_______________________________________________
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934.
For the quarterly period ended January 31, 1997
Commission File Number 0-944
POSSIS MEDICAL, INC.
9055 Evergreen Blvd. NW
Minneapolis, Minnesota 55433-8003
(612) 780-4555
A Minnesota Corporation IRS Employer ID No. 41-0783184
_________________________________
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No___ The number of shares
outstanding of the Registrant's Common Stock, $.40 par value, as of March 12,
1997 was 12,126,890.
________________________________
<PAGE>
POSSIS MEDICAL, INC.
INDEX
PAGE
PART I. FINANCIAL INFORMATION
ITEM 1. Financial Statements
Consolidated Balance Sheets, January 31, 1997
and July 31, 1996......................................... 3
Consolidated Statements of Operations for three
months and six months ended January 31, 1997 and 1996..... 4
Consolidated Statements of Cash Flows for
six months ended January 31, 1997 and 1996................ 5
Notes to Consolidated Financial Statements................ 6
ITEM 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations...................... 7-9
PART II. OTHER INFORMATION
ITEM 4. Submission of Matters to a Vote of Security-Holders....... 9
ITEM 6. Exhibits and Reports on Form 8-K.......................... 10
SIGNATURES...................................................... 11
<PAGE>
<PAGE>
<TABLE>
POSSIS MEDICAL, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<CAPTION>
- --ASSETS-- January 31, 1997 July 31, 1996
(Unaudited)
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents............................................... $ 5,844,776 $ 7,688,507
Marketable securities................................................... 12,928,118 15,838,543
Receivables:
Trade (less allowances for doubtful accounts of $60,000)............. 354,138 389,983
Other................................................................ 1,906,536 218,154
Inventories:
Parts................................................................ 867,651 755,081
Work-in-progress..................................................... 882,362 898,721
Finished goods....................................................... 697,931 466,985
Prepaid expenses and other assets....................................... 290,447 207,156
Total current assets 23,771,959 26,463,130
PROPERTY:
Leasehold improvements.................................................. 1,154,032 1,090,935
Machinery and equipment................................................. 3,015,951 2,782,287
Assets-in-construction.................................................. 124,279 92,743
Total property............................................... 4,294,262 3,965,965
Less accumulated depreciation........................................ (1,695,966) (1,482,233)
Property - net............................................... 2,598,296 2,483,732
OTHER ASSETS:
Goodwill................................................................ 377,922 413,922
TOTAL ASSETS................................................................. 26,748,177 29,360,784
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Trade accounts payable.................................................. 360,142 317,905
Accrued salaries, wages, and commissions................................ 642,404 725,988
Current portion of long-term debt....................................... 35,658 73,386
Other liabilities....................................................... 790,897 566,313
Total current liabilities................................... 1,829,101 1,683,592
DEFERRED REVENUE............................................................. -- 41,768
LONG-TERM DEBT............................................................... 31,134 38,569
SHAREHOLDERS' EQUITY:
Common stock - authorized 100,000,000 and 20,000,000 shares,
respectively, of $.40 par value each; issued and outstanding,
12,124,721 shares and 12,052,644 shares, respectively................ 4,849,888 4,821,058
Additional paid-in capital.............................................. 41,043,436 40,688,535
Unearned compensation .................................................. (39,181) (102,690)
Unrealized loss on investments.......................................... (41,195) (145,276)
Retained deficit........................................................ (20,925,006) (17,664,772)
Total shareholders' equity.................................. 24,887,942 27,596,855
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY................................... $26,748,177 $29,360,784
<FN>
See notes to consolidated financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
POSSIS MEDICAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<CAPTION>
For Three Months Ended For Six Months Ended
Jan. 31, 1997 Jan. 31, 1996 Jan. 31, 1997 Jan. 31, 1996
<S> <C> <C> <C> <C>
REVENUE:
Medical product sales................................. $ 163,936 $ 236,268 $ 553,090 $ 437,163
Sales agreement and other............................. 1,750,000 -- 1,750,000 --
Total revenue......................................... 1,913,936 236,268 2,303,090 437,163
COST OF SALES AND OTHER EXPENSES:
