual report with the management of the Company.
(5). Reviewing annually management's program for monitoring compliance
with the Code of Corporate Conduct.
(6). Reviewing the representation letter submitted by management to the
independent auditor.
(7). Reporting to the Board of Directors the activities of the Audit
Committee.
Section 2. Employee Benefits Committee
---------------------------
The Committee shall consist of four members of the Board, appointed
by the Board and shall be responsible for studying on an ongoing basis, the
compensation of the Officers and Directors of the Company and for reporting at
least annually to the Board on the status of the compensation of the Officers
and Directors and for:
(1) Recommending to the Board from time to time, but at least
annually, any changes in the compensation of the Officers and Directors it feels
are appropriate, to review and recommend to the Board of Directors the adoption
of any compensation plans in which Directors and Officers are eligible to
participate.
(2) Preparing such reports as are required by law for the annual
proxy statement.
(3) Studying, advising and recommending to the Board what types of
stock option or stock appreciation plans may be available to the Company and
advising on the desirability, effect and operation of any plan the Company
presently has or might have or might consider in the future.
(4) Assuming such duties or responsibilities for administration and
interpretation of any option plan of the Company as may from time to time be
delegated to the Committee by a plan or by the Board of Directors, including
selection the employees who are to participate in such plans and determining the
terms of their participation.
(5) Performing the duties delegated to it under the Company
employee's profit sharing plan and trust agreement and in addition to its duties
under the Company Employee's Profit Sharing Plan and Trust Agreement, shall be
responsible for advising the Board of Directors with regard to any and all other
ERISA qualified pension, profit sharing or bonus plans established by the
Company.
Section 3. Nominating Committee
--------------------
10
<PAGE> 11
(1) The Committee shall be composed of three members of the Board
of Directors. Two of whom are not officers or employees of the Company. The
Chairman may name such additional ex-officio members as he deems appropriate.
(2) The Committee shall be responsible on an ongoing basis for the
search for, investigation of, recommendation to the Board for nomination of, the
recruitment of, any new candidates for election to the Board of Directors as
they are needed from time to time.
Section 4. Executive Committee
-------------------
(1) This Committee is created pursuant to Article Four, Section
4.09 of the Code of Regulations of the Company. The Executive Committee shall be
composed of four members of the Board of Directors, not less than two of whom
shall be non employee outside Directors.
(2) The Committee shall have authority to act for the Board of
Directors to the extent provided in this By-Law or by future resolution of the
Board of Directors. The Committee will advise management on personnel, legal,
board agenda organization and strategic planning matters.
(3) The Committee shall meet at least quarterly at the call of the
Chairman and when practicable at a time close to the week falling between Board
of Directors' meetings. The Committee shall meet at any other times necessary
for the transaction of its business.
(4) The Committee shall, at any time when it is not practical or in
the best interest of the Company to wait until a Board meeting, have authority
to approve contracts, obligations and transactions of the Company up to
$350,000.
(5) The Committee shall have responsibility for directing or
contracting for the disposition of charitable grants from the amounts of money
set aside annually by the Board of Directors for charitable contributions.
(6) The minutes of the Committee meetings shall be kept and
submitted to the entire Board for approval by the Board, at the next meeting of
the Board, approval of the minutes by the Board of Directors shall constitute
approval of and ratification of all actions of the Committee set forth in those
minutes by the Board of Directors.
Section 5. Finance Committee
-----------------
(1) The Committee shall be composed of four members of the Board of
Directors which shall include not less than two outside non employee Directors,
the Chief Executive Officer and when a member of the Board, the Chief Operating
Officer. The Committee shall be responsible for formulating and presenting
recommendations to the Board of Directors on investment policy, financial
matters, capital structure and allocation, dividends, financing arrangements,
financial planning, budgeting and shall undertake such other duties and
responsibilities relating to corporate financing as the Board of Directors may
from time to time delegate to the Committee.
(2) The Committee shall keep the Board advised on its evaluation of
the financial operations of the Company resulting from its review of the short
and long term financial plans and results of the Company and its consultations
with the Chief Financial Officer, the Treasurer, and the Controller.
11
<PAGE> 12
ARTICLE VI
SHAREHOLDER MEETINGS
--------------------
Section 1. Transaction of Business
-----------------------
No business may be transacted at an annual meeting of stockholders,
other than business that is either (a) specified in the notice of meeting (or
any supplement thereto) given by or at the direction of the Board of Directors
(or any duly authorized committee thereof), (b) otherwise properly brought
before the annual meeting by or at the direction of the Board of Directors (or
any duly authorized committee thereof) or (c) otherwise properly brought before
the annual meeting by any stockholder of the Corporation (i) who is a
stockholder of record on the date of the giving of the notice provided for in
Section 2 of this Article VI and on the record date for the determination of
stockholders entitled to vote at such annual meeting and (ii) who complies with
the notice procedures set forth in the Section 2 of this Article VI. The
nomination by a stockholder of any person for election as a director, other than
the persons nominated by the Board of Directors or any duly authorized committee
thereof, shall be considered business other than business specified in clauses
(a) and (b) above and shall be permitted only upon compliance with the
requirements of this Section 2 of this Article VI.
Section 2. Notice of Business
------------------
In addition to any other applicable requirements for business to be
properly brought before an annual meeting by a stockholder, such stockholder
must have given timely notice thereof in proper written form to the Secretary of
the Corporation.
To be timely, a stockholder's notice to the Secretary must be
delivered to or mailed and received at the principal executive offices of the
Corporation not less than sixty (60) days nor more than ninety (90) days prior
to the anniversary date of the immediately preceding annual meeting of
stockholders; PROVIDED, HOWEVER, that in the event that the annual meeting is
called for on a date that is not within (30) days before or after such
anniversary date, notice by the stockholder in order to be timely must be so
received not later than the close of business on the tenth (10th) day following
the day on which such notice of the date of the annual meeting was mailed or
such public disclosure of the date of the annual meeting was made, whichever
first occurs.
To be in proper written form, a stockholder's notice to the Secretary
must be set forth as to each matter such stockholder proposes to bring before
the annual meeting (i) a brief description of the business described to be
brought before the annual meeting and the reasons for conducting such business
at the annual meeting, (ii) the name and record address of such stockholder,
(iii) the class or series and number of shares of capital stock of the
Corporation which are owned beneficially or of record by such stockholder, (iv)
a description of all arrangements or understandings between such stockholder and
any other person or persons (including their names) in connection with the
proposal of such business by such stockholder and any material interest of such
stockholder in such business, (v) a representation that such stockholder intends
to appear in person or by proxy at the annual meeting to bring such business
before the meeting, and in the case of the nomination of a person as a director,
a brief
12
<PAGE> 13
description of the background and credentials of such person including (A) the
name, age, business address and residence address of such person, (B) the
principal occupation or employment of such person, (C) the class and number of
shares of the Corporation which are beneficially owned by such person, and (D)
any other information relating to such person that is required to be disclosed
in solicitations of proxies for election of Directors, or as otherwise required,
in each case pursuant to Regulation 14A under the Securities Exchange Act of
1934, as amended (including without limitation such person's written consent to
being named in the proxy statement as a nominee and to serving as a director if
elected).
No business shall be conducted at the annual meeting of stockholders
except business brought before the annual meeting in accordance with the
procedures set forth in this Section 2 of this Article VI, PROVIDED, HOWEVER,
that, once business has been properly brought before the annual meeting in
accordance with such procedures, nothing in this Section 2 of this Article VI
shall be deemed to preclude discussion by any stockholder of any such business.
If the Chairman of an annual meeting determines that business was not properly
brought before the meeting in accordance with the foregoing procedures, the
Chairman shall declare to the meeting that the business was not properly brought
before the meeting and such business shall not be transacted.
ARTICLE VII
AMENDMENT OF CODE OF BY-LAWS
----------------------------
At any meeting of the Board, notice of which shall have been given
or waived as required by this Code of By-Laws, this Code may be amended or
repealed in whole or in part, or new By-Laws added thereto and adopted, by the
affirmative vote of the majority of all of the Directors of the Company, except
as provided in Article III Section 6 and Article IV Section 5 of these By-Laws.
13
<PAGE> 1
Exhibit 10.1
MEDEX, INC. ADMINISTRATIVE INCENTIVE STOCK OPTION PLAN II
1. PURPOSE
The purpose of this plan is to provide the additional incentives
inherent in stock ownership to those employees of Medex, Inc. upon whom rest the
major responsibilities for the success of the Company and thereby to bring them
into closer identity with the future of the Company; to strengthen the desire of
such employees to remain in the service of the Company; and in the future to
secure and retain the services of able management personnel in key positions.
This Plan is intended to permit stock options granted under the Plan to qualify
as incentive stock options under Section 422A of the Internal Revenue Code of
1954 as amended. All options granted under this Plan are intended to comply with
the requirements of Section 422A of the Internal Revenue Code. If any provision
of this Plan conflicts with any requirements of Section 422A of the Internal
Revenue Code, then that provision of the Plan shall be void and of no effect.
2. STOCK TO BE OFFERED FOR PURCHASE
The stock which may be purchased pursuant to options granted under this
Plan shall be authorized capital stock of the Company, either unissued or
reacquired. No option shall be granted if as a result thereof, the aggregate
number of shares optioned under this Plan would exceed 1,050,000 shares,
provided, however, in the event of any change as a result of recapitalization,
merger, consolidation, stock dividend, stock split, combination or exchanges of
shares, or otherwise, in character or amount of the Corporation's authorized and
outstanding capital stock subsequent to approval of this plan by the
shareholders, the number of shares available for option under this Plan shall be
the number to which a holder would have been entitled if the unissued options
had been outstanding at the time of the occurrences of the change. However, in
the event that any option granted under this Plan shall terminate for any reason
or be surrendered without having been exercised in full, the shares not
purchased under such option shall again become available for the purposes of the
Plan.
3. ELIGIBILITY
Options may be granted only to those employees of the Corporation or
its subsidiaries who are eligible under applicable provision of law to receive
an "Incentive Stock Option" as defined by the Internal Revenue Code or any
subsequently enacted taxing statute applicable at the time of granting of such
option. Options may be granted only to those employees of the Corporation or of
its subsidiaries whose duties and responsibilities are such that the rate of
compensation of each equals or exceeds $15,000 per annum and such other criteria
as the Board of Directors of the company, ("The Board or Board") may from time
to time establish. No
<PAGE> 2
employee shall be eligible to receive an option within one year prior to his
normal retirement date. An employee, at the time an option is granted, shall not
own stock possessing more than ten (10) percent of the total combined voting
power of all classes of stock of the Corporation or of any subsidiary
corporation unless at the time of such grant, the option price is fixed at not
less than 110 percent of the fair market value of the stock subject to the
option, and exercise of such option is prohibited by its terms after the
expiration of five (5) years from the date such option is granted. No employee
shall be granted options in any calendar year the aggregate fair market value of
which (at the time of grant) is more than $100,000 plus any unused limit carry
over applicable to that year. The preceding sentence shall not apply to options
granted after December 31, 1986.
4. PURCHASE PRICE
The purchase price of the shares under each option shall be the fair
market value of the stock at the time such option is granted, determined by the
"Last Transaction" price (or price of the stock on the last trade) at which
shares of the Company's stock are listed in the "NASDAQ National Market System"
quotation of the over the counter market at the close of business on the date of
granting the option, or if the stock was not so traded on such date, then on the
next date when the stock is regularly traded and quoted on the "NASDAQ National
Market System". The purchase price shall be paid in full prior to the delivery
of the stock. In any transaction to which the Internal Revenue Code, or any
comparable provision subsequently enacted is applicable, the purchase price
shall be determined in a manner consistent therewith.
5. LIMITATIONS ON THE RIGHT TO EXERCISE OPTIONS
(a) Except as otherwise provided by Articles 6 and 7 hereof, no option
shall be exercised unless at the time of such exercise the holder of the option
is in the employment of the Company or one of its subsidiaries. In no event
shall any option be exercised after the expiration of five years from the date
of granting such option. Each option will be exercisable during such option
period as follows:
At any time during the option period the holder of the option may
purchase all or part of the total number of shares to which his option relates.
However, purchases of less than the total number shall be in one hundred (100)
share increments.
(b) No option granted under this Plan shall be assignable or
transferable otherwise than by will or the laws of descent and distribution and
an option may be exercised during the lifetime of the holder thereof only by
him. The holder of an option or his legal representatives, legatees, or
distributes, as the case may be, shall have none of the rights of a shareholder
with respect to any shares subject to such option until such shares have been
issued to him under the terms of this Plan. In no case may anyone
<PAGE> 3
exercise an option for a fraction of a share.
(c) No option granted under this Plan shall be exercisable while there
is outstanding a previously granted option to such holder. For purposes of this
paragraph, the term outstanding shall have the meaning attributed to it under
Section 422A(c)7 of the Internal Revenue Code. This paragraph shall not apply to
options granted after December 31, 1986.
(d) As to all options granted after December 31, 1986, the aggregate
fair market value (determined at the time the option is granted) of the stock
with respect to which incentive stock options are exercisable for the first time
by such individual during any calendar year (under all plans of the Company)
shall not exceed $100,000.
6. TERMINATION OF EMPLOYMENT
If a holder of an option shall retire or shall cease to be employed by
the Company or by a subsidiary of the Company for any reason other than death
after he shall have been continuously so employed for one year from and after
the date of granting his option, he may, but only within three months next
succeeding such retirement or cessation of employment, exercise his option to
the extent that he was entitled to exercise it at the date of such retirement or
cessation. Leaves of absence duly authorized by the Company shall not be deemed
cessation of employment. This Plan will not confer upon a holder of an option
any right with respect to continuance of employment by the Company or by a
subsidiary of the Company; nor will it interfere in any way with his right, or
his employer's right to terminate his employment at any time.
7. DEATH OF HOLDER
In the event of the death of a holder of an option while in the
employment of the Company or of a subsidiary of the Company, or within three
months after termination of such employment, the option shall be exercisable
only within one year following such death and then only (a) by his estate or by
the person or persons who acquired the right to exercise such option by bequest
or inheritance or by reason of the death of the decedent, and (b) if and to the
extent that he was entitled to exercise the option at the date of his death.
8. ADJUSTMENT OF SHARES
In the event of any change as a result of recapitalization, merger,
consolidation, stock dividend, stock splits, combination or exchanges of shares,
or otherwise, in the character or amount of the Company's authorized and
outstanding capital stock prior to the exercise of an option previously granted,
the option, to the extent that it has not been exercised, shall entitle the
holder to purchase the number and kind of securities which he would have been
entitled to receive had he actually owned the stock subject to the
<PAGE> 4
option at the time of the occurrence of such change. If any other event shall
occur, prior to the exercise of an option granted hereunder, which shall
increase or decrease the amount of capital stock outstanding and which the
Board, in its sole discretion, shall determine equitably requires an adjustment
in the number of shares which the holders of options should be permitted to
acquire, such adjustment as the Board shall determine may be made, and when so
made shall be effective and binding for all purposes of the Plan.
9. ADMINISTRATION
The Plan shall be administered by the Board of Directors, ("The
Board"). The Company shall grant all options under the Plan by resolution of the
Board, which options shall be evidenced by the delivery of certificates in a
form approved by the Board. The Board from time to time may adopt rules and
regulations for carrying out the Plan. With respect to persons subject to
Section 16 of the Securities Exchange Act of 1934 ("1934 Act"), transactions
under this plan are intended to comply with all applicable conditions of Rule
16b-3 or its successors under the 1934 Act. To the extent any provision of the
plan or action by the plan administrators fails to so comply, it shall be deemed
null and void, to the extent permitted by law and deemed advisable by the plan
administrators.
10. AMENDMENTS
The Board, may from time to time make such changes in and additions to
the plan as it may deem proper; provided that no change shall be made that
increases the total number of shares covered by the plan or effect any change in
who may receive options under the plan or materially increases the benefits
accruing to optionees hereunder unless such change is authorized by the holders
of the common stock of the Company. Notwithstanding the foregoing, the Board may
amend the plan without shareholder approval, to the extent necessary to cause
Incentive Stock Options granted under the plan to meet the requirements of
Section 422A of the Internal Revenue Code. If any provision of the plan
conflicts with any requirements of Section 422A of the Internal Revenue Code,
then that provision of the plan shall be void and of no effect.
11. COMPANY RESPONSIBILITY
As long as any options remain outstanding, the Company will reserve and
keep available, and will seek to obtain from any regulatory body having
jurisdiction the requisite authority to issue and sell, such number of shares of
its capital stock as shall be sufficient to satisfy the requirements of such
options. The Company shall not be liable in the event of its inability to issue
or sell stock to any holder of an option if such issuance or sale would be
unlawful, nor shall the Company be liable if an issuance or sale to a holder is
subsequently invalidated.
12. EFFECTIVE DATES AND EXTINGUISHMENT OF RIGHTS
<PAGE> 5
The plan shall become effective upon its approval by the shareholders.
The date of granting an option shall be the date of its approval by the Board
and the certificate evidencing such option shall bear that date. Unless sooner
terminated as herein provided, the plan shall terminate upon expiration of ten
years from the date of its approval by the shareholders.
13. PAYMENT
All payment for shares obtained by exercise of options granted under
this plan shall be made by payment of the amount due to the Treasurer of the
Company in cash or by delivery to the Secretary of the Company of sufficient
shares of the Company's common stock, properly endorsed for transfer to the
Company, which when valued at "Last Transaction" price at the close of business
for the previous day on which the stock was traded on the "NASDAQ National
Market System", will equal the payment due for those shares. Any fractional
amount of overpayment received by the Company because of receiving whole shares
may be refunded in cash by the Treasurer.
<PAGE> 1
Exhibit 10.5
MEDEX, INC.
NON-EMPLOYEE DIRECTOR RESTRICTED
STOCK OPTION PLAN IV
1. Purpose
The Medex, Inc. Non-Employee Director Restricted Stock Option Plan IV
(the "Plan") is intended to strengthen the ability of Medex, Inc. (the
"Company") to attract and retain the services of knowledgeable and experienced
persons who, through their efforts and expertise, can make a significant
contribution to the success of the Company's business by serving as members of
the Company's Board of Directors and to provide additional incentive for such
non-employee directors to continue to work for the best interests of the Company
and its stockholders through continuing ownership of its Common Stock, $.01 par
value ("Common Stock"). Accordingly, the Company will grant to each non-employee
director (the "Optionee") an option (the "Option") to purchase shares of Common
Stock of the Company on the terms and conditions hereinafter established.
2. Administration of the Plan
The Plan shall be administered by the Board of Directors of the Company
(the "Board"). The interpretation and construction by the Board of any
provisions of the Plan or of any agreement or other matters related to the Plan
shall be final. The Board may from time to time adopt such rules and regulations
for carrying out the Plan as it may deem advisable. However, no member of the
Board shall have authority or discretion in determining the selection of
participants, the amount, price, or timing of awards to eligible participants
under the plan, all such determinations shall be in accordance with the formula
provisions set forth in Section 4 hereof. No member of the Board shall be liable
for any action or determination made in good faith with respect to the Plan.
With respect to persons subject to Section 16 of the Securities Exchange Act of
1934 ("1934 Act"), transactions under this plan are intended to comply with all
applicable conditions of Rule 16b-3 or its successors under the 1934 Act. To the
extent any provision of the plan or action by the plan administrators fails to
so comply, it shall be deemed null and void, to the extent permitted by law and
deemed advisable by the plan administrators.
3. Stock Subject to the Plan
The shares to be issued under the Plan shall be made available either
from authorized but unissued shares of Common Stock of the Company or from
shares of Common Stock reacquired by the Company, including shares purchased in
the open market.
<PAGE> 2
Shares issued under the Plan shall be subject to the terms, conditions
and restrictions specified in the Plan.
Subject to the provisions of the succeeding paragraphs of this Section
3, the aggregate number of shares which may be issued under the Plan shall not
exceed 135,000 shares.
If prior to termination of the Plan, Options issued under the Plan
shall be reacquired by the Company pursuant to the provisions hereof, such
Options shall again become available for issuance under the Plan.
In the event that the number of outstanding shares of Common Stock of
the Company shall be changed by reason of split-ups, combinations of shares,
recapitalization or stock dividends, the number of shares which may thereafter
be available under the Plan and the number of options held by Optionees and the
option exercise price shall be appropriately adjusted so as to reflect any such
change.
4. Eligibility and Grant of Options
A. An Option to purchase 15,000 shares of the Company's Common Stock
shall automatically be granted under the Plan to each serving non-employee
director of the Company as of the date of the approval of this Plan by the
Employee Benefits Committee of the Board of Directors subject to the
restrictions on exercise set out in Section seven (7) hereof and subject to
approval of this Plan and the transactions set forth herein by the Board of
Directors.
B. Further, any new non-employee director being first elected (elected
for the first time) a director of the Company, following the approval of this
Plan by the Board of Directors and during the term of this Plan, shall
automatically upon election be granted an option to purchase that number of
shares which is determined by multiplying five thousand (5,000) by a number
determined by subtracting the year in which the Director is elected from the
year 1999, and subject to availability of authorized shares remaining in the
Plan. These Options shall also be subject to the restrictions on exercise
contained in Section seven (7) hereof.
C. No non-employee director to whom an Option has been granted or will
be granted shall be eligible to receive additional Options under this Plan.
D. The exercise price for Options granted under this Plan shall be the
fair market value of the stock on the date such Option is granted. Subject to
approval of this Plan and the terms of the options by the Board of Directors,
the date of grant shall be the date this Plan is approved by the Employee
Benefits Committee of the Board of Directors or as to a new non-employee
director elected subsequent to the approval of the Plan by the Board of
Directors,
2
<PAGE> 3
the date of grant shall be the date of election to the Board of Directors. The
fair market value shall be determined by the "last transaction" price (price of
the stock on the last trade) at which shares of the Company's stock are listed
in the "NASDAQ National Market System" quotation of the over the counter market
at the close of business on the date of granting the option, or if no quotation
is made on that date, on the next date such quotation is made.
5. Non-Transferability of Options
The term of the Option shall be for a period of ten years from the date
of grant. The right of the Optionee to purchase Common Stock through the
exercise of the Option, wholly or in part, shall be available to the Optionee at
any time during the term of the Option subject to restrictions on exercise
contained in Sections five (5) and seven (7) hereof.
Options under the Plan may not be sold, assigned, pledged, encumbered
or otherwise transferred by the Optionee except by will or the Laws of descent
and distribution, or pursuant to a qualified domestic relations order as defined
by the Internal Revenue Code of 1986 or Title I of the Employee Retirement
Income Security Act, or upon approval by the Board of Directors.
The Option shall be exercisable by the Optionee only while serving as a
director or director emeritus of the Company or upon his death or cessation of
service as a director or director emeritus of the Company. If the Optionee shall
die while serving as a director or director emeritus of the Company, his
executor, personal representative or beneficiary shall have the right to
exercise the Option at any time within twelve (12) months from the date of
death, with respect to the total number of shares as to which he would be
entitled to exercise at the date of his death, that is, those shares free of all
the restrictions on exercise imposed by Section 7 hereof.
If the Optionee shall cease to serve as a director or director emeritus
of the Company before the Option shall have terminated, the Optionee may
exercise the Option within ninety (90) days after the date on which he ceases to
serve as a director or director emeritus of the Company, as to those shares
which at the close of business on the date of cessation of service as a director
or director emeritus are free of all restrictions on exercise imposed by Section
7 hereof.
6. Exercise of Options
An Optionee electing to exercise an Option under the Plan shall give
written notice to the Company of such election and of the number of shares the
Optionee has elected to acquire. Until
3
<PAGE> 4
the Optionee has been issued a certificate or certificates for the shares so
acquired, the Optionee shall possess no stockholder rights with respect to any
such shares.
7. Restrictions on the Exercise of the Options and Sale of Shares Issued
for Such Options
Options granted pursuant to Section 4(A) and Section 4(B) hereof shall
not be exercised by the Optionee while serving as a non-employee director or
director emeritus except as provided in the following paragraph.
While serving as a director or director emeritus the restriction
against exercise shall lapse cumulatively to the extent of five thousand shares
per year, beginning one year from the date of grant and thereafter on each
anniversary of the date of grant.
Upon the occurrence of the earlier of the death of the Optionee or the
Optionee's cessation of service as a director and director emeritus of the
Company, Options as to which the restrictions on exercise shall not have lapsed
under the Plan, shall immediately lapse and revert to the Plan.
No shares shall be issued upon exercise of Options granted under this
Plan prior to the effective date of an Registration Statement for said shares
with the Securities and Exchange Commission, which the Company shall undertake
to do, or in violation of the requirements of Section 16 of the Securities and
Exchange Act of 1934 and the rules thereunder.
Any questions as to whether and when there has been a cessation of
service as a director or director emeritus shall be determined by the Board and
its determination of such questions shall be final.
8. Acceleration of Exercisability on Change in Control
Upon a Change in Control of the Company, all options theretofore
granted and not previously exercisable for any reason shall become fully
exercisable to the same extent and in the same manner as if they had become
exercisable by passage of time in accordance with the provisions of the Plan
relating to periods of exercisability.
For purposes of the Plan, a "Change in Control" of the Company shall
mean a change in control of a nature that would be required to be reported in
response to Item 6(e) of Schedule 14A of Regulation 14A promulgated under the
Securities Exchange Act of 1934, as amended ("Exchange Act"); provided that,
without limitation, such a change in control shall be deemed to have occurred
if: (A) any "person" ( as such term is used in Sections 13(d) and 14(d) of the
Exchange Act) is or becomes the "beneficial
4
<PAGE> 5
owner" (as defined in Rule 13d-3 under the Exchange Act), directly or
indirectly, of securities of the Corporation representing 20% or more of the
combined voting power of the Company's then outstanding stock; (B) during any
period of two consecutive years, individuals who at the beginning of such period
constitute the Board cease for any reason to constitute a majority thereof,
unless the election, or the nomination for election by the Company's
shareholders, of each new director was approved by a vote of at least two-thirds
of the directors then still in office who were directors at the beginning of the
period; or (C) the business of the Company for which the Optionee's services are
principally performed is disposed of by the Corporation pursuant to a partial or
complete liquidation of the Company or a sale of all or substantially all the
assets of the Corporation.
A Change in Control shall also be deemed to occur if the Company enters
into an agreement, the consummation of which would result in the occurrence of a
Change in Control of the Company.
9. Payment
The option exercise price shall be payable upon the exercise of the
Option and shall be payable in cash, by check or in shares of Medex Common Stock
of the Company. If shares of Common Stock are tendered as payment of the option
exercise price, the value of such shares shall be their fair market value (last
transaction price as listed in the "NASDAQ National Market System" quotation) as
of the date of exercise. If such tender would result in the issuance of
fractional shares of Common Stock, the Company shall instead return the
difference in cash or by check to the Optionee.
10. Amendments to the Plan
The Board of Directors of the Company may terminate or from time to
time amend the Plan, provided that no such termination or amendment without the
approval of the stockholders of the Company shall:
(a) increase the maximum number of shares which may be issued
under the Plan in the aggregate or to each individual.
(b) Modify the requirements as to eligibility for
participation in the Plan.
11. Termination Date of the Plan
The Plan shall terminate four years from the date of its approval by
the Board of Directors; provided, however, Options granted on or before any
termination of the Plan shall remain outstanding and exercisable, in accordance
with their respective terms, after the termination of the Plan; and provided,
further, that the Plan shall terminate as of the date of the next annual
5
<PAGE> 6
shareholders' meeting of the Company if it is not approved by a majority of the
total votes cast on the proposal in person or by proxy.
6
<PAGE> 1
Exhibit 10.6
MEDEX, INC.
1994 EXECUTIVE STOCK OPTION PLAN
ARTICLE I - GENERAL
1.01. PURPOSE.
The purposes of this Executive Stock Option Plan (the "Plan") are to (1)
closely associate the interests of the management of Medex, Inc. and its
subsidiaries (collectively referred to as the "Company") with the shareholders
by reinforcing the relationship between participants' rewards and shareholder
gains; (2) provide management with an equity ownership in the company
commensurate with the Company performance, as reflected in increased shareholder
value; (3) maintain competitive compensation levels; and (4) provide an
incentive to management for continuous employment with the Company.
1.02. ADMINISTRATION.
(a) The Plan shall be administered by the Board of Directors of Medex, Inc.
(the "Board"), as constituted from time to time.
(b) The Board shall have the authority, in its sole discretion and from
time to time to:
(i) designate the employees or classes of employees eligible to
participate in the Plan;
(ii) grant options provided in the Plan in such form and amount as the
Board shall determine;
(iii) impose such limitations, restrictions and conditions upon any such
options as the Board shall deem appropriate; and
(iv) interpret the Plan, adopt, amend and rescind rules and regulations
relating to the Plan, and make all other determinations and take all
other action necessary or advisable for the implementation and
administration of the Plan.
(c) Decisions and determinations of the Board on all matters relating to
the Plan shall be in its sole discretion and shall be conclusive. No member of
the Board shall be liable for any action taken or decision made in good faith
relating to the Plan or any award thereunder.
(d) with respect to persons subject to Section 16 of the Securities
Exchange Act of 1934 ("1934 Act"), transactions under this plan are intended to
comply with all applicable conditions of Rule 16b-3 or its successors under the
1934 Act. To the extent any provisions of the Plan or actions by the Plan
Administrators or participants fail to comply, it shall be deemed null and void,
to the extent permitted by law an deemed advisable by the Plan Administrators.
<PAGE> 2
1.03. ELIGIBILITY FOR PARTICIPATION.
Participants in the Plan shall be selected by the Board from the executive
officers and other key employees of the Company who occupy responsible
managerial or professional positions and who have the capability of making a
substantial contribution to the success of the Company. In making this selection
and in determining the form and amount of awards, the Board shall consider any
factors deemed relevant, including the individual's performance, functions,
responsibilities, value of services to the Company and past and potential
contributions to the Company's profitability and sound growth.
1.04. TYPES OF AWARDS UNDER PLAN.
Awards under the Plan may be in the form of any one or more of the
following:
(i) Nonqualified Stock Options, as described in Article II;
(ii) Incentive Stock Options, as described in Article III;
1.05. AGGREGATE LIMITATION AWARDS.
The stock which may be purchased pursuant to options granted under this
Plan shall be authorized capital stock of the Company, either unissued or
reacquired. No option shall be granted if as a result thereof, the aggregate
number of shares optioned under this Plan would exceed 300,000 shares, provided,
however, in the event of any change as a result of recapitalization, merger,
consolidation, stock dividend, stock split, combination or exchanges of shares,
or otherwise, in character or amount of the Corporation's authorized and
outstanding capital stock subsequent to approval of this plan by the
shareholders, the Board may appropriately adjust the number of shares available
for option under this Plan, the number of shares of Common Stock subject to
options previously granted under the Plan and the option price of options
previously granted under the Plan. However, in the event that any option granted
under this Plan shall terminate for any reason or be surrendered without having
been exercised in full, the shares not purchased under such option shall again
become available for the purposes of the Plan.
1.06. EFFECTIVE DATE AND TERM OF PLAN.
(a) The Plan shall become effective on the date approved by the holders of
a majority of the shares of Common Stock present in person or by proxy and
entitled to vote at the 1994 Annual Meeting of Shareholders of Medex, Inc. When
so approved, the plan shall be deemed to have been in effect from the date of
its adoption by the Board. Prior to Shareholder approval, the Board may grant
options under the Plan, but such options shall be void if the Plan is not
subsequently approved by the Shareholders.
(b) The Plan shall terminate ten years from its adoption by the Board,
provided, however, all options granted under the Plan prior to such date shall
remain in effect until such options have been exercised or terminated in
accordance with the Plan and the terms of such grants.
2
<PAGE> 3
ARTICLE II - NONQUALIFIED STOCK OPTIONS
2.01. AWARD OF STOCK OPTIONS.
The Board may from time to time, and subject to the provisions of the Plan
and such other terms and conditions as the Board may prescribe, grant to any
participant in the Plan one or more options to purchase for cash or shares the
number of shares of Common Stock ("Stock Options") allotted by the Board. The
date a Stock Option is granted shall mean the date selected by the Board as of
which the Board allots a specific number of shares to a participant pursuant to
the Plan.
2.02. STOCK OPTION AGREEMENTS.
The grant of a Stock Option shall be evidenced by a written Stock Option
Agreement, executed by the Company and the holder of a Stock Option (the
"optionee"), stating the number of shares of Common Stock subject to the Stock
Option evidenced thereby, and in such form as the Board may from time to time
determine.
2.03. STOCK OPTION PRICE.
The option price per share of Common Stock deliverable upon the exercise of
a Stock Option shall be 100% of the fair market value of a share of Common Stock
on the date the Stock Option is granted.
2.04. TERM AND EXERCISE.
Each Stock Option shall be fully exercisable six months from the date of
its grant and unless a shorter period is provided by the Board or by another
Section of this Plan, may be exercised during a period of five years from the
date of grant thereof (the "option term"). No Stock Option shall be exercisable
after the expiration of its option term.
2.05. MANNER OF PAYMENT.
Each Stock Option Agreement shall set forth the procedure governing the
exercise of the Stock Option granted thereunder, and shall provide that, upon
such exercise in respect of any shares of Common Stock subject thereto, the
optionee shall pay to the Company, in full, the option price for such shares
with cash or with previously owned Common Stock. As soon as practicable after
receipt of payment, the Company shall deliver to the optionee a certificate or
certificates for such shares of Common Stock. The optionee shall become a
shareholder of the Company with respect to Common Stock represented by share
certificates so issued and such shall be fully entitled to receive dividends, to
vote and to exercise all other rights of a shareholder.
2.06. DEATH OF OPTIONEE.
(a) Upon the death of the optionee, any rights to the extent exercisable on
the date of death may be exercised by the optionee's
3
<PAGE> 4
estate, or by a person who acquires the right to exercise such Stock Option by
bequest or inheritance or by reason of the death of the optionee, provided that
such exercise occurs within both the remaining effective term of the Stock
Option and one year after the optionee's death.
(b) The provisions of this Section shall apply notwithstanding the fact
that the optionee's employment may have terminated prior to death, but only to
the extent of any rights exercisable on the date of death.
2.07. RETIREMENT OR DISABILITY.
Upon termination of the optionee's employment by reason of retirement or
permanent disability (as each is determined by the Board), the optionee may,
within 36 months from the date of termination, exercise any Stock Options to the
extent such options are exercisable during such 36-month period.
2.08. TERMINATION FOR OTHER REASONS.
Except as provided in Sections 2.6 and 2.7, or except as otherwise
determined by the Board, all Stock Options shall terminate upon the termination
of the optionee's employment.
ARTICLE III - INCENTIVE STOCK OPTIONS
3.01. AWARD OF INCENTIVE STOCK OPTIONS.
The Board may, from time to time and subject to the provisions of the Plan
and such other terms and conditions as the Board may prescribe, grant to any
participant in the Plan one or more "incentive stock options" (intended to
qualify as such under the provisions of section 422 of the Internal Revenue Code
of 1986, as amended ("Incentive Stock Options") to purchase for cash or shares
the number of shares of Common Stock allotted by the Board. The date an
Incentive Stock Option is granted shall mean the date selected by the Board as
of which the Board allots a specific number of shares to a participant pursuant
to the Plan. Notwithstanding the foregoing, Incentive Stock Options shall not be
granted to any owner of 10% or more of the total combined voting power of the
Company and its subsidiaries.
3.02. INCENTIVE STOCK OPTION AGREEMENTS.
The grant of an Incentive Stock Option shall be evidenced by a written
Incentive Stock Option Agreement, executed by the Company and the holder of an
Incentive Stock Option (the "optionee"), stating the number of shares of Common
Stock subject to the Incentive Stock Option evidenced thereby, and in such form
as the Board may from time to time determine.
3.03. INCENTIVE STOCK OPTION PRICE.
The option price per share of Common Stock deliverable upon the exercise of
an Incentive Stock Option shall be 100% of the fair market value of a share of
Common Stock on the date the Incentive Stock Option is granted.
4
<PAGE> 5
3.04. TERM AND EXERCISE.
Each Incentive Stock Option shall be fully exercisable six months from the
date of its grant and unless a shorter period is provided by the Board or
another Section of this Plan, may be exercised during a period of five years
from the date of grant thereof (the "option term"). No Incentive Stock Option
shall be exercisable after the expiration of its option term.
3.05. LIMITATION ON INCENTIVE OPTIONS.
The aggregate fair market value (determined at the time the option is
granted) of the stock with respect to which Incentive Stock Options are
exercisable for the first time by such individual during any calendar year
(under all plans of the Company) shall not exceed $100,000.
3.06. DEATH OF OPTIONEE.
(a) Upon the death of the optionee, any Incentive Stock Option exercisable
on the date of death may be exercised by the optionee's estate or by a person
who acquires the right to exercise such Incentive Stock Option by bequest or
inheritance or by reason of the death of the optionee, provided that such
exercise occurs within both the remaining option term of the Incentive Stock
Option and one year after the optionee's death.
(b) The provisions of this Section shall apply notwithstanding the fact
that the optionee's employment may have terminated prior to death, but only to
the extent of any Incentive Stock Options exercisable on the date of death.
3.07. RETIREMENT OR DISABILITY.
Upon the termination of the optionee's employment by reason of permanent
disability or retirement (as each is determined by the Board), the optionee may,
within 36 months from the date of such termination of employment, exercise any
Incentive Stock Options to the extent such Incentive Stock Options were
exercisable at the date of such termination of employment. Notwithstanding the
foregoing, the tax treatment available pursuant to Section 422 of the Internal
Revenue Code of 1986 upon the exercise of an Incentive Stock Option will not be
available to an optionee who exercises any Incentive Stock Options more than (i)
12 months after the date of termination of employment due to permanent
disability or (ii) three months after the date of termination of employment due
to retirement.
3.08. TERMINATION FOR OTHER REASONS.
Except as provided in Sections 3.6 and 3.7 or except as otherwise
determined by the Board, all Incentive Stock Options shall terminate upon the
termination of the optionee's employment.
3.09. MANNER OF PAYMENT.
Each Incentive Stock Option Agreement shall set forth the procedure
governing the exercise of the Incentive Stock Option
5
<PAGE> 6
granted thereunder, and shall provide that, upon such exercise in respect of any
shares of Common Stock subject thereto, the optionee shall pay to the Company,
in full, the option price for such shares with cash or with previously owned
Common Stock.
ARTICLE IV - MISCELLANEOUS
4.01. GENERAL RESTRICTIONS.
Each option award under the Plan shall be subject to the requirement that,
if at any time the Board shall determine that (i) the listing, registration or
qualification of the shares of Common Stock subject or related thereto upon any
securities exchange or under any state or Federal law, or (ii) the consent or
approval of any government regulatory body, or (iii) an agreement by the grantee
of an award with respect to the disposition of shares of Common Stock, is
necessary or desirable as a condition of, or in connection with, the granting of
such award or the issue or purchase of shares of Common Stock thereunder, such
award may not be consummated in whole or in part unless such listing,
registration, qualification, consent, approval or agreement shall have been
effected or obtained free of any conditions not acceptable to the Board. No
individual participant in the Plan shall receive options exceeding the 300,000
aggregate limit contained in Section 1.05.
4.02. NON-ASSIGNABILITY.
No award under the Plan shall be assignable or transferable by the
recipient thereof, except by will or by the laws of descent and distribution.
During the life of the recipient, such award shall be exercisable only by such
person or by such person's guardian or legal representative.
4.03. WITHHOLDING TAXES.
Whenever, under the plan, the exercise of a stock option will result in the
recognition of taxable income by the participant, the Company shall be entitled
to require as a condition of delivery to the participant of shares that the
participant remit to the corporation an amount sufficient to satisfy all
federal, state, and other withholding tax requirements related to the income
recognized by the participant. If a participant makes a disqualifying
disposition of stock acquired upon the exercise of an incentive stock option the
Company shall be entitled to require the participant to remit to the Company an
amount sufficient to satisfy all federal, state, and other withholding tax
requirements related to the income realized by the participant on the
disqualifying disposition. In any case under this Section 4.03 where withholding
by the Company is required, the Company shall have the right to withhold any
such amounts from compensation otherwise due to the participant.
6
<PAGE> 7
4.04. RIGHT TO TERMINATE EMPLOYMENT.
Nothing in the Plan or in any agreement entered into pursuant to the Plan
shall confer upon any participant the right to continue in the employment of the
Company or effect any right which the Company may have to terminate the
employment of such participant.
4.05. NON-UNIFORM DETERMINATIONS.
The Board's determinations under the Plan (including without limitation
determinations of the persons to receive awards, the form, amount and timing of
such awards, the terms and provisions of such awards and the agreements
evidencing same) need not be uniform and may be made by it selectively among
persons who receive, or are eligible to receive, awards under the Plan, whether
or not such persons are similarly situated.
4.06. RIGHTS AS A SHAREHOLDER.
The recipient of any option under the Plan shall have no rights as a
shareholder with respect thereto unless and until certificates for shares of
Common Stock are issued to him.
4.07. DEFINITIONS.
In this Plan the following definitions shall apply:
(a) "Subsidiary" means any corporation of which, at the time more than 50%
of the shares entitled to vote generally in an election of directors are owned
directly or indirectly by Medex, Inc. or any subsidiary thereof.
(b) "Fair market value" as of any date and in respect of any share of
Common Stock means the "Last Transaction" price on such date or on the next
business day, if such date is not a business day, of a share of Common Stock
reflected in the NASDAQ National Market System quotation, provided that, if
deemed appropriate by the Board for any reason, the fair market value of shares
of Common Stock shall be determined by the Board in such other manner as it may
deem appropriate. In no event shall the fair market value of any share of Common
Stock be less than its par value.
4.08. LEAVES OF ABSENCE.
The Board shall be entitled to make such rules, regulations and
determinations as it deems appropriate under the Plan in respect of any leave of
absence taken by the recipient of any award. Without limiting the generality of
the foregoing, the Board shall be entitled to determine (i) whether or not any
such leave of absence shall constitute a termination of employment within the
meaning of the Plan and (ii) the impact, if any, of any such leave of absence on
awards under the Plan theretofore made to any recipient who takes such leave of
absence.
4.09. AMENDMENT OF THE PLAN.
(a) The Board may, without further action by the shareholders and
without receiving further consideration from the participants,
7
<PAGE> 8
amend this Plan or condition or modify awards under this Plan in response to
changes in securities, tax or other laws or rules, regulations or regulatory
interpretations thereof applicable to this Plan or to comply with stock exchange
rules or requirements.
(b) The Board may at any time and from time to time terminate or modify or
amend the Plan in any respect, except that without shareholder approval the
Board may not (i) increase the maximum number of shares of Common Stock which
may be issued under the Plan (other than increases pursuant to Section 1.05),
(ii) extend the period during which any award may be granted or exercised, (iii)
extend the term of the Plan, (iv) materially increase benefits accruing to
participants under the Plan, or (v) materially modify the requirements as to
eligibility for participation in the Plan. The termination or any modification
or amendment of the Plan, except as provided in subsection (a), shall not
without the consent of a participant, affect his or her rights under an award
previously granted to him or her.
8
<PAGE> 1
Exhibit 10.7
MEDEX, INC
KEY EMPLOYEE NONSTATUTORY STOCK OPTION PLAN
1. PURPOSE
The Medex, Inc. Key Employee Nonstatutory Stock Option Plan (the "Plan") is
intended to strengthen the ability of Medex, Inc. (the "Company"), to attract
and retain the services of knowledgeable and experienced persons who, through
their efforts and expertise, can make a significant contribution to the success
of the Company's business, and to provide additional incentive for such key
employees to continue to work for the best interests of the Company and its
stockholders through continuing ownership of its common stock, $.01 par value
("Common Stock"). Accordingly, the Company will grant to key employees (the
"Optionee") options (the "Option") to purchase shares of Common Stock of the
Company on the terms and conditions hereinafter established.
2. ADMINISTRATION OF THE PLAN
The Plan shall be administered by the Board of Directors of the Company (the
"Board"). The interpretation and construction by the Board of any provisions of
the Plan or of any agreement or other matters related to the Plan shall be
final. The Board may from time to time adopt such rules and regulations for
carrying out the Plan as it may deem advisable. No member of the Board shall be
liable for any action or determination made in good faith with respect to the
Plan. The Company shall grant all Options under the Plan by resolution of the
Board, which Options shall be evidenced by the delivery of certificates in a
form approved by the Board. With respect to persons subject to Section 16 of the
Securities Exchange Act of 1934 ("1934 Act"), transactions under this plan are
intended to comply with all applicable conditions of Rule 16b-3 or its
successors under the 1934 Act. To the extent any provisions of the Plan or
actions by the Board or participants fail to comply, it shall be deemed null and
void, to the extent permitted by law and deemed advisable by the Board.
3. STOCK SUBJECT TO THE PLAN
The shares to be issued under the Plan shall be made available either from
authorized but unissued shares of Common Stock of the Company or from shares of
Common Stock reacquired by the Company, including shares purchased in the open
market.
Shares issued under the Plan shall be subject to the terms, conditions and
restrictions specified in the Plan.
<PAGE> 2
Subject to the provisions of the succeeding paragraphs of this Section 3 and
Section 10, the aggregate number of shares which may be issued under the Plan
shall not exceed 1,000,000 shares.
If prior to August 28, 2001, Options issued under the Plan shall be reacquired
by the Company pursuant to the provisions hereof; such Options shall again
become available for granting under the Plan.
4. ELIGIBILITY AND GRANT OF OPTIONS
Options may be granted only to employees of the Company or its subsidiaries. No
employee shall be eligible to receive Options within one (1) year prior to his
normal retirement date. The Options issued herewith shall be nontransferable. No
Options shall be sold, assigned, pledged, encumbered or otherwise transferred by
the Optionee. Subject to the terms and conditions of the Plan, options may be
granted to such key employees in such amounts and at such times as the Board
shall, in its sole discretion, decide.
5. PURCHASE PRICE
The purchase price of the shares under each Option shall be the fair market
value of the stock at the time such Option is granted, determined by the "Last
Transaction" price at which shares of the Company's stock are listed in the
"NASDAQ National Market System" quotation of the over-the-counter market at the
close of business on the date of granting the Option, or if the stock was not so
traded on such date, then on the next date when the stock is regularly traded
and quoted on the "NASDAQ National Market System". The purchase price shall be
paid in full prior to the delivery of the stock.
6. LIMITATIONS ON THE RIGHT TO EXERCISE OPTIONS
Subject to the provisions of Section 7 hereof, no Options shall be exercised
unless at the time of such exercise the holder of the Options is in the
employment of the Company or one of its subsidiaries. In no event shall any
Options be exercised after the expiration of ten years from the date of granting
such Options. Options will be exercisable during such Option period as follows:
(a) No Options shall be exercised until one year after the date of
grant.
(b) At the end of one year from the date of grant, twenty percent
(20%) of the Options granted, and each year thereafter an
additional twenty percent (20%), if they do not expire under
the terms of Section 7, shall be
2
<PAGE> 3
eligible to be exercised until all the granted Options are
free of this limitation.
(c) No Options shall be exercised which do no survive the
expiration provisions of Section 7 hereof.
Any option granted on or after November 15, 1995 may, by action of the Board, be
granted with any limitation, restriction, and/or condition upon the exercise of
such option as the Board may deem appropriate, including the complete waiver of
any limitation, restriction and/or condition on the right to exercise (including
those set forth in Sections 6 or 7 herein), provided those limitations,
restrictions and/or conditions are not in conflict with any section other than 6
or 7 of this Plan.
7. EXPIRATION OF OPTIONS
Each year all Options granted under this Plan which become exercisable under the
provisions of Section 6 of this Plan shall be subject to expiration and
forfeiture in accordance with the provisions of this section.
(a) GOALS: Each year (except 1991 when the date shall be November
1, 1991) prior to May 1, the Board shall set achievement goals
consisting of: the net consolidated sales goal for the Company
for the next fiscal year; the consolidated net income goal for
the Company for the next fiscal year; the net income goal for
each of the operating divisions of the Company, as these
divisions may be determined from year to year by the Board.
Further, the Board achievement goals, each year, shall
identify each Optionee and the division that Optionee shall be
identified with for that year.
(b) FAILURE TO MEET THESE GOALS: Should the Company or any
operating division as defined by the Board fail in the
following fiscal year to attain the goal established as to
consolidated net income, consolidated net sales or divisional
net income as reflected on the financial reports of the
Company, then certain Options granted under this Plan shall
expire.
(c) EXPIRING OPTIONS: Of the Options becoming exercisable in
any year, forty percent (40%) shall expire if the Company
fails to attain the established goal for net income. Of the
Options becoming exercisable in any year, forty percent
(40%) shall expire if the division identified with the
Options fails to attain the established goal for net income
for that division. Of the Options becoming exercisable in
any year, twenty percent (20%) shall expire if the Company
fails to attain the established goal for net sales. Further,
any option
3
<PAGE> 4
granted to a person assigned to an operating division which
fails to have a net income (make a profit) for that fiscal
year and which option would otherwise be exercisable as
provided in Sections 6 and 7 above, shall also expire.
(d) If an Option expires under the provisions of this section it
shall, except as provided for in Section 14, forever be
forfeited as to that Optionee.
(e) If an Option does not expire as provided in this section, it
shall remain exercisable as otherwise provided in the other
sections of this Plan.
Any option granted on or after November 15, 1995 may, by action of the Board, be
granted with such limitations, restrictions, waivers and/or conditions as to the
expiration or forfeiture of such option as the Board may deem appropriate,
including the complete waiver of any limitation, restrictions and/or conditions
relating to the expiration or forfeiture of such options, provided those
limitations, restrictions, waivers and/or conditions are not in conflict with
any section other than 6 or 7 of this Plan.
8. TERMINATION OF EMPLOYMENT
If a holder of an Option shall retire or shall cease to be employed by the
Company or by a subsidiary of the Company for any reason other than death after
Optionee shall have been continuously so employed for one year from and after
the date of granting his Option, Optionee may, but only within 90 days next
succeeding such retirement or cessation of employment, exercise his Options to
the extent that Optionee was entitled to exercise it at the date of such
retirement or cessation. Provided, however, the Board may, at its sole
discretion, extend the period within which an Optionee who ceased to be employee
from 90 days to a maximum of three (3) years from the date of retirement or
cessation of employment. Leaves of absence duly authorized by the Company shall
not be deemed cessation of employment. This Plan will not confer upon a holder
of Options any right with respect to continuance of employment by the Company or
by a subsidiary of the Company; nor will it interfere in any way with his right,
or his employer's right to terminate his employment at any time.
9. DEATH OF HOLDER
In the event of the death of a holder of Options while in the employment of the
Company or of a subsidiary of the Company, or within three months after
termination of such employment, the Options shall be exercisable only within one
year following such death and then only (a) by his estate representative or by
the person or persons who acquired the right to exercise such Options
4
<PAGE> 5
by bequest or inheritance by reason of the death of the decedent, and (b) only
to the extent that Optionee was entitled to exercise the Options at the date of
his death.