Cost of medical products.............................. 1,098,887 1,205,583 2,375,139 2,254,969
Selling, general and administrative................... 983,600 540,216 1,692,233 1,098,539
Research and development.............................. 1,058,140 646,636 2,135,936 1,524,388
Interest ..................................... 1,501 3,617 3,762 8,606
Total cost of sales and other expenses ......... 3,142,128 2,396,052 6,207,070 4,886,502
Operating loss............................................. (1,228,192) (2,159,784) (3,903,980) (4,449,339)
Interest income............................................ 269,942 436,053 525,098 624,159
Gain on sale of investments................................ -- -- 7,109 --
Loss from continuing operations - net...................... (958,250) (1,723,731) (3,371,773) (3,825,180)
Income from discontinued operations-net.................... -- 209,701 111,539 277,771
Net loss................................................... $ (958,250) $(1,514,030) $(3,260,234) $(3,547,409)
Weighted average number of common
shares outstanding.................................... 12,090,895 11,948,984 12,073,992 11,200,973
Earnings (loss) per common share:
Continuing operations................................. $ (.08) $ (.15) $ (.28) $ (.35)
Discontinued operations............................... -- .02 .01 .03
Net loss.............................................. $ (.08) $ (.13) $ (.27) $ (.32)
<FN>
See notes to consolidated financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
POSSIS MEDICAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<CAPTION>
For Six Months Ended
Jan 31, 1997 Jan 31, 1996
<S> <C> <C>
OPERATING ACTIVITIES:
Net loss ....................................................................... $ (3,260,234) $ (3,547,409)
Adjustments to reconcile net loss to net
cash used in operating activities:
Gain on sale of marketable securities...................................... (7,109) --
(Gain) Loss on asset disposal.............................................. (1,526) 808
Depreciation............................................................... 241,454 195,101
Amortization of goodwill........................................................ 36,000 36,000
Stock compensation......................................................... 41,309 61,616
Increase in receivables......................................................... (1,652,538) (410,182)
Increase in inventories......................................................... (357,543) (646,192)
Increase in other assets........................................................ (83,291) (19,744)
Increase in trade accounts payable.............................................. 42,238 175,005
Increase in accrued and other liabilities....................................... 99,233 42,685
Net cash used in operating activities........................................... (4,902,007) (4,112,312)
INVESTING ACTIVITIES:
Proceeds from sale of discontinued operations................................... -- 589,441
Additions to plant and equipment................................................ (345,060) (121,913)
Proceeds from the disposal of assets............................................ 20,953 1,892
Purchase of marketable securities............................................... (1,990,025) (10,960,564)
Proceeds from sale/maturity of marketable securities............................ 5,011,641 1,275,000
Net cash provided by (used in) investing activities ........................... 2,697,509 (9,216,144)
FINANCING ACTIVITIES:
Repayment of long-term debt..................................................... (45,164) (40,541)
Proceeds from issuance of stock and exercise of options......................... 405,931 26,868,377
Net cash provided by financing activities....................................... 360,767 26,827,836
INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS ................................................................... (1,843,731) 13,499,380
CASH AND CASH EQUIVALENTS
AT BEGINNING OF PERIOD......................................................... 7,688,507 5,450,057
CASH AND CASH EQUIVALENTS AT END OF
PERIOD ....................................................................... $5,844,776 $18,949,437
SUPPLEMENTAL CASH FLOW DISCLOSURE:
Interest paid................................................................... $ 3,762 $ 8,606
Inventory transferred to fixed assets........................................... 30,386 19,983
<FN>
See notes to consolidated financial statements.
</FN>
</TABLE>
<PAGE>
POSSIS MEDICAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Article 10 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (consisting
of normal recurring accruals) considered necessary for a fair presentation have
been included. The accompanying consolidated financial statements and notes
should be read in conjunction with the audited financial statements and notes
thereto included in the Company's 1996 Annual Report.
2. INTERIM FINANCIAL STATEMENTS
Operating results for the three and six month periods ended January 31,
1997 are not necessarily indicative of the results that may be expected for the
year ending July 31, 1997.