10. ADJUSTMENT OF SHARES
In the event of any change as a result of recapitalization, merger,
consolidation, stock dividend, stock splits, combination or exchanges of shares,
or otherwise, in the character or amount of the Company's authorized and
outstanding capital stock prior to the exercise of an Option previously granted,
the Option, to the extent that it has not been exercised, shall entitle the
holder to purchase the number and kind of securities which Optionee would have
been entitled to receive had Optionee actually owned the stock subject to the
Option at the time of the occurrence of such change. If any other event shall
occur, prior to the exercise of an Option granted hereunder, which shall
increase or decrease the amount of capital stock outstanding and which the
Board, in its sole discretion, shall determine equitably requires an adjustment
in the number of shares which the holders of Options should be permitted to
acquire, such adjustment as the Board shall determine may be made, and when so
made shall be effective and binding for all purposes of the Plan.
11. AMENDMENTS
The Board may from time to time make such changes and amendments to the Plan as
it may deem necessary.
12. COMPANY RESPONSIBILITY
As long as any Options remain outstanding, the Company will reserve and keep
available, and will seek to obtain from any regulatory body having jurisdiction
the requisite authority to issue and sell, such number of shares of its capital
stock as shall be sufficient to satisfy the requirements of such Options. The
Company shall not be liable in the event of its inability to issue or sell stock
to any holder of Options if such issuance or sale would be unlawful, nor shall
the Company be liable if an issuance or sale to a holder is subsequently
invalidated.
13. EFFECTIVE DATES AND EXTINGUISHMENT OF RIGHTS
The Plan shall become fully effective upon its approval by the shareholders. The
date of granting an Option shall be the date of its award by resolution of the
Board and the certificate evidencing such Option shall bear that date. Unless
sooner terminated as
5
<PAGE> 6
herein provided, the Plan shall terminate upon expiration of ten years from the
date of its approval by the shareholders.
14. ACCELERATION OF EXERCISABILITY ON CHANGE IN CONTROL
Upon a change in control of the Company, all Options theretofore granted and not
previously exercisable or previously expired by virtue of Section 7, shall
become fully exercisable to the same extent and in the same manner as if they
had become exercisable by passage of the time in accordance with the provisions
of the Plan relating to periods of exercisability.
For purposes of this Plan, a "change in control of the Company" shall mean:
(a) A change in control of a nature that would be required to be
reported in response to Item 6(e) of Schedule 14A of
Regulation 14A promulgated under the Securities Exchange Act
of 1934, as amended ("Exchange Act"); provided that, without
limitation, such a change in control shall be deemed to have
occurred if (i) any "person" (as such term is used in Sections
13(d) and 14(d) of the Exchange Act) is or becomes the
"beneficial owner" (as defined in Rule 13d-3 under the
Exchange Act), directly or indirectly, of securities of the
Company representing 20% or more of the combined voting power
of the Company's then outstanding securities, or
(b) During any period of two consecutive years, individuals who at
the beginning of such period constitute the Board cease for
any reason to constitute at least a majority thereof unless
the election, or the nomination for election by the Company's
stockholders, of each new director was approved by a vote of
at least two-thirds of the directors then still in office who
were directors at the beginning of the period, or
(c) The Company shall have merged into or consolidated with
another corporation, or merged another corporation into the
Company, on a basis whereby less than 50% of the total voting
power of the surviving corporation is represented by shares
held by former shareholders of the Company prior to such
merger or consolidation, or
(d) The Company shall have sold substantially all of its
assets to another corporation or other entity or person.
(e) Provided further, however, that any of the events described
in subparagraphs (a), (b), (c) or (d) above shall not cause
the acceleration of exercisability, described in this
Section, to become operative and there
6
<PAGE> 7
shall be no change of control if the event described in
subparagraphs (a), (b), (c) or (d) is approved by a
two-thirds (2/3) vote of the total non-employee membership
of the Board of Directors of the Company and a majority of
the continuing non-employee directors (as hereinafter
defined) of the Company at the time of said vote. The term
continuing non-employee directors shall mean those members
of the Board of Directors of the Company not otherwise
employed by the Company and elected by the shareholders or
otherwise appointed prior to the occurrence of any of the
events described in subparagraphs (a), (b), (c) or (d)
above.
15. PAYMENT
All payment for shares obtained by exercise of Options granted under the Plan
shall be made by payment of the amount due to the Treasurer of the Company in
cash or by delivery to the Secretary of the Company of sufficient shares of the
Company's Common Stock, properly endorsed for transfer to the Company, which
when valued at "Last Transaction" price at the close of business for the
previous day on which the stock was traded on the "NASDAQ National Market
System," will equal the payment due for those shares. Any fractional amount of
overpayment received by the Company because of receiving whole shares may be
refunded in cash by the Treasurer.
Notwithstanding any of the foregoing restrictions, any free or restricted
Options acquired under the Plan may at any time be pledged or otherwise
hypothecated to secure borrowings by the Optionee to obtain the acquisition
price to be paid by the Optionee for such shares; provided, however, that the
amount of such borrowings may not exceed the acquisition price of such shares.
7
<PAGE> 1
Exhibit 10.8
INDEMNITY AGREEMENT OF EXECUTIVE OFFICER
AGREEMENT, effective as of ________, 19____, between MEDEX, INC., an
Ohio corporation (the "Company"), and ___________________________ (the
"Indemnitee"), ____________________________.
WHEREAS, it is essential to the Company to retain and attract as
officers the most capable persons available;
WHEREAS, both the Company and Indemnitee recognize the increased risk
of litigation and other Claims being asserted against officers of public
companies in today's environment;
WHEREAS, there is a general awareness that competent and experienced
persons are becoming more reluctant to serve as officers of a corporation unless
they are protected by comprehensive insurance and/or indemnification, especially
since shareholder and derivative lawsuits against publicly-held corporations and
their officers for line-of-duty decisions and actions have increased in number
in recent years for damages in amounts which have no reasonable or logical
relationship to the amount of compensation received by the officers from the
corporation, and
WHEREAS, the vagaries of "public policy" and the interpretations of
ambiguous statutes and regulations are too uncertain to provide officers with
adequate, reliable knowledge of legal risks to which they may be exposed with
these indeterminables, and
WHEREAS, damages sought by class action plaintiffs in some cases amount
to tens of millions of dollars and, whether or not the case is meritorious, the
cost of defending them is enormous with few individual officers having the
resources to sustain such legal costs, not to mention the risk of a judgment
running into millions even in cases where the defendant was neither culpable nor
profited personally to the detriment of the corporation, and
WHEREAS, Section 1701.13 of the General Corporation Law of the State of
Ohio, under which the Company is organized, empowers corporations to indemnify
persons serving as a director, officer, employee or agent of the corporation or
a person who serves at the request of the corporation as a director, trustee,
officer, employee, member, manager or agent of another corporation, limited
liability company, partnership, joint venture, trust or other enterprise, and
further specifies that the indemnification set forth in said section "shall not
be exclusive, and shall be in addition to, any other rights granted to those
seeking indemnification under the articles, the regulations, any agreement, a
vote of shareholders or disinterested directors, or otherwise," and
WHEREAS, in recognition of Indemnitee's need for substantial protection
against personal liability in order to enhance Indemnitee's service to the
Company in an effective manner, the increasing difficulty in obtaining
satisfactory directors' and officers' liability insurance coverage, and in part
to provide Indemnitee with specific contractual assurance that
<PAGE> 2
protection will be available to Indemnitee (regardless of, among other things,
any amendment to or revocation of the Articles of Incorporation ("Articles"),
Code of Regulations ("Regulations") or Bylaws ("Bylaws") of the Company or any
change in the composition of the Company's Board of Directors or acquisition
transaction relating to the Company), the Company wishes to provide in this
Agreement for the indemnification of and the advancing of expenses to Indemnitee
to the full extent (whether partial or complete) authorized or permitted by law
and as set forth in this Agreement, and for the continued coverage of Indemnitee
under the Company's directors' and officers' liability insurance policies, and
WHEREAS, Indemnitee is unwilling to serve or to continue to serve the
Company as an executive officer without the assurances provided by this
Agreement; and the Company in order to induce Indemnitee to serve or continue to
serve as an executive officer has agreed to provide Indemnitee with the benefits
contemplated by this Agreement;
NOW, THEREFORE, in consideration of the premises and of Indemnitee
agreeing to serve or to continue to serve the Company directly or, at its
request, another enterprise, and intending to be legally bound hereby, the
parties hereto agree as follows:
I. Basic Indemnification Arrangement.
(a) In the event Indemnitee was, is, or becomes a party to or
witness or other participant in, or is threatened to be made a party to or
witness or other participant in, a Claim by reason of (or arising in part out
of) an Indemnifiable Event, the Company shall indemnify Indemnitee to the full
extent authorized or permitted by law as soon as practicable but in any event no
later than thirty (30) days after written demand is presented to the Company,
against any and all Expenses, judgments, fines, penalties and amounts paid in
settlement (including all interest, assessments and other charges paid or
payable in connection with or in respect of such Expenses, judgments, fines,
penalties or amounts paid in settlement) of such Claim; provided, however, that,
except for proceedings to enforce rights to indemnification, the Company shall
not be obligated to indemnify Indemnitee in connection with a proceeding (or
part thereof) initiated by Indemnitee unless such proceeding (or part thereof)
was authorized in advance, or unanimously consented to, by the Board of
Directors of the Company; and provided further that the Company shall not be
obligated to indemnify Indemnitee hereunder for an Indemnifiable Event which is
not (i) authorized by the Company's Board of Directors or (ii) otherwise within
the authority of the Indemnitee. If so requested by Indemnitee, the Company
shall advance (within two (2) business days of such request) any and all
Expenses to Indemnitee (an "Expense Advance").
(b) Notwithstanding the foregoing, (i) the obligations of the
Company under Section 1(a) shall be subject to the condition that the Reviewing
Party shall not have determined (in a written opinion, in any case in which the
Independent Legal Counsel referred to in Section 2 hereof is involved) that
Indemnitee would not be permitted to be indemnified under applicable law, and
(ii) the obligation of the Company to make an Expense Advance pursuant to
-2-
<PAGE> 3
Section 1(a) shall be subject to the condition that, if, when and to the extent
that the Reviewing Party determines that Indemnitee would not be permitted to be
so indemnified under applicable law, the Company shall be entitled to be
reimbursed by Indemnitee (who hereby agrees to reimburse the Company) for all
such amounts theretofore paid; provided, however, that if Indemnitee has
commenced or thereafter commences legal proceedings in a court of competent
jurisdiction to secure a determination that Indemnitee should be indemnified
under applicable law, any determination made by the Reviewing Party that
Indemnitee would not be permitted to be indemnified under applicable law shall
not be binding and Indemnitee shall not be required to reimburse the Company for
any Expense Advance until a final judicial determination is made with respect
thereto (as to which all rights of appeal therefrom have been exhausted or
lapsed). If there has not been a Change in Control, the Reviewing Party shall be
selected by the Company's Board of Directors, and if there has been such a
Change in Control, the Reviewing Party shall be the Independent Legal Counsel
referred to in Section 2 hereof. If there has been no determination by the
Reviewing Party or if the Reviewing Party determines that Indemnitee
substantively would not be permitted to be indemnified in whole or in part under
applicable law, Indemnitee shall have the right to commence litigation in any
court in the State of Ohio having subject matter jurisdiction thereof and in
which venue is proper seeking an initial determination by the court or
challenging any such determination by the Reviewing Party or any aspect thereof,
including the legal or factual bases therefor, and the Company hereby consents
to service of process and to appear in any such proceeding. Any determination by
the Reviewing Party otherwise shall be conclusive and binding on the Company and
Indemnitee.
(c) No change in the Company's Articles, Regulations or Bylaws
or in the General Corporation Law of the State of Ohio subsequent to the date of
this Agreement shall have the effect of limiting or eliminating the
indemnification available under this Agreement as to any act, omission or
capacity for which this Agreement provides indemnification at the time of such
act, omission or capacity. If any change after the date of this Agreement in any
applicable law, statute or rule expands the power of the Company to indemnify
the Indemnitee, such change shall to the same extent expand the Indemnitee's
rights and the Company's obligations under this Agreement. If any change in any
applicable law, statute or rule diminishes the power of the Company to Indemnify
the Indemnitee, such change, except to the extent otherwise required by law,
statute or rule to be applied to this Agreement, shall have no effect on this
Agreement or the parties' rights and obligations hereunder.
2. Change in Control. The Company agrees that if there is a Change in
Control of the Company, then with respect to all matters thereafter arising
concerning the rights of Indemnitee to indemnity payments and Expense Advances
under this Agreement or any other agreement, or any Article, Regulation, or
Bylaw provision now or hereinafter in effect relating to Claims for
Indemnifiable Events, the Company shall seek legal advice only from Independent
Legal Counsel selected by Indemnitee and approved by the Company (which approval
shall not be unreasonably withheld). Such counsel, among other things, shall
render its written opinion to the Company and Indemnitee as to whether and to
what extent the Indemnitee would be permitted to be indemnified under applicable
law. The Company agrees to pay the reasonable fees of the Independent Legal
Counsel referred to above and to fully indemnify such counsel
-3-
<PAGE> 4
against any and all expenses (including attorneys' fees), claims, liabilities
and damages arising out of or relating to this Agreement or its engagement
pursuant hereto.
3. Indemnification for Additional Expenses. The Company shall indemnify
Indemnitee against any and all expenses (including attorneys' fees) and, if
requested by Indemnitee, shall (within two (2) business days of such request)
advance such expenses to Indemnitee, which are incurred by Indemnitee in
connection with any action brought by Indemnitee for (i) indemnification or
advance payment of Expenses by the Company under this Agreement or any other
agreement, or any Article, Regulation or Bylaw provision now or hereafter in
effect relating to Claims for Indemnifiable Events and/or (ii) recovery under
any directors' and officers' liability insurance policies maintained by the
Company; provided, however, that if there is a final judicial determination (as
to which all rights of appeal therefrom have been exhausted or lapsed) that
Indemnitee is not entitled to such indemnification, advance payment of expenses
or insurance recovery, Indemnitee shall reimburse the Company for all such
expenses theretofore paid under this Section 3.
4. Partial Indemnity, Etc. If indemnitee is entitled under any
provision of this Agreement to indemnification by the Company for some or a
portion of the Expenses, judgments, fines, penalties and amounts paid in
settlement of a Claim but not, however, for all of the total amount thereof, the
Company shall nevertheless indemnify Indemnitee for the portion thereof to which
Indemnitee is entitled. Moreover, notwithstanding any other provision of this
Agreement, to the extent that Indemnitee has been successful on the merits or
otherwise in defense of any or all Claims relating in whole or in part to an
Indemnifiable Event or in defense of any issue or matter therein, including
dismissal without prejudice, Indemnitee shall be indemnified against all
Expenses incurred in connection therewith.
5. Burden of Proof. In connection with any determination by the
Reviewing Party or otherwise as to whether Indemnitee is entitled to be
indemnified hereunder, the burden of proof shall be on the Company to establish
that Indemnitee is not so entitled.
6. No Presumptions. For purposes of this Agreement, the termination of
any claim, action, suit or proceeding, by judgment, order, settlement (whether
with or without court approval) or conviction, or upon a plea of nolo
contendere, or its equivalent, shall not create a presumption that Indemnitee
did not meet any particular standard of conduct or have any particular belief or
that a court has determined that indemnification is not permitted by applicable
law. In addition, neither the failure of the Reviewing Party to have made a
determination as to whether Indemnitee has met any particular standard of
conduct or had any particular belief, nor an actual determination by a Reviewing
Party that Indemnitee has not met such standard of conduct or did not have such
belief, prior to the commencement of legal proceedings by Indemnitee to secure a
judicial determination that Indemnitee should be indemnified under applicable
law shall be a defense to Indemnitee's claim or create a presumption that
Indemnitee has not met any particular standard of conduct or did not have any
particular belief.
7. Nonexclusivity, Etc. The rights of the Indemnitee hereunder shall be
in addition
-4-
<PAGE> 5
to any other rights Indemnitee may have under the Articles, Regulations, Bylaws
or the Ohio General Corporation Law or otherwise. To the extent that a change in
the Ohio General Corporation Law (whether by statute or judicial decision)
permits greater indemnification by agreement than would be afforded currently
under the Articles, Regulations, Bylaws and this Agreement, it is the intent of
the parties hereto that Indemnitee shall enjoy by this Agreement the greater
benefits so afforded by such change.
8. Liability Insurance.
(a) The Company hereby represents and warrants that the
Company has purchased and maintains directors' and officers' liability insurance
consisting of a primary policy issued by The Cincinnati Insurance Company
providing $5,000,000 in coverage (the "D&O Insurance").
(b) The Company hereby covenants and agrees that, so long as
Indemnitee shall continue to serve as an executive officer of the Company and
thereafter so long as Indemnitee 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 Indemnitee was an
executive officer of the Company, the Company shall maintain in full force and
effect the D&O Insurance, or substantially equivalent insurance coverage;
provided, however, that the Company shall not be obligated hereunder to pay
annual premiums for directors' and officers' liability insurance in excess of
one hundred fifty percent (150%) of the annualized rate of premiums paid by the
Company for D&O Insurance in Fiscal Year 1995 (the "Increased Rate"), and if the
premiums for such insurance coverage would exceed the Increased Rate in any
fiscal year, and the Company determines not to spend in excess of the Increased
Rate, the Company shall endeavor to retain such type of coverage by amending the
levels of self-insured retention and/or limits of liability of such insurance
coverage so as not to exceed the Increased Rate.
(c) In all policies of D&O Insurance, Indemnitee shall be
named as an insured in such manner as to provide Indemnitee the same rights and
benefits, subject to the same limitations, as are accorded to the Company's
directors or officers most favorably insured by such policy.
9. Period of Limitations. No legal action shall be brought and no cause
of action shall be asserted by or in the right of the Company against
Indemnitee, Indemnitee's spouse, heirs, executors or personal or legal
representatives after the expiration of two (2) years from the date of accrual
of such cause of action, and any Claim or cause of action of the Company shall
be extinguished and deemed released unless asserted by the timely filing of a
legal action within such two (2) year period; provided, however, that if any
shorter period of limitations is otherwise applicable to any such cause of
action such shorter period shall govern.
10. Notices
(a) The Indemnitee shall give to the Company notice in writing as soon
as practicable of
-5-
<PAGE> 6
any Claim made against him for which indemnification will or
could be sought under this Agreement. Failure to give such notice shall not be
cause for the Company not to indemnify Indemnitee or advance Expenses unless the
Company can demonstrate that it was prejudiced by such failure.
(b) Notices shall be in writing and shall be either personally
delivered or sent by Federal Express of other reputable overnight courier for
next business day delivery, or sent by certified mail, return receipt requested,
addressed as follows:
If to the Company: Medex, Inc.
3637 Lacon Road
Hilliard, Ohio 43026
Attn: Chief Executive Officer
Attn: General Counsel
If to the Indemnitee: at Indemnitee's address stated above
or at such other address as from time to time designated by written notice
delivered in accordance herewith. Any notice personally served shall be deemed
delivered on the date of such service. Any notice sent by overnight courier as
provided above shall be deemed delivered on the first business day after the
date such notice was actually delivered by such overnight courier or refused.
Any notice sent by mail as provided above shall be deemed delivered on the date
of actual receipt or refusal thereof.
11. Amendments, Etc. No supplement, modification or amendment of this
Agreement shall be binding unless executed in writing by both of the parties
hereto. No waiver of any of the provisions of this Agreement shall be deemed or
shall constitute a waiver of any other provisions hereof (whether or not
similar) nor shall such waiver constitute a continuing waiver.
12. Subrogation. In the event of payment under this Agreement, the
Company shall be subrogated to the extent of such payment to all of the rights
of recovery of Indemnitee, who shall execute all papers required and shall do
everything that may be necessary to secure such rights, including the execution
of such documents necessary to enable the Company effectively to bring suit to
enforce such rights.
13. No Duplication of Payments. The Company shall not be liable under
this Agreement to make any payment in connection with any Claim made against
Indemnitee to the extent Indemnitee has otherwise actually received payment
(under any insurance policy, the Articles, Regulations, Bylaws or otherwise) of
the amounts otherwise indemnifiable hereunder.
14. Binding Effect, Etc. This Agreement shall be binding upon and inure
to the benefit of and be enforceable by the parties hereto and their respective
successors, assigns,
-6-
<PAGE> 7
including any direct or indirect successor by purchase, merger, consolidation or
otherwise to all or substantially all of the business and/or assets of the
Company, spouses, heirs, executors and personal and legal representatives. This
Agreement shall continue in effect regardless of whether Indemnitee continues to
serve as an executive officer of the Company.
15. Severability. The provisions of this Agreement shall be severable
in the event that any of the provisions hereof (including any provision within a
single section, paragraph or sentence) is held by a court of competent
jurisdiction to be invalid, void or otherwise unenforceable in any respect, and
the validity and enforceability of any such provision in every other respect and
of the remaining provisions hereof shall not be in any way impaired and shall
remain enforceable to the full extent permitted by law.
16. Governing Law. This Agreement shall be governed by and construed
and enforced in accordance with the laws of the State of Ohio applicable to
contracts made and to be performed in such state without giving effect to the
principles of conflicts of laws.
17. Certain Definitions.
(a) Change in Control: A Change in Control shall be deemed to
have occurred if (i) during any period of two (2) consecutive years, individuals
who at the beginning of such period constituted the Board of Directors and any
new directors, whose election by the Board of Directors or nomination for
election by the Company's stockholders was approved by a vote of at least three
quarters (3/4) of the directors then still in office who either were directors
at the beginning of the period or whose election or nomination for election was
previously so approved (the "Continuing Directors"), cease for any reason to
constitute a majority thereof; or (ii) any individual, partnership, firm,
corporation, association, trust, unincorporated organization or other entity, or
any syndicate or group deemed to be a person under Section 14(d)(2) of the
Exchange Act (other than a trustee or other fiduciary holding securities under
an employee benefit plan of the Company or a corporation owned directly or
indirectly by the stockholders of the Company in substantially the same
proportions as their ownership of stock of the Company), is or becomes the
"beneficial owner" (as defined in Rule 13d-3 of the General Rules and
Regulations under the Exchange Act), directly or indirectly, of securities of
the Company representing 20% or more of the total voting power represented by
the Company's then outstanding Voting Securities in a transaction which has not
been approved by the Continuing Directors; or (iii) the stockholders of the
Company approve a merger or consolidation of the Company with any other
corporation, other than a merger or consolidation which (A) has been approved by
the Continuing Directors or (B) would result in the Voting Securities of the
Company outstanding immediately prior thereto continuing to represent (either by
remaining outstanding or by being converted into Voting Securities of the
surviving entity) at least 80% of the total voting power represented by the
Voting Securities of the Company or such surviving entity outstanding
immediately after such merger or consolidation; or (iv) the stockholders of the
Company approve a plan of complete liquidation of the Company or an agreement
for the sale or disposition by the Company of (in one transaction or a series of
transactions) all or substantially all the Company's assets.
-7-
<PAGE> 8
(b) Claim: any threatened, pending or completed action, suit
or proceeding, or any inquiry or investigation, whether instituted by or in the
right of the Company or any other party, that Indemnitee in good faith believes
might lead to the institution of any such action, suit or proceeding, whether
civil, criminal, administrative, investigative or other, arising in connection
with an Indemnifiable Event.
(c) Expenses: include attorneys' fees and all other costs,
expenses and obligations paid or incurred in connection with investigating,
defending, being a witness in or participating in (including on appeal), or
preparing to defend, be a witness in or participate in any Claim relating to any
Indemnifiable Event.
(d) Indemnifiable Event: any event or occurrence related to
the fact that Indemnitee is or was an executive officer of the Company, or is or
was serving at the request of the Company as a director, officer, or trustee of
another corporation, trust or other enterprise, or by reason of anything done or
not done by Indemnitee in any such capacity.
(e) Independent Legal Counsel: an attorney or firm of
attorneys, selected in accordance with the provisions of Section 2, who shall
not have otherwise performed services for the Company or Indemnitee within the
last five (5) years.
(f) Reviewing Party: any appropriate person or body consisting
of a member of members of the Company's Board of Directors or any other person
or body appointed by the Board who is not a party to the particular Claim for
which Indemnitee is seeking indemnification, or Independent Legal Counsel.
(g) Voting Securities: any securities of the Company which
vote generally in the election of directors.
-8-
<PAGE> 9
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
this ____ day of _______________, 19_____.
_____________________________
By:
Name:
Title:
_______________________________________
Indemnitee
-9-
<PAGE> 10
Exhibit 10.8
INDEMNITY AGREEMENT OF DIRECTOR
AGREEMENT, effective as of _________________, 19__, between MEDEX,
INC., an Ohio corporation (the "Company"), and _______________________ (the
"Indemnitee"),
- --------------------.