3. RECENTLY ISSUED ACCOUNTING STANDARD
In October 1995, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 123, Accounting for Stock-Based
Compensation. Pursuant to the new standard, companies are encouraged but are 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, if presented, earnings per share
as if the Company had applied the new method of accounting.
Disclosure provisions are required to be adopted when the recognition and
measurement provisions are adopted, but no later than fiscal years beginning
after December 15, 1995. The Company has not yet determined if it will elect to
change to the fair value method, nor has it determined the effect the new
standard will have on net income and earnings per share should it elect to make
such a change.
4. EARNINGS (LOSS) PER SHARE
The Company's outstanding stock options and stock warrants were not
included in the computation of earnings per share since the impact would have
been anti-dilutive because of the net loss.
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Results of Operations
Three and Six Month Periods Ended January 31, 1997 and 1996
Total revenues for the three and six month periods ended January 31, 1997
were $1,914,000 and $2,303,000, respectively. This was an increase of $1,678,000
and $1,866,000 from the same periods in the previous year. Second quarter 1997
total revenues included $1,750,000 from the termination and settlement of the
Company's Perma-Seal Graft Supply and Distribution Agreement (Agreement).
Product sales for the second quarter decreased $72,000 while they increased
$116,000 for the six month period ending January 31, 1997. Non-U.S. AngioJet
System sales have not met Company expectations and Possis is taking steps to
terminate its German and Greek distributors. On December 6, 1996, the Company
announced that it had received U.S. Food and Drug Administration (FDA) clearance
to commence U.S. marketing of the AngioJet Rapid Thrombectomy System with
labeling claims for removal of blood clots from grafts used by patients on
kidney dialysis. AngioJet System disposable product sales in the U.S. during the
second quarter were $90,000. The AngioJet System drive unit is considered
capital equipment by customers and has a list price of $80,000 to U.S.
hospitals. Management believes that the sales process for a drive unit takes at
least three to six months to complete. The Company offers a program for AngioJet
System evaluation lasting up to 90 days during which time the hospital purchases
disposable products. Through a third party, the Company offers what it believes
to be attractive drive unit financing plans such as prime interest rate capital
leases, operating leases, and a plan to acquire the drive unit through the
purchase of a minimum number of disposable products. U.S. AngioJet System
disposable products sales are growing and the Company expects to sell its first
U.S. AngioJet drive units in the third quarter ending April 30, 1997.
There were no vascular graft product sales in the second quarter. Baxter
Healthcare Corporation, the Company's Perma-Flow Coronary Bypass Graft
distributor, has recently developed marketing materials targeted for its
non-U.S. sales effort and has increased its resource allocation to the marketing
of the Perma-Flow Graft going forward. Due to the termination of the Company's
Perma-Seal Graft distributor in January 1997, there were no sales of this
product during the second quarter. The Company intends to select another partner
to market this product and is in discussions with potential distributors. Possis
anticipates significant growth in product sales in the third and fourth quarters
of fiscal 1997 and believes most of this growth will be a result of AngioJet
System sales in the U.S. marketplace.
Cost of medical products decreased 9% and increased 5% in the three and six
month periods, respectively, over the same periods in the previous year.
Production expenses relating to the vascular grafts decreased $241,000 and
$523,000 in the three and six month periods, respectively, over the same periods
in the previous year. The decrease was due to the lack of sales demand. AngioJet
System production costs increased $118,000 and $971,000, respectively, in the
three and six months as compared to the previous year. The increases are
primarily due to an inventory buildup in anticipation of growth in U.S. AngioJet
System product sales.
<PAGE>
Selling, general and administrative expense in the three and six months
periods ending January 31, 1997 increased $443,000 and $594,000, respectively,
over the same periods in the previous year. Such increases resulted primarily
from increased sales and marketing expense related to the establishment of a
direct U.S. sales organization to sell the AngioJet System and expenses of
marketing the product in the United States. The Company has employed six
regional sales representatives and expects to hire additional salespeople and
support staff over the next three to six months. Sales and marketing expenses
are expected to increase going forward.
Research and development expense in the three and six month periods ending
January 31, 1997, increased $412,000 and $612,000, respectively, over the same
periods in the previous year. The increases are due primarily to vascular graft
product and production process validation expenses. The Company believes that
research and development expenses will continue to increase as it completes the
development of its current products, invests in the development of new AngioJet
System applications, an endovascular stent graft and other vascular graft and
AngioJet technology-based products.
Interest income has decreased in the most recent periods due to the use of
the Company's cash reserves in funding the Company's operations. The Company
believes that interest income will continue to decrease, along with its cash
balance, until operations become profitable.
The Company recorded the final income relating to the sale of its Technical
Service division during the first quarter of fiscal 1997 and does not anticipate
further revenues from discontinued operations.
Liquidity and Capital Resources
Cash, cash equivalents, and marketable securities totaled $18,773,000 on
January 31, 1997 versus $23,527,000 at July 31, 1996.
Net cash usage for the six months ending January 31, 1997 averaged $811,000
per month, consistent with the Company's expectations. Most of the $4,902,000
cash used in operations in the most recent six month period is due to the
$3,260,000 net loss. The other major component of the cash used is the
$1,750,000 cash settlement from the Agreement which was recorded as an Other
Receivable as of January 31, 1997. The $1,750,000 cash settlement was received
in February 1997. The Company believes that product sales of the AngioJet System
in the U.S. and internationally will yield meaningful sales growth going
forward. At the same time, sales and marketing expenditures will continue to
increase with the sales growth, and research and development expenditures are
expected to grow as well. The Company anticipates reporting a loss for the last
two quarters of the current fiscal year. In addition, the Company expects that
working capital investment in trade accounts receivables and inventory will be
required to support growing product sales.
The Company believes that its existing cash reserves will be adequate to
complete the development and commercialization of its three current products.
<PAGE>
Forward-Looking Statements
This Management's Discussion and Analysis of Financial Condition and
Results of Operations contains certain "forward-looking statements" within the
meaning of Section 27A of the Securities Act of 1933, as amended, and Section
21E of the Securities Exchange Act of 1934 as amended. Such statements relating
to future events and financial performance, including the submission of
applications to the FDA, revenue and expense levels and future capital
requirements, are forward-looking statements that involve risks and
uncertainties, including the Company's ability to meet its timetable for FDA
submissions, the review time at the FDA which is out of the Company's control,
changes in the Company's marketing strategies, changes in manufacturing methods,
the levels of sales of the Company's products that can be achieved, and other
risks detailed from time to time in the Company's various Securities and
Exchange Commission fillings.
Part II. OTHER INFORMATION
ITEM 4. Submission of Matters to a Vote of Security Holders
(a) The 1996 annual meeting of shareholders of Possis Medical, Inc. was
held on December 11, 1996.
(b) By the following vote, management's nominees were elected as directors
of the Corporation for one year or until their successors are elected and
qualified:
FOR AGAINST
Donald C. Wegmiller 10,401,947 518,398
Joe A. Walters 10,397,327 541,018
Dean Belbas 10,421,810 498,535
Seymour J. Mansfield 10,439,743 480,602
Demetre M. Nicoloff, MD 10,396,388 523,957
Robert G. Dutcher 10,384,282 536,063
Ann M. Possis 10,390,261 530,084
(c) By a vote of 10,814,212 in the affirmative, 66,021 in the negative and
40,112 abstaining, the shareholders ratified the appointment of Deloitte &
Touche LLP as the Company's certified public accountants.
By a vote of 8,903,093 in the affirmative, 1,747,563 in the negative,
83,459 abstaining and 186,230 being counted as broker non-votes, the proposed
amendment to the Corporation's restated articles of incorporation was ratified.
The amendment increases the total number of authorized shares of the
Corporation's capital stock, $.40 per value share, from 20,000,000 to
100,000,000 shares and allows for creation of a new class of undesignated stock.
<PAGE>
ITEM 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Certain of the following exhibits are incorporated by reference from prior
filings. The form with which each exhibit was filed and the date of filing are
indicated below.
Exhibit Form Date Filed Description
4.2 8-A December 13, 1996 Rights agreement, dated December
12, 1996, between the Company and
Norwest Bank Minnesota N.A., as
rights agent.
10.25 Settlement agreement and mutual
release relating to the termination
of the Perma-Seal supply and
distribution agreement with C.R.