WHEREAS, it is essential to the Company to retain and attract as
directors the most capable persons available;
WHEREAS, both the Company and Indemnitee recognize the increased risk
of litigation and other Claims being asserted against directors of public
companies in today's environment;
WHEREAS, there is a general awareness that competent and experienced
persons are becoming more reluctant to serve as directors of a corporation
unless they are protected by comprehensive insurance and/or indemnification,
especially since shareholder and derivative lawsuits against publicly-held
corporations and their directors for line-of-duty decisions and actions have
increased in number in recent years for damages in amounts which have no
reasonable or logical relationship to the amount of compensation received by the
directors from the corporation, and
WHEREAS, the vagaries of "public policy" and the interpretations of
ambiguous statutes and regulations are too uncertain to provide directors with
adequate, reliable knowledge of legal risks to which they may be exposed with
these indeterminables, and
WHEREAS, damages sought by class action plaintiffs in some cases amount
to tens of millions of dollars and, whether or not the case is meritorious, the
cost of defending them is enormous with few individual directors having the
resources to sustain such legal costs, not to mention the risk of a judgment
running into millions even in cases where the defendant was neither culpable nor
profited personally to the detriment of the corporation, and
WHEREAS, Section 1701.13 of the General Corporation Law of the State of
Ohio, under which the Company is organized, empowers corporations to indemnify
persons serving as a director, officer, employee or agent of the corporation or
a person who serves at the request of the corporation as a director, trustee,
officer, employee, member, manager or agent of another corporation, limited
liability company, partnership, joint venture, trust or other enterprise, and
further specifies that the indemnification set forth in said section "shall not
be exclusive, and shall be in addition to, any other rights granted to those
seeking indemnification under the articles, the regulations, any agreement, a
vote of shareholders or disinterested directors, or otherwise," and
WHEREAS, in recognition of Indemnitee's need for substantial protection
against personal liability in order to enhance Indemnitee's service to the
Company in an effective manner, the increasing difficulty in obtaining
satisfactory directors' and officers' liability insurance coverage, and in part
to provide Indemnitee with specific contractual assurance that protection will
be available to Indemnitee (regardless of, among other things, any amendment to
<PAGE> 11
or revocation of the Articles of Incorporation ("Articles"), Code of Regulations
("Regulations") or Bylaws ("Bylaws") of the Company or any change in the
composition of the Company's Board of Directors or acquisition transaction
relating to the Company), the Company wishes to provide in this Agreement for
the indemnification of and the advancing of expenses to Indemnitee to the full
extent (whether partial or complete) authorized or permitted by law and as set
forth in this Agreement, and for the continued coverage of Indemnitee under the
Company's directors' and officers' liability insurance policies, and
WHEREAS, Indemnitee is unwilling to serve or to continue to serve the
Company as a director without the assurances provided by this Agreement; and the
Company in order to induce Indemnitee to serve or continue to serve as a
director has agreed to provide Indemnitee with the benefits contemplated by this
Agreement;
NOW, THEREFORE, in consideration of the premises and of Indemnitee
agreeing to serve or to continue to serve the Company directly or, at its
request, another enterprise, and intending to be legally bound hereby, the
parties hereto agree as follows:
I. Basic Indemnification Arrangement.
(a) In the event Indemnitee was, is, or becomes a party to or
witness or other participant in, or is threatened to be made a party to or
witness or other participant in, a Claim by reason of (or arising in part out
of) an Indemnifiable Event, the Company shall indemnify Indemnitee to the full
extent authorized or permitted by law as soon as practicable but in any event no
later than thirty (30) days after written demand is presented to the Company,
against any and all Expenses, judgments, fines, penalties and amounts paid in
settlement (including all interest, assessments and other charges paid or
payable in connection with or in respect of such Expenses, judgments, fines,
penalties or amounts paid in settlement) of such Claim; provided, however, that,
except for proceedings to enforce rights to indemnification, the Company shall
not be obligated to indemnify Indemnitee in connection with a proceeding (or
part thereof) initiated by Indemnitee unless such proceeding (or part thereof)
was authorized in advance, or unanimously consented to, by the Board of
Directors of the Company. If so requested by Indemnitee, the Company shall
advance (within two (2) business days of such request) any and all Expenses to
Indemnitee (an "Expense Advance").
(b) Notwithstanding the foregoing, (i) the obligations of the
Company under Section 1(a) shall be subject to the condition that the Reviewing
Party shall not have determined (in a written opinion, in any case in which the
Independent Legal Counsel referred to in Section 2 hereof is involved) that
Indemnitee would not be permitted to be indemnified under applicable law, and
(ii) the obligation of the Company to make an Expense Advance pursuant to
Section 1(a) shall be subject to the condition that, if, when and to the extent
that the Reviewing Party determines that Indemnitee would not be permitted to be
so indemnified under applicable law, the Company shall be entitled to be
reimbursed by Indemnitee (who hereby agrees to reimburse the Company) for all
such amounts theretofore paid; provided, however, that if Indemnitee has
commenced or thereafter commences legal proceedings in a court of competent
-3-
<PAGE> 12
jurisdiction to secure a determination that Indemnitee should be indemnified
under applicable law, any determination made by the Reviewing Party that
Indemnitee would not be permitted to be indemnified under applicable law shall
not be binding and Indemnitee shall not be required to reimburse the Company for
any Expense Advance until a final judicial determination is made with respect
thereto (as to which all rights of appeal therefrom have been exhausted or
lapsed). If there has not been a Change in Control, the Reviewing Party shall be
selected by the Company's Board of Directors, and if there has been such a
Change in Control, the Reviewing Party shall be the Independent Legal Counsel
referred to in Section 2 hereof. If there has been no determination by the
Reviewing Party or if the Reviewing Party determines that Indemnitee
substantively would not be permitted to be indemnified in whole or in part under
applicable law, Indemnitee shall have the right to commence litigation in any
court in the State of Ohio having subject matter jurisdiction thereof and in
which venue is proper seeking an initial determination by the court or
challenging any such determination by the Reviewing Party or any aspect thereof,
including the legal or factual bases therefor, and the Company hereby consents
to service of process and to appear in any such proceeding. Any determination by
the Reviewing Party otherwise shall be conclusive and binding on the Company and
Indemnitee.
(c) No change in the Company's Articles, Regulations or Bylaws
or in the General Corporation Law of the State of Ohio subsequent to the date of
this Agreement shall have the effect of limiting or eliminating the
indemnification available under this Agreement as to any act, omission or
capacity for which this Agreement provides indemnification at the time of such
act, omission or capacity. If any change after the date of this Agreement in any
applicable law, statute or rule expands the power of the Company to indemnify
the Indemnitee, such change shall to the same extent expand the Indemnitee's
rights and the Company's obligations under this Agreement. If any change in any
applicable law, statute or rule diminishes the power of the Company to Indemnify
the Indemnitee, such change, except to the extent otherwise required by law,
statute or rule to be applied to this Agreement, shall have no effect on this
Agreement or the parties' rights and obligations hereunder.
2. Change in Control. The Company agrees that if there is a Change in
Control of the Company, then with respect to all matters thereafter arising
concerning the rights of Indemnitee to indemnity payments and Expense Advances
under this Agreement or any other agreement, or any Article, Regulation, or
Bylaw provision now or hereinafter in effect relating to Claims for
Indemnifiable Events, the Company shall seek legal advice only from Independent
Legal Counsel selected by Indemnitee and approved by the Company (which approval
shall not be unreasonably withheld). Such counsel, among other things, shall
render its written opinion to the Company and Indemnitee as to whether and to
what extent the Indemnitee would be permitted to be indemnified under applicable
law. The Company agrees to pay the reasonable fees of the Independent Legal
Counsel referred to above and to fully indemnify such counsel against any and
all expenses (including attorneys' fees), claims, liabilities and damages
arising out of or relating to this Agreement or its engagement pursuant hereto.
3. Indemnification for Additional Expenses. The Company shall indemnify
Indemnitee against any and all expenses (including attorneys' fees) and, if
requested by
-3-
<PAGE> 13
Indemnitee, shall (within two (2) business days of such request) advance such
expenses to Indemnitee, which are incurred by Indemnitee in connection with any
action brought by Indemnitee for (i) indemnification or advance payment of
Expenses by the Company under this Agreement or any other agreement, or any
Article, Regulation or Bylaw provision now or hereafter in effect relating to
Claims for Indemnifiable Events and/or (ii) recovery under any directors' and
officers' liability insurance policies maintained by the Company; provided,
however, that if there is a final judicial determination (as to which all rights
of appeal therefrom have been exhausted or lapsed) that Indemnitee is not
entitled to such indemnification, advance payment of expenses or insurance
recovery, Indemnitee shall reimburse the Company for all such expenses
theretofore paid under this Section 3.
4. Partial Indemnity, Etc. If indemnitee is entitled under any
provision of this Agreement to indemnification by the Company for some or a
portion of the Expenses, judgments, fines, penalties and amounts paid in
settlement of a Claim but not, however, for all of the total amount thereof, the
Company shall nevertheless indemnify Indemnitee for the portion thereof to which
Indemnitee is entitled. Moreover, notwithstanding any other provision of this
Agreement, to the extent that Indemnitee has been successful on the merits or
otherwise in defense of any or all Claims relating in whole or in part to an
Indemnifiable Event or in defense of any issue or matter therein, including
dismissal without prejudice, Indemnitee shall be indemnified against all
Expenses incurred in connection therewith.
5. Burden of Proof. In connection with any determination by the
Reviewing Party or otherwise as to whether Indemnitee is entitled to be
indemnified hereunder, the burden of proof shall be on the Company to establish
that Indemnitee is not so entitled.
6. No Presumptions. For purposes of this Agreement, the termination of
any claim, action, suit or proceeding, by judgment, order, settlement (whether
with or without court approval) or conviction, or upon a plea of nolo
contendere, or its equivalent, shall not create a presumption that Indemnitee
did not meet any particular standard of conduct or have any particular belief or
that a court has determined that indemnification is not permitted by applicable
law. In addition, neither the failure of the Reviewing Party to have made a
determination as to whether Indemnitee has met any particular standard of
conduct or had any particular belief, nor an actual determination by a Reviewing
Party that Indemnitee has not met such standard of conduct or did not have such
belief, prior to the commencement of legal proceedings by Indemnitee to secure a
judicial determination that Indemnitee should be indemnified under applicable
law shall be a defense to Indemnitee's claim or create a presumption that
Indemnitee has not met any particular standard of conduct or did not have any
particular belief.
7. Nonexclusivity, Etc. The rights of the Indemnitee hereunder shall be
in addition to any other rights Indemnitee may have under the Articles,
Regulations, Bylaws or the Ohio General Corporation Law or otherwise. To the
extent that a change in the Ohio General Corporation Law (whether by statute or
judicial decision) permits greater indemnification by agreement than would be
afforded currently under the Articles, Regulations, Bylaws and this Agreement,
it is the intent of the parties hereto that Indemnitee shall enjoy by this
Agreement the
-4-
<PAGE> 14
greater benefits so afforded by such change.
8. Liability Insurance.
(a) The Company hereby represents and warrants that the
Company has purchased and maintains directors' and officers' liability insurance
consisting of a primary policy issued by The Cincinnati Insurance Company
providing $5,000,000 in coverage (the "D&O Insurance").
(b) The Company hereby covenants and agrees that, so long as
Indemnitee shall continue to serve as a director of the Company and thereafter
so long as Indemnitee 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 Indemnitee was a director of the
Company, the Company shall maintain in full force and effect the D&O Insurance,
or substantially equivalent insurance coverage; provided, however, that the
Company shall not be obligated hereunder to pay annual premiums for directors'
and officers' liability insurance in excess of one hundred fifty percent (150%)
of the annualized rate of premiums paid by the Company for D&O Insurance in
Fiscal Year 1995 (the "Increased Rate"), and if the premiums for such insurance
coverage would exceed the Increased Rate in any fiscal year, and the Company
determines not to spend in excess of the Increased Rate, the Company shall
endeavor to retain such type of coverage by amending the levels of self-insured
retention and/or limits of liability of such insurance coverage so as not to
exceed the Increased Rate.
(c) In all policies of D&O Insurance, Indemnitee shall be
named as an insured in such manner as to provide Indemnitee the same rights and
benefits, subject to the same limitations, as are accorded to the Company's
directors or officers most favorably insured by such policy.
9. Period of Limitations. No legal action shall be brought and no cause
of action shall be asserted by or in the right of the Company against
Indemnitee, Indemnitee's spouse, heirs, executors or personal or legal
representatives after the expiration of two (2) years from the date of accrual
of such cause of action, and any Claim or cause of action of the Company shall
be extinguished and deemed released unless asserted by the timely filing of a
legal action within such two (2) year period; provided, however, that if any
shorter period of limitations is otherwise applicable to any such cause of
action such shorter period shall govern.
10. Notices
(a) The Indemnitee shall give to the Company notice in writing as soon
as practicable of any Claim made against him for which indemnification will or
could be sought under this Agreement. Failure to give such notice shall not be
cause for the Company not to indemnify Indemnitee or advance Expenses unless the
Company can demonstrate that it was prejudiced by such failure.
-5-
<PAGE> 15
(b) Notices shall be in writing and shall be either personally
delivered or sent by Federal Express of other reputable overnight courier for
next business day delivery, or sent by certified mail, return receipt requested,
addressed as follows:
If to the Company: Medex, Inc.
3637 Lacon Road
Hilliard, Ohio 43026
Attn: Chief Executive Officer
Attn: General Counsel
If to the Indemnitee: at Indemnitee's address stated above
or at such other address as from time to time designated by written notice
delivered in accordance herewith. Any notice personally served shall be deemed
delivered on the date of such service. Any notice sent by overnight courier as
provided above shall be deemed delivered on the first business day after the
date such notice was actually delivered by such overnight courier or refused.
Any notice sent by mail as provided above shall be deemed delivered on the date
of actual receipt or refusal thereof.
11. Amendments, Etc. No supplement, modification or amendment of this
Agreement shall be binding unless executed in writing by both of the parties
hereto. No waiver of any of the provisions of this Agreement shall be deemed or
shall constitute a waiver of any other provisions hereof (whether or not
similar) nor shall such waiver constitute a continuing waiver.
12. Subrogation. In the event of payment under this Agreement, the
Company shall be subrogated to the extent of such payment to all of the rights
of recovery of Indemnitee, who shall execute all papers required and shall do
everything that may be necessary to secure such rights, including the execution
of such documents necessary to enable the Company effectively to bring suit to
enforce such rights.
13. No Duplication of Payments. The Company shall not be liable under
this Agreement to make any payment in connection with any Claim made against
Indemnitee to the extent Indemnitee has otherwise actually received payment
(under any insurance policy, the Articles, Regulations, Bylaws or otherwise) of
the amounts otherwise indemnifiable hereunder.
14. Binding Effect, Etc. This Agreement shall be binding upon and inure
to the benefit of and be enforceable by the parties hereto and their respective
successors, assigns, including any direct or indirect successor by purchase,
merger, consolidation or otherwise to all or substantially all of the business
and/or assets of the Company, spouses, heirs, executors and personal and legal
representatives. This Agreement shall continue in effect regardless of whether
Indemnitee continues to serve as a director of the Company.
-6-
<PAGE> 16
15. Severability. The provisions of this Agreement shall be severable
in the event that any of the provisions hereof (including any provision within a
single section, paragraph or sentence) is held by a court of competent
jurisdiction to be invalid, void or otherwise unenforceable in any respect, and
the validity and enforceability of any such provision in every other respect and
of the remaining provisions hereof shall not be in any way impaired and shall
remain enforceable to the full extent permitted by law.
16. Governing Law. This Agreement shall be governed by and construed
and enforced in accordance with the laws of the State of Ohio applicable to
contracts made and to be performed in such state without giving effect to the
principles of conflicts of laws.
17. Certain Definitions.
(a) Change in Control: A Change in Control shall be deemed to
have occurred if (i) during any period of two (2) consecutive years, individuals
who at the beginning of such period constituted the Board of Directors and any
new directors, whose election by the Board of Directors or nomination for
election by the Company's stockholders was approved by a vote of at least three
quarters (3/4) of the directors then still in office who either were directors
at the beginning of the period or whose election or nomination for election was
previously so approved (the "Continuing Directors"), cease for any reason to
constitute a majority thereof; or (ii) any individual, partnership, firm,
corporation, association, trust, unincorporated organization or other entity, or
any syndicate or group deemed to be a person under Section 14(d)(2) of the
Exchange Act (other than a trustee or other fiduciary holding securities under
an employee benefit plan of the Company or a corporation owned directly or
indirectly by the stockholders of the Company in substantially the same
proportions as their ownership of stock of the Company), is or becomes the
"beneficial owner" (as defined in Rule 13d-3 of the General Rules and
Regulations under the Exchange Act), directly or indirectly, of securities of
the Company representing 20% or more of the total voting power represented by
the Company's then outstanding Voting Securities in a transaction which has not
been approved by the Continuing Directors; or (iii) the stockholders of the
Company approve a merger or consolidation of the Company with any other
corporation, other than a merger or consolidation which (A) has been approved by
the Continuing Directors or (B) would result in the Voting Securities of the
Company outstanding immediately prior thereto continuing to represent (either by
remaining outstanding or by being converted into Voting Securities of the
surviving entity) at least 80% of the total voting power represented by the
Voting Securities of the Company or such surviving entity outstanding
immediately after such merger or consolidation; or (iv) the stockholders of the
Company approve a plan of complete liquidation of the Company or an agreement
for the sale or disposition by the Company of (in one transaction or a series of
transactions) all or substantially all the Company's assets.
(b) Claim: any threatened, pending or completed action, suit
or proceeding, or any inquiry or investigation, whether instituted by or in the
right of the Company or any other party, that Indemnitee in good faith believes
might lead to the institution of any such action, suit or proceeding, whether
civil, criminal, administrative, investigative or other.
-7-
<PAGE> 17
(c) Expenses: include attorneys' fees and all other costs,
expenses and obligations paid or incurred in connection with investigating,
defending, being a witness in or participating in (including on appeal), or
preparing to defend, be a witness in or participate in any Claim relating to any
Indemnifiable Event.
(d) Indemnifiable Event: any event or occurrence related to
the fact that Indemnitee is or was a director of the Company, or is or was
serving at the request of the Company as a director, officer, or trustee of
another corporation, trust or other enterprise, or by reason of anything done or
not done by Indemnitee in any such capacity.
(e) Independent Legal Counsel: an attorney or firm of
attorneys, selected in accordance with the provisions of Section 2, who shall
not have otherwise performed services for the Company or Indemnitee within the
last five (5) years.
(f) Reviewing Party: any appropriate person or body consisting
of a member of members of the Company's Board of Directors or any other person
or body appointed by the Board who is not a party to the particular Claim for
which Indemnitee is seeking indemnification, or Independent Legal Counsel.
(g) Voting Securities: any securities of the Company which
vote generally in the election of directors.
-8-
<PAGE> 18
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
this ____ day of _______________, 1996.
_______________________________
By: ___________________________
Name: ___________________________
Title: ___________________________
________________________________
_______________, Indemnitee
-9-
<PAGE> 1
Exhibit 10.9
MULTI-LIFE EXECUTIVE BENEFIT PLAN
---------------------------------
ENDORSEMENT SPLIT DOLLAR
------------------------
"FLEXIBLE PREMIUM LIFE INSURANCE"
---------------------------------
MASTER AGREEMENT
----------------
This Executive Benefit Master Agreement is established as of the 1st day of
January, 1990, by Medex, Inc., of Hilliard, Ohio, a Corporation organized and
existing under the laws of the State of Ohio; hereinafter referred to as
"Corporation", and certain select key employees; hereinafter referred to as "Key
Executive", who shall elect to become a party to this Master Agreement by
execution of a Joinder Agreement in a form provided by Corporation.
Key Executives have now and for years past faithfully served the Corporation and
the Board of Directors by Resolution has declared that their services have been
exceptional merit; in excess of compensation paid and an invaluable contribution
to the profits and position of Corporation in its filed of business activity.
The Corporation further concludes that the continued services of such select Key
Executives is so essential to the Corporation's future growth and continued
profits that it would suffer severe financial loss should any Key Executive
leave the Corporation and prematurely terminate his/her services.
Accordingly, it is to the mutual benefit of both the Corporation and the Key
Executives that the employment relationship continue; and based upon the Key
Executives' services performed in the past and those to be performed in the
future, Corporation agrees to provide the following Executive Benefit:
ENDORSEMENT SPLIT DOLLAR
"FLEXIBLE PREMIUM LIFE INSURANCE"
The respective rights and duties of the Corporation and Key Executive in the
subject policy shall be as defined in the following numbered paragraphs, namely:
I. DEFINITIONS (Refer to Policy Contract to Confirm Correct Definitions)
"DEATH PROCEEDS": Death Proceeds as used in this Agreement shall mean:
Death benefits as defined by the policy.
"CASH VALUES": Cash Values as used in this Agreement shall mean: The
Surrender Benefit, as that term is defined in the policy contract.
"Planned Periodic Premium" shall mean the level premium selected by
the Corporation subject to the Insurer's minimum premium requirements.
<PAGE> 2
II. POLICY TITLE AND OWNERSHIP
Title and ownership shall reside in the Corporation for its
use and for the use of Key Executive, all in accordance with
this Agreement. The Corporation alone may, to the extent of
its interest, exercise the right to borrow or withdraw on the
policy cash values. Where the Corporation and Key Executive
(or his/her assignee, with the consent of the Key Executive)
mutually agree to exercise the right to increase the coverage
under the subject Split Dollar Policy, then, in such event,
the rights, duties and benefits of the parties to such
increased coverage shall continue to be subject to the terms
of this Agreement.
III. BENEFICIARY DESIGNATION RIGHTS
Key Executive (or his/her assignee) shall have the right and
power to designate a beneficiary or beneficiaries to receive
his/her share of the proceeds payable on his/her death and to
elect and change a payment option for such beneficiaries but
subject to any right or interest the Corporation may have in
such proceeds as provided in this Agreement. Key Executive's
beneficiary(s) shall be as listed in a Direction for
Settlement form and the Joinder Agreement to be executed
hereafter.
IV. EMPLOYER-PAY-ALL PREMIUM PAYMENT METHOD
The Corporation shall pay all Planned Periodic Premiums
annually, as of the date of issue and upon each subsequent
premium due date, upon a policy issued by
______________________________, having a specified amount as
set forth in a Joinder Agreement to be executed hereafter.
V. ASSUMPTION OF PREMIUM PAYMENT OBLIGATION BY THE OTHER PARTY
In the event the Corporation fails to fulfill the obligation
to pay all premiums as contemplated in Paragraph IV., the Key
Executive may freely assume such obligation in which event the
rights under the policy shall be altered in the manner
described in Paragraph VIII.
VI. DIVISION OF DEATH PROCEEDS OF POLICY
The division of death proceeds of the policy, when premiums
are paid in accord with Paragraph IV. and when insured's death
occurs before the end of the grace period for any premium
default, is as follows:
2
<PAGE> 3
A. The Corporation shall be entitled to an amount equal to the
amount of the premiums paid, less any indebtedness, interest on
such indebtedness, or withdrawals previously exercised by
Corporation, such values determined as of the date of death.
B. The Key Executive's (or his/her assignee's) beneficiary(s),
designated in accordance with Paragraph III., shall be entitled
to the remainder of such proceeds.
C. Corporation and Key Executive (or his/her assignees) shall share
in any interest due on the death proceeds as their respective
share of the proceeds as above-defined bears to the total
proceeds excluding any such interest or unearned premium.
VII. DIVISION OF THE CASH SURRENDER VALUE OF THE POLICY
Division of the cash surrender value of the policy, when premiums are
paid in accord with Paragraph IV. and when surrender occurs not later
than sixty days after due date of any premium in default, are as
follows:
The Corporation shall be entitled to an amount equal to the
policy's cash value, as that term is defined herein, less any
policy loans and unpaid interest or cash withdrawals previously
incurred by the Corporation and any applicable policy surrender
charges. Such cash value shall be determined as of the date of
surrender.
VIII. PARTIES' RIGHTS WHERE PREMIUM PAYMENT VARIATIONS EXIST
When premiums are not paid in strict accord with Paragraph IV.,
division of death proceeds or net cash value of the policy, as in
either case is defined in Paragraph VI. or VII., shall be as follows:
In the event the Corporation should pay less in the aggregate
than the share of planned periodic premiums, as defined in
Paragraph IV., then the Corporation's share of death proceeds or
of the net cash value of the policy on surrender shall be
decreased within the limits of such proceeds or cash value, as
the case may be, by the total amount of such decreased premiums.
The Key Executive's (or his/her assignee's) designated
beneficiary, in the event of death, and the Key Executive (or
his/her assignee), in the event of surrender, shall be entitled
to any remainder of proceeds or net cash value.
3
<PAGE> 4
IX. NONFORFEITURE DEATH PROCEEDS
The Corporation's share of death proceeds payable on the Key
Executive's death while the policy is in force under any of its
nonforfeiture provisions shall be an amount equal to the premiums
paid value at the date of default in premium payment.
X. NONFORFEITURE CASH VALUE
The Corporation's share of the cash value payable on surrender of
the policy while it is in force under any of its nonforfeiture
provisions shall be an amount equal to the cash value at the date
of surrender.
XI. TERMINATION OF AGREEMENT
This Agreement shall terminate upon the occurrence of any one of
the following events:
A. Termination by either party upon submission of 30-day
written notice to the other party;
B. Termination of the Key Executive's employment;
Upon any such termination, and at such time as the cash value of
the policy equals or exceeds the premium paid to date, the Key
Executive, upon request within 30 days of such termination, and
subject to approval by the Board of Directors of the Corporation,
shall have an option to receive an assignment of the policy upon
the payment to the Corporation of an amount equal to the premiums
paid less any policy loans or withdrawals, prior to the date of
such assignment.
Should Key Executive (or his/her assignee) fail to exercise the
option within the prescribed 30-day period or should the Board of
Directors of the Corporation fail to approve an assignment of the
policy, Key Executive (or his/her assignee) agrees that he/she
waives all rights in the policy and all rights under this
Agreement and that Corporation may deal with the policy in any
manner it sees fit.
XII. INSURED OR ASSIGNEE'S ASSIGNMENT RIGHTS
Key Executive (or his/her assignee) may, at any time, assign to
any individual, trust or other organization all right, title and
interest in the subject policy and all rights, options,
privileges and duties created under this Agreement.
4
<PAGE> 5
XIII. AGREEMENT BINDING UPON PARTIES
This Agreement shall bind the Key Executive and the Corporation,
their heirs, successors, personal representatives and assigns.
XIV. FUNDING
The funding policy for the Split Dollar arrangement shall be to
maintain the subject policy in force by paying, when due, all
premiums required.
XV. AMENDMENT
The Split Dollar plan may be amended at any time and from time to
time by a written instrument executed by the Key Executive (or
his/her assignees) and the Corporation.
XVI. GOVERNING LAW
This Agreement has been drawn, executed and is to be performed in
the State of Ohio and shall be construed and enforced in
accordance with the laws of the State of Ohio.
XVII. CLAIMS PROCEDURE FOR LIFE INSURANCE POLICY AND SPLIT DOLLAR PLAN
Claim forms or claim information as to the subject policy can be
obtained by contacting .
--------------------
XVIII. INSURANCE COMPANY NOT A PARTY TO AGREEMENT
The Insurer shall not be deemed a party to this Agreement but
will respect the rights of the parties as herein developed upon
receiving an executed copy of this Agreement. Payment or other
performance of its contractual obligations in accordance with the
policy provisions shall fully discharge the Insurer for any and
all liability. The parties hereto shall be bound by the terms and
conditions of the policy contract and in the event of any
conflicts between this Agreement and the policy contract, the
policy contract shall be controlling.
IN WITNESS WHEREOF, Medex, Inc. has executed this Executive Benefits Master
Agreement as of this 1st day of January, 1990.
/s/Robert E. Boyd, Jr. /s/Medex, Inc.
- ---------------------- -------------------------
(WITNESS) MEDEX, INC.
BY: /s/ Craig Waldbillig CEO
------------------------
5
<PAGE> 6
Exhibit 10.9
MULTI-LIFE EXECUTIVE BENEFIT PLAN
---------------------------------
ENDORSEMENT SPLIT DOLLAR
------------------------
"FLEXIBLE PREMIUM LIFE INSURANCE"
---------------------------------
JOINDER AGREEMENT TO MASTER AGREEMENT
-------------------------------------
____________________, at the invitation of Medex, Inc., hereby applies for
participation in the EXECUTIVE BENEFIT MASTER AGREEMENT established for its Key
Executives on January 1, 1990, as such Agreement may now exist or hereafter be
modified; and further agrees to the terms and conditions thereof.
____________________, understands and acknowledges that no provision of the
aforementioned Master Agreement shall be deemed to limit or restrict any
employment agreement now existent or hereafter entered into, nor shall any of
its conditions create any specific employment term or rights thereunder.
Benefits provided ____________________, shall include:
ENDORSEMENT SPLIT DOLLAR
"FLEXIBLE PREMIUM LIFE INSURANCE"
During Executive's employment years, Executive may designate
the beneficiary for the amount in excess of the premiums
paid by Corporation on a certain split dollar life insurance
policy issued by ____________________ having a face amount
of _______________. The Executives excess death benefit
shall by payable to the beneficiary as elected herein and
set forth in the Direction for Settlement form delivered to
____________________.
The details of the Plan elected above are set forth in an Executive Benefits
Master Plan, the terms of which are hereby incorporated by reference.
The Executive requests that the death benefits as provided under the Executive
Benefit Master Agreement be payable to: ____________________, if living or if
not, to ____________________.
This Joinder Agreement shall become effective as of the date below stated and
upon receipt by Corporation's duly authorized officer.
Dated as of this _____ day of ____________________, at Columbus, Ohio.
This Joinder Agreement received, acknowledged and accepted as of this _____ day
of ____________________.
_______________________
Medex, Inc.
<PAGE> 1
Exhibit 10.10
EMPLOYMENT AGREEMENT
This Agreement, dated____________ , by and between MEDEX, INC., an Ohio
corporation (the "Company"), and (the "Employee").
RECITALS
--------
A. Employee is an executive of the Company, or one of its principal
subsidiaries, with significant policy-making and operational responsibilities in
the conduct of its business.
B. The Company recognizes that Employee is a valuable resource for the
Company and the Company desires to be assured of the continued services of
Employee.
C. The Company is concerned that upon a possible or threatened change in
control, Employee may have concerns about the continuation of his employment
and/or his status and responsibilities and may be approached by others with
employment opportunities, and desires to provide Employee some assurance as to
the continuation of his employment status and responsibilities on a basis
consistent with that which he has earned in the event of such possible or
threatened change in control.
D. The Company desires to assure that if a possible change of control
situation should arise and Employee should be involved in deliberations or
negotiations in connection therewith that Employee would be in a secure position
to consider and/or negotiate such transaction as objectively as possible and to
this
<PAGE> 2
end desire to protect Employee from any direct or implied threat to his
financial well-being.
E. The Company is concerned about the possible effect on Employee of the
uncertainties created by any proposed change in control of the Company.
F. Employee is willing to continue to serve as such but desires assurance
that in the event of such a change in control he will continue to have the
responsibility and status he has earned.
AGREEMENTS
----------
The parties do hereby agree as follows:
1. CHANGE IN CONTROL. The provisions of Section 2 and 3 of this Agreement
shall become operative upon a change in control of the Company, as hereinafter
defined. For purposes of this Agreement, a "change in control of the Company"
shall mean:
(a) A change in control of a nature that would be
required to be reported in response to Item 6(e) of Schedule
14A of Regulation 14A promulgated under the Securities
Exchange Act of 1934, as amended ("Exchange Act"); provided
that, without limitation, such a change in control shall be
deemed to have occurred if (i) any "person" (as such term is
used in Sections 13(d) and 14(d) of the Exchange Act) is or
becomes the "beneficial owner" (as defined in Rule 13d-3
under the Exchange Act), directly or indirectly, of
securities of the Company representing 20% or more of the
combined voting
2
<PAGE> 3
power of the Company's then outstanding securities, or
(b) During any period of two consecutive years,
individuals who at the beginning of such period constitute
the Board cease for any reason to constitute at least a
majority thereof unless the election, or the nomination for
election by the Company's stockholders, of each new director
was approved by a vote of at least two-thirds of the
directors then still in office who were directors at the
beginning of the period, or
(c) The Company shall have merged into or consolidated
with another corporation, or merged another corporation into
the Company, on a basis whereby less than 50% of the total
voting power of the surviving corporation is represented by
shares held by former shareholders of the Company prior to
such merger or consolidation, or
(d) The Company shall have sold substantially all of
its assets to another corporation or other entity or person.
(e) Provided further, however, that any of the events
described in subparagraphs (a), (b), (c) or (d) above shall
not cause Sections 2 and 3 of this Agreement to become
operative and there shall be no change of control if the
event described in
3
<PAGE> 4
subparagraphs (a), (b), (c) or (d) is approved at any time
before consummation of the event by a two-thirds (2/3) vote
of the total membership of the Board of Directors of the
Company and a majority of the continuing directors (as
hereinafter defined) of the Company at the time of said
vote. The term continuing directors shall mean those members
of the Board of Directors of the Company elected by the
shareholders or otherwise appointed prior to the occurrence
of any of the events described in subparagraphs (a), (b),
(c) or (d) above.
2. TERMINATION WITHIN ONE YEAR. In the event that the employment of
Employee with the Company is terminated involuntarily within one year after a
change in control occurs:
(a) Employee shall be entitled to receive an amount of
cash equal to two (2) times his annual salary at his then
current rate. Such amount shall be paid in equal monthly
installments over a period of 24 months, the first such
installment to be paid within ten (10) days after
termination.
(b) Employee shall be entitled to receive a lump sum
amount of cash equal to two (2) times the amount that was
awarded to him in the previous fiscal year immediately prior
to such a change in control under the Incentive Compensation
Plan of the Company, regardless of whether such Plan may
have
4
<PAGE> 5
been changed or terminated after such change in control.
Such amount shall be paid at the same time as awards are
paid to other participants in said Plan if such Plan shall
have been continued but in no event later than the first
January 31 following termination or resignation.
(c) Employee shall continue for a period of 24 months
to be covered at the expense of the Company by the same or
equivalent hospital, medical, accident, disability and life
insurance coverages as he was covered by immediately prior
to termination of his employment; provided, however, that
the Employee may elect to be paid in cash within 30 days
after termination of his employment an amount equal to the
Company's cost of providing such coverages during such
period.
(d) Within 30 days thereafter, the Company shall pay to
Employee in a lump sum an amount of cash, net of all
federal, state and local income taxes, which shall be
sufficient to enable Employee to purchase a paid-up annuity
issuable by a financially sound and reputable insurance
company providing for payment beginning at age 65 of a
monthly benefit equal to that which Employee would have
received under the Company's profit sharing plan as in
effect immediately prior to such change
5
<PAGE> 6
in control (with all payment options as provided for in such
plan) had all of the benefits credited to his account under
said profit sharing plan to the date of termination of his
employment been fully vested. Notwithstanding the foregoing,
if at the time of his termination Employee is fully vested
under the Company's profit sharing plan, then Employee shall
receive the benefits he is entitled to under, and pursuant
to the terms of, such profit sharing plan and the preceding
sentence shall be inapplicable.
3. RESIGNATION WITHIN ONE YEAR. In the event that Employee should determine
in good faith that his status or responsibilities with the Company has or have
diminished subsequent to a change in control, and shall for that reason resign
from his employment with the Company within one year after such change in
control, Employee shall be entitled to receive all of the payments and enjoy all
of the benefits specified in Section 2 hereof.
4. ARRANGEMENTS NOT EXCLUSIVE. The specific arrangements referred to above
are not intended to exclude Employee's participation in other benefits available
to executive personnel generally or to preclude other compensation or benefits
as may be authorized by the Board of Directors of the Company at any time.
5. ENFORCEMENT COSTS. The Company is aware that upon the occurrence of a
change in control the Board of Directors or a
6
<PAGE> 7
stockholder of the Company may then cause or attempt to cause the Company to
refuse to comply with its obligations under this Agreement, or may cause or
attempt to cause the Company to institute, or may institute, litigation seeking
to have this Agreement declared unenforceable, or may take, or attempt to take,
other action to deny Employee the benefits intended under the Agreement. In
these circumstances, the purpose of this Agreement could be frustrated. It is
the intent of the Company that Employee not be required to incur the expenses
associated with the enforcement of his rights under this Agreement by litigation
or other legal action because the cost and expense thereof would substantially
detract from the benefits intended to be extended to Employee hereunder, nor be
bound to negotiate any settlement of his rights hereunder under threat of
incurring such expenses. Accordingly, if following a change in control it should
appear to Employee that the Company has failed to comply with any of its
obligations under this Agreement or in the event that the Company or any other
person takes any action to declare this Agreement void or unenforceable, or
institutes any litigation or other legal action designed to deny, diminish or to
recover from Employee the benefits intended to be provided to Employee
hereunder, and that Employee has complied with all of his obligations under this
Agreement, the Company irrevocably authorizes Employee from time to time to
retain counsel of his choice at the expense of the Company as provided in this
Section 5, to represent Employee in connection with the initiation or defense of
any litigation or
7
<PAGE> 8
other legal action, whether by or against the Company or any Director, officer,
stockholder or other person affiliated with the Company, in any jurisdiction.
Notwithstanding any existing or prior attorney-client relationship between the
Company and such counsel, the Company irrevocably consents to Employee entering
into an attorney-client relationship with such counsel, and in that connection
the Company and Employee agree that a confidential relationship shall exist
between Employee and such counsel. The reasonable fees and expenses of counsel
selected from time to time by Employee as hereinabove provided shall be paid or
reimbursed to Employee by the Company on a regular, periodic basis upon
presentation by Employee of a statement or statements prepared by such counsel
in accordance with its customary practices, up to a maximum aggregate amount of
$500,000.
6. LETTER OF CREDIT. In order to ensure the benefits intended to be
provided to Employee under this Agreement without Employee incurring the cost
and expense of such litigation, the Company will immediately upon a change in
control, as defined in Section 1 herein, establish an irrevocable standby Letter
of Credit in favor of Employee and each of the other employees executing forms
of this Agreement, such Letter of Credit to be drawn on such bank with assets of
not less than $1.5 billion and capital of not less than $100 million as the
Chief Executive Officer of the Company shall, in his sole discretion select (the
"Letter of Credit") and shall provide that the credit amount of $500,000 will be
available against which Employee and each of the other employees
8
<PAGE> 9
executing forms of this Agreement may draw for payment of any legal costs of the
type provided for in Section 5 which have not been paid by the Company when due.
Subject to the provisions hereof, the Letter of Credit shall contain and be on
such terms and conditions as to require the issuing bank to pay Employee on
presentation by Employee of a statement signed by Employee or his legal
representative setting forth (a) the amounts of the payments owing to Employee
under Section 5 which are then due and payable, and (b) a statement that such
amounts were not paid by the Company when due. The Company shall pay all fees
required to maintain the Letter of Credit in effect for three years from the
date of any change in control, as defined in Section 1 herein. If the Company
shall fail to pay such fees, Employee may as provided above draw upon the Letter
of Credit for the same and pay such fees with the amount so drawn. Each time
Employee draws under the Letter of Credit, Employee shall provide to the Company
a copy of such draft and of the statement of his counsel referred to in Section
5.
7. NO SET-OFF. The Company shall not be entitled to set off against the
amounts payable to Employee any amounts earned by Employee in other employment
after termination of his employment with the Company, or any amounts which might
have been earned by Employee in other employment had he sought such other
employment. Employee shall not be required to mitigate the amount of any payment
provided for herein by seeking other employment. The amounts payable to Employee
under this Agreement shall not be treated as damages but as severance
compensation to which Employee
9
<PAGE> 10
is entitled by reason of termination of his employment in the circumstances
contemplated by this Agreement.
8. TERMINATION. This Agreement has no specific term, but shall terminate
if, prior to a change in control of the Company, the employment of Employee with
the Company shall terminate.
9. SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and insure
to the benefit of the Company and its successors and assigns, and shall be
binding upon and inure to the benefit of Employee and his legal representatives,
heirs, and assigns.
10. SEVERABILITY. In the event that any Section, paragraph, clause or other
provision of this Agreement shall be determined to be invalid or unenforceable
in any jurisdiction for any reason, such Section, paragraph, clause or other
provision shall be enforceable in any other jurisdiction in which valid and
enforceable and, in any event, the remaining Sections, paragraphs, clauses and
other provisions of this Agreement shall be unaffected and shall remain in full
force and effect to the fullest extent permitted by law.
11. LIMITATIONS ON TERMINATION COMPENSATION.
(a) The present value (as defined herein) of any
Severance Benefits payable to you under this Agreement, and
any other payments otherwise payable to you by the Company
on or after a Change in Control, which are deemed under
Section 280G of the
10
<PAGE> 11
Internal Revenue Code of 1954, as amended (the "Code"), to
constitute "parachute payments" (as defined in Section 280G
without regard to Section 280G(b)(2)(A)(ii), shall be less
than three times your base amount (as defined herein). In
the event that the present value of such payments equals or
exceeds such amount, the provisions set forth below will
apply, and Severance Benefits payable to you under this
Agreement will be made only in accordance with this Section
11, notwithstanding any provision to the contrary in this
Agreement.
(b) Not later than thirty (30) days from the date of
termination, the Company will provide you with a schedule
indicating by category the present value of all Severance
Benefits payable to you under this Agreement (specifying the
paragraph under which each such payment is to be made) and
any other payments otherwise payable to you by the Company
on or after the Change in Control, which, in the Company's
opinion, constitute parachute payments under Section 280G.
No payments under this Agreement shall be made until after
thirty (30) days from the receipt of such schedule by you.
At any time prior to the expiration of said 30-day period,
you shall have the right to select from all or part of any
category of payment to be made under this
11
<PAGE> 12
Agreement those payments to be made to you in an amount the
present value of which (when combined with the present value
of any other payments otherwise payable to you by the
Company that are deemed parachute payments) is less than
300% of your base amount. If you fail to exercise your right
to make a selection, only a lump-sum cash severance payment
in the maximum amount that is less than 300% of your base
amount (reduced by the present value of any other payments
otherwise payable to you by the Company that are deemed
parachute payments) shall be made to you on the day after
the expiration of the period extending thirty (30) days from
the receipt by you of the schedule provided for hereunder,
and no other Severance Benefits under this Agreement shall
be paid to you under any circumstances.
(c) At any time prior to exercising your right to make
a selection under paragraph (b) of this Section 11, you
shall have the right to request that the Company obtain a
ruling from the Internal Revenue Service ("Service") as to
whether any or all payments listed on the schedule provided
hereunder are, in the view of the Service, parachute
payments under Section 280G. If a ruling is sought pursuant
to your request, no Severance Benefit under this
12
<PAGE> 13
Agreement shall be paid to you until after fifteen (15) days
from the date of such ruling, and the period during which
you may exercise your right to make a selection under
paragraph (b) hereof shall be extended to a date fifteen
(15) days from the date of such ruling. For purposes of this
Section 11, you and the Company hereby agree to be bound by
the Service's ruling as to whether payments constitute
parachute payments under Section 280G. If the Service
declines, for any reason, to provide the ruling requested, a
certified public accountant, chosen by Employee shall make a
determination with respect to what payments constitute
parachute payments, and the period during which you may
exercise your right to make a selection under paragraph (b)
hereof shall be extended to a date forty-five (45) days from
the date of the Service's notice indicating that no ruling
will be forthcoming.
(d) For purposes of this Section 11, present value
means the value determined in accordance with the principles
of Section 1274(b)(2) of the Code under rules provided in
Treasury Regulations under Section 280G of the Code, and
base amount means the average annual compensation payable to
you by the Company and includible in your gross income for
13
<PAGE> 14
Federal income tax purposes during the shorter of the period
consisting of the most recent five (5) taxable years ending
before the date of any change of control of the Company or
the portion of such period during which you were an
employee.
(e) Any selection by you under this Section 11 of
Severance Benefit payments shall be invalid, and no such
payments will be made, unless, under relevant Treasury
Regulations, such payments can be reduced to present value
as of the date of termination or such appropriate date prior
thereto as provided in said regulations.
(f) Reference to Code Section 280G herein are specific
references to Section 280G as added to the Code by the Tax
Reform Act of 1984. To the extent that Code Section 280G is
amended prior to expiration or termination of this
Agreement, or replaced by a successor statute, the
limitations imposed by this Section 11 upon payments to be
made to you under this Agreement shall be deemed modified
without further action of the parties so as to provide only
for such limitations that are consistent with such
amendment(s) or successor statutes, as the case may be. In
the event that Section 280G, or any successor statute, is
repealed, this Section 11 shall cease to be effective on the
14
<PAGE> 15
effective date of such repeal. The parties to this Agreement
recognize that final Treasury Regulations under Code Section
280G may affect the amounts that may be paid hereunder and
agree that, upon issuance of such final Regulations, this
Agreement may be modified as in good faith deemed necessary
in light of the provisions of such Regulations to achieve
the purposes hereof, and that consent to such
modification(s) shall not be unreasonably withheld.
IN WITNESS WHEREOF, this Agreement has been executed on __________________
______, 19___.
MEDEX, INC.
By____________________________
Its___________________________
------------------------------
Employee
15
<PAGE> 1
EXHIBIT 10.13
SEVERANCE AGREEMENT AND RELEASE
THIS SEVERANCE AGREEMENT AND RELEASE is entered into as of
this 27th day of March, 1996, by and between Phillip D. Messinger ("Messinger")
and Medex, Inc. ("Medex").
WHEREAS, the purpose of this Agreement and General Release is
to set forth certain understandings which have been reached between Messinger,
an individual residing in Ohio, and Medex, a corporation organized and existing
under the laws of the State of Ohio, maintaining its headquarters in Hilliard,
Ohio; and
WHEREAS, Messinger has been an employee of Medex and served as
its Chief Executive Officer from March 1993 until October 1995; and
WHEREAS, since 1976, Messinger has served as a Director of
Medex; and
WHEREAS, Messinger desires to resign as a Director for
personal reasons; and
WHEREAS, both Messinger and Medex desire to end all
relationships between them with a minimum of hardship to Messinger and
disruption to Medex and to memorialize their agreement, which settles and
resolves any and all disputes between them.
NOW, THEREFORE, in exchange for and in consideration of the
following promises, and other valuable consideration the receipt and sufficiency
of which is acknowledged by Messinger, the parties agree as follows:
<PAGE> 2
1. SEVERANCE PAYMENT. Medex will pay Messinger as a severance
payment the sum of Four Hundred Twenty-Eight Thousand Dollars ($428,000), less
all applicable payroll deductions required by law. This payment shall be made no
earlier than April 1, 1996, nor later than April 5, 1996, and shall be sent to
Escrow Account Number 5364401, Bank One, Columbus, NA or to such other account
or entity as directed by the Common Pleas Court of Franklin County, Division of
Domestic Relations in Case No. 93DR-12-6116. This payment shall be deemed to
include all vacation pay, accrued but unused, as of the date of this Agreement.
2. HEALTH INSURANCE. Medex shall provide continued health
insurance coverage for Messinger through the COBRA Termination Date. For
purposes of this Section 2, the "COBRA Termination Date" shall be the earlier
of: (i) the effective date of Messinger's notification to Medex that he no
longer desires COBRA coverage, or (ii) the date upon which COBRA coverage
expires, which date shall be no later than August 1, 1997. Upon the COBRA
Termination Date, Medex shall pay to Messinger the sum of $8,000.00 less $216.78
per month times the number of months elapsed since the date of this Agreement.
If Medex is unable to provide the COBRA coverage for 36
months, Messinger may prefer to obtain coverage elsewhere.
3. ADDITIONAL PAYMENT. Medex shall pay Messinger an additional
lump sum payment of Two Hundred Forty-Two Thousand Six Hundred Thirteen and Six
Tenths Dollars ($242,613.60), less all applicable payroll deductions required by
law, as additional consideration for his Release and promises of
Confidentiality as to this
2
<PAGE> 3
Agreement and as to Medex's proprietary information and trade
secrets, described below. This payment shall be made no earlier than April 1,
1996, nor later than April 5, 1996, and shall be sent to Escrow Account Number
5364401, Bank One, Columbus, NA or to such other account or entity as directed
by the Common Pleas Court of Franklin County, Division of Domestic Relations in
Case No. 93DR-12-6116.
4. LIFE INSURANCE POLICY. Medex agrees to transfer its entire
interest in the Great West Split Dollar Key Man Life Insurance Policy (Policy
No. 4205594) to Messinger. Medex shall have no responsibility for any premium
payments due on or after December 1, 1995, in respect of such policy.
5. PERSONAL COMPUTER. Messinger shall retain as his own the
personal computer purchased by Medex and presently in Messinger's possession,
provided, however, that Messinger permit a Medex employee to remove and delete
all files containing confidential or proprietary information from its memory.
6. RELEASE BY MESSINGER. In consideration of the benefits
provided in paragraphs 1 through 5 above and the other promises in this
Agreement and General Release, Messinger, for himself, his family, heirs,
executors, administrators, and assigns, fully and forever releases, acquits, and
discharges Medex, any and all of its operating companies, or entities,
subsidiary companies or entities, parent companies or entities, and affiliate
companies or entities, and their respective officers, directors, employees, and
agents of and from any and all claims, demands, damages, expenses, liabilities,
judgments, and causes of action, including claims for attorneys' fees, which
Messinger now has or may have arising under any federal, state, or local
3
<PAGE> 4
statutory or common law, whether in law or in equity, whether in any federal or
state court or before an administrative agency of any federal, state, county or
municipal government.
7. SCOPE OF RELEASE BY MESSINGER. The Release by Messinger
extends, without limitation, to rights and claims related to Messinger's
treatment by Medex during the course of and in connection with Messinger's
employment and separation from his employment with Medex and his treatment by
Medex as a Director of Medex, including but not limited to any claims Messinger
may have under the Age Discrimination in Employment Act (as amended by the Older
Workers Benefit Protection Act). The Release by Messinger does not extend to
rights or claims arising after the execution of this Severance Agreement and
Release, does not extend to the enforcement of Messinger's rights under this
Agreement and does not extend to Messinger's rights under the Medex, Inc.
Employee Profit Sharing Plan. Further, notwithstanding anything to the contrary
in this Severance Agreement and Release, Messinger does not release or discharge
Medex from any claim which Messinger may hereafter have against Medex for
indemnification under Ohio Revised Code Section 1701.13, or under Medex's
Articles of Incorporation, Code of Regulations, or any agreement, vote of
shareholders or disinterested directors or otherwise with respect to
indemnification of directors and/or officers. Additionally, Medex hereby agrees
to indemnify Messinger to the fullest extent permitted or permissible by Section
1701.13, or under its Articles of Incorporation, Code of Regulations, any
agreement, a vote of
4
<PAGE> 5
shareholders or disinterested directors or otherwise with respect to
indemnification of directors and/or officers.
8. RIGHTS TO COUNSEL AND REVOCATION. Messinger has been
advised that he (a) should consult with his attorney before signing this
Severance Agreement Release; (b) has twenty-one days within which to consider
signing this Severance Agreement and Release; and (c) may revoke this Severance
Agreement and Release at any time before the expiration of seven days after he
signs it. Messinger acknowledges that he has been consulting with Attorney
Richard A. Barnhart, Esq. for a period in excess of 21 days on all legal matters
pertaining to this Agreement and General Release.
9. RELEASE BY MEDEX. In consideration of the promises herein,
Medex, for itself, its affiliates and assigns, fully and forever releases,
acquits, and discharges Messinger, of and from any and all claims, demands,
damages, expenses, liabilities, judgments, and causes of action, including
claims for attorneys' fees, which Medex now has or may have arising under any
federal, state, or local statutory or common law, whether in law or in equity,
whether in any federal or state court or before an administrative agency of any
federal, state, county or municipal government, relating directly or indirectly
to or resulting directly or indirectly from Messinger's employment, or his
separation from employment, with Medex, and any loan obligations by Messinger to
Medex for certain stock options, the balance of which as of March 31, 1996, is
$7,386.40.
5
<PAGE> 6
10. SCOPE OF RELEASE BY MEDEX. The Release by Medex does not
extend to rights or claims arising after the execution of this Severance
Agreement and Release, and does not extend to the enforcement of Medex's rights
under this Agreement.