Bard, Inc.
27 Financial data schedule.
(b) Reports on Form 8-K
During the quarter ended January 31, 1997, the Company filed a report on
Form 8-K dated December 6, 1996, reporting under Item 5 termination of its
Perma-Seal supply and distributor agreement. On the same Form 8-K, reporting
under Item 5, the Company announced that it had received 510(k) clearance from
the FDA to market its AngioJet Rapid Thrombectomy System in the U.S. for A-V
access graft applications.
The Company also filed a report on Form 8-K dated December 12, 1996,
reporting under Item 5 the declaration of a preferred share purchase right
dividend in connection with the Company's adoption of a shareholder rights plan.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
POSSIS MEDICAL, INC.
DATE: March 12, 1997 BY: /s/ Robert G. Dutcher
ROBERT G. DUTCHER
President and Chief Executive Officer
DATE: March 12, 1997 BY: /s/ Russel E. Carlson
RUSSEL E. CARLSON
Vice President of Finance and
Chief Financial Officer
POSSIS MEDICAL, INC.
EXHIBIT INDEX
Exhibit
Number Description
10.25 Settlement agreement and mutual release relating to the
termination of the Perma-Seal supply and distribution agreement
with C.R. Bard, Inc., dated January 28, 1997.
27 Financial data schedule (electronically filed only).
<PAGE>
SETTLEMENT AGREEMENT AND MUTUAL RELEASE
This Settlement Agreement and Mutual Release ("Agreement") is entered into
effective the 28th day of January, 1997, by and between Possis Medical, Inc.
("Possis"), on the one hand, and Bard Vascular Systems Division, C. R. Bard,
Inc. ("Bard"), and IMPRA, Inc., on the other hand.
RECITALS
WHEREAS, Possis and Bard entered into a Supply and Distribution Agreement
dated December 30, 1994 ("Distribution Agreement"), regarding the worldwide
distribution, marketing, and sales of the Possis Perma~Seal dialysis access
graft, a vascular graft serving as an artificial blood vessel and access point
for kidney dialysis treatment, and other related or improved products
manufactured by Possis (hereinafter referred to collectively as the Perma-Seal
Graft")
WHEREAS, Possis and Bard entered into an Addendum to the Distribution
Agreement dated April 1, 1996 ("Addendum"), which modified some of the terms of
the Distribution Agreement;
WHEREAS, Bard acquired IMPRA, a manufacturer of vascular grafts, including
grafts used in connection with dialysis treatment, through a merger transaction
that was consummated on or about September 15, 1996;
WHEREAS, disputes have arisen between Possis, on the one hand, and Bard and
IMPRA on the other hand, regarding the distribution, marketing, and sales
of the Perma-Seal Graft and the rights and obligations of the parties under the
Distribution Agreement and Addendum; and
WHEREAS, Possis, Bard, and IMPRA have independently determined that it is
desirable and beneficial to settle, compromise, and resolve their disputes and
claims, without any admission of liability by any party, on the terms set forth
in this Agreement;
NOW, Therefore, in order to consummate the intent of the parties to enter
into a full, final, and complete settlement of all disputes and claims as set
forth in the foregoing recitals, which are made a contractual part of this
Agreement, and in consideration of the mutual covenants contained herein, and
other good and valuable consideration, the receipt and sufficiency of which is
hereby acknowledged, the undersigned parties agree as follows:
1. Settlement Sum. Bard shall pay Possis a settlement sum in the amount of
One Million Seven Hundred Fifty Thousand Dollars ($1,750,000.00) within ten (10)
days after the effective date of this Agreement. Payment of the settlement sum
shall be made by wire transfer of immediately available funds to the following
account:
<PAGE>
Name of Bank: Norwest Bank Minnesota, N.A.
Address of Bank: Norwest Center, Sixth Street & Marquette Avenue,
Minneapolis Minnesota 55479-1041
Name of Account Holder: Possis Medical, Inc.
Account Number: 6355003718
Bank ABA Number: 091000019
Attention: Ms. Vicki Plymate (612-667-0557)
or in such other manner as Possis may reasonably request in advance of the
payment date.