11. CONFIDENTIALITY. Messinger agrees not to, at any time,
talk about, write about or otherwise publicize the terms of this Severance
Agreement and Release which were negotiated, executed or implemented, including,
but not limited to, the existence and amount of the benefits, except with: (1)
his attorney or tax advisor; (2) his immediate family, provided his attorney,
tax advisor and his immediate family agree in advance to keep such information
confidential and not to disclose it to others; and (3) upon proper request by
any court of competent jurisdiction, the Internal Revenue Service or other
governmental agency, such court or agency. The provisions of this paragraph
concerning Messinger's confidentiality obligations constitute material
consideration for Medex's obligations under this Severance Agreement and
Release. Notwithstanding the foregoing, if Medex makes public this Agreement
(other than by proper request by a court of competent jurisdiction, the IRS or
other government agency other than the Securities and Exchange Commission), then
Messinger shall not have any duty of confidentiality under this Section 11.
12. RESIGNATION OF MESSINGER AS A MEDEX DIRECTOR; STOCK
OPTIONS. Messinger shall resign as a Director of Medex pursuant to the form of
letter attached as Exhibit A. Messinger shall be paid directors' fees for the
first quarter of 1996 totaling $2,250. For purposes of this Agreement,
Messinger's employment by Medex shall be
6
<PAGE> 7
deemed to have terminated on January 15,1996. Messinger has options to purchase
Medex common shares under three Option Plans which are exercisable as follows:
<TABLE>
<CAPTION>
Option Plan Number Exercisable Until
----------- ------ -----------------
<S> <C> <C>
Administrative Plan II 22,500 April 15, 1996
Executive 17,300 August 24, 1999
Key Employee Non Statutory 10,000 January 15, 1999
</TABLE>
Messinger agrees to timely make all Securities and Exchange
Commission filings required by the rules and regulations under Section 16 of the
Securities Exchange Act of 1934, as amended, and to furnish Medex copies of the
same.
13. RETURN OF COMPANY CAR AND CREDIT CARDS. Messinger shall
return the car used by him and paid for by Medex to Medex on or before the
eighth day after execution of this Agreement. Messinger shall also return all
Medex credit cards whether active or cancelled and agrees to reimburse Medex for
any personal expenses charged on such cards.
14. EXECUTION OF AFFIDAVIT AND DISCLOSURE OF INVENTIONS.
Messinger shall execute and deliver to Medex the accompanying Affidavit (Exhibit
B) concerning the hiring of Don Barry. Messinger shall fully disclose on Exhibit
C all inventions or improvements made or conceived by him, solely or with
others, during his employment with Medex. Where the subject matter of such
inventions or improvements results from or is suggested by any work which
Messinger may have done for or on behalf of Medex or relates in any way to
Medex's business (or that of its affiliated companies), Medex shall have all
rights to such inventions and improvements, whether they are patentable
7
<PAGE> 8
or not. The fact that such inventions and improvements were made or conceived by
Messinger outside of Medex's facilities or other than during Messinger's working
hours with Medex shall not diminish Medex's rights with respect to such
inventions or improvements. At the request of Medex, Messinger shall execute or
join in executing all papers or documents required for the filing of patent
applications in the United States and such foreign countries as Medex may elect,
and Messinger shall assign all such patent applications to Medex or its nominee,
and shall provide Medex or its agents or attorneys with all reasonable
assistance in the preparation and prosecution of patent applications, drawings,
specifications, and ;the like, all at the expense of Medex, and shall do all
that may be necessary to establish, protect and maintain the rights of Medex or
its nominee in the inventions, patent applications, and Letters Patent in
accordance with the spirit of this Agreement.
15. CONFIDENTIALITY OF PROPRIETARY INFORMATION AND TRADE
SECRETS. Messinger shall keep and maintain Confidential Information of Medex
confidential and shall not, at any time, either directly or indirectly, use any
Confidential Information for his benefit or to the benefit of any other person
or entity, and shall not divulge, disclose or reveal or otherwise communicate
any Confidential Information to any person or entity in any manner whatsoever,
except as required by law. For purposes of this Agreement, "Confidential
Information of Medex" means any and all non-public, confidential and proprietary
information and trade secrets of Medex, which includes without limitation:
8
<PAGE> 9
(a) any business plans, processing information,
financial information, purchasing data, supplier data, accounting data, or other
financial or processing information;
(b) any inventions, technical information, drawings
or designs, production techniques, patents, patent applications, copyrights or
copyright applications (in any case, whether registered or to be registered in
the United States or any foreign country);
(c) any marketing or sales information, sales
records, customer lists, prices, sales projections or other listing of names,
addresses, or telephone numbers, or other sales information;
(d) trade secrets and confidential matter or
information as relating to Medex and its business defined by the statutory and
common law of the State of Ohio; and
(e) trade secrets and confidential matter or
information to which Medex is under an obligation to a third party.
"Confidential Information of Medex" does not include, however, information
generally available to and known by the public and information that is or
becomes available to Messinger on a non-confidential basis from a source other
than Medex or Medex employees or agents and information independently acquired
or developed by Messinger without violating any of his obligations under this
Agreement. Additionally, "Confidential Information of Medex" does not include
any information which does not satisfy both of the following:
9
<PAGE> 10
(1) It derives independent economic value, actual or potential,
from not being generally known to, and not being readily
ascertainable by proper means by, other persons who can obtain
economic value from its disclosure or use, and
(2) It is the subject of efforts that are reasonable under the
circumstances to maintain its secrecy.
Medex hereby agrees that any claim by it that Messinger has
breached the covenants of this Section 15 shall not entitle it to an award of
damages based upon a theory of rescission of this Agreement or any recovery of
the amounts paid to Messinger hereunder, but shall only entitle Medex to recover
damages directly incurred as a result of Messinger's conduct which is violative
of this Section 15, as well as such injunctive relief as a court of competent
jurisdiction may grant.
16. TERMINATION OF DISPUTES. Messinger and Medex agree that
each party intends to avoid litigation and controversy. As a condition precedent
to Medex's obligations under this Agreement, Messinger shall effectuate a
dismissal of Medex with prejudice in the litigation, styled Messinger v.
Messinger, et al., Case No. 93DR-12-6116 pending in the Court of Common Pleas of
Franklin County, Ohio, Division of Domestic Relations, and a dismissal of the
Restraining Order in such case concerning Medex. This Severance Agreement and
Release is not to be construed as an admission of liability for any wrongful
conduct on the part of either Messinger or Medex.
16. GOVERNING LAW. This Severance Agreement and Release shall
be governed by and construed in accordance with the laws of the State of Ohio.
10
<PAGE> 11
17. EXECUTION IN PARTS. This Severance Agreement and Release
may be executed in multiple counterparts, each of which shall constitute an
original, and all of which shall constitute a single memorandum.
18. INTEGRATION CLAUSE. This Severance Agreement and Release
sets forth the entire agreement between Messinger and Medex with respect to its
subject matter and supersedes and replaces any and all prior or contemporaneous
representations or agreements, whether oral or written.
19. ENFORCEABILITY. This Severance Agreement and Release shall
be construed and interpreted so as to be enforceable to the fullest extent
permitted by law and to the extent that any provision shall be deemed
unenforceable or invalid in any jurisdiction, such invalidity and
unenforceability shall not affect its validity or enforceability in any other
jurisdiction, nor shall it affect the enforceability or validity of any other
provision hereof.
20. AMENDMENT. This Severance Agreement and Release may not be
amended or modified, except by a written memorandum executed by both Messinger
and Medex.
21. VOLUNTARY ACTS. Both Messinger and Medex acknowledge that
each has carefully read this Severance Agreement and Release and knowingly and
voluntarily agree to execute it.
PHILLIP D. MESSINGER ACKNOWLEDGES THAT HE HAS CAREFULLY READ AND FULLY
UNDERSTANDS ALL THE PROVISIONS OF THIS SEVERANCE AGREEMENT AND RELEASE, THAT HE
HAS BEEN GIVEN AT LEAST TWENTY-ONE DAYS WITHIN WHICH TO CONSIDER SIGNING THIS
AGREEMENT AND
11
<PAGE> 12
RELEASE, THAT HE HAS BEEN ADVISED TO CONSULT WITH HIS ATTORNEY, THAT HE MAY
REVOKE THIS AGREEMENT AND RELEASE WITHIN SEVEN DAYS AFTER HE SIGNS IT, AND THAT
HE KNOWINGLY AND VOLUNTARILY HAS ENTERED INTO THIS AGREEMENT AND RELEASE IN
EXCHANGE FOR VALUABLE CONSIDERATION, INCLUDING THE BENEFITS IDENTIFIED IN
PARAGRAPHS 1 THROUGH 5 HEREOF.
IN WITNESS WHEREOF, the parties hereby execute this Severance
Agreement and Release as of the day and year first above written.
WITNESSES:
/s/ /s/ Phillip D. Messinger
- -------------------- ------------------------------------
PHILLIP D. MESSINGER
/s/
- --------------------
WITNESSES: MEDEX, INC.
/s/
- --------------------
By /s/ Terry L. Sanborn
--------------------------------
/s/
- -------------------- Its Senior VP & COO
------------------------
12
<PAGE> 1
Exhibit 10.14
SEPARATION AGREEMENT AND RELEASE
--------------------------------
I. PARTIES.
--------
The parties to this Agreement and Release ("Agreement") are:
A. William J. Post, hereinafter referred to as "Post"; and
B. Medex, Inc., and its subsidiaries, directors, officers, agents,
attorneys, past and present employees, hereinafter referred to as "Medex."
II. RECITALS.
--------
A. Post has been employed by Medex and has served as an officer of Medex.
B. Medex and Post wish to sever their employment relationship and, for
valuable consideration, Post wishes to release certain claims and rights he may
possess as a result of such employment relationship.
C. Post shall be paid his final salary pay through May 31, 1996, which
shall include all wages earned and unpaid through that date.
III. COVENANTS.
----------
In consideration of the mutual covenants set forth herein, the parties
agree as follows:
A. Post, for himself, his heirs and assigns, does hereby forever release
and discharge Medex, its directors, officers, agents, attorneys and past and
present employees, from any and all causes of action, actions, judgments, liens,
damages, losses, claims, contracts, liabilities and demands whatsoever
including, but not limited to, any claim arising from or related to or
attributable to his employment or cessation of such employment with Medex or its
present or former subsidiaries, including, but not limited to, a letter of
employment dated September 27, 1993, any claims Post may have under the Age
Discrimination in Employment Act (as amended by the Older Worker's Benefit
Protection Act), any other federal, state or local laws or regulations
prohibiting employment discrimination and all claims growing out of any legal
restrictions on the Company's right to terminate its employees.
B. Medex, for itself and its assigns, does hereby forever release and
discharge Post, his heirs and assigns, from any and all causes of action,
actions, judgments, liens, damages, losses, claims, contracts, liabilities and
demands whatsoever including, but not limited to, any claim arising from or
related to or attributable to his employment with Medex.
<PAGE> 2
C. Post and Medex understand and expressly agree that this Agreement
extends to all claims of every nature and kind, known and unknown, suspected or
unsuspected, presently existing or resulting from or attributable to any act or
omission of Post or Medex and the other parties released under this Agreement
occurring prior to the execution of this Agreement. The release by Post and
Medex contained herein does not apply to rights or claims arising after the date
of the execution of this Agreement. Post further understands and expressly
agrees that his confidentiality and nondisclosure obligations to Medex are not
being released hereunder and will specifically survive the termination of his
employment.
D. Medex agrees to indemnify Post against third party actions arising out
of Post's performance of his duties with Medex in the same manner that Medex
indemnifies current officers of the Company.
E. Post shall keep, maintain and treat all Confidential Information of
Medex as proprietary to Medex and shall not, at any time, either directly or
indirectly, use any Confidential Information for his benefit or to the benefit
of any other person or entity, and shall not divulge, disclose or reveal or
otherwise communicate any Confidential Information to any person or entity in
any manner whatsoever, except as required by law. "Confidential Information"
includes, but is not limited to, any confidential data, figures, projections,
estimates, pricing data, customer lists, policy and/or procedure manuals or
handbooks, supplier information, tax records, personnel histories and records,
information regarding sales, information regarding products and properties and
any other confidential information regarding the business, operations,
properties or personnel of Medex which were disclosed to or learned by Post as a
result of his employment. Confidential Information shall not include any
information of public knowledge or hereafter obtained through sources
independent of Medex. Post warrants that from the date of his employment up to
the present time he has not used or disclosed any Confidential Information,
except in the performance of his duties as an employee and officer of Medex.
F. In addition to paying Post his final salary as specified above, Post
shall receive severance pay as consideration for his release of all claims and
potential causes of action under the terms of this Agreement. This severance pay
shall be for a period of nine (9) months beginning June 1, 1996. The total gross
severance amount payable to Post shall be $116,902.00. The severance payments
shall be payable semi-monthly in a gross amount equal to $6,494.59 until the
expiration of nine (9) months from June 1, 1996.
G. All amounts paid or payable hereunder shall be subject to and reduced by
all withholdings and deductions required by federal, state, and local tax
authorities.
2
<PAGE> 3
H. Medex shall continue to pay its current share of the premiums for the
health insurance for Post and his dependents, group term life insurance coverage
($50,000 death benefit) and Minnesota Mutual Split-Dollar Life Insurance Policy
No.2-027-371V ($200,000 total death benefit) through the severance payment
period. Post shall continue to pay his current portion of the health insurance
coverage through deductions to his semi-monthly severance payments. Upon the
conclusion of the severance payments, Post may elect and be responsible for the
entire payment of extended health insurance coverage provided pursuant to COBRA.
Post's travel and accident life insurance shall terminate as of April 30, 1996.
Post shall be entitled to his vested benefits, as of May 31, 1996, provided
under the Medex Employees Profit Sharing Plan and Trust and the Medex 401(k)
Savings Plan, in accordance with the terms and conditions of each Plan.
I. Post shall return all property belonging to Medex by June 4, 1996,
including, but not limited to, such items as company automobile (Lexus LS 400),
keys, credit cards, computers, dictaphone equipment, fax machines and related
equipment, and any other company property in his possession or control. Upon
termination of the lease on the automobile, the $5,000 security deposit shall
belong to and be returned to Medex.
J. Post is the holder of options entitling him to purchase Medex common
shares under the Company's Option Plans as follows:
<TABLE>
<CAPTION>
NUMBER EXERCISABLE UNTIL
------ -----------------
<S> <C> <C> <C>
Administrative Incentive II 10,000 August 31, 1996
Executive 6,300 June 10, 1996
10,000 June 10, 1996
400 June 10, 1996
</TABLE>
Post shall be entitled to exercise these options in accordance with the
terms of the option grants, the terms of the particular option plans and in
compliance with state and federal securities laws, rules and regulations.
Post agrees to cooperate with Medex in connection with and to timely make
all Securities and Exchange Commission filings required by the rules and
regulations under Section 16 of the Securities and Exchange Act of 1934, as
amended, and to furnish Medex copies of the same.
K. Post and Medex expressly agree that they and each of them will keep the
substance of negotiations, the terms of the settlement and this Agreement
strictly confidential. Post and Medex agree that they will not disclose the
substance of this Agreement to anyone for any reason whatsoever except insofar
as such disclosure is made to a party's attorney, certified public accountant,
or as required by state or federal law or regulation, or upon receipt of a duly
issued subpoena. Additionally, Medex may
3
<PAGE> 4
communicate to its Board, and to persons within Medex whatever information is
appropriate in connection with any legitimate business purpose required for the
execution of this Agreement.
L. Post agrees to cooperate with Medex during the course of all proceedings
arising out of Medex's business about which he has knowledge or information.
Such proceedings may include, but are not limited to, internal investigations,
administrative investigations or proceedings, and lawsuits (including pre-trial
discovery). For the purposes of this Paragraph, cooperation includes, but is not
limited to, Post making himself available for interviews, meetings, depositions,
hearing, and/or trials without the need for subpoena or assurances by Medex,
providing any and all documents in his possession that relate to the proceeding,
and providing assistance in locating any and all relevant notes and/or
documents. However, such cooperation shall not unreasonably interfere with
Post's current or future employment. Should Post's cooperation become necessary,
Medex agrees to reimburse him for travel expenses and to pay his ending hourly
rate if Post's cooperation is requested after completion of the severance
payments. Post agrees that Medex shall be entitled to immediate preliminary and
final injunctive relief to compel his cooperation as described above.
M. Post agrees not to communicate with, or give statements or testimony to,
any former or current employee of Medex, their representative (including private
investigator), or any attorney of theirs or the media relating to any matter
about which Post has knowledge or information as a result of his employment with
Medex unless compelled to do so by lawfully-served subpoena or court order. Post
also agrees to notify Medex's counsel immediately if he is compelled by subpoena
or court order to appear and testify. Post agrees that Medex shall be entitled
to immediate preliminary and final injunctive relief to compel his compliance
with this Paragraph.
N. Post agrees not to make any disparaging statements, comments or remarks
about Medex and its agents, to any person, business enterprise or their agents.
Medex agrees not to make any disparaging statements, comments or remarks about
Post to any person, business enterprise or their agents.
O. Both parties acknowledge that the other party is not waiving any right
or claim which may arise after the date of this Agreement.
P. This Agreement provides and Post acknowledges that he has received value
under this Agreement beyond which he is entitled to under the policies and
normal practices of Medex or pursuant to any contract with Medex.
Q. This Agreement provides and Post acknowledges that he has been advised
that he (A) CONSULT WITH AN ATTORNEY BEFORE SIGNING THIS SEPARATION AGREEMENT
AND RELEASE; (B) HAS TWENTY-ONE DAYS WITHIN WHICH TO CONSIDER SIGNING THIS
SEPARATION AGREEMENT AND
4
<PAGE> 5
RELEASE; AND (C) MAY REVOKE THIS SEPARATION AGREEMENT AND RELEASE AT ANY TIME
BEFORE EXPIRATION OF SEVEN DAYS AFTER HE SIGNS IT, THAT THIS SEPARATION
AGREEMENT AND RELEASE IS NOT EFFECTIVE UNTIL THE EXPIRATION OF SUCH SEVEN DAYS,
AND THAT HE WILL NOT BEGIN TO RECEIVE THE SEVERANCE PAYMENTS UNTIL AFTER THE
SEVEN DAYS EXPIRE.
R. This Agreement supersedes, replaces and terminates all prior contracts
or agreements between Post and Medex relating to Post's employment, including
but not limited to, a certain letter of employment dated September 27, 1993.
This Agreement sets forth the complete agreement and understanding between the
parties. This Agreement may not be modified or terminated by Medex or Post
unless both Medex and Post execute a subsequent, written agreement terminating
or modifying this Agreement.
S. This Agreement shall be governed by and construed in accordance with the
laws of the State of Ohio.
T. In case any one or more of the provisions contained in this Agreement
shall, for any reason, be held to be invalid, illegal, or unenforceable in any
respect by a court of competent jurisdiction, such invalidity, illegality, or
unenforceability shall not affect any other provision of this Agreement, but
this Agreement shall be construed as if such invalid, illegal, or unenforceable
provision had never been contained herein.
BY SIGNING THIS SEPARATION AGREEMENT AND RELEASE, POST AGREES AND
ACKNOWLEDGES THAT HE HAS HAD THE OPPORTUNITY TO CONSULT WITH ATTORNEY RICHARD A.
BARNHART, AND POST REPRESENTS AND WARRANTS THAT HE UNDERSTANDS THE TERMS OF THIS
SEPARATION AGREEMENT AND RELEASE, THAT HE HAS VOLUNTARILY ENTERED INTO THIS
SEPARATION AGREEMENT AND RELEASE AND FURTHER WARRANTS THAT THE ONLY PROMISES
MADE TO HIM TO SIGN THIS SEPARATION AGREEMENT AND RELEASE ARE THOSE STATED
HEREIN.
Date: June 4, 1996 /s/ William J. Post
-------------------- -----------------------
William J. Post
MEDEX, INC.
Date: June 7, 1996 By:/s/ Bradley P. Gould
-------------------- --------------------
Its: President & CEO
-------------------
5
<PAGE> 1
MEDEX, INC. AND SUBSIDIARIES EXHIBIT 11
COMPUTATION OF EARNINGS PER SHARE
FOR THE YEARS ENDED JUNE 30, 1996, 1995 AND 1994
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended June 30
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
PRIMARY:
Weighted average common
shares outstanding 6,170,407 6,137,628 6,087,898
Common equivalent shares -
stock options 57,491 (1) 51,880 (1) 93,223 (1)
---------- ---------- ----------
Common shares and common
equivalent shares outstanding 6,227,898 6,189,508 6,181,121
========== ========== ==========
NET INCOME $ 374,866 $1,755,884 $6,730,995
========== ========== ==========
NET INCOME PER SHARE $ 0.06 $ 0.28 $ 1.09
========== ========== ==========
FULLY DILUTED:
Weighted average common
shares outstanding 6,170,407 6,137,628 6,087,898
Common equivalent shares -
stock options 65,871 (1) 66,266 (1) 102,775 (1)
---------- ---------- ----------
Common shares and common
equivalent shares outstanding 6,236,278 6,203,894 6,190,673
========== ========== ==========
NET INCOME $ 374,866 $1,755,884 $6,730,995
========== ========== ==========
NET INCOME PER SHARE $ 0.06 $ 0.28 $ 1.09
========== ========== ==========
</TABLE>
(1) Calculated under the Treasury Stock Method using the average price or
year-end market price of Medex stock, as applicable.
<PAGE> 1
Exhibit 13
- --------------------------------------------------------------------------------
SELECTED CONSOLIDATED
FINANCIAL DATA
<TABLE>
<CAPTION>
Year Ended June 30 1996 1995 1994 1993 1992 1991 1990 1989 1988 1987
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Dollar amounts in millions,
except per-share data
- ----------------------------------------------------------------------------------------------------------------
Net Sales $99.3 $95.2 $95.6 $92.3 $87.0 $65.5 $44.7 $36.7 $28.0 $ 23.2
- ----------------------------------------------------------------------------------------------------------------
Net Income(1) 0.4 1.8 6.7 4.2 6.9 4.9 3.9 2.8 2.7 2.1
- ----------------------------------------------------------------------------------------------------------------
Net Income Per Share:(1,2)
-------------------------------------------------------------------------------------------------------
Primary .06 .28 1.09 .69 1.15 .98 .86 .65 .63 .48
-------------------------------------------------------------------------------------------------------
Fully Diluted .06 .28 1.09 .69 1.14 .97 .83 .65 .63 .48
- ----------------------------------------------------------------------------------------------------------------
Total Assets 92.3 90.5 89.1 84.7 81.3 55.1 35.3 28.8 25.7 21.0
- ----------------------------------------------------------------------------------------------------------------
Long-Term Debt 3.0 3.5 4.0 4.6 4.9 8.4 1.3 1.8 2.3 1.5
- ----------------------------------------------------------------------------------------------------------------
Cash Dividends 1.0 1.0 .9 .8 .7 .5 .4 .4 .3 .2
- ----------------------------------------------------------------------------------------------------------------
Cash Dividends Per Share(2) .16 .16 .15 .14 .12 .10 .09 .08 .07 .05
- ----------------------------------------------------------------------------------------------------------------
<FN>
1) 1994 amounts include income of $355,827, or $.06 per primary and fully
diluted share, representing the cumulative effect of a change in accounting
for income taxes.
2) Restated to reflect 10% and 5% stock dividends declared in February 1989
and 1988, respectively.
</TABLE>
<PAGE> 2
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION
- --------------------------------------------------------------------------------
RESULTS OF OPERATIONS
The following table shows the Company's results of operations as a percent of
net sales for the years indicated for certain items in the consolidated
statement of income. Dollar amounts in all the following tables are in
thousands.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------
PERCENT OF NET SALES
Year Ended June 30 1996 1995 1994
------ ------ ------
<S> <C> <C> <C>
Net sales 100.00% 100.00% 100.00%
Cost of goods sold 53.62 55.26 50.63
Discontinued items 1.69
------ ------ ------
Gross margin 44.69 44.74 49.37
Selling, research and administrative expenses 39.70 39.54 38.89
Restructuring expenses 3.06 2.77
------ ------ ------
Operating income 1.93 2.43 10.48
Other income (expense) (0.12) 0.57 0.49
------ ------ ------
Income before income taxes 1.81 3.00 10.97
Income taxes 1.43 1.15 4.30
------ ------ ------
Income before accounting change 0.38 1.85 6.67
Cumulative effect of change in accounting for income taxes .37
------ ------ ------
Net income 0.38% 1.85% 7.04%
====== ====== ======
- ----------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
NET SALES
Year Ended June 30 1996 1995 1994
------- ------- -------
<S> <C> <C> <C>
Net sales $99,297 $95,156 $95,578
</TABLE>
Net sales for fiscal 1996 increased $4,141,000 or 4.4 percent from the previous
fiscal year. Net sales from domestic operations decreased $779,000 or 1.2
percent to $64,379,000 while sales from the Company's European operations
increased $4,920,000 or 16.4 percent to $34,918,000.
The decrease in domestic sales is primarily due to a decrease in infusion
systems of $949,000. This decrease was caused by a decline in large volume pump
products partially offset by increased syringe pump sales and ambulatory product
sales. The decreases in the large volume pump products are due to decreases in
both large volume pumps and large volume pump disposables.
The increase in sales from the Company's European operations is due to increases
in all areas. The most significant increases were in cath lab and pressure
monitoring products. Cath lab sales increased $3,040,000 primarily due to
increased sales of procedure packs. The increase in pressure monitoring products
of $606,000 is primarily due to the sales efforts continuing to be redirected
into this product line as a result of the procedure pack business being more
established. In addition, the increase in foreign currency exchange rates
accounted for $552,000 of the $4,920,000 increase in European sales.
Net sales for fiscal 1995 decreased $422,000 or .4 percent over the previous
fiscal year. Net sales from domestic operations decreased $8,522,000 or 12
percent to $65,158,000 while sales from the Company's European operations
increased $8,100,000 or 37 percent to $29,998,000.
The decrease in domestic sales in fiscal 1995 was due to decreases in critical
care accessories of $8,160,000 and infusion systems of $362,000. The decrease in
critical care accessories was primarily due to a decrease in bulk/OEM sales as
certain customers elected to produce various products in-house versus purchasing
them from the Company. The decrease in infusion systems was due to decreased
syringe pump sales offset by increased sales of large volume pump products.
The increase in sales from the Company's European operations was primarily due
to increased sales of cath lab and pressure monitoring products which increased
equally and due to the effect of increased foreign currency translation rates.
The increases in cath lab and pressure monitoring sales were primarily due to
the same factors noted above for fiscal 1996. The increase in foreign currency
exchange rates accounted for $2,815,000 of the $8,100,000 increase in sales.
<PAGE> 3
<TABLE>
<CAPTION>
- -----------------------------------------------------------
COST OF GOODS SOLD AND GROSS MARGIN
Year Ended June 30 1996 1995 1994
------- ------- -------
<S> <C> <C> <C>
Cost of goods sold $53,242 $52,585 $48,390
Discontinued items 1,678
------- ------- -------
Total cost of goods sold $54,920 $52,585 $48,390
Gross margin $44,378 $42,571 $47,188
</TABLE>
Gross margin as a percent of net sales for fiscal 1996 was flat compared to the
previous fiscal year. Domestic margins decreased .6 percentage points while the
Company's European margins increased .7 percentage points.
Domestic gross margins were negatively impacted 2.6 percentage points due to
discontinued items which represent the write off of inventory and other assets
related to items which will be discontinued or replaced. Excluding discontinued
items, domestic margins increased to 45.1 percent from the 43.1 percent reported
in the prior year. This increase in margin is due to a decrease in unfavorable
manufacturing variances.
European gross margins have increased to 49.2 percent from 48.5 percent
primarily due to the effect of lower per unit manufacturing costs associated
with increased volume from procedure packing. This increase was partially offset
by a change in product mix to include a larger percentage of procedure packs
which generally have a lower gross margin than the Company's other products.
Gross margin as a percent of net sales decreased in fiscal 1995 as compared to
fiscal 1994. This decrease was entirely due to a seven percentage point domestic
gross margin decrease as the European gross margins remained relatively
constant. The domestic margins decreased primarily due to significant
unfavorable manufacturing variances attributable to reduced production volumes
caused by lower sales. European margins remained flat due to lower per unit
manufacturing costs, due to the same reasons noted above, along with favorable
purchase price variances due to foreign currency fluctuations offset by changes
in product mix to include more procedure packs.
<TABLE>
<CAPTION>
- ------------------------------------------------------------
OPERATING EXPENSES
Year Ended June 30 1996 1995 1994
------- ------- -------
<S> <C> <C> <C>
Selling, research
and administrative $39,422 $37,622 $37,173
Restructuring expenses 3,038 2,635
------- ------- -------
Total operating expenses $42,460 $40,257 $37,173
</TABLE>
Total operating expenses for fiscal 1996 increased over the previous year both
in total dollars and as a percent of net sales. The $2,203,000 increase in total
operating expenses is due to a $1,800,000 increase in selling, research and
administrative expenses and a $403,000 increase in restructuring expenses.
The increase in selling, research and administrative expenses is the result of a
$228,000 decrease in the domestic expenses offset by a $2,027,000 increase in
the European expenses.
The domestic expenses have decreased due to $1,168,000 and $129,000 decreases in
selling and research expenses which were partially offset by a $1,069,000
increase in administrative expenses. The decrease in selling expenses resulted
from a general reduction in expenses due to lower sales; additionally, selling
expenses decreased due to the elimination of sales positions and due to open
sales positions along with the related expenses for these positions.
Administrative expenses increased primarily due to costs associated with the
senior management changes announced in the second quarter of fiscal 1996.
The $2,027,000 increase in the European expenses for fiscal 1996 consists of a
$1,020,000 increase in selling expenses and a $1,007,000 increase in
administrative expenses. Selling expenses have increased due to increased
salaries and related items resulting from increased personnel and increased
commissions due to increased sales levels. As a percent of sales, selling
expenses decreased slightly to 23% in fiscal 1996 from 24% in fiscal 1995. The
increase in administrative expenses is primarily due to a full year of costs at
Ashfield Medical Systems which was acquired in the fourth quarter of fiscal 1995
and a general increase in expenses to support the increased level of sales.
Increased foreign currency exchange rates had the effect of increasing European
operating expenses by $219,000.
The restructuring expenses recorded in fiscal 1996 relate to costs incurred as
part of a "turnaround" program for the domestic operations and the final
expenses associated with closing the Denver facility. The "turnaround" program
was initiated during the third quarter of fiscal 1996 and is focused on a number
of efficiency and organizational measures, including "right sizing" the
organization, developing management tools to achieve consistent performance,
creating new programs to manage inventories, improving cost competitiveness, and
developing bench marking and "best of class" measures to track Company
performance.
Management estimates the "turnaround" program will realize the Company
approximately $4,000,000 to $5,000,000 in annualized savings while costing
$4,350,000 to implement. The savings associated with the plan are expected to be
primarily achieved by reducing salaried personnel in the manufacturing, sales
and administrative areas and by achieving greater manufacturing efficiencies.
The costs associated with the plan consist of $1,678,000 of write-offs of
discontinued items (see cost of goods sold) and $2,672,000 of consulting,
severances for terminated employees, outplacement and legal costs. As of June
30, 1996, $1,678,000 of discontinued items have been expensed along with
$1,148,000 of consulting, $605,000 of severances and $210,000 of legal and
outplacement expenses. The remaining costs of $709,000 are expected to be
recorded in the first quarter of fiscal 1997. Approximately 50 positions have
been eliminated at June 30, 1996. The annualized salaries and fringe benefits
associated with these positions total approximately $2,100,000. See Note 3 of
the "Notes to Consolidated Financial Statements" for further information.
<PAGE> 4
Selling, research and administrative expenses for fiscal 1995 increased $450,000
over fiscal 1994 consisting of a $768,000 decrease in domestic expenses and a
$1,090,000 increase in European expenses. Domestic expenses decreased primarily
due to lower administrative expenses due to the elimination of personnel and
decreased bonuses resulting from lower domestic profit levels. Virtually all of
the increase in European expenses is attributable to the effects of increased
foreign currency exchange rates.
The restructuring expenses recorded in fiscal 1995 relate to the Company's
decision to close its Denver operations and integrate all functions and product
lines into other Company locations. Management originally anticipated the plan
would cost approximately $3,200,000 to implement. The plan was completed in
fiscal 1996 at a total cost of $3,709,000. The excess cost of $509,000 is
primarily due to the costs to terminate the Denver lease being greater than
originally estimated.
<TABLE>
<CAPTION>
- ------------------------------------------------------------
OTHER INCOME (EXPENSE)
Year Ended June 30 1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Other income (expense) $(125) $539 $468
</TABLE>
The decrease in other income of $664,000 in fiscal 1996 as compared to fiscal
1995 is primarily due to a reduction in foreign currency exchange gains. The
Company recorded a $272,000 foreign currency loss for fiscal 1996 versus a gain
of $312,000 for fiscal 1995. In addition, investment income decreased to
$188,000 in fiscal 1996 from $246,000 in fiscal 1995 due to lower investment
levels. Interest expense increased to $247,000 in fiscal 1996 from $177,000 in
fiscal 1995 due to a reduction in the amount of interest capitalized on
construction projects.
The increase in other income in fiscal 1995 as compared to fiscal 1994 is due to
an increase in foreign currency exchange gains and other miscellaneous items
partially offset by an increase in interest expense. The Company recorded a
foreign currency exchange gain of $312,000 in 1995 versus a $241,000 gain in
1994. This additional income was partially offset by an increase in interest
expense of $74,000 in fiscal 1995 over fiscal 1994. The increase in interest
expense is due to a reduction of interest capitalized related to construction
projects.
<TABLE>
<CAPTION>
- --------------------------------------------------------
INCOME TAXES
Year Ended June 30 1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Income taxes $1,418 $1,097 $4,107
</TABLE>
Income taxes for fiscal 1996, 1995 and 1994 were 79.1 percent, 38.5 percent and
39.2 percent of pre-tax income, respectively. The increase in the Company's
effective tax rate for fiscal 1996 as compared to the prior year is primarily
due to an increase in the loss from domestic operations which can not be used to
offset foreign income for tax purposes. The result is an increase in the
effective tax rate as the domestic loss and the foreign income are combined for
financial reporting purposes.
In fiscal 1995, the Company's effective tax rate decreased from fiscal 1994 due
to benefits received as the result of carry backs of excess foreign tax credits,
which had previously been reserved, partially offset by an increase in foreign
taxes, both in actual dollars and as a percent of total taxes, resulting from
increased foreign income in relation to total income.
In fiscal 1994, the Company adopted Statement of Financial Accounting Standards
(SFAS) No. 109, "Accounting for Income Taxes." The cumulative effect of adopting
SFAS No. 109 on the Company's consolidated financial statements was to increase
income by $356,000, which was reported separately as the cumulative effect of an
accounting change.
- --------------------------------------------------------------------------------
LIQUIDITY AND CAPITAL RESOURCES
Net working capital at June 30, 1996, decreased $704,000 versus June 30, 1995.
The current ratio at June 30, 1996 was 3.61 to 1.00, compared to 4.32 to
1.00 at June 30, 1995. Property additions of $5,766,000 primarily relate to
the acquisition of machinery & equipment and dies & molds.
Management believes that currently available cash and investments, cash provided
from future operations and debt financing options will be sufficient to finance
expected future capital expenditures. Subsequent to June 30, 1996, the Company
borrowed $4,000,000 through the issuance of Industrial Revenue Bonds, sold its
WalkMed ambulatory pump product line for $3,200,000 and retired $682,000 of debt
that was outstanding. See Notes 4 and 9 to "Notes to Consolidated Financial
Statements" for further information.
- --------------------------------------------------------------------------------
MANAGEMENT'S OUTLOOK
In fiscal 1997, Management anticipates the Company's European operations will
continue to post increases in sales and profits are expected to be in line with
fiscal 1996 barring any material unfavorable changes in foreign currency
exchange rates. The domestic operations are expected to post improved
performance over fiscal 1996. Sales are expected to show a modest increase;
however, they are expected to continue to be impacted by pricing pressures in
the market, especially in infusion systems. The Company plans to introduce two
new products in the second half of fiscal 1997. Profits are expected to improve,
as the savings associated with the "turnaround" program are experienced.
However, the domestic operations will continue to experience production related
variances which will affect the Company's performance. Once the "turnaround"
program is completed, the Company will continue to pursue opportunities,
including product line extensions through acquisitions and strategic alliances,
to strengthen the Company's product offering in strategic markets.
SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
Except for the historical information, the matters discussed in this report are
forward-looking statements which involve risks and uncertainties, including but
not limited to: business conditions in the healthcare industry and the general
economy; competitive factors, including further consolidation in the healthcare
industry; regulatory requirements; new technologies and pricing pressures; and
management decisions to pursue new products or businesses which involve
additional costs, risks or capital expenditures.
<PAGE> 5
- --------------------------------------------------------------------------------
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
For the years ended June 30 1996 1995 1994
----------- ----------- -----------
<S> <C> <C> <C>
NET SALES $99,297,459 $95,156,058 $95,578,046
Cost of goods sold 53,241,708 52,584,765 48,390,400
Discontinued items (note 3) 1,677,957
----------- ----------- -----------
TOTAL COST OF GOODS SOLD 54,919,665 52,584,765 48,390,400
----------- ----------- -----------
GROSS MARGIN 44,377,794 42,571,293 47,187,646
----------- ----------- -----------
OPERATING EXPENSES:
Sales & marketing 21,835,904 21,983,891 21,682,624
Research & development 3,018,195 3,147,421 3,299,430
Administrative 14,567,854 12,491,541 12,191,039
Restructuring costs (note 3)
Turnaround program 1,963,312
Denver closing 1,074,730 2,634,630
----------- ----------- -----------
Total restructuring costs 3,038,042 2,634,630
----------- ----------- -----------
Total operating expenses 42,459,995 40,257,483 37,173,093
----------- ----------- -----------
OPERATING INCOME 1,917,799 2,313,810 10,014,553
----------- ----------- -----------
OTHER INCOME (EXPENSE):
Investment income 188,426 246,346 250,914
Interest expense (247,432) (176,811) (102,757)
Other - net (65,927) 469,539 319,458
----------- ----------- -----------
Total other income (expense) (124,933) 539,074 467,615
----------- ----------- -----------
INCOME BEFORE INCOME TAXES AND CUMULATIVE
EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE 1,792,866 2,852,884 10,482,168
INCOME TAXES 1,418,000 1,097,000 4,107,000
----------- ----------- -----------
INCOME BEFORE CUMULATIVE EFFECT OF
CHANGE IN ACCOUNTING PRINCIPLE 374,866 1,755,884 6,375,168
CUMULATIVE EFFECT OF CHANGE IN
ACCOUNTING FOR INCOME TAXES (note 1) 355,827
----------- ----------- -----------
NET INCOME $374,866 $1,755,884 $6,730,995
=========== =========== ===========
NET INCOME PER COMMON SHARE:
Income before cumulative effect of
change in accounting principle $0.06 $0.28 $1.03
Cumulative effect of change in accounting
for income taxes 0.06
----------- ----------- -----------
NET INCOME $0.06 $0.28 $1.09
=========== =========== ===========
Weighted average number of
common shares outstanding 6,227,898 6,189,508 6,181,121
=========== =========== ===========
</TABLE>
See notes to consolidated financial statements.
<PAGE> 6
- --------------------------------------------------------------------------------
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
June 30
ASSETS 1996 1995
----------- -----------
<S> <C> <C>
CURRENT ASSETS:
Cash & equivalents $5,587,527 $4,911,074
Investments 345,000
Trade receivables (less allowance for doubtful
accounts: 1996 - $763,000; 1995 - $714,000) 18,670,315 18,506,153
Inventories:
Raw materials & supplies 11,433,900 11,495,702
Work-in-process 4,423,868 3,626,058
Finished goods 7,208,815 7,248,231
----------- -----------
Total inventories 23,066,583 22,369,991
Deferred income taxes 2,722,410 1,633,456
Prepaid expense and other 613,930 812,925
----------- -----------
Total Current Assets 50,660,765 48,578,599
----------- -----------
PROPERTY, PLANT & EQUIPMENT - AT COST:
Land & land improvements 2,321,356 2,053,046
Buildings 18,716,605 19,504,336
Machinery & equipment 17,681,223 15,940,342
Dies & molds 9,510,043 8,226,919
Furniture & data processing equipment 9,251,887 8,285,376
Additions in progress 3,293,911 3,330,646
----------- -----------
Total 60,775,025 57,340,665
Less accumulated depreciation 26,172,126 23,028,147
----------- -----------
Property, Plant & Equipment - Net 34,602,899 34,312,518
----------- -----------
COST IN EXCESS OF FAIR VALUE OF NET ASSETS ACQUIRED
(Net of accumulated amortization: 1996 - $1,171,496; 1995 - $997,352) 4,698,837 4,872,981
----------- -----------
OTHER ASSETS:
Deferred income taxes 530,872
Other 2,378,855 2,206,581
----------- -----------
Total Other Assets 2,378,855 2,737,453
----------- -----------
TOTAL ASSETS $92,341,356 $90,501,551
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Current portion of long-term debt $510,226 $513,066
Accounts payable (principally trade) 4,521,672 3,797,582
Accrued liabilities:
Income taxes 1,263,015 602,209
Compensation & profit sharing 3,603,801 2,873,619
Restructuring costs 416,453 649,983
Other 3,715,457 2,807,811
----------- -----------
Total Current Liabilities 14,030,624 11,244,270
----------- -----------
LONG TERM DEBT - LESS CURRENT PORTION 2,952,661 3,463,232
----------- -----------
DEFERRED INCOME TAXES 232,972
----------- -----------
COMMITMENTS AND CONTINGENCIES (NOTE 4)
SHAREHOLDERS' EQUITY:
Common stock - $.01 par value, shares authorized - 20,000,000;
shares outstanding: 1996 - 6,197,413; 1995 - 6,159,502
(net of treasury shares: 1996 - 150,590; 1995 - 150,590) 61,974 61,595
Additional paid-in capital 42,886,968 42,460,256
Retained earnings 32,559,918 33,172,136
Foreign currency translation adjustment (383,761) 100,062
----------- -----------
Total Shareholders' Equity 75,125,099 75,794,049
----------- -----------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $92,341,356 $90,501,551
=========== ===========
</TABLE>
See notes to consolidated financial statements.
<PAGE> 7
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
FOREIGN
ADDITIONAL CURRENCY TOTAL
COMMON STOCK OUTSTANDING PAID-IN RETAINED TRANSLATION SHAREHOLDERS'
Shares Amount CAPITAL EARNINGS ADJUSTMENT EQUITY
--------- ------- ----------- ----------- --------- -----------
<S> <C> <C> <C> <C> <C> <C>
Balance at June 30, 1993 6,043,380 $60,434 $40,779,821 $26,581,105 $(826,384) $66,594,976
Net income 6,730,995 6,730,995
Cash dividends ($.15 per share) (913,621) (913,621)
Foreign currency translation adjustment 347,935 347,935
Issuance of stock under stock option
and purchase plans (net of exchange
of 14,595 treasury shares) (note 5) 86,486 865 880,514 881,379
Tax benefit received from exercise of
stock options (note 5) 42,180 42,180
--------- ------- ----------- ----------- --------- -----------
Balance at June 30, 1994 6,129,866 61,299 41,702,515 32,398,479 (478,449) 73,683,844
Net income 1,755,884 1,755,884
Cash dividends ($.16 per share) (982,227) (982,227)
Foreign currency translation adjustment 578,511 578,511
Issuance of stock under stock option
and purchase plans (net of exchange
of 2,163 treasury shares) (note 5) 21,413 214 206,533 206,747
Tax benefit received from exercise
of stock options (note 5) 463,812 463,812
Issuance of treasury shares 8,223 82 87,396 87,478
--------- ------- ----------- ----------- --------- -----------
Balance at June 30, 1995 6,159,502 61,595 42,460,256 33,172,136 100,062 75,794,049
Net income 374,866 374,866
Cash dividends ($.16 per share) (987,084) (987,084)
Foreign currency translation adjustment (483,823) (483,823)
Issuance of stock under stock option
and purchase plans (note 5) 37,911 379 350,255 350,634
Tax benefit received from exercise of
stock options (note 5) 76,457 76,457
--------- ------- ----------- ----------- --------- -----------
Balance at June 30, 1996 6,197,413 $61,974 $42,886,968 $32,559,918 $(383,761) $75,125,099
========= ======= =========== =========== ========= ===========
</TABLE>
See notes to consolidated financial statements.
<PAGE> 8
- --------------------------------------------------------------------------------
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
For the years ended June 30 1996 1995 1994
---------- ---------- ----------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $374,866 $1,755,884 $6,730,995
Adjustments to reconcile net income to net cash provided by operating
activities:
Cumulative effect of change in accounting for income taxes (355,827)
Depreciation & amortization 4,484,402 4,301,592 4,473,862
Loss on disposal of property, plant & equipment 958,877
Deferred income taxes (311,000) (631,000) 1,434,000
Change in operating assets and liabilities net of effects
from acquisition:
Increase in trade receivables (589,930) (1,640,600) (1,435,691)
(Increase) decrease in inventories (1,025,444) 967,346 (4,760,842)
Decrease in prepaid expenses and other 181,147 55,131 147,166
Increase in accounts payable 764,782 325,195 69,073
Increase (decrease) in accrued restructuring costs (233,530) 244,983 (1,000,000)
Increase (decrease) in accrued liabilities 2,508,591 (1,457,407) (346,351)
Other operating items - net (106,331) 238,275 127,411
---------- ---------- ----------
Net cash provided by operating activities 7,006,430 4,159,399 5,083,796
---------- ---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Property additions (5,765,782) (6,959,261) (8,758,708)
Proceeds from sale of property 45,555 35,072 1,995
Purchase of investments (757,840)
Proceeds from maturity of investments 345,000 1,112,437 648,258
Acquisition of subsidiary, net of cash acquired (330,632)
Decrease in unused proceeds of industrial revenue bond 2,818,659
---------- ---------- ----------
Net cash used in investing activities (5,375,227) (6,142,384) (6,047,636)
---------- ---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payment of long-term obligations (513,411) (641,872) (320,470)
Proceeds from issuance of common stock - net 350,634 206,747 881,379
Cash dividends paid (987,084) (982,227) (913,621)
---------- ---------- ----------
Net cash used by financing activities (1,149,861) (1,417,352) (352,712)
---------- ---------- ----------
EFFECT OF EXCHANGE RATE CHANGES ON CASH 195,111 (293,044) (197,666)
---------- ---------- ----------
NET INCREASE (DECREASE) IN CASH AND EQUIVALENTS 676,453 (3,693,381) (1,514,218)
---------- ---------- ----------
CASH AND EQUIVALENTS AT BEGINNING OF YEAR 4,911,074 8,604,455 10,118,673
---------- ---------- ----------
CASH AND EQUIVALENTS AT END OF YEAR $5,587,527 $4,911,074 $8,604,455
========== ========== ==========
Supplemental Disclosures
CASH PAID DURING THE YEAR FOR:
Interest $247,432 $176,811 $102,757
========== ========== ==========
Income taxes $1,734,881 $1,337,617 $4,265,720
========== ========== ==========
</TABLE>
See notes to consolidated financial statements.
<PAGE> 9
- --------------------------------------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the years ended June 30, 1996, 1995 and 1994
- ------------------------------------------------
1. ACCOUNTING POLICIES
The Company designs, manufactures, assembles and markets a broad range of
products for the diagnosis and treatment of patients receiving care in
hospitals, alternative health care facilities and the home health care
environment. The Company's products are used by clinicians for fluid and drug
infusion, invasive pressure monitoring, angiographic imaging and coronary
angioplasty. The Company's significant accounting policies are as follows:
Principles of Consolidation -- The consolidated financial statements include the
accounts of all subsidiaries and all significant intercompany transactions and
balances have been eliminated. The accompanying consolidated financial
statements have been prepared in accordance with generally accepted accounting
principles (GAAP). The preparation of financial statements in conformity with
GAAP requires management to make estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosure of contingent assets
and liabilities at the date of the financial statements and the reported amounts
of revenue and expenses during the reporting period. Actual results could differ
from those estimates.
Revenue Recognition -- Revenue from product sales is recognized at the time
products are shipped.
Translation of Foreign Currencies -- The Company has operations in three foreign
countries (see Note 8). The assets and liabilities of these foreign subsidiaries
are translated at the exchange rates in effect at the balance sheet date.
Revenues and expenses are translated at the average exchange rates in effect
during the year. Translation gains and losses are not included in income but are
accumulated and reported as a separate component of shareholders' equity.
Foreign currency exchange gains (losses) arise primarily from the translation of
intercompany balances that are expected to be repaid in the foreseeable future
and from forward exchange contracts and are included in other income (expense)
in the amount of approximately ($272,000), $312,000 and $241,000 in fiscal 1996,
1995 and 1994, respectively. The Company enters into forward exchange contracts
to hedge against foreign currency fluctuations on certain intercompany
transactions. Transactions hedged with forward exchange contracts will come due
at the approximate time the forward exchange contracts expire. Realized and
unrealized gains and losses on these contracts are included in other income
(expense). At June 30, 1996, the Company had no forward exchange contracts. At
June 30, 1995 the Company had contracts of approximately $720,000 maturing from
July 26, 1995 through August 30, 1995 to exchange pounds sterling for United
States dollars.
Investments -- Investments consist primarily of tax-exempt interest bearing
securities with remaining maturities of less than one year. Investments are
classified as held-to-maturity and therefore are recorded at amortized cost. The
fair value of the investments approximates amortized cost.
Inventories -- The Company values its inventories at the lower of cost, using
the first-in, first-out method, or market.
Research and Development -- Research and development expenditures are charged to
operations in the year incurred.
Advertising Costs -- Advertising costs primarily relate to trade shows, product
catalogues and product literature. The cost of product catalogues is capitalized
and amortized over the period in which future benefits are expected. The cost of
product literature is expensed as incurred. Total advertising expenses were
$969,000, $712,000, and $1,112,000 in 1996, 1995 and 1994, respectively.
Depreciation -- Property, plant and equipment are depreciated using the
straight-line method based on estimated useful lives as follows:
<TABLE>
<CAPTION>
ASSETS Estimated Useful Lives (Years)
<S> <C>
Land improvements 20
Buildings 20 - 40
Machinery & equipment 2 - 10
Dies & molds 5
Furniture & data processing equipment 2 - 10
</TABLE>
Depreciation expense for fiscal years 1996, 1995 and 1994 was $4,310,000,
$4,159,000 and $4,293,000, respectively.
Interest Capitalization -- The Company capitalizes interest costs associated
with the construction of plant and equipment. During fiscal years 1996, 1995 and
1994, the Company incurred total interest costs of approximately $326,000,
$306,000 and $335,000 of which approximately $79,000, $129,000 and $232,000 were
capitalized, respectively.
Cost in Excess of Fair Value of Net Assets Acquired -- The cost in excess of
fair value of tangible net assets acquired is being amortized on a straight-line
basis over lives ranging from 20 to 40 years. The Company evaluates the carrying
value of these intangible assets for possible impairment by taking into
consideration such factors as recent operating results, projected cash flows and
plans for future operations.
Major Customers and Concentration of Credit Risk -- The Company had sales to a
domestic distributor in fiscal 1996, 1995 and 1994 which represent approximately
11%, 12% and 11% of the Company's total net sales, respectively. The Company had
sales to a European medical device company in fiscal 1996, 1995 and 1994 which
represent approximately 12%, 8% and 1% of the Company's total net sales,
respectively. Substantially all of the Company's revenues and receivables relate
to companies operating in the health care industry.