2. Termination of Distribution Agreement and Addendum. The Distribution
Agreement and Addendum are hereby terminated, and the rights and obligations of
the parties thereunder are hereby canceled, save as set forth in paragraph 3
below regarding Restricted Information.
3. Restricted Information. The provisions regarding Restricted Information
set forth in Sections 1.10, 11.01, and 11.02 of the Distribution Agreement shall
remain in full force and effect. Restricted Information shall continue to be
held in confidence as set forth in Section 11.01 of the Distribution Agreement,
and, with the exception of the retention of one (1) archival copy of Restricted
Information as set forth in Section 11.02 of the Distribution Agreement, all
Restricted Information shall be returned to the disclosing party within 30 days
after the effective date of this Agreement.
4. Return of Perma-Seal Graft Inventory. Within 30 days after the effective
date of this Agreement, Bard shall return to Possis all unused inventory of the
Perma-Seal Graft that it is still holding. All costs and risks of shipment
involved in accomplishing the return of inventory shall be borne solely by
Possis. Bard hereby assigns and transfers the unused Perma~Sea1 Graft inventory
to Possis "AS IS" and "WHERE IS" and without recourse, representation, or
warranty, express or implied.
5. Mutual Releases:
a) Possis hereby fully and completely releases and forever discharges Bard
and IMPRA, each and all of their respective predecessors, successors, parents,
subsidiaries, and affiliates, and each and all of their present and former
officers, directors, partners, principals, employees, agents, and assigns,
jointly and severally (collectively in this paragraph 5(a), "Releasees"), of and
from any and all claims, complaints, causes of action, debts, demands, disputes,
liabilities, or obligations whatsoever, whether legal or equitable, and whether
sounding in tort or contract or based on any other theory of recovery, and
whether for compensatory or punitive damages or other relief or remedy, whether
known or unknown, whether suspected or unsuspected, whether liquidated or
unliquidated, whether mature or unmatured, which Possis had, has, or may ever
have or claim to have against any of the Releasees for, upon, or by reason of
any matter, event, cause, or thing whatsoever from the beginning of the world
through the effective date of this Agreement, including, without limitation, all
claims, complaints, causes of action, debts, demands, disputes, liabilities, or
obligations arising out of or relating to the Distribution Agreement, the
Addendum, the Perma-Seal Graft, or Bard's acquisition of IMPRA.
b) Bard and IMPRA hereby fully and completely release and forever discharge
Possis, each and all of its predecessors, successors, parents, subsidiaries, and
affiliates, and each and all of their present and former officers, directors,
partners, principals, employees, agents, and assigns, jointly and severally
(collectively in this paragraph 5(b), "Releasees"), of and from any and all
claims, complaints, causes of action, debts, demands, disputes, liabilities, or
obligations whatsoever, whether legal or equitable, and whether sounding in tort
or contract or based on any other theory of recovery, and whether for
compensatory or punitive damages or other relief or remedy, whether known or
unknown, whether suspected or unsuspected, whether liquidated or unliquidated,
whether mature or unmatured, which Bard or IMPRA had, have, or may ever have or
claim to have against any of the Releasees for, upon, or by reason of any
matter, event, cause, or thing whatsoever from the beginning of the world
through the effective date of this Agreement, including, without limitation, all
claims, complaints, causes of action, debts, demands, disputes, liabilities, or
obligations arising out of or relating to the Distribution Agreement, the
Addendum, the Perma-Seal Graft, or Bard's acquisition of IMPRA.
<PAGE>
6. Non-Disparagement:
a) Possis shall not, directly or indirectly, make statements or comments
about Bard or IMPRA or their officers, directors, or employees or their
reputations, products, or businesses which would reasonably be interpreted in
the vascular graft and medical device industry as being demeaning, disparaging,
or defamatory.
b) Bard and IMPRA shall not, directly or indirectly, make statements or
comments about Possis or its officers, directors, or employees or its
reputation, products, or business which would reasonably be interpreted in the
vascular graft and medical device industry as being demeaning, disparaging, or
defamatory.