Income Taxes -- Effective July 1, 1993, the Company adopted Statement of
Financial Accounting Standards (SFAS) No. 109, "Accounting for Income Taxes," on
a prospective basis. Accordingly, deferred income taxes are provided for the
temporary differences between the financial reporting and the tax basis of the
Company's assets and liabilities by applying enacted statutory tax rates
applicable to future years to the book tax basis differences.
<PAGE> 10
Net Income Per Common Share -- Net income per common share is based on the
weighted average number of common and common equivalent shares outstanding
during the year. Common share equivalents represent the dilutive effect of the
assumed exercise of certain outstanding stock options.
Cash and Equivalents -- The Company considers all highly liquid investments with
original maturities of three months or less at the date of purchase to be cash
equivalents. Cash equivalents at June 30, 1996 consist of tax exempt mutual
funds and at June 30, 1995 consists of tax-exempt mutual funds and commercial
paper.
New Accounting Standards -- In March 1995, the Financial Accounting Standards
Board (FASB) issued Statement of Financial Accounting Standards No. 121 (SFAS
121), "Accounting for the Impairment of Long-Lived Assets and Long-Lived Assets
to Be Disposed Of. " In accordance with SFAS 121, management evaluates the
recoverability of the long-lived assets on an on going basis taking into
consideration such factors as recent operating results, projected cash flows and
plans for future operations. At June 30, 1996, there were no material
impairments of the Company's assets.
In October 1995, the FASB issued Statement of Financial Accounting Standards No.
123 (SFAS 123), "Accounting for Stock Based Compensation" which requires
adoption no later than fiscal years beginning after December 15, 1995. Under
SFAS 123, companies are encouraged but not required to adopt the fair value
method of accounting for employee stock-based transactions. Companies are also
permitted to continue to account for such transactions under Accounting
Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees," but
would be required to disclose in a note to the financial statements pro forma
net income and earnings per share, as if the Company had applied the new method
of accounting. The Company has determined that it will not adopt the expense
recognition provisions of this standard; therefore, the new standard will have
no effect on the Company's financial condition or results of operations.
Reclassifications -- Certain reclassifications have been made to prior years'
amounts to conform with the classifications of such amounts for fiscal 1996.
- --------------------------------------------------------------------------------
2. DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amounts of cash and cash equivalents, accounts receivable, accounts
payable and accrued liabilities approximate fair value because of the short-term
maturity of these instruments. The fair value and carrying amounts of long-term
debt as of June 30, 1996 was $3,514,000 and $3,463,000 respectively. Fair values
are based on current quoted interest rates of similar financial instruments with
like maturities.
- --------------------------------------------------------------------------------
3. RESTRUCTURING COSTS
Turnaround costs recorded in fiscal 1996 represent costs associated with a
"turnaround program" for the domestic operations. The Company originally
estimated the program costs would be approximately $4,200,000 consisting
primarily of consulting costs, severance costs and the write off of discontinued
items. At June 30, 1996 approximately $1,963,000 of restructuring costs and
$1,678,000 in write-offs of discontinued items relating to the turnaround
program have been recognized. The Company estimates the remaining restructuring
costs to be recognized in fiscal 1997 will be approximately $709,000. Of the
costs recognized at June 30, 1996, $416,000 remains to be paid and is included
in accrued restructuring costs. The amounts included in accrued restructuring
costs along with costs to be recognized in fiscal 1997 will be funded with
available cash on hand and cash generated from operations during fiscal 1997.
The turnaround costs recorded in fiscal 1996 consist primarily of consulting
services, severances for terminated employees, outplacement and legal costs and
the discontinued items consist primarily of inventory and fixed assets as a
result of the Company's decision to discontinue or replace certain items. The
difference of $150,000 between the originally estimated costs and the current
estimate of $4,350,000 is primarily due to consulting and severance costs being
greater than originally anticipated.
Denver restructuring costs recorded in fiscal 1996 and 1995 represent costs
associated with closing the Company's Denver operations and integrating all
functions and product lines into other Company locations. The Company originally
estimated that the restructuring costs would be approximately $3,200,000
consisting primarily of employee severance and other exit costs related to
lease; hiring, training and relocating personnel; travel; moving equipment and
inventory; and facility shutdown. The difference of $509,000 between the
originally estimated costs and the total actual costs is primarily due to the
termination of the Denver lease being greater than originally anticipated.
<PAGE> 11
4. LONG-TERM DEBT, BANK NOTES AND LEASES
Long-term debt consists of the following:
<TABLE>
<CAPTION>
June 30 1996 1995
---------- ----------
<S> <C> <C>
Mortgages payable:
Industrial Revenue Bond, average interest rate of 6.18%, due in variable yearly
principal installments through June 2002, secured by a $3,002,000 bank letter
of credit at June 30, 1996 $2,775,000 $3,150,000
9% Industrial Revenue Bond, due in monthly installments
of $13,500 (including interest) through November 2001, collateralized by first
mortgage on land and buildings and security interest in certain equipment with
an approximate
net book value of $1,500,000 at June 30, 1996 682,491 778,679
Other 5,396 47,619
---------- ----------
Total 3,462,887 3,976,298
Less current portion 510,226 513,066
---------- ----------
Long-term debt $2,952,661 $3,463,232
========== ==========
</TABLE>
Long-term debt as of June 30, 1996 matures as follows:
<TABLE>
Year Ending June 30
<S> <C>
1997 $510,226
1998 539,664
1999 575,420
2000 607,185
2001 650,054
Thereafter 580,338
----------
Total $3,462,887
==========
</TABLE>
At June 30, 1996, the Company had available a $5,000,000 line of credit and a
$3,002,000 letter of credit. The line of credit bears interest at LIBOR plus one
half percent and expires in April, 1997. The letter of credit can only be used
to pay principal and interest on the Industrial Revenue Bond maturing in 2002.
Any borrowings made under the letter of credit bear interest at the bank's prime
rate plus two percent and are secured by land and buildings with an approximate
net book value of $3,200,000. The letter of credit agreement automatically
renews every month through the maturity of the bond, subject to a 13-month
notification from the issuer of their intention not to renew the letter. No
borrowings were made from the line of credit or the letter of credit during
fiscal 1996 or 1995.
Subsequent to year end, the Company borrowed an additional $4,000,000 through
the issuance of Industrial Revenue Bonds. The bonds bear interest at a weekly
adjustable rate and mature in June, 2016. Annual principal payments of $200,000
are scheduled beginning in July, 1997. Also in July 1996, the Company retired
the 9% Industrial Revenue Bond.
The Company leases buildings, equipment, furniture and automobiles in the United
States and Europe under operating leases. Future minimum rental payments
required under such leases that have initial or remaining noncancellable lease
terms in excess of one year as of June 30, 1996 are as follows:
<TABLE>
Year Ending June 30
<S> <C>
1997 $1,338,712
1998 709,405
1999 176,330
2000 109,139
2001 152,672
Thereafter 1,397,546
----------
Total $3,883,804
==========
</TABLE>
Total rental expense was approximately $2,099,000, $2,097,000 and $1,906,000 for
fiscal 1996, 1995 and 1994, respectively.
- --------------------------------------------------------------------------------
5. STOCK OPTIONS
Key Employee Nonstatutory Stock Option Plan -- Pursuant to a key employee stock
option plan, as previously approved by the shareholders, the Company reserved
1,000,000 shares for issuance to certain key employees. Under this plan, options
may be granted at a price equal to the fair market value at the date of grant.
The options shall be exercised by the optionee only while employed by the
Company or a limited time thereafter. The plan contains provisions which define
certain limitations on the right to exercise options and provides for the
expiration and forfeiture of options based upon the Company's achievement of
certain goals. These goals are set by the employee benefits committee of the
Company's Board of Directors. Additionally, all options expire after ten years
from the date of grant if not previously exercised or forfeited. In fiscal 1996,
the plan was amended, subject to shareholder approval in November 1996, whereby
for options granted on or after November 15, 1995, the employee benefit
committee may waive certain provisions of the plan defining the limitations on
the right to exercise and the forfeiture of options and may establish any
limitations or forfeiture provisions they deem appropriate. At June 30, 1996,
expiration dates on options outstanding range from December 2001 to November
2005 without regards to the forfeiture provisions tied to the attainment of
achievement goals discussed above.
<PAGE> 12
Non-Employee Director Restricted Stock Option Plans -- Pursuant to Non-Employee
Director Restricted Stock Option Plans, as previously approved by the
shareholders, the Company reserved 384,315 shares of common stock for issuance
to directors and directors emeritus not otherwise employed by the Company. These
plans provide for one-time grants of options to purchase shares of common stock
at a price equal to the fair market value at the date of grant. Options are
exercisable at the date of grant subject to certain restrictions contained in
the plans and expire after ten years; however, the options shall be exercised by
the optionee only while serving as a director or director emeritus of the
Company or a limited time thereafter. Expiration dates on options outstanding
range from May 1997 to August 2003.
Executive Stock Option Plan -- Pursuant to an executive stock option plan, as
previously approved by the shareholders, the Company reserved 300,000 shares for
issuance to certain key employees. Under this plan, options may be granted at
prices equal to the fair market value at the date of grant. Options expire after
five years and are exercisable six months after the date of grant. At June 30,
1996, expiration dates on options outstanding range from August 1999 to December
2000.
Employees Stock Purchase Plan -- Pursuant to an employees stock purchase plan,
as previously approved by the shareholders, the Company reserved 160,000 shares
of common stock for issuance to qualified employees. Under this plan, qualified
employees may request options to purchase shares of common stock, subject to
certain limitations contained in the plan, at a price equal to 87.5% of the fair
market value at the date of grant. Options expire after twenty-seven months and
are exercisable at date of grant subject to certain limitations. Expiration
dates on options outstanding at June 30, 1996 range from August 1996 to August
1998.
Incentive Stock Option Plan -- Pursuant to an incentive stock plan, as
previously approved by the shareholders, the Company reserved 1,050,000 shares
of common stock for issuance to qualified key employees. In November 1995, this
plan expired and no additional options may be granted under this plan; however,
options previously granted remain exercisable until expiration of the option
term. Options expire after five years and are exercisable at date of grant.
Expiration dates on options outstanding at June 30, 1996 range from August 1996
to February 1999.
The following summarizes stock option transactions for all effective plans
during the three years ended June 30, 1996:
<TABLE>
<CAPTION>
NUMBER OF OPTION PRICE
OPTIONS SHARES Per Share Total
--------- --------------- -----------
<S> <C> <C> <C>
Outstanding at June 30, 1993 919,589 $5.63 - $33.00 $19,640,495
Granted 327,378 $10.58 - $19.13 4,160,053
Exercised (101,081) $8.86 - $29.70 (1,055,331)
Forfeited (195,650) $10.35 - $33.00 (5,395,631)
-------- -----------
Outstanding at June 30, 1994 950,236 $5.63 - $33.00 17,349,586
Granted 134,271 $8.75 - $13.75 1,586,760
Exercised (23,576) $7.63 - $29.70 (230,409)
Forfeited (181,640) $10.35 - $33.00 (4,497,393)
-------- -----------
Outstanding at June 30, 1995 879,291 $5.63 - $33.00 14,208,544
Granted 445,571 $9.19 - $11.38 4,820,690
Exercised (37,911) $6.93 - $17.22 (350,634)
Forfeited (343,441) $8.75 - $33.00 (6,629,539)
-------- -----------
Outstanding at June 30, 1996 943,510 $5.63 - $33.00 $12,049,061
======== ===========
</TABLE>
<PAGE> 13
The following summarizes the status of shares reserved and options outstanding
as of June 30, 1996:
<TABLE>
<S> <C>
Shares presently exercisable 648,610
Shares not presently exercisable 294,900
---------
Total options outstanding 943,510
Available for future grants 993,900
---------
Shares reserved for exercise of options 1,937,410
=========
</TABLE>
In fiscal 1995 and 1994, certain employees of the Company exchanged 2,163 and
14,595 common shares outstanding and owned by the employees for 2,600 and 17,430
shares issued related to stock options exercisable under the incentive stock
option plan. Stock issued is included as outstanding shares, while stock
received in the exchange is included as treasury shares.
For certain stock options, the Company is permitted a tax deduction equal to the
difference between the option price on the date of grant and the fair market
value of the stock on the date an employee exercises such stock option. In
fiscal 1996, 1995 and 1994 the Company received a tax benefit of $76,457, $6,280
and $42,180, respectively, related to such sales, and the benefit was recorded
as a credit to additional paid-in capital. In fiscal 1995 the Company also
amended prior years Federal income tax returns to correct deductions originally
filed related to such sales. The tax benefit of $457,532 related to the amended
returns was recognized in fiscal 1995 and recorded as a credit to additional
paid-in capital.
- --------------------------------------------------------------------------------
6. PROFIT SHARING AND RETIREMENT PLANS
The Company has a deferred profit sharing plan and a 401(k) savings plan
covering substantially all of its domestic employees. Contributions to the
deferred profit sharing plan are determined at the discretion of the Board of
Directors, and are funded annually. Contributions to the 401(k) savings plan are
determined based upon a percentage of the employees' elective contributions up
to specified levels.
Total profit sharing and 401(k) expenses for fiscal 1996, 1995 and 1994 were
approximately $238,000, $152,000 and $726,000, respectively. The profit sharing
and 401(k) amounts unpaid and included in accrued liabilities at June 30, 1996,
1995 and 1994 were approximately $111,000, $11,000 and $593,000, respectively.
- --------------------------------------------------------------------------------
7. INCOME TAXES
The provisions for income taxes are as follows:
<TABLE>
<CAPTION>
Year Ended June 30 1996 1995 1994
---------- ---------- ----------
<S> <C> <C> <C>
Current expense (benefit):
United States Federal $(124,000) $147,000 $1,959,000
Foreign 1,608,000 1,505,000 399,000
State and local 245,000 76,000 315,000
---------- ---------- ----------
Total 1,729,000 1,728,000 2,673,000
---------- ---------- ----------
Deferred expense (benefit):
United States Federal (154,000) (575,000) 1,280,000
Foreign (59,000) (35,000) 82,000
State and local (98,000) (21,000) 72,000
---------- ---------- ----------
Total (311,000) (631,000) 1,434,000
---------- ---------- ----------
Total provision $1,418,000 $1,097,000 $4,107,000
========== ========== ==========
</TABLE>
The sources of income (loss) before income taxes and cumulative effect of change
in accounting principle are as follows:
<TABLE>
<CAPTION>
Year Ended June 30 1996 1995 1994
----------- --------- ----------
<S> <C> <C> <C>
United States $(1,903,626) $(770,174) $9,401,486
Foreign 3,696,492 3,623,058 1,080,682
----------- --------- ----------
Total $1,792,866 $2,852,884 $10,482,168
----------- --------- ----------
</TABLE>
<PAGE> 14
The differences between the Company's effective tax rate and the statutory
Federal income tax rate are as follows:
<TABLE>
Year Ended June 30 1996 1995 1994
---------- ---------- ----------
<S> <C> <C> <C>
Amount based on statutory rate $610,000 $970,000 $3,569,000
State and local taxes, net of federal benefit 97,000 36,000 255,000
Foreign taxes 1,549,000 1,470,000 481,000
Foreign tax credit including tax rate differential (792,000) (1,414,000) (268,000)
Foreign sales corporation (61,000) 42,000 (45,000)
Other 15,000 77,000 115,000
---------- ---------- ----------
Total $1,418,000 $1,097,000 $4,107,000
========== ========== ==========
Effective tax rate 79.1 % 38.5 % 39.2 %
========== ========== ==========
</TABLE>
The significant components of the Company's net deferred tax asset at June 30,
1996 and 1995 are as follows:
<TABLE>
<CAPTION>
Year Ended June 30 1996 1995
<S> <C> <C>
DEFERRED TAX ASSETS:
Net operating loss carryforwards $1,939,131 $2,151,800
Foreign tax credit carryforwards 849,460 1,563,513
Uniform inventory capitalization 673,263 556,718
Vacation accrual 379,625 201,670
Trade receivable allowances 236,243 225,577
Restructuring costs 153,237 267,699
Sales returns and allowances 339,288 224,210
Obsolete inventory 829,569 101,921
Other 448,643 415,800
---------- ----------
Total 5,848,459 5,708,908
Less valuation allowance (1,352,450) (1,376,334)
---------- ----------
Total deferred tax assets 4,496,009 4,332,574
---------- ----------
DEFERRED TAX LIABILITIES:
Accelerated depreciation 1,154,227 1,265,648
Other 852,344 902,598
---------- ----------
Total deferred tax liabilities 2,006,571 2,168,246
---------- ----------
NET DEFERRED TAX ASSET $2,489,438 $2,164,328
========== ==========
</TABLE>
The Company has Federal net operating loss carryforwards of approximately
$4,224,000 that expire from fiscal 2000 through fiscal 2005 and approximately
$849,000 of foreign tax credit carryforwards for Federal income tax purposes
that expire in fiscal 2000 and fiscal 2001. The Company also has foreign net
operating loss carryforwards of approximately $1,635,000 that expire from fiscal
1997 through fiscal 2001. The foreign tax credits and the foreign net operating
loss carryforwards have been fully reserved by a valuation allowance due to the
uncertainties related to their future utilization.
The valuation allowance decreased during fiscal 1996 by $23,884 and during
fiscal 1995 by $73,832 primarily as a result of the use of foreign tax credits
for tax purposes that had been reserved for financial statement purposes.
At June 30, 1996 no provision for Federal income taxes was recorded for
approximately $1,251,000 of undistributed earnings of certain foreign
subsidiaries as remittance of the earnings would be treated as a tax-free
liquidation or would be substantially offset by foreign tax credits.
<PAGE> 15
8. FOREIGN OPERATIONS
The Company's operations include assembly and distribution centers in the United
Kingdom and distribution centers in Germany and France. Information about the
Company's operations in different geographic areas is presented below, with the
United Kingdom, Germany and France operations collectively shown as Europe:
<TABLE>
<CAPTION>
UNITED STATES EUROPE ELIMINATIONS TOTAL
------------- ------------ ------------ ------------
<S> <C> <C> <C> <C>
Fiscal 1996
Sales:
Unaffiliated customers $64,379,428 $34,918,031 $99,297,459
Between geographic areas 6,913,707 $(6,913,707)
----------- ----------- ----------- -----------
Net sales 71,293,135 34,918,031 $(6,913,707) 99,297,459
=========== =========== =========== ===========
Net income (loss) (1,521,280) 1,896,146 374,866
=========== =========== ===========
Identifiable assets at year-end $69,906,519 $22,434,837 $92,341,356
=========== =========== ===========
Fiscal 1995
Sales:
Unaffiliated customers $65,158,275 $29,997,783 $95,156,058
Between geographic areas 5,693,820 $(5,693,820)
----------- ----------- ----------- -----------
Net sales 70,852,095 29,997,783 $(5,693,820) 95,156,058
=========== =========== =========== ===========
Net income (loss) (176,432) 1,932,316 1,755,884
=========== =========== ===========
Identifiable assets at year-end $71,331,370 $19,170,181 $90,501,551
=========== =========== ===========
Fiscal 1994
Sales:
Unaffiliated customers $73,679,731 $21,898,315 $95,578,046
Between geographic areas 5,434,972 $(5,434,972)
----------- ----------- ----------- -----------
Net sales 79,114,703 21,898,315 $(5,434,972) 95,578,046
=========== =========== =========== ===========
Net income 6,164,093 566,902 6,730,995
=========== =========== ===========
Identifiable assets at year-end $73,780,255 $15,331,448 $89,111,703
=========== =========== ===========
</TABLE>
Substantially all sales between geographic areas are based on manufacturing cost
plus allowances for freight, other expenses and a reasonable profit to the
seller. Export sales included in the United States sales approximated 7% of
total net sales in fiscal 1996 and approximated 5% in fiscal 1995 and 1994. The
majority of such sales were to Asia and the Pacific Rim and Canada.
- --------------------------------------------------------------------------------
9. SUBSEQUENT EVENT
In July 1996, the Company sold its WalkMed ambulatory infusion pump product
line, related disposable products and associated assets. The Company will
continue to manufacture the WalkMed line and related disposables and will
distribute the products outside of North America for up to three years. The
Company's sales related to WalkMed in fiscal 1996 were approximately $3,500,000.
The Company will recognize a gain of approximately $3,000,000. WalkMed infusion
systems are used to administer intravenous therapies to patients in
non-hospitalized, alternate site locations.
- --------------------------------------------------------------------------------
10. SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)
<TABLE>
<CAPTION>
For Fiscal Year Ended: 1ST QUARTER 2ND QUARTER 3RD QUARTER 4TH QUARTER FULL YEAR
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
June 30, 1996:
Net sales $23,697,611 $23,533,502 $25,468,469 $26,597,877 $99,297,459
Gross margin 12,058,434 11,381,988 9,601,822 11,335,550 44,377,794
Net income (loss)(1) 1,137,069 138,876 (1,999,296) 1,098,217 374,866
Net income (loss) per share $0.18 $0.02 $(0.32) $0.18 $0.06
June 30, 1995:
Net sales $23,082,139 $22,376,351 $24,647,101 $25,050,467 $95,156,058
Gross margin 10,589,719 9,572,497 12,809,550 9,599,527 42,571,293
Net income (loss)(2) 1,317,662 (648,418) 1,073,679 12,961 1,755,884
Net income (loss) per share $0.21 $(0.10) $0.17 $0.00 $0.28
<FN>
(1) Includes pre-tax restructuring expenses of $241,251, $833,479, $2,723,685,
and $917,584, respectively for each quarter.
(2) Includes pre-tax restructuring expenses of $1,674,262, $381,286, and
$579,082, respectively, for the second, third and fourth quarters.
</TABLE>
<PAGE> 16
- --------------------------------------------------------------------------------
INDEPENDENT AUDITORS' REPORT
To the Shareholders and Directors of Medex, Inc.:
We have audited the accompanying consolidated balance sheets of Medex, Inc. and
subsidiaries as of June 30, 1996 and 1995, and the related consolidated
statements of income, shareholders' equity, and cash flows for each of the three
years in the period ended June 30, 1996. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of Medex, Inc. and subsidiaries as of
June 30, 1996 and 1995, and the results of their operations and their cash flows
for each of the three years in the period ended June 30, 1996 in conformity with
generally accepted accounting principles.
As discussed in Note 1 of the Notes to Consolidated Financial Statements,
effective July 1, 1993, the Company changed its method of accounting for income
taxes to conform with Statement of Financial Accounting Standards No. 109,
"Accounting for Income Taxes."
/s/ Deloitte & Touche LLP
Columbus, Ohio
August 13, 1996
- --------------------------------------------------------------------------------
MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED SHAREHOLDER MATTERS
<TABLE>
<CAPTION>
1996 STOCK PRICE 1995 STOCK PRICE
HIGH LOW HIGH LOW
<S> <C> <C> <C> <C>
First quarter $12.75 $9.75 $14.25 $11.25
Second quarter 11.50 10.13 17.75 12.25
Third quarter 12.50 10.75 13.75 10.00
Fourth quarter $14.25 $11.50 $12.75 $9.50
</TABLE>
The common shares of the Company are traded in the over-the-counter market and
are identified by the NASDAQ symbol "MDEX."
The source of the stock price information is NASDAQ and represents the high and
low last transaction price as reported by the NASDAQ National Market System.
The Company paid cash dividends in fiscal years 1996 and 1995 of $987,084 ($.16
per share) and $982,227 ($.16 per share), respectively. There were approximately
1,200 shareholders of record as of August 13, 1996. The Company intends to
continue to pay cash dividends on its common stock, subject to the Company's
earnings, financial condition, capital requirements and such other factors as
the Board of Directors deems relevant. It is currently intended that the amount
of cash dividends will continue as a low percentage of earnings, and that the
Company will continue its policy of retaining the major portion of earnings for
use in the Company's business.
<PAGE> 1
Exhibit 21
SUBSIDIARIES OF REGISTRANT
A. Medex Exports, Inc., a U.S. Virgin Islands corporation.
B. Medex Medical, Inc., an Ohio corporation
C. Medex Medical France SARL, organized under the laws of France.
D. Medex Medical GmbH, organized under the laws of Germany.
E. Ashfield Medical Systems Limited, organized under the laws of
Scotland.
<PAGE> 1
EXHIBIT 23
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in Registration Statements No.
33-23787, No. 33-44859, No. 33-36739, No. 33-79854 and No. 33-89964 of Medex,
Inc. on Form S-8 of our reports dated August 13, 1996 (which expresses an
unqualified opinion and includes an explanatory paragraph relating to the change
in the method of accounting for income taxes), appearing in and incorporated by
reference in the Annual Report on Form 10-K of Medex, Inc. for the year ended
June 30, 1996.
Deloitte & Touche LLP
Columbus, Ohio
September 25, 1996
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
company's balance sheet and statements of income for the period ended June 30,
1996 and is qualified in its entirety by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-START> JUL-01-1995
<PERIOD-END> JUN-30-1996
<CASH> 5,587,527
<SECURITIES> 0
<RECEIVABLES> 18,670,315
<ALLOWANCES> 763,000
<INVENTORY> 23,066,583
<CURRENT-ASSETS> 50,660,765
<PP&E> 60,775,025
<DEPRECIATION> 26,172,126
<TOTAL-ASSETS> 92,341,356
<CURRENT-LIABILITIES> 14,030,624
<BONDS> 2,952,661
<COMMON> 61,974
0
0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 92,341,356
<SALES> 99,297,459
<TOTAL-REVENUES> 99,297,459
<CGS> 54,919,665
<TOTAL-COSTS> 42,459,995
<OTHER-EXPENSES> 124,933
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 1,792,866
<INCOME-TAX> 1,418,000
<INCOME-CONTINUING> 1,792,866
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 374,866
<EPS-PRIMARY> .06
<EPS-DILUTED> 0
</TABLE>