7. Confidentiality. The terms and conditions of this Agreement are
confidential in nature and are intended to be kept confidential. The parties
shall not disclose, comment upon, or publish, in any manner, to any third party
(i.e., a person or entity who is not an employee, agent, or director of the
parties) the amount of the settlement sum or the terms and conditions of this
Agreement, and they shall take all reasonable and prudent steps to ensure that
no such third-party disclosures are made by any of their employees, agents, or
directors, except (a) as may be necessary in dealing with legal counsel,
auditors, or lenders in their normal course of business, (b) as may be necessary
to comply with the requirements of any regulatory agency or body which exercises
oversight over their business, (c) as may be necessary for the preparation of
financial statements or tax returns, (d) as may be necessary for adequate
disclosure to shareholders, in quarterly and annual earnings releases and in
quarterly and annual reports of Possis to its shareholders or in response to
inquiries from shareholders, (e) in response to subpoena, official government
inquiry, or other lawful process, (f) as otherwise required by law, or (g) to
enforce the terms and conditions of this Agreement. Any third-party disclosure
of the settlement terms in accordance with subparts (a) through (g) of this
paragraph 7 shall be neutral in nature consistent with paragraph 6 above
regarding non-disparagement and paragraph 9 below regarding no admission of
liability or wrongdoing by any party.
<PAGE>
8. Press Release or Public Announcement. Any press release or public
announcement regarding the subject matter of this Agreement shall be subject to
advance review and approval by Bard. Any such press release or public
announcement shall be neutral in nature consistent with paragraph 6 above
regarding non-disparagement and paragraph 9 below regarding no admission of
liability or wrongdoing by any party, and shall preserve the confidentiality of
the settlement terms as required by paragraph 7 above.
9. No Admission of Liability or Wrongdoing. The parties have agreed to the
settlement embodied in this Agreement to resolve their disputes and to avoid the
costs and burdens of litigation. Therefore, nothing in this Agreement, including
payment of the settlement sum, shall in any way be deemed or construed to
constitute an admission of liability or wrongdoing by any party or the waiver of
any defense.
This Agreement has been drafted and entered into as a compromise of
disputed claims under Rule 408 of the Federal Rules of Evidence, and it shall
not be offered or received conditions hereof.
10. Acknowledgment of Representation by Independent Counsel. The parties
acknowledge that they have been represented by their own independent legal
counsel in entering into this Agreement, and that they are each relying on their
own judgment and that of their own legal counsel as to all of the terms and
conditions of this Agreement.
11. Representations. The parties each represent and warrant as follows:
(a) They have not assigned or transferred to anyone, voluntarily or
involuntarily, any matter released pursuant to the terms of this Agreement, or
any part or portion thereof.
(b) They have full power and authority to enter into this Agreement, which
constitutes the valid, legal, and binding obligation of each of them.
(c) The person who has executed this Agreement on their behalf has full
authority to do so, and to bind them as a party to this Agreement.
12. General Provisions:
(a) This Agreement constitutes the entire Agreement between the parties
regarding the subject matter hereof. No representations or inducements have been
made to any party concerning this Agreement other than the representations or
covenants set forth herein, and this Agreement supersedes all prior agreements
and understandings between the parties, oral or written, with respect to the
subject matter hereof.
<PAGE>
(b) This Agreement may be amended or modified only by a written instrument
signed by all of the parties or their successors in interest.
(c) The terms and conditions of this Agreement are contractual in nature,
and not a mere recital. The Agreement shall be governed by, interpreted
according to, and enforced in accordance with the laws of the Commonwealth of
Massachusetts.
(d) This Agreement shall be binding and shall inure to the benefit of the
parties and their respective successors and assigns.
(e) The captions identified in the paragraphs of this Agreement are for
convenience only, and they do not in any way limit, expand, or modify the terms
and conditions of this Agreement.
(f) This Agreement may be executed by facsimile signature and in one or
more counterparts, each of which shall be deemed an original.
IN WITNESS WHEREOF, the undersigned parties have executed this Agreement to
be effective as of the date first set forth above.
P0SSIS MEDICAL, INC. BARD VASCULAR SYSTEMS DIVISION
C. R. BARD, INC.
By By
Its Its
IMPRA, INC.
By
Its
1492536.1
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